Tekmar Group Plc (LON:TGP) has announced its final results for the year ending 30 September 2024.
The Group’s financial performance is improving with FY24 in-line with market expectations for the Period
· Adjusted EBITDA of £1.7m (FY23: £0.6m) on revenue of £33m (FY23: £36m), in-line with market expectations, highlighting the successful execution of the Group’s profit improvement plan.
· Gross profit of £10.5m (FY23: £8.3m), representing a materially improved gross profit margin of 32.1% (FY23: 23.3%) as remaining low margin backlog from previous years has been worked through in the offshore energy division.
· Operating loss reduced from £7.9m to £3.8m in the year, mainly reflects the profit improvement plan. FY24 includes an impairment charge of £1.5m, a provision of £0.5m in respect of an aged debt balance and £0.7m provision in respect of warranty claims. The prior year includes a £4.7m impairment charge.
· The Group held £4.6m of cash as at 30 September 2024 with net debt of £1.6m. This cash position excludes the SCF Capital Partners £18m convertible loan note facility which remains undrawn and is available to drive growth through acquisitions.
· During the year, the Group completed the divestment of its subsidiary, Subsea Innovation Limited for a total cash consideration of £1.9m. This divestment aligns with Tekmar’s strategy to drive profitable growth and improve its financial performance. As at the year end, £0.2m cash was received with £1.7m being deferred.
· Order book as at the end of January 2025 of £16.4m and net debt of £0.4m.
Strategic plan in place to achieve a step-change in scale and transformation
· Refreshed three-year strategy in-place under new CEO, Richard Turner, who was appointed in September 2024. The plan focuses on achieving greater scale through accelerated profitable organic growth and complementary M&A.
· Robust M&A pipeline developed and the Board is actively assessing M&A opportunities.
· Warranty claims in relation to alleged CPS defects have progressed. The Group has recognised a net charge of £0.7m in FY24 from a £5.8m provision which is largely offset by insurance monies received post year end of £5.2m.
Financial KPIs
| Audited 12MendedSep-24£m | Audited 12MendedSep-23 £mRestated | Audited 12MendedSep-22£mRestated | |
| Revenue1 | 32.8 | 35.6 | 33.2 |
| Adjusted EBITDA2 | 1.7 | 0.6 | (2.3) |
| Gross profit % | 32% | 23% | 23% |
| Net cash/(debt)3 | (1.6) | (1.4) | 1.5 |
Commercial KPIs
| 12MendedSep-24£m | 12MendedSep-23 £m | 12MendedSep-22£m | |
| Order Book4 | 16.4 | 16.7 | 15.0 |
| Order intake5 | 32.4 | 37.4 | 33.2 |
Notes:
| (1) | Revenue is the value of sales recognised in the financial statements in the year. |
| (2) | Adjusted Earnings before interest, tax, depreciation, amortisation and significant one-off items, as defined in CFO review. |
| (3) | Net cash / (debt) represents total cash less banking facilities. |
| (4) | Order Book is defined as signed and committed contracts with clients. |
| (5) | Order intake is the value of contracts awarded in the in the year. |
Current trading and outlook
The Board is encouraged that the market environment is improving and supports sustained demand for Tekmar’s technology and engineering services across our markets. Moreover, we believe Tekmar’s differentiated technology positions the Group to outperform this improving market. This is supported by the Group’s developing sales pipeline, which the Board expects will convert to orders and revenue over time.
Accordingly, we believe a reasonable expectation is for EBITDA for FY25 to be consistent with FY24, and for the phasing of EBITDA generation to be second half weighted. This is aligned with our primary focus on increasing order intake through 2025 to position the Group for improved performance in 2026 and beyond.
The Company continues to maintain tight controls on managing the cash requirements of the business to support growth and working capital, including disciplined capex and targeted investment in products and services that represent the greatest opportunity for near-term growth.
Richard Turner, CEO, commented: “Overall, these results demonstrate we now have a stronger platform from which we can execute our medium-term plan to deliver true scale and diversification. FY24 was a transitionary year for Tekmar, where we focused on the basics – providing high-quality engineering, delivering on time and maintaining consistent commercial discipline. This supported the Group reporting its highest level of Adjusted EBITDA since FY20, and a material improvement in gross margin to 32%. Looking ahead, our markets are aligned for growth like never before. Our strategy looks to capitalise on our industry pedigree to drive organic growth across all revenue streams, leverage our operational gearing to enhance our returns on sales, drive value through strategic M&A and generate cash to build our reserves and fuel our growth.”
Chairman’s Statement
I joined the Board in April 2023, initially as Non-Executive Director, and was appointed Chair in June 2024. The period of time with which I have been involved with Tekmar has strengthened my conviction about the opportunity we have to make Tekmar a stand-out offshore energy business – a business that delivers exceptional value for customers and creates significant value for shareholders. This is what drives us as a Board. We start from a position of unmatched experience in the offshore wind market and a reputation across the broader industry for engineering and technical excellence. Our growth strategy builds on these strengths to create a business of much greater scale, through both organic growth and M&A. 2025 is where we underpin the foundations of this growth to support sustained and profitable growth in the years to follow.
2024 was a year of stabilisation for the business and for the industry more widely. The financial results for the year reflect this, with Adjusted EBITDA of £1.7m on revenue of £32.8m. Both divisions were profitable at the Adjusted EBITDA level such that the Group overall delivered its highest level of Adjusted EBITDA since FY20. This was achieved through disciplined execution of projects supporting higher gross margin.
Going forward, we are focused on fundamentally transforming the financial strength of the business through organic growth complemented by meaningful M&A.
Richard Turner was appointed as CEO in September 2024 and has set the strategic plan to build this value. Richard has been involved in the energy industry for over 15 years and brings a strong track record in driving true scale and transformation in his previous leadership roles.
Our organic growth plan aims to deliver record financial performance for the Group through outperforming an improving and growing market and benefitting from our operational leverage.
Our M&A strategy is based on accelerating scale and strengthening our offering through a logical broadening of the portfolio. Overall, the successful execution of our strategy will build an exceptional and profitable platform with the attributes that investors value.
One of our primary responsibilities as a Board is to support and challenge Richard and the team to deliver from here – to scale the business effectively and to accelerate growth, whilst critically making Tekmar a durable business that will be successful “no matter what” the path of energy transition looks like.
As we execute on these plans, we are fortunate to draw on the experience, relationships and insights of our Board. It is a marker of our ambition that in 2024 we were able to secure the appointments of Lars Bondo Krogsgaard and David Kemp as Non-Executive Directors. Both bring complementary and highly relevant experience gained at large, global organisations. That they chose to join Tekmar highlights the scale of the opportunity we have, and we look ahead with confidence and renewed purpose as we unlock the true potential of Tekmar.
During the year, and in light of the appointments of Lars and David, Ian Ritchey and Julian Brown stepped down from their roles on the Tekmar Board. Julian had been a member of the Board since the IPO in 2018, and Ian joined the Board in 2021.
In February 2025, Alasdair MacDonald stepped down from his position as Director of the Group. Alasdair had been on the Board of Tekmar for over a decade, both as Chairman and CEO.
On behalf of the Board, I would like to reiterate our thanks to Alasdair, Ian and Julian for their contributions to Tekmar over their respective periods, which included supporting the business to navigate the market-wide challenges of recent years.
A final comment on our people. Tekmar is dependent on the capability and commitment of its employees. We are fortunate that our colleagues bring unrivalled experience and expertise to address what can often be complex customer requirements. They demonstrate their commitment to Tekmar on a daily basis and this translates to long-standing service to the business and underpins our pedigree of engineering excellence.
This commitment to Tekmar has been sustained as the business has navigated its way through some challenging periods in recent years. As a Board, we appreciate the hard work of our colleagues as they’ve supported our improved performance for the benefit of all our stakeholders.
The pressures in the industry are abating and we have a focused growth strategy to deliver true scale for Tekmar as a leading global offshore energy services business.
Our commitment as a Board is to be careful stewards of capital and to promote the best interests of Tekmar’s people and shareholders as we position the business for long-term success.
Thank you.
Steve Lockard
Chairman
Chief Executive Officer’s Review
I joined the business as CEO in September 2024. Having worked across the offshore energy markets for more than 15 years, I know the Tekmar business, the customers and supply chain. It is clear to me that Tekmar has exceptional growth potential.
In December 2024, alongside our trading update for FY24, we communicated to the market a summary of our three-year plan to transform Tekmar and realise this potential. We are executing this plan with a business that is positioned for growth and with great people and strong industry pedigree. The services we offer across the full lifecycle of offshore energy projects from front end engineering and design, installation, operation and decommissioning perform a critical role in ensuring security and certainty of supply from offshore assets. Our holistic offering across our protection and assurance technology and engineering services sets us apart in the market and puts us ahead of the competition.
FY24 Performance and FY25 Outlook
FY24 was a transitionary year for Tekmar, where we focused on the basics – providing high-quality engineering, delivering on time and maintaining consistent commercial discipline.
The Group reported Adjusted EBITDA of £1.7m, an increase of £1.1m on a like-for-like basis reflecting the disposal of Subsea Innovation. The improvement in EBITDA primarily reflects consistency of execution, with a material improvement in gross margin to 32% and was achieved despite market conditions which remained challenging in FY24. This is a stable and solid platform against which the business can drive profitable growth.
On a statutory basis, the Group’s result for the period before tax from continuing operations was a loss of £4.5m, an improvement of £4m versus the previous year. FY24 includes an impairment charge of £1.5m, a provision of £0.5m in respect of an aged debt balance and £0.7m provision in respect of warranty claims. The prior year includes a £4.7m impairment charge. This reflects an underlying trading improvement of £0.8m.
The Group closed the year with £4.6m of cash at bank (2023: £5.2m) in addition to the availability of undrawn working capital debt facilities of £0.8m with Barclays. The Group’s net debt position, including all debt except right of use property leases, was £1.6m at the end of the financial year (2023: £1.4m).
As we look ahead, we are encouraged that the market environment is improving and supports sustained demand for Tekmar’s technology and engineering services across our markets. Moreover, we believe Tekmar’s differentiated technology positions the Group to outperform this improving market. This is supported by the Group’s developing sales pipeline, however it will take time for this activity to convert to orders and revenue.
Accordingly, we believe a reasonable expectation is for EBITDA for FY25 to be consistent with FY24, and for the phasing of EBITDA generation to be second half weighted. This is aligned with our primary focus on increasing order intake through 2025 to position the Group for improved performance in 2026 and beyond.
The Company continues to maintain tight controls on managing the cash requirements of the business to support growth and working capital, including disciplined capex and targeted investment in products and services that represent the greatest opportunity for near-term growth.
Favourable Markets Support Sustained Demand for Tekmar’s Technology
The key indicators across offshore energy markets are consistent with an improving market environment.
In offshore wind, there is now a higher volume of projects being sanctioned than ever before as the market moves into recovery and builds momentum after the challenges of recent years. The lead indicators support this improving trajectory, with record Final Investment Decision (“FID”) in 2023 and 2024, with 12.3GW and 13.1GW respectively reversing the pause in 2022 when 0.8GW of offshore wind capacity was consented. Linked to this, industry analysts forecast 1,000 turbines per year will be installed through 2028, increasing to 2,000 by 2030. Demand is expanding globally, with Europe remaining the anchor growth market, particularly the UK. In addition, turbine OEMs are reporting improved financial performance and cable manufacturers are reporting stronger backlogs. Activity levels across the oil and gas industry highlight the continued high and sustained levels of CAPEX and OPEX, with this investment increasingly recognised as essential to support energy transition. These factors in turn indicate supply chain capacity will be stretched and supports sustained demand for Tekmar’s technology and engineering services.
Our three-year plan supports a step-change in Tekmar’s scale
We have developed a three-year plan rooted in driving significant organic growth across the Group’s existing portfolio of products and services, along with an iterative product development programme and complementary M&A. This addresses the importance of Tekmar achieving greater scale with significant profitability gains driven by the benefit of operational gearing. The following opportunities are integral to the plan:
· capitalise on our industry pedigree and differentiated technology to drive order intake and outperform a growing market
· drive higher utilisation rates across the business, achieved through the balance of scale of projects and duration of projects
· reweighting of revenue streams, with a shift to higher margin services
· investment in our grouting capability which provides compelling near-term returns
· incremental investment in our technology roadmap to support product development and market diversification
· resolve outstanding legacy issues relating to notifications of potential defects
· continued refinement of the org model and deployment of Tekmar best practice programme across the business.
Our M&A strategy complements the organic growth opportunity
The organic growth plan is complemented by the Group’s ambitious M&A strategy to deliver additional scale and diversification. This plan is supported by the £18m of funding available through the SCF convertible loan note instrument and the relevant experience and relationships across the Board and the broader business.
Accelerating the level of EBITDA and cash generation of the Group is key in our assessment of opportunities as we look to build scale, strengthen the technology and services we offer customers, and expand our reach in targeted geographies. A robust acquisition pipeline has been developed and the Board is actively assessing complementary acquisition targets.
Ongoing legacy defect notifications
Tekmar has continued its commitment in working with relevant installers and operators to investigate further, the root cause of ongoing legacy defect notifications.
This has been undertaken without prejudice and on the basis that Tekmar has consistently denied any responsibility for these issues. Given the extensive uncertainties, the RCA investigations have not concluded that the Tekmar products are defective.
Working in collaboration with the relevant two customers, Tekmar has explored the insurance available for such matters notwithstanding Tekmar’s position regarding responsibility and liability. In this regard, the Group has negotiated a commercial settlement with its EXPL insurance provider of £5.2m in relation to the above claims. The insurance proceeds are available for use at the discretion of the Group in settlement of the above claims, with any unused cash repayable to the insurer.
Within the result for FY24 there is a net charge of £0.7m recognised in the P&L. This represents the net impact of the provision of £5.8m offset by the insurance monies received post year end of £5.2m.
The business is positioned for growth, our markets are aligned for growth and our strategic plan focuses on delivering this growth. I have a track record of driving growth in my previous leadership roles and we have the opportunity to do the same at Tekmar building our financial strength. We have renewed purpose for what Tekmar can achieve and we look forward to updating investors with our progress over the course of the year.
Richard Turner
Chief Executive Officer
3 March 2025
CFO Review
The Group delivered further improvement in its financial performance in FY24, delivering the highest full-year Adjusted EBITDA reported by the Group since FY20. This was driven primarily as a result of significant improvement in gross profit margins despite market conditions remaining challenging during the period.
A summary of the Group’s financial performance is as follows:
Note, due to the sale of Subsea Innovation Limited in the year, comparative figures have been restated to exclude Subsea Innovation Limited as this is now included as discontinued operations in the Statement of Comprehensive Income
| Audited 12M ended Sep -24 £m | Audited12M endedSep-23£mRestated | |
| Revenue | 32.8 | 35.6 |
| Gross Profit | 10.5 | 8.3 |
| Adjusted EBITDA(1) | 1.7 | 0.6 |
| LBT from continuing operations | (4.5) | (8.5) |
| Loss for the period from continuing operations | (5.1) | (8.8) |
| EPS | (3.74p) | (9.2p) |
| Adjusted EPS(2) | (1.00p) | (3.2p) |
(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 which 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, £160k (£508k FY23), amortisation on acquired intangibles £98k (£168k FY23), Impairment of goodwill £1,546k (£4,745k FY23), warranty provision £656k (2023: £nil), expected credit loss £520k (2023:£nil) and other one-off items £399k (FY23: £430k) and the tax impact of £351k (FY23: £22k).
On a statutory basis, the Group loss from continuing operations was £5.1m (FY23: £8.8m loss).
Overview
For the year ended 30 September 2024, the Group reported revenue of £32.8m, reflecting an 8% decrease compared to FY23. The decrease in revenue is due to the Marine Civils Division delivering lower revenue in the period as expected against a particularly strong prior year comparator.
Despite the revenue decrease, the Group achieved a 27% increase in Gross Profit to £10.5m versus £8.3m in the previous reporting period. This improvement in margin performance is attributable to the success of the Group’s margin improvement action plans which have been focused on securing contracts with suitably attractive project economics followed by disciplined execution of these projects.
The Group’s adjusted EBITDA for the year was £1.7m, compared to £0.6m in FY23. This was primarily as a result of stronger gross margins.
The Group’s loss before tax from continuing operations of £4.5m has been impacted by a goodwill impairment charge in relation to the offshore energy division of £1.5m, net charge to the P&L of £0.7m in relation to the warranty related matters and £0.5m in relation to expected credit losses discussed below.
Discontinued Operation
As part of Tekmar Group’s strategic focus on strengthening the Group’s performance through efficient resource allocation and portfolio management, during the period, the Group completed the divestment of Subsea Innovation Limited to Unique Group for £1.9m. As a result of the disposal, the financial performance of Subsea Innovation Limited (sold in May-24) is classified as a discontinued operation and consolidated into a single line item in the Statement of Comprehensive Income. This line item includes the post-tax profit or loss of the discontinued operation, as well as any gains or losses from the sale or remeasurement of the assets associated with the discontinued operation. A loss from discontinued operations of £1.3m has been recognised in FY24, further details can be found in note 26 of the Group financial statements. The prior periods have been restated to reflect the discontinued operation ensuring consistency and comparability.
Revenue and Gross Profit
| Revenue by operating segment | Revenue by market | ||||||
| £m | 12MFY24 | 12M FY23 | £m | 12MFY24 | 12MFY23 | ||
| Offshore Energy | 19.5 | 17.3 | Offshore wind | 17.1 | 17.7 | ||
| Marine Civils | 13.3 | 18.3 | Other offshore | 15.7 | 17.9 | ||
| Total | 32.8 | 35.6 | Total | 32.8 | 35.6 | ||
| Gross profit by operating segment | Gross Profit by market | |||||||
| £m | 12MFY24 | 12M FY23 | £m | 12MFY24 | 12MFY23 | |||
| Offshore Energy | 5.7 | 3.0 | Offshore wind | 5.5 | 4.8 | |||
| Marine Civils | 4.8 | 5.3 | Other offshore | 6.0 | 5.1 | |||
| Unallocated costs | (1.0) | (1.6) | ||||||
| Total | 10.5 | 8.3 | Total | 10.5 | 8.3 | |||
It is encouraging to see a continuation of revenue growth in the Offshore Energy division during the period. Revenues in this division increased by 13% in FY24 and 24% in FY23. The Offshore Energy division incorporates Tekmar Energy and Ryder business units, both of which are beginning to benefit from the improvement in the offshore renewables market and a higher volume of projects being sanctioned.
Marine Civils division experienced a decline in revenue for the 12-month period of £13.3m, which is £5.0m lower compared with revenue of £18.3m for the previous 12-month period. The prior year performance had been particularly strong and included several large Middle East contracts which were completed in the prior period.
Consistent with the approach of the Offshore Energy division, the Marine Civils division, comprising Pipeshield International, has focused on delivering more profitable contracts. As a result, this has led to higher gross margin for the division in comparison to previous periods since acquisition, despite the decrease in revenue in the period.
Marine Civils has continued to supply the core Pipeshield product lines as well as further investment in the grouting service line offering. This diversification, which has predominantly been in the Middle East to date, is expected to continue as a growth area for the Group and will be replicated in other regions as the asset base is increased.
The gross profit for the reporting period for the Group increased by £2.2m to £10.5m, with a significant increase in gross profit percentage from 23% in FY23 to 32% in FY24. The growth in profit margins results from the Group’s improved contracting policies and project execution. There was also a specific focus in the year on strategic supply chain initiatives which further contributed to the improvement.
Within the Offshore Energy division, gross margins increased from 17% for FY23 to 29% for FY24. FY23 was impacted as the opening order book included two, sizable, lower margin offshore wind contracts awarded in prior periods and had experienced material cost escalations from wider macro-economic factors since their award in 2021. One of these contracts was substantially complete in FY23 with the other being substantially complete in FY24 and will have no material impact on FY25 margin.
Gross profit margin within Marine Civils increased to 35.9% from 29.1%. This was primarily due to strong contribution from variation orders in the period and also service based income from equipment hire. Whilst this level of gross profit margin is not expected to be repeated in FY25 to the same extent, the Group is focused on the diversification of revenues to offshore services alongside traditional protection and stabilisation product sales and has incrementally invested in the asset base throughout the period to support this transition.
Operating expenses
Operating expenses for the 12-month period to 30 September 2024 were £14.4m compared to £16.3m for the previous 12-month period ending 30 September 2023. The decrease of £1.9m relates largely to a goodwill impairment relating to the offshore energy CGU of £4.7m in the prior period versus an impairment of £1.5m in FY24, offset by a £0.5m charge to the P&L for expected credit losses and £0.7m warranty provision charge to the P&L for ongoing defect notices. Other costs have been managed carefully and remained stable despite the inflationary environment.
Adjusted EBITDA
Adjusted EBITDA is a primary measure used by management to monitor and provide a consistent measure of trading performance from one period to the next. The adjustments to EBITDA remove 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 measure 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 FY23. The adjustment to EBITDA for foreign exchange is also shown in FY24 for consistency and comparability with FY23 results. For transparency of the FY24 result, details of foreign exchange transactions for FY24 are highlighted below.
The below table shows the adjustments that have been made to calculate adjusted EBITDA in the year ended 30 September 2024.
| EBITDA Reconciliation (£m) | 12 months Sep-24 | 12 months Sep-23 |
| Reported operating (loss)/profit | (3.8) | (7.9) |
| Amortisation of acquired intangible assets | 0.1 | 0.1 |
| Amortisation of other intangible assets | 0.3 | 0.4 |
| Depreciation on tangible assets | 0.9 | 0.7 |
| Depreciation on ROU assets | 0.4 | 0.5 |
| EBITDA | (2.1) | (6.2) |
| Adjusted items: | ||
| Share Based Payments | 0.2 | 0.5 |
| Impairment of goodwill | 1.5 | 4.7 |
| Exceptional items – Bonus | – | 0.3 |
| Implementation of accounting System | 0.2 | – |
| Warranty provision | 0.6 | – |
| Expected credit loss | 0.5 | – |
| Foreign exchange losses | 0.6 | 0.9 |
| Restructuring costs | 0.2 | 0.3 |
| Adjusted EBITDA | 1.7 | 0.6 |
EBITDA and Adjusted EBITDA have shown significant improvement from FY23 in line with our profit improvement focus. Growth in adjusted EBITDA is attributed to the growth in Gross Profit discussed above. Both divisions reported positive Adjusted EBITDA for FY24, which has resulted in an overall positive Adjusted EBITDA for the Group in the period.
| Adjusted EBITDA by division £m | |||||||
| £m | 12MFY24 | 12MFY23 | |||||
| Offshore Energy | 1.7 | (1.2) | |||||
| Marine Civils | 2.6 | 3.5 | |||||
| Group costs | (2.6) | (1.8) | |||||
| Total | 1.7 | 0.6 | |||||
Group costs increased by £0.9m largely due to an increase in staff costs of £0.4m; wage inflation and increased share based payments related to management incentive schemes launched, £0.2m increase in professional fees and £0.1m higher bank facility fees.
Subsea Innovation Divestment
In May 2024, Tekmar Group plc completed the divestment of Subsea Innovation Limited (SIL) to Unique Group for a cash consideration of £1.9m. This strategic move was part of Tekmar’s broader plan to enhance its financial stability and focus on core operations. SIL, which specialises in subsea products and engineering consultancy for the energy sector, had previously reported an adjusted EBITDA loss of £1.4m in 2023. The sale has allowed Tekmar to reallocate resources more efficiently and invest in growth areas. Tekmar retained ownership of Innovation House, the premises previously occupied by SIL. As part of the transaction, the Group agreed for Subsea Innovation to use the property on a rent-free basis for a 12-month period following Completion, with an option for both parties to enter into a lease agreement for a further 12 months following the rent-free period. This divestment aligns with Tekmar’s strategy to drive profitable growth and improve its financial performance.
Profit/(loss) for the year
The result for the period is a loss of £6.6m (FY23: Loss of £10.1m) which is shown in the Statement of Comprehensive Income. The result includes a £1.3m loss attributable to the disposal of Subsea Innovation with the loss for the period from continuing operations being £5.3m.
Foreign currency
The Group has continued to see growth in international markets and, as a result, this increases the Group’s exposure to fluctuations in foreign currency rates. During the year, the Group was impacted by foreign exchange losses of £0.6m. These losses have been accounted for within operating expenses.
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 asset of £0.3m.
The Group predominately trades in pounds sterling with its principal currency exposures including approximately 17% of revenue denominated in Euros and 23% denominated in US dollars. In prior years there has been a material level of trading in Chinese RMB which has now reduced although the Group had £2m billed debtors in RMB at the FY24 period end. On certain overseas projects the Group can, in some cases, 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. The Groups net loss from FX in FY24 is generated predominantly from outstanding balances denominated in RMB, the uncertainty surrounding the recovery of these balances has resulted in the Group being unable to effectively hedge against these transactions which have resulted in FX losses of c.£0.5m over the past 2 financial years.
Cashflows and Balance Sheet
A summary balance sheet is presented below:
| Balance Sheet | |||
| £m | FY24 | FY23 | |
| Fixed Assets | 4.5 | 6.8 | |
| Other non-current assets | 19.6 | 19.4 | |
| Inventory | 1.9 | 2.1 | |
| Trade & other receivables | 20.3 | 19.7 | |
| Cash | 4.6 | 5.2 | |
| Current liabilities | (20.9) | (16.9) | |
| Non-current liabilities | (1.8) | (1.7) | |
| Equity | 28.2 | 34.6 | |
Other key balance sheet items
Included within other current liabilities is a provision of £5.1m and non-current liabilities a provision of £0.7m. The provision covers the warranty matters outlined in note 20 of the Group financial statements, with these matters having been disclosed as contingent liabilities in the prior year’s financial statements. A corresponding receivable due from the Groups EXPL insurance of £5.2m is included within Trade and other receivables. The net charge in the year to the P&L is £0.7m.
Cashflows and cash balances
The gross cash balance at 30 September 2024 was £4.6m with net debt (gross cash less bank facilities) of £1.6m. The Group’s cash position at year end is comparable to the prior period end, where gross cash was £5.2m with net debt of £1.4m.
The Group has extended its CBILs facility of £3.0m for a further 12 months to October 2025 and the UKEF backed trade loan facility of £4.0m remains available to Tekmar, with the next annual review date with Barclays Bank being in June 2025. 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 forms part of the Directors going concern assumptions which are detailed in the notes to the financial statements below.
Of the £4.0m trade loan facility available, £3.2m was drawn against supplier payments at the year end and is repayable within 90 days of drawdown. The FY23 comparative is £3.6m. The change in the value borrowed is dependent on the timing of the loan drawdowns and the Groups immediate funding requirements. The trade loan facility balance and the CBILS loan of £3.0m are reported within current liabilities as both are fully repayable within 12 months of the balance sheet date.
For FY24, the Group generated cash flows from operations of £3.3m. The main driver of the increase was the successful recovery of final milestone balances on completed contracts within the Middle East region. Historically these balances have taken longer to be recovered.
The Group’s ageing profile for trade receivables significantly improved, with almost 50% of balances for FY24 being within standard credit terms compared to 21% in the comparative period. This benefit has arisen from the Group’s enhanced contracting terms and cash collection processes implemented in previous periods.
The Group holds a debt of £2.0m outside of standard credit terms with a customer in China.
Historically, the Group has recovered 100% of receivable balances and no credit losses have previously been accounted for. However, at the year end, the Group has made a credit loss provision in line with IFRS9 of £0.5m in relation to a specific historic debt in China. The Group continues to operate in global markets where payment practices surrounding large contracts differ 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 30 September 2024 the value of these overdue trade receivables was £2.0m, of a total outstanding trade receivable balance for the entity was £2.2m. These amounts are not in dispute from the customer, however given the range of possible outcomes and duration of the outstanding debt, the Group have made an expected credit loss provision in relation to the outstanding China debt of £0.5m. Further details can be found in note 16 of the Group financial statements.
All other receivables are considered to be fully recoverable on the basis that previous trading history sets a precedent that these balances will be received.
The net cash outflow from investing activities was £2.0m with Group capital expenditure in the period totalling £1.9m. These projects primarily relate to investment in Grouting equipment and other service-related assets which are able to provide near term cash and profit generation. An additional £0.2m also related to the Group’s main manufacturing facility.
Relating to the sale of Subsea Innovation, the Group received £0.2m cash proceeds. The remaining deferred consideration of £1.7m relating to this disposal falls into FY25 and at the year-end is included within other receivables on the balance sheet. £1.2m of the deferred consideration has been received since the balance sheet date with a further £0.5m due 12-months following the transaction date.
Net cash outflows from financing activities of £1.6m related to £0.4m net movement on the Group’s trade loan facility, £0.5m due to the repayment of lease borrowings with £0.8m attributable to interest payments on the Group’s banking facilities.
As noted in the basis of preparation below in the notes to the financial statements, due to the required annual renewal of our banking facilities and the uncertain timing of contract awards the Group has disclosed a material uncertainty in relation to going concern. Management remains confident that the relationship with Barclays and positive growth outlook for the offshore energy market will ensure sufficient liquidity for the Group.
A continued focus on cash management remains to ensure growth and working capital can be supported as the business scales.
Summary
The business improvement measures implemented in recent years have led to a stabilised and streamlined business with both divisions now delivering profit at the Adjusted EBITDA level. There is a strong foundation now from which the Group can scale and become more resilient. The key drivers of this being diversified revenues and cashflows, operational gearing benefits and improving market conditions in sectors in which Tekmar operates.
Leanne Wilkinson
Chief Financial Officer, Tekmar Group
3 March 2025
