Foundation for Growth
Annual Report and Accounts 2019
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Strategic
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Finance
Highlights for the year
Strong result in H2 with FY19 in line with revised market expectations
Revenue growth of 28.3% with Compound Annual Growth Rate over last five years at 21.5%
Strong balance sheet, following successful IPO in June 2018, enabling the Group to deliver on its growth
and diversification strategy
Adjusted EPS of 6.0p
100% market share of all cable protection systems into European Offshore Wind (“OWF”) maintained by
Tekmar Energy
Two acquisitions completed in the year:
Subsea Innovation in September 2018, adding complementary products in shared markets with specialist
engineers to aid new product development
Ryder Geotechnical on 28 March 2019 bringing earlier engagement to customers.
Diversification strategy has broadened the Group’s technology offering to 47 products (FY18: 20)
Market Visibility at a record high of £50m a 44% increase year on year
Long term global outlook in the Group’s markets continues to be positive with oil price stable above $50 a
barrel and the offshore wind outlook up by 51.3%
02
Contents
Review
03 Highlights for the year
04 Chairman’s statement
08 Visions and Values
10 Investment case
12 Chief Executive Q&A
Strategic Report
18 Market review
22 Our business model
24 Track Record in offshore wind
28 Our strategy in action
30 Key performance indicators
32 Risk Management
36 Sustainability and CSR
38 Chief Executive Review
42 Chief Financial Officer’s review
Governance
Financial Statements
72 Independent Auditor’s Report
78 Consolidated statement of comprehensive income
79 Consolidated balance sheet
80 Consolidated statement of changes of equity
81 Consolidated cash flow statement
83 Notes to the consolidated financial statements
116 Parent company balance sheet
117 Parent company statement of changes in equity
118 Notes to the company financial statements
Additional Information
125 Shareholder information
126 Glossary
48 Chairman’s introduction to governance
50 Corporate Governance Statement
54 Board of Directors
56 Management Team
58 Audit Committee Report
60 Remuneration Committee Report
64 Nomination Committee Report
66 Directors’ Report
68 Statement of Directors’ responsibility
Tekmar Group plc’s vision is
to be the partner of choice for
the supply and installation
support of subsea protection
equipment to the global
offshore energy markets.
Cautionary note and disclaimer
Forward-looking statements. This Annual Report contains certain forward-looking statements with respect to the operations, strategy, performance, financial condition
and growth opportunities of the Group. By their nature, these statements involve uncertainty and are based on assumptions and involve risks, uncertainties and other
factors that could cause actual results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information
available at the date of preparation of this Annual Report and, other than in accordance with its legal and regulatory obligations, the Company undertakes no obligation
to update these forward-looking statements. Nothing in this Annual Report should be construed as a profit forecast.
Non-GAAP measures and why we use them. Throughout this report we present underlying reports and measures. These underlying measures allow stakeholders to
better compare the performance of the Group between current and prior periods by removing the impact of one-off or non-operational items. Exceptional items are
explained in the Notes to the accounts and a reconciliation of GAAP to non-GAAP measures is also included within the report.
04
Chairman’s Statement
Alasdair McDonald
Whilst the level of growth in profitability in FY19 was
affected by the timings in procurement activity in the
offshore wind industry, our continued track record in
offshore wind array projects in Europe demonstrates
the business’ unique presence in this market place and
provides a strong platform for growth over the next five
years.
I believe the Group’s results for the full year demonstrate
the strength of the management team and the people
within the business. Whilst the level of profitability
expected at the outset of the year has unavoidably been
affected by the change in product mix, the management
team has worked hard to deliver record revenues,
making good progress on the diversification of revenue
streams, both organically through innovation and via
complementary acquisitions supporting
the overall
Group’s long term vision.
Delivery on strategy
The successful IPO strengthened the Group’s balance
sheet considerably, enabling us to deliver on our stated
strategic objective to diversify revenue streams and build
a solid foundation for expansion and growth.
Maintain dominance in the existing and growing offshore
wind market
I am pleased to report that, once again, we maintained
our 100% market share for Array Cable Protection
Systems in Europe. We achieved this through TekLink’s®
intrinsic value proposition, which offers a total solution to
customers, not just a product. In addition, we continue to
harness technology and evolve the product which is now
in its eighth generation.
Our overall market share of the global offshore wind
market is circa 75%. We have an office in Shanghai,
where we are seeing significant growth opportunities,
supported by sales agents in Busan, Singapore and Abu
Dhabi to support our global position.
I am pleased to present Tekmar Group’s results for the
year ended 31 March 2019 (“FY19”), the first since our
successful IPO in June last year. It has been an exciting
and productive year for the Group, though not one
without its challenges, which I am pleased to report that
the team successfully addressed. The Group showed its
resilience in FY19, delivering substantial revenue growth
of 28%, despite facing a rapid change in the procurement
pattern from its major offshore wind customers, which
is detailed in the CEO’s Statement. This industry-wide
change, which we reported in our H1 19 results, created
a delay in the award of major contracts for our core
product TekLink.
In line with our strategy to broaden the Group’s technology
offering, we completed two complementary acquisitions
during the year; Subsea Innovation in September 2018
and Ryder Geotechnical just prior to the year end. Both
businesses have been successfully integrated and we
are delighted with their contribution to the Group.
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£195m
Total sales enquiry book
grew to a record of £195m,
(a 35% increase YOY)
£50m
Market visibility at a record
high, a 44% increase YOY.
28%
Year on Year Growth in
Revenue (FY19 vs FY18)
97% increase >20% CAGR
Preferred Bidder Status
FY19 vs FY18 (£14.9m vs £7.6m)
Markets showing long term growth of >20%
CAGR predicted from 25.2 GW to 211.2 GW of
projects underway by year 2028
5 year
revenue
growth
28.1
21.9
19.4
17.2
10.6
FY15
FY16
FY17
FY18
FY19
Offshore Wind (%)
Subsea (%)
Engineering (%)
75
24
1
Total Revenue (£m)
Gross Profit (£m)
Gross Profit Margin (%)
10.6
2.6
25
81
15
2
17.4
6.6
38
89
8
3
19.4
8
41
83
16
1
21.9
8.9
41
68
30
2
28.1
9.9
35
06
Overseas growth
We continued our expansion into international markets
and established an entity in China, a country where
we expect to see significant growth for the Asia Pacific
offshore wind market.
In the Middle East, we delivered a first ‘In-Kingdom’
project to National Petroleum Construction Company, as
part of its long-term agreement with Saudi Aramco.
Grow market share in subsea oil and gas
The acquisition of Subsea Innovation, shortly after the
IPO, increased the Group’s access to the oil and gas
market, brought significant potential for cross-selling
opportunities and increased our technical capabilities
and engineering capacity. The Group businesses have
already worked together on a number of high profile
projects, adding intrinsic customer value.
Add new product variations
During the year, we increased the number of products
that we are able to offer to new and existing clients from
20 to 47 across all sectors.
two strategic acquisitions
Make selective acquisitions
We made
In
September, we acquired Subsea Innovation and, in
March 2019, Ryder Geotechnical. Both companies
met our strategic objectives of increasing the Group’s
technology and customer base and extending the Group
offering into full lifecycle revenues on projects.
in FY19.
Governance
We adopted the QCA Corporate Governance Code,
which is available to view on the Group’s website. The
Board recognises the importance of high standards of
corporate governance and has appointed In-House
Legal Counsel to support this.
The Group has a strong culture of excellence and safety
first, which is supported by detailed and audited policies
and I am pleased to note that Tekmar Energy was one of
the first UK businesses to be accredited to ISO 45001,
awarded by DNV. During this period of increased activity,
the Group also achieved zero lost time incidents, putting
its people and their safety first.
People
I would like to take this opportunity to thank all our people.
Events beyond the Board’s control made this a more
challenging 12 months than anticipated. Our people
have shown spirit and resilience to produce a strong H2
performance and, thanks to their efforts, the Group has
delivered the best possible outcome for its shareholders.
Outlook
Market Visibility, our primary measure for Group outlook,
was up 44% at £50.2m. This measure is calculated from
the sum of the previous 12 months’ turnover plus pending
contracts under negotiation on which we have Preferred
Bidder Status and the Group’s Secured Order Book.
We expect the Group’s FY20 results to follow similar
weighting to that which we experienced in FY19 with
the majority of revenue and profit being secured in the
second half of the year. This seasonality has two primary
drivers: offshore projects are generally executed during
the summer months and the timing of the award of
Government subsidies. As our diversification strategy
develops through acquisition and product development,
we anticipate that the Group’s results performance will
smooth out over future years.
At the year end, our Order Book, which reflects the
seasonality of contract awards as outlined above,
stood at £7.2m - an increase of 33% on FY18. Pending
contracts, on which we hold Preferred Bidder Status,
have increased by 97% to £15m. The Group’s Enquiry
Book improved by 35% to £195m and our conversion
rate on the bid to win ratio has increased from 56% to
62%.
The market outlook for offshore wind and oil and gas are
both strong, with offshore wind CAGR forecasts of above
20% between 2018-2028 and demand for products for
the oil and gas market at a three-year high.
The Group remains focused on its strategy as stated at
IPO to deliver long-term growth through the expansion
of new products, organic growth and by selective
and complementary acquisitions. On behalf of all the
directors, I am pleased to report that the new financial
year has started well and, with current order visibility
levels, believe that the Group is making good progress
to deliver results in line with market expectations in FY20.
Alasdair MacDonald
Non-Executive Chairman
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EBITDA Bridge (£m)
A
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£6m
£5m
£4m
£3m
£2m
4.9
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Recruitment Bridge FY19
KEY
TEL (Tekmar Energy)
AEL (AgileTek Engineering)
RYD (Ryder Geotechnical)
SIL (Subsea Innovation)
TGP (Tekmar Group plc)
+5 RYD
+2 AEL
+6 TGP
+12 SIL
+18 TEL
+28 SIL
5 RYD
180
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40 SIL
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08
Vision
Key Objectives
Key Enablers
Values
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Strategic
Our vision is to be the partner of choice
for the supply and installation support of
subsea protection equipment to the global
offshore energy markets.
1)
2)
3)
4)
Sustainable Growth
Focus on value added technology for subsea
and offshore (Niche IP).
Develop ways to get into projects early and
stay in for longer (Full life cycle).
Leverage group support between companies
(Synergies).
1)
2)
3)
4)
5)
Our core values
Growing global demand >20% CAGR
Strong brand and outstanding reputation
Balance sheet post IPO
Our core strategy
Safety
Heritage
Innovation
Collaboration
People
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Investment case
Tekmar Group plc’s vision is to be the partner of choice for the supply and
installation support of subsea protection equipment to the global offshore
energy markets.
We have a clear vision to become the partner of choice for
the supply and installation support of subsea protection
equipment to the global offshore energy markets. We aim
to achieve this by growing our business through our people,
track record, heritage and reputation for excellence. We
believe that Tekmar Group’s strategy, together with the
following competitive strengths, distinguish it from its
competitors in its chosen marketplaces.
A culture of innovation
Tekmar Group’s entry into the offshore wind farm market
with the TekLink CPS product was a direct consequence
of developing an innovative solution to meet a market
need. The Group has continued to build on this pedigree
and its heritage to develop a market leading range of
products and solutions offered to the global offshore
energy markets.
We believe people choose to invest in Tekmar Group
because of the following:
Strong track record of historical financial growth
Leading market position and deep relationships with global
clients Tekmar Group is a market leader in the protection
of subsea assets in the offshore wind farm market. Its
patented TekLink cable protection system (CPS) is the
recognised solution for offshore wind cable protection.
Exposure to a structural high growth market
Building on the significant growth achieved in recent
years, Tekmar Group has plans to accelerate its growth
in the offshore wind market to meet demand in an
expanding global market.
Proven, experienced high-calibre management team
The Group benefits from a high-calibre senior management
team with substantial industry experience, led by James
Ritchie, the Group’s Chief Executive Officer.
Together, the management team has driven the growth
and strong financial performance of the business over
the past several years and has a proven track record of
delivering results.
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Strategic
Energy
Tekmar Energy is a global market leader in subsea cable, umbilical
and flexible pipe protection systems. Tekmar have been trusted to
protect billions of Euros worth of assets in the offshore wind, oil and
gas, wave, tidal and interconnector markets.
Engineering
AgileTek Engineering is an award-winning subsea engineering
consultancy. AgileTek de-risks offshore projects through advanced
computer simulation and analysis.
Subsea Innovation is a global leader in the design, manufacture and
supply of complex engineered equipment and technology used in the
offshore energy market.
Ryder provide expert geotechnical design and consulting services
to the offshore oil and gas and renewables sectors. We believe
that innovation and the application of engineering experience and
knowledge are key to ensuring the success of any project.
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Chief Executive Q&A
James Ritchie
“
We are
continually
looking to evolve
the product
offering and the
services we offer.
James Ritchie, CEO
“
This is your first year as a plc. What are the benefits of being
a quoted company?
Joining AIM was a particularly proud moment for me. I was
one of the first employees at Tekmar and led the business
through rapid growth via private equity to flotation. It has
been an incredible journey so far and IPO took us to the
next stage. The fundraise significantly strengthened the
Company’s balance sheet, allowing us to pursue our vision
and implement our growth strategy debt free and invest in the
growth and diversification of the business. The new capital
structure has also enhanced customer confidence, through
the Group’s increased profile and transparency, and by
allowing us to remain independent, which is very important to
our customers. Finally, it has allowed us to incentivise staff –
aligning shareholder success with management reward. That
sense of ownership really boosts staff morale.
What have been the stand-out moments for you?
Our successful float on AIM was a significant life achievement
and experience for me. So, it was tough in the half year
roadshow to have to present results that were lower than
expectations, resulting from changes beyond our control in
offshore wind procurement patterns. We explained these
changes openly and honestly to our investors and are,
hopefully, rebuilding confidence, having delivered on key
parts of our strategy during the year and a significant result
in the second half of the year. But seeing all four subsidiary
companies working on a single project together in unison,
creating intrinsic client value, was like creating a family and
watching your four children play happily together. It was great
to see.
How do you maintain your dominant position in the offshore
wind farm market?
TekLink holds an intrinsic value proposition to its customers.
It is a total solution not just a product and is, therefore, very
hard to compete against. We work hard to educate all key
stakeholders on the importance of the product and the
benefits of working with Tekmar. Like any good technology
company, we don’t stand still. We are continually looking to
evolve the product offering and the services we offer.
What are the growth opportunities in the offshore wind farm
market?
In short, huge. According to the latest 4C offshore report,
the industry is forecast to grow above 20% CAGR over the
next 10 years, driven by a global commitment to renewables,
is
decarbonisation and clean energy. Offshore Wind
providing a safe domestic power source in close proximity to
some of the most densely populated parts of the planet that
can be implemented rapidly on a massive scale. Crucially,
this power source is now being implemented at competitive
pricing levels, making wind the clear choice for future energy
demand globally.
How much impact do you think a recovering oil and gas market
will have on your business in the coming financial year?
We are a small fish in a big pond in oil and gas and this
market is still dominating capital spend offshore, compared
to renewables. We expect increased demand, driven by the
stable price of oil, to increase the number of opportunities for
the whole Group. It is important to keep a balance between
both sectors as the market transitions to renewable energy
sources, whilst maintaining our strategic long term focus on
renewables.
Do you have any interesting new products under development?
Absolutely! During the year we have increased the number
of products we offer by 135% from 20 to 47, through
acquisition and R&D. We have a long term R&D programme
and are committed to investing continually in new product
ideas designed to save client’s money, improve efficiencies
offshore and produce the best possible shareholder returns.
What most excites you about the future?
Undoubtedly, it is the global growth opportunity in renewables:
as the cost competitiveness of this industry matures, the
opportunities will multiply. But also, building a robust and
diversified portfolio of businesses, through organic growth and
the total integration of acquisition targets, which generate full
lifecycle revenues on projects and realise our absolute vision.
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What is Subsea Cable Protection?
Cable Protection is a collective term used within both the oil & gas
and offshore renewable industries as a means for protecting subsea
cables and SURF (subsea umbilicals, risers and flowlines) products
from external mechanical forces whether in dynamic and/or static
environments. In its roughest form, the terminology ‘cable protection’ covers
many solutions including cable burial, rock dumping, mattressing, split-pipe,
buoyancy and bend restrictors. A cable protection system (CPS) such as
our product TekLink is the term used for the interface protection of products
as they transition from the seabed and into the foundation structure, such
as an offshore wind turbine generator or an oil and gas jacket foundation.
Why is Cable Protection necessary?
Having exposed cables within a subsea environment is not good practice
based on the rate of cable failures from either environmental conditions or
accidental loads. Burying cables is seen as the most effective means of
protection for the majority of a subsea cable length, however it is common
for these cables to transition out of burial and connect to an offshore asset
and/or shore landing. These ‘exposed’ elements require protection, such
as Tekmar’s cable protection systems. Subsea cable and SURF products
provide a vital connection between assets. If this vital connection is
damaged in any way the environmental and financial impact can
be unprecedented. Cable Protection is understood to be the most
appropriate way of de-risking potential failures mitigating large
potential claims.
Why protect Cables & SURF Products?
When we developed TekLink we focused on the specific application
of an offshore wind turbine and developed a total solution that
considered all the key stakeholders. The product offers not only a
major improvement in the protection performance of the subsea
cable for 25-years but also a major cost saving of above 70%
delivering a quicker offshore installation and reduced cost of
steel works needed on the foundation. This, then combined
with the patented mechanical design and priority material
knowledge, makes it the recognised brand for subsea
cable protection systems in offshore wind.
A year of achievements
TGP floated 20 June 2018
100%
TekLink CPS retained
its leading market
position; sustaining its
track record of 100%
market share in the EU
33%
Increase in order
book FY19
62% zero
Sales conversions
exceeded internal
KPI, achieving
62%, a 10%
improvement
Lost Time
Incidents for 2019
Two acquisitions
Subsea Innovation Ltd - September 2018
Ryder Geotechnical Ltd - March 2019
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Finance
Strategic
Strategic Report
Establishing a strategy and business model that promotes long-term value
for shareholders.
Strategic Report Contents
18 Market review
22 Our business model
24 Track Record in offshore wind
28 Our strategy in action
30 Key performance indicators
32 Risk Management
36 Sustainability and CSR
38 Chief Executive Review
42 Chief Financial Officer’s review
The Board has a clear strategy for delivering long-term
shareholder value. We will do this through:
a) Increasing market share - through focusing on our
differentiated value proposition.
b) Bringing in new opportunities - through adding new
customers.
c) Increasing our offer to the market - through increasing
our technology and service portfolio.
d) Maximise growth - through developing a strong
regional presence in high demand and high growth
areas.
The strategy is supported by our core building blocks of:
• Organic Growth – increasing sales to new and existing
customers.
• Accelerated Growth – investing in our business, R&D
and operations.
• Acquisition Strategy – targeting businesses which align
with our brand and values; that would benefit from Group
support; will add to Tekmar’s customer base and product
offering; smooth seasonality of contract revenues; and
which leverage engineering skills whilst maintaining
margins.
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Market Review - Offshore Wind
Industry growth predicted from 25.2 GW to 227 GW of projects underway by
year 2028.
Market Highlights:
1) Zero subsidy projects now under way within Europe.
2) Analysts drastically increase outlook to 227GW from
150GW and accelerated CAGR from 15% to above 20%.
4) UK set clear plans to support 30GW by 2030 (Currently
9.7GW) and path to zero subsidies for Round 4 following
announcement of the recent UK Government Sector
Deal.
is supplying their
Tekmar Highlights:
1) Tekmar Energy is pleased with our market penetration,
product propositioning and customer concentration.
Clients include VBMS, Van Oord, Ørsted, JDR, Tideway,
Prysmian, Iberdrola.
2) Tekmar Energy
renewable CPS system.
3) TekLink 8th Generation has secured 100% EU IAC
market share.
4) Tekmar Energy supplied cable protection systems to
the biggest OWF in China (Binhai P2) and also the follow-
on project Dafeng H3.
5) Tekmar Energy has increased its market share of
other products including hang-offs and operations and
maintenance solutions.
floating
first
Offshore wind is now a mainstream supplier of low-
carbon electricity. The UK is the world leader in offshore
wind with more capacity installed than any other country.
This growth has been supported by the cost of electricity
from new offshore wind projects has fallen by around
50%, making it cheaper than gas or nuclear.
Supportive regulation
in the developed world has
resulted in significant inflows of public and private
investment, while governmental commitments to meet
climate change targets are expected to drive demand for
increases in global renewable energy capacity.
The UK retains its position as the global leader in installed
offshore wind capacity with a total of 9.7 GW of capacity
currently installed. The global total stands at 25.2 GW,
up from 20.8 GW in April 2019, with another 16.3 GW
of capacity currently under-construction but yet to be
installed, or in pre-construction.
Future Growth 2019 - 2028
Based on projects included within 4C Offshore’s Project
Opportunity Pipeline we expect to see the industry grow
from the current installed capacity worldwide of 25.2 GW
to a cumulative total of 227 GW of projects underway by
year 2028, meaning a total of 186 GW of capacity should
enter construction between now and the end of 2028.
Significant growth is expected to arise from within APAC.
Europe will also grow and we should also see significant
emerging demand in markets such as the United States
and India giving the industry an annual capacity growth
rate above 20%.
£550 Bn
Estimated Spend over 10 years
(90% CAPEX 10% OPEX)
51%
227 GW
186 GW
In planning
150GW
115.2 GW
In planning
Installed capacity by country 2019
Belgium (1556 MW)
Other (545 MW)
Netherlands (1118 MW)
Denmark (1701 MW)
UK (9746 MW)
China (4776 MW)
25.2
GW
Germany (6580 MW)
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Under construction and pre-construction,
capacity yet to be installed
Belgium (706 MW)
Other (568 MW)
Netherlands (1484 MW)
UK (3019 MW)
Denmark (605 MW)
China (7243 MW)
16.3
GW
Germany (1081 MW)
14.1 GW
Ongoing
20.8 GW
Live
16 GW
Ongoing
25 GW
Live
March 2018
March 2019
Offshore Wind Market
10 year outlook
2018 vs 2019
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Market Review - Oil and Gas
Pricing has remained above the $50 trigger point for the past two years
The subsea oil and gas market has experienced a period
of turbulence since 2014, with increasing price pressure
driven by underlying supply and demand dynamics.
The price per barrel for Brent Crude dipped below $30
in 2016, resulting in a drop in demand for new projects
and new equipment. This dip also forced companies to
seek more cost-effective solutions to ensure that the
price of extraction remained viable. The oil price has now
stabilised above $50 per barrel and as more projects
are coming back online the industry has gone through
a restructuring process and the offshore market is
beginning to see a gradual increase in tendering activity.
The market for providers of offshore oil and gas protection
solutions, reflective of the wider oil and gas sector, is
more mature than that of the offshore wind sector.
For Tekmar Group, we are expanding our offer to
protect pipelines with equipment; such as Subsea
Innovation’s Emergency Pipeline Repair Claims (EPRC)
and AgileTek’s analysis of subsea umbilicals, risers and
flowlines (SURF); as we look to increase revenues from
all global energy markets.
Highlights:
1) Analysts increase outlook for Brent to $69/bbl and
supply chain requirement towards $54/bbl.
2) Tekmar Group’s main focus markets are Middle East
and local UK customers for export.
3) Tekmar Group key clients include; Subsea 7, Technip,
Saipem, Royal IHC, NPCC, GE, EMAS.
4) Tekmar Energy supplying first in country content in
Saudi, first API products to GE, expecting 42% growth
from FY18.
5) Subsea
three bespoke
engineering packages for IHC for backdeck pipelay, new
generation of pipe-in-pipe seal for Subsea 7 and several
innovative pipeline repair solutions.
6) 73% of all offshore capital spend still coming from Oil
and Gas.
Innovation supplying
$69 “
Brent Crude Price
- 31 March 2019
The market is at a 3
year high and demand
is picking up.
James Ritchie, CEO
“
22
Review
Governance
Finance
Strategic
Our business model
A world-leading subsea technology business, built on innovation
Group Revenues are split into the following sectors
and subsectors. Across the group there are no unique
customers. All customers are applicable for all Group
companies, allowing the Group to cross-sell all products
and services; working together with the same clients,
providing more revenue per client and also providing a
longer project lifecycle. A complete approach to subsea
protection.
As the business grows, our aim is to increase the revenue
per project, “more £ per stick” from all stages of offshore
energy and subsea projects. We also have an aim to
gain maximum visibility on projects as early as possible,
with our two design analysis businesses assisting in us
gaining visibility on projects as early as possible, to the
greater benefit of the Group.
Group revenue split:
84%
12%
4%
Not
included
in FY19
figures
Energy
Engineering
TEL revenue split:
40% TekLink
60% Other
Sectors:
OWF - Offshore Wind
O&G - Oil and Gas
IC - Interconnectors
W&T - Wave and Tidal
Marine
Revenue split by market
68%
Offshore Wind
£19.2m
30%
Subsea
£8.4m
2%
Engineering
£543k
The Group operates within one segment in accordance with IFRS8 but we do track markets and areas which our
businesses operate in.
Revenues from:
Applications:
Customers:
Technology Provider
Power Cables, SURF, Telecom, Pipeline, Vessel, Topsides
End Users, EPIC , Manufacturers
Project Phases:
DEVEX Development Expenditure
CAPEX Project Build Phase ,
OPEX Project Operation and Maintenance
Locations include:
UK, EU, Middle East, North America,
South America, Asia Pacific, China
Product Categories:
Cable Protection System (CPS)
Pipeline Repair (PR)
Cable Protection (CP)
Hang-Offs (HO)
Bend Protection (BP)
Structural
Mechanical
Engineering
An example of Tekmar Group products are
shown in page 26.
24
45
72
Track record in
offshore wind
50
The Market Leaders
Protecting over 24 GW of electrical infrastructure
since 2008.
Review
Governance
Finance
Strategic
11
46
55
18
22
36
49
“Tekmar Energy has secured more than
75% of the global market in offshore
wind cable protection”James Ritchie, CEO
44
13
42
8
5
4
17
31
9
23
59
71
40
30
68
53
66
32
16
25
19 20
62
29
35
1
58
52
61
10
12
15
48
24
43
2
3
33
28
26
41
65
57
56
6
39
60
7
21
47
38
14
37
Europe
Engineering:
72 Projects
Export CPS:
44 Projects 119 Systems
Array CPS:
62 Projects 7,073 Systems
Hang-offs:
8 Projects 515 Units
Generation 1
1 Hooksiel
Generation 2
2 Bard I
3 Alpha Ventus
Generation 3
4 Walney I
5 Ormonde
6 Greater Gabbard
7 Thornton Bank II
8 Walney II
9 Gwynt-y-Mor
10 Borkum West II
Generation 4
11 Anholt
12 Riffgat
13 Teesside
14 Thornton Bank III
15 Global Tech I
16 Dan Tysk
Generation 5
17 West of Duddon
18 Baltic I
19 Meerwind
20 Amrumbank
21 Belwind Demonstator
22 Baltic II
23 Westermost Rough
24 Borkum Riffgrund
Generation 5 (cont.)
25 Butendiek
26 Luchterduinen
27 Cape Wind
28 Westermeerwind
29 Gode Wind
Generation 6
30 Dudgeon
31 Burbo Bank Extension
32 Sandbank
33 Gemini Phase I
34 Block Island
35 Nordegründe
36 Wikinger
37 Rampion
38 Nobelwind
39 Formosa I P1
Generation 7
Generation 8
USA
40 Race Bank
41 Galloper
42 Walney Extension
43 Borkum Riffgrund II
44 Blyth Demonstrator
45 Beatrice
46 Pori Tahkoluoto
47 Rentel
48 Merkur
49 Arkona
50 Aberdeen
51 Binhai Phase II
52 Hohe See
53 East Anglia I
54 Southwest Demo
55 Kriegers Flak OSS
56 Borssele I&II
57 Norther OSS
58 Albatros
59 Hornsea ONE
60 Modular Offshore Grid
61 BorWin 3
62 Deutsche Bucht
63 Dafeng H3
64 Formosa I P2
65 Borssele III & IV
66 Borssele V
67 Southwest Internal Line
68 Northwester 2
69 UK Replacement Project
70 Changhau
71 Triton Knoll
72 Moray East
27
34
APAC
67
54
51
63
70
39
64
26
Vessel Back Deck
Equipment Design (SIL)
Mooring Solutions
(RYD)
TekTube®
J-tube Solutions
(TEL)
Offshore installation
analysis (AEL)
Geotechnical
Foundation Design
(RYD)
Review
Governance
Finance
Strategic
Hang-offs (TEL, SIL)
Structural Finite Element
Analysis (AEL, SIL)
Bend Stiffeners (TEL)
Buoyancy (TEL)
TekLink®
J-tubeless CPS (TEL)
Armadillos (TEL)
Piggyback Clamps (TEL)
J-tube Seals (TEL)
TekLink® J-tube
CPS (TEL)
Hold back clamp (SIL)
TekSpace®
Crossing Solutions (TEL)
Vertebrae Bend
Restrictors (TEL)
Ballast Modules (TEL)
TekDuct® Ducting (TEL)
Sleeve Connectors (SIL)
Split Pipe (TEL)
Emergency Pipeline
Repair Systems (SIL)
Cable burial risk assessment
Geotechnical route data and design
Burial and trenching optimisation (RYD)
Pipe-in-Pipe
Waterstops (SIL)
28
Review
Governance
Finance
Strategic
Acquisition
Strategy
M&A targets;
Shared vision
Technology and sector focus
Leverage group support
Share customers
Project Life cycle
Successes in the year:
1) Two acquisitions successfully completed; with Ryder
Geotechnical Limited and Subsea Innovation Limited.
2) The acquisitions are adding value, generating more full
life cycle revenues and a stronger customer proposition
within Group.
Related Risk Factors:
Systems and Processes, Availability of capital
Our Strategy in Action
Increased revenue per project by combined product offering
The Group’s objective is to be the partner of choice for the supply of subsea protection equipment to the global offshore
energy markets. The Group has a strong track record of organic growth and intends to grow its business in the following
ways:
Accelerated
Growth
Investment in new technology,
operational efficiency, expand
overseas
Successes in the year:
1) Increased TRL from 20 to 47 products.
2) Zero Lost time incidents and overall improvement
towards quality KPI’s.
3) Our strategy for international opportunities within the
ME for O&G and APAC for OWF are progressing well.
Related Risk Factors:
Technology and competition, Risk of claims
Organic
Growth
Markets growing;
OWF growing at >20% CAGR
Oil and Gas stable >$50 PBL
Successes in the year:
1) Grew revenues by 28%.
2) Preferred bidder status a record high at £15m (a 97%
YOY improvement).
2) Tekmar Energy’s core product TekLink CPS retained
its leading market position; sustaining its track record of
100% market share in the EU.
3) Order book increased 33% to £7.2m.
4) Total sales enquiry book grew to a record of £195m, (a
35% increase YOY) and conversions at 62%.
Related Risk Factors:
General Economic Environment, Project
Technology, Key Staff Members
timings,
Energy
Engineering
“
Generating more full
life cycle revenues and
a stronger customer
proposition within Group.
James Ritchie, CEO
“
30
Review
Governance
Finance
Strategic
Key Performance Indicators
Identifying and monitoring the key indicators of success in our business.
KPI
FY19
FY18
Change
%
Enquiry book
£194.6m
£144.6m
+£50m
+35%
Preferred Bidder
£15.0m
£7.6m
+£7.4m
+97%
Order book
£7.2m
£5.4m
+£1.8m
+33%
Revenue
£28.1m
£21.9m
+£6.2m
+28%
Market visibility
£50.2m
£34.9m
+£15.3m
+44%
Conversion Rate
62%
56%
+6%
+10%
Book to Bill
103%
78%
25%
33%
People
Technology
180
47
109
20
+71
+65%
+27
130%
62%
Conversion Rate FY19
£195m
Total sales enquiry book FY19
£120m
£50.2m
market visibility{
£15m preferred bidder
£7.2m order book
£28.1m revenue
180
people
47
products
32
Risk Management
Identifying and monitoring the key risks in our business to inform strategic
decision making.
The Board has overall responsibility for the determination
of the Group’s risk management objectives and policies.
This risk management is included and reviewed monthly.
As an offshore energy business, managing risk is core to
our everyday responsibilities and has been demonstrated
by over 30 years of proven policies, procedures and
behaviours.
The objective of the Board is to set policies that seek to
reduce ongoing risk as far as possible without unduly
affecting the Group’s competitiveness and flexibility. The
Board believes this helps to sustain shareholder value;
including the company’s supply chain, from key suppliers
to end-customer; while also protecting the Group’s
corporate culture.
Risk management, including financial and non-financial
controls; what the board does to identify, assess and
manage risk and how it gets assurance that the risk
management and control systems are effective, is covered
by the company’s business risk assessment procedures.
The Group operates a structured risk management
process, which
identifies and evaluates risks and
uncertainties and reviews mitigation activity, including a
bi-mionthly review of all risks and opportunities.
The most relevant and significant risks that the Board
considers could potentially affect the business (based
on the risk assessment described above) are described
below. We consider the Group’s principal risks have not
materially changed since our admission in June last year.
Review
Governance
Finance
Strategic
Severity
Risk Type:
Unlikely Possible Likely Very Likely
Strategic
Financial
Operational
Compliance
3) 7)
5) 6)
2)
1) 4)
Extensive
Major
Medium
Minor
Probability
Risk
1)
Macroeconomic
environment
(including Brexit)
Risk Type
Description
Impact
Mitigation
Evaluation
On 23 June 2016, the UK held a referendum on the
UK’s continued membership of the EU. This resulted in
a vote for the UK to exit the EU. There are significant
uncertainties in relation to the terms within which such
an exit will be effected, and to what the impact will be
on the fiscal, monetary and regulatory landscape in
the UK.
The overall trading conditions for
the company and environment in
which we operate.
Brexit is closely monitored by the business, and any
potential changes are planned and prepared.
No Change
Monitoring. Planning. Preparing.
2)
Systems and
processes
IT systems are integral to the operations of the Group.
Failure to adequately invest in the Group’s systems could
lead to the loss or theft of sensitive data or compromise
the Group’s ability to effectively carry out operations.
Failure of systems could lead to
an inability to meet customers’
needs and lead to reputational
damage with all stakeholders. The
loss of sensitive information could
lead to significant damage with an
associated risk of fines.
The Group outsources provision of IT services to a
suitably qualified third-party, whose competence
and service are regularly reviewed. Regular staff
training is offered or mandated, depending upon the
nature of the training, to ensure that all staff maintain
awareness of their responsibilities with respects to IT
security.
No Change
3)
Access to
capital
Linked to Macroeconomic environment, access to
capital is a significant factor in the growth plans of the
company. There is uncertainty in relation to how, when
and to what extent these developments will impact on
the economy, levels of investor activity and confidence
and on market performance and exchange rates.
Without access to
finance the
company may struggle on its ability
to undertake all aspects of its
growth plan such as accelerated
growth and acquisition strategy.
Currently the business is cash positive with no debt
and has ongoing relationships with banks and other
financial institutions that offer the required level of
support.
No Change
34
Review
Governance
Finance
Strategic
Risk
Risk Type
Description
Impact
Mitigation
Evaluation
4)
Project timings and
delay to contract
awards
The project-based, contractual nature of the Group’s
business, compounded by its concentrated customer
base, brings with it a revenue profile that is inherently
uneven. Most contract awards and revenues are
dependent on large capital projects within the energy
sector the timing of which is out of the businesses
control.
5)
Technology and
competition
The risk of new competitors, and/or design changes
leading to technology becoming redundant in the
market and subsequently reduced volume of sales.
There is an associated risk that
the completion of any contract,
together with
its attributable
revenue, may fall outside the
financial period that was originally
forecast. This, in turn, may have
a material adverse impact on
the Group’s reported financial
performance
that specific
for
period.
three-year
The business undertakes a detailed
strategic planning review that includes an independent
assessment on project timing and the revenue
streams macro climate.
The long-term strategy that is being implemented by
the business is for diversification into full life cycle
revenues on projects while keeping sales across
multiple sectors including renewables, oil and gas,
energy, subsea, marine.
No Change: We have started
to diversify as described within
the mitigation, further we have
no specific triggers within our
forecast to suggest any further
delays to our major projects.
However, given
impact
to our H1 results we feel it is
prudent to advise that this risk
is still prevailing.
the
Reduced volume of sales.
Increase in capital expenditure to
develop new products.
Reduction in Group’s financial
performance.
The business undergoes a detailed (TRL) technology
level program when developing new
readiness
products that includes review of competition and what
our ultimate value proposition would be.
The business where possible invest in intellectual
property protection including the use of trademarks
and patent protection.
A large investment is made in evolving existing
products to ensure they keep pace with current
market trends.
Reduced: Given the investment
in R&D hours and increase
in respective market share
would suggest that the value
proposition for our technology
is well regarded.
6)
Recruitment
and Retention
of Key People
The business may fail to attract, retain and develop
key staff members of the required calibre particularly
within commercials and engineering and further to
plan for succession in leadership positions.
A major impact on the businesses
ability to perform its contractual
obligations.
Impact
strategy for the business.
the
to
future growth
The businesses monitor staff retention as a specific
KPI and people are all core values within each
company, further an independent assessment with
Investors in people is undertaken bi-annually.
Ongoing skill matrix with risk mitigation plans is
developed annually by HR.
We regularly review our offering to ensure we are
competitive against other local firms.
Increased: Given the increased
volume of staff recruitment
there is an inherent retention
risk. Further with growth
expectations
across many
subsea sectors and a shortage
of engineers our staff’s skill are
in high demand.
7)
Risk of claims
and failure
to meet
contractual
obligations
The Group enters into contracts that contain terms
that, in some cases, contain wide reaching warranties
and indemnities. These terms are prevalent in the
subsea industry and do not unfairly prejudice the
Group, nor are they considered likely to put the
Group in a material worse position than its peers and
competitors. Such warranties and indemnities given
by the Group create an inherent risk that its liability for
any breach could be extensive, especially if these are
given on an uncapped basis.
Financial impact if aspects of the
claim were not insured.
Reputational damage
the
industry that could reduce repeat
orders from our customer base.
in
Contracts are reviewed extensively, and the likelihood
of risks assessed by legal and technical teams.
Uncapped liabilities are kept to a minimum and are
only agreed to for areas of the contract that Directors
believe are very low risk.
Where possible the Group will insure against risks to
minimise the financial impact.
Strong
focus on high quality project execution
which is regularly reviewed under independent ISO
certification.
Reduced: Whilst this risk
is
constantly reviewed the Group
has not had this risk come to
fruition. Further
investment
in key roles to reduce this
risk, including appointing In-
House Legal Counsel and
Project Managers.
Senior
Improvement
in
reported
our recent ISO accreditation
reviewed
independently by
DNV.
36
Review
Governance
Finance
Strategic
Sustainability and
Corporate Social Responsibility
Creating a sustainable business model to remain efficient and competitive
Tekmar recognise that creating a sustainable business
will enable the Group to deliver its strategy whilst
remaining efficient and competitive. We are committed
to ensuring that we are all conscious of and committed
to our responsibilities towards the people, communities,
businesses and environments impacted by our business
in the many different markets in which we operate.
Customers and suppliers
Our customers and suppliers are extremely important
to us. We have followed a customer-led strategy with
regards to expansion into international markets and
we are proud to be a trusted partner of many major
corporations, government agencies and other customers
around the world.
Environment
We are committed to conducting business
in an
environmentally responsible manner. We are putting
in place processes to understand and address our
responsibilities in respect of our operational impacts on
the environment, including climate change.
Employees
We believe it is important to dedicate time, effort and
attention to implementing systems, ways of working and
initiatives to create conditions in which people are eager
and empowered to contribute.
Shareholders
The Company maintains
communication with shareholders.
and
values
regular
Local communities
We encourage our businesses and employees to support
local communities within their operational areas. The
Group’s businesses are spread across the UK and
internationally. Product and service procurement is site-
specific which means many of our businesses are able
to procure products and services locally to support the
local supply chain and sustain local jobs. Each Tekmar
Group business encourages and supports its employees
to engage with local community projects and to make a
positive impact on their local communities.
Every customer has different needs and expectations
and we have developed long relationships through active
engagement with customers and suppliers over many
years to help customers find the product and service
solutions they need.
Tekmar Group is committed to ensuring that legal
compliance, respect for human rights and transparent
business ethics are cemented both up and down our
supply chain.
Innovation and technology
The entrepreneurial culture of Tekmar Group allows
for product and service innovation to move fast in
response to changes in the market and the competitive
environment. Tekmar Group businesses look to engage
with customers in a way that allows them to identify and
help solve customer needs. Engagement with employees
and suppliers allows the business to solve those customer
needs through innovation.
Safety
We strive to have a proactive attitude towards health,
safety, quality and the environment (HSQE) among all our
stakeholders. We operate a safety-first policy ensuring
that everyone takes equal responsibility and ownership
for one’s own and others safety. We pride ourselves on
our open and honest reporting culture with an aim to
achieve a ‘zero’ Lost Time Incident goal.
Images left to right; Tekmar Energy supporting Butterwick Hospice, Subsea Innovation supporting a local suicide prevention charity,
James Ritchie presenting at a local offshore renewables event raising awareness of the opportunities in the sector.
Respect for human rights
The Group is committed to supporting and respecting
human rights in the workplace and in the communities in
which it operates across its international business.
We have work practices and policies throughout the
Group which are designed to ensure that respect for
human rights is integrated into the systems and culture
of our businesses.
We do not tolerate the use of child or forced labour within
our business and take all steps possible to ensure that
our suppliers and customers also uphold internationally
recognised human rights.
The Modern Slavery statement outlines steps taken
by the Group to ensure that there is transparency
in the Group and throughout our supply chains. The
Group encourages any concerns relating to modern
slavery to be raised using the procedure set out in the
whistleblowing policy.
Business ethics, anti-bribery and corruption matters
We aim to act responsibly and ethically in all of our
business dealings. We aim to instil the highest standards
of business behaviour across the Group and we focus on
embedding a culture of ethical compliance so that all of
our people understand the standards of ethical business
practice that are expected of them.
The Group has an established anti-bribery and
corruption policy and has introduced a compliance
programme which has the support of the Board and
senior management within the Group. The programme
includes communication of the statement and policy,
training,
review
risk assessment, monitoring and
processes. Employees assessed to be at risk are
required to complete the training and to self-certify that
they understand and agree to be bound by its provisions.
The Group does not permit bribery, nor illegal or corrupt
business practices.
Supply Chain
Tekmar Group is committed to supporting the supply
chains in which we operate. We are members of several
trade bodies who raise awareness of the opportunities;
including allowing us to share with the supply chain how
to do business with Tekmar. Our memberships include,
but are not limited to: RenewableUK, NOF, EnergiCoast,
SubseaUK, EIC and Wind Europe.
James Ritchie is also Chairman of EnergiCoast, a
representative group for the North East of England’s
offshore renewables sector.
ISO Standards
Within the Tekmar Group, our businesses are accredited
to all of the required international standards. These
include, but are not limited to:
ISO 45001:2018
ISO 14001:2015
ISO 9001:2015
ISO/TS 29001:2010
Tekmar Energy was also
first offshore &
manufacturing company in the UK to be recommended
for ISO 45001:2018, awarded in Sept 2018.
the
Images: Tekmar Energy MD Russell Edmondson
and HSQE Manager Rob McGill after receiving ISO
45001:2018.
38
Review
Governance
Finance
Strategic
Chief Executive Review
How the strategy in action has manifested during the year.
“
We delivered on
all points of our
growth strategy
and are laying a
solid foundation.
James Ritchie, CEO
“
Our vision is to be the partner of choice for the supply and
installation support of subsea protection equipment to
the global offshore energy market. We aim to achieve this
by developing a portfolio of complementary businesses
serving shared markets and leveraging the enhanced
skills and relationships these operations bring.
We are very pleased with the strategic progress that the
Group has made since IPO last June and are confident
of the long-term prospects of the Group. The solid
foundations that we built prior to the Group’s IPO have
been strengthened further in the year under review with
two strategic acquisitions, further product development
and continued overseas expansion. The Board is focused
on building a robust and diversified business, which
generates revenues across the full lifecycle of projects
and furthers the opportunities for the Group’s growth.
We remain committed to the three strategic growth
areas: organic growth within our core markets;
accelerated growth through overseas expansion and
new technologies in our product mix; and by acquisitions,
which complement Tekmar Group’s overall vision.
In the first half of FY19, the Group was impacted by a
fundamental change in the procurement patterns of our
major offshore wind customers for TekLink. Previously,
the procurement lead times on offshore wind projects
were typically 12-18 months. As the major industry
operators drive maximum cost efficiencies, contract
negotiations have become more protracted and lead
times shorter. Whilst these changes have brought
short term frustrations for the Group, it is a clear sign of
maturation in the industry as renewable energy becomes
cost competitive with fossil fuels. This procurement
pattern, along with the aforementioned seasonality,
is likely to prevail and we have aligned our business
operations accordingly.
Despite these challenges, we have delivered growth in
Group revenue of 28%. This growth has been generated
from new offshore wind products, increased volume in
the oil and gas market and from the acquisition of Subsea
Innovation, which contributed £3.5m to revenue.
a CAGR of above 20% from 2018 to 2028. Demand
for products for the oil and gas market is at a three-
year high with oil prices sustained above $50 price per
barrel, which is assumed to be above the trigger for new
offshore capital expenditure approvals.
It is important to note that Tekmar Energy has maintained
its unrivalled supplier position winning 100% share of
the European offshore wind market in FY19 for our core
product TekLink cable protection system.
I am pleased to report that we have made impressive
progress on new product development, increasing the
number of products we can offer to new and existing
customers from 20 to 47. This is an important step for
the Group; it increases our ability to grow organically and
broadens the Group’s addressable market, expanding
our offering to customers and our ability to increase
revenue per project across the lifecycle.
To support the Group’s growth ambitions and improving
Market Visibility, we have increased our headcount by
65% to 180 through the introduction of Tekmar Group
(4) acquisition of Subsea Innovation (28) and Ryder
Geotechnical (4), as well as organically to create
additional engineering capacity.
I am delighted to report that we achieved an excellent
record of zero lost time safety incidents, during the
year, and improved our quality performance indicators,
adhering to our core values of excellence and ‘safety first’
- a vital requirement for suppliers in our markets.
Markets
The market and product split for the full year was, as
indicated in our Half Year results, 70% offshore wind
(FY18: 84%) and 30% oil and gas (FY18: 16%) with
40% coming from our core TekLink CPS product (FY18:
61%). With 60% of our sales in FY19 coming from
other products, this demonstrates the success of our
diversification strategy in terms of product mix.
All businesses in the Group supply both the offshore wind
and oil and gas markets. Our aim is to create a Group in
which no customer is unique to one portfolio business.
Our core markets continue to show strong long-term
growth potential. Global cumulative capacity in offshore
wind is expected to rise from 25 GW to 227 GW, creating
Operation review
Tekmar Energy (“TEL”) – 84% of Group revenue
Tekmar Energy is a technology specialist focusing on
the design, engineering and manufacture of subsea
protection for dynamic products across multiple subsea
markets including offshore wind, oil and gas and
telecoms. The business is the world market leader in
subsea cable protection systems for offshore wind and is
renowned for its patented TekLink technology, which is
used on 75% of the world’s installed offshore wind farms.
The business has, as previously mentioned, maintained
its unrivalled position in OWF with our 8th Generation
securing seven new projects for 850 systems during
the year within the EU. Outside TekLink, Tekmar
Energy secured three new projects for 168 systems,
including, as reported in an RNS in February, a large
scope for a bespoke remedial cable protection system
for replacement subsea cables. Tekmar Energy also
successfully delivered 132 systems into China for one of
the largest Chinese wind farms. The business secured
its largest order to-date for 226 hang-off systems onto
the world’s largest offshore wind farm Ørsted’s Hornsea
1 project.
Two strategic frameworks with customers Ørsted and
Royal Boskalis Westminster N.V. (formally VBMS) were
secured during the year. Ørsted is the world’s biggest
offshore wind developer and Royal Boskalis Westminster
is market leader in offshore cable installation. The
award of these agreements increases our confidence in
securing our future pipeline.
On the back of recent offshore wind success in China,
Tekmar Energy opened a dedicated office in Shanghai
and established a Wholly Foreign-Owned Enterprise,
“Tekmar Marine Technology Company Limited”. This
office now employs four native speakers, who also
support the wider Tekmar Group on sales activity for the
APAC region.
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The strategy for China is to export core polyurethane
products from the UK, whilst project managing the build
and procurement of metallic parts in-country, to provide
local content value. Local content (also called in-country
value) is often a stipulation for overseas contracts,
ensuring long term benefit to the economic prosperity in
the host region.
Following on from previous agency agreements, Tekmar
Energy has continued to develop within the Middle
East. As part of the business’s strategic plan, local
content arrangements have been established in Saudi
Arabia. The first “In-Kingdom” project was delivered in
November 2018, as part of the recently awarded, long
term agreement that National Petroleum Construction
Company (NPCC) has with Saudi Aramco.
Tekmar Energy contributed 33% to total Group revenues
from non-core (excluding TekLink) products, comprising
16% subsea, 5% OPEX cable protection repair solutions,
5% other OWF and 4% hang-off product solutions,
increasing its respective market share within these
product groups.
Subsea Innovation – 12% of Group revenue:
Subsea Innovation is a global leader in the design,
manufacture and supply of complex engineered
equipment and technology used in the offshore energy
market. Its products include large equipment handling
systems which operate on the back of pipelay installation
vessels; emergency pipeline repair clamps (EPRC)
which protect major oil and gas pipelines, and bespoke
equipment for use in the construction of offshore energy
projects.
We completed the acquisition of Subsea Innovation in
September 2018 for a maximum consideration of £4m,
with circa £3m in fixed assets. The integration has gone
seamlessly. Under the ownership of the Group, Subsea
Innovation has turned around from a loss-making position
in FY18 to contributing £3.5m in revenue and £0.5m in
Adjusted EBITDA in the six months of the financial year
following completion.
We have invested in people in this business, adding
engineers to meet demand and build capacity to fulfil the
clear growth opportunities. Since we acquired Subsea
Innovation, it has secured a record order book of new
work with a new Dutch customer, Royal IHC, for the
design and build of pipeline installation tools and back-
deck equipment. In addition, the business has generated
a three-year record level of customer spend on proprietary
technology, primarily with existing customers, such as
Subsea 7 for pipeline repair equipment and Saipem for
back-deck refurbishments.
AgileTek Engineering (“AgileTek”) – 4% of Group revenue:
AgileTek
is an award-winning subsea engineering
consultancy for offshore energy projects, which helps
its clients de-risk projects through advanced computer
simulation and analysis.
AgileTek’s scope for analytical engineering analysis
enables the Group to differentiate itself from other
technology providers and give us earlier involvement
in a project’s lifecycle, giving us a clear competitive
advantage. In addition, its strategic value, this business
grew revenues by 50% to £1m in FY19, contributing
Adjusted EBITDA of £117,000, while also more than
doubling its own independent customer base to 18.
In March, AgileTek completed its first acquisition of an
80% share in Ryder Geotechnical Limited for a nominal
consideration of £2 with an option to buy the remaining
20% for a maximum consideration of £2m. The acquisition
of Ryder increases the Group’s ability to generate greater
revenue per project, extends our involvement in the
project lifecycle and provides a further opportunity to
leverage our existing customers, with Group companies
now joint bidding on multiple up-and-coming offshore
wind projects.
Outlook
The Group’s strategy, primary focus and vision remain
unchanged. We are confident that the long-term growth
prospects of the global offshore wind market are strong
and that Tekmar Group is well positioned to capitalise on
this opportunity.
The Group is focused on building a strategic portfolio of
products and services, which will strengthen its value
proposition further. We continue to focus on our three
areas of sustainable growth: organic with the pending
uplift in market demand; accelerated with more focus
overseas and increase in our technology offering; and
acquisitive supporting our vision and broadening our
technology offering, to create full life cycle revenues
which can leverage Group support.
James Ritchie
CEO
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Chief Financial Officer’s
Statement
Sue Hurst
“
Our first year as
a plc has been
a pivotal point
in the incredible
journey we are on.
Sue Hurst, CFO
“
I am pleased to report that, during our first year as a plc,
we increased revenue by 28% and moved the business
from loss making to profitability on a PBT basis. The IPO
in June 2018 strengthened the Group’s balance sheet
and has enabled us to invest in growth and diversification.
Whilst acquiring two strategically important businesses
during the year, the Group ended FY19 with healthy cash
balances.
Overview
When we provided our first interim plc statements in
December 2018 it was disappointing to report a loss at
Adjusted EBITDA level for the six months to 30 September,
particularly as we had been extremely successful in
winning work during the period. As discussed at the time,
this was due to changes in the procurement patterns of
customers, particularly within the offshore wind sector,
which impacted the timings of projects and pushed some
expected revenues into the second half of the year and
some into FY20. We developed and executed a plan to
ensure a strong result in H2, in line with revised market
expectations.
Revenue
Revenue increased by 28%. The acquisition of Subsea
Innovation accounted for half of this with the balance
driven by the second half plan to mitigate the delays
experienced in offshore wind projects. This delivered
a different product mix, with more emphasis on lower
margin non-offshore wind markets, ensuring we
maintained Adjusted EBITDA at last year’s level, rather
than the year on year growth originally expected.
Costs
The increase in operating expenses from £5.2m to £7.0m
was largely due to the expansion of the Group, following
our acquisition of Subsea Innovation and additional
expenses associated with listing on AIM and running a
plc.
Adjusted EBITDA
We focus on Adjusted EBITDA as a primary KPI across
the businesses to provide a consistent measure of trading
performance. We adjust EBITDA to remove certain non-
cash and exceptional items to provide a more accurate
reflection of underlying earnings. The Board reviews all
exceptional items to ensure resulting Adjusted EBITDA
achieves this. For the period ended 31 March 2019,
the adjustment includes costs relating to the IPO and
acquisition activities. We also adjust for share based
payment charges, relating to the IPO options and SIP
schemes. The gain on bargain purchase relates to the
Ryder acquisition.
Profit before tax
Depreciation charges increased due to the early adoption
of IFRS 16 Leases, which moved costs from operating
expenses for this year. Amortisation includes the charge
relating to the acquisition of intangible assets on the
purchase of Subsea Innovation.
The improvement year over year is largely due to the
reduction in interest charges, arising from the repayment
of the debt instruments in place under the previous
private equity ownership. Funds raised from the IPO
allowed us to repay all debt in June 2018 with the interest
reflecting the first quarter charge only. As the Group is
now debt free, the only remaining sources of interest
costs are from interest recognised to increase the lease
liability under IFRS16 and derivatives relating to foreign
currency transactions (see below).
Profit after tax
Taxation is a major focus across the Group, as we capture
the benefits available to us under the R&D tax credit and
patent box regimes, along with loss relief from previous
periods. These, combined with prior year adjustments,
resulted in a tax credit in the year of £0.4m.
Foreign currency
Whilst we trade internationally, the majority of our
contracts, both customers and supply chain, are in GBP.
In the year under review, we delivered three sizeable
contracts in Euros and purchased forward currency
transactions to mitigate this risk. The closing rate for
revaluation of Euro balances at the year end was 1.1605
(FY18: 1.1410).
Year ended 31 March 2019
(£m)
Adjusted
items
Adjusted
Revenue
EBITDA
PBT
PAT
Adjusted EPS*
28.1
4.2
2.0
2.4
-
0.6
0.6
0.6
28.1
4.8
2.6
3.0
6.0p
Year ended 31 March 2018
(£m)
Adjusted
items
Adjusted
Revenue
EBITDA
PBT
PAT
Adjusted EPS
21.9
4.8
(0.4)
(0.1)
-
0.1
0.1
0.1
21.9
4.9
(0.3)
0.0
N/A
* Adjusted EPS is a key metric used by the Directors since IPO and
aligns to the analysts’ method of calculation. This measure differs from
that in Note 10 as it is based on Adjusted PAT and the shares in issue
at the end of the year.
Adjusted items
(£000)
2019
2018
IPO costs
Professional fees - acquisition
Gain on bargain purchase
Other fees
Share based payment charge
Total
204
117
(95)
-
418
644
-
52
-
71
-
123
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Revenue by business
(£m)
Tekmar Energy
Subsea Innovation
AgileTek
Intercompany elimination
Total
FY19
24.1
3.5
1.0
(0.5)
28.1
Revenue by market
(£m)
Offshore wind
Subsea
Engineering
FY18
21.6
-
0.7
(0.4)
FY19
FY18
19.2
8.4
0.5
18.1
3.5
0.3
21.9
Total
28.1
21.9
Gross Profit by business
(£m)
FY19
FY18
Gross Profit by market
(£m)
Tekmar Energy
Subsea Innovation
AgileTek
Total
Adjusted EBITDA by business
(£m)
Tekmar Energy
Subsea Innovation
AgileTek
Group
Total
8.2
1.1
0.6
9.9
FY19
4.6
0.5
0.1
(0.4)
4.8
8.5
-
0.4
Offshore wind
Subsea
Engineering
Unallocated costs
8.9
Total
FY18
5.1
-
(0.2)
-
4.9
FY19
9.0
2.8
0.6
(2.5)
9.9
FY18
9.6
1.2
0.4
(2.3)
8.9
Our businesses
We completed two acquisitions during the year.
Subsea Innovation - 100% of the share capital of Subsea
Innovation Limited was acquired in September 2018.
Consideration was made up of £66k in cash, £1m of
Group shares and £1m of contingent consideration
based on the business performance to 31 March 2020.
Funding of £1.8m was also provided to the business for
the repayment of director and bank loans. The contingent
consideration is considered highly likely to be paid so
the fair value of the acquisition is deemed to be the total
amount payable and has not been discounted due to the
timeframe for payment being short. All consideration was
recognised as either tangible or intangible assets and the
deferred tax liability on the acquired intangibles is treated
as goodwill.
Ryder Geotechnical - 80% of the share capital of Ryder
Geotechnical Limited was acquired at the end of March
2019 for consideration of £2, with a working capital
facility being provided to the business by the Group to
fund growth. This gave rise to a gain on bargain purchase
of £95k, which was recognised as an exceptional credit
in the Income Statement. The Group holds an option
to purchase the remaining 20% of the business by the
end of the third full year of ownership, subject to certain
financial conditions being met. This option has not been
valued in the financial statements at year end as it vesting
is wholly within our discretion.
Tekmar Energy
We achieved revenue growth of 6% in offshore wind
despite the delays to project timings. This was achieved
with additional revenue from new products developed
for this market. Revenue also increased as a result of
expanding our customer base in other subsea sectors,
predominantly oil and gas.
In the drive to maintain our competitive position, we
continually review our product design and supply chain
relationships to ensure we provide the most robust cost-
effective solution to customers.
Unallocated costs in the table left (gross profit by market)
mainly relate to the manufacturing costs within this
business, which were in line with previous years despite
the additional throughput.
Subsea Innovation
Following the acquisition in September 2018, the team
at Subsea Innovation has made considerable progress.
Prior to acquisition, the business was loss making. The
team have turned this round by securing profitable
projects on accelerated customer timelines, the majority
coming from the oil and gas sector. The integration of
Subsea Innovation into the Group has been seamless
and it has made a strong financial contribution in the six
months since joining.
AgileTek Engineering
In addition to external sales, AgileTek provides support to
the other businesses in the Group with internal sales of
£0.5m to Tekmar Energy in the year.
We completed the acquisition of 80% of the share capital
in Ryder Geotechnical at the end of March 2019, which
significantly complements the engineering skills within
AgileTek. Given the timing of the deal, there is no trading
impact in this year’s P&L.
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Balance Sheet
(£m)
Fixed assets
Other non-current assets
Stock
Trade & other receivables
Cash
Trade & other payables
Other non-current liabilities
FY19
FY18
5.5
21.8
1.9
20.0
4.2
9.8
0.8
1.4
20.2
1.8
8.8
2.6
6.7
38.0
Fixed Assets
We acquired £3m of fixed assets as part of the
Subsea Innovation deal with £2.7m relating to the
property, Innovation House. We also invested £0.8m
in new production equipment within Tekmar Energy,
predominantly being new tooling to support the efficiency
programme being rolled out in the manufacturing plant. In
addition, the net impact of adopting IFRS16 was £0.7m.
Other non-current assets
This relates primarily to the goodwill arising on the
original management buy-out in 2011 (£19.6m). During
the year, there has been significant investment within
Tekmar Energy on new product development (£0.8m)
and additional intangible assets arising on the acquisition
of Subsea Innovation (£1.2m).
Trade and other receivables
We closed the year with unusually high levels of accrued
income reflecting the significant volume of production
activity in the final quarter (£13.5m). The majority of this
relates to offshore wind projects previously delayed from
the first half of the year. This balance unwinds into trade
receivables as the contractual milestones are achieved.
Cash
As part of the IPO, we raised additional funding for
the business to invest in growth (£8.2m after costs).
We invested £2m of cash in the acquisition of Subsea
Innovation and a further £2m to support the businesses in
their investment plans. We closed the year with a healthy
cash balance across the Group, which is forecast to
improve significantly as the current high levels of working
capital unwind. The majority of the balance is held in GBP
with £0.4m held in Euros.
Trade and other payables
the deferred
Trade and other payables
consideration (£1m) under
Innovation
acquisition which we expect to pay within twelve months.
includes
the Subsea
Other non-current liabilities
Other non-current liabilities relates to the lease liabilities
in relation to IFRS16 and deferred grant income. Last
year reflects the equity debt instruments that were repaid
following the IPO.
Sue Hurst
CFO
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Governance Section
Establishing and embedding the culture
Good governance is at the heart of what we do as a Board. As
Chairman I am responsible for establishing and embedding
the culture of the Board. By setting the tone from the top
the Board aims to ensure that values and behaviours are
consistent across the Group, both in the way we behave with
each other and in the way we interact with our customers,
suppliers, shareholders, employees and communities around
us. Within the Annual Report we have set out how we have
engaged with our key stakeholders - reference Pages 36-37.
Our strategy as a Group is founded on meeting those high
standards. Creating the right ethical culture at Tekmar is vital
to the Group’s success.
The Directors acknowledge the importance of high standards
of corporate governance and the Company has adopted the
QCA Code. The QCA Code sets out a standard of minimum
best practice for small and mid-size quoted companies,
particularly AIM companies. The Company has adopted
the QCA Corporate Governance Code in line with the
requirement for AIM quoted companies to adopt and comply
with a recognised corporate governance code.
The Board comprises five Directors, two Executive Directors
and three Non-Executive Directors, reflecting a blend of
different experiences and backgrounds as described on
Pages 54-55. We believe that the composition of the Board
brings a desirable range of skills and experience in light of
the Company’s challenges and opportunities, while at the
same time ensuring that no individual (or a small group of
individuals) can dominate the Board’s decision-making. The
Board meets regularly to review, formulate and approve the
Group’s strategy, budgets, corporate actions and oversee
the Group’s progress towards its goals.
The Company has established an Audit Committee, a
Remuneration Committee and a Nomination Committee,
each with formally delegated duties and responsibilities and
with written terms of reference. From time to time, separate
committees may be set up by the Board to consider specific
issues when the need arises.
Combined with effective and efficient decision-making, the
Board aim to minimise risk and maximise value within our
business. We believe the QCA Code is an excellent way for
us to demonstrate our commitment to all stakeholders and
shareholders.
I trust that as you read this Governance section of the Annual
Report that the commitment to governance I have outlined
above will shine through.
Alasdair MacDonald
Non-Executive Chairman
Page Numbers
48 Chairman’s introduction to governance
50 Corporate Governance Statement
54 Board of Directors
56 Management Team
58 Audit Committee Report
60 Remuneration Committee Report
64 Nomination Committee Report
66 Directors’ Report
68 Statement of Directors’ responsibility
“Good governance is at
“
the heart of what we do.
Ally MacDonald, Chairman
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Corporate Governance Statement
We understand that good corporate governance is about building
strong relationships with both shareholders and stakeholders for
the long-term benefit of all parties. Combined with effective and
efficient decision-making, the Board aims to minimise risk and
maximise value within our business. In support of this goal we
have chosen to apply the Quoted Companies Alliance Corporate
Governance Code (the “QCA Code”). We believe the QCA Code
is an excellent way for us to demonstrate our commitment to all
stakeholders and shareholders and a description of how the we
apply the ten governance principles is provided below.
Maintaining consistent and positive engagement with shareholders
is a high priority. Due in part to the AIM admission in June 2018,
there has been considerable engagement with shareholders and
we expect this to continue.
The principal methods of communication are through disclosures in
the Annual Report; the interim and full-year results announcements;
the Annual General Meeting and other announcements to be found
on the Group’s investor website. We will also carry out investor
roadshows at key dates throughout the year, attend investor
conferences and host investors for site visits.
Principle 1. Establish a strategy and a business model that
promote long-term value for shareholders
The Board has a clear strategy for delivering long-term shareholder
value. We will do this through:
If and when voting decisions at AGMs or General Meetings are
not in line with the Company’s expectations, the Board will engage
with shareholders to understand and address any issues informing
those decisions.
Requests for information on any of these matters, including details
of investor days, can be made to investors@tekmar.co.uk.
Note: no unpublished price sensitive information will be provided by
this email address. All Tekmar Group plc communications will align
and accord with official AIM guidelines.
Principle 3. Take into account wider stakeholder and social
responsibilities, and implications for longer term success
In line with our corporate social responsibility policy, the Board
upholds its commitment to being a socially and ethically responsible
Company.
The executive team oversee our social and ethical framework and
are responsible for reviewing operational processes for managing
social, environmental and ethical risk.
These processes and strength in this area are externally audited
and reflected by our ISO accreditation and Tekmar’s Investors
in People certification. Tekmar is accredited to ISO 9001:2015
(quality management system), ISO 14001:2015 (environmental
management systems) and ISO 45001:2018 (occupational health
and safety management systems).
• Increasing market share - through focusing on our differentiated
value proposition.
• Bringing in new opportunities - through adding new customers.
• Increasing our offer to the market - through increasing our
technology and service portfolio.
• Maximise growth - through developing a strong regional presence
in high demand and high growth areas.
The strategy is supported by our core building blocks of:
• Organic Growth – increasing sales to new and existing customers.
• Accelerated Growth – investing in our business, R&D and
operations.
• Acquisition Strategy – targeting businesses which align with our
brand and values; that would benefit from Group support; will add to
Tekmar’s customer base and product offering; smooth seasonality
of contract revenues; and which leverage engineering skills whilst
maintaining margins.
To achieve this and to protect shareholders, we manage risk
closely to limit any potential adverse effects in the implementation
of our strategy. We do this by ensuring that we have a framework
in place to identify and monitor risk and uncertainty in line with our
business risk assessment policy and reporting.
Principle 2. Seek to understand and meet shareholder
needs and expectations
Tekmar is committed to communicating openly with shareholders
to ensure that its strategy, business model and performance are
clearly understood.
Understanding what analysts and investors think about us,
including their drivers on why they choose to invest, and helping
our stakeholders understand our business is a key part of driving
our business forward.
Tekmar Energy Ltd was recently confirmed as the first offshore
company to receive ISO 45001:2018 accreditation, proving our
leading position in the industry and commitment to health and
safety management.
Our commitment to these areas is shown through their inclusion
in our annual strategic planning process, including a review of any
associated strengths, weaknesses, opportunities and threats, and
thus integrated into the company’s strategy and business model.
The Board recognises the need to maintain effective working
relationships across a wide range of stakeholders, including
investors, employees, partners and local communities. This is
managed by our Head of Marketing and Strategy, with solid and
continued feedback from our wider stakeholders as an essential
part of ensuring long term success.
risk management,
Principle 4. Embed effective
considering both opportunities and threats, throughout
the organisation
The Board has overall responsibility for the determination of
the Group’s risk management objectives and policies. This risk
management is included and reviewed within our business plan. As
an offshore energy business, managing risk is core to our everyday
responsibilities and has been demonstrated by over 30 years of
proven policies, procedures and behaviours.
The objective of the Board is to set policies that seek to reduce
ongoing risk as far as possible, without unduly affecting the Group’s
competitiveness and flexibility. The Board believes this helps to
sustain shareholder value; including the company’s supply chain,
from key suppliers to end-customer; while also protecting the
Group’s corporate culture.
A detailed breakdown of the Company’s risk factors can be found
on Page 30 of the Admission Document and Pages 32-35 of the
Annual Report.
Risk management, including financial and non-financial controls;
what the Board does to identify, assess and manage risk and how it
gets assurance that the risk management and control systems are
effective, is covered by the company’s business risk assessment
procedures.
Principle 5. Maintain the Board as a well functioning,
balanced team led by the Chair
The Directors acknowledge the importance of high standards of
corporate governance and believe the QCA Code provides the best
fit for the Group by setting out a standard best practice for small
and mid-size quoted companies, particularly those listed on AIM.
The Chairman has overall responsibility for ensuring the Group’s
compliance to the QCA Code. The Non-Executive Directors are
also responsible for the effective running of the Board’s committees
which comprise an important element of the governance process.
In line with QCA code guidance, three of the Non-Executive
Directors, one of whom is the Chairman, are independent. The
Non-Executive Directors of the Board have been selected with
the objectives of increasing the breadth of skills and experience
of the Board and bringing constructive challenge to the Executive
Directors.
The Company Directors are:
• Alasdair MacDonald, Independent Non-Executive Chairman
• Christopher Gill, Senior Independent Non-Executive Director
• Julian Brown, Independent Non-Executive Director
• James Ritchie, Chief Executive Officer
• Sue Hurst, Chief Financial Officer
The Group has determined that the composition of the Board and
its committees brings a desirable range of skills, personal qualities
and experience for delivering the strategy, based upon the size and
nature of the business.
All Directors are subject to re-election by shareholders at the Annual
General Meeting within a three-year period of their appointment.
Any Directors appointed during the financial year must be formally
elected at the Annual General Meeting following their appointment.
The Group believes
functioning and
effectiveness of the Board is premised upon a number of key
factors in addition to Board composition. These are:
the successful
that
• Operations – the agenda and frequency of meetings, and
monitoring of attendance;
• Access to the appropriate advice and administrative services –
via the Company Secretary and external resources as required;
• Thorough induction of new Directors to the Board and its
committees;
• Performance assessment of the Board as a unit and of its
members individually.
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Both the Chairman and the Board hold these factors in the highest
regard and commit to performing ongoing evaluation to review and
assess their application in practice.
The time commitments of the Non-Executive Directors are as
follows:
• Alasdair MacDonald minimum time commitment of four/five days
per month.
• Christopher Gill minimum time commitment of two / three days
per month.
• Julian Brown minimum time commitment of two / three days per
month.
Principle 6. Ensure that between them, the Directors have
the necessary up-to-date skills, experience and capability
The Board is satisfied that its members have the appropriate
balance of backgrounds, competencies and knowledge in order to
deliver on its core objectives. The Board has particular experience
in offshore energy; engineering; manufacturing; operations and
finance, in both private and public companies.
The Nomination Committee is responsible for overseeing the
selection of Board members that are equipped with the correct
range of experience, knowledge, integrity and ethics. Throughout
the year, the Directors have access to the advice and services of
independent professional advisors at the expense of the Company.
All of the Directors are active in the energy sector and continually
refine and improve their knowledge of the latest techniques and
strategies.
For the acquisition activity Tekmar use a range of professional
advisors to protect the Group’s position as it executes its strategy.
Principle 7. Evaluate Board performance based upon clear
objectives and reassess continuously
The Board will formally appraise the individual members of the
Board annually. The scope of which includes skills, experience and
capabilities, and take account of additional responsibilities such
as chairing or membership of the Board committees. The annual
appraisal will be carried out by the Chairman with reference to the
competencies set out by the Nomination Committee pursuant to
each Board role. As part of this process, any training and personal
development needs will be identified.
The Chairman will also be subject to appraisal through a process
managed by a Chairman Appraisal Group comprising the Chief
Executive Officer and the Chief Financial Officer.
The objectives of the Board are to review, formulate and approve
the Group’s strategy, budgets and corporate activities, and to
oversee the Group’s progress towards its goals. The Group
has a process for evaluating the performance of the Board, its
committees and the individual Directors, including the Chairman,
in respect of these objectives.
The Board will carry out a full evaluation of its performance annually.
The evaluation criteria include Board composition and skills, strategy
and performance, governance and organisation, Board dynamics,
and communication with shareholders and key stakeholders. The
evaluation will be based upon the self-assessment of the Chairman
and Directors. An external evaluation using an independent
adviser may be executed if deemed necessary. The results of the
evaluation process will be analysed and reported back to the Board
in order to agree any action required.
The Nomination Committee may use the results of the evaluation
process when reviewing the composition of the Board for selecting
any new Board members, and in succession planning for the
Directors of the Board as well as key executive team members.
Principle 8. Promote a culture which is based on ethical
values and behaviours
At Tekmar we have a clear vision, mission and values. Our values
are:
Safety: Paramount to everything we do for our people, our
customers and the environment in which we operate. We always
aim higher than industry standards.
People: Are the foundation on which the business operates through
their integrity, intelligence, empowerment and ongoing investment
in their development.
Excellence: Is engrained in our culture to ensure we deliver
dynamic, reliable and responsive solutions that meet the exact
needs of our customers every time.
Heritage: Capitalising on years of experience and lessons learned
to deliver intelligent solutions that we’re proud of.
Innovation: Apply our technical excellence, experience and vision
to engineer products and services that evolve with the marketplace.
Collaboration: Committed to establishing strategic partnerships to
create robust and effective solutions that exceed expectations.
Customers: Driving our people to excel and exceed client
expectations, reduce cost, improve quality, apply innovation and
ensure excellence.
Following the recent admission to AIM, it is considered that the
Board composition is appropriate for the company’s current size
and structure. This will also be reviewed annually. Effectiveness of
the Board is premised upon a number of key factors in addition to
Board composition. These are:
• Operations – the agenda and frequency of meetings, and
monitoring of attendance;
• Access to the appropriate advice and administrative services –
via the Company Secretary and external resources as required;
• Thorough induction of new Directors to the Board and its
committees;
• Performance assessment of the Board as a unit and of its
members individually.
Principle 10. Communicate how the company is governed
and performing by maintaining a dialogue with
shareholders and other relevant stakeholders
Tekmar is committed to communicating openly with its shareholders
to ensure that its strategy, business model and performance are
clearly understood. Understanding what stakeholders think about
us, including their drivers on why they choose to invest is a key
part of developing our business. We also focus strongly on helping
our stakeholders understand our business. We aim to achieve this
through a constant dialogue with the investor community via our
broker.
The principal methods of communication with shareholders are the
Annual Report, the interim and full-year results announcements,
the Annual General Meeting and other announcements as and
when applicable on the Group’s investor website.
The website is updated regularly with information regarding Group
activities and performance, and users can register to receive alerts
regarding new announcements, reports and events, including
Annual General Meetings. We will also proactively support investor
roadshows at key dates throughout the year, attend investor
conferences and host site visits to Tekmar Group premises;
including ad-hoc meetings by exception.
The Board promotes ethical responsibility and good conduct
within the Group, fostering a culture of inclusion, responsibility
and openness which is consistent with the Group’s objectives.
A demonstration of this is Tekmar Energy’s “Tekcare” initiative.
Tekcare was introduced to ensure safety remains the top priority
as the Company continues to grow. Tekmar strives to actively
promote a proactive attitude towards health, safety, quality and
the environment (HSQE) by all stakeholders and has a safety-first
approach in everything they do.
The Group is an equal opportunities employer and encourages
diversity at all levels. These values are embedded in the Group’s
leadership and throughout the organisation.
Principle 9. Maintain governance structures and processes
that are fit for purpose and support good decision making
by the Board
Our business is built upon quality. Within the offshore energy
industry, standards and the protection of these standards are
paramount and something which the Tekmar Group Board has
a wealth of experience in. Our independently audited quality
management systems and ISO accreditation demonstrate our
commitment in this area.
The Group operates an effective governance framework. Within this
framework the Board supports the executive team in developing
and executing the Group’s strategy. Any decisions between and
within these governance structures are reached through an open
and constructive dialogue.
The Chairman leads the Board and is responsible for its governance
structures, performance and effectiveness. This includes ensuring
that the dynamics of the Board are functional and productive,
and that no individual Director dominates discussion or decision
making. The Chairman is also responsible for ensuring that the
links between the Board and the executive team and the Board and
the shareholders, are strong and efficient. Meanwhile, the Chief
Executive Officer is responsible for the day-to-day management of
the Group’s operations and for implementing the strategic goals
agreed by the Board.
The Board has an agenda of regular business, financial and
operational matters for discussion, as well as a review of each
committee’s area of work. The Board is ultimately responsible for
making any key strategic or business decisions. Members of the
executive team may be invited to attend meetings of the Board
in order to facilitate these processes. In other instances, the
executive team is represented by the Chief Executive Officer, who
communicates all their relevant views and information.
The effectiveness of the corporate governance structures and
processes is formally assessed as part of the annual Board
evaluation.
54
The Board
Alasdair MacDonald
Independent
Non-executive Chairman
Ally has over 30 years’ experience in
the oil and gas industry. He has held
senior executive positions at Wellstream
International Limited and Wellstream
Holdings plc, a FTSE 250 designer,
flexible
manufacturer and supplier of
pipeline product to customers
in the
offshore oil industry. He was then CEO
of Seanamic Group, an engineering and
equipment manufacturer in the energy,
defence, oceanographic science and
seismic industries. He spent 19 years with
Technip UK, acting as Managing Director
of Technip Umbilicals Limited between
2005 and 2008, a leader in its global
markets. Ally is currently Group CEO
of Benbecula Group, a privately funded
engineering based buy and build business.
An engineer by trade, he graduated
with an honours degree in mechanical
engineering.
James Ritchie
Chief Executive Officer
Sue Hurst
Chief Financial Officer
James has 10 years’ experience as an
executive manager and is one of the first
and founding employees of Tekmar Energy.
In 2009, James became Operations
Director and led the business through
substantial growth. He then subsequently
led the management buy-out of Tekmar
Energy in September 2011 with Elysian
and Opera Finance and, consequently,
became Chief Executive Officer. He is
also a committee member of Subsea
North East and Chairman of Energi Coast.
Energi Coast is the representative group
for the North East of England’s offshore
renewables sector.
across
oil &
renewables,
With over 30 years in senior finance and
commercial roles Sue has extensive
experience in both private equity backed
businesses and large listed companies,
ICI, Electrolux and
such as Serco,
sectors
Brambles. Working
including
gas,
transportation, information technology and
outsourcing, as a Chartered Management
Accountant, she prides herself in people
management and has
led extensive
change programmes, along with overseas
business developments. With a robust
approach
to corporate governance,
she has worked on numerous business
expansions, new product launches and
acquisitions. Sue joined Tekmar in 2012
shortly after the management buy-out as
Finance Director.
Review
Strategic
Governance
Finance
Committee Membership
Remuneration committee
Nomination committee
Audit committee
Christopher Gill
Independent
Non-executive Director
Julian Brown
Independent
Non-executive Director
Chris, a Chartered Accountant, has
extensive private and plc experience in the
engineering, fast moving consumer goods,
manufacturing and energy sectors. He was
Finance Director at Domnick Hunter Group
plc, an international filtration business, for
7 years before moving to become Finance
Director at Wellstream Holdings plc, the
FTSE250 designers, manufacturers and
supplier of flexible pipeline product to the
offshore oil industry. Subsequently, Chris
was director and CFO of SMD Limited,
a designer, engineer and assembler of
remotely controlled subsea equipment
to the oil and gas, offshore renewables,
telecommunications and mining industries.
Chris’ experience also
includes being
CFO of Seanamic Group, a private equity
backed buy and build sub-sea engineering
business, and Senior Independent Director
and Audit Committee Chairman of AIM
quoted Stadium Group plc.
Julian is a prominent figure within the
UK Renewables market, with a wealth of
experience in the sector. He is currently
Vice President and UK Country Manager
for MHI Vestas Offshore, the leading
wind turbine manufacturer. He is former
Chair of RenewableUK, the UK’s leading
renewable energy trade association. Other
former roles include co founder and Chair
of 8.2Aarufield, UK Director of AREVA
Wind, a founding partner of the globally
respected
consultancy
renewables
BVG Associates Limited, and Managing
Director of Vestas Blades UK (formerly
NEG Micon Rotors Limited), which was
the
largest renewables manufacturing
supply chain employer in the UK during his
employment.
56
Management Team
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Finance
Russell Edmondson
Managing Director, Tekmar
Energy
Terry Sheldrake
Non-executive Technical
Director, Tekmar Energy
Jack Simpson
Director, Tekmar Energy
Steve Rossiter,
Managing Director,
AgileTek Engineering
Dave Thompson
Managing Director,
Subsea Innovation
Fraser Gibson,
Managing Director,
Ryder Geotechnical
industry prior
the construction
With over 20
years management
experience, Russell began his career
to
in
moving into the offshore wind and oil &
gas sectors. Having worked with all the
key industry stakeholders, Russell joined
Tekmar Energy in 2012 and is responsible
for the company P&L. Russell has a
passion for both business and innovation
and strives to develop teams who share
his commitment in operating within the
vanguard.
Terry has over 25 years’ experience in
both academia and within the oil and
gas industry. This includes 14 years of
executive management experience as
the Head of Technology at Wellstream
International
subsequently GE
Wellstream. Terry has also been an active
member on a number of International
standards committees, has a PhD in
Mechanical Engineering and is a Fellow
of the Institution of Mechanical Engineers.
and
Joining in 2011, Jack was part of the
early Tekmar Energy team who grew the
company from its early roots to where it
stands today as a global market leader.
Jack has over 11 years experience in
business and is responsible for sales and
business development globally. Leading
the expansion of the business into Asia,
Jack is also the Chairman of Tekmar’s
Shanghai based subsidiary.
Steven is the founder of AgileTek and is
responsible for managing the day to day
business of the division. He leads the
coordination of the services delivered
by AgileTek to the rest of the Group and
is responsible for external direct sales.
He is also a certified solutions architect
for Amazon Web Services and leads
the development of AgileTek’s cloud
platforms.
A Chartered Engineer with over 32 years
experience. Dave is a fellow of the IMechE
with a Master’s Degree in engineering and
a degree in Management Studies. Dave has
worked in senior engineering roles for over
20 years designing, building and servicing
capital equipment for several engineering
sectors. Dave joined Subsea Innovation
initially as Technical Director in 2014 moving
into the role as Managing Director in 2016.
Fraser is a Chartered Engineer with the
Institution of Civil Engineers and has been
working as a geotechnical engineering
consultant in the offshore sector for over
15 years. Fraser spent time at UTEC
Geomarine, progressing
from Senior
Engineer to Principal Engineer and then to
Regional Manager for APAC where Fraser
spent 2 years in Singapore establishing an
office for UTEC Geomarine in the region,
before later setting up Ryder Geotechnical
in 2016.
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Audit Committee Report
Chris Gill, Chair of the Audit Committee
Dear shareholder,
I am pleased to present the Audit Committee Report for the year
ended 31 March 2019 and trust that you will find the content
insightful.
Key Responsibilities
The Audit Committee has primary responsibility for:
• reviewing the effectiveness of the Group’s internal controls,
• monitoring the integrity of the Group’s financial statements,
• reviewing the external announcements of the Group’s results,
and
• approving the appointment and remuneration of the Group’s
external auditors, reviewing their reports and ensuring their
independence is maintained,
in all cases having due regard to the interests of shareholders.
The Audit Committee reports to the Board on these matters and
meets at least three times a year. Since the IPO and up to the
date of this report the Committee has met four times. The Audit
Committee has terms of reference in place which have been
formally approved by the Board and are made available at the
AGM and on the Group’s website.
Experience
The Audit Committee comprises two Non-Executive Directors
and was chaired during the year under review by Chris Gill who
is a chartered accountant with relevant financial experience in
this role. Alasdair MacDonald is the other independent non-
executive director who served during the year and is deemed to
have to necessary ability and experience to understand financial
statements.
External audit
The Audit Committee also approves the appointment and
remuneration of the Group’s external auditors and satisfies
itself that they maintain their independence regardless of any
non-audit work performed by them. The auditor is permitted to
provide non-audit services which are not, and are not perceived
to be, in conflict with auditor independence, providing it has
the skill, competence and integrity to carry out the work and is
considered to be the most appropriate to undertake such work
in the best interests of the Group. All assignments are monitored
by the Committee.
The respective responsibilities of the Directors and external
auditors in connection with the Group financial statements are
explained in the Statement of Directors’ Responsibilities on page
68 and the Auditors’ Report on pages 72-75. Details of services
provided by and fees payable to the auditors are shown in note
8 of the Group financial statements.
Whilst the Audit Committee has not adopted a formal policy in
respect of the rotation of the external auditor, one of its principal
duties is to make recommendations to the Board in relation to
the appointment of the external auditor. Various factors are
taken into account by the Committee in this respect, including
the quality of the reports provided to the Committee and the
level of understanding of the Group’s business.
Internal control and risk management
The Audit Committee supports the Board in reviewing the risk
management methodology and the effectiveness of internal
control.
The Group does not currently have an internal audit function,
and this is considered appropriate for the current size and
complexity of the business. As the Group grows the need for
an internal audit function, to complement and challenge the risk
management procedures already in place, will be monitored on
a regular basis.
Activities of the Audit Committee during the year
During the year the key areas the Committee has focussed on
have been:
• Determining the scope of the auditors’ half year review and
discussed the report once received;
• Reviewing the auditors’ audit strategy and plan for the year
end audit;
• Reviewing the tax arrangements of the Group; and
• Discussing progress of a review of the corporate structure
performed by management.
Significant issues considered in relation to the financial
statements
The key issues relating to the financial statements considered,
discussed with the auditors and concluded upon were:
• Revenue – the impact of transitioning to IFRS 15 was
discussed; also, the specific financial reporting risks in respect
of the judgements required for revenue recognised over time, in
particular estimates of cost to complete on specific contracts;
• IPO accounting – the Committee reviewed the complex
accounting around the IPO and determined the approach taken
by management was appropriate;
• Subsea Innovation acquisition accounting – the acquisition
accounting was deemed reasonable for the half year, with a full
purchase price allocation completed for year end;
• Share based payments charge – the assumptions in relation
to the options and free shares issued during the year were
discussed and the treatment agreed as reasonable.
Chris Gill
Chair of the Audit Committee
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Remuneration Committee
Report
Chris Gill, Chair of the Remuneration Committee
Dear shareholder,
I am pleased to present the Directors’ Remuneration Report
for the year ended 31 March 2019. The Remuneration
Committee is chaired by myself as an independent Non-
Executive Director, and includes Alasdair MacDonald. The
aim of this report is to provide shareholders with information
to understand our remuneration strategy and its linkage to
the Group’s financial performance.
Responsibilities
The remuneration committee reviews the performance of
the executive directors and determines their terms and
conditions of service, including their short and long-term
rewards, having due regard to the interests of shareholders.
It also satisfies itself that good practices apply to all Group
employees through the relevant management structures. In
particular, pay awards and other benefits for the executive
management of any Group company are tabled to the
Remuneration Committee in advance of the award. The
Remuneration Committee meets at least twice a year.
Our performance in FY19
The successful IPO was a major achievement during the
year and despite a disappointing result in the first half,
largely attributable to changes in customer procurement
activities that delayed certain revenues, the second half
matched our expectation and those of the market. The final
result being a small shortfall in EPS of 4% vs that expected
on float and a share price of 130p as of 21 June vs 130p
on float.
Share Awards
During the period and as described on IPO, share incentives
were envisaged and awarded under two schemes, the IPO
Share Incentive Plan and the Group Share Incentive Plan,
the former to certain key executives and the latter being
free shares awarded to all employees, excluding directors,
with qualifying service on the date of the IPO. No other
bonus or share related payments were made to senior
executives other than those attributable to the period prior
to the IPO described below.
Awards under the IPO Scheme were made to key executives
on IPO focussing on growth in both EPS and TSR over the
two years to 31 March 2020. The performance targets,
being equally weighted across these two measures, also
include an initial EPS performance target for the first year
to 31 March 2019 to meet market expectations as at the
IPO. The financial results for this year show that the first
year EPS (on adjusted earnings as defined in the scheme
rules) is 5.97p which is marginally behind the IPO market
expectation of 6.25p.
The Board and Remuneration Committee are acutely
aware of the need to keep our key executives incentivised
to meet the business challenges, meet or beat the IPO
targets and to maximise shareholder returns. The Board
believes that the IPO options is key to this and, given small
shortfall in EPS, and, after discussions with a number of
larger shareholders, has exercised a discretion within the
IPO Scheme to amend the performance targets within
it. Specifically the scheme has been amended to waive
the year one EPS performance condition, increasing the
year two EPS performance condition so as to require an
increase of 5% in cumulative EPS to be delivered over the
two years to 31 March 2020 whilst leaving all other terms
and conditions, including the two year TSR target and
vesting period, unchanged.
Group Remuneration Policy
The key components of the remuneration policy are set out below.
Why
How
Basic annual salary
Pension
To attract and retain the right talent
reflecting level of responsibilities of
the role, along with experience and
skills required
To provide a contributory pension
scheme in line with statutory
requirements, to provide employees
with support after retirement
Inflationary pay rises implemented annually to track
national indicators
The group increased its contribution to 5% in advance of
the statutory requirement to do so
Other benefits
Additional benefits to support
the health and wellbeing of our
employees
Life assurance, healthcare scheme, cycle to work and
tech purchase schemes
Annual bonus
To reward high-performing
individuals
Annual bonus with performance criteria based upon
a mixture of profit-based and personal objectives,
supporting the Group’s growth strategy
Share schemes
Share ownership is an important
part of employee incentivisation and
retention
Four share schemes developed on IPO; implemented
IPO options and Share Incentive Plan; intending to
launch LTIP and SAYE plans in the coming year
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Recruitment remuneration arrangements
When hiring a new Executive Director, the Committee will set
the Executive Director’s ongoing remuneration in a manner
consistent with the policy described above. To facilitate the hiring
of candidates of the appropriate calibre required, the Committee
may make an award to “buy-out” variable remuneration
arrangements forfeited on leaving a previous employer. In doing
so, the Committee will take account of relevant factors including
the form of award, any performance conditions and the time over
which the award would have vested. Recruitment awards will
normally be liable to forfeiture or “clawback” on early departure
which for Executive Directors is defined as being within the first
two years of employment. Appropriate costs and support will be
covered if the recruitment requires relocation of the individual.
Statement of consideration of employment conditions elsewhere
in the Company
When reviewing and setting Executive Director remuneration,
the Committee takes into account the pay and employment
conditions of all employees of the Group. The Group-wide
pay review budget is one of the key factors when reviewing
the salaries of the Executive Directors. Although the Group
has not carried out a formal employee consultation regarding
Board remuneration, it does comply with local regulations and
practices regarding employee consultation more broadly.
Name of Director
J Ritchie
S Hurst
A MacDonald
C Gill (1)
J Brown (1)
Fees /
basic
salary
(£000)
201
141
65
35
27
Benefits
(£000)
Bonus
(£000)
Pension
(£000)
2019 Total
(£000)
2018 Total
(£000)
124
161
-
-
-
1,000
-
-
-
-
7
5
-
-
1
1,332
307
65
35
28
179
130
47
-
-
1 Part year only – appointed 20 June 2018
Benefits – one-off payment relating to the sale of shares allocated to key management during the IPO from the Employee Benefit Trust. There
were no other benefits.
Bonus – compensation to J Ritchie for the IPO transaction which was reimbursed to the Group by the exiting private equity shareholders. No
other bonuses were paid in the period.
Executive Director remuneration
The Committee reviewed Executive Director remuneration
prior to the floatation to ensure this was in line with market
benchmarks. Having worked for the business for a number
of years prior to floatation, both Executive Directors entered
into new service agreements on 14 June 2018 which became
effective upon Admission.
There is a notice period of six months and other than payment
of salary and benefits in lieu of notice, the Directors’ service
agreements do not provide for benefits upon termination of
employment. It is the Committee’s intention that any future
service contracts will be subject to similar notice periods.
Non-Executive Director remuneration
Non-Executive Directors have appointment letters setting out
their terms of appointment. All Non-Executive Directors are
appointed for an initial three year term, with a three months’
notice period by either party. The Board considers that the Non-
Executive Directors meet the independence tests.
IPO options plan
Awards granted under the IPO Plan were awarded to the
employees below on 20 June 2018 giving options to acquire
shares for a consideration per share, equal to its nominal value.
No further awards will be granted under the IPO Plan.
The table below summarises the IPO option awards for the two
Group Executive Directors and Senior Management:
Maximum
No of shares
vesting
EPS
condition -
maximum
vesting
No of shares
vesting
at EPS
threshold
(50%)
TSR condition
- maximum
vesting
No of shares
vesting
at TSR
threshold
(50%)
Performance
year ending
Name of Director
J Ritchie
S Hurst
900,000
450,000
225,000
450,000
225,000
31 March 2020
350,000
175,000
87,500
175,000
87,500
31 March 2020
R Edmondson
125,000
62,500
S Rossiter
J Simpson
125,000
62,500
125,000
62,500
31,250
31,250
31,250
62,500
62,500
62,500
31,250
31 March 2020
31,250
31 March 2020
31,250
31 March 2020
Participants will be entitled to acquire all the shares subject
to their individual IPO awards if the following performance
conditions are met:
• Earnings per share (EPS) – 25% of the total shares will vest
where the cumulative EPS for the two years ended 31 March
2020 exceeds its initial target by 120%. 50% of the total shares
will vest where this growth is 130%; as discussed earlier, both
thresholds were increased when the Board waived the year one
EPS performance hurdle.
• Total shareholder return (TSR) - 25% of the total shares will
vest where the TSR for the year ended 31 March 2020 is not
less than 15%. 50% of the total shares will vest where this is
25%.
Upon leaving employment, the Board has sole discretion as to
whether any unvested option will vest, taking into account the
extent to which any performance condition has been satisfied
at the date of cessation of employment, and the length of time
that elapsed from the date of grant to the date of cessation of
employment.
Looking forward
The current share option schemes have provided the desired
incentives to management and staff in driving the right
behaviour across the Group. During the next twelve months
we will endeavour to launch the LTIP scheme to key executives
(excluding those already participating in the IPO scheme) and
the SAYE scheme to all qualifying staff. The Committee will
continue to review the reward policy to ensure it aligns to the
Group’s growth strategy and make recommendations to the
Board.
I do trust that this clearly explains our approach to remuneration
and enables you to appreciate how it underpins our business
growth strategy. I will be available at the Annual General Meeting
to discuss any questions you may have.
Chris Gill
Chair of the Remuneration Committee
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Nomination Committee
Report
The Nomination Committee will lead the process for board
appointments and make recommendations to the Board.
The Nomination Committee shall evaluate the balance
of skills, experience, independence and knowledge on
the Board and, in the light of this evaluation, prepare
a description of the role and capabilities required for a
particular appointment. The Nomination Committee will
meet as and when necessary and comprises Alasdair
MacDonald (as Chairman), Chris Gill, and James Ritchie.
Given the newly constituted Board following IPO in June
2018 it has not been necessary to hold a Nomination
Committee during this period. Going
forward the
committee will meet at least twice a year in line with the
terms of reference, a copy of which is available on the
Group’s website.
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Finance
Directors Report
for the year ended 31 March 2019
The Directors present their report together with the audited
Group financial statements of the Parent Company (‘the
Company’) and the Group for the year ended 31 March 2019.
Business review and future developments
A review of the performance of the Group during the year,
including principal risks and uncertainties, key performance
indicators and comments on future developments, is given in
the Strategic Report.
Dividends
The Directors do not intend that the Company will declare a
dividend in the near term, as available cash resources will be
channelled into funding the growth strategy of the Group. No
dividends have been paid in the period.
Ordinary shares of
1p each
A MacDonald
J Ritchie
S Hurst
C Gill
J Brown
31 March 2019
434,526
1,013,375
276,569
19,230
19,230
Directors and their interests
The Directors of the Company during the year and their interests
in the ordinary share capital at the end of the year are shown in
the table to the right.
All shares above have been in place from admission with no
further shares acquired or disposed of in the period to the
end of the financial year. Further information on the Directors’
interests can be found in the Remuneration Committee Report.
Major shareholders
As at 24 June 2019 the following interests of shareholders in excess of 3% have been notified to the Company.
Donations
During the year the Group made no charitable or political
donations.
Employees
The Group systematically provides employees with information
on matters of concern to them, consulting them regularly, so that
their views can be taken into account when making decisions
that are likely to affect their interests. Employee involvement in
the Group is encouraged, as achieving a common awareness on
the part of all employees of the financial and economic factors
affecting the Group plays a major role in its performance. The
Group has a Business Integrity Policy that governs the expected
business behaviours of employees and this policy incorporates
guidance on employee’s responsibilities should they become
aware of inappropriate business behaviours or any similar
concern.
in suitable employment and gives
The Group recognises its responsibility to employ disabled
persons
fair
consideration to such persons, including any employee who
becomes disabled, having regard to their particular aptitudes
and abilities. Where practicable, disabled employees are treated
equally with all other employees in respect of their eligibility for
training, career development and promotion.
full and
Miton Group
BlackRock Investment Management (UK) Limited
Berenberg Bank
Fidelity Worldwide Investment (FIL)
Hargreave Hale
Legal & General Investment Management
Henderson Global Investors Limited
River and Mercantile Asset Management LLP
Schroders plc
Impax Asset Management Ltd
J O Hambro Capital Management Limited
Threadneedle Asset Management
Number of
ordinary shares
Ordinary shares
as a % of issued
share capital
5,300,000
5,068,270
4,950,000
4,000,000
3,400,000
3,000,000
2,800,000
2,775,000
2,680,318
2,516,574
2,500,000
2,000,000
10.46%
10.00%
9.77%
7.89%
6.71%
5.92%
5.52%
5.47%
5.29%
4.96%
4.93%
3.95%
Going Concern
The Directors confirm that, having made appropriate enquiries,
they have a reasonable expectation the Group and the
Company have adequate resources to continue operations for
the foreseeable future. Accordingly, the Directors continue to
adopt the going concern basis in the preparation of the financial
statements.
Takeover Directive requirements
The Company has one class of equity share, namely £0.01
ordinary shares. The shares have equal voting rights and there
are no special rights or restrictions attaching to any of them
or their transfer to other persons. The rights and obligations
attaching to these shares are governed by the Companies Act
2006 and the Company’s Articles.
Rules governing the appointment and replacement of Directors,
and those relating to the amendment of the Company’s Articles
of Association, are contained within those Articles of Association,
a copy of which is located on the Company’s website (investors.
tekmar.co.uk).
Notice of Annual General Meeting
The Annual General Meeting will be held at 10am on 21 August
2019 at Tekmar, Park 2000, Millennium Way, Newton Aycliffe
DL5 6AR. The Notice of Meeting which sets out the resolutions
to be proposed at the forthcoming AGM accompanies these
Group financial statements.
Events after the reporting date
There have been no significant events in the period from 31
March 2019 and the publication of these financial statements.
Independent auditor
The auditor, KPMG LLP, has indicated its willingness to continue
in office and a resolution concerning their reappointment will be
proposed at the AGM. So far as each of the Directors is aware
at the time this report is approved:
• there is no relevant audit information of which the Company’s
auditor is unaware; and
• the Directors have taken all the steps that they ought to
have taken to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
This Directors’ Report was approved by order of the Board.
S Hurst
Chief Financial Officer & Company Secretary
Tekmar Group plc
Unit 1,
Park 2000 Millennium Way
Aycliffe Business Park
Newton Aycliffe
County Durham
DL5 6AR
Registered number: 11383143
24 June 2019
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Statement of Directors’ responsibilities
in respect of the Annual Report and the
Financial Statements
The directors are responsible for preparing the Annual
Report and the Group and parent Company financial
statements in accordance with applicable law and
regulations.
• use the going concern basis of accounting unless
they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic
alternative but to do so.
Company law requires the directors to prepare Group
and parent Company financial statements for each
financial year. Under the AIM Rules of the London
Stock Exchange they are required to prepare the Group
financial statements in accordance with International
Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and
applicable law and they have elected to prepare the
parent Company financial statements in accordance
with UK accounting standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS
101 Reduced Disclosure Framework.
Under company law the directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Group and parent Company and of their profit or loss for
that period. In preparing each of the Group and Parent
company financial statements, the directors are required
to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable,
relevant, reliable and prudent;
• for the Group financial statements, state whether
they have been prepared in accordance with IFRSs as
adopted by the EU;
• for the parent Company financial statements, state
whether applicable UK accounting standards have been
followed, subject to any material departures disclosed
and explained in the financial statements;
• assess the Group and parent Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the parent Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the parent Company and enable them to
ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable
the preparation of financial statements that are free from
material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of
the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the directors are
also responsible for preparing a Strategic Report and a
Directors’ Report that complies with that law and those
regulations.
The directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the company’s website. Legislation in the
UK governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
S Hurst
Company Secretary
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Financial Statements
We developed and executed a plan to ensure a strong result in H2
I am pleased to report that, during our first year as a plc, we
increased revenue by 28% and moved the business from loss
making to profitability on a PBT basis. The IPO in June 2018
strengthened the Group’s balance sheet and has enabled us
to invest in growth and diversification. Whilst acquiring two
strategically important businesses during the year, the Group
ended FY19 with healthy cash balances.
Sue Hurst, CFO
Page Numbers
72 Independent Auditor’s Report
78 Consolidated statement of comprehensive income
79 Consolidated balance sheet
80 Consolidated statement of changes of equity
81 Consolidated cash flow statement
83 Notes to the consolidated financial statements
116 Parent company balance sheet
117 Parent company statement of changes in equity
118 Notes to the company financial statements
“
The IPO in June
2018 strengthened
the Group’s
balance sheet and
has enabled us to
invest in growth
and diversification.
Sue Hurst, CFO
“
72
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Independent Auditors Report on
the members of Tekmar Group plc
Key audit matters: including our assessment of risks of material misstatement
2.
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due to
fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters in
arriving at our audit opinion above. These matters were addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon and we do not provide a separate opinion on these matters.
The impact of
uncertainties due to
the UK exiting the
European Union
Refer to page 32 (principal risks), page
58 (Audit Committee Report), page
84 (accounting policy) and page 83
(financial disclosures).
1. Our opinion is unmodified
We have audited the financial statements of Tekmar
Group plc (“the Company”) for the year ended 31
March 2019 which comprise the consolidated statement
of comprehensive
income, consolidated balance
sheet, consolidated statement of changes in equity,
consolidated cash flow statement, parent company
balance sheet, parent company statement of changes
in equity and the related notes, including the accounting
policies in note 2.
In our opinion:
the financial statements give a true and fair view of the
state of the Group’s and of the parent Company’s affairs
as at 31 March 2019 and of the Group’s profit for the
year then ended;
the group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European Union
(IFRSs as adopted by the EU);
the parent Company financial statements have been
properly prepared in accordance with UK accounting
standards, including FRS 101 Reduced Disclosure
Framework; and
the
in
financial statements have been prepared
accordance with the requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities are described below. We
have fulfilled our ethical responsibilities under, and
are independent of the Group in accordance with, UK
ethical requirements including the FRC Ethical Standard
as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate
basis for our opinion.
Overview
Materiality: group
financial statements
as a whole
270,000 (2018: £510,000)
0.96% (2018: 2.3%) of Revenue
Coverage
100% (2018: 100%) of Group
revenue and profit before tax
Key audit matters
vs 2018
Recurring risks
Revenue recognition
on contracts ongoing
at year end
New event driven
risks
Recoverability of
parent company’s
investments in
subsidiaries
The impact of
uncertainties due
to the UK exiting
the European Union
Going concern
The risk
Our response
in
the
company’s
Unprecedented levels of uncertainty
All audits assess and challenge the
reasonableness of estimates, in particular
recoverability
as described
investment
parent
of
in subsidiaries below, and
related
disclosures and the appropriateness of
the going concern basis of preparation
of the financial statements (see below).
All of these depend on assessments
of the future economic environment
and the group’s future prospects and
performance.
Brexit is one of the most significant
economic events for the UK and at the
date of this report its effects are subject
to unprecedented levels of uncertainty of
outcomes, with the full range of possible
effects unknown.
We developed a standardised
firm-
wide approach to the consideration of
the uncertainties arising from Brexit in
planning and performing our audits. Our
procedures included:
Our Brexit knowledge
We considered the directors’ assessment
of Brexit-related sources of risk for the
group’s business and financial resources
compared with our own understanding
of the risks. We considered the directors’
plans to take action to mitigate the risks.
Sensitivity analysis
When addressing the recoverability of
the parent company’s investment in
subsidiaries and other areas that depend
on forecasts, we compared the directors’
analysis to our assessment of the full
range of reasonably possible scenarios
resulting
uncertainty
and, where forecast cash flows are
required to be discounted, considered
adjustments to discount rates for the
level of remaining uncertainty.
from Brexit
Assessing transparency
As well as assessing
individual
disclosures as part of our procedures
on the recoverability of the parent
company’s investment in subsidiaries,
we considered all of the Brexit related
disclosures together, including those
in the strategic report, comparing the
overall picture against our understanding
of the risks.
However, no audit should be expected
to predict the unknowable factors or
all possible future implications for a
company and this is particularly the case
in relation to Brexit.
74
Revenue recognition
on contracts ongoing
at year end
(£28.1 million)
(2018: £21.9 million)
Refer to page 58 (Audit Committee
Report), page 84 (accounting policy)
and page 83 (financial disclosures).
The risk
Our response
The risk
Our response
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Strategic
Governance
Finance
at
ongoing
contracts
inaccurate
identification
Subjective estimate:
The Group enters in to contracts for
the manufacture and assembly of
cable protection systems. A typical
contract may have multiple performance
obligations and the transaction price
will be allocated to these performance
obligations. The Group has to make
an assessment of the progress of each
contract in order to determine how much
revenue to recognise.
Each contract is reviewed to identify and
assess distinct performance obligations,
and the transaction price allocated to
each.
year
For
end,
of
the performance obligations and/
or
incorrectly concluding whether
performance obligations have been
satisfied could lead to material variances
in the amounts recognised in revenue.
Inaccurate allocation of contract price to
separate performance obligations and/
or assessment of whether revenue from
ongoing contracts at year end should be
recognised ‘over time’ rather than ‘point
in time’, under the relevant accounting
standards, could
to material
variances in the amounts recognised in
revenue.
The effect of these matters is that, as part
of our risk assessment, we determined
that
recognised of £28.8
million has a high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than our
materiality for the financial statements
as a whole, and possibly many times that
amount. The financial statements (note
3) disclose the sensitivity estimated by
the Group.
revenue
lead
Our procedures included:
Accounting analysis: we assessed
whether
the Group’s determination
of performance obligations as well as
principles of revenue allocation to those
performance obligations is appropriate
by inspecting selected ongoing contracts
at the year end.
Test of detail: we assessed whether the
separate performance obligations had
been satisfied and transaction price had
been properly allocated by inspecting the
contracts, customer correspondence,
other documentation and interviewing
the client project personnel.
Assessing transparency: we assessed
the adequacy of
the disclosures
about the judgements involved in the
identification of performance obligations
and
price
allocation.
transaction
respective
Going concern
Refer to page 58 (Audit Committee
Report), page 84(accounting policy) and
page 83 (financial disclosures).
Recoverability of
parent company’s
investment in
subsidiaries
(£42.5 million;
2018: £nil)
Refer to page 58 (Audit Committee
Report), page 84 (accounting policy)
and page 83 (financial disclosures).
Disclosure quality:
The financial statements explain how the
Board has formed a judgement that it is
appropriate to adopt the going concern
basis of preparation for the group and
parent company.
That judgement is based on an evaluation
of the inherent risks to the Group’s and
Company’s business model and how
those risks might affect the Group’s and
Company’s financial resources or ability
to continue operations over a period of
at least a year from the date of approval
of the financial statements.
The risks most likely to adversely affect
the Group’s and Company’s available
financial resources over this period were
in relation to the timing and delivery
of larger contracts which can cause
material fluctuations in actual cash flows
compared to those forecast.
There are also less predictable but
realistic second order impacts, such
as the impact of Brexit and the erosion
of customer or supplier confidence,
which could result in a rapid reduction
of demand and available
financial
resources.
The risk for our audit was whether or
not those risks were such that they
amounted to a material uncertainty
that may have cast significant doubt
about the ability to continue as a going
concern. Had they been such, then that
fact would have been required to have
been disclosed.
The risk
Low risk, high value
The carrying amount of the parent
company’s investments in subsidiaries
represents 64% of the company’s total
assets. Their recoverability is not at a
high risk of significant misstatement
or subject to significant
judgement.
However, due to their materiality in the
context of the parent company financial
statements, this is considered to be the
area that had the greatest effect on our
overall parent company audit.
the Group’s
Our procedures included:
Historical comparisons:
• We assessed the reasonableness of
the cash flow projections by considering
the historical accuracy of the previous
forecasts.
Sensitivity analysis:
• We considered sensitivities over the
level of available financial resources
indicated by
financial
forecasts taking account of reasonably
possible (but not unrealistic) adverse
effects that could arise from these risks
individually and collectively.
Benchmarking assumptions:
• We tested the integrity of the cash
flow
challenged
projections
key
the appropriateness of
assumptions used therein by reference
to our knowledge of the business. We
also assessed
the projections and
assumptions by reference to general
market conditions and post year end
trading and cash flows.
Assessing transparency:
• We assessed the completeness and
accuracy of the matters covered in the
going concern disclosure with reference
to our audit findings from the above
procedures and our understanding of
the Group’s business and strategies.
and
the
Our response
Our procedures included:
Tests of detail: Comparing the carrying
amount of 100% of investments with
the relevant subsidiaries’ draft balance
sheets (audited as part of the Group
audit) to
identify whether their net
assets, being an approximation of their
minimum recoverable amount, were
in excess of their carrying amount and
assessing whether those subsidiaries
have historically been profit-making.
Comparing
the
valuations:
investments where the carrying amount
exceeded the net asset value, comparing
the carrying amount of the investment
with the expected value of the business
based on a suitable multiple of the
subsidiaries’ profit.
For
76
3. Our application of materiality and an
overview of the scope of our audit
for
the group
Materiality
financial
statements as a whole was set at
£270,000, determined with reference to
a benchmark of revenue of £28,082,000,
of which it represents 0.96% (2018:
2.3%). We consider total revenue to be
the most appropriate benchmark as it
provides a more stable measure year on
year than Group profit before tax. Our
materiality level has decreased because
the group is now listed.
for
reference
Materiality
the parent company
financial statements as a whole was
set at £256,500 (2018: £385,000),
determined with
to a
benchmark of company total expenses,
of which it represents 0.4% (2018: 2%).
We agreed to report to the Audit
Committee any corrected or uncorrected
identified misstatements
exceeding
£13,500, in addition to other identified
misstatements that warranted reporting
on qualitative grounds.
Of the group’s 6 (2018: 5) reporting
components, we subjected 6 (2018: 5)
to full scope audits for group purposes.
The components within the scope of our
work accounted for the percentages
illustrated opposite.
The Group team carried out all of the
work on all the reporting components
(including the parent company audit).
We used component materialities,
which range from £12k to £256k, having
regard to the mix of size and risk profile
of the Group across the components.
4.
going concern
We have nothing to report on
the
The Directors have prepared
financial statements on
the going
concern basis as they do not intend to
liquidate the Company or the Group or
to cease their operations, and as they
have concluded that the Company’s and
the Group’s financial position means that
this is realistic. They have also concluded
that there are no material uncertainties
that could have cast significant doubt
over their ability to continue as a going
concern for at least a year from the date
of approval of the financial statements
(“the going concern period”).
Our responsibility is to conclude on
the appropriateness of the Directors’
conclusions and, had there been a
material uncertainty related to going
concern, to make reference to that in
this audit report. However, as we cannot
predict all future events or conditions
and as subsequent events may result
in outcomes that are inconsistent with
judgements that were reasonable at the
time they were made, the absence of
reference to a material uncertainty in this
auditor’s report is not a guarantee that
the group or the company will continue
in operation.
We identified going concern as a key
audit matter (see section 2 of this
report). Based on the work described
in our response to that key audit matter,
we are required to report to you if:
we have concluded that the use of the
going concern basis of accounting is
inappropriate or there is an undisclosed
material uncertainty
that may cast
significant doubt over the use of that
basis for a period of at least a year from
the date of approval of the financial
statements.
We have nothing to report in this respect.
5.
We have nothing to report
on the other information in the Annual
Report
in
The directors are responsible for the
other
the
information presented
Annual Report together with the financial
statements. Our opinion on the financial
statements does not cover the other
information and, accordingly, we do
not express an audit opinion or, except
as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider
whether, based on our
financial
statements audit work, the information
therein
is materially misstated or
inconsistent with the financial statements
or our audit knowledge. Based solely on
that work we have not identified material
misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other
information:
we have not
identified material
misstatements in the strategic report
and the directors’ report;
in our opinion the information given in
those reports for the financial year is
consistent with the financial statements;
and in our opinion those reports have
been prepared in accordance with the
Companies Act 2006.
6.
We have nothing to report
on the other matters on which we are
required to report by exception
Under the Companies Act 2006, we
are required to report to you if, in our
opinion:
adequate accounting records have not
been kept by the parent Company, or
returns adequate for our audit have not
been received from branches not visited
by us; or
the parent Company financial statements
are not in agreement with the accounting
records and returns; or
directors’
certain
remuneration specified by law are not
made; or
we have not received all the information
and explanations we require for our
audit.
We have nothing to report in these
respects.
disclosures
of
Respective responsibilities
7.
Directors’ responsibilities
As explained more fully in their statement
set out on page 68, the directors are
responsible for: the preparation of the
financial statements
including being
satisfied that they give a true and fair
internal control as they
view; such
determine is necessary to enable the
preparation of financial statements that
are free from material misstatement,
whether due to fraud or error; assessing
the Group and parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters
related to going concern; and using
the going concern basis of accounting
unless they either intend to liquidate
the Group or the parent Company or to
cease operations, or have no realistic
alternative but to do so.
the
financial
free
Auditor’s responsibilities
Our objectives are to obtain reasonable
assurance about
statements
whether
as a whole are
from material
misstatement, whether due to fraud
or error, and to issue our opinion in an
auditor’s report. Reasonable assurance
is a high level of assurance, but does
not guarantee that an audit conducted
in accordance with ISAs (UK) will always
detect a material misstatement when
Misstatements can arise
it exists.
from fraud or error and are considered
material if, individually or in aggregate,
they could reasonably be expected to
influence the economic decisions of
users taken on the basis of the financial
statements.
A fuller description of our responsibilities
is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
to
is made solely
8.
The purpose of our audit work
and to whom we owe our responsibilities
This report
the
Company’s members, as a body, in
accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit
work has been undertaken so that we
might state to the Company’s members
those matters we are required to state
to them in an auditor’s report and for
no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other
than the Company and the Company’s
members, as a body, for our audit work,
for this report, or for the opinions we
have formed.
David Mitchell (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory
Auditor
Chartered Accountants
Quayside House, 110 Quayside,
Newcastle upon Tyne.
NE1 3DX
24 June 2019
Review
Strategic
Governance
Finance
Revenue
£28.1m (2018 £21.9m)
Group Materiality
£270,000 (2018: £510,000)
£270,000
Whole financial statements
materiality (2018: £510,000)
£202,000
Range of materiality at 6 components
(£12,000-£256,500) (2018:£13,500
to £430,000)
£13,500
Misstatements reported to the audit
committee
Revenue
Group materiality
Group revenue
Group profit before tax
100%
2018: 100%
100
100
100%
2018: 100%
100
100
Group total assets
100%
2018: 100%
100
100
Full scope for group audit purposes 2019
Full scope for group audit purposes 2018
78
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Finance
Consolidated statement of
comprehensive income
For the year ended 31 March 2019
Consolidated balance sheet
as at 31 March 2019
Note
2019
(£000)
Revenue
Cost of sales
Gross profit
Operating expenses
Other operating income
Group operating profit
Analysed as:
Adjusted EBITDA [1]
Depreciation
Amortisation
Share based payments charge
Exceptional items
Group operating profit
Finance costs
Finance income
Net Finance costs
Profit / (Loss) before taxation
Taxation
Profit / (Loss) for the year and total comprehensive
expense
Attributable to owners of the parent
Attributable to the non-controlling interest
Profit / (Loss) per share (pence)
Basic
Diluted
There are no items of Other Comprehensive Income
Note
4
6
6
12
11
24
6
7
9
10
10
2019
(£000)
28,082
(18,190)
9,892
(6,987)
-
2,905
4,833
(808)
(476)
(418)
(226)
2,905
(1,066)
147
(919)
1,986
407
2,393
2,393
-
2,393
4.75
4.63
2018
(£000)
21,891
(12,962)
8,929
(5,177)
56
3,808
4,947
(563)
(453)
-
(123)
3,808
(4,192)
4
(4,188)
(380)
270
(110)
(59)
(51)
(110)
(0.22)
(0.22)
Non-current assets
Property, plant and equipment
Goodwill and other intangibles
Deferred tax asset
Total non-current assets
Current assets
Inventory
Trade and other receivables
Corporation tax recoverable
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Share capital
Share premium
Merger relief reserve
Merger reserve
Retained losses
Total equity / (deficit)
Non-current liabilities
Borrowings
Trade and other payables
Deferred tax liability
Total non-current liabilities
Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
12
11
20
14
15
16
22
18
17
20
18
17
2018
(£000)
1,401
20,005
177
21,583
1,842
8,493
263
2,617
13,215
5,501
21,837
-
27,338
1,914
19,537
459
4,190
26,100
53,438
34,798
507
64,100
993
(12,685)
(10,098)
-
-
-
2,886
(12,704)
42,817
(9,818)
487
358
3
848
378
9,395
9,773
10,621
53,438
32,521
5,430
-
37,951
-
6,665
6,665
44,616
34,798
Note 1: Adjusted EBITDA, which 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
All results derive from continuing operations.
The Group financial statements were approved by the Board and authorised for issue on 24 June 2019 and were signed on its behalf
by:
S Hurst
Chief Financial Officer & Company Secretary
Company registered number: 11383413
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Governance
Finance
Consolidated statement of
changes in equity as at 31 March 2019
Consolidated cash flow
statement as at 31 March 2019
Share
capital
Share
premium
(£000)
(£000)
Merger
relief
reserve
(£000)
Merger
reserve
Retained
earnings
(£000)
(£000)
Total equity
attributable to
the owners of
the parent
(£000)
Non
controlling
interest
(£000)
Total
equity
(£000)
2,886
(12,645)
(9,759)
(51)
(9,708)
-
-
(59)
(59)
(59)
(59)
(51)
(51)
(110)
(110)
Balance at 1 April 2017
Loss for the year
Total comprehensive expense for
the year
Balance at 31 March 2018
Adjustment on adoption of IFRS 16
Adjusted balance at 1 April 2018
Profit for the year
Total comprehensive income for
the year
Issue of shares on IPO
Expenses of the IPO
Issue of shares post IPO
Share based payments
Total transactions with owners,
recognised directly in equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,886
(12,704)
(9,818)
-
(163)
(163)
2,886
(12,867)
(9,981)
-
-
2,393
2,393
2,393
2,393
49,429
(400)
1,000
376
50,405
500
-
7
-
64,500
(400)
-
-
-
-
993
-
(15,571)
-
-
-
507
64,100
993
(15,571)
-
-
-
376
376
Balance at 31 March 2019
507
64,100
993
(12,685)
(10,098)
42,817
-
-
-
-
-
-
-
-
-
-
-
(9,818)
(163)
(9,981)
2,393
2,393
49,429
(400)
1,000
376
50,405
42,817
Cash flows from operating activities
Profit / (Loss) before taxation
Adjustments for:
Depreciation
Amortisation of intangible assets
Share based payments charge
Other operating income
Gain on bargain purchase
Finance costs
Finance income
Changes in working capital:
Decrease/(increase) in inventories
(Increase) in trade and other receivables
Increase in trade and other payables
(Decrease) in provisions
Cash (used in)/generated from operations
Tax recovered/(paid)
Net cash (outflow)/inflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds on sale of property, plant and equipment
Acquisition of subsidiary net of cash acquired
Interest received
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of borrowings
Repayment of other borrowings
Proceeds from issues of shares
Expenses of the IPO
Interest paid
Net cash inflow/(outflow) from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2019
(£000)
2018
(£000)
1,986
808
476
345
-
(95)
1,066
(147)
4,439
176
(10,493)
2,876
(131)
(3,133)
180
(2,953)
(996)
(865)
3
(168)
147
(1,879)
(33,282)
(1,771)
49,429
(400)
(7,571)
6,405
1,573
2,617
4,190
(380)
563
453
-
(54)
-
4,192
(4)
4,770
(605)
(40)
2,318
(300)
6,143
(250)
5,893
(248)
(124)
1
-
4
(367)
(2,250)
-
-
-
(2,194)
(4,444)
1,082
1,535
2,617
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Notes to the Group financial statements
for the year ended 31 March 2019
1. General Information
incorporated and domiciled
Tekmar Group plc (the “Company”) is a public limited
company
in England
and Wales. The registered office of the Company is
Unit 1, Park 2000, Millennium Way, Aycliffe Business
Park, Newton Aycliffe, County Durham, DL5 6AR. 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 cable, umbilical and flexible protection
systems operating across the Offshore Wind, Oil & Gas
and other energy sectors, including associated subsea
engineering services.
Initial public offering (“IPO”)
The Company’s shares were admitted to trading on the
AIM Market, a market operated by the London Stock
Exchange, on 20 June 2018. These Group financial
statements are the Company’s first subsequent to its
admission to AIM and followed a group reorganisation to
facilitate the IPO. The consolidated financial statements
were approved and authorised for issue by a duly
appointed and authorised committee of the Board of
Directors on 24 June 2019.
These Group financial statements have been prepared
under merger accounting principles because
the
transaction under which the Company became the
holding company of Tekmar Limited, the previous parent
undertaking of the Tekmar trading operations, was a
group reorganisation as the Company did not actively
trade at that time.
The result of the application of the capital reorganisation
is to present the financial statements as if the Company
had always owned the Tekmar trading operations.
Group reorganisation
The principal steps of the Group reorganisation were as
follows:
The Company was incorporated on 25 May 2018 as a
private company limited by shares in England and Wales,
with the allotment of 1 share of £0.01.
The Company issued 5,000,000 redeemable shares of
£0.01 each in the capital of the Company which were
redeemed shortly after Admission.
Under an Escrow agreement dated 14 June 2018, the
selling shareholders agreed to sell their shares in Tekmar
Limited to the Company immediately on Admission and
the selling shareholder of AgileTek Engineering Limited
agreed to sell his shares to Tekmar Holdings Limited
immediately on Admission.
The acquisition by the Company of the shares in Tekmar
Limited and AgileTek Engineering Limited constitutes a
group reorganisation and the transaction is accounted
for as a capital reorganisation. Under merger accounting
principles, the assets and liabilities of the subsidiaries are
consolidated at book value in the financial statements
and the consolidated reserves of the Group are adjusted
to reflect the statutory share capital, share premium and
the reserves of the Company as if it had always existed.
The Company issued 50,000,000 shares of £0.01 each
on Admission to AIM 20 June 2018. The consideration
in excess of the nominal value of £500,000 has been
recorded as share premium. An amount was also
recorded in merger reserve in respect of the element
of the IPO proceeds to acquire the existing group. IPO
costs of £400,000 have been charged to the share
premium account.
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.
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2. Basis of preparation and accounting policies
(c) New standards, amendments and interpretations
The Group has adopted the following new standards and
interpretations:
• IFRS 16 – Leases (effective 1 January 2019 and early
adopted).
IFRS 16 “Leases” replaced IAS 17 “Leases” and sets
out the principles for the recognition, measurement,
presentation and disclosure of leases and has been
from 1 January 2018 using the modified
applied
retrospective approach. Under
IFRS 16 the main
difference for the Group is that all leases that the Group
holds as a lessee are recognised on the balance sheet,
as both a right-of-use asset and a largely offsetting
lease liability. The right-of-use asset is depreciated in
accordance with IAS 16 ‘Property, Plant and Equipment’
and the liability is increased for the accumulation of
interest and reduced by lease payments. There is no
impact on cashflow. On the income statement the Group
recognises a depreciation charge and an interest charge
instead of a straight-line operating cost. This changes
the timing of cost recognition on the lease, resulting in
extra cost in early years of the lease, and reduced cost
towards the end of the lease.
The Group elected to exclude all short-term leases and
all leases for which the underlying asset is of low value.
There are no standards endorsed but not yet effective
that will have a significant impact going forward.
(d) Basis of consolidation
Subsidiaries are all entities over which the Group has
control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to
affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and are
deconsolidated from the date control ceases.
Inter-company transactions, balances and unrealised
gains and
losses on transactions between group
companies are eliminated.
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.
(a) Basis of preparation
The results for the year ended 31 March 2019 have
been prepared in accordance with International Financial
Reporting Standards (“IFRS”), and their interpretations
adopted by the European Union. It should be read in
conjunction with the Historical Financial Information
for the three years ended 31 March 2018 within the
Company’s Admission Document and which was
prepared in accordance with International Financial
Reporting Standards as endorsed by the European Union
(‘IFRS’), International Financial Reporting Standards
Interpretation Committee (‘IFRS IC’) interpretations and
those provisions of the Companies Act 2006 applicable
to companies reporting under
financial
statements have been prepared on the going concern
basis and on the historical cost convention modified for
the revaluation of certain financial instruments.
IFRS. The
Tekmar Group plc (“the Company”) has adopted all IFRS
in issue and effective for the year.
The financial information presented in respect of the
year ended 31 March 2019 has been prepared on a
basis consistent with that presented in the Company’s
Admission Document.
flow
(b) Going concern
The Group meets
its day-to-day working capital
requirements through its available banking facilities.
The Directors have prepared cash
forecasts
and projections for the years ending 31 March 2021.
There is currently no external debt and the Group has
no covenants which it needs to comply with. Taking
account of reasonably foreseeable changes in trading
performance, these forecasts and projections show
that the Group is expected to have a sufficient level of
financial resources available through current and future
facilities. Furthermore, the Directors have assessed the
future funding requirements of the Group and compared
them with the level of available borrowing facilities.
Based on this work, the Directors are satisfied that the
Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason they
continue to adopt the going concern basis in preparing
the financial statements.
The Group has a number of revenue transactions which
are generally contracted with customers using purchase
and sales orders. There is generally one performance
obligation for each order and the transaction price is
specified in the order. Revenue is recognised at a point
in time as the customer gains control of the products,
which tends to be on delivery. There is no variable
consideration.
Accounting for revenue is considered to be a key
accounting judgement which is further explained in note
3.
(f) EBITDA and Adjusted EBITDA
Earnings before Interest, Taxation, Depreciation and
Amortisation (“EBITDA”) and Adjusted EBITDA are
non-GAAP measures used by management to assess
the operating performance of the Group. EBITDA is
defined as profit before 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.
(e) Revenue
Revenue arises from the supply of subsea protection
systems, principally through fixed fee contracts. To
determine whether to recognise revenue in line with IFRS
15, the Group follows a 5-step process as follows:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance
obligations
5. Recognising revenue when
obligation(s) are satisfied
/ as performance
Revenue is measured at transaction price, stated net of
VAT and other sales related taxes.
Revenue is recognised either at a point in time, or over-
time as the Group satisfies performance obligations by
transferring the promised services to its customers as
described below.
i) Fixed-fee contracted supply of subsea protection
systems
For the majority of revenue transactions, the Group
enters into individual contracts for the supply of subsea
protection systems, generally for a specific project in
a particular geographic location. Depending upon the
nature of the contract and process for manufacture and
assembly either the output method or input method is
used to determine the amount of revenue to recognise.
For example, if a cable protection system (“CPS”) is
manufactured as a complete unit, the output method is
used. This is calculated by reference to the number of
units assembled at each month end compared to the
total number of units to be assembled. Alternatively, if
the CPS is manufactured in sections, and the contract
supports the unconditional right to payment for the work
completed should the customer terminate, the input
method is used. This is calculated by reference to costs
incurred to date as a proportion of total expected project
costs.
In all cases, any advance billings are deferred and
recognised as the service is delivered.
ii) Manufacture and distribution of ancillary products and
equipment
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(g) Exceptional costs
The Group presents as exceptional costs on the face of
the income statement, those significant items of expense,
which, because of their size, nature and infrequency
of the events giving rise to them, merit separate
presentation to allow shareholders to understand better
the elements of financial performance in the year, so
as to facilitate comparison with prior years and assess
trends in financial performance more readily. Such costs
include private-equity management fees in prior years,
together with deal related income and costs (principally
professional fees).
(h) Foreign currency
Transactions in foreign currencies are translated into the
Group’s functional currency at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance
sheet date are translated at the foreign exchange rate
ruling at that date. Foreign exchange differences arising
on translation are recognised in profit or loss.
(i) Classification of instruments issued by the Group
Instruments issued by the Group are treated as equity
(i.e. forming part of shareholders’ funds) only to the
extent that they meet the following two conditions:
• they include no contractual obligations upon the Group
to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party
under conditions that are potentially unfavourable to the
Group; and
• where the instrument will or may be settled in the
Company’s own equity instruments, it is either a non-
derivative that includes no obligation to deliver a variable
number of the Company’s own equity instruments or is a
derivative that will be settled by the Company exchanging
a fixed amount of cash or other financial assets for a fixed
number of its own equity instruments.
To the extent that this definition is not met, the items are
classified as a financial liability. Where the instrument
so classified takes the legal form of the Company’s
own shares, the amounts presented in these financial
statements for called up share capital and share premium
account exclude amounts in relation to those shares.
Finance payments associated with financial liabilities are
dealt with as part of finance expenses. Finance payments
associated with financial instruments that are classified in
equity are dividends and are recorded directly in equity.
(j) Property, plant and equipment
Owned assets
Property, plant and equipment are stated at cost less
accumulated depreciation.
Cost includes the original purchase price of the asset and
the costs attributable to bringing the asset to its working
condition for its intended use.
Where parts of an item of property, plant and equipment
have different useful lives, they are accounted for as
separate items of property, plant and equipment.
Leased assets
Leases under which the Group assumes substantially
all the risks and rewards of ownership of an asset
are classified as finance leases. Property, plant and
equipment acquired under finance leases is recorded at
fair value or, if lower, the present value of minimum lease
payments at inception of the lease, less depreciation and
any impairment.
Each lease payment is allocated between the liability and
finance charges. The corresponding rental obligations,
net of finance charges, are included in the other long-
term payables. The interest element of the finance cost
is charged to the income statement over the lease year
so as to produce a constant periodic rate of interest on
the remaining balance of the liability for each year. The
property, plant and equipment under finance leases is
depreciated over the shorter of the useful life of the asset
and lease term.
Depreciation
Depreciation is charged to profit or loss over the
estimated useful lives of each part of an item of property,
plant and equipment. Depreciation is provided on the
following basis:
Freehold property, 50 years straight line
Leasehold improvements, Over the life of the lease
Containers and racking, 4 years straight line
Plant and equipment, 6 years reducing balance or 15%
straight line
Production tooling, 3 years straight line
Motor vehicles, 4 years reducing balance
Computer equipment, 4 years straight line
It has been assumed that all assets will be used until the
end of their economic life.
(k) Intangible assets
Goodwill
All business combinations are accounted for by applying
the purchase method. Goodwill represents the difference
between the cost of the acquisition and the fair value of the
net identifiable assets acquired. Identifiable intangibles
are those which can be sold separately, or which arise
from legal or contractual rights regardless of whether
those rights are separable, and are initially recognised
at fair value. Other identified intangible assets include
customer relationships and brands. These are amortised
on a straight-line basis over the useful economic lives,
which are estimated to be 3 and 10 years respectively.
presented within operating expenses, together with any
amortisation which is charged to the income statement
on a straight-line basis over the estimated useful lives of
product development intangible assets of 2-5 years.
Computer software
Computer software purchased separately, that does not
form an integral part of related hardware, is capitalised
at cost.
Amortisation is charged to profit or loss on a straight-line
basis over the estimated useful lives and is presented
within operating expenses. The useful life of computer
software is 3 years.
is stated at cost
Goodwill
less any accumulated
impairment losses. In cases where the fair value of the
net identifiable assets exceeds the cost of acquisition,
negative goodwill arises which is recorded immediately
in the income statement. Goodwill is allocated to cash-
generating units and is not amortised but is tested
annually for impairment.
(l) Impairment
For goodwill that has an indefinite useful life, the
recoverable amount is estimated annually. For other
assets, the recoverable amount is only estimated when
there is an indication that an impairment may have
occurred. The recoverable amount is the higher of fair
value less costs to sell and value in use.
Research and Product Development costs
Research costs are charged to the income statement in
the year in which they are incurred and are presented
within operating expenses. Internal development costs
that are incurred during the development of significant
and separately identifiable new technology are capitalised
when the following criteria are met:
• It is technically feasible to complete the technological
development so that it will be available for use;
• Management intends to complete the technological
development and use or sell it;
It can be demonstrated how the technological
•
development will develop probable future economic
benefits;
• Adequate technical, financial, and other resources to
complete the development and to use or sell the product
are available; and
• Expenditure attributable to the technological product
during its development can be reliably measured.
Capitalised development costs include costs of materials
and direct labour costs. Internal costs that are capitalised
are limited to incremental costs specific to the project.
Other development expenditures that do not meet these
criteria are recognised as an expense as incurred and
An impairment loss is recognised whenever the carrying
amount of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised
in profit or loss.
Impairment losses recognised in respect of cash-
generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the cash-generating
unit and then to reduce the carrying amount of the other
assets in the unit on a pro rata basis. A cash generating
unit is the smallest identifiable group of assets that
generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.
(m) Inventories
Inventories are stated at the lower of cost and estimated
selling price less costs to complete and sell. Cost is
calculated on a first in first out basis and includes the
cost of acquiring raw materials. Provision is made for any
foreseeable losses where appropriate.
(n) Defined contribution plans
Obligations for contributions to defined contribution
pension plans are recognised as an expense in profit or
loss as incurred.
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(o) Provisions
A provision is recognised in the balance sheet when the
Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific
to the liability.
(p) Leases
The Group has applied IFRS 16 for this set of financial
statements. At inception of a contract, the Group
assesses whether a contract is, or contains, a lease. A
contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a
period of time in exchange for consideration.
The Group recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-
use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate
of costs to restore the underlying asset, less any lease
incentives received.
The right-of-use asset is subsequently depreciated using
the straight-line method from the commencement date
to the earlier of the end of the useful life of the right-of-
use asset or the end of the lease term. In addition, the
right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements
of the lease liabilities.
The lease liability is initially measured at the present
value of lease payments that were not paid at the
commencement date, discounted using the Group’s
incremental borrowing rate.
The lease liability is measured at amortised cost using
the effective interest method. If there is a remeasurement
of the lease liability, a corresponding adjustment is made
to the carrying amount of the right-of-use asset, or is
recorded directly in profit or loss if the carrying amount of
the right of use asset is zero.
The Group has elected not to recognise right-of-use
assets and lease liabilities for short-term leases of
machinery that have a lease term of 12 months or less
or leases of low value assets. These lease payments are
expensed on a straight-line basis over the lease term.
(q) Net financing costs
Net financing costs comprise interest payable and
interest receivable on funds invested. Interest income
and interest payable are recognised in profit or loss as
they accrue using the effective interest method.
(r) Taxation
Tax on the profit or loss for the year comprises current
and deferred tax. Tax is recognised in profit or loss
except to the extent that it relates to items recognised
in other comprehensive income or directly in equity, in
which case it is recognised in other comprehensive
income or in equity, respectively.
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for
taxation purposes, except to the extent that it arises on:
• the initial recognition of goodwill;
• the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit other than in a
business combination;
• differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the
foreseeable future.
The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet
date.
A deferred tax asset is recognised only to the extent that
it is probable that future taxable profits will be available
against which the asset can be utilised.
(s) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and
call deposits. Bank borrowings that are repayable on
demand and form an integral part of the Group’s cash
management are included as a component of cash and
cash equivalents for the purpose only of the statement of
cash flows.
(t) Financial instruments
Financial assets
Non-derivative financial assets are classified as either
financial assets at amortised cost, fair value through
profit or loss and fair value through other comprehensive
income. The Group derecognises a financial asset when
the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual
cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are
transferred. The basis of classification depends on the
Group’s business model and the contractual cash flow
characteristics of the financial asset. All financial assets
of the Group are held at amortised cost.
Financial assets include trade and other receivables and
cash and cash equivalents. Trade and other receivables
are amounts due from customers for services performed
in the ordinary course of business. If collection is expected
in one year or less (or in the normal operating cycle of the
business if longer), they are classified as current assets.
If not, they are presented as non-current assets.
Trade and other receivables are initially recorded at fair
value and thereafter are measured at amortised cost using
the effective interest rate. A loss allowance for expected
credit losses is recognised based upon the lifetime
expected credit losses in cases where the credit risk on
trade and other receivables has increased significantly
since initial recognition. In cases where the credit risk has
not increased significantly, the Group measures the loss
allowance at an amount equal to the 12-month expected
credit loss. This assessment is performed on a collective
basis considering forward-looking information.
Financial liabilities
Non-derivative financial liabilities are initially recognised at
fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these liabilities are
measured at amortised cost using the effective interest
method. The Group’s borrowings, finance leases, trade
and most other payables fall into this category of financial
instruments.
at amortised cost with any difference between cost and
redemption value being recognised in profit or loss over
the year of the borrowings on an effective interest basis.
Trade payables are obligations to pay for goods or
services that have been acquired in the ordinary course
of business from suppliers and are initially recorded at fair
value and thereafter at amortised cost using the effective
interest rate method.
Financial derivatives
The Group uses derivative financial instruments to hedge
its exposure to risks arising from operational activities,
principally foreign exchange risk. In accordance with
treasury policy, the Group does not hold or issue
derivative financial instruments for trading purposes.
The Group does not hedge account for these items. Any
gain or loss arising from derivative financial instruments
is based on changes in fair value, which is determined by
direct reference to active market transactions or using
a valuation technique where no active market exists. At
certain times the Group has foreign currency forward
contracts that fall into this category.
(u) Contract assets
Contract assets represent the gross unbilled amount for
contract work performed to date, calculated by way of
units assembled using either the input or output method
– refer policy (e). They are presented as part of “trade
and other receivables” in the balance sheet. If payments
received from customers exceed the income recognised,
then the difference is presented as “accruals and contract
liabilities” in the balance sheet.
(v) Segmental reporting
The Group reports its business activities in one area,
being the design, manufacture and supply of subsea
cable, umbilical and flexible protection systems, and
provision of subsea engineering services to the Offshore
Wind and Oil and Gas sectors. This is reported in a
manner consistent with the internal reporting to the
Board of Directors, which has been identified as the
chief operating decision maker. The Board of Directors
consists of the Executive Directors and the Non-
Executive Directors.
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled, or
expire.
(w) Share capital
Share capital represents the nominal value of shares that
have been issued.
Interest-bearing borrowings are recognised initially at fair
value less attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated
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Further details on how the policy is applied can be found
in note 2(e). For the large, offshore wind projects in the
Tekmar Energy business which were not complete at year
end, and require the most judgment, if the percentage
completion was 1% different to management’s estimate
the revenue impact would be £116,000. However, the
likelihood of this is small, as the percentage completion
is based upon items that are physically counted at year
end.
Share based payments
The weighted average fair value of equity options granted
is determined using various fair value models, including
Black-Scholes-Merton and Monte Carlo models. The
Group makes assumptions in identifying the appropriate
inputs significant as disclosed within note 24. The
assumptions are subject to estimation and are considered
for reasonableness at each balance sheet date. If the fair
value assumption on the options was changed by 5% this
would lead to a £17,000 difference in the share-based
payment charge.
IPO accounting
For the reasons set out in note 1 the Group applied
merger accounting principles to the IPO accounting. This
treatment was mandatory and therefore no reasonable
sensitivity can be applied to the numbers involved.
(b) Critical accounting estimates
Subsea Innovation acquisition accounting
Accounting for the purchase price allocation on the
Subsea Innovation acquisition was a critical accounting
estimate made during the year. In particular, deriving the
value of the intangible assets acquired (£1,184,000) and
goodwill attributed (£234,000) were critical estimates. If
these intangibles had not been identified as such, and
instead the balance recognised as goodwill, profit for the
year would have been higher by £109,000.
(x) Share premium
Share premium includes any premiums received on issue
of share capital. Any transaction costs associated with
the issuing of shares are deducted from share premium,
net of any related income tax benefits.
(y) Consolidation reserve
The consolidation reserve was created as a result of the
share for share exchange under which Tekmar Group plc
became the parent undertaking prior to the IPO. Under
merger accounting principles, the assets and liabilities of
the subsidiaries were consolidated at book value in the
Group financial statements and the consolidated reserves
of the Group were adjusted to reflect the statutory
share capital, share premium and other reserves of the
Company as if it had always existed, with the difference
presented as the consolidation reserve.
(z) Own shares held by ESOP trust
Transactions of the Group-sponsored ESOP trust are
treated as being those of the Group and are therefore
reflected in the financial statements. In particular, the
trust’s purchases and sales of shares in the Group are
debited and credited to equity.
(aa) Retained earnings
Retained earnings includes all current and prior year
retained profits and losses.
(ab) Government grants
Government grants are included within accruals and
contract liabilities in the balance sheet and credit to
the income statement over the expected useful lives of
the assets to which they relate or in years to which the
related costs are incurred.
(ac) Share based payments
The Group operates equity-settled
share-based
remuneration plans for certain employees. None of the
Group’s plans are cash-settled. All goods and services
received in exchange for the grant of any share-based
payment are measured at their fair values.
Where employees are rewarded using share-based
payments, the fair value of employees’ services is
determined indirectly by reference to the fair value of the
equity instruments granted. This fair value is appraised
at the grant date and excludes the impact of non-market
vesting conditions.
All share-based remuneration is ultimately recognised as
an expense in profit or loss with a corresponding credit
to retained earnings. If vesting years or other vesting
conditions apply, the expense is allocated over the
vesting year, based on the best available estimate of the
number of share options expected to vest.
3. Critical accounting judgements and estimates
The preparation of the Group financial statements under
IFRS requires the Directors to make estimates and
assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets
and liabilities. Estimates and judgements are continually
evaluated and are based on historical experience and
other factors including expectations of future events that
are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The Directors consider that the following estimates
and judgements are likely to have the most significant
effect on the amounts recognised in the Group financial
statements.
(a) Critical judgements in applying the entity’s accounting
policies
Revenue recognition
The recognition of revenue on contracts requires
judgement and estimates on the overall contract margin.
This judgement is based on contract value, historical
experience and forecasts of future outcomes. Judgement
is applied in determining the most appropriate method
to apply in respect of recognising revenue over-time as
the service is performed using either the input or output
methods.
92
4. Segmental Reporting
The trading operations of the Group are only in the global
offshore energy industry and are all continuing. This
includes the activities of Tekmar Energy Limited, Subsea
Innovation Limited, and AgileTek Engineering Limited.
In addition, the centralised group services and assets
provided to Group companies are considered incidental
to the activities of the Group and have therefore not been
shown as a separate operating segment but have been
subsumed within the global offshore energy industry. All
assets of the Group reside in the UK.
Major customers
In the year ended 31 March 2019 there were three major
customers that individually accounted for at least 10%
of total revenues (2018: five customers). The revenues
relating to these in the year to 31 March 2019 were
£11,217,000 (2018: £17,047,000). Included within this
is revenue from multiple projects with different entities
within each customer.
Analysis of revenue
UK & Ireland
Rest of the World
5. Employees and Directors
(a)
Staff numbers and costs
The average number of persons employed by the Group (including
directors) during the year, analysed by category, was as follows:
Directors
Sales
Administration
Technical
Direct labour
2019
(£000)
2018
(£000)
10,483
17,599
28,082
5,379
16,512
21,891
2019
(No)
5
9
22
40
60
136
2018
(No)
7
6
14
30
56
113
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Staff costs for the Group during the year were:
Wages and salaries
Social security costs
Defined contribution pension cost (note 5 (d))
Share based payments
(b)
Key management compensation
Key management of the Group is considered to be the Board of
Directors. Remuneration paid to the Directors is as follows:
Short term benefits:
Salaries including bonuses
Social security costs
Total short-term benefits
Post-employment benefits:
Defined contribution pension plan
Total remuneration
2019
(£000)
4,399
520
155
418
5,492
2018
(£000)
3,460
320
75
-
3,855
2019
(£000)
2018
(£000)
1,754
235
1,989
12
2,002
353
49
402
3
405
Name of Director
J Ritchie
S Hurst
A MacDonald
C Gill (1)
J Brown (1)
Fees / basic salary
(£000)
Benefits
(£000)
Bonus
(£000)
Pension
(£000)
2019 Total
(£000)
2018 Total
(£000)
201
141
65
35
27
124
161
-
-
-
1,000
-
-
-
-
7
5
-
-
1
1,332
307
65
35
28
179
130
47
-
-
94
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Highest paid director
The aggregate remuneration of the highest paid director was £1,332,000 (2018: £183,000), which includes
pension contributions of £7,000 (2018:£nil). In addition to basic salary, this remuneration includes a bonus and
one-off payment relating to the sale of shares, both specific to the IPO transaction. The bonus of £1,000,000 was
reimbursed to the Group by the exiting private equity shareholders with the Group paying the associated social
security costs of £154,136. [The payment of £124,000 relating to the sale of shares allocated from the Employee
Benefit Trust plus social security costs of £17,000.]
The number of directors accruing pension benefits under a defined contribution plan was three (2018: three).
6. Expenses by nature
Research and development
Employee benefit expense
Amortisation (note 11)
Depreciation – leased (note 12)
Depreciation – owned (note 12)
Inventory recognised as an expense
Exceptional items
Other expenses
2019
(£000)
298
5,492
476
292
516
15,112
226
2,765
2018
(£000)
485
3,855
453
27
536
9,440
123
3,220
Total cost of sales and operating expenses
25,177
18,139
Exceptional items
Exceptional items in 2019 include:
•
•
note 25.
Exceptional items in 2018 included:
•
AIM and are considered non-recurring in nature; and
•
Deal related costs, principally professional fees.
Deal related costs, principally professional fees; and
Credit in respect of negative goodwill arising on the acquisition of Ryder Geotechnical Limited – see
Monitoring fees charged by private equity owners that will not recur following admission to trading on
7. Net finance costs
Interest payable and similar charges
On loan notes
On other loans
On preference shares classed as liabilities
Fair value movement on forward foreign exchange contracts
Total interest payable and similar charges
Interest receivable and similar income
Fair value movement on forward foreign exchange contracts
Interest receivable
Total interest receivable and similar income
Net finance costs
8. Auditors Remuneration
During the year the Group obtained the following services from
the Company’s auditors at costs as detailed below:
Fees payable to Company’s auditor for the audit of the
parent company financial statements
Fees payable to Company’s auditor for other services:
– The audit of Company’s subsidiaries
– Tax compliance
– Other non-audit services
2019
(£000)
2018
(£000)
144
664
258
-
1,066
(142)
(5)
(147)
919
624
2,392
1,123
53
4,192
-
(4)
(4)
4,188
2019
(£000)
2018
(£000)
28
26
21
10
85
4
21
31
-
56
96
9. Taxation
Analysis of credit in year
Current tax
Current taxation charge for the year
Adjustments in respect of prior periods
Total current tax
Deferred tax
Origination and reversal of timing differences
Adjustments in respect of prior periods
Total deferred tax
Tax on loss on ordinary activities
Profit / (loss) on ordinary activities before tax
Profit / (loss) on ordinary activities multiplied by the rate
of corporation tax in the UK of 19% (2018: 19%)
Effects of:
Non-deductible expenses
Non-taxable income
Enhanced R&D tax relief
Impact of unrecognised deferred tax assets
Effect of change in rates
Adjustments in respect of previous periods
Total taxation credit
2019
(£000)
2018
(£000)
-
(384)
(384)
(23)
-
(23)
(407)
1,986
377
178
(55)
(373)
(145)
(5)
(384)
(407)
250
(383)
(133)
(23)
(114)
(137)
(270)
(380)
(72)
660
(238)
(129)
3
3
(497)
(270)
The current year’s Adjustments in respect of previous periods relates to tax accruals held at the end of the prior
year which did not crystallise as liabilities upon submission of the final tax computations for the previous financial
year (£250,000) coupled with a prior year R&D claim received during the year (£134,000).
Factors that may affect future tax charges
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (on 26 October
2015) and Finance Bill 2016 (on 7 September 2016). These included reductions to the main rate to reduce the
rate to 17% from 1 April 2020, and this has been reflected in these financial statements.
Our expectation is that the Group will continue to benefit from incentives, such as Patent box, and this will lead to
an effective tax rate that is lower than the main rate of corporation tax for future years.
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10. 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 conditional share awards granted during the year.
The calculation of basic and diluted loss per share is based on the following data:
Earnings
Earnings for the purposes of basic and diluted earnings per
share being loss for the year attributable to equity shareholders
Number of shares
Weighted average number of shares for the purposes of basic
earnings per share
Weighted average dilutive effect of conditional share awards
Weighted average number of shares for the purposes of diluted
earnings per share
Profit / (Loss) per ordinary share (pence)
Basic profit / (loss) per ordinary share
Diluted profit / (loss) per ordinary share
2019
(£000)
2,393
2018
(£000)
(110)
50,351,745
1,336,986
50,000,000
-
51,688,732
50,000,000
4.75
4.63
(0.22)
(0.22)
The denominators used to calculate basic earnings per share are the same as those shown above for
both basic and diluted earnings per share.
Adjusted EPS is calculated as follows:
Earnings
Earnings for the purposes of basic and diluted earnings per
share being adjusted profit for the year attributable to equity shareholders
Number of shares
Number of shares in issue at year end
Profit per ordinary share (pence)
Basic profit per ordinary share
2019
(£000)
3,037
50,687,852
6.0
98
11. Goodwill and other intangibles
Goodwill
(£000)
Software
(£000)
Product
development
(£000)
Trade name
(£000)
Customer
relationships
(£000)
COST
As at 1 April 2017
Additions
As at 31 March 2018
On acquisition
Additions
Disposals
23,471
-
23,471
234
-
-
As at 31 March 2019
23,705
AMORTISATION AND
IMPAIRMENT
As at 1 April 2017
Charge for the year
As at 31 March 2018
Charge for the year
Eliminated on disposals
4,109
-
4,109
-
-
As at 31 March 2019
4,109
NET BOOK VALUE
As at 31 March 2017
As at 31 March 2018
As at 31 March 2019
19,362
19,362
19,596
151
-
151
25
93
(88)
181
80
50
130
36
(88)
78
71
21
103
1,105
124
1,229
-
772
-
2,001
204
403
607
331
-
938
901
622
1,063
-
-
-
738
-
-
738
-
-
-
36
-
36
-
-
702
Total
(£000)
24,727
124
24,851
1,443
865
(88)
27,071
4,393
453
4,846
476
(88)
5,234
-
-
-
446
-
-
446
-
-
-
73
-
73
-
-
373
20,334
20,005
21,837
The remaining amortisation periods for software and product development are 6 months to 36 months (2018: 5
months to 26 months).
The goodwill, brand and customer relationships additions in the year relates to the acquisition of Subsea Innovation
Ltd as set out in note 25.
Goodwill has been tested for impairment. The method, key assumptions and results of the impairment review are
detailed below:
Goodwill is attributed to the only CGU within the Group, services to the subsea Offshore Wind and Oil and Gas
sectors. Goodwill has been tested for impairment by assessing the value in use of the cash generating unit. The
value in use calculations were based on projected cash flows in perpetuity. Budgeted cash flows for 2019 to 2021
were used. These were based on a three-year forecast with growth rates of 13.2% and 14.9% applied for the
following years. Subsequent years were based on a reduced rate of growth of 2.0% into perpetuity.
These growth rates are based on past experience and market conditions and discount rates are consistent with
external information. The growth rates shown are the average applied to the cash flows of the individual cash
generating units and do not form a basis for estimating the consolidated profits of the Group in the future.
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The discount rate used to test the cash generating units was the Group’s pre-tax WACC of 10.0%.
The value in use calculations described above, together with sensitivity analysis using reasonable assumptions, indicate
ample headroom and therefore do not give rise to impairment concerns. Having completed the impairment reviews no
impairments have been identified. Management does not consider that there is any reasonable downside scenario which
would result in an impairment.
All amortisation charges have been treated as an expense and charged to cost of sales and operating costs in the income
statement.
12. Property, Plant and Equipment
Freehold
property
(£000)
Leasehold
improvements
(£000)
Containers
& racking
(£000)
Plant and
equipment
(£000)
Production
tooling
(£000)
Motor
Vehicles
(£000)
Computer
Equipment
(£000)
Right of
use asset
(£000)
Total
equity
(£000)
COST
As at 1 April 2017
Additions
Disposals
As at 31 March 2018
-
-
-
-
Arising on acquisition
Right of use asset
adjustment
2,760
-
Additions
Disposals
-
-
As at 31 March 2019
2,760
DEPRECIATION
As at 1 April 2017
Charge for the year
As at 31 March 2018
Right of use asset
adjustment
Charge for the year
Eliminated on disposal
As at 31 March 2019
-
-
-
-
20
-
20
NET BOOK VALUE
As at 31 March 2017
As at 31 March 2018
As at 31 March 2019
-
-
2,740
873
5
-
878
-
-
41
-
919
623
195
818
-
50
-
1,135
-
-
1,135
-
-
13
(30)
1,873
26
-
905
177
-
1,899
1,082
234
-
176
(3)
-
-
600
-
1,118
2,306
1,682
1,079
34
1,113
-
16
(30)
753
160
913
-
194
-
718
118
836
-
188
-
868
1,099
1,107
1,024
250
60
51
56
22
19
1,120
986
1,199
187
246
658
11
-
-
11
-
-
-
-
11
11
-
11
-
-
-
11
-
-
-
328
40
(1)
367
-
-
60
-
427
224
56
280
-
48
-
328
104
87
99
-
-
-
-
-
2,360
106
(97)
5,125
248
(1)
5,372
2,994
2,360
996
(130)
2,369
11,592
-
-
-
1,439
292
(97)
3,408
563
3,971
1,439
808
(127)
1,634
6,091
-
-
735
1,717
1,401
5,501
Depreciation charges are allocated to cost of sales and operating expenses in the income statement.
The Group has elected to early adopt IFRS 16 using the modified retrospective approach. At the start of the year this
led to the recognition of right of use assets with a net book value of £0.7m and a lease liability of £0.8m. As a result of
the change the Group recognised £30,000 of interest and £292,000 of depreciation, offset by a saving in operating
costs of £357,000 of rental charges. As a result of timing differences between recognition of the operating expense and
depreciation and interest related to the capitalised lease an adjustment of £163,000 was required to equity. This can be
seen in the Statement of changes in equity. The right of use assets all relate to building leases. Cash flows during the year
in relation to these leases totalled £357,000.
100
13. Investments
Principal subsidiary undertakings of the Group
Details of the investments in which the Group holds 20 per cent. or more of the nominal value of any class of share
capital are as follows:
Tekmar Limited
Tekmar Holdings Limited
Tekmar EBT Limited
Subsea Innovation Limited
Tekmar Energy Limited
Tekmar Polyurethanes Limited
Tekmar GmbH
AgileTek Engineering Limited
Ryder Geotechnical Limited
Tekmar Marine Technology Company Limited
Class of share
capital held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Proportion
held by
parent company
Proportion
held by
Group
100%
-
-
100%
-
-
-
-
-
-
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
All the companies listed above are incorporated in England and Wales, and have a registered address of Unit 1,
Park 2000, Millennium Way, Aycliffe Business Park, Newton Aycliffe, County Durham, DL5 6AR, with the following
exception:
Company; Country of Incorporation; Address
Tekmar GmbH; Germany; Möllneyer Ufer 17, 45257 Essen, Germany
Tekmar Marine Technology Company Limited; China; Room 301,3F,No.1271 West Beijing Road, Jingan District,
Shanghai, China
There are no restrictions on the Group’s ability to access or use the assets and settle the liabilities of the Group’s
subsidiaries. The principal activities of these undertakings for the last relevant financial period were as follows:
Company
Tekmar Limited
Tekmar Holdings Limited
Tekmar EBT Limited
Subsea Innovation Limited
Tekmar Energy Limited
Tekmar Polyurethanes Limited
Principal activity
Holding of shares in subsidiary companies and the management
thereof
Holding of shares in subsidiary companies and the management
thereof
Corporate trustee for an employee benefit trust established to
facilitate employee share ownership
Design and manufacture of equipment for the offshore oil and gas
industry
Design and manufacture of cable protection system for use in
subsea environment
Dormant
Tekmar GmbH
Investment
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Company
Principal activity
AgileTek Engineering Limited
Engineering consulting for subsea environments
Ryder Geotechnical Limited
Geotechnical consulting for subsea environments
Tekmar Marine Technology
Company Limited
Dormant at year-end
14. Inventories
Raw materials
Finished goods
2019
(£000)
1,761
153
1,914
2018
(£000)
1,527
315
1,842
There is no difference between the carrying value and net realisable value of the above inventory items.
15. Trade and other receivables
Amounts falling due within one year:
Trade receivables not past due
Trade receivables past due
Trade receivables net
Contract assets
Other debtors
Prepayments and accrued income
Derivative financial assets
2019
(£000)
3,279
1,462
4,741
13,515
693
441
147
19,537
2018
(£000)
984
2,358
3,342
4,432
404
315
-
8,493
Trade and other receivables are all current and any fair value difference is not material. They are considered past
due once they have passed their contracted due date and are assessed for impairment based upon the expected
credit losses model.
The carrying amounts of the Group’s trade and other receivables are all denominated in GBP. 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.
102
16. Cash and Cash Equivalents
Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents were held in the following currencies:
UK Pound
Euro
Other
17. Trade and other payables
Current
Trade payables
Tax and social security
Accruals and contract liabilities
Derivative financial liabilities
2019
(£000)
2018
(£000)
4,190
2,617
3,778
411
1
4,190
2019
(£000)
6,187
212
2,996
-
9,395
1,986
631
-
2,617
2018
(£000)
2,929
400
3,230
106
6,665
The fair value of financial liabilities approximates to their carrying value due to short maturities. All trade and other
payables were held in GBP. The derivative financial liability related to forward foreign currency contracts. Accruals
and contract liabilities includes £1m in relation to deferred consideration on the Subsea Innovation acquisition (see
note 25).
Non-current
Accruals and contract liabilities
2019
(£000)
358
358
2018
(£000)
5,430
5,430
18. Borrowing
Current
Lease Liability
Non-current
Shares classified as debt
Share premium classified as debt
Loan notes
Other loans
Lease Liability
Amount repayable
Within one year
In more than two years but less than three years
In more than three years but less than four years
In more than four years but less than five years
In more than five years
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2019
(£000)
2018
(£000)
378
378
-
-
-
-
487
487
378
367
120
-
-
865
-
-
10
9,590
6,802
16,119
-
32,521
-
16,119
6,802
-
9,600
32,521
The above carrying values of the borrowings equate to the fair values. Borrowings were secured against all the
assets of the Group during 2018.
Average interest rates at the balance sheet date
Redeemable preference shares
Loan notes
Other loans
Lease Liability
2019
(%)
-
-
-
3.25
2018
(%)
7.75
8.50
15.00
-
Loan notes
Loan notes were repaid following the listing in June 2018.
Interest accrued on a daily basis at a fixed rate of 8.5% per annum. On 30 September each year, accrued interest
was either paid in cash or compounded on the loan principal, provided that further loan notes in respect of the
accrued interest were allocated and that approval for that transaction had been given by the majority shareholder.
Other loans
Other loans were repaid following the listing in June 2018.
Interest accrued on a daily basis at a fixed rate of 15% per annum.
20% of interest accruing daily after 27 March 2014 was payable in cash quarterly in arrears on the last business
day of June, September, December and March. Residual interest is added to the principal amount of the loan
annually.
104
Lease liability
This represents the lease liability recognised under IFRS 16. The assets leased are shown as a right of use asset
within Property, plant and equipment (note 12) and relate to the buildings from which the Group operates.
The asset and liability have been calculated using a 3.25% discount rate.
These leases are due to expire between January and December 2021.
Cash flows from financing activities
An analysis of cash flows from financing activities is provided as follows:
Loans and
Borrowings
(£’000)
Shares classified
as debt
(£000)
Finance lease
liabilities
(£000)
Balance at 1 April 2018
Changes from financing cash flows
Repayment of borrowings
Payment of finance lease liabilities
Redemption of preference shares
Total changes from financing cash flows
Changes arising from obtaining control of
subsidiaries
Other changes
New finance leases
Interest expense
Interest paid
Total other changes
Balance at 31 March 2019
29,963
(25,234)
-
-
(25,234)
1,776
-
808
(7,313)
(4,729)
-
9,600
-
-
(9,600)
(9,600)
-
-
258
(258)
-
-
-
-
(219)
-
(219)
-
1,084
-
-
1,084
865
19. Provisions
Non-current provisions
At the start of the period
Provisions released
Provisions used
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2019
(£000)
-
-
-
-
2018
(£000)
300
(150)
(150)
-
The provisions relate to warranties given to customers in the ordinary course of business. The provision has
been estimated based on management’s best estimate of the costs that will be incurred based on legislative and
contractual requirements.
As at 31 March 2019 and 2018 no specific warranty claims have been noted or are expected and therefore the
provisions are £nil.
106
20. Deferred Tax
Asset at start of year
Credit to income statement
Credit on share based payments
Arising on acquisition
(Liability) / Asset at end of year
The deferred tax (liability) / asset relates to the following:
Accelerated capital allowances on property, plant & equipment
On intangible assets
On share based payments
Other timing differences
2019
(£000)
177
23
31
(234)
(3)
141
(183)
90
(51)
(3)
2018
(£000)
40
137
-
-
177
176
-
-
1
177
In addition to the deferred tax (liability) / asset above, the Group has additional unrecognised gross tax losses of
£2,929,000 (2018: £696,000), hence an unrecognised deferred tax asset of £498,000 (2018: £118,000). These
assets remain unrecognised as there is expected to be sufficient relief available in the businesses that hold the
losses to mean it is unlikely that the losses will be used over the medium term and therefore the benefit derived
from them is too uncertain to warrant recognition of an asset.
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21. Financial instruments and Financial risk
management
Financial risk management
The Group uses various financial instruments. These have historically included preference shares, loan notes and
other loans (in the period to IPO), cash, forward foreign exchange contracts, issued equity instruments and various
items, such as trade receivables and trade payables that arise directly from its operations. The main purpose of
these financial instruments is to raise finance for the Group’s operations.
The existence of these financial instruments exposes the Group to a number of financial risks, which are described
in more detail below.
The main risks arising from the Group’s financial instruments are market risk, cash flow interest rate risk, credit
risk and liquidity risk. The Directors review and agree policies for managing each of these risks and they are
summarised below.
Market risk
Market risk encompasses three types of risk, being currency risk, interest rate risk and price risk. In this instance
price risk has been ignored as it is not considered a material risk to the business. The Group’s policies for managing
interest rate risk are set out in the subsection entitled “interest rate risk” below.
Currency risk
The Group contracts with certain customers in Euros and manages this foreign currency risk using forward foreign
exchange contracts which match the expected receipt of foreign currency income. As at 31 March 2019 this
covers the period up to September 2019. (As at 31 March 2018 the period to May 2018).
The table below shows the EBITDA impact (excluding any changes in the fair value of derivatives) if there had been
a 5% difference in the year end £:€ exchange rate:
+5%
-5%
2019
(£000)
(224)
247
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs by
closely managing the cash balance and by investing cash assets safely and profitably.
The Group policy throughout the period has been to ensure continuity of funding. Short-term flexibility is achieved
by revolving working capital facilities. The maturity of borrowings is set out in note 18 to the financial statements.
108
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The table below analyses the group’s non-derivative and derivative financial liabilities into relevant maturity
groupings based on the remaining period at the balance sheet date to the contractual maturity date. Derivative
financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the
timing of cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows.
At 31 March 2019
Less than 1 year
(£000)
Between
1 and 2 years
(£000)
Between
2 and 5 years
(£000)
Over 5 years
(£000)
Borrowings
Forward foreign exchange contracts
Trade and other payables
399
-
6,187
380
-
-
125
-
-
-
-
-
At 31 March 2018
Less than 1 year
(£000)
Between
1 and 2 years
(£000)
Between
2 and 5 years
(£000)
Over 5 years
(£000)
Borrowings
Forward foreign exchange contracts
Trade and other payables
-
106
2,929
-
-
-
29,789
-
5,430
12,207
-
-
Interest rate risk
The Group finances its operations through a mixture of retained profits, bank borrowings and historically, loan
notes. The Directors’ policy to manage interest rate fluctuations is to regularly review the costs of capital and the
risks associated with each class of capital, and to maintain an appropriate mix between fixed and floating rate
borrowings.
Sensitivity to interest rate fluctuations
All borrowings carry fixed interest rates, and hence there is no sensitivity to interest rate fluctuations. Interest on
cash balances held is received at a floating rate but is immaterial.
Credit risk
The Group’s principal financial assets are cash and trade receivables. The credit risk associated with cash is limited,
as the counterparties have high credit ratings assigned by international credit-rating agencies. The principal credit
risk arises therefore from the Group’s trade receivables. In order to manage credit risk the Directors set limits for
customers based on a combination of payment history and third-party credit references. Credit limits are reviewed
on a regular basis in conjunction with debt ageing and collection history.
The Directors consider that the Group’s trade receivables were not impaired for the year ended 31 March 2019
or 2018 and no provision for credit losses was made. See note 15 for further information on financial assets that
are past due.
Summary of financial assets and liabilities by category
The carrying amount of financial assets and liabilities recognised at the balance sheet date of the reporting periods
under review may also be categorised as follows:
Financial assets
Financial assets measured at amortised cost
Trade and other receivables
Cash and cash equivalents
Financial assets measured at fair value through profit or loss
Forward foreign exchange contracts
2019
(£000)
18,949
4,190
147
23,286
2018
(£000)
8,178
2,617
-
10,795
Financial liabilities
Financial liabilities measured at fair value through profit or loss
Forward foreign exchange contracts
-
(106)
Financial liabilities measured at amortised cost
Non-current:
Borrowings
Current:
Borrowings
Trade and other payables
Net financial assets and liabilities
Non-financial assets and liabilities
Plant, property and equipment
Goodwill
Other intangible assets
Inventory
Prepayments and accrued income
Deferred tax
Accruals and contract liabilities - current
Accruals and contract liabilities - non-current
Tax and social security
Corporation tax
Total equity / (deficit)
(487)
(378)
(6,187)
(7,052)
16,234
5,501
19,596
2,241
1,914
441
(3)
(2,996)
(358)
(212)
459
26,583
42,817
(32,521)
-
(2,929)
(35,450)
(24,761)
1,401
19,362
643
1,842
315
177
(3,230)
(5,430)
(400)
263
14,943
(9,818)
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23. Related party transactions
The directors consider there to be no ultimate controlling party following Admission in June 2018. During the
current and prior year, related parties included representatives of major shareholder, Elysian Capital LLP and
parent and intermediate parent entities ultimately owned by the same shareholders. Related party balances with
the Company are as follows:
Interest arising from transactions with previous shareholders totalled £1,066,000 (2018: £4,139,000).
Under an agreement dated 20 September 2018, the Company acquired the entire share capital of Subsea
Innovation Limited from its founder Gary Ritchie-Bland, the father of James Ritchie-Bland. Further details are set
out in note 25.
Tekmar Energy Limited rents a property from a business owned by Gary Ritchie-Bland. Costs relating to this rental
during the year were £90,000 (2018: £120,000).
Key management compensation is given in note 5 (b).
110
Financial instruments carried at fair value include forward foreign exchange contracts which are valued
using Level 2 inputs in accordance with IFRS 13.
Capital risk management
The Group’s capital management objectives are:
•
•
the level of risk.
To ensure the Group’s ability to continue as a going concern; and
To provide an adequate return to shareholders by pricing products and services commensurately with
This is achieved through close management of working capital and regular reviews of pricing. Decisions on whether
to raise funding using debt or equity are made by the board based on the requirements of the business.
Capital for the reporting period under review is shown as total equity in the table above
22. Share Capital
Nominal value
On incorporation on 25 May 2018
Issued during the year
Redeemed during the year
Issued on Admission
Issued post Admission
Ordinary
shares
£0.01
(Number)
Redeemable
shares
£0.01
(Number)
1
-
-
50,000,000
687,852
-
5,000,000
(5,000,000)
-
-
Ordinary
Share Total
(£)
-
50,000
(50,000)
500,000
6,878
At 31 March 2019
50,687,852
-
506,878
The movements in share capital to the date of the IPO are set out in the “Group reorganisation” paragraph of Note
1. General Information.
The Company issued 42,691 shares of £0.01 each on 13 September 2018 for consideration of £427 to satisfy
awards granted under the SIP (see note 24), and a further 645,161 shares of £0.01 were issued on 14 September
2019 at a value of £1,000,000 in respect of the acquisition of Subsea Innovation Limited.
112
24. Share based payments
During the year the Group operated three equity-settled share-based payment plans as described below. Expenses of
£418,000 were recognised in respect of equity settled share-based payment transactions in the period from IPO to 31
March 2019.
The Tekmar Group plc IPO Plan (“IPO Plan”)
As part of the admission to trading on AIM in June 2018, the Group granted a total of 1,750,000 share options to key
executives. All of the options granted are subject to service conditions, being continued employment with the Group
until the end of the vesting period. The options include certain performance conditions which must be met, based
upon earnings per share and total shareholder return targets for the financial year ending March 2020. The awards will
become exercisable on 20 June 2021 to the extent that the performance conditions have been satisfied.
The options were granted with an exercise price equal to the nominal value of the share (£0.01).
The Tekmar Group plc Long Term Incentive Plan (“LTIP”)
The LTIP is a discretionary executive share plan under which the Board may, within certain limits and subject to any
applicable performance conditions, grant to eligible employees nil or nominal cost options, options with a market value
exercise price, conditional or restricted awards. All employees are eligible for selection to participate in the plan. [No
awards have been granted under the LTIP.]
The Tekmar Group Share Incentive Plan (“SIP”)
The SIP is an all-employee ownership plan under which eligible employees may be awarded free and/or matching
shares. The SIP operates through a UK-resident trust (the “SIP Trust”). On 13 September 2018 the Company issued
42,691 shares of £0.01 each in the Company. The shares will be held in trust for a minimum holding period of 3 years
and there is a forfeiture period of 3 years during which employees who participated in the SIP will lose their Award if they
resign or are dismissed from their employment.
A summary of the options granted is shown in the table below:
Plan
IPO Plan
SIP
1 April 2018
Granted in
the period
30 March 2019
share options
outstanding
-
-
1,750,000
42,691
1,625,000
42,691
Vesting
period
3 years
3 years
Exercise
period
10 years
10 years
The Group has recognised a total expense of £418,000 in respect of equity-settled share-based payment
transactions in the year ended 31 March 2019 (31 march 2018: £nil), which has been included in staff costs. No
options were exercised during the period.
Valuation model inputs
The key inputs to the Black-Scholes-Merton and Monte Carlo simulation models for the purposes of estimating the
fair values of the share options granted in the year are as follows:
Grant Date
Share price on
date of grant
Expiry Date
Expectation
of meeting
performance
criteria
IPO Plan
SIP
20 June 2018
13 September 2018
130.00
161.50
20 June 2028
13 September 2028
75%
80%
The other factors in the Black-Scholes-Merton model do not affect the calculation and have not been
disclosed, as the options were issued for nil consideration with an exercise price of either £nil of £0.01.
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25. Business Combinations
On 20 September 2018, the Company acquired the entire share capital of Subsea Innovation Limited for an initial
cash payment of £65,923, shares in the Group of £1,000,000 and contingent consideration of £1,000,000. Subsea
Innovation Limited is an innovation leader in the design, manufacture and supply of complex engineered equipment and
technology used in the installation of subsea equipment for the offshore oil and gas market. Its products include large
equipment handling systems, which operate on the back of installation vessels; including cable, pipeline and SURF
(subsea umbilical riser and flowline); pipeline repair clamps, which protect major oil and gas pipelines, and equipment
for the construction of offshore oil and gas projects.
Consideration as at 20 September 2018
Cash
Shares
Contingent consideration to be settled
Total consideration
(£000)
66
1,000
1,000
2,066
For cash flow disclosure purposes, the amounts are disclosed as follows:
Cash consideration
Overdraft acquired
Recognised amounts of identifiable assets acquired
and liabilities assumed.
66
115
181
Assets
Property, plant and equipment
Other intangibles - software
Other intangibles - customer relationship
Other intangibles - brand
Trade and other receivables
Inventories
Liabilities
Borrowings - overdraft
Trade and other payables
Directors Loan Account
Borrowings
Deferred tax liabilities
Provisions
Total identifiable assets
Goodwill
Total
Values recognised at acquisition
Book value
(£’000)
Adjustments
(£’000)
Fair value
(£’000)
3,323
25
-
-
314
248
3,910
(115)
(182)
(2,623)
(348)
-
(131)
(3,399)
511
(329)
-
446
738
(11)
-
844
-
(489)
1,200
-
(234)
-
477
1,321
2,994
25
446
738
303
248
4,754
(115)
(671)
(1,423)
(348)
(234)
(131)
(2,922)
1,832
234
2,066
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26. Post balance sheet events
There has been no significant change in the financial or trading position of the Group or Company since 31 March 2019,
to the date of the approval of these financial statements.
Subsea Innovation Limited contributed £3,572,000 to revenue and £365,000 to profit before tax.
The fair value adjustments reflect:
• Uplift in the valuation of freehold property to fair value;
• Finalisation of the purchase price allocation and presentation of the identified other intangible assets of customer
relationships and brand, with the associated deferred tax liability provided; and
• Settlement of certain liabilities on acquisition.
On 28 March 2019, the Group acquired 80% of the share capital of Ryder Geotechnical Limited for a cash payment of
£2. Ryder Geotechnical Limited is involved in geotechnical consulting for subsea environments.
Consideration as at 28 March 2019
Cash
Total consideration
(£000)
-
-
For cash flow disclosure purposes, the amounts are disclosed as follows:
Cash consideration
Cash acquired
-
13
13
Recognised amounts of identifiable assets acquired
and liabilities assumed.
Values recognised at acquisition
Book value
(£’000)
Adjustments
(£’000)
Fair value
(£’000)
Assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Liabilities
Trade and other payables
Borrowings
Total identifiable assets
Gain on bargain purchase
Total
11
90
13
114
(14)
(5)
(19)
95
-
-
-
-
-
-
-
-
11
90
13
114
(14)
(5)
(19)
95
(95)
-
Ryder Geotechnical Limited contributed £nil to revenue and £nil to profit before tax due to the close proximity
of the acquisition to the year end.
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Parent company balance sheet
as at 31 March 2019
Parent company statement
of changes in equity as at 31 March 2019
Share
capital
(£000)
Share
premium
(£000)
Merger
relief
reserve
(£000)
Retained
earnings
(£000)
-
-
-
500
-
7
-
507
-
-
-
64,500
(400)
-
-
64,100
-
-
-
-
-
993
-
993
-
(836)
(836)
-
-
-
368
368
Total
equity
(£000)
-
(836)
(836)
65,000
(400)
1,000
368
65,968
On incorporation on 28 May 2018
Loss for the year
Total comprehensive expense for the
year
Issue of shares on IPO
Expenses of the IPO
Issue of shares post IPO
Share based payments
transactions with owners,
Total
recognised directly in equity
Balance at 31 March 2019
507
64,100
993
(468)
65,132
Non-current assets
Investments
Deferred tax assets
Trade and other receivables
Total non-current assets
Current assets
Trade and other receivables
Cash at bank and in hand
Total current assets
Total assets
Equity and liabilities
Share capital
Share premium
Merger relief reserve
Retained earnings
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
Note
3
4
4
5
2019
(£000)
42,484
67
15,869
58,420
4,062
3,848
7,910
66,330
507
64,100
993
(468)
65,132
1,198
1,198
1,198
66,330
The Parent Company financial statements were approved by the Board of Directors on 24 June 2019 and were
signed on its behalf by:
S Hurst
Chief Financial Officer & Company Secretary
Company registered number: 11383143
118
Notes to the parent company financial statements
for the year ended 31 March 2019
1. Significant Accounting Policies
incorporated and domiciled
Basis of preparation
Tekmar Group plc (the “Company”) is a public limited
company
in England
and Wales. The registered office of the Company is
Unit 1, Park 2000, Millennium Way, Aycliffe Business
Park, Newton Aycliffe, County Durham, DL5 6AR. 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 cable, umbilical and flexible protection
systems operating across the Offshore Wind, Oil & Gas
and other energy sectors, including associated subsea
engineering services.
Initial public offering (“IPO”)
The Company’s shares were admitted to trading on the
Alternative Investment Market (“AIM”), a market operated
by the London Stock Exchange, on 20 June 2018. These
Group financial statements are the Company’s first
subsequent to its admission to AIM and followed a group
reorganisation to facilitate the IPO. The consolidated
financial statements were approved and authorised for
issue by a duly appointed and authorised committee of
the Board of Directors on 24 June 2019.
These financial statements have been prepared under
merger accounting principles because the transaction
under which the Company became the holding company
of Tekmar Limited, the previous parent undertaking of the
Tekmar trading operations, was a group reorganisation
as the Company did not actively trade at that time.
The result of the application of the capital reorganisation
is to present the financial statements as if the Company
had always owned the Tekmar trading operations.
Group reorganisation
The principal steps of the Group reorganisation were as
follows:
The Company was incorporated on 25 May 2018 as a
private company limited by shares in England and Wales,
with the allotment of 1 share of £0.01.
The Company issued 5,000,000 redeemable shares of
£0.01 each in the capital of the Company which were
redeemed shortly after Admission.
Under an Escrow agreement dated 14 June 2018, the
selling shareholders agreed to sell their shares in Tekmar
Limited to the Company immediately on Admission and
the selling shareholder of AgileTek Engineering Limited
agreed to sell his shares to Tekmar Holdings Limited
immediately on Admission.
The acquisition by the Company of the shares in Tekmar
Limited and AgileTek Engineering Limited constitutes a
group reorganisation and the transaction is accounted
for as a capital reorganisation. Under merger accounting
principles, the assets and liabilities of the subsidiaries are
consolidated at book value in the financial statements
and the consolidated reserves of the Group are adjusted
to reflect the statutory share capital, share premium and
the reserves of the Company as if it had always existed.
The Company issued 50,000,000 shares of £0.01 each
on Admission to AIM 20 June 2018. The consideration
in excess of the nominal value of £500,000 has been
recorded as share premium. An amount was also
recorded in merger reserve in respect of the element
of the IPO proceeds to acquire the existing group. IPO
costs of £400,000 have been charged to the share
premium account.
Reporting framework
The separate financial statements of the Company have
been prepared in accordance with Financial Reporting
Standard 101 “Reduced Disclosure Framework” (“FRS
101”), on the going concern basis under the historical
cost convention, and in accordance with the Companies
Act 2006 and applicable Accounting Standards in the
UK. The principal accounting policies are set out below.
The following exemptions from the requirements in IFRS
have been applied in the preparation of these financial
statements, in accordance with FRS 101:
• The following paragraphs of IAS 1 “Presentation of
Financial Statements”
o 10(d) (statement of cash flows);
o 16 (statement of compliance with all IFRS);
o 11 (cash flow statement information); and
o 134-136 (capital management disclosures)
• IFRS 7 “Financial Instruments : Disclosures”;
• IAS 7 “Statement of Cash Flows”;
• IAS 24 (paragraphs 17 and 18a) “Related Party
Disclosures” (key management compensation); and
• IAS 24 “Related Party Disclosures” – the requirement to
disclose related party transactions between two or more
members of a group.
As the Group financial statements include the equivalent
disclosures, the Company has taken the exemptions
available under FRS 101 in respect of the following
disclosures;
• IFRS 2 “Share-based Payments” in respect of Group
settled equity share-based payments; and
• Certain disclosures required by IFRS 13 “Fair Value
Measurement” and disclosures required by IFRS 7
“Financial Instruments : Disclosures”
Parent Company profit and loss account
The Company has not presented its own profit and loss
account as permitted by Section 408 of the Companies
Act 2006. The Company’s loss after taxation for the
period was £0.836 million. There are no material
differences between the profit after taxation in the
current and prior year and its historical cost equivalent.
Accordingly, no note of historical cost profits and losses
has been presented.
Dividend distribution
The distribution of a dividend to the Company’s
shareholders is recognised as a liability in the Company’s
financial statements in the year in which it is approved by
the Company’s shareholders.
Investment in subsidiary undertakings
Investments in Group undertakings are stated at cost,
unless their value has been impaired in which case they
are valued at the lower of their realisable value or value
in use.
Deferred taxation
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the
balance sheet date where transactions or events that
result in an obligation to pay more tax in the future or a
right to pay less tax in the future have occurred at the
balance sheet date.
Deferred tax assets are regarded as recoverable and
recognised in the Group financial statements when, on
the basis of available evidence, it is more likely than not
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that there will be suitable taxable profits from which the
future reversal of the timing differences can be deducted.
The recoverability of tax losses is assessed by reference
to forecasts which have been prepared and approved
by the Board. No timing differences are recognised in
respect of revalued tangible fixed assets or fair value
adjustments to acquired tangible fixed assets where
there is no commitment to sell the asset. The deferred
tax assets and liabilities are not discounted.
Share-based payments
The Group operates equity-settled
share-based
remuneration plans for certain employees. None of the
Group’s plans are cash-settled. All goods and services
received in exchange for the grant of any share-based
payment are measured at their fair values.
Where employees are rewarded using share-based
payments, the fair value of employees’ services is
determined indirectly by reference to the fair value of the
equity instruments granted. This fair value is appraised
at the grant date and excludes the impact of non-market
vesting conditions.
All share-based remuneration is ultimately recognised as
an expense in profit or loss with a corresponding credit
to retained earnings. If vesting years or other vesting
conditions apply, the expense is allocated over the
vesting year, based on the best available estimate of the
number of share options expected to vest.
The fair value determined at the grant date of equity-
settled share-based payments issued to employees of
subsidiary undertakings is recognised as an addition to
the cost of investment in subsidiary undertakings on a
straight-line basis over the vesting period, based on the
Company’s estimate of shares that will eventually vest
and adjusted for the effect of non-market-based vesting
conditions.
in
Employer social security contributions payable
connection with the grant of share awards are considered
an integral part of the grant itself and the charge is treated
as a cash-settled transaction.
Share capital
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares
are shown in equity as a deduction, net of tax, from the
proceeds of issue.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and
call deposits with an original maturity of three months or
less.
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The value in use calculations performed for the impairment
review, together with sensitivity analysis using reasonable
assumptions, indicate ample headroom and therefore do
not give rise to impairment concerns. Having completed
the impairment reviews no impairments have been
identified. Management does not consider that there is
any reasonable downside scenario which would result in
an impairment.
2. Remuneration of Directors and Auditors
Details of Directors’ remuneration are shown in the
Directors’ Remuneration Report on page 60 of the Group
financial statements. Details of auditor remuneration are
shown in note 8 of the Group financial statements.
120
Financial assets
Classification
The Company classifies its financial assets as loans and
receivables. Management determines the classification
of its financial assets at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that arise principally
through the provision of services to customers. They are
initially recognised at fair value, and are subsequently
stated at amortised cost using the effective interest
method. They are included in current assets, except
for maturities greater than 12 months after the end of
the reporting year. Loans and receivables comprise
mainly cash and cash equivalents and trade and other
receivables, including amounts owed by related entities.
Impairment of financial assets
Impairment provisions are recognised when there is
objective evidence (such as significant financial difficulties
on the part of the counterparty or default or significant
delay in payment) that the Group will be unable to collect
all of the amounts due under the terms receivable, the
amount of such a provision being the difference between
the net carrying amount and the present value of the
future expected cash flows associated with the impaired
receivable.
Financial liabilities
The Company initially recognises its financial liabilities
at fair value net of transaction costs where applicable
and subsequently they are measured at amortised cost
using the effective interest method. Financial liabilities
comprise trade and other payables, amounts owed
to Group undertakings, other liabilities and accruals
and deferred income and are initially recognised at
transaction price, unless the arrangement constitutes
a financing transaction, where the debt instrument is
measured at the present value of the future payments
discounted at a market rate of interest.
Trade and other payables are obligations to pay for
goods or services that have been acquired in the ordinary
course of business from suppliers. Trade payables are
classified as current liabilities if payment is due within one
year or less. If not, they are presented as non-current
liabilities. Other liabilities include payments in advance
from customers and rebates.
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently
carried at amortised cost; any difference between the
proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the year
of the borrowings using the effective interest method.
Critical accounting estimates
The preparation of the Parent Company
financial
statements requires the Directors to make estimates and
assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets
and liabilities. Estimates and judgements are continually
evaluated and are based on historical experience and
other factors including expectations of future events that
are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The Directors consider that the following estimates
and judgements are likely to have the most significant
effect on the amounts recognised in the Group financial
statements.
(a) Critical judgements in applying the entity’s accounting
policies
Share based payments
The weighted average fair value of equity options granted
is determined using various fair value models, including
Black-Scholes-Merton and Monte Carlo models. The
Group makes assumptions in identifying the appropriate
inputs significant as disclosed within note 24 to the
Group financial statements. The assumptions are subject
to estimation and are considered for reasonableness at
each balance sheet date.
(b) Critical accounting estimates
Impairment of non-current assets
The carrying amount of the Company’s investments in
subsidiaries £42,484,000 as at 31 March 2019. The
Directors have carried out an impairment review in
accordance with the accounting policies. The forecast
cash generation for each Cash Generating Unit (“CGU”)
and the Weighted Average Cost of Capital (“WACC”)
represent significant assumptions.
The cash flows are based on a three year forecast
with growth between 13.2% and 14.9%. Subsequent
years are based on a reduced growth rate of 2.0% into
perpetuity.
The discount rate used was the Group’s pre-tax WACC
of 10.0%.
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3. Investments in subsidiary undertakings
4. Trade and other receivables
Cost and carrying amount
On incorporation
Additions
At 31 March 2019
(£000)
-
42,484
42,484
Under an Escrow agreement dated 14 June 2018, the selling shareholders agreed to sell their shares in Tekmar
Limited to the Company immediately on Admission and the selling shareholder of AgileTek Engineering Limited
agreed to sell his shares to Tekmar Holdings Limited immediately on Admission.
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
The Company directly owns the whole of the issued ordinary shares of the following subsidiary undertakings:
Details of the investments in which the Company holds 20 per cent or more of the nominal value of any class of
share capital are as follows:
Amounts owed by Group undertakings - non -current
Amounts owed by Group undertakings - current
Prepayments and accrued income
2019
(£000)
15,869
4,054
8
19,931
All of the amounts owed by Group undertakings shown above are repayable on demand and attract interest at
rates between 0% and 3%. No expected credit losses are recognised on intercompany receivables as repayment
of the balances is within the control of the Group.
5. Creditors: amounts falling due within one year
Tekmar Limited
Subsea Innovation Limited
Class of share capital held
Ordinary
Ordinary
Proportion held by
parent company
100%
100%
Trade creditors
Amounts due to group undertakings
Other taxation and social security
Accruals and deferred income
Deferred consideration
All the companies listed above are incorporated in England and Wales, and have a registered address of Unit 1,
Park 2000, Millennium Way, Aycliffe Business Park, Newton Aycliffe, County Durham, DL5 6AR. There are no
restrictions on the Group’s ability to access or use the assets and settle the liabilities of the Group’s subsidiaries.
The principal activities of these undertakings for the last relevant financial period were as follows:
Company
Principle activity
Tekmar Limited
Holding of shares in subsidiary companies and the management thereof
Subsea Innovation Limited
Design and manufacture of equipment for the offshore oil and gas industry
All of the amounts owed to Group undertakings shown above are repayable on demand.
2019
(£000)
8
23
83
84
1,000
1,198
124
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Strategic
Governance
Finance
6. Share Capital
Details of movements in shares are set out in note 22 to the Group financial statements.
7. Related party transactions
The Company has taken advantage of the exemption included in IAS 24 ‘Related Party Disclosures’ not to disclose
details of transactions with Group undertakings, on the grounds that it is the parent company of a Group whose accounts
are publicly available.
Directors’ transactions
Details of the Directors’ interests in the ordinary share capital of the Company are provided in the Directors’ Report.
8. Share-based payments
The Company operates a number of share option arrangements for key executives and employees, further details
of which can be found in note 24 to the Group financial statements. Further details of the arrangements for senior
executives can be found in the Directors’ Remuneration Report in the Group financial statements.
The Company recognised total expenses of £312,527 in respect of the equity-settled share-based payment transactions
in the year ended 31 March 2019.
9. Post balance sheet events
There has been no significant change in the financial or trading position of the Group or Company since 31 March 2019,
to the date of the approval of these financial statements.
Shareholder Information
Annual General Meeting
The AGM will be held at 10am on 21 August 2019 at Tekmar, Park 2000, Millennium Way, Newton Aycliffe DL5 6AR. The
Notice of Meeting will be separately distributed to shareholders.
Key Contacts:
Company Secretary
Sue Hurst
Registered office: Tekmar Group plc
Park 2000
Millennium Way
Newton Aycliffe
DL5 6AR.
Nominated Advisor
Grant Thornton UK LLP
30 Finsbury Square
London EC2P 2YU
Auditor & Tax advisors
KPMG LLP
Quayside House
110 Quayside
Newcastle Upon Tyne NE1 3DX
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing Business Park
West Sussex BN99 6DA
Investor Relations
Belvedere Communications Limited
Enterprise House
1-2 Hatfields
London
SE1 9PG
Broker
Berenberg
60 Threadneedle St
London EC2R 8HP
Bank
Barclays
Barclays House
5 St Ann’s Street
Quayside
Newcastle NE1 3DX
Review
Strategic
Governance
Finance
Financial calendar
21 August 2019 – Annual General Meeting
30 September 2019 – Half Year End
December 2019 – Interim Results
31 March 2020 – Full Year End
July 2020 – Full Year Results
126
Glossary
Adjusted EBITDA earnings before interest, tax,
depreciation and amortisation, and non-recurring
and exceptional items
Admission the admission of the Enlarged Share
Capital to trading on AIM becoming effective
in accordance with Rule 6 of the AIM Rules for
Companies
AEL AgileTek Engineering Limited
AgileTek AgileTek Engineering Limited
AIM the AIM market of the London Stock Exchange
API American Petroleum Institute
Berenberg Joh. Berenberg, Gossler & Co. KG,
London Branch, broker to the Company and sole
global coordinator
Board the board of Directors of the Company
Brent Crude a trading classification of sweet light
crude oil that serves as a benchmark price for
purchases of oil worldwide
CAGR compounded annual growth rate
CPS cable protection system
EEA the European Economic Area
EU the European Union
GW gigawatt, a unit of power
HSQE health, safety, quality and environmental
IAC Inter Array Cables
J-Tube a hollow steel tube that has the shape of a
letter “J” attached to the outside of a monopile or
wind turbine platform to act as a conduit for the
power cable that runs from the wind turbine to the
seabed
Monopile a large-diameter, fixed single column
foundation structure to support the above-surface
wind turbine typically used in shallow water
MWh megawatt hour, a unit for measuring power
Non-Executive Directors
non-executive
Directors of the Company (including the Chairman)
as at the date of this document, namely Alasdair
MacDonald, Christopher Gill and Julian Brown
the
QCA the Quoted Companies Alliance
QCA Code the QCA Corporate Governance Code
published in 2018
OWF Offshore Wind
RYD Ryder Geotechnical Limited
SIL Subsea Innovation Limited
Executive Directors the executive Directors of the
Company as at the date of this document, namely
James Ritchie-Bland and Susan Hurst
Subsea division the division of the Group’s business
focused on the oil and gas industry
SURF Subsea Umbilicals, Risers and Flowlines
FCA or Financial Conduct Authority the Financial
Conduct Authority of the United Kingdom
TEL Tekmar Energy Limited
Flowline a flexible pipe laid on the seabed linking
subsea structures for the transportation of crude oil
or natural gas
Group as from Admission means the Company and
its subsidiaries,
TRL Number of technology and products within the
Group
Umbilical subsea umbilical system providing vital
supply (such as electric power, hydraulic power)
and control link from platforms or topside vessels to
subsea oil and gas equipment
Park 2000
Newton Aycliffe
DL5 6AR
United Kingdom
T: +44 1325 379520
F: +44 1325 379521
E: investors@tekmar.co.uk
W: investors.tekmar.co.uk