Interim Results

RNS Number : 5595O

Tekmar Group PLC

13 June 2022

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

TEKMAR GROUP PLC

("Tekmar Group", the "Group" or the "Company")

UNAUDITED INTERIM RESULTS

For the 6-month period ending 31 March 2022

Tekmar Group (AIM: TGP), a leading provider of technology and services for the global offshore energy markets, announces its half year results for the 6-month period ending 31 March 2022 ("H1 2022" or the "Period") and also notifies it is separately announcing today that the board of directors (the "Board") has determined to undertake a review of the strategic options open to the Company in order to maximise value for shareholders. These options include, but are not limited to, a sale of the Company which will be conducted under the framework of a "formal sale process" in accordance with the Takeover Code.

Headlines

Current trading remains challenging albeit consistent with management expectations

· Revenue of £13.0m (6M to 31 March 2021: £13.9m) and Adjusted EBITDA loss of £1.8m (6M to 31 March 2021: loss of £1.1m), is in-line with management expectations for the period

· On a statutory basis Group loss before tax was £3.2m (6M to 31 March 2021: £2.2m loss)

Recent landmark contract awards highlight the appeal of Tekmar's differentiated and engineering-led solutions, and signal that the market environment for commissioning offshore wind projects is improving

· Contract award to design, manufacture and supply Cable Protection System Solution ("CPS") for Dogger Bank Offshore Wind Farm

· US$10m award for pipeline support and protection for a major subsea customer in the Middle East, Tekmar's largest single contract award to date

· Further expansion into the strategically important US offshore wind market with the recent award to provide an integrated engineering and CPS solution for a US offshore wind farm project

· The above contract awards support a healthy order book of £20.1m as at the end of March 2022

Significant actions taken during the period to stabilise the Group's balance sheet

· The Group extended its £3.0m CBILs facility to October 2022 and extended and increased its trade loan facility to £4.0 million, which is available at least to November 2022

· The Group raised additional cash proceeds of £3.7m, net of expenses, through a Firm Placing and Open Offer of new ordinary shares which completed in March 2022

· Cash on the balance sheet of £10.3m at the period-end is overstated by £5.2m due to a customer overpayment, which has now been repaid. Available cash at the period-end net of this overpayment was £5.1m and includes the funds received from the equity fundraise and draw down of bank facilities of £5.7m

H1 2022 financials

	6M ending Mar-22 Unaudited  £m	6M ending Mar-21 Unaudited   m	18M ending Sep-21 Audited £m
Revenue	13.0	13.9	47.0
Adjusted EBITDA1	(1.8)	(1.1)	(2.1)

Sales KPIs

	6M ending Mar-22 Unaudited   £m	6M ending Mar-21 Unaudited   £m	18M ending Sep-21 Audited £m
Order Book2	20.1	14.5	9.7
Order intake3	22.7	21.5	46.4
Enquiry Book4	302	273	327
Book to Bill5	1.7	1.5	0.99

 Alasdair MacDonald, CEO, commented: 

"We continue to see 2022 and 2023 as transition years for Tekmar as we stabilise the business through the residual impacts of the pandemic and drive our business improvement programs to recover a sustainable level of profitability and cash generation for the business. Whilst we are making satisfactory progress in delivering on our strategic plans, our planned timeframes to establish the improved financial performance for the business we are targeting are being hampered by the prevailing industry conditions, which remain challenging.

On a more positive note, we are greatly encouraged by the momentum we have in securing landmark contracts. These contracts provide a good level of forward visibility for the business as we work on the transition and are an important marker of the market starting to recover.

We remain focused on managing the business through the current industry-wide pressures to benefit from this recovery. Whilst cautious on the environment in the near-term, with a focus on cash preservation prevalent across the industry an added pressure, the market opportunity for Tekmar remains significant, with our differentiated and integrated solutions adding value to our customers in large addressable markets."

Notes:

(1)	Adjusted EBITDA is defined as profit before finance costs, tax, depreciation, amortisation, share based payments charge, and exceptional items is a non-GAAP metric used by management and is not an IFRS disclosure.
(2)	Order Book is defined as signed and committed contracts with clients.
(3)	Order intake is the value of contracts awarded in the Period, regardless of revenue timing.
(4)	Enquiry Book is defined as all active lines of enquiry within the Tekmar Group. Expected revenue recognition within 3 years.
(5)	Book to Bill is the ratio of order intake to revenue.

Enquiries:

Tekmar Group plc Alasdair MacDonald, CEO Derek Bulmer, CFO	[phone]
Singer Capital Markets (Nominated Adviser and Joint Broker) Rick Thompson / Rachel Hayes	[phone]
Berenberg (Joint Broker) Chris Bowman / Ben Wright / Ciaran Walsh	[phone]
Bamburgh Capital Limited (Financial media & investor relations) Murdo Montgomery	[phone]

The person responsible for arranging the release of this announcement on behalf of the Company is Derek Bulmer, Chief Financial Officer .

About Tekmar Group plc

Tekmar Group plc (LON:TGP) collaborates with its partners to deliver robust and sustainable engineering led solutions that enable the world's energy transition.

Through our Offshore Energy and Marine Civils Divisions we provide a range of engineering services and technologies to support and protect offshore wind farms and other offshore energy assets and marine infrastructure. With near 40 years of experience, we optimise and de-risk projects, solve customer's engineering challenges, improve safety and lower project costs. Our capabilities include geotechnical design and analysis, simulation and engineering analysis, bespoke equipment design and build, subsea protection technology and subsea stability technology. 

We have a clear strategy focused on strengthening Tekmar's value proposition as an engineering solutions-led business which offers integrated and differentiated technology, services and products to our global customer base.

Headquartered in Darlington, UK, Tekmar Group has an extensive global reach with offices, manufacturing facilities, strategic supply partnerships and representation in 18 locations across Europe, Africa, the Middle East, Asia Pacific and North America.

For more information visit: www.tekmargroup.co.uk .

Subscribe to further news from Tekmar Group at Group News .

INTERIM REPORT FOR THE 6 MONTHS TO 31 MARCH 2022

CEO overview

The financial results we are reporting today, with the headlines of revenue of £13.0m and an adjusted EBITDA loss of £1.8m, are in-line with our expectations for the first half at the time we announced our FY21 results in February. Whilst these results are consistent with management's expectations for the period, they do highlight the continued challenging environment in which the Company has operated over the last two years.

These results are also consistent with one of my key messages since assuming the role of CEO - that the business requires a transition period as we position Tekmar to recover a sustainable level of profitability and cash generation. We see this transition running through 2022 and 2023 as we navigate the ongoing industry pressures including the current dislocation triggered by the events in Ukraine.

A consequence of the Company incurring the level of sustained losses it has over the last two years has been the weakening of the balance sheet over this period. Since Derek Bulmer joined as Group CFO on 1 June 2021, to strengthen the management team, a key priority for the business has been to stabilise the balance sheet. A number of significant steps have been taken to improve the cash position, including renewing and extending the banking facilities, strengthening the systems and processes relating to cash collection, embedding a more disciplined approach to contract bidding and negotiation and undertaking the equity fundraise undertaken earlier this year. Whilst the net proceeds raised through the fundraise of £3.7m incrementally supports the balance sheet and the Group's turnaround strategy, it does not go as far as the Board would have wanted in fulfilling the objective of strengthening the balance sheet given the sustained period of losses and anticipated further challenges during the transition period over 2022 and 2023.

Operational progress highlighted by significant contract momentum

Alongside strengthening the balance sheet, the other key priority for the management team has been to deliver on the strategy to maintain Tekmar's position as a leader in the industry. The Group is making good progress towards meeting its strategic goals set out at the 2021 Capital Markets Day in support of this objective. The Company is embedding a stronger engineering culture within the business as a key pillar of strengthening the value proposition to customers. The success of this approach is highlighted by a number of significant contract wins announced by the Company over the course of the last six months. These contract awards highlight Tekmar's continued position as a trusted partner alongside strengthening the business through diversification and regional expansion.

Of particular note in this context are the following landmark contract awards:

- the partnership with DEME Offshore, announced in December 2021, contracting Tekmar to design, manufacture and supply Cable Protection System Solutions (CPS) for the Dogger Bank Wind Farm, which is set to become the world's largest offshore wind farm by capacity;

- the US$ 10m contract award announced in January 2022, to provide pipeline support and protection materials for a major subsea construction project in the Middle East. This is Tekmar's largest contract award to date; and

- the recent award of a significant contract to provide an integrated engineering solution, including Cable Protection System Solutions ("CPS"), for an offshore wind farm project in the US (expected to be delivered in 2023), extending our presence in this strategically important market.

These recent contract wins underpin an order book of £20.1m (as at end March 2022), which highlights the commercial momentum across the business. This momentum, order book visibility and broader pipeline of contract activity are particularly significant for the business as management stabilises and completes the turnaround of the business.

Industry cross-winds - short-term industry-wide challenges mask the longer-term market opportunity

The Group has been executing on its turnaround strategy at the same time as it continues to work with industry partners to assess and address the industry wide issues relating to legacy cable installations. Whilst the business is managing this as part of its commitment to responsibly supporting its customers, and the learnings complement its existing expertise and capability and supports its strategic initiative to further diversify across the wider lifecycle of offshore wind projects, it requires the Company to dedicate significant engineering and senior management resource.  The issues surrounding the ultimate resolution of these legacy issues are complex and multi-faceted and may be likely to continue to consume significant company resource and senior management attention for the foreseeable future. For a business the size of Tekmar this becomes a particularly onerous undertaking alongside executing a turnaround strategy in a market environment which remains challenging.

The contract awards highlighted above also signal an improving market outlook for commissioning new projects, as the industry emerges from the lag in offshore wind capacity investment we have highlighted with previous results announcements. Industry analysts highlight visibility on over 300 projects for construction by 2030 as the industry invests US$520bn⁽¹⁾ to build over 200GW⁽²⁾ of new offshore wind capacity by 2030. Additionally, the offshore wind market is a maturing industry with installations and ongoing maintenance become more complex and challenging. This is positive for Tekmar as we are using our expertise to provide the industry leading solutions in our field. It can, however, also lead to extended timelines for securing contracts as clients assess the impact of technology transition and the changing value proposition from a product-led approach to a more holistic integrated solutions and services led approach.

Whilst the market fundamentals support a positive medium to long term outlook, the current market environment remains challenging for contract related businesses operating in global energy supply chains. The issue of funding and cash pressure across the industry is evident from the extent of major corporate restructurings undertaken over the course of the last 12 months or so and companies continue to reference cash preservation as a key theme in public disclosures. Tekmar has not been immune from the impact of these pressures, with extended payment cycles a tactic being deployed by certain counterparties. The industry is also dealing with the ongoing disruption to global trade of "exogeneous shocks", which now extends to the repercussions of the Ukraine crisis. We are taking a proactive approach to mitigate cost inflation and supply chain issues, including escalation clauses on new contracts alongside more favourable milestone and earlier cash payments. This is consistent with our overall business improvement programme which is aligned with our objective of gross margin improvement through embedding a more disciplined commercial approach across the business.

We remain focused on delivering on our plans and on managing the business through the current headwinds, including prioritising balance sheet stability and cash. The Group meets its day-to-day working capital requirements through its available banking facilities which includes a CBILs loan of £3.0m, currently available to 31 October 2022, and a trade loan facility of up to £4.0m that can be drawn against supplier payments, currently available to 30 November 2022. As was outlined in the Company's audited accounts for the 18-month period to 30 September 2021, whilst these renewals are expected with some confidence, they represent a material uncertainty for the Group. The Board recognises this creates a potential vulnerability for the business, particularly at a time when the industry environment remains challenging. The Group's available cash at the period end of £10.3m over-states the Group's available cash position as it includes an overpayment of £5.2m by a customer that has subsequently been repaid. Available cash at the period-end net of this overpayment was £5.1m. This includes the net proceeds of £3.7m raised in the equity fundraise earlier in the year and draw down of bank facilities of £5.7m.

Announcement of strategic review including a formal sale process

Whilst the Group is currently operating with sufficient working capital for its requirements, the combination of sustained trading losses and increased pressure on working capital mean that the Group may not have the necessary cash to make all the required investment to deliver fully the turnaround strategy to return the Group to profitable cash generation within the timescale targeted by the Board.

In light of these matters, the Board considers that the Group's best interests would be served by seeking a strategic partner to support its opportunities for growth and provide additional balance sheet strength.  Accordingly, the Board has now determined to undertake a review of the strategic options open to it in order to maximise value for shareholders. These options include, but are not limited to, a sale of the Company which will be conducted under the framework of a "formal sale process" in accordance with the Takeover Code.

Further information on this process is set out in the strategic review and formal sales process announcement released separately today.

Market  overview

The global market for offshore wind, the Group's core market, continues to strengthen as energy markets are aligned to the commitment of the United Nation's global coalition for net-zero emissions by 2050. Most notably:

· Global capacity is forecast to reach over 258GW (installed or underway) by 2030, from a commissioned capacity of 53GW today, with current visibility of over 300 projects.^{(1), (2)}

· Considering growing energy security concerns triggered by Russia's invasion of Ukraine, the market's mid-term outlook could be revised upwards again.

· Almost 40% of projects entering construction by 2032 will be in the UK, US and China, markets where Tekmar is already active and well-positioned to benefit from future growth.⁽¹⁾

· The global operation and maintenance (O&M) market continues to scale up and is now valued at £11.8bn per year by 2030, offering significant growth potential for the Group. ⁽¹⁾

· In the last six months, the emerging floating wind market outlook has grown by 4GW to 16GW, installed or underway by 2030, motivated by a requirement to cut carbon emissions and reduce dependency on Russian energy.⁽¹⁾

Adjacent offshore energy markets are strengthening, reflecting a stronger oil price. Most notably:

· Brent spot price has reached a ten year high of $120 per barrel.

· Upturn expected in UK North Sea activity due to short-term anxiety of supply. UK regulators are looking to hold oil and gas licencing rounds for new fields, and the UK government looking to fast track investment.  

Post period-end events

On 6 May 2022, the Company announced the appointment of David Wilkinson as a new independent Non-executive Director replacing Chris Gill, effective from the date of the announcement.

On 25 May 2022, the Company announced a contract award to provide an integrated engineering solution, including Cable Protection Systems ("CPS"), for an offshore wind farm project in the US, strengthening its position in this strategically important market.

Alasdair MacDonald

CEO

13 June 2022

Sources:

(1) 4C Offshore, Offshore Wind Farms Project Opportunity Pipeline Database, Version Q1 2022

(2) 4C Offshore - Offshore Wind Farm Database (06-Apr-2021 to 09-Jun-2022)

Financial review

A summary of the Group's financial performance is as follows: 

	6M ending Mar-22   £m	6M ending Mar-21   £m	18M ending Sep-21 £m
Revenue	13.0	13.9	47.0
Adjusted EBITDA(1)	(1.8)	(1.1)	(2.1)
LBT	(3.2)	(2.2)	(5.8)
Adjusted EPS(2)	(4.63p)	(3.35p)	(9.1p)

· Adjusted EBITDA is a key metric used by the directors. Earnings before interest tax depreciation and amortisation are adjusted certain non-cash and exceptional items. Details of the adjustments can be found in the adjusted EBITDA section below.

· Adjusted EPS is a key metric used by the Directors and measures earnings after adjusting for non-recurring items. Earnings for EPS calculation are adjusted for share-based payments awarded on IPO (£0k HY22, £44k HY21) and amortisation on acquired intangibles (£376k HY22, £376k HY21).

On a statutory basis Group loss before tax was £3.2m (HY21: £2.2m loss).

Overview

In the 6 months to 31 March 2022, the Group has endured the impacts of delayed financial investment decisions in the industry during the Covid pandemic. The 6-month period to 31 March 2022 has seen revenue at £13.0m, down by 6.2% on the 6-months to 31 March 2021.  The business has seen cost pressures and inefficiencies remain, driven by these lower volumes, supply chain and logistics matters. The group continues to experience the challenging operating environment across the industry which has seen gross profit fall to 22.2% for the 6 months ending 31 March 2022 from 25.8% for the comparative 6-month period.  As a result of decreased revenues and gross margin, Adjusted EBITDA has fallen to a loss of £(1.8)m for the 6 month period (HY21: Loss £1.1m).

Despite the challenges faced by the Group, we continue to view the current year as a transition year. We presented the Group's strategic plan to investors in the Capital Markets Day of 22nd July 2021, setting out the significant medium and long term prospects of the Group.  This driven by the expansion in offshore wind energy anticipated at the time from 33GW to over 238GW by 2030, drawing from the engineering and technology base of the Group, supplemented by the acquisitions on complementary technologies and products during 2018 and 2019. 

As announced on 16^th March 2022, the Group successfully raised approximately £3.7m (net of expenses) through the Firm Placing and Open Offer. The proceeds of the fundraise have been used to strengthen the balance sheet and will help support the delivery of the strategic plan as the business seeks to transition to sustained profitable growth.

Revenue

Revenue by Division						Revenue by market
£m		6M Mar22	6M Mar21	18M Sep21		£m	6M Mar22	6M Mar21	18M Sep21
Offshore Energy		7.8	9.6	33.8		Offshore Wind	7.2	8.8	26.9
Marine Civils		5.2	4.3	13.2		Other Offshore	5.8	5.1	20.1
Total		13.0	13.9	47.0		Total	13.0	13.9	47.0

Offshore Energy, incorporating Tekmar Energy, Subsea Innovation, AgileTek and Ryder Geotechnical, all of which operate largely as a single unit, continued to see revenue severely impacted by the protracted effects of the pandemic, with revenue at £7.8m for 6-months compared to £9.6m for the comparative 6-month period. Revenue is behind the comparative period due to customer delays in project execution dates. 

The Marine Civils division has seen an increase in revenue of £0.9m, up from £4.3m for the comparative 6-month period to £5.2m for the 6-months to 31 March 2022. The majority of the underlying growth was driven by a single contract of in excess of £8m to design, build and supply a subsea protection system for a project in Qatar.

Gross profit

Gross profit by Division					Gross Profit by market
£m	6M Mar22	6M Mar21	18M Sep21		m	6M Mar22		6M Mar21	18M Sep21
Offshore Energy	1.9	2.6	8.2		Offshore Wind		1.5	2.4	8.9
Marine Civils	1.0	1.0	3.0		Other Offshore		2.2	2.0	5.0
Unallocated costs	-	-	-		Unallocated costs		(0.8)	(0.8)	(2.7)
Total	2.9	3.6	11.2		Total		2.9	3.6	11.2

Gross profit margin for the group reduced from 25.8% (HY21) to 22.2% (HY22). This is due primarily to a change in project mix, with a higher proportion of group revenues being derived from the Marine Civils division, which operates at lower profit margins. The Group has also continued to face cost pressures driven by the global supply chain and logistics issues.  

Within Offshore Energy, gross profit fell to 24% (HY21: 27%) and within Marine Civils, gross profit fell to 19% (HY21: 23%) due to the impacts noted above.  Offshore Energy was particularly impacted due to lower volumes of sales as it carries fixed manufacturing costs of an annual equivalent of £2m.  Further, this division continue to incur costs supporting investigations to support our customers in the industry wide infield cable protection issues caused by the movement of the CPS over the rock-scour protection installed on the seabed. 

Operating expenses

Operating expenses for the 6-month period to 31 March 2022 was £6.0m (HY21: £6.0m). There have been no changes in the composition of the running costs of the business with the comparative period. 

Adjusted EBITDA

Adjusted EBITDA is a primary measure used across the business to provide a consistent measure of trading performance.  The adjustment to EBITDA removes certain non-cash and exceptional items to provide a key metric to the users of the financial statements as it represents a useful milestone that is reflective of the performance of the business resulting from movements in revenue, gross margin and the cash costs of the business.  The Board reviews all exceptional items to ensure resulting Adjusted EBITDA achieves this. For the 6-month period ended 31 March 2022 and the comparable 6-month period to 31 March 2021, the adjustment includes share-based payment charges relating to the IPO options and SIP schemes launched at IPO costs. 

Adjusted EBITDA by division						Adjusted items
£m		6M Mar22	6M Mar21	18M Sep21		£000	6M Mar22	6M Mar21	18M Sep21
Offshore Energy		(1.4)	(1.0)	(1.9)		Exceptional charges	-	(36)	-
Marine Civils		0.2	0.4	1.2		Share based payment charge	-	(44)	(364)
Group costs		(0.6)	(0.5)	(1.4)
Total		(1.8)	(1.1)	(2.1)			-	(80)	(364)

Profit

The result after tax is a loss of £3.2m (HY21: Loss £2.1m, FY21: Loss £5.4m)) due mainly to a fall in revenue and reduction in gross margin as set out above.

Balance Sheet

Balance Sheet
£m		Mar22	Mar21	Sep21
Fixed Assets		5.4	5.4	5.7
Other non-current assets		24.9	25.7	25.3
Inventory		3.1	2.5	4.0
Trade & other receivables		15.8	18.5	18.0
Cash		10.4	3.8	3.5
Current Liabilities		15.0	11.5	12.5
Other non-current liabilities		3.8	1.0	3.7
Equity		40.9	43.5	40.2

Fixed Assets

Fixed asset investments were largely in line with depreciation levels. There was no major capital expenditure project or disposal in the period.

Other non-current assets

Goodwill of £22.2m includes the goodwill arising on the original management buy-out of Tekmar Energy Limited in 2011 of £19.6m. The balance relates to the acquisitions of Subsea Innovation and Pipeshield. 

Trade and other receivables

Trade and other receivables fell to £15.8m (HY21:  £18.5m) due largely to the fall in revenue levels discussed earlier in this review. The high levels of debtors and accrued income relative to revenue reflects the large number of contracts across the Group, including in Offshore Energy into China, plus the major contracts within the Marine Civils division where project milestones were towards the end of the reporting period, or the projects were not yet due for invoicing.  Added to this, the Group has seen the impact of slowing down of payment cycles from a number of customers noted earlier.

Cash

Cash balance at the period end to 31 March 2022 was £10.4 million. As announced on 16th March 2022, the Group successfully raised £3.7m (net of expenses) through the Firm Placing and Open Offer. The proceeds of the fundraise have been used to strengthen the balance sheet and will help support the delivery of the strategic plan as the business transitions to sustained profitable growth. At the period end, the Group had received a milestone overpayment from one of its customers of £5.2m, resulting in an inflated cash and other current liabilities position.  Included within cash is £5.7m of draw down of the banking facilities.

Cash continues to be a major focus of the Group as we monitor and manage the working capital lifecycle across projects.  We have strengthened much of the business systems surrounding contracting, project management and accounts receivable to drive greater transparency and integration amongst functions and also established dedicated credit control functions.  We strongly believe that these enhanced systems will drive greater fluidity in contract lifecycles and cash collection. 

Trade and other payables

Trade and other payables increased to £12.1m (HY21:  £8.1m).  Within the HY22 balance of £12.1m, £5.2m relates to an overpayment from a customer, which was refunded in April 2022. The underlying reduction in the balance of £1.3m is linked to lower revenues throughout the group.

Other non-current liabilities

Other non-current liabilities are £3.7m (HY21:  £1.0m), with the increase due to the drawdown and renewal of the £3.0m CBILs facility.  Other amounts relate to lease liabilities in relation to IFRS16, deferred grant income and £0.3m in deferred tax liability relating to the Pipeshield acquisition in 2019.

Derek Bulmer

CFO

13 June 2022

Consolidated statement of comprehensive income

for the 6M period ended 31 March 2022

	Note	6M ended  31 Mar 2022 Unaudited	6M ended 31 Mar 2021 Unaudited	18M ended 30 Sep 2021 Audited
		£000	£000	£000
Revenue	3	13,033	13,901	47,034
Cost of sales		(10,144)	(10,319)	(35,794)
Gross profit		2,889	3,582	11,240
Administrative expenses		(5,956)	(5,975)	(16,721)
Other operating income		9	23	48
Group operating (loss)		(3,058)	(2,370)	(5,433)
Analysed as:
Adjusted EBITDA[1]		(1,761)	(1,131)	(2,115)
Depreciation		(652)	(642)	(2,031)
Amortisation		(645)	(517)	(1,651)
Exceptional Share based payments charges		-	(44)	364
Exceptional items		-	(36)	-
Group operating (Loss)		(3,058)	(2,370)	(5,433)
Finance costs		(147)	121	(402)
Finance income		-	48	5
Net finance costs		(147)	169	(397)
(Loss) before taxation		(3,205)	(2,201)	(5,830)
Taxation		5	38	394
(Loss) for the period		(3,200)	(2,163)	(5,436)
Equity-settle share-based payments		196	260	(164)
Retranslation of overseas subsidiaries		20	-	(153)
Total comprehensive income for the period		(2,984)	(1,903)	(5,753)
Loss attributable to owners of the parent		(3,200)	(2,163)	(5,436)
Total Comprehensive income attributable to owners of the parent		(2,984)	(1,903)	(5,753)
(Loss) per share (pence)
Basic	4	(6.11)	(4.22)	(10.60)
Diluted	4	(6.11)	(4.22)	(10.60)

All results derive from continuing operations.

1: Adjusted EBITDA, which is defined as profit before net finance costs, tax, depreciation, amortisation, share based payments charge, and exceptional items is a non-GAAP metric used by management and is not an IFRS disclosure.

Consolidated balance sheet

as at 31 March 2022

	Note	31 Mar 2022 Unaudited	31 Mar 2021 Unaudited	30 Sep 2021 Audited
		£000	£000	£000
Non-current assets
Property, plant and equipment		5,416	5,386	5,696
Goodwill and other intangibles		24,895	25,721	25,307
Total non-current assets		30,311	31,107	31,003
Current assets
Inventory		3,121	2,508	3,966
Trade and other receivables	5	15,837	18,546	17,971
Cash and cash equivalents		10,366	3,781	3,482
Total current assets		29,324	24,385	25,419
Total assets		59,635	55,942	56,422
Equity and liabilities
Share capital		610	513	516
Share premium		67,664	64,100	64,097
Merger relief reserve		1,738	1,738	1,738
Merger reserve		(12,685)	(12,685)	(12,685)
Foreign currency translation reserve		(133)	-	(153)
Retained losses		(16,294)	(10,197)	(13,290)
Total equity		40,900	43,469	40,223
Non-current liabilities
Other interest-bearing loans and borrowings	6	3,172	247	3,183
Trade and other payables		333	347	343
Deferred tax liability		263	370	125
Total non-current liabilities		3,768	964	3,651
Current liabilities
Other interest-bearing loans and borrowings	6	2,624	3,088	3,160
Trade and other payables		12,075	8,128	9,121
Corporation tax payable		268	293	267
Total current liabilities		14,967	11,509	12,548
Total liabilities		18,735	12,473	16,199
Total equity and liabilities		59,635	55,942	56,422

Consolidated statement of changes in equity

for the 6M period ended 31 March 2022

	Share 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 1 April 2020	513	64,100	1,738	(12,685)	-	(7,690)	45,976	45,976
Loss for the period	-	-	-	-		(187)	(187)	(187)
Total comprehensive income for the year	-	-	-	-		(187)	(187)	(187)
Issue of shares	-	-	-	-		-	-	-
Share based payments	-	-	-	-		(417)	(417)	(417)
Total transactions with owners, recognised directly in equity	-	-	-	-		(417)	(417)	(417)
Balance at 30 September 2020	513	64,100	1,738	(12,685)	-	(8,294)	45,372	45,372
Profit for the period	-	-	-	-		(2,163)	(2,163)	(2,163)
Total comprehensive income for the year	-	-	-	-		(2,163)	(2,163)	(2,163)
Issue of shares	-	-	-	-		-	-	-
Share based payments	-	-	-	-		260	260	260
Total transactions with owners, recognised directly in equity	-	-	-	-		(1,903)	(1,903)	(1,903)
Balance at 31 March 2021	513	64,100	1,738	(12,685)	-	(10,197)	43,469	43,469
(Loss) for the Period	-	-	-	-		(3,086)	(3,086)	(3,086)
Total comprehensive income for the year	-	-	-	-		(3,086)	(3,086)	(3,086)
Issue of shares	3	(3)	-	-		-	-	-
Share based payments Exchange difference on translation of overseas subsidiary	- -	- -	- -	- -	(153)	(7) -	(7) (153)	(7) (153)
Total transactions with owners, recognised directly in equity	3	(3)	-	-	(153)	(3,093)	(3,246)	(3,246)
Balance at 30 September 2021	516	64,097	1,738	(12,685)	(153)	(13,290)	40,223	40,223
(Loss) for the Period	-	-	-	-		(3,200)	(3,200)	(3,200)
Total comprehensive income for the year	-	-	-	-		(3,200)	(3,200)	(3,200)
Issue of shares	94	3,567	-	-		-	3,661	3,661
Share based payments Exchange difference on translation of overseas subsidiary	- -	- -	- -	- -	20	196 -	196 20	196 20
Total transactions with owners, recognised directly in equity	94	3,567	-	-	20	(3,004)	677	677
Balance at 31 March 2022	610	67,664	1,738	(12,685)	(133)	(16,294)	40,900	40,900

Consolidated cash flow statement

for the 6M period ended 31 March 2022

		6M ended  31 March 2022 Unaudited	6M Ended  31 Mar 2021 Unaudited	18M Ended 30 Sep 2021 Audited
		£000	£000	£000
Cash flows from operating activities
Loss / profit before taxation		(3,205)	(2,201)	(5,830)
Adjustments for:
Depreciation		652	642	2,031
Amortisation of intangible assets		645	517	1,651
Share based payments charge		226	258	(135)
Finance costs		147	(121)	402
Finance income		-	(48)	(5)
		(1,535)	(953)	(1,886)
Changes in working capital:
(Increase) in inventories		844	(316)	(1,429)
Decrease / (increase) in trade and other receivables		2,232	1,701	8,847
(Decrease) / increase in trade and other payables		2,944	513	(6,954)
Cash (used) / generated from operations		4,485	945	(1,422)
Tax recovered		-	225	240
Net cash (outflow) / inflow from operating activities		4,485	1,170	(1,182)
Cash flows from investing activities
Purchase of property, plant and equipment		(395)	(503)	(1,840)
Purchase of intangible assets		(233)	(422)	(664)
Proceeds from sale of property, plant and equipment		-	-	5
Interest received		-	5	5
Net cash (outflow) from investing activities		(628)	(920)	(2,494)
Cash flows from financing activities
Proceeds from capital share issues Lease Obligation borrowings Repayment of borrowings under Lease obligations		3,661 (212) (440)	- - (203)	- 247 (770)
Facility drawdown		-	-	6,052
Interest paid		(2)	121	(348)
Net cash inflow / (outflow) from financing activities		3,007	(82)	5,181
Net increase /(decrease) in cash and cash equivalents		6,864	168	1,505
Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes		3,482 20	3,613 -	2,130 (153)
Cash and cash equivalents at end of year		10,366	3,781	3,482

Notes to the Group financial statements

for the 6 month period ended 31 March 2022

1. GENERAL INFORMATION

Tekmar Group plc (the "Company") is a public limited company incorporated and domiciled in England and Wales. The registered office of the Company is Innovation House, Centurion Way, Darlington, DL3 0UP. The registered company number is 11383143.

The principal activity of the Company and its subsidiaries (together the "Group") is that of design, manufacture and supply of subsea stability and protection technology, including associated subsea engineering services, operating across the global offshore energy markets, predominantly Offshore Wind.

Forward looking statements

Certain statements in this Annual report are forward looking. The terms "expect", "anticipate", "should be", "will be" and similar expressions identify forward-looking statements. Although the Board of Directors believes that the expectations reflected in these forward-looking statements are reasonable, such statements are subject to a number of risks and uncertainties and events could differ materially from those expressed or implied by these forward-looking statements.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The Group's principal accounting policies have been applied consistently to all of the years presented, with the exception of the new standards applied for the first time as set out in paragraph (c) below where applicable.

(a)  Basis of preparation

The unaudited consolidated interim financial information has been prepared under the historical cost convention and in accordance with the recognition and measurement requirements of UK-adopted international accounting standards ("IFRS"). The condensed consolidated interim financial information does not constitute financial statements within the meaning of Section 434 of the Companies Act 2006 and does not include all of the information and disclosures required for full annual financial statements. It should therefore be read in conjunction with the Group's Annual Report for the period ended 30 September 2021, which has been prepared in accordance with IFRSs and is available on the Group's investor website.

The accounting policies used in the financial information are consistent with those used in the Group's consolidated financial statements as at and for the period ended 30 September 2021, as detailed on pages 77 to 85 of the Group's Annual Report and Financial Statements for the period ended 30 September 2021, a copy of which is available on the Group's website, www.tekmargroup.com.

The comparative financial information contained in the condensed consolidated financial information in respect of the period ended 30 September 2021 has been extracted from the 2021 Financial Statements. Those financial statements have been reported on by Grant Thornton UK LLP, and delivered to the Registrar of Companies. The report was unqualified and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. The report did include a reference to a material uncertainty in relation to going concern which the auditor drew attention to by way of emphasis without qualifying their report.

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at the period ended 30 September 2021.

The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events and are believed to be reasonable under the circumstances. Actual results may differ from these estimates. In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the period ended 30 September 2021.

There have been no new accounting standards or changes to existing accounting standards applied for the first time from 1 October 2021 which have a material effect on these interim results. The Group has chosen not to early adopt any new standards or amendments to existing standards or interpretations.

(b)  Going concern

The Group meets its day-to-day working capital requirements through its available banking facilities which includes a CBILs loan of £3.0m currently available to 31 October 2022 and a trade loan facility of up to £4.0m that can be drawn against supplier payments, currently available to 30 November 2022.  The latter is provided with support from UKEF due to the nature of the business activities both in renewable energies and in driving growth through export lead opportunities. The Group held £10.3m of cash at 31 March 2022 including full draw down of the £3.0m CBILS loan and a further £2.6m of the trade loan facility. There are no financial covenants that the Group must adhere to in either of the bank facilities.

The Directors have prepared cash flow forecasts to 30 September 2023.  The base case forecasts include assumptions for annual revenue growth supported by current order book, known tender pipeline, and by publicly available market predictions for the sector.  The forecasts also assume a retention of the costs base of the business with inflationary increases of 2% on salaries and a cautious recovery of gross margin on contracts.  These forecasts show that the Group is expected to have a sufficient level of financial resources available to continue to operate on the assumption that the two facilities described are renewed.

Given the planned recovery of the Group from the impacts of the Covid-19 pandemic and recognising the significant market opportunity for growth in the market for off-shore energy, the Directors have sensitised their base case forecasts for a severe but plausible downside impact.  This sensitivity includes reducing revenue by 15% for the year to 30 September 2022, including the loss or delay of a certain level of contracts in the pipeline that form the base case forecast, and a 15% increase in costs across the group as a whole for the same period.  The base case forecast also includes discretionary spend on capital outlay which has been withheld in the sensitised case. In addition, the directors note there is further discretionary spend within their control which could be cut, if necessary, although this has not been modelled in the sensitised case given the headroom already available.  These sensitivities have been modelled to give the Directors comfort in adopting the going concern basis of preparation for these financial statements.  Further to this, a 'reverse stress test' was performed to determine at what point there would be a break in the model.

Based on this assessment, the Directors are satisfied that, taking account of reasonably foreseeable changes in trading performance and on the basis that the bank facilities are renewed, these forecasts and projections show that the Group is expected to have a sufficient level of financial resources available through current facilities to continue in operational existence and meet its liabilities as they fall due for at least the next 12 months from the date of approval of the financial statements and for this reason they continue to adopt the going concern basis in preparing the financial statements.

Facilities

Within both the base case and severe but plausible case, management have assumed the renewal of both the CBILS loan and trade loan facility in November 2022. In the unlikely case that the facilities are not renewed, the group would aim to take a number of co-ordinated actions designed to avoid the cash deficit that would arise.

The directors are confident, based upon the communications with the team at Barclays, the historical strong relationship and recent bank facility renewal in November 2021, that these facilities will be renewed and will be available for the foreseeable future.

However, as the renewal of the two facilities in October and November 2022 are yet to be formally agreed and the Group's forecasts rely on their renewal, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group's and parent company's ability to continue as a going concern.

(c)  Basis of consolidation

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are deconsolidated from the date control ceases.  Inter-company transactions, balances and unrealised gains and losses on transactions between group companies are eliminated.

(d)  EBITDA and Adjusted EBITDA

Earnings before Interest, Taxation, Depreciation and Amortisation ("EBITDA") and Adjusted EBITDA are non-GAAP measures used by management to assess the operating performance of the Group. EBITDA is defined as profit before net finance costs, tax, depreciation and amortisation. Exceptional items and share based payment charges are excluded from EBITDA to calculate Adjusted EBITDA.

The Directors primarily use the Adjusted EBITDA measure when making decisions about the Group's activities. As these are non-GAAP measures, EBITDA and Adjusted EBITDA measures used by other entities may not be calculated in the same way and hence are not directly comparable.

3. SEGMENTAL REPORTING

Management has determined the operating segments based upon the information provided to the executive Directors which is considered the chief operation decision maker. The Group is managed and reports internally by business division and markets.

Major customers

In the period ended 31 March 2022 there was one major customer within the Marine Civils segment that individually accounted for at least 10% of total revenues (2021 6M: one customer, 2021 18M: one customer). The revenues relating to these in the period to 31 March 2022 were £2,236,000 (2021 6M: £1,957,000, 2021 18m: £7,123,000). Included within this is revenue from multiple projects with different entities within each customer.

Analysis of revenue by region	6M ending 31 March 2022 Unaudited	6M ending 31 Mar 2021 Unaudited	18M ending 30 Sep 2021 Audited
	£000	£000	£000
UK & Ireland	834	4,656	20,312
China	1,657	4,072	7,068
USA & Canada	235	2,548	4,351
Middle East Europe	270 7,412	- 1,201	3,810 7,414
Rest of the World	2,625	1,424	4,079
	13,033	13,901	47,034

Analysis of revenue by market	Mar-22 Unaudited	Mar-21 Unaudited	Sep-21 Unaudited
	£000	£000	£000
Offshore Wind	7,221	8,788	26,899
Other offshore	5,812	5,113	20,135
	13,033	13,901	47,034

Analysis of revenue by product category	Mar-22 Unaudited	Mar-21 Unaudited	Sep-21 Unaudited
	£000	£000	£000
Offshore Energy protection systems & equipment	6,996	8,715	30,584
Marine Civils	5,166	4,265	13,196
Engineering consultancy services	872	921	3,254
	13,033	13,901	47,034

Profit and cash are measured by division and the Board reviews this on the following basis.

	Offshore Energy Mar-22 Unaudited	Marine Civils Mar-22 Unaudited	Group/ Eliminations Unaudited	Total Mar-22 Unaudited
	£000	£000	£000	£000
Revenue	7,867	5,166	-	13,033
Gross profit	1,904	985	-	2,889
% Gross profit	24%	19%	-	22%
Operating (loss)/ profit	(2,233)	99	(924)	(3,058)
Analysed as: Adjusted EBITDA	(1,434)	221	(548)	(1,761)
Depreciation	(530)	(122)	-	(652)
Amortisation	(269)	-	(376)	(645)
Share based payments	-	-	-	-
Exceptional	-	-	-	-
Operating (loss)/ profit	(2,233)	99	(924)	(3,058)
Interest & similar expenses	(88)	-	(59)	(147)
Tax	5	-	-	5
(Loss) / profit after tax	(2,316)	99	(983)	(3,200)

	Offshore Energy Mar-2022 Unaudited	Marine Civils Mar-2022 Unaudited	Group/ Eliminations Unaudited	Total Mar-2022 Unaudited
	£000	£000	£000	£000
Other information
Reportable segment assets	24,684	6,979	27,972	59,635
Reportable segment liabilities	(9,452)	(2,885)	(6,398)	(18,735)

	Offshore Energy Mar-21 Unaudited	Marine Civils Mar-21 Unaudited	Group/ Eliminations Unaudited	Total Mar-21 Unaudited
	£000	£000	£000	£000
Revenue	9,636	4,265	-	13,901
Gross profit	2,616	966	-	3,582
% Gross profit	27%	23%	-	26%
Operating profit/(loss)	(1,737)	292	(925)	(2,370)
Analysed as: Adjusted EBITDA	(1,019)	357	(469)	(1,131)
Depreciation	(577)	(65)	-	(642)
Amortisation	(141)	-	(376)	(517)
Share based payments	-	-	(44)	(44)
Exceptional	-	-	(36)	(36)
Operating profit/(loss)	(1,737)	292	(925)	(2,370)
Tax & Finance cost	195	(3)	15	207
Profit / (loss) after tax	(1,542)	289	(910)	(2,163)

	Offshore Energy Mar-21	Marine Civils Mar-21	Group/ Eliminations	Total Mar-21
	£000	£000	£000	£000
Other information
Reportable segment assets	24,941	7,665	23,336	55,942
Reportable segment liabilities	(5,931)	(3,160)	(3,382)	(12,473)

	Offshore Energy Sep-21 Audited	Marine Civils Sep-21 Audited	Group/ Eliminations Audited	Total Sep-21 Audited
	£000	£000	£000	£000
Revenue	33,837	13,197	-	47,034
Gross profit	8,208	3,032	-	11,240
% Gross profit	24%	23%	-	24%
Operating profit/(loss)	(4,266)	969	(2,136)	(5,433)
Analysed as: Adjusted EBITDA	(1,881)	1,195	(1,429)	(2,115)
Depreciation	(1,805)	(226)	-	(2,031)
Amortisation	(523)	-	(1,128)	(1,651)
Share based payments	(57)	-	421	364
Exceptional	-	-	-	-
Operating profit/(loss)	(4,266)	969	(2,136)	(5,433)
Tax & Finance cost	(50)	(238)	285	(3)
Profit / (loss) after tax	(4,316)	731	(1,851)	(5,436)

	Offshore Energy Sep-21 Audited	Marine Civils Sep-21 Audited	Group/ Eliminations Audited	Total Sep-21 Audited
	£000	£000	£000	£000
Other information
Reportable segment assets	25,048	6,793	25,542	57,383
Reportable segment liabilities	(6,755)	(2,832)	(7,072)	(16,659)

4. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted average number of ordinary shares in issue. Diluted earnings per share are calculated by including the impact of all conditional share awards.

The calculation of basic and diluted profit per share is based on the following data:

	6M ending 31 Mar 2022 Unaudited	6M ending 31 Mar 2021 Unaudited	18M ending 30 Sep 2021 Audited
Earnings (£'000)
Earnings for the purposes of basic and diluted earnings per share being profit/(loss) for the year attributable to equity shareholders	(3,200)	(2,163)	(5,436)
Number of shares
Weighted average number of shares for the purposes of basic earnings per share	52,404,863	51,261,685	51,284,412
Weighted average dilutive effect of conditional share awards	678,432	2,032,894	1,545,392
Weighted average number of shares for the purposes of diluted earnings per share	53,083,295	53,294,579	52,829,804
Profit per ordinary share (pence)
Basic profit per ordinary share	(6.11)	(4.22)	(10.60)
Diluted profit per ordinary share	(6.11)	(4.22)	(10.60)

Adjusted earnings per ordinary share (pence)*	(4.63)	(3.35)	(9.11)
The calculation of adjusted earnings per share is based on the following data:
	Mar-22 Unaudited	Mar-21 Unaudited	Sep-21 Unaudited
	£000	£000	£000
(Loss) / Profit for the period attributable to equity shareholders	(3,200)	(2,163)	(5,436)
Add back:
Amortisation on acquired intangible assets	376	376	1,128
Share based payments	-	44	(364)
Exceptional items	-	36	-
Tax effect on above	(1)	(8)	1
Adjusted earnings	(2,825)	(1,715)	(4,671)

*Adjusted earnings per share is calculated as profit for the period adjusted for amortisation as a result of business combinations, exceptional items, share based payments and the tax effect of these at the effective rate of corporation tax, divided by the closing number of shares in issue at the Balance Sheet date.  This is the measure most commonly used by analysts in evaluating the business' performance and therefore the Directors have concluded this is a meaningful adjusted EPS measure to present.

5. TRADE AND OTHER RECEIVABLES

	Mar-22 Unaudited	Mar-21 Unaudited	Sep-21 Unaudited
	£000	£000	£000
Amounts falling due within one year:
Trade receivables not past due	3,620	5,222	4,861
Trade receivables past due (1-30 days)	1,770	979	3,192
Trade receivables past due (over 30 days)	6,253	898	3,344
Trade receivables net	11,643	7,099	11,397
Contract assets	1,900	10,020	5,432
Other receivables	1,525	606	563
Prepayments and accrued income Deferred Tax Asset	633 139	636 -	542 -
Derivative financial assets	(3)	185	37
	15,837	18,546	17,971

Trade and other receivables are initially recorded at transaction price and thereafter are measured at amortised cost using the effective interest rate. A loss allowance for expected credit losses on trade and other receivables and contract assets is measured at an amount equal to the lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that will result from all possible default events over the expected life of a financial instrument. This assessment is performed on a collective basis considering forward-looking information. The Group considers a financial asset to be in default when the receivable is unlikely to pay its credit obligations to the Group in full without recourse by the Group to actions such as realising security (if any is held).

Trade and other receivables are all current and any fair value difference is not material. 

The derivative financial asset relates to forward foreign currency contracts.

There have been no provisions for impairment against the trade and other receivables noted above.  The Group has calculated the expected credit losses to be immaterial.

6. BORROWINGS

	Mar-22 Unaudited	Mar-21 Unaudited	Sep-21 Unaudited
	£000	£000	£000
Current
Trade Loan Facility Lease liability	2,549 75	3,000 88	2,999 160
	2,624	3,088	3,159
Non-current
CBILS Bank Loan Lease liability	3,088 84	- 247	3,053 131
	3,172	247	3,184

 

END

 

 

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