Tekmar Group Plc (LON:TGP) Chief Executive Officer Richard Turner caught up with DirectorsTalk for an exclusive interview to discuss highlights from final results, refreshed strategy & growth plan, improving market environment, and the key opportunities investors should be looking out for.
Q1: Richard, could you just talk us through the main points of the results that you’ve published?
A1: In many ways, 2024 has been a transitionary year for Tekmar Group. The focus has been on creating a strong and stable platform for future growth and continuing to execute on our refreshed strategy.
In terms of our financial performance, it’s been in line with market expectations, including the highest level of EBITDA that we’ve generated since 2020 and improvements across gross margin, despite the fact that market conditions generally have been quite challenging. So, I think very positive results overall.
That’s really a sign of the consistent commercial discipline and operational performance that we’ve deployed in our business and focused not so much on high revenues but return on sales. You see that through the margins that we’re delivering consistently across all areas of our business.
We’re also starting to see some of the fruits of our medium-term growth plan, and we launched recently our long-term three to five-year strategic plan. So, not only is this a positive step forward for our business, but also there’s very much more to come in terms of our future growth and improved profitability.
Also, a key focus for us over recent years has been on tight cost control and managing working capital extremely well and that’s something that will continue to be a key area of focus as we grow.
Q2: In December, you announced the group’s refreshed strategy and growth plan. Can you talk us through how that’s progressing so far?
A2: The new three to five-year plan is called Project Aurora, and there’s a number of different pillars within that strategy.
First of all, the platform that we’ve got in our business is very strong, and our pedigree in the industry is extremely strong and therefore, the organic growth potential of the business is huge. So, the first pillar in our strategy is to add scale. Our markets are growing after a couple of years where they’ve been reasonably flat, offshore wind, oil and gas are simultaneously expanding quite considerably so, the market opportunity for us is really large. Added into that, our differentiated technology, we expect to be able to grow the business and the top line of the business quite considerably in the coming years.
The second pillar is operational gearing. So, at the moment, we have additional capacity, capacity which is not being utilised, therefore, we can considerably scale up our output and therefore our revenue without needing to invest anything in terms of capex. The gearing effect in our P&L is really interesting and quite profound so if we were to double our turnover, we’ll not double our profitability, it’ll more like quadruple. So, bringing in that scale in order to benefit from that operational gearing is what really underpins the organic part of our three to five-year plan.
The final area is M&A. We have the convertible loan note facility with our major shareholder SCF Partners. We intend to use that plus other funding opportunities to make a series of accretive investments in compatible and scalable businesses within our industry.
So, overall, we intend to make a much larger, more resilient and more financially strong business in the next three to five years so both the organic and the acquisitive side of the business are extremely exciting.
Q3: Now, you mentioned in the results that you’ve seen an improving market environment. What can you tell me about what you’re seeing there?
A3: It’s a fairly unique situation, to be honest. Historically, typically in the offshore energy industry, which you can segment in a number of ways, but typically between offshore oil and gas and offshore renewables, predominantly wind, one’s been up, and the other’s been down, so it’s been quite a cyclic and a very lumpy market. Certainly, in the last few years, offshore wind has had a number of challenges, which has led to project delays and also, oil and gas has had a very difficult time in recent years.
As we look now from 2025 onwards, offshore wind is having quite a strong resurgence. The highest number of projects received financial investment decision in 2023, and that number was exceeded in 2024. So, there’s a really healthy pipeline of projects in that market, still anchored in Europe but expanding globally and also, at the same time, oil and gas investment is not just continuing, it’s also increasing.
So, for the first time, really, the markets are really lined up and growing together. Therefore, the aggregated demand for our products and our services, which are applicable in both of those industries, is very high at the moment but is also set to increase quite considerably in the coming years.
Q4: What are the key opportunities investors should be excited about at Tekmar Group over the next 12 months, say?
A4: Well, I think there’s a number of things but the key focus for us at the moment is order book development. The market in which we are operating is growing, we’re seeing a higher level of inquiries than we’ve ever seen before, we already have sight of more than £400 million of orders in the inquiry book. We look forward to delivering on that and seeing that convert into order intake throughout the process of 2025. The intention for doing that is to build a good quality and sustainable level of order intake that is conducive to much higher levels of revenue in the future.
We’re already seeing signs of that, and we’re already delivering on that, having secured a significant offshore wind contract in the UK post-period end, which will support revenue in 2025 and 2026. So, certainly, delivering on the order book and growing a very, very healthy pipeline of projects to support future growth will be a key highlight for 2025.
The second area, I think, is us starting to deliver on our M&A strategy. We spend a lot of time scanning the market, understanding the M&A universe, identifying against key criteria what types of businesses in which we want to invest in order to become a more complete system solutions provider. We’re currently in active discussions with a number of businesses, which would provide good scalability, but also making creative investments for our group. So, I think that will also be a key highlight for 2025.
