Annual Report 2021
02
Contents
Strategic Report
06 Chairman’s Statement
08 CEO Review
12 CFO Review
16 Vision, Mission & Values
18 Strategic Review
20 Market Review
24 Our Business Model
26 Our Business Model in Action
38 Key Performance Indicators
40 Sustainability Report
Governance
44 Message from the Chairman
46 Corporate Governance Statement
50 Board of Directors
52 Key Management
54 Risk Management
60 Audit Committee Report
62 Remuneration Committee Report
66 Nomination Committee Report
68 Directors’ Report
71 Statement of Directors’ Responsibilities
Financial Statements
74 Independent Auditor’s Report
84 Consolidated Statement of Comprehensive Income
85 Consolidated Balance Sheet
86 Consolidated Statement of Changes in Equity
87 Consolidated Cash Flow Statement
88 Notes to the Group Financial Statements
120 Parent Company Balance Sheet
121 Parent Company Statement of Changes in Equity
122 Notes to the Parent Company Financial Statements
Additional Information
131 Annual General Meeting
131 Advisors
132 Glossary
Highlights
• Major Cable Protection System (“CPS”) projects secured and/or delivered globally, including increased volume
manufactured and exported to China and first Generation 10 CPS delivered and installed subsea
•
•
•
Various contract awards in support of the Offshore Wind Operations & Maintenance (O&M) market, including the
delivery of first significant O&M scope
Secured and delivered largest Marine Civils project to date in Canada
Established strategic partnership in the US in preparation for project activity anticipated with the emerging US offshore
wind industry and to enhance Tekmar Group’s floating wind offering
•
Established local entities in the UAE and Kingdom of Saudi Arabia, supported by a plan for expansion in the Middle East
• Middle East expansion progressing with various contract awards, including a $10m award for pipeline support and
protection for a major subsea customer (announced January 2022)
•
•
•
Selected for Dogger Bank Offshore Wind Farm, when delivered will be the largest Global Offshore Wind Project
(announced December 2021)
The Group held £3.5m of cash at 30 September 2021 including full draw down of the £3.0m CBILS loan and a further
£3.0m trade loan facility
Post year end, the Group extended its CBILs facility to October 2022 and extended and increased the trade loan facility
to £4.0 million, which is available at least to November 2022
The above contract awards highlight the breadth and depth of our offering and supports growth in our order book to £20.3m
as at the end of December 2021, which is the largest we have reported since our admission to AIM.
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.
StrategicGovernanceFinance 04
Strategic Report
A 5-year strategy delivering on the opportunity and promoting long term
value for shareholders.
Strategic Report Contents
06 Chairman’s Statement
08 CEO Review
12 CFO Review
16 Vision, Mission & Values
18 Strategic Review
20 Market Review
24 Our Business Model
26 Our Business Model in Action
38 Key Performance Indicators
40 Sustainability Report
The Board has established a strategic plan that will see
us capitalise on our strong foundations, diversifying
further into the offshore wind industry by disciplined
investment in new technology and innovation. We will do
this through:
a) Leveraging our market advantage
b) Expanding and deepening our value proposition
c) Innovation in applied engineering
d) Disciplined investment
e) Operational excellence
f) High quality profitable growth
g) Sustainable shareholder returns
The strategy is supported by our core building blocks
a) Organic Growth: Ambition to double organic revenue
growth over the next 5 years from FY20 revenue of
~£40m
b) Sustainable Business: Deliver a sustainable mid-to-
high teens EBITDA margin in the later years of the plan
c) Acquisition Strategy: Bolt-on technologies and
services that align with our offshore wind focused growth
plan
StrategicGovernanceFinance 06
Chairman’s Statement
subsea installations are moving closer to the near-term
horizon and increasingly will play to Tekmar’s strengths
as we continue our transition as an engineering solutions
led company.
It is my conviction that this is increasingly what the industry
needs, today and into the future. When I think about the
capability we have across our business – to analyse,
simulate and understand the subsea environment, to
use our technology and engineering capability to provide
strategic solutions, and to build on our industry learnings
as a critical part of the offshore supply chain for over 30
years, I see a tremendous opportunity ahead for Tekmar.
The great work of the team, involving collaboration across
the business, in securing our role to provide the cable
protection strategy to DEME Offshore in support of the
Dogger Bank wind farm, shows the critical importance
of our understanding and of our differentiated approach.
Set against this, and as has been widely observed,
current market conditions are tough across the industry.
Obviously, the protracted impact of the pandemic has
caused significant disruption across global logistics with
rapid raw material cost inflation also hurting the supply
chain. A further consequence has been significant
delays to project FIDs, or Final Investment Decisions,
which affects our pipeline and resource planning. A
personal observation is the industry needs to encourage
governments to smooth the flow of offshore wind projects
in construction. In the UK, for example, more frequent
Contracts for Difference (CfD) auctions will strengthen
the stability and visibility for the UK’s increasingly valuable
offshore supply chain, giving them the confidence
to invest, to maintain industry leadership and create
valuable jobs. This is particularly important when you
consider the pressure being exerted on the supply chain
as the offshore wind industry transitions to a sustainable
and competitive levelised cost of energy, or LCoE.
Tekmar, of course, is more than a supplier of product to
the offshore wind industry. It’s important to emphasise
in this context, and is a key feature of the results we are
reporting, the success of the acquisitions we have made
in making us more resilient to the offshore wind market
and in building our subsea expertise. We are a more
balanced business as a result of these acquisitions and
they position us to offer valuable, integrated solutions to
our customers.
It is my pleasure to introduce the 2021 Report to
shareholders, which covers the extended 18-month
financial period to 30 September 2021. Whilst this is my
first report as Chairman, I have been on the Board of
Tekmar since its admission to AIM in 2018 and have over
20 years’ experience within the Renewables and Offshore
energy market. The reason for highlighting this is to give
context to the comments I make in this introduction.
The market environment in which we are currently
operating is in many ways unprecedented in its “double-
edged” nature. We have an industry which is maturing,
and needs to mature, in the offshore environment and
a critical call to action with Net Zero by 2050, which is
focusing the minds of governments, the energy industry,
the global finance community and society more broadly.
This presents a clear opportunity for Tekmar to be part
of the industry response, highlighted by the over 200GW
increase in offshore capacity expected to be installed by
2030, from a current installed base globally of 40GW.
The recent ScotWind auction is a case in point, where
we are also seeing floating offshore wind as an important
part of the mix. These types of complex offshore and
This has been a challenging period for our people who are
steering us through significant change as well as dealing
with the personal hardships of the COVID-19 pandemic.
On behalf of the Board, I would like to thank all our staff
for their resolute hard work and dedication in focusing on
supporting the Group’s performance alongside playing
their role in building on Tekmar’s strong foundations
to improve our business. During the period, Alasdair
MacDonald took over the CEO role, having assumed the
role of Executive Chair on a temporary basis following
the resignation of James Ritchie-Bland. The appointment
of Ally as CEO was made in October 2020, following the
Nomination Committee’s extensive and rigorous formal
process. Derek Bulmer also joined the Board as CFO
in June 2021, ensuring a smooth transition from Sue
Hurst, who retired after 10 years’ in the role. We would
like to reiterate our thanks to James and Sue for their
considerable contribution in growing Tekmar.
Whilst we are not reporting the financial performance
we would want to for this period, it is a function of the
broader environment, which has not been easy for the
best part of two years. Ally and the new team are doing
a great job of responding to these conditions alongside
restructuring the business to the new environment.
Julian Brown
Non-Executive Chairman
(1) The Contracts for Difference (CfD) scheme is the government’s main
mechanism for supporting low-carbon electricity generation
StrategicGovernanceFinance 08
CEO Review
“
Tekmar is at a pivotal
stage as a company -
we have built strong
foundations and have a
market opportunity in
our offshore wind and
subsea markets that is
striking in its scale.
“
Alasdair MacDonald, CEO
Change, opportunity and a stronger engineering culture.
This has been our focus as a business since I took over
the role of Executive Chairman and subsequently Group
CEO in 2020. Tekmar is at a pivotal stage as a company
- we have built strong foundations and have a market
opportunity in our offshore wind and subsea markets
that is striking in its scale. As Julian highlighted in his
introduction, the industry is changing, with a maturing
industry alongside technology transition as installations
and ongoing maintenance become more complex and
challenging. This is positive for Tekmar and we are using
our expertise to provide the industry leading solutions
in our field, giving customers what they need to adapt
to this changing environment. Our role in providing the
cable protection strategy for Dogger Bank, set to be
the world’s largest offshore wind farm, underscores the
scale of the opportunity ahead of us and validates how
our integrated approach is resonating with the market.
To make sure we capture this opportunity fully, Tekmar
is changing. We highlighted in our capital markets day
(“CMD”) in July 2021 that we would drive through a
number of business improvement initiatives to enable us
to benefit from more predictable, higher quality earnings
and improved cash generation, based on a stronger,
engineering-led business. We also highlighted this would
involve a transition period for the business through
2022 as we prepared the business for significant order
book growth, which we anticipate flowing through to
accelerated revenue growth from FY23 onwards. Our
view on the trajectory of growth in the market remains
very positive over the mid-to long-term, supporting the
ambitions we outlined at the CMD. This view is supported
by visibility on planned offshore wind construction
projects, with over 200GW of new capacity by 2030,
and by broader market indicators and industry analysis.
We share this analysis with investors, with key industry
analysis provided in this Report and summarised in the
Markets section below.
There has been considerable change in the business
through the 2021 financial period and this change
continues. There has been significant change
in
personnel, with key roles strengthened to align with our
core values as an engineering-led business. We are
prioritising investment in our technology, product and
services offering and strengthening our processes,
systems and control. Our sales strategy has been
reshaped with greater focus on higher margins rather
than volume and more robust governance procedures
during a bid process. We are embedding a more
disciplined framework in managing commercial risk and
strengthening the technical content of proposals with
dedicated engineering resource. The above examples
give an illustration of the type of changes we are making
to strengthen the business, but we are doing a lot more
across key areas such as Organisation Leadership
& Culture, Engineering Solutions & Organisation,
Commercial Risk Management and Project Execution.
At our capital markets day, we set out our growth plan
and our ambition to double organic revenue over the
next five years and to deliver a sustainable mid to high
teens EBITDA margin in the later years of the plan.
M&A complements organic growth under the plan,
building on the valuable acquisitions we have made.
Acquisition candidates will share a similar customer
base to our existing portfolio and support diversification
into new products, markets or regions, aligned with our
major opportunities in offshore wind and the subsea
environment.
We came to market in 2018 as a business best known
as the market leading provider of offshore wind cable
protection systems. A key priority since IPO has been
to diversify as an engineering-led services business that
combines our technology and product capability. The
acquisitions of Subsea Innovation, Ryder Geotechnical
and Pipeshield accelerated this diversification and these
businesses are now fully integrated and offer a lot of
value to our Group, both financially and also strategically.
Under our strategic plan, we see the opportunity to drive
significant growth by building on these strong foundations
and diversifying further into the offshore wind industry
and subsea environment.
Financial performance and operational review
This was a challenging financial period for Tekmar, with
COVID-19 related disruption a factor across the extended
18-month period from April 2020 to September 2021.
Derek reviews the financial performance and position in
his commentary, but from my perspective, whilst clearly
it is disappointing to report an adjusted EBITDA loss of
£2.1m, I do believe as a business we responded to these
challenges as well as we could reasonably expect in what
has been and remains a difficult market environment.
We are an operationally geared business, and
the profitability impact of lower volumes has been
exacerbated for Tekmar by the operational challenges
in the current market. We covered the substance of
these challenges in our October trading update - the
dislocation to global trade flows, challenges with shipping
goods for delivery, supply chain constraints and cost
control pressures. A related challenge is short term
delays to projects and lengthy tender and bid processes,
with some projects taking 12 or more months to secure.
Whilst this adds uncertainty to our business planning and
pipeline visibility, and the prevailing market environment
remains difficult across the supply chain, we do think
it highlights the more prudent approach the industry is
moving towards and that this plays to the strengths of our
integrated, solutions-led offer.
We have made good progress in FY21 and into FY22 in
securing a number of landmark contracts in line with our
strategic plan:
• We are diversifying into the growing O&M market,
with various contract awards in support of Offshore
Wind Operations and Maintenance projects. This
includes an ongoing landmark project providing
O&M solutions to a UK offshore wind farm
• We are extending our geographical reach, targeting
regional growth in-line with market expectations of
future growth, including China where we generated
approximately £7m in revenue in FY21 through our
Shanghai base
• Our Marine Civils division has secured
two
transformational contracts, expanding our reach in
North America and the Middle East, with the latter
contract announced in January 2022 worth in
excess of $10m, the largest contract Tekmar has
secured to date
•
• We are successfully evolving our commercial
proposition in subsea cable protection, where we
have all Group companies working on engineering
solutions supporting our holistic and differentiated
cable protection strategy offering. Recent contract
wins, including Dogger Bank, demonstrate the
combined value of the Group in addressing the
complex engineering challenges of the subsea
environment
A contract award with Van Oord to supply Tekmar’s
Cable Protection System (“CPS”) for the Baltic
Eagle offshore wind farm in the Baltic Sea, Germany
A partnership agreement with DeepWater Buoyancy
announced
in August 2021, which supports
Tekmar’s ambition for the global floating wind market
and the US fixed offshore wind market.
A contract award from EPC contractor to design,
build and supply an Emergency Pipeline Repair
System for a subsea project in Qatar
A contract award
to
manufacture and supply concrete mattresses for a
subsea project in the UK.
from EPC contractor
•
•
•
(1) Adjusted EBITDA defined in CFO review on page 12
StrategicGovernanceFinance the market outlook is very positive and we believe we are
on a path consistent with the trajectory we have set out
to restore sustained profitable growth from 2023 in line
with our longer-term ambitions for the company.
Alasdair MacDonald
CEO
10
These contract awards and related pipeline activity
highlight a healthy level of forward visibility, with the
Company reporting an order book at the end of December
2021 of £20.3 million, which is the highest order book
value the Company has reported since its admission to
AIM. This order book helps to support a broader pipeline
of opportunity which the Company estimates to be in the
region of £100 million. In addition to the £20.3 million
order book, the Company estimates visible projects at
advanced bid and bid stage to be in the region of £25
million, with the remainder representing a reasonable
level of visibility through typical run-rate activity the
Company expects to see and visible projects which have
not yet reached the bid stage.
We continue to engage constructively with industry
partners to help assess the legacy issues relating to cable
installation which has had some industry prominence in
the last 12 months. We see this as a wider industry issue
that we are well set up to support as demonstrated on
recent contracts where we have all Group companies
working on engineering solutions in support of cable
protection strategies, utilising our analytical and
engineering capability, alongside our subsea and
offshore wind expertise. Whilst we are managing this
as part of our commitment to responsibly supporting
our customers, the learnings complement our existing
expertise and capability and supports our strategic
initiative to further diversify across the wider lifecycle
of offshore wind projects, including our growing O&M
capability, where Tekmar’s technical understanding can
be of real value to our customer.
Market
The global market for offshore wind, the Group’s core
market, continues to strengthen and we are encouraged
by the UK Government’s initiatives to support UK content
within the UK sector. Most notably:
•
•
•
•
Projected global demand increasing from a fully
commissioned capacity of 41GW to projected global
capacity of 244GW (starting offshore construction)
by 2030, with project visibility on over 300 projects
globally
The UK has committed to quadrupling its offshore
wind capacity from 10GW to 40GW in the next 10
years, presenting a sizable growth opportunity for
the Group in our home market
The US is targeting 30GW installed offshore wind
capacity by 2030, broadly equivalent to existing
global installed offshore wind capacity
Sixfold increase in global demand for subsea power
cables, one of Tekmar’s key service and technology
application, with over 100,000km of cable expected
to be installed globally by the end of 2030 compared
to less than 17,000km which were installed by the
end of 2020
• China, Europe and the US will dominate the offshore
wind markets within the decade, markets which
Tekmar already supplies and is well-positioned to
benefit from future growth
• Global floating wind industry is expected to grow at
a commercial scale from 2025 with 14GW of floating
offshore wind capacity forecast to be installed or
underway globally by 2030
Sustainability and People
Fundamental to the delivery of our ambitions are the
contribution our people make, along with the impact we
have on the environment, our local communities and
the wider world. We have invested considerable time
over the last year to develop specific PEOPLE and ESG
strategies and these are detailed in our Sustainability
Report.
I would also like to extend my thanks to the team at
Tekmar. Managing change can be difficult and I recognise
the last two years have been particularly demanding for
the team and the scale of change has been significant. It
will take time for the benefits of this change programme
to be reflected in the financial performance of the
business, but the plan is working and we are building a
stronger business that can continue to deliver real value
to our customers. We have a great team in place and I
look forward to continuing the journey with you and thank
you for your effort and commitment.
Near-term Outlook
As the Company highlighted in its trading update on
21 October 2021, the dislocation to global trade flows
continues to act as a near-term headwind across the
industry. However, whilst Tekmar is not immune to these
industry-wide pressures, and it is difficult to assess
when these pressures will abate, the Board is greatly
encouraged by the operational progress the Company is
making towards delivering its strategic goals announced
at the 2021 CMD, supported by the record £20.3m order
book as at end December 2021 and broader pipeline of
activity.
The Company has announced a number of significant
contract wins over the course of the last six months,
highlighting the progress the Company
is making
towards diversification and regional expansion, and
reinforcing Tekmar’s leading position as a trusted partner
to customers.
Of particular note is the partnership with DEME Offshore,
announced in December 2021, contracting Tekmar to
design, manufacture and supply
Cable Protection Systems (CPS) for the Dogger Bank
Wind Farm, which is set to become the world’s largest
offshore wind farm by capacity.
These recent contract wins highlight the commercial
momentum which has developed across the business,
demonstrating that customers are recognising the value
of Tekmar’s integrated and engineering-led solutions.
This momentum is particularly important in the current
financial year, as the Board aims to complete the transition
period in FY22, ahead of restoring sustained profitable
growth, achieving margin improvement and broadening
the Company’s growth strategy to strengthen its position
in FY23 and beyond.
In terms of financial performance for the current year,
the Board expects revenues for the 12 months to 30
September 2022 to be ahead of the 12-month equivalent
of approximately £32m for the period to 30 September
2021 and for revenues to be strongly weighted to
the second half of the financial year. Management’s
visibility on this weighting is supported by a number of
significant secured project awards which are expected
to contribute materially to revenues for the second half
of 2022. This includes, inter alia, the $10m contract
announced in January 2022, the bulk of which is planned
to be delivered in the second half of 2022, in addition to
meaningful contributions from the Dogger Bank project,
opportunities in China and two further O&M contracts we
have been awarded.
Final perspective
We continue to see 2022 as a transition year for Tekmar
and the industry, although we are encouraged by our
own momentum, with our record order book of £20.3m
as at the end of December 2021 and the improving
activity levels across the industry.
We have announced a number of landmark contracts
that highlight the strategic progress we are making
through diversification and regional expansion and
reinforcing Tekmar’s leading position as a trusted
partner to customers. We have strengthened the
leadership team in-line with our focus on establishing a
stronger engineering culture across the business. We
are investing in our technology and applied engineering
offering and embedding a number of changes to our
systems and processes to improve the way we run the
business. The industry investment in our core markets
provides significant forward opportunity for us and
we believe the market will increasingly look for the
integrated, engineering-led solutions and services which
differentiates our offering.
Whilst cautious on the environment in the very near-term,
StrategicGovernanceFinance
12
CFO Review
It is my pleasure to present my first Financial Review for
the Group and I would like to start by thanking Sue Hurst
for her input and commitment as my predecessor CFO.
A summary of the Group’s financial performance is as
follows:
Revenue
Adjusted EBITDA(1)
(LBT) / PBT
Adjusted EPS(2)
18M ending
Sep-21
£000
47.0
(2.1)
(5.8)
(9.1p)
12M ending
Mar-20
£000
40.9
4.7
2.0
5.8p
On a statutory basis Group loss before tax was (£5.8m)
(FY20: £2.0m profit).
Overview
As has been well documented in prior announcements,
the Group has been subject to the significant impacts of
the COVID-19 pandemic. As the market has reacted
and the constraints of the pandemic took hold, the
Group has seen revenue at £47.0m for the extended
18-month reporting period, effectively a fall to a 12-month
equivalent of just below £31.3m, down near 23.5% on
the 12-months to 31 March 2020. The business has
seen cost pressures and inefficiencies driven by these
lower volumes, supply chain and logistics matters. This
together with a more challenging operating environment
across the industry has seen gross profit fall from 30.0%
for the prior period to 24% for the current period. As a
result Adjusted EBITDA has fallen to a loss of £(2.1)m
(FY20: profit of £4.7m).
Despite these challenges of the COVID-19 pandemic,
some of which the impacts will flow into the transition
year of FY22, we presented the Groups strategic plan
to investors in the Capital Markets Day of 22nd July
2021, setting out the significant medium and long term
prospects of the Group. This driven by the expansion
in offshore wind energy from 33GW to over 238GW by
2030, drawing from the engineering and technology
base of the Group, supplemented by the acquisitions on
complementary technologies and products during 2018
and 2019.
The Group has seen two significant contract awards
announced during late 2021 and early 2022. The
contract at Dogger Bank, the world’s largest offshore
windfarm with DEME Offshore was followed by a $10m
contract to provide pipeline support and protection
materials for a major subsea construction project in the
Middle East. As noted in the contract announcement for
Dogger Bank, such awards support the Groups strategic
plan as we work through ongoing challenges that make
for a more challenging near-term environment for the
industry in terms of managing costs, contract delivery
and associated payment cycles.
(1) Adjusted EBITDA is a key metric used by the directors. Earnings before interest tax depreciation and amortisation are adjusted certain non-cash and
exceptional items. Details of the adjustments can be found in the adjusted EBITDA section below
(2) Adjusted EPS is a key metric used by the Directors and measures earnings after adjusting for non-recurring items. Earnings for EPS calculation are
adjusted for share-based payments (£364k FY21) and amortisation on acquired intangibles (£1,128k FY21)
Revenue
Revenue by Division (£m)
Offshore Energy
Marine Civils
Total
Revenue by Market (£m)
Offshore Wind
Subsea
Total
18M
FY21
33.8
13.2
47.0
26.9
20.1
47.0
12M
FY20
37.8
3.1
40.9
25.7
15.2
40.9
Offshore Energy, incorporating Tekmar Energy, Subsea
Innovation, AgileTek and Ryder Geotechnical, all of
which operate largely as a single unit, saw revenue
severely impacted by the protracted and ongoing effects
of COVID-19, with revenue at £33.8m for 18-months
compared to £37.8m for the previous 12-month period.
Towards the latter part of the reporting period a significant
number of despatches were successfully delivered with
our contracts into China, despite the many challenges,
with that region seeing revenue of £7.0m (FY20: £1.1m).
This division also saw its first significant O&M contract
delivered in a project providing a fix and secure solution
to our clients failed system that had been supplied by a
competitor to the Group.
Marine Civils, largely comprising Pipeshield, saw revenue
for the 18-month period at £13.2m (FY20: £3.1m). In
the prior period for FY20 much of the division became
part of the Group only halfway through the year following
the acquisition of Pipeshield in October 2019, so in effect
compares an 18-month period to a 6-month period.
The larger part of the underlying growth was driven by
a contract of in excess of £4m to design, engineer, and
manufacture a subsea scour protection solution for a
major quay development project.
Gross Profit
Gross profit by Division (£m)
Offshore Energy
Marine Civils
Total
Gross profit by Market (£m)
Offshore Wind
Subsea
Unallocated costs
Total
18M
FY21
8.2
3.0
11.2
8.9
5.0
(2.7)
11.2
12M
FY20
11.2
1.1
12.3
9.8
4.3
(1.8)
12.3
Gross profit reduced in the year due to a change in
project mix along with the impact of COVID-19, where
lower
cost pressures and
volumes, supply chain and logistics matters, plus a more
challenging operating environment under COVID-19
restrictions saw gross profit fall to 24% (FY20: 30%).
inefficiencies driven by
Within Offshore Energy, gross profit fell to 24% (FY20:
30%) and within Marine Civils, gross profit fell to 30%
(FY20: 35%) due to the impacts noted above. Offshore
Energy was particularly impacted due to lower volumes of
sales as it carries fixed manufacturing costs of an annual
equivalent of £2m. Further, this division incurred costs
supporting investigations to support our customers in the
industry wide infield cable protection issues caused by
the movement of the CPS over the rock-scour protection
installed on the seabed.
Operating expenses
Operating expenses for the 18-month period to 30
September 2021 was £16.7m (FY20: £10.2m).The
pro-rata equivalent for 12 months being approximately
£11.1m, indicating an annual, like for like increase of
£1.1m, driven by the full year impacts of the Marine Civils
division.
Adjusted EBITDA
Adjusted EBITDA is a primary measure used across
the business to provide a consistent measure of trading
performance. The adjustment to EBITDA removes certain
non-cash and exceptional items to provide a key metric
to the users of the financial statements as it represents
a useful milestone that is reflective of the performance of
the business resulting from movements in revenue, gross
margin and the cash costs of the business. The Board
reviews all exceptional items to ensure resulting Adjusted
EBITDA achieves this.
StrategicGovernanceFinance
14
For the 18-month period ended 30 September 2021 and
the comparable 12-month period to 31 March 2020,
the adjustment includes share-based payment charges
relating to the IPO options and SIP schemes launched at
IPO costs. Further adjustments relate to the acquisition
activities and the amortisation on the acquired intangible
assets for Pipeshield during FY20.
Adjusted EBITDA by Divison (£m)
Offshore Energy
Marine Civils
Group costs
Total
Adjusted items (£k)
Professional fees - acquisition
Share based payment charge
Total
18M
FY21
(1.9)
1.2
(1.4)
(2.1)
-
(364)
(364)
12M
FY20
4.8
0.4
(0.5)
4.7
109
454
563
Profit
The result after tax is a loss of £5.4m (FY20: Profit
£2.0m) due mainly to a fall in revenue and reduction in
gross margin as set out above.
Foreign currency
We delivered four offshore wind contracts in Euros this
year and purchased forward currency transactions to
mitigate the risk of currency movements on payment
milestones. The closing rate for revaluation of Euro
balances at the year end was 1.1306 (FY 20: 1.1605).
Balance Sheet
Fixed Assets
Other non-current assets
Inventory
Trade & other receivables
Cash
Current liabilities
Other non-current liabilities
FY21
£000
5.7
25.3
4.0
18.0
3.5
12.5
3.7
FY20
£000
5.9
26.3
2.5
26.8
2.1
16.6
1.1
investments were
Fixed Assets
Fixed asset
line with
depreciation levels with an overall modest decrease of
£0.2m. There was no major capital expenditure project
or disposal in the period.
largely
in
Other non-current assets
Goodwill of £22.2m includes the goodwill arising on the
original management buy-out of Tekmar Energy Limited in
2011 of £19.6m. The balance relates to the acquisitions
of Subsea Innovation during FY19 and Pipeshield during
FY20.
Other non-current liabilities
Other non-current liabilities are £3.7m (FY20: £1.1m),
with the increase due to the drawdown and renewal of
the £3.0m CBILs facility noted above within the Cash
section. Other amounts relate to lease liabilities in relation
to IFRS16, deferred grant income and the deferred tax
liability relating to the Pipeshield acquisition in 2019.
Whilst the above results for the 18-month period to
30th September 2021 represent disappointing financial
performance during the era of the COVID-19 pandemic
and some industry wide challenges, I feel it important to
thank the team that have worked with such outstanding
levels of commitment and professionalism. With the
enhancement of business systems and controls ongoing
and currently being executed and the significant market
opportunity for offshore wind, I look forward with cautious
optimism. I say this, not just because of the market
opportunity, but because of the quality of the team that I
lead and the Board that I am a part of. It is our absolute
commitment to drive value in this business through high
quality practices and strong values and cultures.
Derek Bulmer
CFO
Trade and other receivables
Trade and other receivables fell to £18.0m (FY20: £26.8m)
due largely to the fall in revenue levels discussed earlier
in this review. The high levels of debtors and accrued
income relative to revenue reflects the large number of
contracts across the Group, including in Offshore Energy
into China, plus the major contracts within the Marine
Civils division where project milestones were towards the
end of the reporting period, or the projects were not yet
due for invoicing.
Cash
Cash balance at the period end to 30 September 2021
was £3.5m. The Group has extended its CBILs facility of
£3.0m for a further 12 months to October 2022 and has
also worked with its relationship bank Barclays, together
with UK Export Finance, to introduce an additional
trade loan facility of £4.0m, which is available at least to
November 2022. This provides the Group with capacity
to fund growth and the flexibility to support the working
capital requirements typical in delivering the type of
contracts that it undertakes in this industry.
Cash continues to be a major focus of the Group as we
monitor and manage the working capital lifecycle across
projects. We have strengthened much of the business
systems surrounding contracting, project management
and accounts receivable to drive greater transparency
and integration amongst functions and also established
dedicated credit control functions. We strongly believe
that these enhanced systems will drive greater fluidity in
contract lifecycles and cash collection.
Trade and other payables
Trade and other payables fell to £12.5m (FY20: £16.6m)
due partly to the fall in revenue levels. Within the FY21
balance of £12.5m, £3.0m relates to a Trade Loan
Facility with Barclays Bank which is drawn against
supplier payments and is repayable within 90 days of
drawdown. Additionally, the balance at 30 March 2020
included £2.75m of deferred consideration due under the
Pipeshield acquisition of October 2019, due across two
tranches with the first payment of £1.5m being made in
April 2020 and the balance of £1.25m in October 2020.
Other non-current liabilities
Other non-current liabilities are £3.7m (FY20: £1.2m),
with the increase due to the drawdown and renewal of
the £3.0m CBILs facility noted above within the Cash
section. Other amounts relate to lease liabilities in relation
to IFRS16, deferred grant income and the deferred tax
liability relating to the Pipeshield acquisition in 2019.
StrategicGovernanceFinance 16
Vision, Mission and Values
Our Vision
To enable the world’s energy transition, reflecting our responsibility to future
generations.
Our Mission
Collaborating with our stakeholders, we will deliver robust, sustainable technology
and services utilising our talented and diverse team that will enable the Group to grow
significantly and profitably.
Our Values
Work Together
We foster teamwork without boundaries, to ensure the best results are delivered in an
environment where people feel empowered, safe, trusted, confident and inspired to
develop.
Do Things Right
We take a united approach towards Safety, Quality and Delivery. We lead by example
and constantly find ways to raise standards. We challenge the norm and have courage
to stand up for what is right.
Break the boundaries
We collaborate with our customers and constantly look for ways to develop our
technology and services to make today’s impossible tomorrow’s deliverable.
GETHER
D
O
T
H
I
N
G
S
We foster teamwork without
boundaries, to ensure the
best results are delivered in
an environment where people
feel empowered, safe, trusted,
confident and inspired to
develop.
We take a united approach
towards Safety, Quality and
Delivery. We lead by example
and constantly find ways to
raise standards. We challenge
the norm and have courage to
stand up for what is right.
R
I
G
H
T
O
K T
R
O
W
We collaborate with our
customers and constantly
look for ways to develop our
technology and services to
We collaborate with our customers and
make today’s impossible
constantly look for ways to develop our
tomorrow’s deliverable.
technology and services to make today’s
impossible tomorrow’s deliverable.
BREAK THE B O U N D A
R I E S
StrategicGovernanceFinance
18
Strategic Review
Our strategy achieves a doubling of organic revenue and mid-to-high teens
EBITDA margin over the five years of the plan
The world has a global challenge to achieve net zero
carbon emissions by 2050. Offshore wind is fundamental
to securing this energy transition, with an acceleration
in the construction and operation of these power
plants, along with exponential growth in the associated
Operations and Maintenance (O&M) market.
The Board has developed a clear 5-year strategy to
deliver long-term shareholder value by being a key player
in the industry response to these targets.
Our AMBITION is to:
• Double Tekmar’s revenue within 5 years through
organic growth and complement this growth
through targeted M&A
Our KEY FOCUS AREAS within our growth strategy:
01. Organic Growth
Strengthen the core business
•
• Maintain and enhance market leading positions
•
• Diversify Tekmar’s offering
Self-funded investment
•
Expand Tekmar’s technical capability
02. Sustainable Business
• Deliver People strategy
• Deliver ESG strategy
• Ongoing business improvement
03. Acquisition Strategy
• Deliver a sustainable mid to high teens EBITDA
margin in the later years of the 5-year plan
•
• Reinforce Tekmar’s industry leadership position
as a trusted partner
•
•
Expand Tekmar’s
its
service and geographical reach to capitalise on
expanding global offshore wind market
technical capability,
Provide our people with the platform to drive
success
Our VALUE PROPOSITION:
•
•
Superior global reach
Solve customer’s engineering challenges
• Optimise and de-risk projects
•
Improve safety and lower project costs
The next phase of Tekmar’s strategy will see us
capitalise on our strong foundations. Diversifying further
into the Offshore Wind industry by disciplined investment
in new technology and innovation.
Previous acquisitions now integrated for greater
efficiency
Proven synergistic benefits
•
• Acquisition candidates will share a similar customer
base and support diversification into new products,
markets or regions
Investment
To deliver the strategy we have identified five priority
areas of incremental investment to drive growth and
have earmarked £10-12m for these over the course of
the plan:
1. Offshore Wind Technology Development – maintain
market position and future proof our technology in
our core market
2. Offshore Wind O&M – leverage existing customer
relationships, our technology and our track record
to expand into a growth market
3. Floating Offshore Wind Solutions - position Tekmar
to benefit from the major contribution anticipated
from floating offshore wind from c.2030
4. Grouting Division – build on existing concrete
solutions capability
5. New Geographies – leverage existing customers
and relevant track record to expand footprint into
new markets and increase revenue generating
opportunities
This diversification will give us increased involvement
in all aspects of the project lifecycle, from feasibility
studies, through engineering, manufacture, O&M and
Life Extension activities.
In order to further strengthen the liquidity of the Group,
given the high levels of working capital inherent in our
industry, we have upgraded our bank funding. We have
rolled the CBILs loan out for a further 12 months to Oct
22 and added a £4m working capital facility (which
supports supply chain payments). We also have a larger
bank guarantee facility (of £8m), which is also a feature
of the offshore wind industry, to support revenue growth
in this sector.
Fundamental to the delivery of our ambitions are the
contribution our people make, along with the impact we
have on the environment, our local communities and the
wider world. To address we have developed specific
strategies for PEOPLE and ESG which are detailed in our
Sustainability Report.
Section 172 Statement
The Directors consider that they have acted in good
faith in the way they consider would be most likely to
promote the success of the company for the benefit of its
members as a whole, having regard to decisions taken
during the period ended 30 September 2021. This is a
period of transition for the business and the focus on a
Strategy Review covering the next five years will position
the Group for success.
Particular attention has been paid to key areas to ensure
sustainability:
Liquidity
•
• Disciplined investment
•
•
People development
ESG strategy
The Group Strategy has been developed to have a
long-term beneficial impact on the Group for both its
shareholders and employees. The details were provided
to shareholders in the Group’s Capital Markets Day in
July 2021 and can be found on our website.
In terms of our shareholders, it is important for the Board
to maintain a good understanding of their interests, and
keep shareholders informed regarding the strategy and
objectives of the Group. The CEO and other directors
communicate regularly with shareholders and meet at
least bi-annually. This year the CEO and CFO presented
the strategy to shareholders in our first Capital Markets
Day, providing shareholders with a platform to discuss
this too. The Board recognises its responsibility to act
fairly between all shareholders of the Company and
ensures up-to-date information is available on the Group
Investor website (investors.tekmar.co.uk) and the Group
business website (www.tekmargroup.com), the latter
brings together the Group’s portfolio of companies
into one site, promoting a greater understanding
of the breadth of our product and service offering,
which supports the global offshore wind, oil and gas,
interconnectors, telecommunications, marine civils, and
wave and tidal sectors.
Our people are fundamental to the delivery of the strategy
and we have developed a detailed People Strategy setting
out the key areas of focus and deliverables over the next
few years. In addition to providing the right training and
development to our teams we will focus on diversity and
inclusion as we grow, to ensure the workplace represents
the communities in which we thrive. More details are
included in our Sustainability Report this year.
We regularly provide our people with information on
matters of concern to them, consulting them regularly,
so that their views can be factored in when making
decisions that are likely to impact them. Employee
involvement in the Group is encouraged, as achieving a
shared awareness of the part that all employees play in
the financial and economic factors affecting the Group
plays a major role in its performance. We have a Business
Integrity Policy that communicates the expected business
behaviours of all employees and this policy incorporates
guidance on employee’s responsibilities should they
become aware of inappropriate business behaviours or
any similar concern.
Apart from its shareholders and employees, the Group’s
main stakeholders are customers and suppliers. The
Group has several contracts with customers that relate
to longer term technology development and supply. The
Group has a dedicated Legal function that operates with
the Group’s commercial, project and production teams
and those of the Group’s key customers and suppliers.
As the Board of Directors, our intention is to behave
responsibly and ensure that management operate the
business in a responsible manner, operating within
the high standards of business conduct and good
governance and in doing so, will contribute to the
delivery of the plan. We adhere to the QCA Code and
set out how we apply the ten governance principles in
our Corporate Governance Statement, included in this
report and on our website.
StrategicGovernanceFinance 20
Market Review
Market momentum is building with positive trends supporting our growth
ambition
OFFSHORE ENERGY
Offshore Wind - A Global Movement
The offshore wind market is reaping the benefits of a global
move towards clean renewable energy generation. Strong
political support is now in play with a carbon reduction
agenda championed at the 2021 G7 Summit and COP 26.
The UK has committed to quadrupling its offshore wind
capacity from 10GW to 40GW in the next 10 years,
presenting a sizable growth opportunity for the Group
in our home market. The UK government is increasing
its emphasis on local content and will remove subsidies
from UK projects not utilizing the UK supply chain. They
have also pledged significant investment in the country’s
port and manufacturing infrastructure to increase the
competitiveness of UK suppliers both locally and exporting
globally.
The EU is targeting a fourfold increase in offshore wind
capacity to 60GW in the same period, which is accessible
to Tekmar through our strong relationships and established
track record in the region. The UK and EU alone will account
for over 40% of global offshore wind activity by 2030, a
significant opportunity that we are well positioned to take
advantage of.
The US has rejoined the Paris Climate Accord and plans
to deploy 30GW of offshore wind by 2030. This ambitious
commitment aligns with total capacity currently installed
worldwide, making the US a key growth region for Tekmar.
The group is well positioned for the burgeoning US
market with first mover advantage helping us establish a
track record in the region, and our recently signed MOU
(“Memorandum of Understanding”) with a US based
subsea buoyancy manufacturer, Deepwater Buoyancy inc,
further improving our access to the region and providing
stateside manufacturing capability.
Offshore Wind - Market Confidence
The lead indicators highlight a recovery and growth in
offshore wind construction activity from 2022 following a
slowdown in new project and tender activity in 2019 and
2020 respectively.
Tender activity increased in 2021 with the award of a
record 23GW anticipated worldwide. Offshore wind CAPEX
commitments reached $44bn in 2021 further demonstrating
market confidence.
This is reflected in our own tender activity where we are
experiencing a record high number of enquiries coming
into the business, confirming market recovery from 2022
onwards.
Offshore Wind - Global Outlook
As we look at the global offshore wind outlook to 2030,
we see credible growth of an additional 198GW by 2030,
with a CAGR of 13.5%, taking the total global offshore
activity (operational and underway) to 244GW by end-
2030.
At time of writing, 35GW of global capacity is either under
construction or subject to FID (“financial investment
decision), with Europe (16GW) and Asia (18GW)
dominating the market. Tekmar benefits from an early
move into Asia having established an office in Shanghai
China, and built a project track record in China, Taiwan,
South Korea, and Japan. Tekmar is well positioned
to further support the region going forward, including
embryonic markets such as Vietnam and the Philippines.
This positive market outlook includes a sixfold increase in
global demand for subsea power cables, one of Tekmar’s
key service and technology applications, with over
100,000km of cable expected to be installed globally by
the end of 2030 compared to less than 17,000km which
were installed by the end of 2020.
Operations & Maintenance (“O&M”)
The offshore wind O&M market is accelerating as the
offshore wind market matures and more assets are
installed. The growth in O&M provides a major opportunity
for Tekmar to grow in this OpEx market by leveraging
our existing complementary technologies and customer
relationships in support of their asset management during
the life of the project.
The overall scale of the global market is valued at £8.9bn
per year by 2030. The UK market alone is valued at £1.3bn
per year by 2030. Securing a section of this market is a
key part of our strategy going forward. The Group is already
active in this sector with O&M revenue representing
approximately 10% of our annual turnover in FY21, with
much more untapped potential, which is why it’s a key area
of Tekmar’s Growth Strategy.
14 £bn
Estimated Global Offshore Wind O&M Market Value - £bn (Source: ORE Catapult)
Global Offshore Wind Outlook to 2030 - GW (Source: 4C Offshore)
Other
1GW
Asia
15GW
USA
1GW
Asia
18GW
Other
7GW
USA
27GW
41GW fully
commissioned
35GW under
construction
/ FID made
168GW entering
construction by
2030
Europe
25GW
Europe
16GW
Asia
59GW
Other
75GW
12
10
8
6
2
0
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
2
0
3
0
2
1
3
0
2
2
3
0
2
3
3
0
2
4
3
0
2
5
3
0
2
StrategicGovernanceFinance 22
Floating Offshore Wind
A new emerging market, floating wind will be a key part
of the future offshore renewable energy mix. The industry
is expected to grow at a commercial scale from 2025
with 14GW of floating offshore wind capacity forecast to
be installed or underway globally by 2030. The UK and
Europe are set to be the leaders in floating wind, closely
followed by Asia.
Floating wind in the UK has recently been bolstered with
the UK government’s pledge of £160 million to develop
new large-scale floating offshore wind ports and factories.
Leading offshore developers and transitioning oil and
gas operators have also begun rolling out new floating
wind platform concepts which will enable industrial
standardisation and acceleration in the development
of this market. Tekmar’s unrivalled range of innovative
marine technology and experience in the ‘fixed’ offshore
wind market will make us the supplier of choice.
Tekmar is leading the way and already active in this
exciting market having participated on eight floating
in Europe,
offshore wind projects to-date
Asia and the US. Additionally, the group has recently
enhanced its floating wind product offering through its
MOU with Deepwater Buoyancy inc.
located
Other Infrastructure
Offshore infrastructure activities provide both balanced
growth for Tekmar and the opportunity to support other
industries in their transition to clean energy and “net
zero”.
Our adjacent offshore markets remain an important part
of Tekmar’s strategy. We are pleased to see growth in
these markets supported by a strong recovery in the
Bent spot price to $80 per barrel which is encouraging
project investment.
The oil and gas (O&G) industry is pivotal in the
development, at scale, of a number of clean energy
technologies such as carbon capture, storage and
usage, low carbon hydrogen, biofuels and offshore wind.
Scaling up these technologies and bringing down their
costs will rely on large scale engineering and project
management capabilities, qualities that are already in
abundance in large O&G companies. We are seeing
existing customers such as BP, Shell, Equinor, ENI
and tier one contractors all now investing in offshore
renewables, and we are already supporting them.
Photo courtesy of Principle Power
MARINE CIVILS
The Marine Civils market contains areas such as
estuaries, coastlines, ports and harbours, which require
solutions in erosion control, harbour/river works and
bridge protection. Marine Civils is a relatively new
market for Tekmar with a crossover of technical expertise
and the suitability of our products making it an exciting
growth market with untapped potential.
Growth in the import and export markets, and the
resurgence of the tourism industry is encouraging
investment in port infrastructure. Strategic competition is
also driving the development or larger terminals capable
of accommodating greater volumes of marine traffic and
powerful new vessels. There is further demand from the
global offshore wind market to develop ports to facilitate
construction, operation, and maintenance of fixed bottom
and floating wind projects.
Market Fundamentals
Strong global political and social support
•
• Dramatic acceleration in offshore wind
•
Emerging regions requiring Tekmar’s skills and
expertise
Steady growth and sizeable opportunity in O&M
Industry Innovation - Floating Wind
•
•
• O&G transition to clean energy and “net zero”
StrategicGovernanceFinance 24
Our Business Model
A world-leading subsea technology business built on innovation
Group Revenues are divided into the following sectors and
subsectors. Across the Group there are no customers
that are unique to any one business. There is potential
for all Group companies to work with all customers that
the Group engages, allowing the Group to cross-sell all
products and services; work together to provide value to
the same clients, provide more revenue per client and
to provide a complementary range of technology and
services that support multiple stages of the project life
cycle.
As the business grows, our goal is to increase the
revenue per project from all stages of offshore energy
and marine civils projects. We also have an aim to gain
visibility on upcoming projects as early as possible, with
our design and analysis businesses helping us achieve
this.
38%
43%
Group revenue
split
Offshore Energy
Marine Civils
Revenue split
by market(1)
Offshore Wind
Subsea*
62%
57%
7%
11%
7%
Revenue split by
product
45%
23%
6%
9%
CPS(TekLink)
Back Deck Equipment
Marine Civils
Hang-offs
O&M
Engineering
Other
17%
15%
Revenue split
by region
60%
Europe
APAC
Middle East
North America
(1) The Group operates within two operating segments in accordance with IFRS8. We also track markets and areas which our businesses operate in.
Sectors:
Offshore Wind
* Oil & Gas, Interconnectors, Wave & Tidal, Marine Civils, Telecoms
Applications:
Subsea Cables, Rigid & Flexible Pipelines, Umbilicals, Seabed, Vessel Back Deck, Structures
Customers:
Developers & Operators, EPCI Contractors, Product & Service Providers
Project Phases:
DEVEX Development Expenditure
CAPEX Project Build Phase
OPEX Project Operation and Maintenance
Locations include:
UK, EU, Middle East, North America, Asia Pacific, China
Product Categories
Geotechnical Design & Analysis
Engineering Analysis & Software Innovation
Bespoke Equipment Design & Build
Subsea Protection Technology
Subsea Stability & Protection Solutions
StrategicGovernanceFinance 26
Our Business Model in Action
offshore wind farm projects in China to date with revenue
from China increasing from £1.1m in FY19 to £6m in FY21.
We continue to work with regional customers and partners
to further expand our activities in Asia, which is one of the
three leading offshore wind markets alongside Europe and
North America.
Growth in China
Exporting services and technologies to the global offshore
energy markets remains a key part of Tekmar’s business
model. Global exports represented 57% of Group revenue
in FY21, of which 15% of Group revenue was attributed to
China, our largest export market to date
The journey in China began in 2017, with Tekmar benefitting
from first-mover advantage following the introduction of
our innovative CPS technology to China’s offshore wind
industry, and the subsequent award of a CPS supply
contract for the SPIC Binhai 2 offshore wind farm.
Our entry into China was further supported by the then
British Chamber of Commerce Shanghai General Manager
and founder of the Sino-British Offshore Wind Hub,
Angela Lock. Angela joined Tekmar in 2018 as Regional
Manager China and leveraged her industry knowledge and
experience to help Tekmar secure a second CPS supply
contract for the SPIC DaFeng 3 offshore wind farm.
Recognising the need to truly understand the complexities
of the Chinese market and the importance of building
trusted relationships with local industry stakeholders,
in 2019 Tekmar established a legal entity in Shanghai
(Tekmar Marine Company Limited). The company recruited
locally to build a core team., which was initially responsible
for supporting activities in China, but has since evolved to
promote Tekmar’s offering across Asia as well as providing
engineering services, technical support, and training to
customers.
Adopting a top down strategy, the team in Shanghai
leveraged their relationships with wind farm developers and
local design institutes to raise the profile of our high quality
services and technologies, and the value they add. Tekmar
also actively engaged with local EPC contractors, cable
manufacturers and offshore installers to share the benefits
of our products. As a result of these positive relationships
Tekmar has supplied products to European projects through
Chinese customers such as ZTT Cables and Orient Cable.
Tekmar is now widely recognised as innovative, flexible, and
reactive in China’s offshore wind industry, qualities which
are favourable in the region. Tekmar has supported over 9
StrategicGovernanceFinance
28
Our Business Model in Action
and are designed to be containerised to allow easier
transportation to the remote work site. The introduction of
this new technology further expands our value proposition
to our clients and increases our capacity to carry out this
type of work in the future.
The project marks our fourth major Marine Civils project
in successive years. The project has opened a new
geographical region for the Group and introduced new
customers who we look forward to working with to diversify
further into this market.
Marine Civils
Tekmar has seen revenue from Marine Civils increase year-
on-year and in a relatively short period of time and become
somewhat of an expert in this field due to the crossover of
technical expertise, and the suitability of Group’s products.
In FY2021 Tekmar delivered its largest Marine Civils project
to date, valued at £4.4m to design, manufacture and supply
a subsea scour protection solution for a port development
project in Canada. The project, like most busy ports and
marinas with sea going traffic, is vulnerable to scour and
quay wall erosion which is commonly caused when the
turbulence from vessel thrusters carves out scour pits and
damages quay walls, leading our clients to come to Tekmar
for a solution.
The projects main challenge was its remote location on the
north-west coast of British Columbia. Logistical practicalities
and costs often stop a project before it begins. To make the
project economical for the client we leveraged our ability to
mobilise equipment and personnel within proximity of the
worksite, as well as developing relationships with the local
supply chain to manufacture the entire scope locally.
To address the scour and erosion challenge, our in-house
engineering team assessed site environmental data against
project specifications to determine the optimum scour
protection solution. This was subsequently validated against
historical tank testing data of our unique N2 concrete
mattress blocks design. The N2 block design is proven to be
three times more stable than competing blocks and offers
us a strong market advantage. The engineered solution
was to create a protective scour skirt around the quay wall
and surrounding area. This included the manufacturing
and supply of over 1,150 bespoke concrete mattresses of
various sizes ranging up to 8x3 metres, over 650 Precise
Rock Placement Units (PRPs) filled with locally sourced
rock, and grout bags. The solution also included the design
and fabrication of bespoke lifting and installation frames that
enabled the client to deploy our products quickly and safely.
Our in-house technical design team further enhanced
operational efficiency by developing the next generation
pouring moulds. The innovative moulds are capable of
casting concrete mattresses of varying size and thickness
StrategicGovernanceFinance 30
Our Business Model in Action
commissioning of a bespoke remedial solution. The result
was a first of its kind, retrofit dynamic bend stiffener clamp
that is attached to the subsea infrastructure to reinforce
it and maintain its design parameters. Bespoke subsea
installation tooling was also developed to reduce deployment
time, and reduce diver interaction, thus increasing offshore
installation safety.
Following successful trial and testing, the installation tools
were installed during 2021 and successfully supported the
customer’s remedial campaign, with all the clamps installed
in a safe and timely manner. We continue our strong play
on more disciplined engineering solutions to ensure we are
well positioned for future O&M project, and we continue to
collaborate with customers to develop both bespoke and
standardised solutions for future remedial campaigns.
Operations & Maintenance
The O&M market is valued at £8.9bn per year by 2030 and
represents a major growth opportunity for Tekmar. We are
already leveraging our existing complimentary technologies
and customer relationships to maximise our value offering
for offshore wind O&M projects.
In FY2021 Tekmar delivered its first significant offshore wind
O&M project to provide remedial services and technology
for an operational offshore wind farm in the UK. The project
was awarded by an existing customer who is aware of the
Groups unique range of capabilities and expertise following
the successful delivery of previous CAPEX and OPEX work
packages.
The wind farm had been fully operational for six years when
failures were identified across elements of the wind farms
subsea infrastructure. If not addressed, a reduction or total
loss of generation was likely, with the customer incurring
the cost of generation downtime, business interpretation
and repair. The customer approached Tekmar to deliver a
solution capable of remediating the failures and preventing
future occurrences.
Tekmar applied its engineering expertise to develop a
conceptual solution and bring it to realisation. Multiple
Group companies worked together to analyse the in situ
infrastructure, determine design requirements, conceptual
design, engineer, manufacture, deliver, and support the
StrategicGovernanceFinance 32
Global Reach
StrategicGovernanceFinance 34
Addressing
complex industry
problems is in
our DNA
We provide a range of engineering services and technologies to support and
protect offshore wind farms and other offshore energy assets and marine
infrastructure
DEVEX
CAPEX
OPEX
Geotechnical Design
& Analysis
Engineering Analysis
& Software Innovation
Subsea Protection
Technology
Subsea Stability
Technology
Bespoke Equipment
Design & Build
Detailed site
assessment
to identify and
understand project
environmental
conditions.
Advanced analysis
of assets to
establish installation
parameters and
operational integrity.
Subsea asset
protection systems
that maintain asset
integrity and ensure
project operability.
Stabilisation and
scour protection
solutions to protect
assets against
impact, seabed
migration and
erosion.
Engineered solutions
to overcome complex
subsea installation
and operational
and maintenance
requirements.
StrategicGovernanceFinance 36
Innovative Marine Technology
StrategicGovernanceFinance 38
Key Performance Indicators
Identifying and monitoring the key indicators of success in our business
KPI
Enquiry book (1)
Order book (2)
Revenue (3)
Order intake (4)
Book to Bill (5)
FY19
FY20
FY21
£195m
£224m
£327m
£7.2m
£10.0m
£9.7m
£28.1m
£40.9m
£46.9m
£29.9m
£43.7m
£46.4m
1.06
1.07
0.99
Adjusted EBITDA (6)
£4.8m
£4.7m
£(2.1)m
Market measures
OWF outlook GW
Oil price $/bbl
227
216
$69.0
$22.7
244
$75
(1) Enquiry book comprises all active lines of enquiry within the Tekmar Group. Expected revenue recognition within 3 years
(2) Order Book is the revenue value for signed contracts with clients. Expected revenue recognition within 6-12 months
(3) Revenue is the value of sales recognised in the financial statements in the period (18m period for FY21)
(4) Order intake is the value of all orders secured in the period (18m period for FY21)
(5) Book to Bill is the ratio of order intake to revenue
(6) Adjusted Earnings before interest, tax, depreciation, and amortisation, as defined in CFO review. (18m period for FY21).
StrategicGovernanceFinance 40
Sustainability Report
Inspire our people to deliver and improve our environmental footprint
We are focused on growing the business and ensuring this
is done in a sustainable way. Our recent Strategic Review
is underpinned by two key components, our ESG Strategy
and our People Strategy, which set out our goals in these
areas. We recognise that in showing respect for our people,
the community and the environment we are establishing a
strong foundation for our growth ambitions.
ESG Strategy
Working predominantly in the renewables sector really
focusses the business on the impact we are having on
the planet, and we are proud holders of the London Stock
Exchange’s Green Economy Mark. However, we can do
more and this year the Board formalised our ESG Strategy,
which is aligned to the UN Sustainable Development Goals
(UN SDG’s) with a goal to make sustainability a natural part
of everything we do.
To execute our ESG Strategy we have set up a group-wide
ESG Steering Group with employee representatives from
all businesses.
We developed a detailed action plan for those areas we can
positively impact, whilst also identifying many areas where
we are already achieving results, particularly through our
People Strategy. Our action plan is organised under the
‘four pillars’ recommended by the World Economic Forum
and International Business Council in their ‘Stakeholder
Capitalism Metrics’ project to align corporate values and
strategies with the UN SDG’s, being:
•
•
•
•
Principles of Governance
Planet
People
Prosperity
Each ‘pillar’ has a working group to focus on delivering
the actions across the Group and we are working through
the process of establishing baseline measures, where
applicable, from which we can target improvements.
Our ESG Strategy and our internal processes will be
regularly reviewed to ensure our people think about
the environmental, social and financial impacts of their
decisions.
People Strategy
As we focus on the further development and enhancement
of our people we identified six key areas of activity and
structured a 3 year plan to deliver this, underpinned by
core HR improvements:
Our strategic aspiration is to create an environment
where our people thrive and our performance excels in a
collaborative and trusting environment. We support and
encourage autonomy, accountability and leadership in
order to attract and retain the best talent in our industry.
Through continuous development and investment in
our people’s minds and wellbeing, our high performing
culture will drive innovation, diversity and engagement.
We are collaborating with Sharing in Growth (SIG)
through a programme funded by the Offshore Wind
Growth Partnership, targeting productivity improvements
for the UK offshore wind supply chain. The SIG team
are working with our senior team to drive our strategic
execution plan, shape our culture and achieve global
growth plans. We believe this programme will increase
the team’s ability to respond rapidly and navigate the
changing needs of the offshore wind sector.
This supports the work we are doing internally to simplify
our structure and develop more effective processes
to
improve productivity, encourage accountability
and improve decision making and communication.
We already have combined group support services
and are now bringing together the other functional
teams, starting with the Engineering Team under the
lead of Dave Thompson, Group Engineering Director.
Local Communities
local communities across our many
We support
locations, predominantly in the UK. Where possible we
procure products and services locally with a view to
supporting supply chains and sustaining employment in
each region. Our employees are supported to engage
with local community projects and initiatives that have a
positive impact on the areas we work in.
UN SDG’s
Key activities to date
Key objectives
Ensure healthy lives
and promote well-
being for all at all ages
• 18 Mental First Aiders appointed
• 2021 Health & Wellbeing campaign
• Annual Flu vaccinations for all
• Employee Assistance Programme
•
•
•
•
2022 Health & Wellbeing campaign
Advanced driving courses
Cycle to work scheme
Volunteering/charity support
Ensure inclusive and
equitable quality
education and
promote lifelong
learning opportunities
for all
• Professional development (MBA’s etc.)
• Personal Development Plans
• Launch graduate & apprenticeship
programmes
Achieve gender
equality and empower
all women and girls
• Gender pay gap to be reported
• Target recruitment of women into
• Review of Maternity / Paternity Leave
senior roles
policy
• Engagement in local communities/
schools to encourage girls into our
industry
Promote inclusive and
sustainable economic
growth, employment
and decent work for all
• Aligning pay grades across all
• Engagement in local communities/
businesses
• Employee engagement surveys
providing feedback on workplace
improvements
schools to encourage youth into our
industry
• Ensure all suppliers adhere to good
human rights policies
Reduce inequality
within and among
countries
• Online EDI training for all employees
• Employee gender reporting by team
Introduce diversity targets
• Launch EDI policy
•
• Group Values
• Behavioural Code
Ensure sustainable
consumption and
production patterns
• Energy consumption monitoring
• Recycling
• Waste monitoring
• Target reduced energy consumption
• Expand recycling processes
• Targeted waste reduction
• Sustainable supply chain
Conserve and
sustainably use the
oceans, seas and
marine resources
• R&D into environmental Precision Rock
Placement product (Pipeshield)
•
•
Improve the environmental impact of
our products subsea
Innovation focus to support expansion
of renewable energy
StrategicGovernanceFinance
42
Commitment to EDI across full HR lifecycle
Educate and reiterate
Company values drive behaviours
Treat each other with respect
Equality,
Diversity &
Inclusion
Culture, Values
& Behaviour
Group-wide reward and
recognition schemes
Health &
Wellbeing
Capabilities
& Talent
Competency Framework
Retention Strategies
Training and Development plans
Reward &
Recognition
Engagement &
Communication
Group-wide reward and recognition
schemes
Employee Engagement Survey
Internal communications
Local Communities
We also launched our Health and Wellbeing calendar for
2021 which included a number of initiatives that benefited
our people and their families and friends. To date we
have delivered campaigns on topics such as stress,
mental health, menopause, cancer and healthy habits,
offering live speaker events, workshops and webinars.
We enjoyed some inspirational cooking tips from our
collaboration with Quorn and completed our 5,000 mile
charity challenge earlier in the year.
Customers and Suppliers
We follow a customer-led strategy with regards to
expansion into international markets and are a trusted
partner of energy majors, developers, operators, marine
contractors, and subsea asset manufacturers around the
world. We have expanded our export activities and have
the support of UK Export Finance to provide working
capital and bonds in this area. We have developed
positive, long-standing relationships with customers and
suppliers over many years to ensure we deliver the best
solutions. We listen to and learn from our customers and
engage with them so that we can identify and help solve
their problems. We are committed to ensuring that legal
compliance, respect for human rights and transparent
business ethics are cemented both up and down our
supply chain.
Safety
We endeavour to create a safe workplace for our people
and all those that we work with. We have a safety-first
policy, ensuring that everyone takes equal responsibility
and ownership for their own and others safety. We pride
ourselves on our transparent and honest reporting
culture through which we aim to achieve a ‘zero’ Lost
Time Incident goal.
Good business conduct
We do not permit bribery, nor illegal or corrupt business
practices in any form. We have an established Business
Integrity Policy and compliance programme which has
the support of the Board and Senior Management within
the Group. The programme incorporates communication
of the policy, training, risk assessments, monitoring and
review processes. Adherence to the policy is mandatory
for all employees and relevant contractors, and those
assessed to be at heightened risk are required to
complete detailed training on an annual basis.
Respect for Human Rights
We maintain work practices and policies throughout the
Group which are engineered to ensure that respect for
human rights is engrained in the fabric of our businesses.
We do not tolerate the use of child or forced labour
within our business and take all reasonable steps to
ensure that our suppliers and customers also adhere to
internationally recognised human rights.
Our Modern Slavery statement outlines the steps we
take to ensure that there is transparency across the
Group and throughout our supply chain. We encourage
any concerns relating to modern slavery to be raised
using the procedure set out in our whistleblowing policy.
Supply Chain
We are committed to supporting the supply chains
in which we operate. We are members of several
trade bodies who promote
industry awareness,
opportunities, and share best practise and lessons
learnt. Our memberships include, but are not limited
to: RenewableUK, NOF, EnergiCoast, SubseaUK, Wind
Europe and Asia Wind Energy Association.
ISO Standards
Within Tekmar, our businesses are accredited to all the
required international standards. These include, but are
not limited to ISO 45001:2018, ISO 14001:2015, ISO
9001:2015, ISO/TS 29001:2010.
Principal Risks and uncertainties
The principal risks and uncertainties of the group are
disclosed on page 54.
Derek Bulmer
Chief Financial Officer & Company Secretary
Tekmar Group plc
Innovation House
Centurion Way
Darlington
DL3 0UP
Registered number: 11383143
24 February 2022
StrategicGovernanceFinance 44
Governance
Message from the Chairman
We have developed our corporate governance processes
in line with practices appropriate to the size of the group
to ensure good business conduct and culture. We seek
to drive the right values and behaviours throughout
the Group and ensure the Board remains visible and
accountable.
Our corporate governance covers the way that we
behave with each other and how we interact with our
wider stakeholders – including customers, suppliers,
shareholders, employees and the communities around
us. We have provided more detail on these areas in our
Sustainability Report and in other areas of this report. We
strive to create a culture at Tekmar based on the highest
ethical standards as this is fundamental to the Group’s
success.
The Directors acknowledge the value of high standards
of corporate governance and adopt and comply with the
QCA Corporate Governance Code which is an effective
and flexible governance model for the Group. Our
Corporate Governance Statement (overleaf and on our
website) provides more detail.
In delivering our strategic growth ambitions it is important
that the Board composition provides a balance of
experience and healthy challenge to the Executive team.
I believe that the different experiences and backgrounds
of the Board brings a suitable range of skills in light of
the Group’s challenges and opportunities. At the same
time, the composition of the Board ensures that no
individual (or a small group of individuals) can dominate
the Board’s decision-making. The Board meets regularly
to formulate, approve and review progress against the
Group’s strategy, budgets, corporate actions and goals.
The Board delegates some duties and responsibilities
to representative committees, Audit, Remuneration and
Nomination, each having agreed terms of reference and
a process for making recommendations to the Board.
Details of the activities for each of the committees are
included in this governance section of the Annual Report.
The Executive team have the appropriate delegated
authorities from the Board to ensure the right decision-
making takes place across the business and that the right
controls are embedded into these processes. They are
responsible for the day-to-day management of the Group
and driving the execution of our strategy.
This next section of the Annual Report covers our
corporate governance and how it operates for the Group.
I hope it provides the detail you require and am always
happy to receive feedback from our stakeholders in this
regard.
Julian Brown
Non-Executive Chair
StrategicGovernanceFinance 46
Corporate Governance Statement
The Board are focused on effective and entrepreneurial
decision-making to ensure the long-term sustainable
success of the Group, generating value for shareholders
whilst managing risk. We adhere to the QCA Code in
support of this and demonstrate our commitment to all
stakeholders, including shareholders, with a description
of how we apply the ten governance principles is provided
below.
Principle 1. Establish a strategy and a business model that
promote long-term value for shareholders
The Board have developed a clear strategy for delivering
long-term shareholder value. Our ambition is to:
Double Tekmar’s revenue within 5 years through organic
growth and complement this growth through targeted
M&A:
• Deliver a sustainable mid to high teens EBITDA
margin in the later years of the 5-year plan
Reinforce Tekmar’s industry leadership position as a
trusted partner
Expand Tekmar’s technical capability, its service
and geographical reach to capitalise on expanding
global offshore wind markets
Provide our people with the platform to drive success
•
•
•
The key focus areas within our growth strategy:
•
• Organic Growth – strengthen our core business
and expand our technical capability to allow us to
maintain and enhance our market leading positions
Sustainable business – target ongoing business
improvement, underpinned by our People Strategy
and our ESG Strategy
Acquisition Strategy – benefiting from the synergies
of the wider Group and will target businesses that
share a similar customer base and can support
diversification into new products, markets or regions
•
We have identified incremental investments to support
growth and will ensure the plan is self-funded where
possible, to protect the business and shareholder
interests. We will 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 procedures.
Principle 2. Seek to understand and meet shareholder
needs and expectations
We are dedicated
to communicating openly with
shareholders to ensure that our strategy, business model
and performance are clearly understood.
Understanding what analysts and investors think about
us, including the factors which drive their investment
decisions towards us, and helping our stakeholders
understand our business, is a key component in driving
our business forward.
Maintaining regular and positive engagement with
shareholders is a priority. Our primary methods of
communication are through the Annual Report; interim
and full-year results announcements; the Annual General
Meeting and other information shared on the Group’s
investor website. Where possible, we will continue
to carry out investor roadshows at significant times
throughout the year, attend investor conferences and
host investors for site visits. Always adhering to the latest
government guidance on COVID-19 restrictions means
a significant amount of this activity has moved online
and we will continue to monitor the best practices and
guidance.
If and when voting decisions at AGMs or General
Meetings deviate from the Company’s expectations, the
Board will communicate 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
The Board strives to create a socially and ethically
responsible business and has developed an ESG
Strategy to formalise our alignment to the UN Sustainable
Development Goals. The Executive team maintain
oversight over the delivery of this strategy going forward
including delivery against targeted improvements.
The Board appreciates the need to maintain effective
working relationships across a wide range of stakeholders,
including investors, employees, partners
and local communities. Our ESG Strategy will continue
to evolve as we respond to feedback from our wider
stakeholders and actions taken as a result seen as an
essential part of ensuring long term success.
Our operational processes are also externally audited and
reflected by the ISO accreditations within our subsidiary
businesses. Our commitment to these areas is shown
through their inclusion in our annual strategic planning
process, including a SWOT analysis, and thus they are
embedded into the Group’s strategy and business model.
Principle 4. Embed effective
risk management,
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, as well as the Group’s risk appetite. This risk
management is included in and reviewed as part of our
annual business plan and Strategic Review. Operating in
the offshore energy sector, managing risk is fundamental
to our everyday responsibilities and our policies,
procedures and behaviours are continuously reviewed to
ensure these are appropriate.
The Board aims to set policies that provide a balance
between reducing risk as far as possible, without unduly
impacting the Group’s competitiveness and flexibility. The
Board believes this helps to sustain stakeholder value;
including the Group’s supply chain through to the end-
customer; while also protecting the Group’s established
corporate culture.
A breakdown of the Company’s key risk factors can be
found in the Risk Management report. Risk management,
including financial and non-financial controls; what the
board does to identify, assess and manage risk and
how it obtains assurance that our risk management and
control systems are operating effectively, is covered by
the Group’s business risk assessment procedures.
Principle 5. Maintain the Board as a well functioning,
balanced team led by the Chair
The Directors recognise the importance of high standards
of corporate governance and believe the QCA Code
provides the most appropriate guidance for the Group by
setting out a standard best practice for small and mid-size
quoted companies, particularly those listed on AIM. The
Chairman maintains overall responsibility for ensuring
the Group’s compliance with the QCA Code. The Non-
Executive Directors share responsibility for the effective
running of the Board’s committees which comprise an
important element of the governance process.
In line with QCA 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 desire to increase the breadth of skills
and experience of the Board and bring constructive
challenge to the Executive Directors.
The Company Directors are:
Julian Brown, Independent Non-Executive Chairman
•
• Christopher Gill, Senior Independent Non-Executive
Director
Ian Ritchey, Independent Non-Executive Director
Alasdair MacDonald, Chief Executive Officer
•
•
• Derek Bulmer, Chief Financial Officer
The Group has determined that the composition of the
Board and its committees brings a desirable portfolio of
skills, personal qualities and experience for delivering our
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.
It is considered that the composition of the Board is
appropriate for the Group’s current size and structure.
This is reviewed on an annual basis. The Group believes
that the successful functioning and effectiveness of the
Board is predicated upon a number of key factors, in
addition to its composition. These are:
• Operations – the agenda and frequency of meetings,
•
and monitoring of attendance;
Access to appropriate advice and administrative
services – via both the Company Secretary and
external resources, as required;
• Detailed induction of new Directors to the Board and
•
its committees; and
Regular assessment of Board performance – both
as a unit and of its members individually.
Both the Chairman and the other members of the
Board hold these factors in the highest regard and are
dedicated to performing ongoing evaluation to evaluate
how they are applied in practice.
The time commitments of the Non-Executive Directors
are as follows:
•
Julian Brown minimum time commitment of four or
five days per month
StrategicGovernanceFinance
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
information
is updated regularly with
regarding developments across the Group, and users
can register to receive email alerts regarding new
announcements, reports and events, including Annual
General Meetings. Where possible, we proactively
support investor roadshows at key dates throughout
the year, attend investor conferences and host site
visits to Tekmar premises; including ad-hoc meetings by
exception.
48
• Christopher Gill minimum time commitment of two
•
or three days per month
Ian Ritchey minimum time commitment of two or
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 confident that its members have an
appropriate balance of backgrounds, skills and
knowledge in order to deliver on its core objectives. The
members of the Board have particular experience in
offshore energy; engineering; manufacturing; operations
and finance, covering both private and public companies.
The Nomination Committee is responsible for overseeing
the selection of Board members that possess an
appropriate range of experience, knowledge, integrity
and ethics. Throughout the year, the Directors can
access advice and services of independent professional
advisors, at the expense of the Company.
Each of the Directors are active in the energy sector and
continually refine and improve their knowledge of the
latest techniques and strategies in order to ensure they
are adding maximum value to the Board.
For acquisition activity we use a range of professional
advisors to protect and enhance the Group’s position as
it delivers on its strategy.
Principle 7. Evaluate Board performance based upon clear
objectives and reassess continuously
The Board has an annual process for the performance
appraisal of its members, the scope of which includes
skills, experience and capabilities, and incorporates
consideration of additional responsibilities such as
chairing or membership of the Board committees. The
annual appraisal is carried out by the Chairman with
regards to the competencies and responsibilities 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 and a plan
formulated to ensure these are met over an appropriate
timeframe.
The Chairman’s performance is also appraised through
a process managed by a Chairman Appraisal Group,
comprising the Chief Executive Officer and the Chief
Financial Officer.
The responsibilities 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 defined process for evaluating
the performance of the Board, its committees and the
individual Directors, including the Chairman, in respect
of these objectives.
The Board carries out an evaluation of its performance
review regularly, covering Board composition and skills,
strategy and performance, governance and organisation,
Board dynamics, and communication with shareholders
and other key stakeholders. This evaluation is based
upon the self-assessment of the Chairman and Directors.
If deemed necessary an external adviser may be brought
in to support with the evaluation.
The Nomination Committee may use the output of the
evaluation process when evaluating the composition
of the Board for selecting 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
We have a clear vision and values. Our values are:
• Work Together - We foster teamwork without
boundaries, to ensure the best results are delivered
in an environment where people feel empowered,
safe, trusted, confident and inspired to develop
• Do Things Right - We take a united approach towards
Safety, Quality and Delivery. We lead by example
and constantly find ways to raise standards. We
challenge the norm and have courage to stand up
for what is right
•
Break the boundaries - We collaborate with our
customers and constantly look for ways to develop
our technology and services to make today’s
impossible tomorrow’s deliverable
The Board advocates ethical responsibility and good
conduct within the Group, encouraging a culture of
inclusion, responsibility and openness which is consistent
with the Group’s objectives. We constantly strive to
actively promote a proactive attitude towards HSQE by
all stakeholders and we have a safety-first approach in
everything we do.
The Group is an equal opportunities employer and
actively 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
Quality underpins everything we do. Within the offshore
energy industry, standards and the protection of those
standards are paramount and something which the
Tekmar Board has a wealth of experience in. Our
independently audited quality management systems and
ISO accreditations demonstrate our commitment in this
area.
The Group operates an effective governance framework.
Within this
framework the Board encourages and
in developing and
challenges the executive team
delivering the Group’s strategy. An open and constructive
dialogue is entered into before decisions within these
governance structures are concluded.
The Chairman leads the Board and takes responsibility
for
its governance structures, performance and
effectiveness. This includes ensuring that the dynamics
of the Board are functional and productive, and that
deliberations and discussions are not dominated by any
individual member. The Chairman is also responsible for
ensuring that links between the Board and the executive
team and the Board and shareholders, are strong and
effective. Meanwhile, the Chief Executive Officer takes
responsibility for the day-to-day management of the
Group’s operations and for delivering the strategic goals
agreed by the Board.
The Board maintains an agenda of regular financial and
operational matters for discussion, as well as reviewing
each committee’s area of work. The Board takes ultimate
responsibility for making any key strategic or business
decisions. Members of the Executive team are invited to
attend appropriate portions of meetings of the Board in
order to facilitate these processes. In other instances,
the Chief Executive Officer communicates their relevant
views and information to the rest of the Board.
The effectiveness of the corporate governance structures
and processes is formally assessed as part of the annual
Board evaluation.
Principle 10. Communicate how the company is governed
and performing by maintaining a dialogue with
shareholders and other relevant stakeholders
We are committed to communicating openly with our
shareholders to ensure our strategy, business model and
performance are all clearly understood. Understanding
what key stakeholders think about us, including the
drivers behind their investment decisions, is a key part of
developing our business. We also maintain a strong focus
on ensuring our stakeholders understand our business.
StrategicGovernanceFinance 50
Board of Directors
Remuneration committee
Nomination committee
Audit committee
Julian Brown
Independent
Non-Executive Chair
Julian is a prominent figure within the
UK Renewables market with a wealth of
experience in the sector. In addition to
Tekmar he has NED roles with BW Ideol
AS, ORE Catapult and SENSEwind Ltd. He
is former Vice President and UK Country
Manager for MHI Vestas Offshore, the
leading wind
turbine manufacture and
a board member and former Chair of
RenewableUK, the UK’s leading renewable
energy trade association. Other former roles
include co-founder and Chair of 8.2Aarufield
Ltd, UK Director of AREVA Wind, a founding
partner of the globally respected renewables
consultancy BVG Associates Limited and
Managing Director of Vestas Blades UK.
He is a member of the UK Offshore Wind
Industry Council.
Alasdair MacDonald
Chief Executive Officer
Derek Bulmer
Chief Financial Officer
Ally has over 30 years’ experience in the
offshore energy sector. He has held senior
executive positions at Wellstream Holdings
plc, a FTSE 250 designer, manufacturer,
and supplier of flexible pipeline product to
customers in the offshore oil industry. He
spent 19 years with Technip UK, a Global
engineering and construction company
including acting as Managing Director of
Technip Umbilicals Limited between 2005
and 2008, a leader in its global markets.
Ally has also held or holds Director roles
in various privately funded businesses. An
Engineer by trade, he graduated with an
honour’s degree in mechanical engineering.
Derek joined Tekmar in 2021 and has
significant experience in senior finance and
management roles at public companies
including, most recently, as Chief Financial
Officer and in house counsel at AIM listed
radiation detection technology company
Kromek Group plc for ten years between
2010 and 2020. Prior to Kromek, Derek built
significant financial and legal experience at
Bass plc, AWG plc and Ibstock plc, as well
as a number of privately owned companies
across a range of
including
the energy industry. Derek qualified as a
Chartered Accountant in 1992 and as a
Barrister in 2010, being a member of the
Middle Temple.
industries
Christopher Gill
Senior Independent
Non-executive Director
Ian Ritchey
Independant
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 subsea engineering business,
and Senior
Independent Director and
Audit Committee Chairman of AIM quoted
Stadium Group plc.
Ian is an experienced engineering leader with
a strong track record of delivery in the Energy,
Aerospace, Defence, and Marine sectors.
Ian has nearly 30 years’ experience in the
engineering industry, including 20 years in
senior leadership positions with Rolls-Royce
plc, where he held key roles including: Head
of Aerospace Research and Technology,
Defence Engineering Director and Executive
VP Engineering and Technology – Commercial
Marine. Most recently, he was Group Chief
Engineer, leading the Engineering function
across the business. Ian has degrees from
Cambridge and Stanford Universities. He is
an Honorary Professor at Durham University,
a Chartered Engineer, a Fellow of the IMechE
and a Fellow of the Royal Academy of
Engineering, where he currently Chairs the
Diversity and Inclusion Leadership Group.
StrategicGovernanceFinance 52
Key Management
Fraser Gibson
Managing Director
AgileTek Engineering
Dave Thompson
Managing Director Subsea
& Group Engineering Director
Steve Howlett
Managing Director
Pipeshield International
Marc Bell
Managing Director
Tekmar Energy
Angela Lock
General Manager
Tekmar Energy
Jim Pearson
Group In-house
Legal Counsel
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 16 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.
A Chartered Engineer with over 34 years’
experience. Dave is a member of the IET and 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
companies, including Technip and Royal IHC.
Dave
initially as
Technical Director in 2014 moving into the role as
Managing Director in 2016.
joined Subsea
Innovation
Steve established Pipeshield in 1999. Over the
past 20 years Steve has overseen the growth of
the company to become one of the world’s leading
providers of specialised subsea asset protection
systems to the offshore energy markets, picking
up numerous awards for growth, innovation and
global exports along the way.
Marc is a Mechanical Engineer with a Master’s
in Business Management from the University
of Durham. He has over 25 years of technical
and operational leadership experience within a
manufacturing, service and project engineering
focused organisations, the past 15 years spent
within the Global Energy Sector. Prior to taking up
the Managing Director position with Tekmar Energy
in 2021, Marc held positions of Global Operations
Director for JDR Cables, Head of Offshore Wind UKI
for Siemens Gamesa and Global Manufacturing
Manager for Technip Umbilical’s.
Joining in 2018, Angela played a key role in
establishing Tekmar Energy in China. Previously,
Angela was the General Manager of the British
Chambers of Commerce Shanghai and has
assisted numerous UK companies enter China.
Endorsed by the UK Department for International
Trade, Scotland Development International, and
RenewableUK, she was the founder of UK-China
Hub for Offshore Wind in January 2017. Angela
is also a member of Sino-British Offshore Wind
Collaboration Advisory Committee Meeting since
2016.
Jim is an English law qualified Solicitor and has
worked as an In-House Counsel in the energy
and renewable sectors since 2012. Jim trained at
Pinsent Masons, specialising in commercial law
on qualification, with further specific experience in
data protection, IT and IP law. Jim has worked on
a wide range of energy projects both in the UK and
globally, including offshore wind, onshore wind,
battery and Oil & Gas sectors, advising a range of
companies from owners and operators to various
levels in the supply chain. Jim joined Tekmar Group
in early 2021 and manages the legal function
across the Group, supporting the business in its
global operations.
Gary Howland
Group Sales Director
Tekmar Group
Leanne Wilkinson
Finance Director
Tekmar Energy
Tom Howard
Group Marketing Manager
Tekmar Group
Gary joined Tekmar Group in 2021 from subsea
cable manufacturer JDR Cable Systems. Gary
has over 15 years of experience in the offshore
energy sector having held business development,
strategic marketing, sales, and commercial
positions for a number of Tekmar’s customers and
competitors. Gary holds an engineering degree in
Marine Technology from Newcastle University.
Leanne is a CIMA qualified accountant with
over 20 years’ experience as a senior finance
professional and business leader. Prior to joining
Tekmar in 2020, Leanne previously worked in
manufacturing and technology sectors and has
experience of business change, transformation
and integration.
Tom has over 14 years’ marketing and business
development experience in the offshore energy
sector. Having previously worked for one of
Tekmar’s customers, Tom has an extensive
knowledge of
industry and a strong
understanding of the group’s markets, products
and stakeholders. Tom joined Tekmar Group
in 2019 and is responsible for marketing and
communications across the business.
the
StrategicGovernanceFinance 54
Risk Management
Identifying, evaluating and monitoring the key indicators to the success of our
business is pivotal to informing our strategic decision making
The Board has overall responsibility for setting the course
for the Group’s risk management objectives and policies.
Working within the offshore energy industry, managing
risk is integral to our business and we continuously review
our policies, procedures and behaviours to mitigate our
risks and reduce them to acceptable levels.
The objective of the Board is to set policies that seek to
mitigate ongoing risk as far as possible whilst maintaining
the Group’s competitiveness and flexibility. The Board
believes this helps to sustain stakeholder value; from
key suppliers to end-customers; while also protecting
the Group’s established corporate culture and creating
shareholder value.
The Group operates a structured process in relation
to risk management, including both financial and non-
financial controls, which identifies and evaluates risks
and uncertainties and reviews activity to mitigate those
risks. The most salient and significant risks that the
Board considers could potentially impact the business
are described below. We consider the nature of the
Group’s principal risks and uncertainties have not
materially changed since last year:
Severity
Risk Type:
Unlikely Possible Likely Very Likely
Strategic
Financial
Operational
Compliance
2) 6) 7)
3)
8)
4)
5)
1)
Extensive
Major
Medium
Minor
Probability
Risk
1)
Macroeconomic
environment
Risk Type
Description
Impact
Mitigation
Evaluation
Brexit: There continues to be significant uncertainties in
relation to the terms within which the UK has exited the
EU and to what the impact will be on the fiscal, monetary
and regulatory landscape in the UK.
COVID-19: there continues to be considerable impact
of the COVID-19 pandemic, both on the economy and
the population. A significant, longer term downturn in
the wider economy could impact on the opportunities
available to the Group. However, there could also be
opportunity here, should world governments seek to
stimulate economies through increasing public spending
on energy infrastructure, and particularly renewables.
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.
The business has reacted positively to the challenges
presented by COVID-19, with regular meetings of the
senior management team determining our response
and regular communication made to our valued
employees. The business continues to monitor the
challenges presented by COVID-19 and will continue
to undertake its business practices in-line with the
appropriate government guidance.
StrategicGovernanceFinance
56
Risk
2)
Risk Type
Description
Impact
Mitigation
Systems and
processes
IT systems are vital to the operations of the Group.
Failure to adequately invest in and maintain 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.
Systems failures could lead to an
inability to meet customers’ needs
and lead to reputational damage.
The loss of sensitive information
could lead to significant damage
with an associated risk of fines.
The Group predominantly outsources provision of
IT services to a suitably qualified third-party, whose
competence and service are regularly reviewed. This
is supplemented by in-house resource to focus on
effective and consistent IT systems and processes
across the Group. 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, with
particular focus on cyber-security.
Evaluation
No change.
3)
Access to
capital
(Liquidity Risk
& Cashflow)
Linked to Macroeconomic environment, access to capital
is a significant factor in our plans to grow the business.
There is uncertainty in relation to how, when and to what
extent developments will impact on the markets we
operate in, the wider economy, levels of investor activity
and confidence and exchange rates.
Without access to sufficient finance
the company may struggle
to
undertake all aspects of its growth
plan, such as
the acquisition
strategy and accelerated growth.
4)
Project timings
and delay
to contract
awards
The project-based, contractual nature of the Group’s
business, coupled with its concentrated customer base,
leads to a revenue profile that is inherently uneven over
the year. Most contract awards and associated revenues
are dependent on large capital projects within the energy
sector, the timing of which is out of the business’ control.
5)
Technology
and
competition
The risk of new competitors leading to a reduction in
pricing. Design changes could lead to technology
obsolescence and subsequently reduced volume of
sales.
There is an associated risk that
fulfilment of any contract,
the
together with its 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
the
specific period.
for
Reduced volume of sales. Increase
in capital expenditure to develop
new products. Resulting
in a
reduction in the Group’s financial
performance.
No change.
The business has ongoing relationships with banks
and other financial institutions that offer the required
level of support. The Group has strengthened its cash
position with the extension on banking facilities. Cash
flow forecasts are updated and discussed regularly,
with analysis prepared at both a subsidiary and
Group level. As noted in the basis of preparation of
the financial statements on page 88, there is a risk
that bank facilities are not renewed. The business
has a strong relationship with Barclays and as a
result management are confident that bank facilities
will continue to be available to the group for the
foreseeable future.
The business has produced a 5-year strategic plan
that includes an assessment on project timing and
the revenue streams macro climate. The wider Group
portfolio offers a mix of project timings due to new
markets and regions.
No change.
The business undergoes a detailed
technology
readiness level (TRL) programme when developing
new products, which includes an assessment of
competition and what our ultimate value proposition
would be. Significant investment is made in the
continuous development of existing products to
ensure they keep pace with current market trends.
Our more diversified product portfolio allows us to
offer a unique proposition to customers.
Increased:
there are
industry challenges that
need revised technology
solutions.
StrategicGovernanceFinance 58
Risk
6)
Risk Type
Description
Impact
Mitigation
Recruitment
and Retention
of Key People
The business may fail to attract, develop and retain
key individuals with the skillsets required to maintain
a successful business and culture, particularly within
engineering and leadership.
A major impact on Tekmar’s ability
to fulfil its contractual obligations.
Adverse
future
impact on
growth aspirations for the Group.
the
7)
Risk of claims
and failure
to meet
contractual
8)
Financial
The Group enters contracts that contain terms that, in
some cases, contain wide reaching indemnities and
warranties. These terms are commonplace in the subsea
industry and do not unfairly prejudice the Group, nor do
they put the Group in a materially worse position than its
competitors. These warranties and indemnities lead to
an inherent risk that the Group’s liability for any breach
could be extensive, especially if these are given on an
uncapped basis.
Price Risk: The Group’s key products are reliant on key
components including Polyurethane (PU), Cast Iron and
concrete. There is an inherent risk that price increases
outside of Group’s control can have an impact of the
trading conditions and environment in which the Group
operates.
Credit Risk: The ability of the Group along with its key
stakeholders, customers and suppliers to avoid default
on credit is key to future growth strategy of the business.
to
fulfil
A major impact on the business’
its contractual
ability
obligations. Adverse
impact on
the future growth strategy for the
business.
Without access to sufficient finance
the company may struggle
to
undertake all aspects of its growth
plan, such as
the acquisition
strategy and accelerated growth.
Evaluation
No change.
No change.
No change.
Key KPI’s are reviewed monthly by the Executive
and Board. In addition the People Strategy has been
developed to focus on the retention and development
of
talent. Annual appraisal assessments are
undertaken and a skills matrix and succession plan
developed from this, including risk mitigation plans.
Annual review of remuneration and benefits to
ensure we are consistent across the Group and are
competitive in the relevant region. Executives and
senior management incentive plan in place. Regular
pulse surveys to invite feedback on a range of issues
over the period.
Contracts are reviewed extensively prior to signing,
and the likelihood of risks assessed by legal and
technical teams. Uncapped liabilities are kept to a
minimum and only agreed to for areas of the contract
that Directors believe are very low risk. Where
possible the Group insures against risks to minimise
the potential financial impact. There is a strong focus
across the Group on high quality project execution
which is regularly reviewed under independent ISO
certification where appropriate.
The business has ongoing relationships with banks
and other financial institutions that offer the required
level of support. The Group has strengthened its cash
position with the extension on banking facilities. Cash
flow forecasts are updated and discussed regularly,
with analysis prepared at both a subsidiary and Group
level. Enhanced due diligence is undertaken at the
contracting stage to understand the price impacts
of a particular contract, detailed financial project
reviews are undertaken with multiple key suppliers
underpinning the core of the Group’s supply chain.
StrategicGovernanceFinance •
•
•
Impairment of goodwill and intangible assets –
there is a significant risk regarding the valuation of
intangible assets including goodwill, which are based
on management’s assessment and assumptions in
the annual impairment review
Going concern – assessed by the regulators as a
heightened risk in the current environment with the
impact of COVID-19 on the businesses
Valuation of investments in subsidiaries – this risk
associated with valuation of subsidiaries is increased
by the uncertainty caused by the COVID-19
pandemic
• Management override of controls – this is a non-
rebuttable presumed risk for all companies and is
reviewed for all companies in the Group
As Chair of the Audit Committee I am satisfied that the
Audit Committee Report covers the activities of the
Committee over the period to 30 September 2021 along
with the subsequent audit of the financial statements.
I will be available at the Group’s Annual General Meeting
to discuss any matters raised in this report.
Chris Gill
Chair of the Audit Committee
60
Audit Committee Report
Chris Gill, Chair of the Audit Committee
Please find the Audit Committee Report for the period
ended 30 September 2021. The Committee comprises
Julian Brown, our Non-Executive Chairman and myself
as Chair. As a chartered accountant I bring the relevant
financial experience in this role and am in my third year
as Audit Chair for the Company.
Responsibilities
The Audit Committee oversees
formal and
transparent arrangements for considering how the Board
should apply the financial reporting and internal control
principles of the Company and maintains an appropriate
relationship with the Company’s auditors.
the
We monitor the integrity of the financial statements of the
Company, including its annual and half-yearly reports,
interim management statements, and any other formal
announcement relating to its financial performance,
reviewing significant
issues and
judgements which they contain.
financial reporting
The full Terms of Reference can be found on the Group’s
website, covering the following areas:
Financial Reporting
Internal Controls and Risk Management Systems
•
•
• Compliance, whistleblowing and fraud
•
External Audit
External auditor
The Audit Committee recommended to the Board the
appointment of a new external auditor this year and a
formal Audit Tender process commenced in February
2021. We requested the CFO, Sue Hurst, to research
the market in order to table companies that could offer
the appropriate audit services and we developed a
Selection Criteria against which to review the short list.
Four audit firms were invited to tender and the timetable
was developed to ensure the CEO, CFO and Audit
Committee reviewed each company separately and the
prospective auditors had plenty of access the Company
in order to develop their proposals.
Following a detailed review process, Sue and I agreed
on the recommendation to appoint Grant Thornton LLP
UK LLP (GT) as the Group’s new external auditors for
the current period. A detailed Report to the Board was
produced supporting this recommendation and the Board
approved the recommendation of the Audit Committee.
The formal resignation of KPMG and appointment of
Grant Thornton took place in August 2021 and was
announced to shareholders via RNS. KPMG resigned by
notice to the Group under section 516 of the Companies
Act 2006 and has confirmed that there were no matters
connected with their resignation which they consider
need to be brought to the attention of the members or
creditors of the Group for the purposes of section 519
of the Companies Act 2006. Any proposal to re-appoint
GT in respect of the financial year beginning 01 October
2021 will be subject to shareholder approval at the next
AGM.
The Audit Committee monitors the relationship with the
external auditor, Grant Thornton UK LLP, to ensure that
auditor independence and objectivity are maintained.
As part of its review, the Audit Committee monitors the
provision of non-audit services by the external auditor.
The breakdown of fees between audit and non-audit
services in the two periods ended 30 September 2021
is provided in note 8 of the Group’s financial statements.
There were non-audit services provided by the current
external auditor to the Group during the 2021 period of
£34k. These fees are considered to be a low value and
therefore do not impact on the auditors independence.
Significant issues considered in relation to the financial
statements
Significant risks relate to those significant non-routine
transactions that are deemed complex and/or highly
judgmental. The significant risks relating to the financial
statements for this period were considered, discussed
with the auditors and concluded upon. Details can
be found in the Independent Auditor Report and are
summarised below:
•
The revenue cycle included fraudulent transactions
– there are two types of revenue that require
management judgement, being revenue recognised
over time and revenue recognised at a point in time.
The significant risk relates to the assessment of the
cut-off for those contracts spanning the period end
StrategicGovernanceFinance
62
Remuneration Committee
Report
Julian Brown, Chair of the Remuneration Committee
Employee remuneration
Free Shares and Annual Pay Review
Due to the trading performance of the Group in the period,
combined with moving the year end, the discretionary
annual inflationary pay rise did not take place as usual
in April 2021. In recognition of the hard work and loyalty
of our people during the last eighteen months, in August
2021 we awarded £750 of Free Shares to all eligible staff
through the Tekmar Group plc Employee Share Incentive
Plan (SIP). This amounted to 241,376 new ordinary
shares being issued and are held by Equiniti Share Plan
Trustees Limited. We have now confirmed an inflationary
award of 2% to all eligible staff from 1 October 2021.
Sharesave Plan 2021 (SAYE)
Following the success of our first Sharesave plan in
2020 we launched our second plan in March 2021.
The scheme was again open to all employees subject
to a qualifying service period. A total of 20 employees
subscribed to 197,452 share options over a period of
three years.
the Directors’ Remuneration Report
I present
for
the period ended 30 September 2021. I chair the
Remuneration Committee and am joined by Chris
Gill, Senior Independent Non-Executive Director. The
report provides shareholders with details regarding our
directors’ remuneration policy and the impact of this on
executive remuneration outcomes in the period, along
with how this links to the Group’s financial performance.
that
Responsibilities
The Remuneration Committee ensures
the
executive directors and executive management are fairly
rewarded for their individual contributions to the overall
performance of the Group, having appropriate regard to
the views of our shareholders and other stakeholders.
Our policy aims to provide appropriate incentives to
encourage enhanced Group performance, without
paying more than in necessary, having regard to relevant
remuneration trends. The Committee also oversees any
major changes in employee benefit structures across the
Group, also ensuring changes to employment law are
duly enacted.
The remuneration of non-executive directors is a matter
for the Chairman of the Board along with the executive
members, not this Remuneration Committee, and no
director or manager is involved in any decisions as to his
or her own remuneration.
Executive Incentive Plan (EIP)
The Group operates an Executive Incentive Plan to
ensure the senior management team are motivated and
rewarded for supporting the growth aspirations of the
Group. The EIP is made up of equal parts long term share
option plans and bonus, with values being indicative of
an individual’s role and tenor. The EIP is reviewed by
this Committee to ensure performance measures align
to the financial targets of the Group, including reward for
material stretch targets.
Targets for the CEO and CFO are based on Earnings per
Share and the remaining executive management team
are based on Earnings Before Interest & Tax and Cash
Generation.
Group Remuneration Policy
The key components of the remuneration policy are:
Why
How
Basic annual salary
To attract and retain the right talent
reflecting level of responsibilities of the role,
along with experience and skills required
Inflationary pay rises implemented annually to
track national indicators
Pension
To provide a contributory pension scheme in
line with statutory requirements, to provide
employees with support after retirement
The Group continues
employees’ pensions
to contribute 5%
to
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 financial targets, to support the Group’s
growth strategy
Share schemes
Share ownership is an important part of
employee incentivisation and retention
All employee SIP and SAYE Plans and LTIPs for
executive management
Remuneration of the Board
The Remuneration Committee reviewed the market rates in considering the appointments of the CEO and CFO during the
period, along with the non-executive director roles, and confirm they remain in line with appropriate benchmarks.
Name of Director
Ally MacDonald
Derek Bulmer(5)
Julian Brown
Chris Gill
Ian Ritchey(2)
James Ritchie(3)
Sue Hurst
Basic salary / fees
£000
250
61
77
63
19
170
217
Benefits
£000
-
-
-
-
-
-
-
Bonus
£000
50(1)
-
-
-
-
-
115(4)
Pension
£000
-
1
3
-
1
4
11
FY21 Total
£000
300
62
80
63
20
174
343
FY20 Total
£000
70
-
37
45
-
214
150
(1) a guaranteed advance bonus payment of £50,000 in recognition/compensation for Ally’s prompt departure from his previous Executive
role, including lost remuneration/notice
(2) Part year only – appointed 22 March 2021
(3) Part year only – leaver 03 August 2020
(4) Retention bonus and termination payment to Sue Hurst prior to her leaving on 30 November 2021
(5) Part year only – appointed 01 June 2021
StrategicGovernanceFinance 64
IPO Options
The table below shows the activity in relation to the IPO options from 2018.
IPO options
James Ritchie
Sue Hurst
Russell Edmondson
Jack Simpson
Steve Rossiter
Share options
b/fwd.
225,000
87,500
31,250
31,250
31,250
Options lapsed
- employment
(225,000)
-
-
-
-
Options
exercised
-
-
(31,250)
(31,250)
-
Remaining
options
-
87,500
-
-
31,250
Retention Plan
Following the resignation of the former CEO, James Ritchie, in August 2020 the Board approved a new share option incentive
plan, the Retention Plan, to further incentivise the executive management team. The team were granted awards for up to
200,000 ordinary shares based on length of service, effectively reallocating a large proportion of the IPO options that lapsed
on James leaving.
IPO options
Ally MacDonald
Sue Hurst
Russell Edmondson
Jack Simpson
Steve Rossiter
Dave Thompson
Options
granted
17,073
43,042
43,042
53,802
32,281
10,760
Options lapsed
- employment
-
(43,042)
-
(53,802)
(32,281)
-
Options
exercised
-
-
(43,042)
-
-
-
Remaining
options
17,073
-
-
-
-
10,760
Under the plan shares became available to exercise on 2nd June 2021. For those individuals working their notice on this
date the options lapsed.
LTIPs
In August 2020, under the EIP, the Remuneration Committee approved three Long Term Incentive Plans (LTIPs) to incentivise
and reward management for the three financial years, ending 31 March 2023. Management were granted awards for up
to 1,294,010 ordinary shares, representing 2.5% of the Company’s issued share capital at that time. The performance
conditions were aligned to achieving financial targets for each of the three years with the following awards for each year:
LTIPs
FY21 LTIP
FY22 LTIP
FY23 LTIP
Ordinary shares
391,108
446,980
455,922
Due to the reduced financial performance for the Group, along with the extended eighteen period the Board reviewed the
Executive Incentive Plan and in June 2021 the Board agreed that the performance conditions for the FY21 scheme could not
be met and the options immediately lapsed.
The Executive Team tabled a detailed Strategic Plan which the Board approved and was presented to shareholders at the
Capital Markets Day in July 2021. The table below shows the activity in the period in relation to LTIPs including the position at
the period end, showing those options lapsing due to performance conditions not being met (FY21 LTIPs) and those lapsing
due to the employment conditions not being met.
IPO options
Sue Hurst
Russell Edmondson
Jack Simpson
Steve Rossiter
Fraser Gibson
Dave Thompson
Marc Bell
Leanne Wilkinson
Other
Options lapsed
- employment
Options
granted
360,750
182,112
144,172
151,760
136,585
182,112
51,086
45,977
39,456
Options
exercised
(360,750)
(182,112)
(144,172)
(151,760)
-
-
-
-
(39,456)
Remaining
options
-
-
-
-
136,585
182,112
51,086
45,977
-
The Board recognises the need to ensure the executive management team remain incentivised going forward and will be
confirming revised arrangements under the FY23 LTIP as well as launching the FY24 LTIP once clear of the financial closed
period. This will include the arrangements for the current CEO and CFO who have been appointed in the period.
The above report sets out our approach to remuneration for the executive management team and employees. However, if
you have any questions regarding this I will be available at the Group’s Annual General Meeting to discuss them.
Julian Brown
Chair of the Remuneration Committee
StrategicGovernanceFinance 66
Nomination Committee Report
Julian Brown, Chair of the Nomination Committee
I present the Nomination Committee Report for the eighteen
month period ended 30 September 2021. The Committee
comprises Chris Gill who is our Senior Independent Non-
Executive Director and myself as Chair.
regularly
Responsibilities
The Nomination Committee
the
structure, size and composition of the Board and makes
recommendations to the Board with regard to any changes.
We give regular consideration to the succession planning
for directors and senior executives, taking into account the
skills and experience needed both now and in the future.
reviews
There have been a number of changes to the Board
this year and I provide more detail as to the Nomination
Committee’s involvement and process below.
Chief Executive Officer – August 2020
The former Chief Executive Officer (CEO), James Ritchie,
informed the Board of his intention to leave the business
and formerly resigned as CEO, stepping down from the
Board on 3rd August 2020. Alasdair Macdonald (“Ally”),
the Non-Executive Chairman at the time, assumed the role
of Executive Chairman with immediate effect and a formal
process to recruit and appoint a new CEO commenced.
The Nomination Committee met to agree the candidate
specification and the recruitment process to be followed.
As Ally declared his interest in the role he immediately
stepped down as Chair of the Nomination Committee
and I took over. The key aspects of the ideal candidate
were identified and we appointed an external recruitment
firm to support us in the selection process. The role was
advertised and we received 140 applications. Of these,
60 individuals were contacted with 15 progressing to
screening interviews by the recruiter. A long-list of 9
candidates were reviewed by the Nomination Committee
and 5 were shortlisted for interview.
The Nomination Committee conducted the interviews
in early October, supported by the Group HR Manager.
Following a detailed review I invited Ally to a final
interview to discuss his candidacy and hear what his
recommendations were for the business, following his
few months in his executive post. We concluded that
Ally was the strongest candidate for the role with relevant
experience, skills, motivation, and prior knowledge of
the business and its markets. Ally is also positioned to
start immediately and has a clear grasp of the immediate
challenges and opportunities faced by the business.
The Nomination Committee recommended appointing Ally
MacDonald to the role of CEO and appoint Julian Brown
to the role of Non-Executive Chairman, replacing Ally. The
Board approved these recommendations.
Non-Executive Director – March 2021
Following the above appointments there was a need to
add a Non-Executive Director to the Board, to ensure the
overall independence of the Board was maintained. The
Nomination Committee reviewed various candidates which
culminated in the selection of Ian Ritchey in March 2021.
Ian has nearly 30 years’ experience in the engineering
industry and previously held senior with Rolls Royce for
over 20 years. Following our recommendation, Ian met
with all members of the Board, who were in agreement that
he is a strong candidate that will enhance the strength of
the Board.
The Nomination Committee recommended appointing Ian
Ritchey to the role of Non-Executive Director. The Board
approved this recommendation.
Chief Financial Officer – June 2021
As part of our regular succession planning activities Sue
Hurst indicated to the Board her plan to resign from the
role of Chief Financial Officer this year, following nine
years with the business. We quickly identified an excellent
candidate, Derek Bulmer, who was interviewed by all
board members and appropriate advisors. As Derek was
available,
the Nomination Committee recommended
appointing him to the role immediately, with the advantage
of being supported by Sue during her 6-month notice
period.
The Nomination Committee recommended appointing
Derek Bulmer to the role of Chief Financial Officer. The
Board approved this recommendation.
I trust that this clearly explains the approach and activities
of the Nomination Committee, particularly in a year of
significant change to the Board. I am confident that the
process we follow allows us to find the best candidates for
the Group and that the Board moves forward with the right
skills and experience to deliver shareholder value.
Julian Brown
Chair of the Nomination Committee
StrategicGovernanceFinance 68
Directors’ Report
for the year ended 30 September 2021
The Directors present their report together with the
financial statements of the Parent
audited Group
Company (‘the Company’) and the Group for the period
ended 30 September 2021.
Directors
The directors who held office during the year and up to
the date to the approval of accounts were as follows:
Alasdair Macdonald
•
• Derek Bulmer (Appointed 1st June 2021)
•
Julian Brown
• Christopher Gill
•
•
•
Ian Ritchey (Appointed 22nd March 2021)
Susan Hurst (Resigned 30th November 2021)
James Ritchie Bland (Resigned 3rd August 2020)
Business review and future developments
The information that fulfils the requirements of the
strategic report and business review, including details
of the results for the year ended 30 September
2021, principal risks and uncertainties, research and
development, financial KPIs and the outlook for future
years, are set out in the Chairman’s Statement and Chief
Executive Officer’s and Chief Financial Officer’s Reviews.
Going Concern
The Group meets
its day-to-day working capital
requirements through its available banking facilities
which includes a CBILs loan of £3.0m currently available
to 31 October 2022 and a trade loan facility of up to
£4.0m that can be drawn against supplier payments,
currently available to 30 November 2022. The latter is
provided with support from UKEF due to the nature of
the business activities both in renewable energies and
in driving growth through export lead opportunities.
The Group held £3.5m of cash at 30 September 2021
including full draw down of the £3.0m CBILS loan and
a further £3.0m of the trade loan facility. There are no
financial covenants that the Group must adhere to in
either of the bank facilities.
The Directors have prepared cash flow forecasts to
30 September 2023. The base case forecasts include
assumptions for annual revenue growth supported
by current order book, known tender pipeline, and by
publicly available market predictions for the sector. The
forecasts also assume a retention of the costs base of
the business with inflationary increases of 2% on salaries
and a cautious recovery of gross margin on contracts.
These forecasts show that the Group is expected to
have a sufficient level of financial resources available
to continue to operate on the assumption that the two
facilities described are renewed.
Given the planned recovery of the Group from the
impacts of the COVID-19 pandemic and recognising the
significant market opportunity for growth in the market
for off-shore energy, the Directors have sensitised their
base case forecasts for a severe but plausible downside
impact. This sensitivity includes reducing revenue
by 15% for the year to 30 September 2023, including
the loss or delay of a certain level of contracts in the
pipeline that form the base case forecast, and a 15%
increase in costs across the Group as a whole for the
same period. The base case forecast also includes
discretionary spend on capital outlay which has been
withheld in the sensitised case. In addition, the directors
note there is further discretionary spend within their
control which could be cut, if necessary, although this
has not been modelled in the sensitised case given the
headroom already available. These sensitivities have
been modelled to give the Directors comfort in adopting
the going concern basis of preparation for these financial
statements. Further to this, a ‘reverse stress test’ was
performed to determine at what point there would be a
break in the model.
Based on this assessment, the Directors are satisfied
that, taking account of reasonably foreseeable changes
in trading performance and on the basis that the bank
facilities are renewed, these forecasts and projections
show that the Group is expected to have a sufficient level
of financial resources available through current facilities
to continue in operational existence and meet its liabilities
as they fall due for at least the next 12 months from the
date of approval of the financial statements and for this
reason they continue to adopt the going concern basis in
preparing the financial statements.
Facilities
Within both the base case and severe but plausible case,
management have assumed the renewal of both the
Major shareholders
As at 20January 2022 the following interests of shareholders in excess of 3% have been notified to the Company:
Schroders plc
J O Hambro Capital Management Limited
BGF Investment Management Limited
Columbia Threadneedle Investments
Sarasin & Partners
Moneta Asset Management
CBILS loan and trade loan facility in November 2022. In
the unlikely case that the facilities are not renewed, the
group would aim to take a number of coordinated actions
designed to avoid the cash deficit that would arise.
The directors are confident, based upon
the
communications with the team at Barclays, the historical
strong relationship and recent bank facility renewal in
November 2021, that these facilities will be renewed and
will be available for the foreseeable future.
However, as the renewal of the two facilities in October
and November 2022 are yet to be formally agreed and
the Group’s forecasts rely on their renewal, these events
or conditions indicate that a material uncertainty exists
that may cast significant doubt on the Group’s and
Parent Company’s ability to continue as a going concern.
Dividends
The Directors do not anticipate that the Company will
declare a dividend in the near term, as available cash
will support working capital requirements along with the
identified strategic investment plan. No dividends have
been paid in the period.
Directors and their interests
The Directors of the Company during the period and their
interests in the ordinary share capital at the end of the
year are shown in the table below:
Ordinary shares
of 1p each
A MacDonald
S Hurst
C Gill
J Brown
30 Sep 2021
509,526
276,569
19,230
19,230
31 Mar 2020
434,526
276,569
19,230
19,230
Note - the table above shows only directors that have an interest
in the Group in the period.
Number of ordinary
shares
8,276,872
4,400,000
3,955,000
3,154,366
3,100,100
2,190,000
Ordinary shares as a %
of issued share capital
16.00%
8.51%
7.65%
6.10%
5.99%
4.23%
There have been no changes to the above shareholdings
since the period end, with the exception of S Hurst who
has exercised options over 87,500 shares. Further
details of the Directors’ interests can be found in the
Remuneration Committee Report.
Directors’ indemnities
The Group has not made qualifying third-party indemnity
provisions for the benefit of its directors during the year.
Streamline energy and carbon reporting (SECR)
The Group is classed as large under the Companies
Act 2006 and therefore falls under the scope of the
(SECR)
Streamlined Energy & Carbon Reporting
requirements. The Group is exempt from disclosure
related to SECR as no individual UK registered subsidiary
is a large company and the parent company itself
consumes less than 40,000 KWH of energy per year.
Relations with stakeholders
The Group considers its key stakeholders to be its
shareholders, employees and customers and suppliers.
How the Group engages with these and broader
stakeholders is described in the s172 statement on page
71.
Takeover Directive requirements
The Company has one class of equity share, namely 1p
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.
StrategicGovernanceFinance 70
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
29 March 2022 at Innovation House, Centurion Way,
Darlington, DL3 0UP. 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
30 September 2021 and the publication of these financial
statements.
Independent auditor
The auditor, Grant Thornton UK LLP, has been appointed
and a resolution concerning their appointment 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.
Derek Bulmer
Chief Financial Officer & Company Secretary
Tekmar Group plc
Innovation House
Centurion Way
Darlington
DL3 0UP
Registered number: 11383143
24 February 2022
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.
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
Accounting Standards in Conformity with Companies
Act 2006 (IFRS’s)) 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;
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
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.
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.
Derek Bulmer
Company Secretary
StrategicGovernanceFinance 72
Financial Statements
Page Numbers
74 Independent Auditor’s Report
84 Consolidated Statement of Comprehensive Income
85 Consolidated Balance Sheet
86 Consolidated Statement of Changes in Equity
87 Consolidated Cash Flow Statement
88 Notes to the Group Financial Statements
120 Parent Company Balance Sheet
121 Parent Company Statement of Changes in Equity
122 Notes to the Parent Company Financial Statements
StrategicStrategicGovernanceFinance 74
Independent Auditor’s Report to the
members of Tekmar Group plc
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are
further described in the ‘Auditor’s responsibilities for
the audit of the financial statements’ section of our
report. We are independent of the group and the parent
company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in
the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty related to going concern
We draw attention to the going concern note in Note 2(b)
in the financial statements, which indicates that at the
reporting date, the group meets its day-to-day working
capital requirements through reliance on its available
banking facilities which includes a CBILs loan of £3.0m
currently available to 31 October 2022 and a trade loan
facility of up to £4.0m that can be drawn against supplier
payments, currently available to 30 November 2022.
As stated in note 2(b), these events or conditions,
indicate that a material uncertainty exists that may cast
significant doubt on the company’s ability to continue as
a going concern. Our opinion is not modified in respect
of this matter.
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate.
Our opinion on the financial statements is unmodified
We have audited the financial statements of Tekmar
Group plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the period ended 30 September 2021, 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 notes
to the financial statements, including a summary of
significant accounting policies. The financial reporting
framework that has been applied in the preparation of
the group financial statements is applicable law and
international accounting standards in conformity with the
requirements of the Companies Act 2006. The financial
reporting framework that has been applied in the
preparation of the parent company financial statements
is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101
‘Reduced Disclosure Framework’ (United Kingdom
Generally Accepted Accounting Practice).
In our opinion:
•
•
•
•
in
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 30 September 2021 and of the group’s
loss for the period then ended;
the group financial statements have been properly
international
prepared
accordance with
accounting standards
the
requirements of the Companies Act 2006;
the parent company financial statements have
been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice;
and
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
in conformity with
•
•
•
•
reverse stress
Assessed the plausibility of the mitigating actions
available to management to continue as a going
concern if downside sensitivities were to crystalise;
Evaluated management’s
test
forecasts and management’s
and worse-case
consideration of the magnitude of a decline in
cash that would give rise to the elimination of the
headroom in the borrowing facilities;
Performed arithmetical and consistency checks on
management’s going concern base case model;
and
Assessed the adequacy of related disclosures within
the annual report.
In performing our audit procedures, we noted that if the
debt facilities were not renewed in November 2022, within
the going concern period, the group would at certain
points of the going concern period have insufficient cash
as described in the material uncertainty relating to going
concern section above.
Our responsibilities
We are responsible for concluding on the appropriateness
of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the group’s
and the parent company’s ability to continue as a going
concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our report to
the related disclosures in the financial statements or, if
such disclosures are inadequate, to modify the auditor’s
opinion. Our conclusions are based on the audit evidence
obtained up to the date of our report. However, future
events or conditions may cause the group or the parent
company to cease to continue as a going concern.
The responsibilities of the directors with respect to going
concern are described in the ‘Responsibilities of directors
for the financial statements’ section of this report.
Our evaluation of management’s assessment of the
entity’s ability to continue as a going concern
The existence of a material uncertainty related to going
concern was assessed as a matter that was one of the
most significant assessed risks of material misstatement
due to the uncertainty of the renewal of key debt facilities,
and in particular on its ability to continue as a going
concern for the foreseeable future, as defined in IAS 1,
Presentation of Financial Statements. Due to the ongoing
COVID-19 pandemic, there is also more judgement
applied in developing cash flow forecasts.
Management performed an assessment of the group’s
ability to continue as a going concern, which included
modelling a base case scenario, a severe but plausible
case scenario and performing a reverse stress test.
The assumptions selected by management in preparing
these assessments required the application of significant
management judgement, in particular, in the estimation of
future contract wins and the timing of related cashflows.
Management have also assessed the likelihood of the
facilities being renewed and discussed this with the
lenders.
This, in turn, required us to exercise significant auditor
judgement when evaluating the assumptions used
by management in preparing the scenarios and in
concluding whether the Reverse Stress Test scenario
identified by management was plausible. We also applied
significant professional judgement in evaluating and
concluding on the impact of the sensitivity analyses.
We performed the following audit procedures to evaluate
management’s assessment of the entity’s ability to
continue as a going concern:
•
• Obtained an understanding of how management
prepared their base case and sensitised forecasts
for the period to September 2023;
Assessed
of management’s
forecasting by comparing the reliability of past
forecasts to management’s actual results, and
considering whether management’s
historic
forecasting accuracy impacts upon the reliance we
can place upon the forecasts provided;
accuracy
the
• Obtained an understanding of key trading, balance
sheet and cash flow assumptions and testing those
key assumptions to underlying historical financial
data, post period end trading information and
market analysis data;
Assessed the terms of the external debt held and
challenging management’s assessment of
the
possibility of renewal during the going concern
period and obtained correspondence from the
lender;
•
StrategicStrategicGovernanceFinance 76
OUR APPROACH TO THE AUDIT
Overview of our audit approach
Materiality
Overall materiality:
Group: £322,000, which represents approximately 0.7%
of the group’s revenue.
company: £290,000, which
Parent
represents
approximately 0.5% of the parent company’s gross
assets.
Key audit matters
Key audit matters were identified as:
Materiality
Key audit
matters
Scoping
Key audit matters
Key audit matters are those matters that, in our
professional
judgement, were of most significance
in our audit of the financial statements of the current
period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that
we identified. These matters included those that had the
greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team. 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.
In addition to the matter described in the Material
uncertainty related to going concern section, we have
determined the matters described below to be the key
audit matters to be communicated in our report.
Revenue recognition;
•
• Going concern;
•
Impairment of goodwill and other intangible assets;
and Impairment of investments (parent only).
Scoping
Scoping has been determined to ensure appropriate
coverage of the significant risks as well as coverage of
the key results in the financial statements:
We performed an audit of the financial information of
five components using component materiality (full-
scope audit) and one audit of one or more accounts,
balances, classes of transactions or disclosures of the
component (specific-scope audit) for one component.
We performed analytical procedures at group level
(analytical procedures) on the financial information of all
the remaining group components.
Description
Audit response
KAM
Disclosures
Our results
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
High
Going concern
Revenue recognition
Valuation of investments in
subsidiaries (Parent only)
Management override
of controls
Impairment of goodwill
and intangible assets
Completeness and
accuracy of trade
creditors and accruals
Accuracy of the share
based payment charge
Extent of management judgement
High
Existence and valuation of trade
receivables and contract assets
Existence of
assets and
completeness of
liabilities for IFRS
16 - Leases
Existence and
valuation of
inventory balances
held
Low
Low
Key audit matter
Significant risk
Other risk
Key Audit Matter - Group
How our scope addressed the matter – Group
Revenue recognition
We
fraudulent
identified
transactions as one of the most significant assessed risks of
material misstatement due to fraud.
that revenue
the risk
includes
We determined that the risk of material misstatement lies within
the two types of revenue recognised as follows:
Revenue recognised over time
The significant risk is in relation to fraudulent or erroneous
recording of revenue by allocating incorrect amounts of
consideration and/or
the stage of
completion for a contract. This area includes management
judgement for incomplete contracts at the period end.
incorrectly assessing
It could also occur through manipulation or error in accrued
income which could be inaccurate or incomplete or existence
of contract assets.
Total revenue recognised over time is £40.2m (2020: £35.7m).
Revenue recognised at a point in time.
The significant risk identified is in relation cut off by accelerating
revenues that should not be recognised in the period ending 30
September 2021. This impacts revenue recognised at the end
of the financial period.
Total revenue recognised at a point in time is £6.8m (2020:
£5.2m).
In responding to the key audit matter, we performed the following
audit procedures:
Testing the design and implementation of key controls in the
revenue recognition process, including those related to the
posting and reconciliation of revenue;
Evaluated the revenue recognition policies for consistency
with IFRS 15, through assessment of management’s IFRS 15
paper; including, specifically, consideration of management’s
identification of performance obligations and allocation of the
transaction prices to the performance obligations;
analytical
Performed
comparing
procedures
revenue earned in the period to the prior year, corroborating
management’s explanation for significant or unusual variances;
through
Obtained and read management’s IFRS 15 assessment of
performance obligations and re cording of consideration across
a sample of contracts to determine whether there is an indication
of bias in the amount of consideration recognised by obligation
or that there is an error in the performance obligations identified;
total expected costs
Challenged management’s
to gain
assurance that revenue had been recognised correctly by
reference to the accuracy of the percentage of completion.
We compared costs expected with post period end results and
tested a sample of forecasted costs to supporting evidence
such as purchase orders and supplier quotations;
Tested the historical accuracy of forecasting by comparing final
out turn of completed contracts to original forecasts;
Tested a sample of contracts held by the Group and recalculate
the revenue that should have been recognised and revenue that
should have been accrued or deferred in the period;
StrategicStrategicGovernanceFinance
78
Key Audit Matter - Group
How our scope addressed the matter – Group
Key Audit Matter - Parent
How our scope addressed the matter – Parent
Recalculated the period-end accrued and deferred income
balance based on management’s schedules, and perform
procedures on a sample basis to ensure schedules were
complete and accurate;
Sampled from sales made around the period end and determine
whether cut off procedures are appropriate. We used a
proportion of materiality to select our sample and review the
revenue recognised in September 2021; and
Tested a sample of credit notes raised throughout the period
and post period end to ensure revenue is not being artificially
inflated at the period end. Where we identify unusual credit
notes, we tested them to supporting evidence.
Relevant disclosures in the Annual Report and Accounts 2021
•
•
Financial statements: Note 4,
Audit committee report: Page 60
Our results
Based on our audit work performed, we have not identified any
material misstatements relating to the revenue cycle including
fraudulent transactions.
Impairment of goodwill and intangible assets
We identified impairment of goodwill and intangible assets as one
of the most significant assessed risks of material misstatement
due to error.
This is because of the underperformance of the group in the
period and the high level of estimation uncertainty in assessing
the future performance of the group using operating cash flows
and long-term growth rates and also in assessing the appropriate
discount rate to apply in calculating the ‘value in use’ of the cash
generating units (CGU’s):
•
•
This risk is relevant to all CGU’s
The Group recorded goodwill and other intangible assets
with a carrying value of £25.3m as at 30 September 2021
(2020: £26.3m).
In responding to the key audit matter, we per-formed the
following audit procedures on the CGU’s identified:
•
•
•
•
•
•
•
Obtained and read management’s assessment of the CGUs
to assess compliance with IAS 36 and the assignment of
assets to those CGU’s;
Assessed and challenged management’s
impairment
model to ensure appropriate costs and expenses are
included and excluded, and that cash flows included in
the model are appropriate when taking into consideration
COVID-19;
Recalculated and challenged the implied growth rates
included in the model by comparing the actual results to
historical forecasting, evidencing accuracy;
Performed
impairment model and own sensitivities;
Engaged our Valuations team to assess the appropriateness
of the discount rate included in management’s impairment
model;
Performed the same review procedures noted above on
the impairment review performed by management on the
CGU’s disclosed in the prior year; and
Assessed whether
the disclosure
headroom sensitivities
whether the accounting policy is in line with IAS 36.
the
is appropriate and assessing
on management’s
sensitivity
included
analysis
for
Relevant disclosures in the Annual Report and Accounts 2021
•
•
Financial statements: Note 11
Audit committee report: Page 60
Our results
From our audit work performed we are satisfied with
management’s judgement that the goodwill is held at an
appropriate value in use and intangible assets are not materially
impaired.
Valuation of investments in subsidiaries
We identified a significant risk regarding the valuation of
investments in subsidiaries for Tekmar Group plc as one of the
most significant assessed risks of material misstatement due to
error.
This is because of the underperformance of the group in the
period and the high level of estimation uncertainty in assessing
the future performance of the group using operating cash flows
and long-term growth rates and also in assessing the appropriate
discount rate to apply in calculating the ‘recoverable amounts’
of the investments.
We note the market capitalisation of the group is lower than the
value attributed to the investments and as such, an impairment
indicator is present. Management are therefore required to
perform a value in use calculation for these assets.
As at 30 September 2021 the Company has total investments of
£37.1m (2020 £38.9m restated).
Relevant disclosures in the Annual Report and Accounts 2021
•
•
Financial statements: Note 3 and Note 10
Audit committee report: Page 60
Obtained and read management’s assessment of whether there
are indicators of impairment in the investments held to assess
compliance with IAS 36;
Tested management’s workings for the value in use of the
investments. We tested the model to ensure appropriate
costs and expenses are included and excluded, and that cash
flows included in the model are appropriate when taking into
consideration COVID-19;
Recalculated and challenged the implied growth rates included
in the model by comparing the actual results to historical
forecasting, evidencing accuracy;
Performed sensitivity analysis on management’s impairment
model and own sensitivities; and
Engaged our Valuations team to assess the appropriateness of
the discount rate included in management’s impairment model.
Our results
Based on our audit work performed, we agree with the
impairment recorded, the prior year adjustment recorded and
consider the value attributed to investments to be in line with the
recoverable amount of those subsidiaries.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified
misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion
in the auditor’s report.
Materiality was determined as follows:
Materiality measures
Group
Parent company
Materiality for financial
statements as a whole
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of these financial statements. We use materiality in determining the
nature, timing and extent of our audit work.
Materiality threshold
£322,000, which is approximately 0.7% of
the group’s revenue.
£290,000, which is approximately 0.5% of
the parent company’s gross assets.
Significant judgements
made by auditor in
determining the materiality
In determining materiality, we made the
following significant judgements:
In determining materiality, we made the
following significant judgements:
•
The metrics most relevant to the users
of the financial statements which was
determined to be revenue following the
review of broker report and the previous
financial statements;
•
The metrics most relevant to the users
of the financial statements which was
determined to be gross assets for the
parent entity;
StrategicStrategicGovernanceFinance 80
Materiality measures
Group
Parent company
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
• Whether the metric has been materiality
influenced by matters such as
COVID-19, Brexit or changes in the
marketplace; and
• Whether the metric has been materiality
such as
influenced by matters
COVID-19, Brexit or changes in the
marketplace; and
•
This benchmark is considered the most
appropriate because of the stability of
revenue compared to the profit before
tax.
•
This benchmark
the
most appropriate because the parent
company is a holding company.
is considered
Performance materiality
used to drive the extent of
our testing
We set performance materiality at an amount less than materiality for the financial statements
as a whole to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for the financial statements
as a whole.
Performance materiality
threshold
£193,000, which is 60% of financial
statement materiality.
£174,000, which
statement materiality.
is 60% of
financial
Significant judgements
made by auditor
in determining the
performance materiality
Specific materiality
In determining performance materiality, we
made the following significant judgements:
In determining performance materiality, we
made the following significant judgements:
•
The audit is a first period following a
change in statutory auditor.
•
The audit is a first period following a
change in statutory auditor.
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Specific materiality
We determined a lower level of specific
materiality for the following areas:
We determined a lower level of specific
materiality for the following areas:
• Directors’ remuneration; and
Related party transactions.
•
•
•
Directors’ remuneration; and
Related party transactions.
Communication of
misstatements to the audit
committee
We determine a threshold for reporting unadjusted differences to the audit committee.
Threshold for
communication
£16,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£14,500 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
Overall materiality – Group
Overall materiality – Parent company
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected
misstatements.
An overview of the scope of our audit
We performed a risk-based audit
that requires an
understanding of the group’s and the parent company’s
business and in particular matters related to:
its components, and their
Understanding the group,
environments, including group-wide control
• We obtained an understanding of the group and its
environment,
including group-wide controls, and
assessed the risks of material misstatement at the
group level; and
• we obtained an understanding of the effect of the group
organisational structure on the scope of the audit, for
example, the level of centralisation of the group control
function and the use of service organisations.
Identifying significant components
• We evaluated the identified components to assess their
significance and determined the planned audit response
based on a measure of materiality. Significance was
determined as a percentage of the group’s total
revenue, profit before tax and total assets as well as
considering qualitative factors, such as a component’s
specific nature or circumstances; and
For five components we responded with a full-scope
audit of their financial information and for one further
•
component we performed a specific-scope audit.
For the remaining seven components we performed
analytical procedures.
Performance of our audit
•
•
All KAMs were addressed with the full-scope audit
procedures and specific-scope audits where relevant to
the component;
Specific procedures were primarily designed to obtain
further coverage of the revenue recognition KAM;
• We performed the full-scope audit and specific-scope
audits across the components in line with the scope
described. We engaged with one component auditor to
provide support to the group engagement team in the
UK;
• We communicated with the component auditor to
ensure that the group approach was understood and
adopted locally, that the work performed was to an
appropriate standard and appropriately addressed the
key audit matters as appropriate.
StrategicStrategicGovernanceFinance 82
Audit approach
Number of
components
% coverage
Revenue
Full-scope audit
Specified audit procedure
Analytical procedures
Total
5
1
7
13
90
4
6
100
% coverage
profit
before tax
96
3
1
100
Other information
The directors are responsible for the other information.
The other information comprises the information included
in the annual report and accounts, other than the financial
statements and our auditor’s report thereon. Our opinion on
the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies
Act 2006 is unmodified
In our opinion, based on the work undertaken in the course
of the audit:
•
•
the information given in the strategic report and the
directors’ report for the financial period for which the
financial statements are prepared is consistent with the
financial statements; and
the strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements.
Matter on which we are required to report under the
Companies Act 2006
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us 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
certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and explanations
we require for our audit.
the directors are responsible
Responsibilities of directors for the financial statements
As explained more fully in the statement of directors’
the
responsibilities,
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
for
In preparing the financial statements, the directors are
responsible for assessing the group’s and the 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 the directors either
intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
including
fraud, are
Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
instances of non-
Irregularities,
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. Owing to the inherent limitations of an audit, there is an
unavoidable risk that material misstatements in the financial
statements may not be detected, even though the audit is
properly planned and performed in accordance with the ISAs
(UK).
adequacy of the training to inform staff of the relevant
legislation, the adequacy of procedures for authorisation
of transactions and procedures to ensure that possible
breaches of requirements are appropriately investigated
and reported.
•
• We made enquiries of the one component auditor, and
requested that they confirm to us instances of non-
compliance with laws and regulations that gave rise to
a risk of material misstatement of the group financial
statements.
These audit procedures were designed to provide
reasonable assurance that the financial statements
were free from fraud or error. The risk of not detecting
a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error and
detecting irregularities that result from fraud is inherently
more difficult than detecting those that result from error,
as fraud may involve collusion, deliberate concealment,
forgery or intentional misrepresentations. Also, the
further removed non-compliance with
laws and
regulations is from events and transactions reflected
in the financial statements, the less likely we would
become aware of it.
Use of our report
This report is made solely to 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.
Victoria McLoughlin
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
24th February 2022
The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below:
• We obtained an understanding of the legal and
regulatory frameworks that are applicable to the group
and the parent company and determined that the most
significant are applicable law and international accounting
standards in conformity with the requirements of the
Companies Act 2006 (for the group), United Kingdom
Generally Accepted Accounting Practice (for the parent
company) and relevant tax regulations.
• We assessed the susceptibility of the group’s and the
parent company’s financial statements to material
misstatement, including how fraud might occur, by
evaluating management’s incentives and opportunities
for manipulation of the financial statements. This
included the evaluation of the risk of management
override of controls. We determined that the principal
risks were in relation to:
•
journal entries that increased revenues or that
reclassified costs from the income statement to the
balance sheet that are posted by senior finance
personnel;
potential management bias
in determining
accounting estimates, especially in relation to their
assessment of the valuation of intangible assets;
and
transactions with related parties outside the normal
course of business.
•
•
•
Assessment of the appropriateness of the collective
competence and capabilities of the engagement team
including consideration of the engagement team’s:
•
through appropriate
understanding of, and practical experience
with, audit engagements of a similar nature and
complexity
training and
participation
knowledge of the industry in which the group and
the parent company operate; and
understanding of
regulatory
requirements specific to the group and the parent
company.
legal and
•
•
the
•
• We had team communications in respect of potential
non-compliance with laws and regulations and fraud
included the potential for fraud in revenue recognition
through manipulation of deferred income.
In assessing the potential risks of material misstatement,
we obtained an understanding of the group’s and the
parent company’s operations, including the nature
of their revenue sources, products and services and
of their objectives and strategies to understand the
classes of transactions, account balances, expected
financial statement disclosures and business risks that
may result in risks of material misstatement.
• We obtained an understanding of the group’s and the
parent company’s control environment, including the
StrategicStrategicGovernanceFinance 84
Consolidated Statement of
Comprehensive Income
for the 18-month period ended 30 September 2021
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Group operating (loss) / profit
Analysed as:
Adjusted EBITDA (1)
Depreciation
Amortisation
Exceptional share based payments charge
Exceptional items
Group operating (loss) / profit
Finance costs
Finance income
Net finance costs
(Loss) / Profit before taxation
Taxation
(Loss) / Profit for the period
Equity-settled share-based payments
Retranslation of overseas subsidiaries
Total comprehensive income for the period
(Loss) / Profit attributable to owners of the parent
Total Comprehensive income attributable to owners of the parent
(Loss) / Profit per share (pence)
Basic
Diluted
All results derive from continuing operations.
18M ended
30 Sep
2021
£000
47,034
(35,794)
11,240
(16,721)
48
(5,433)
12M ended
31 Mar
2020
£000
40,943
(28,671)
12,272
(10,227)
-
2,045
(2,115)
(2,031)
(1,651)
364
-
(5,433)
(402)
5
(397)
(5,830)
394
(5,436)
(164)
(153)
(5,753)
(5,436)
(5,753)
(10.60)
(10.60)
4,695
(1,253)
(834)
(454)
(109)
2,045
(170)
84
(86)
1,959
3
1,962
446
-
2,408
1,962
1,962
3.85
3.73
Note
4
6
6
12
11
23
6
7
9
10
10
(1) Adjusted EBITDA, which is defined as profit before net finance costs, tax, depreciation, amortisation, share based
payments charge, and exceptional items is a non-GAAP metric used by management and is not an IFRS disclosure.
Consolidated Balance Sheet
as at 30 September 2021
Non-current assets
Property, plant and equipment
Goodwill and other intangibles
Total non-current assets
Current assets
Inventory
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Share capital
Share premium
Merger relief reserve
Merger reserve
Foreign currency translation reserve
Retained losses
Total equity
Non-current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Deferred tax liability
Total non-current liabilities
Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Corporation tax payable
Total current liabilities
Total liabilities
Total equity and liabilities
Note
12
11
14
15
16
21
18
17
19
18
17
30 Sep
2021
£000
5,696
25,307
31,003
3,966
17,971
3,482
25,419
56,422
516
64,097
1,738
(12,685)
(153)
(13,290)
40,223
3,183
343
125
3,651
3,160
9,121
267
12,548
16,199
56,422
31 Mar
2020
£000
5,892
26,294
32,186
2,536
26,819
2,130
31,485
63,671
513
64,100
1,738
(12,685)
-
(7,690)
45,976
310
355
469
1,134
504
16,010
47
16,561
17,695
63,671
The Group financial statements were approved by the Board and authorised for issue on 24 February 2022 and were
signed on its behalf by:
Derek Bulmer
Chief Financial Officer & Company Secretary
Company registered number: 11383143
StrategicStrategicGovernanceFinance
86
Consolidated Statement of
Changes in Equity
for the 18-month period ended 30 September 2021
Consolidated Cash Flow
Statement
for the 18-month period ended 30 September 2021
Share
capital
£000
Share
premium
£000
Merger
relief
reserve
£000
Merger
reserve
£000
Retained
earnings
£000
Foreign
currency
translation
reserve
£000
Total equity
attributable to
the owners of
the parent
£000
Total
equity
£000
Balance at 31 March 2019
507
64,100
993
(12,685)
(10,098)
Profit for the year
Total comprehensive income for
the year
Issue of shares
Share based payments
Total transactions with owners,
recognised directly in equity
-
-
6
-
6
-
-
-
-
-
-
-
745
-
745
-
-
-
-
-
1,962
1,962
-
446
446
Balance at 31 March 2020
513
64,100
1,738
(12,685)
(7,690)
(Loss) for the Period
Total comprehensive income for
the year
Issue of shares
Share based payments
Exchange difference on
translation of overseas subsidiary
Total transactions with owners,
recognised directly in equity
-
-
3
-
-
3
-
-
(3)
-
-
(3)
-
-
-
-
-
-
-
-
-
-
-
-
(5,436)
(5,436)
-
(164)
-
(164)
-
-
-
-
-
-
-
-
-
-
-
(153)
(153)
42,817
42,817
1,962
1,962
1,962
1,962
751
446
1,197
751
446
1,197
45,976
45,976
(5,436)
(5,436)
(5,436)
(5,436)
-
(164)
(153)
-
(164)
(153)
(317)
(317)
Balance at 30 September 2021
516
64,097
1,738
(12,685)
(13,290)
(153)
40,223
40,223
Cash flows from operating activities
(Loss) / profit before taxation
Adjustments for:
Depreciation
Amortisation of intangible assets
Share based payments charge
Finance costs
Finance income
Changes in working capital:
Increase in inventories
Decrease / (increase) in trade and other receivables
(Decrease) / increase in trade and other payables
Cash (used in) generated from operations
Tax recovered
Net cash inflow/(outflow) 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) / inflow from investing activities
Cash flows from financing activities
Facility drawdown
Lease obligation borrowings
Repayment of borrowings under Lease obligations
Interest paid
Net cash inflow / (outflow) from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
18M ended
30 Sep 2021
£000
12M ended
31 Mar 2020
£000
(5,830)
2,031
1,651
(135)
402
(5)
(1,886)
(1,429)
8,847
(6,954)
(1,422)
240
(1,182)
(1,840)
(664)
5
-
5
(2,494)
6,052
247
(770)
(348)
5,181
1,505
2,130
(153)
3,482
1,959
1,253
834
488
170
(84)
4,620
(512)
(4,393)
2,357
2,072
209
2,281
(1,704)
(729)
-
(1,637)
84
(3,986)
-
-
(355)
-
(355)
(2,060)
4,190
-
2,130
StrategicStrategicGovernanceFinance
88
Notes to the Group Financial Statements
for the 18-month period ended 30 September 2021
1. General Information
Tekmar Group plc (the “Company”) is a public limited
company incorporated and domiciled in England and
Wales. The registered office of the Company is Innovation
House, Centurion Way, Darlington, DL3 0UP. The
registered company number is 11383143.
The principal activity of the Company and its subsidiaries
(together the “Group”) is that of design, manufacture
and supply of subsea stability and protection technology,
including associated subsea engineering services,
operating across the global offshore energy markets,
predominantly Offshore Wind.
Forward looking statements
Certain statements in this Annual report are forward
looking. The terms “expect”, “anticipate”, “should be”,
“will be” and similar expressions identify forward-looking
statements. Although the Board of Directors believes
that the expectations reflected in these forward-looking
statements are reasonable, such statements are subject
to a number of risks and uncertainties and events could
differ materially from those expressed or implied by these
forward-looking statements.
2. Basis of preparation and accounting policies
The Group’s principal accounting policies have been
applied consistently to all of the years presented, with the
exception of the new standards applied for the first time
as set out in paragraph (c) below where applicable.
(a) Basis of preparation
The results for the 18 months ended 30 September 2021
have been prepared in accordance with international
accounting standards in conformity with companies
act 2006 (“IFRS). The financial statements have been
prepared on the going concern basis and on the historical
cost convention modified for the revaluation of certain
financial instruments. The comparative period represents
12 months from 1 April 2019 to 31 March 2020.
Tekmar Group plc (“the Company”) has adopted all IFRS
in issue and effective for the year.
(b) Going concern
The Group meets
its day-to-day working capital
requirements through its available banking facilities which
includes a CBILs loan of £3.0m currently available to 31
October 2022 and a trade loan facility of up to £4.0m
that can be drawn against supplier payments, currently
available to 30 November 2022. The latter is provided
with support from UKEF due to the nature of the business
activities both in renewable energies and in driving growth
through export lead opportunities. The Group held £3.5m
of cash at 30 September 2021 including full draw down
of the £3.0m CBILS loan and a further £3.0m of the trade
loan facility. There are no financial covenants that the
Group must adhere to in either of the bank facilities.
The Directors have prepared cash flow forecasts to
30 September 2023. The base case forecasts include
assumptions
for annual revenue growth supported
by current order book, known tender pipeline, and by
publicly available market predictio`ns for the sector. The
forecasts also assume a retention of the costs base of
the business with inflationary increases of 2% on salaries
and a cautious recovery of gross margin on contracts.
These forecasts show that the Group is expected to
have a sufficient level of financial resources available
to continue to operate on the assumption that the two
facilities described are renewed.
Given the planned recovery of the Group from the
impacts of the COVID-19 pandemic and recognising the
significant market opportunity for growth in the market
for off-shore energy, the Directors have sensitised their
base case forecasts for a severe but plausible downside
impact.
This sensitivity includes reducing revenue by 15% for the
year to 30 September 2023, including the loss or delay
of a certain level of contracts in the pipeline that form
the base case forecast, and a 15% increase in costs
across the Group as a whole for the same period. The
base case forecast also includes discretionary spend on
capital outlay which has been withheld in the sensitised
case. In addition, the directors note there is further
discretionary spend within their control which could be
cut, if necessary, although this has not been modelled
in the sensitised case given the headroom already
available. These sensitivities have been modelled to give
the Directors comfort in adopting the going concern basis
of preparation for these financial statements. Further to
this, a ‘reverse stress test’ was performed to determine at
what point there would be a break in the model.
Based on this assessment, the Directors are satisfied
that, taking account of reasonably foreseeable changes
in trading performance and on the basis that the bank
facilities are renewed, these forecasts and projections
show that the Group is expected to have a sufficient level
of financial resources available through current facilities
to continue in operational existence and meet its liabilities
as they fall due for at least the next 12 months from the
date of approval of the financial statements and for this
reason they continue to adopt the going concern basis in
preparing the financial statements.
Facilities
Within both the base case and severe but plausible case,
management have assumed the renewal of both the
CBILS loan and trade loan facility in November 2022.
In the unlikely case that the facilities are not renewed,
the Group would aim to take a number of co-coordinate
actions designed to avoid the cash deficit that would
arise.
The directors are confident, based upon
the
communications with the team at Barclays, the historical
strong relationship and recent bank facility renewal in
November 2021, that these facilities will be renewed and
will be available for the foreseeable future.
However, as the renewal of the two facilities in October
and November 2022 are yet to be formally agreed and
the Group’s forecasts rely on their renewal, these events
or conditions indicate that a material uncertainty exists
that may cast significant doubt on the Group’s and
parent company’s ability to continue as a going concern
(c) New standards, amendments and interpretations
The new standards, amendments or interpretations
issued in the year, with which the Group has to comply
with, have not had a significant effect impact on the
Group. There are no standards endorsed but not yet
effective that will have a significant impact going forward..
(d) Basis of consolidation
Subsidiaries are all entities over which the Group has
control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to
affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and are
deconsolidated from the date control ceases. Inter-
company transactions, balances and unrealised gains
and losses on transactions between Group companies
are eliminated.
(e) Revenue
Revenue (in both the subsea energy and the marine civils
markets) arises from the supply of subsea protection
solutions and associated equipment, principally through
fixed fee contracts. There are also technical consultancy
services delivered through subsea energy.
To determine how to recognise revenue in line with IFRS
15, the Group follows a 5-step process as follows:
Identifying the contract with a customer
Identifying the performance obligations
1.
2.
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
solutions
For the majority of revenue transactions, the Group enters
individual contracts for the supply of subsea protection
solutions, generally for a specific project in a particular
geographic location. Each contract generally has one
performance obligation, to supply subsea protection
solutions. When the contracts meet one or more of the
criteria within step 5, including the right to payment for
the work completed, including profit should the customer
terminate, then revenue is recognised over time.
StrategicStrategicGovernanceFinance 90
If the criteria for recognising revenue over time is not met,
revenue is recognised at a point in time, normally on the
transfer of ownership of the goods to the customer.
For contracts where revenue is recognised over time,
an assessment is made as to the most accurate method
to estimate stage of completion. This assessment is
performed on a contract by contract basis to ensure that
revenue most accurately represents the efforts incurred
on a project. For the majority of contracts this is on an
inputs basis (costs incurred as a % of total forecast costs).
There are also contracts which include the manufacture
of a number of separately identifiable products. In
such circumstances, as the deliverables are distinct,
each deliverable is deemed to meet the definition of a
performance obligation in its own right and do not meet
the definition under IFRS of a series of distinct goods or
services given how substantially different each item is.
Revenue for each item is stipulated in the contract and
revenue is recognised over time as one or more of the
criteria for over time recognition within IFRS 15 are met.
Generally for these items, an output method of estimating
stage of completion is used as this gives the most accurate
estimate of stage of completion. On certain contracts
variation orders are received as the scope of contract
changes, these are review on a case-by-case basis to
ensure the revenue for these obligations is appropriately
recognised.
In all cases, any advance billings are deferred and
recognised as the service is delivered.
ii) Manufacture and distribution of ancillary products,
equipment.
The Group also receives a proportion of its revenue
streams through the sale of ancillary products and
equipment. These individual sales are formed of individual
PO’s for which goods are ordered or made using inventory
items. These items are recognised on a point in time basis,
being the delivery of the goods to the end customer.
iii) Provision of consultancy services.
The entities within the offshore energy division also provide
consultancy based services whereby engineering support
is provided to customers. These contracts meet one or
more of the criteria within step 5, including the right to
payment for the work completed, including profit should
the customer terminate. Revenue is recognised over time
on these contracts using the inputs method.
The Group has a number of revenue transactions which
are generally contracted with customers using purchase
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.
Accounting for revenue is considered to be a key
accounting judgement which is further explained in note 3.
(f) EBITDA and Adjusted EBITDA
Earnings before Interest, Taxation, Depreciation and
Amortisation (“EBITDA”) and Adjusted EBITDA are non-
GAAP measures used by management to assess the
operating performance of the Group. EBITDA is defined
as profit before net finance costs, tax, depreciation and
amortisation. 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.
(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 underlying
financial performance in the period, so as to facilitate
comparison with prior years and assess trends in financial
performance more readily.
(h) Foreign currency
Transactions in foreign currencies are translated into the
Group’s presentational 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. Non-monetary items carried at
fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency
are not retranslated. 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
Property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment
loss.
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 property is accounted for as a “right-of-use” asset
under IFRS 16 Leases. The initial value of a right-of-use
asset is determined by the value of the lease liability.
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–
25% straight line
Production tooling - 3 years straight line
Fixtures & fittings - 4 years straight line
Motor vehicles - 4 years reducing balance or straight line
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.
Goodwill is stated at cost 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.
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
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.
StrategicStrategicGovernanceFinance
92
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.
(i) Impairment
Goodwill is not amortised but is reviewed for impairment
at least annually. Intangible assets which are not yet
available for use are tested for impairment 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.
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.
losses recognised
Impairment
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.
(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 pre-tax
rate that reflects current market assessments of the
time value of money and, where appropriate, the risks
specific to the liability. As noted by the Group in prior
public announcements, there is an emerging industry-
wide issue regarding abrasion of legacy cable protection
systems installed at offshore wind farms. The Group has
addressed technical improvements based on industry
lessons learned and is engaged and sharing lessons
with partners to address these industry-wide issues and
supporting customers with such issues. The precise cause
of the issues are not clear and could be as a result of a
number of factors, such as the absence of a second layer
of rock to stabilise the cables. Tekmar is committed to
working with relevant installers and operators, including
directly with customers who have highlighted this issue,
to investigate the root cause and assist with identifying
potential remedial solutions but given the extensive
uncertainties and level of variabilities at this early stage of
investigations no conclusions can yet be made.
(p) Leases
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 that have
a lease term of less than 12 months 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 period 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
tax rates enacted or
substantively enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous years.
the year, using
for
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.
(s) 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, which the exception
of derivative financial instruments which are held at FVTPL.
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
transaction price and thereafter are measured at amortised
cost using the effective interest rate. A loss allowance for
expected credit losses on trade and other receivables and
contract assets is measured at an amount equal to the
lifetime expected credit losses. Lifetime expected credit
losses are the expected credit losses that will result from
all possible default events over the expected life of a
financial instrument. This assessment is performed on a
collective basis considering forward-looking information.
The Group considers a financial asset to be in default
when the receivable is unlikely to pay its credit obligations
to the Group in full without recourse by the Group to
actions such as realising security (if any is held); or the
financial asset is more than 120 days old.
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.
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled, or
expire.
Interest-bearing borrowings are recognised initially at fair
value less attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated
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
StrategicStrategicGovernanceFinance
94
thereafter at amortised cost using the effective interest
rate method.
other reserves of the Company as if it had always existed,
with the difference presented as the merger reserve.
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 across Offshore
Energy and Marine Civils and 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.
Project performance is also monitored by both business
entities and by Offshore Wind and Subsea markets to
provide differing perspectives.
(w) Share capital
Share capital represents the nominal value of shares that
have been issued.
(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) Merger reserve
The merger reserve and the merger relief reserve were
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
(z) Translation reserve
For the purpose of presenting consolidated financial
statements, the assets and liabilities of the Group’s
foreign operations are translated at exchange rates
prevailing on the statement of financial position date.
Income and expense items are translated at the average
exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case
the exchange rates at the date of transactions are used.
Exchange differences arising, if any, are recognised in
other comprehensive income and accumulated in equity.
On consolidation, the results of overseas operations are
translated into pounds sterling at rates approximating to
those ruling when the transactions took place. All assets
and liabilities of overseas operations are translated at
the rate ruling at the statement of financial position date.
Exchange differences arising on translating the opening
net assets at opening rate and the results of overseas
operations at actual rate are recognised directly in other
comprehensive income and are credited/(debited) to the
translation reserve.
(aa) 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.
(bb) Retained earnings
Retained earnings includes all current and prior year
retained profits and losses.
(ab) Government grants
Government grants are not recognised until there is
reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be
received.
income
Government grants are recognised
statement so as to match them with the related expenses
that they are intended to compensate.
the
in
Grants that relate to capital expenditure 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.
The Group has received Government grants in relation to
the Coronavirus Job Retention Scheme (CJRS) provided
by the UK Government in response to COVID-19’s impact
on business. The Group has elected to account for these
Government grants within administrative expenses, rather
than to show these separately as other operating income.
(ac) Share based payments
The Group operates
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.
equity-settled
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 . Estimates and judgements are continually
evaluated and are based on historical experience and
other factors including expectations of future events that
are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The Directors consider that the following estimates and
judgements are likely to have the most significant effect on
the amounts recognised in the Group financial statements.
(a) Critical judgements in applying the entity’s accounting
policies
Revenue recognition
Judgement is applied in determining the most appropriate
method to apply in respect of recognising revenue over-
time as the service is performed using either the input or
output method. Further details on how the policy is applied
can be found in note 2(e).
Product development capitalisation
in note 2, Group expenditure on
As described
development activities is capitalised if it meets the criteria
as per IAS 38. Management have exercised and applied
judgement when determining whether the criteria of IAS
38 is satisfied in relation to development costs. As part
of this judgement process, management establish the
future Total Addressable Market relating to the product or
process, evaluate the operational plans to complete the
product or process and establish where the development
is positioned on the Group’s technology road map and
asses the costs against IAS 38 criteria. This process
involves input from the Group’s Chief Technical Officer
plus the operational, financial and commercial functions
and is based upon detailed project cost analysis of both
time and materials.
(b) Critical accounting estimates
Revenue recognition – stage of completion when using
input method
Revenue on contracts is recognised based on the stage
of completion of a project, which, when using the input
method, is measured as a proportion of costs incurred
out of total forecast costs. Forecast costs to complete
each project are therefore a key estimate in the financial
statements and can be inherently uncertain due to
changes in market conditions. For the partially complete
projects in Tekmar Energy at year end if the percentage
completion was 1% different to management’s estimate
the revenue impact would be £123,926. Within Subsea
Innovation and Pipeshield International there were a
number of projects in progress over the year end and a
1% movement in the estimate of completion would impact
revenue in each by £78,065 and £86,250 respectively.
However, the likelihood of errors in estimation is small,
as the businesses have a history of reliable estimation
of costs to complete and given the nature of production,
costs to complete estimate are relatively simple.
for
Recoverability of contract assets and receivables
Management judges the recoverability at the balance
sheet date and makes a provision for impairment where
appropriate. The resultant provision
impairment
represents management’s best estimate of losses incurred
in the portfolio at the balance sheet date, assessed on
the customer risk scoring and commercial discussions.
Further, management estimate the recoverability of
any AROC balances relating to customer contracts.
This estimate includes an assessment of the probability
of receipt, exposure to credit loss and the value of any
potential recovery. Management base this estimate using
the most recent and reliable information that can be
reasonably obtained at any point of review.
StrategicStrategicGovernanceFinance 96
A material change in the facts and circumstances could
lead to a reversal of impairment proportional to the
expected cash inflows supported by this information.
Impairment of Non-Current assets
Management conducts annual impairment reviews of
the Group’s non-current assets on the consolidated
statement of financial position. This includes goodwill
annually, development costs where IAS 36 requires it,
and other assets as the appropriate standards prescribe.
Any impairment review is conducted using the Group’s
future growth targets regarding its key markets of offshore
energy and marine civils. Sensitivities are applied to the
growth assumptions to consider any potential long-term
impact of current economic conditions, such as the
impact caused by the COVID-19 pandemic. Provision
is made where the recoverable amount is less than the
current carrying value of the asset. Further details as to
the estimation uncertainty and the key assumptions are
set out in note 11.
4. Segmental Reporting
Management has determined the operating segments
based upon the information provided to the executive
Directors which
is considered the chief operation
decision maker. The Group is managed and reports
internally by business division and market and has
changed the composition of its reportable segments for
the year ended 30 September 2021 to reflect this. The
change in segmental reporting gives a more accurate
representation of the combined entity product offering
across the group. The previous period was reported as
four reportable segments being the separate business
entities.
Analysis of revenue by region
UK & Ireland
China
USA & Canada
Middle East
Rest of the World
Analysis of revenue by market
Offshore Wind
Other Offshore
Analysis of revenue by product category
Offshore Energy protection systems & equipment
Marine Civils
Engineering consultancy services
Analysis of revenue by recognition point
Point in Time
Over Time
Major customers
In the period ended 30 September 2021 there was One
major customer[s] within the offshore energy segment
that individually accounted for at least 10% of total
revenues (2020: two customers). The revenues relating
to these in the period to 30 September 2021 were
£7,123,000 (2020: £11,079,395). Included within this
is revenue from multiple projects with different entities
within each customer.
18M ending
30 Sep 2021
£000
12M ending
31 Mar 2020
£000
20,312
7,068
4,351
3,810
11,493
47,034
26,899
20,135
47,034
30,584
13,196
3,254
47,034
6,791
40,243
47,034
24,152
1,108
1,479
1,958
12,219
40,943
25,706
15,237
40,943
34,774
3,143
3,026
40,943
5,194
35,749
40,943
At 30 September 2021, the group had a total transaction price £9,724k (2020: £10,056k) allocated to performance
obligations on contracts which were unsatisfied or partially unsatisfied at the end of the reporting period. The amount
of revenue recognised in the reporting period to 30 September 21 which was previously recorded in contract liabilities
was £991k (2020: £570k).
Profit and cash are measured by division and the Board reviews this on the following basis.
Revenue
Gross profit
% Gross profit
Operating profit/(loss)
Analysed as:
Adjusted EBITDA
Depreciation
Amortisation
Share based payments
Exceptional
Operating (loss)/profit
Interest & similar expenses
Tax
(Loss)/profit after tax
Other information
Reportable segment assets
Reportable segment liabilities
Revenue
Gross profit
% Gross profit
Operating profit/(loss)
Analysed as:
Adjusted EBITDA
Depreciation
Amortisation
Share based payments
Exceptional
Operating profit/(loss)
Tax & Finance cost
Profit/(loss) after tax
Other information
Reportable segment assets
Reportable segment liabilities
Offshore Energy
2021
£000
33,837
8,208
24%
(4,266)
Marine Civils
2021
£000
13,197
3,032
23%
969
Group /
Eliminations
£000
-
-
-
(2,136)
(1,881)
(1,805)
(523)
(57)
-
(4,266)
(285)
235
(4,316)
25,048
(6,755)
1,195
(226)
-
-
-
969
(8)
(230)
731
6,793
(2,832)
(1,429)
-
(1,128)
421
-
(2,136)
(104)
389
(1,851)
25,542
(7,072)
Offshore Energy
2020
£000
37,800
11,212
30%
3,097
Marine Civils
2020
£000
3,143
1,060
34%
295
Group /
Eliminations
£000
-
-
-
(1,347)
4,781
(1,166)
(391)
(122)
(5)
3,097
(146)
2,951
41,996
20,716
382
(87)
-
-
-
295
93
388
4,586
1,255
(468)
-
(443)
(332)
(104)
(1,347)
(30)
(1,377)
17,089
(4,276)
Total
2021
£000
47,034
11,240
24%
(5,433)
(2,115)
(2,031)
(1,651)
364
-
(5,433)
(397)
394
(5,436)
57,383
(16,659)
Total
2020
£000
40,943
12,272
30%
2,045
4,695
(1,253)
(834)
(454)
(109)
2,045
(83)
1,962
63,671
17,695
StrategicStrategicGovernanceFinance 98
5. Employees and Directors
(a) Staff numbers and costs
The average number of persons employed by the Group (including directors) during the period, analysed by category,
was as follows:
Directors
Sales
Administration
Technical
Direct labour
Staff costs for the Group during the period were:
Wages and salaries
Social security costs
Defined contribution pension cost
Share based payments (note 23)
2021
(No)
5
9
41
69
63
187
2020
(No)
5
10
53
40
86
194
18M ending
30 Sep 2021
£000
12M ending
31 Mar 2020
£000)
11,967
1,219
568
205
13,959
7,100
754
300
454
8,608
(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
18M ended
30 Sep 2021
£000
12m ended
31 Mar 2020
£000
1,023
116
1,139
20
1,159
497
62
559
19
578
Share options were awarded in the year, see note 23 for details of share option plans. No existing share options were
exercised in the year by key management personnel.
Director remuneration
Basic salary / fees
£000
Benefits
£000
Bonus
£000
Pension
£000
FY21 Total
£000
FY20 Total
£000
Name of Director
J Ritchie
S Hurst
A MacDonald
C Gill
J Brown
D Bulmer
I Ritchey
170
217
250
63
76
62
19
-
115
50
-
-
-
-
-
-
-
-
-
4
11
-
-
4
-
1
174
343
300
63
80
62
20
214
150
70
45
37
0
0
Highest paid director
The aggregate remuneration of the highest paid director was £343,000 (2020: £214,200), which includes pension
contributions of £10,877 (2020: £10,000), and accrued bonus costs of £276,000 to be paid in October 2021. The
number of directors accruing pension benefits under a defined contribution plan was five (2020: three).
StrategicStrategicGovernanceFinance 100
6. Expenses by nature
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
18M ending
30 Sep 2021
Current
Auditor
£000
100
12M ending
31 Mar 2020
Previous
Auditor
£000
59
69
-
34
203
26
41
10
136
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
Total cost of sales and operating expenses
Exceptional items
Exceptional items in 2020 include:
• Deal related costs, principally professional fees.
7. Net finance costs
Interest payable and similar charges
On other loans
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
Interest expense on lease liabilities was £19,356 (2020: £25,534).
18M ended
30 Sep 2021
£000
-
13,959
1,651
606
1,425
31,873
-
3,001
52,515
12m ended
31 Mar 2020
£000
298
8,606
834
380
872
21,029
109
6,770
38,898
18M ending
30 Sep 2021
£000
12M ending
21 Mar 2020
£000
298
104
402
-
(5)
(5)
397
170
-
170
(80)
(4)
(84)
86
StrategicStrategicGovernanceFinance 102
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 / profit on ordinary activities
Reconciliation of total tax credit:
(Loss) / Profit on ordinary activities before tax
(Loss) / Profit on ordinary activities multiplied by the rate of
corporation tax in the UK of 19% (2020: 19%)
Effects of:
Non-deductible expenses
Non-taxable income
Enhanced R&D tax relief
Impact of unrecognised deferred tax assets
Effect of deferred tax
Adjustments in respect of previous periods
Total taxation credit
Factors that may affect future tax charges
10. Earnings per share
18M ending
30 Sep 2021
£000
12m ending
31 Mar 2020
£000
Basic earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted
average number of ordinary shares in issue. Diluted earnings per share are calculated by including the impact of all
conditional share awards.
-
(18)
(18)
(376)
-
(376)
(394)
(5,830)
(1,108)
294
(147)
(267)
1,228
(376)
(18)
(394)
55
(48)
7
(10)
-
(10)
(3)
1,959
372
147
(208)
(418)
162
(10)
(48)
(3)
The calculation of basic and diluted profit per share is based on the following data:
Earnings £000
Earnings for the purposes of basic and diluted earnings per
share being profit/(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 per ordinary share (pence)
Basic profit per ordinary share
Diluted profit per ordinary share
18M ending
30 Sep 2021
(5,436)
12M ending
31 Mar 2020
1,962
51,248,412
50,961,405
1,545,392
52,829,804
1,625,000
52,586,405
(10.60)
(10.60)
3.85
3.73
Adjusted earnings per ordinary share (pence)*
(9.11)
5.82
The calculation of adjusted earnings per share is based on the following data:
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). The decision for the UK corporation tax rate to remain at 19% (effective
from 1 April 2020) instead of a reduction to 17% was substantively enacted on 17 March 2020. As a result, deferred
tax balances have been measured at the effective rate of 19%.The corporation tax rate will increase from increase to
25% from 19% with effect from April 2023.
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.
(Loss)/profit for the period attributable to equity shareholders
Add back:
Amortisation on acquired intangible assets
Exceptional costs
Share based payment on IPO and SIP at Admission
Tax effect on above
Adjusted earnings
2021
£000
(5,436)
1,128
-
(364)
1
(4,671)
2020
£000
1,962
443
109
454
2
2,970
*Adjusted earnings per share is calculated as profit for the period adjusted for amortisation as a result of business
combinations, exceptional items, share based payments and the tax effect of these at the effective rate of corporation
tax, divided by the closing number of shares in issue at the Balance Sheet date. This is the measure most commonly
used by analysts in evaluating the business’ performance and therefore the Directors have concluded this is a meaningful
adjusted EPS measure to present.
StrategicStrategicGovernanceFinance
104
11. Goodwill and other intangibles
Goodwill
£000
Software
£000
Product
development
£000
Trade
name
£000
Customer
relationships
£000
COST
As at 1 April 2019
On acquisition
Additions
As at 31 March 2020
Additions
As at 30 September 2021
AMORTISATION AND IMPAIRMENT
As at 1 April 2019
Charge for the year
As at 31 March 2020
Charge for the period
As at 30 September 2021
NET BOOK VALUE
As at 1 April 2019
As at 31 March 2020
As at 30 September 2021
23,705
2,587
-
26,292
-
26,292
4,109
-
4,109
-
4,109
19,596
22,183
22,183
181
-
89
270
124
394
78
10
88
44
132
103
182
262
2,001
-
640
2,641
540
3,181
938
381
1,319
4,79
1,798
1,063
1,322
1,383
738
551
-
1,289
-
1,289
36
97
133
193
326
702
1,156
963
446
1,424
-
1,870
-
1,870
73
346
419
935
1,354
373
1,451
516
Total
£000
27,071
4,562
729
32,362
664
33,026
5,234
834
6,068
1,651
7,719
21,837
26,294
25,307
The remaining amortisation periods for software and product development are 6 months to 48 months
(2020: 6 months to 36 months).
Goodwill has been tested for impairment. The method, key assumptions and results of the impairment review are
detailed below:
Goodwill is attributed to the CGU being the division in which the goodwill has arisen. The Group has 2 CGUs and the
goodwill related to each CGU as disclosed below.
Goodwill
Offshore Energy Division
Marine Civils Division
2021
£000
19,593
2,590
2020
£000
19,593
2,590
Goodwill was all allocated to four CGUs last year and this has now changed following the integration of the various
acquisitions into the business model. Goodwill has been tested for impairment by assessing the value in use of the cash
generating unit. The value in use has been calculated using budgeted cash flow projections for the next 4 years. A
terminal value based on a perpetuity calculation using a 2% real growth rate was then added. The next 4 years forecasts
have been compiled at individual entity level with the forecasts in the first 2 years modelled around the known contracts
which the entities have already secured or are in an advanced stage of securing. A targeted revenue stream based on
historic revenue run rates has then been incorporated into the cashflows to model contracts that are as yet unidentified
that will be won and completed in the year. The forecasts for year 3 and year 4 are based on assumed growth rates for
each individual entity, the total growth rate for the group (CAGR 15.5%) are in line with expected market rate.
The cashflow forecasts assume growth in revenue and profitability across the Group. 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.
In addition to growth in revenue and profitability, the key assumptions used in the impairment testing were as follows:
• Gross Margin % returning towards FY20 levels for offshore energy division
•
A post tax discount rate of 12.1 % WACC (FY20 11.6%) estimated using a weighted average cost of capital
adjusted to reflect current market assessment of the time value of money and the risks specific to the group
Terminal growth rate percentage of 2% (FY20: 2%)
•
The discount rate used to test the cash generating units was the Group’s post-tax WACC of 12.1%. The goodwill
impairment review has been tested against a reduction in free cashflows by 80% versus the original budget in each
year. This is considered by management to be the most likely worst-case scenario. Under this sensitivity test sufficient
headroom was available to support the carrying value of goodwill.
Further sensitivity analysis performed by management shows that free cashflows would have to reduce to 56% of
forecasted values to trigger an impairment of goodwill. The post-tax discount rate of 12.1% would need to increase to
13.75% to trigger an impairment of goodwill. Management do not consider either of these scenarios to be likely.
The value in use calculations described above, together with sensitivity analysis, indicate sufficient 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.
StrategicStrategicGovernanceFinance 106
12. Property, Plant and Equipment
13. Investments
Freehold
property
£000
Leasehold
improvements
£000
Containers
& racking
£000
Plant &
equip
£000
Fixture &
fittings
£000
Production
tooling
£000
Motor
Vehicles
£000
Computer
Equipment
£000
Right of
use asset
£000
COST
As at 31 March 2019
Arising on acquisition
Additions
Disposals
As at 31 March 2020
Additions
Disposals
As at 30 September 2021
DEPRECIATION
As at 31 March 2019
Charge for the year
Eliminated on disposal
As at 31 March 2020
Charge for the year
Eliminated on disposal
As at 30 September 2021
2,760
576
-
(450)
2,886
-
-
2,886
20
50
-
70
76
-
146
NET BOOK VALUE
As at 31 March 2019
As at 31 March 2020
As at 30 September 2021
2,740
2,816
2,740
919
1
1
-
921
3
(5)
919
868
36
-
904
17
-
921
51
17
(2)
1,118
-
86
(63)
1,141
77
(24)
1,194
1,099
17
(63)
1,053
69
(24)
1,098
19
88
96
2,306
151
244
-
2,701
1,069
-
3,770
1,107
277
-
1,384
476
-
1,860
1,199
1,317
1,910
-
-
21
-
21
9
-
30
-
1
-
1
13
-
14
-
20
16
1,682
-
632
-
2,314
393
-
2,707
1,024
450
-
1,474
699
-
2,173
658
840
534
11
-
-
-
11
-
-
11
11
-
-
11
-
-
11
-
-
-
427
5
61
-
493
30
(1)
522
328
41
-
369
75
(1)
443
99
123
79
2,369
-
316
-
2,685
258
(120)
2,823
1,634
380
-
2,014
606
(120)
2,500
735
671
323
Total
£000
11,592
733
1,361
(513)
13,173
1,839
(150)
14,862
6,091
1,252
(63)
7,280
2,031
(145)
9,166
5,501
5,892
5,696
Depreciation charges are allocated to cost of sales and administrative expenses in the income statement. The carrying
value of the right of use asset relates to property leases (£302k)and plant and equipment assets (£21k).
As at 30 September 2021, the freehold property with carrying value of £2,740k were subject to a fixed and floating charge
that forms security for the bank borrowings disclosed in note 18.
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
Pipeshield International Limited
Pipeshield Company Limited
Pipeshield International Trading LLC
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
Ordinary
Ordinary
Ordinary
Proportion held by
parent company
100%
-
-
100%
-
100%
-
-
-
-
-
-
-
Proportion held
by Group
100%
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 Innovation
House, Centurion Way, Darlington, DL3 0UP with the following exceptions:
Company / Country of Incorporation / Address
Pipeshield International trading LLC / UAE / C2 Al Buttien Building, Office 642
Pipeshield Company Limited / Saudi Arabia / Dammam, KSA, Po Box 130 31952
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
Pipeshield International Limited
Pipeshield International trading LLC
Pipeshield Company Limited
Tekmar Polyurethanes Limited
Tekmar GmbH
AgileTek Engineering Limited
Ryder Geotechnical Limited
Tekmar Marine Technology Company 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 subsea industry
Design and manufacture of subsea protection solutions for use in
offshore subsea industry
Design and manufacture of subsea asset protection
Design and manufacture of subsea asset protection
Design and manufacture of subsea asset protection
Dormant
Investment
Engineering consulting for subsea environments
Geotechnical consulting for subsea environments
Sales and project management for Asia Pacific region
StrategicStrategicGovernanceFinance 108
14. Inventories
Raw materials
Work in Progress
Finished goods
All inventory items are carried at the lower of cost or net realisable value.
15. Trade and other receivables
Amounts falling due within one year:
Trade receivables not past due
Trade receivables past due (1-30 days)
Trade receivables past due (over 30 days)
Trade receivables net
Contract assets
Other debtors
Prepayments and accrued income
Derivative financial assets
30 Sep 2021
£000
2,222
1,488
256
3,966
31 Mar 2020
£000
2,182
-
354
2,536
30 Sep 2021
£000
31 Mar 2020
£000
4,861
3,192
3,344
11,397
5,432
563
542
37
17,971
9,049
509
296
9,854
14,969
1,261
593
142
26,819
Trade and other receivables are all current and any fair value difference is not material. Trade receivables are assessed
by management for credit risk and are considered past due when a counter party has failed to make a payment when
that payment was contractually due. Management assesses trade receivables that are past the contracted due date
by up to 30 days and by over 30 days.
The carrying amounts of the Group’s trade and other receivables are all denominated in GBP. The derivative financial
asset relates to forward foreign currency contracts.
There have been no provisions for impairment against the trade and other receivables noted above. The Group has
calculated the expected credit losses to be immaterial.
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
30 Sep 2021
£000
31 Mar 2020
£000
3,482
2,130
2,219
585
678
3,482
2,077
18
35
2,130
30 Sep 2021
£000
31 Mar 2020
£000
5,845
222
3,054
9,121
7,597
545
7,868
16,010
The fair value of financial liabilities approximates to their carrying value due to short maturities. Accruals and contract
liabilities for FY20 includes £2.75m in relation to deferred consideration on the Pipeshield acquisition.
Non-current
Accruals and contract liabilities
30 Sep 2021
£000
31 Mar 2020
£000
343
343
355
355
StrategicStrategicGovernanceFinance
110
18. Borrowing
Current
Trade Loan Facility
Lease liability
Non-current
CBILS Bank Loan
Lease liability
Amount repayable
Within one year
In more than one year but less than two years
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
The above carrying values of the borrowings equate to the fair values.
Average interest rates at the balance sheet date
Lease liability
Trade Loan Facility
CBILS Bank Loan
30 Sep 2021
£000
31 Mar 2020
£000
2,999
160
3,159
3,053
131
3,184
3,159
3,141
43
-
-
-
6,343
2021
(%)
3.25
3.10
2.25
-
504
504
-
310
310
505
-
202
45
41
41
814
2020
(%)
3.25
-
-
The CBILS Bank Loan is due for maturity on 31 October 2022, The trade Loan Facility has been renewed post year end
and is due for Maturity on 30 November 2022, as described in note 2b.
Lease liability
This represents the lease liability recognised under IFRS 16. The assets leased are shown as a right of use asset within
Property, plant and equipment (note 12) and relate to the buildings from which the Group operates, along with leased
items of equipment.
The asset and liability have been calculated using a 3.25% discount rate.
These leases are due to expire between March 2022 and September 2024.
Cash flows from financing activities
An analysis of cash flows from financing activities is provided as follows:
Balance at 1 April 2019
Changes from financing cashflows
Payment of lease liabilities
Total Changes from financing cashflows
Other changes
Changes arising from obtaining control of subsidiaries
New Leases
Total other changes
Balance at 1 April 2020
Changes from financing cashflows
Proceeds from loans & borrowings
Payment of lease liabilities
Total changes from financing cashflows
Other changes
New Leases
Interest expense
Total other changes
Balance at 30 September 2021
Lease
liabilities
£000
865
Loans &
Borrowings
£000
-
Total
£000
865
(355)
(355)
48
256
304
814
6,000
(790)
5,210
247
72
319
-
-
-
-
-
-
6,000
-
6,000
-
52
52
6,052
6,343
(355)
(355)
48
256
304
814
-
(790)
(790)
247
20
267
291
StrategicStrategicGovernanceFinance 112
19. Deferred Tax
At start of year
Credit to income statement
Credit on share based payments
Arising on acquisition
At end of year
The deferred tax liability relates to the following:
Accelerated capital allowances on property, plant &
equipment
On intangible assets
On share based payments
Other timing differences
30 Sep 2021
31 Mar 2020
Asset
£000
31
405
(31)
-
(405)
Liability
£000
(500)
(30)
-
-
(530)
Net
£000
(469)
375
(31)
-
(125)
Asset
£000
25
-
6
-
31
Liability
£000
(28)
10
-
(482)
(500)
Net
£000
(3)
10
6
(482)
(469)
-
(119)
(119)
-
-
405
405
(358)
-
(53)
(530)
(358)
-
(352)
(125)
-
-
31
-
31
(34)
(34)
(420)
-
(46)
(500)
(420)
31
(46)
(469)
Other timing difference relate to the deferred tax liability arising on the property revaluation.
In addition to the deferred tax liability above, the Group has additional unrecognised gross tax losses of £7,598,735
(2020: £3,941,000), hence an unrecognised deferred tax asset of £1,899,684 (2020: £749,000). 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.
20. Financial Instruments and Financial Risk
Management
Financial risk management
The Group uses various financial instruments. These have historically included 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 are 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, US dollars, Canadian Dollars and Chinese Yuan. It manages this
foreign currency risk using forward foreign exchange contracts which match the expected receipt of foreign currency
income. At 30 September 2021 this covers the period up to Jan 2022 (As at 31 March 2020 the period to May 2020).
The table below shows the impact in GBP to the profit & Loss account and net assets of the group (excluding any
changes in the fair value of derivatives) if there had been a 5% difference in the year end exchange rates:
At 30 September 2021
+5%
-5%
At 31 March 2020
+5%
-5%
EUR
£000
(79)
89
(488)
539
USD
£000
(132)
145
-
-
CAD
£000
(132)
146
-
-
RMB
£000
(223)
246
-
-
Total
£000
(566)
626
(488)
539
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
bank loan facilities.
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.
StrategicStrategicGovernanceFinance 114
At 30 September 2021
Borrowings
Lease Obligations
Trade and other payables
At 31 March 2020
Lease Obligations
Trade and other payables
2,999
160
5,845
468
7,597
3,053
88
-
199
-
-
43
-
106
-
-
-
-
-
-
Interest rate risk
The Group finances its operations through a mixture of retained profits and bank borrowings. 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.
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 30 September 2021
or 31 March 2020 and no provision for credit losses was made. See note 15 for further information on financial assets
that are past due.
Less than 1 year
£000
Between
1 and 2 years
£000
Between
2 and 5 years
£000
Over 5 years
£000
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
Financial liabilities
Financial liabilities measured at fair value through profit or loss
Forward foreign exchange contracts
Financial liabilities measured at amortised cost
Non-current:
Borrowings
Current:
Borrowings
Trade payables
Net financial assets and liabilities
30 Sep 2021
£000
31 Mar 2020
£000
17,342
3,482
37
20,861
(3,183)
(3,160)
(5,845)
(12,188)
8,673
26,084
2,130
142
28,356
(310)
(504)
(7,597)
(8,411)
19,945
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:
•
•
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 the level of
risk.
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.
StrategicStrategicGovernanceFinance 116
21. Share Capital
Nominal value
At 31 March 2019
Issued during the year
At 31 March 2020
Issued during the period
At 30 September 2021
Ordinary
shares
£0.01
(Number)
50,687,852
573,833
51,261,685
346,918
51,608,603
Ordinary
Share Total
(£)
506,879
5,738
512,617
3,469
516,086
The new shares issued during the period arose from the exercise of share options in the IPO (62,500 shares) and
retention schemes (43,042 shares) (see Note 23) and the free issue of shares to employees (241,376 shares).
22. Related Party Transactions
The directors consider there to be no ultimate controlling party following Admission in June 2018. Related party
transactions with the Company are as follows:
During the period, Tekmar Energy Limited rented a property from a business owned by Gary Ritchie-Bland, father of
James Ritchie, former CEO. Costs relating to this rental during the period were £40,000 (2020: £120,000). No amounts
were due at the period end.
During the period, Agiletek Engineering Limited made payments to Tynetec Engineering Limited, a company with which
Alasdair Macdonald is a director of £33,893 for engineering services. There was no balance outstanding at the year
end. These transactions were on an arm’s length basis and at commercial rates.
Key management compensation is given in note 5 (b).
23. Share based payments
During the year the Group operated four equity-settled share-based payment plans as described below.
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 became
exercisable on 20 June 2020 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 plc Retention Plan (“Retention”)
The retention is a discretionary executive share plan under which the Board may, within certain limits and subject to
any applicable service 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.
The Tekmar Group plc 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.
On 15 September 2021 the Company issued 241,376 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.
The Tekmar Group plc Save as you earn Plan (“SAYE”)
The SAYE is an all-employee ownership plan under which eligible employees are invited to subscribe for options over
the Company’s shares which may be granted at a discount of up to 20%. On 31 March 2021 the Company launched the
a further SAYE plan (SAYE 2021) and options over 190,252 shares were granted to 52 staff. There is a forfeiture period
of 3 years during which employees who participated in the SAYE will lose their award if they resign or are dismissed
from their employment.
StrategicStrategicGovernanceFinance 118
A summary of the options granted is shown in the table below:
Plan
IPO Plan
SIP
SAYE
Retention
LTIP
Plan
IPO Plan
SIP
SAYE
1 April 2020
Granted in
the period
Exercised in
the period
Lapsed in the
period
1,625,000
42,691
428,983
-
-
190,252
225,000
1,294,010
(62,500)
(43,042)
(1,381,250)
(14,102)
(186,715)
(154,125)
(878,250)
30 September
2021 share
options
outstanding
181,250
28,589
432,520
27,833
415,760
Vesting
period
Exercise
period
2 years
3 years
3 years
3 years
3 years
10 years
10 years
10 years
10 years
10 years
1 April 2019
Granted in
the period
Exercised in
the period
Lapsed
in the period
1,625,000
42,691
-
-
-
428,983
-
-
-
-
-
-
31 March 2020
share options
outstanding
1,625,000
42,691
428,983
Vesting
period
Exercise
period
2 years
3 years
3 years
10 years
10 years
10 years
The weighted average share price at the date of exercise for share options exercised during the year was £0.51
(2020:£nil).
The schemes had a weighted average remaining contractual life as follows:
Plan
IPO Plan
SIP
SAYE
Retention Schemes
LTIP
2021
7 years
7 years
8 years
9 years
9 years
2020
8 years
8 years
8 years
-
-
The Group has recognised a total credit of £140,058 (2020: £454,000 expense) in respect of equity-settled share-
based payment transactions in the period ended 30 September 2021. The share-based payment transactions for the
IPO options have been treated as an exceptional cost in the profit and loss account. These transactions account for a
£364,000 credit (2020: 454,000 expense) in the 18 month period to 30 September 2021. The remaining share based
payment transactions are treated as administrative expenses £224,000 charge (2020: Nil).
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:
Plan
Grant Date
Share price at grant date (P)
Expiry Date
Exercise price (P)
Expected Volatility (%)
Risk-free rate (%)
Expectation of meeting
performance criteria
IPO Plan
SIP
SAYE20
SAYE21
Retention
LTIP
20/06/18
130
20/06/18
1.00
44.02
2.0%
75%
13/09/18
161.5
13/09/28
1.00
44.02
2.0%
80%
31/03/20
83
31/03/30
78.00
45.02
2.0%
61%
31/03/21
63.75
31/03/31
50.20
78.95
2.0%
61%
22/08/20
108
22/08/30
1.00
53.85
2.0%
100%
04/08/20
110
04/08/30
1.00
53.57
2.0%
75%
24. Post Balance Sheet Events
There has been no events after the reporting date that require adjustment or disclosure in line with IAS10 events after
the reporting period to the date of the approval of these financial statements.
StrategicStrategicGovernanceFinance 120
Parent Company Balance Sheet
as at 30 September 2021
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
Other loans and borrowings
Trade and other payables
Total current liabilities
Non-current liabilities
Other loans and borrowings
Trade and other payables
Total equity and liabilities
Note
30 Sep 2021
£000
31 March 2020
RESTATED
£000
3
4
4
5
6
37,095
49
15,869
53,013
6,655
589
7,244
38,891
60
15,869
54,820
5,320
-
5,320
60,257
60,140
516
64,097
1,738
(15,076)
51,275
3,000
2,930
5,930
3,052
3,052
513
64,100
1,738
(11,756)
54,595
535
5,010
5,545
-
-
60,257
60,140
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 £3.156m (2020: £11.735m )
The prior year balance sheet was restated as described in note 10.
The Parent Company financial statements were approved by the Board of Directors on 24 February 2022 and were
signed on its behalf by:
Derek Bulmer
Chief Financial Officer & Company Secretary
Company registered number: 11383143
Parent Company Statement of
Changes in Equity
for the 18 Month Period ended 30 September 2021
Balance at 1 April 2019
Loss for the year (Restated)
Total comprehensive expense for
the year (Restated)
Issue of shares
Share based payments
Total transactions with owners,
recognised directly in equity
Share
capital
£000
507
Share
premium
£000
64,100
Merger
relief
reserve
£000
993
Retained
earnings
£000
(468)
Total
equity
£000
65,132
-
-
6
-
6
-
-
-
-
-
-
(11,735)
(11,735)
-
745
-
745
(11,735)
-
447
(11,735)
751
447
447
(1,198)
Balance at 31 March 2020 (Restated)
513
64,100
1,738
(11,756)
54,595
Loss for the period
Total comprehensive expense for
the period
Issue of shares
Share based payments
Total transactions with owners,
recognised directly in equity
-
-
3
-
3
-
-
(3)
-
(3)
-
-
-
-
-
(3,156)
(3,156)
(3,156)
-
(164)
(3,156)
-
(164)
(164)
(164)
Balance at 30 September 2021
516
64,097
1,738
(15,076)
51,275
StrategicStrategicGovernanceFinance
122
Notes to the parent company financial statements
for the year ended 30 September 2021
1. Significant Accounting Policies
The Group has consistently applied the
following
accounting policies to all periods presented in these
financial statements. Certain comparative amounts in
the Parent company balance sheet and Parent company
statement of changes in equity have been restated as a
result of a correction of a prior period error (see note 10)
relating to the carrying value of investments.
Basis of preparation
Tekmar Group plc (the “Company”) is a public limited
company
in England
and Wales. The registered office of the Company is
Innovation House, Centurion Way, Darlington, DL3 0UP.
The registered company number is 11383143.
incorporated and domiciled
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.
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:
•
•
Disclosures” (key management compensation)
IAS 24 “Related Party Disclosures” – the requirement
to disclose related party transactions between two
or more members of a Group; and
IAS 8.30 – the requirement to disclose accounting
standards issued but not effective.
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 £3.156m (2020: £11.735m).
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 their recoverable amount.
•
•
•
•
10(d) (statement of cash flows);
16 (statement of compliance with all IFRS);
111 (cash flow statement information); and
134-136 (capital management disclosures)
The following paragraphs of IAS 1 “Presentation of
Financial Statements”
•
•
•
•
IFRS 7 “Financial Instruments : Disclosures”;
IAS 7 “Statement of Cash Flows”;
IAS 24 (paragraphs 17 and 18a) “Related Party
Deferred taxation
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.
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.
of its financial assets at initial recognition.
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.
Share-based payments
share-based
The Group operates equity-settled
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.
Employer social security contributions payable
in
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.
Financial assets classification
The Company classifies its financial assets as loans and
receivables. Management determines the classification
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 the transaction price, 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 trade and other receivables, including
amounts owed by related entities.
Impairment of financial assets
A loss allowance for expected credit losses on trade
and other receivables and contract assets is measured
at an amount equal to the lifetime expected credit
losses. Lifetime expected credit losses are the expected
credit losses that will result from all possible default
events over the expected life of a financial instrument.
This assessment is performed on a collective basis
considering forward-looking information. The Group
considers a financial asset to be in default when the
receivable is unlikely to pay its credit obligations to the
Group in full without recourse by the Group to actions
such as realising security (if any is held); or the financial
asset is more than 120 days old.
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 are
initially recognised at fair value, 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.
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.
StrategicStrategicGovernanceFinance 124
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 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 accounting estimates
Impairment of non-current assets
The carrying amount of the company’s investments
in subsidiaries for the prior year have been restated
following the identification of a prior period error.
During 2021, the Company discovered that the weighted
average cost of capital (WACC) used in the investment
carrying value impairment review had been erroneously
calculated and applied. On recalculation, the WACC
applied in the impairment calculation should have been
11.6% as opposed to the 8.1% used in the prior year
financial statements.
Had the correct WACC been correctly applied, the
carrying value of the investment in Tekmar Limited
would have exceeded the value in used calculation by
£10,885,000, resulting in an impairment. The prior period
error has been corrected in line with IAS 8, see note 10
for further details. This does not create an impairment to
group goodwill.
The carrying amount of the Company’s investments in
subsidiaries £37,095,000 as at 30 September 2021
(2020: £38,891,000 restated). 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 four year forecast with a
compound average growth rate over the 4 year period
of 15.5%. 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 12.1%.
in use calculations performed
The value
the
impairment review, together with sensitivity analysis using
reasonable assumptions, indicate sufficient headroom
for the investments in Subsea Innovations Limited and
Pipeshield International Limited and therefore do not give
rise to impairment concerns.
for
2. Remuneration of Directors and Auditors
Details of Directors’ remuneration are shown in the Directors’ Remuneration Report on page 62 of the Group financial
statements. Details of auditor remuneration are shown in note 8 of the Group financial statements.
The value in use calculations described above for Tekmar
Limited indicated that the recoverable amount was below
the carrying value at the period-end by £2,048,000. As
a result, an impairment charge off £2,048,000 has been
recognised in FY21.
3. Investments in subsidiary undertakings
Investment in subsidiaries
Capital contribution related to share-based payments for subsidiaries
30 Sep 2021
£000
36,745
350
37,095
31 Mar 2020
Restated
£000
38,793
98
38,891
The carrying amount of the company’s investments in subsidiaries for the prior year have been restated following the
identification of a prior period error.
During 2021, the Company discovered that the weighted average cost of capital (WACC) used in the investment
carrying value impairment review had been erroneously calculated and applied. On recalculation, the WACC applied in
the impairment calculation should have been 11.6% as opposed to the 8.1% used in the prior year financial statements.
Had the correct WACC been correctly applied, the carrying value of the investment in Tekmar Limited would have
exceeded the value in used calculation by £10,885,000, resulting in an impairment. The prior period error has been
corrected in line with IAS 8, see note 10 for further details.
The carrying amount of the Company’s investments in subsidiaries £37,095,000 as at 30 September 2021 (2020:
£38,891,000 restated).
At the period-end management reviewed the carrying value of the Investments for Impairment. The investment relates
to 3 companies being Tekmar Limited (which owns Tekmar Energy Limited and Agiletek Engineering Limited), Subsea
Innovation Limited and Pipeshield International Limited.
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 four year forecast with a compound average growth rate over the 4 year period of 15.5%,
with subsequent years based on a reduced growth rate of 2.0% into perpetuity.
The discount rate used was the Group’s pre-tax WACC of 12.1% estimated using a weighted average cost of capital
adjusted to reflect current market assessment of the time value of money and the risks specific to the group.
The value in use calculations performed for the impairment review, together with sensitivity analysis using reasonable
assumptions, indicate sufficient headroom for the investments in Subsea Innovations Limited and Pipeshield International
Limited and therefore do not give rise to impairment concerns.
The value in use calculations described above for Tekmar Limited indicated that the recoverable amount was below
the carrying value at the period-end by £2,048,000. As a result, an impairment charge has been recognised in FY21.
StrategicStrategicGovernanceFinance
126
The Company directly owns the whole of the issued ordinary shares of the following subsidiary undertakings:
5. Borrowings
Tekmar Limited
Subsea Innovation Limited
Pipeshield International Limited
Total
Capital contribution related to share-
based payments for subsidiaries
Total Investment in subsidiaries
Class of share
capital held
Ordinary
Ordinary
Ordinary
Proportion held by
parent company
100%
100%
100%
Carrying Value
FY21
27,505
2,066
7,174
36,745
Carrying Value
FY20 (Restated)
29,553
2,066
7,174
38,793
350
37,095
98
38,891
All the companies listed above are incorporated in England and Wales and have a registered address of Innovation
House, Centurion Way Darlington DL3 0UP.
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
Subsea Innovation Limited
Pipeshield International Limited
Holding of shares in subsidiary companies and the management thereof
Design and manufacture of equipment for the offshore oil and gas industry
Design and manufacture of subsea asset protection
4. Trade and other receivables
Amounts owed by Group undertakings - non-current
Amounts owed by Group undertakings - current
Prepayments and accrued income - current
Total - Current
Current
Trade Loan Facility
Bank overdraft
Non-current
CBILS Loan Facility
Amount repayable
Within one year
In more than one year but less than two years
2021
£000
3,000
-
3,000
3,052
6,052
3,000
3,052
6,052
2020
£000
-
535
535
-
535
535
-
535
The above carrying values of the borrowings equate to the fair values. The trade loan facility is provided at interest rate
of 2.15% over base rate pa and is available to the Company until 30 November 2022. The CBILS loan facility is provided
at interest rate of 1.5% over base rate pa and is available to the Company until 31 October 2022.
6. Payables: amounts falling due within one year
2021
£000
15,869
6,578
77
6,655
22,524
2020
£000
15,589
5,248
72
5,320
20,909
Trade payables
Amounts due to Group undertakings
Other taxation and social security
Accruals and deferred income
Deferred consideration
2021
£000
81
2,408
48
393
-
2,930
2020
£000
93
2,007
84
76
2,750
5,010
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 they are assessed to
be immaterial.
All of the amounts owed to Group undertakings shown above are repayable on demand. Deferred consideration in 2020
relates to the Pipeshield acquisition. A payment of £1.5m was paid on 9 April 2020 and a payment of £1.25m was paid
on 9 October 2020.
StrategicStrategicGovernanceFinance
128
7. Share Capital
Details of movements in shares are set out in note 21 to the Group financial statements.
8. 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.
9. 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 23 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 credit of £446,030 in respect of the equity-settled share-based payment transactions in
the period ended 30 September 2021 (2020 £332,000).
10. Correction of material prior period errors
During 2021, the Company discovered that the weighted average cost of capital (WACC) used in the investment
carrying value impairment review had been erroneously calculated and applied. On recalculation, the WACC applied in
the impairment calculation should have been 11.6% as opposed to the 8.1% used in the prior year financial statements.
As a consequence, the carrying value of investments have been overstated in the prior period. The errors have been
corrected by restating each of the affected financial statement line items for prior periods. The following tables summarise
the impacts on the Parent Company’s financial statements:
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
Other loans and borrowings
Trade and other payables
Total current liabilities
Non-current liabilities
Other loans and borrowings
Trade and other payables
Total equity and liabilities
31 Mar 2020
As previously
reported
£000
31 March 2020
RESTATED
£000
Adjustments
49,776
60
15,869
65,705
5,320
-
5,320
(10,885)
-
-
(10,885)
-
-
-
38,891
60
15,869
54,820
5,320
-
5,320
71,025
(10,885)
60,140
513
64,100
1,738
(871)
65,480
535
5,010
5,545
-
-
-
-
-
(10,885)
(10,885)
-
-
-
-
-
513
64,100
1,738
(11,756)
5,595
535
5,010
5,545
-
-
71,025
(10,885)
60,140
The loss for the prior year has been restated as a result of the impairment of investments from £850k loss to £11,735k
loss.
StrategicStrategicGovernanceFinance 130
11. Post balance sheet events
Annual General Meeting
There has been no events after the reporting date that require adjustment or disclosure in line with IAS10 events after
the reporting period to the date of the approval of these financial statements.
The AGM will be held at 10am on 29 March 2022 at Innovation House, Centurion Way, Darlington, DL3 0UP.
The Notice of Meeting will be separately distributed to shareholders.
Advisors
Nominated Adviser and Joint Broker
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
United Kingdom
Joint Brokers
Joh. Berenberg, Gossler & Co. KG,
London Branch
60 Threadneedle Street
London EC2R 8HP
Legal Advisers to the Company
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Muckle LLP
Time Central
32 Gallowgate
Newcastle upon Tyne NE1 4BF
Financial calendar
29 March 2022 - Annual General Meeting
Auditors
Grant Thornton
No 1 Whitehall Riverside
Leeds
LS1 4BN
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing Business Park
West Sussex BN99 6DA
Investor Relations & PR Advisers to the Company
Bamburgh Capital Limited
10th Floor, Chancery Place
50 Brown Street
Manchester
M2 2JT
StrategicStrategicGovernanceFinance 132
Glossary
Adjusted EBITDA earnings before
tax,
depreciation and amortisation, and non-recurring and
exceptional items
interest,
LTIP Long Term Incentive Plan
QCA the Quoted Companies Alliance
QCA Code the QCA Corporate Governance Code
published in 2018
SAYE Sharesave plan
SDG Sustainable Development Goals
SECR Streamlined Energy and Carbon Reporting
SIP Share Incentive Plan
TRL Technology Readiness Level
UKEF UK Export Finance
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
AIM the AIM market of the London Stock Exchange
Board the board of Directors of the Company
CAGR Compounded Annual Growth Rate
CBILS Coronavirus Business Interruption Loan Scheme
CFD Contracts for Difference
CGU Cash Generating Unit
CPS Cable Protection System
EEA European Economic Area
EIP Executive Incentive Plan
ESG Environmental, Social, and Governance
EU European Union
FCA or Financial Conduct Authority the Financial Conduct
Authority of the United Kingdom
FID Final Investment Decision
FRC Financial Reporting Council
FY Financial Year
Group means the Company and its subsidiaries
GW Gigawatt, a unit of power
IFRS International Financial Reporting Standards
IPO Initial Public Offering
ISA International Standards on Auditing
LCOE Levelised Cost of Energy
StrategicStrategicGovernanceFinance
E: investors@tekmar.co.uk
W: investors.tekmar.co.uk
Innovation House
Centurion Way
Darlington
DL3 0UR
United Kingdom