Annual Report 2022
Highlights
• Revenue of £30.2m (18M to 30 September 2021: £47m) and Adjusted EBITDA loss of £2.1m for the year
(18M to 30 September 2021: loss of £2.1m, 12M to 30 September 2021: loss of £2.9m).
• Revenue of £17.2m for H2 22 (6M to 31 March 2022: £13.0m) and Adjusted EBITDA loss of £0.3m (6M to 31
March 2022: loss of £1.8m) highlights an improved second-half performance.
•
•
•
•
Gross margin of 23% represents a 330 basis points improvement on prior year (FY21: 20%) and shows
business transition continues.
Secured and delivered the Group’s largest project to date in excess of £10m for pipeline protection systems
in the Middle East.
Selected for Dogger Bank C Offshore Wind Farm (in continuation of the previously announced Dogger Bank
A & B contracts), when delivered will be the largest Global Offshore Wind Project.
The above contract awards support growth in our order book to £22.9m as at the end of December 2022,
which is the largest reported since the Company’s admission to AIM.
• On a statutory basis Group loss before tax was £5.2m (18M to 30 September 2021: £5.8m loss).
•
•
The Group held £8.5m of cash as at 30 September 2022, including the drawdown of bank facilities from the
£3.0m CBILS loan and £4.0m trade loan facility. Both these facilities were renewed post year end to 2023 .
The formal sale process and strategic review process continues and the Board anticipates drawing this
process to a successful conclusion for the benefit of stakeholders.
02
Contents
Strategic Report
06
08
12
16
18
20
24
28
36
38
Chairman’s Statement
CEO Review
CFO Review
Vision, Mission & Values
Strategic Review
Market Review
Our Business Model
Our Business Model in Action
Key Performance Indicators
Sustainability Report
Governance
42
44
48
50
52
58
60
64
66
69
Message from the Chairman
Corporate Governance Statement
Board of Directors
Senior Management
Risk Management
Audit Committee Report
Remuneration Committee Report
Nomination Committee Report
Directors’ Report
Statement of Directors’ Responsibilities
Financial Statements
72
82
83
84
85
86
118
119
120
Independent Auditor’s Report
Consolidated Statement of Comprehensive
Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Group Financial Statements
Parent Company Balance Sheet
Parent Company Statement of Changes in Equity
Notes to the Parent Company Financial
Statements
Additional Information
129
129
130
Annual General Meeting
Advisors
Glossary
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
Strategic Report Contents
06
08
12
16
18
20
24
28
36
38
Chairman’s Statement
CEO Review
CFO Review
Vision, Mission & Values
Strategic Review
Market Review
Our Business Model
Our Business Model in Action
Key Performance Indicators
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) Initiatives to return to profitability followed by
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
b) Business Improvement: 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
In June 2022 the Board announced the intention
to seek a strategic partner to support the Group’s
opportunities for growth with an option to
accelerate the plan.
StrategicGovernanceFinance During the financial year, we announced the appointment
of David Wilkinson as a new independent non-executive
Director, with David replacing Chris Gill who had been on
the Board since the IPO. Post the financial year-end, we
announced that Derek Bulmer had resigned from his position
as Group CFO, with Leanne Wilkinson, who was Group FD,
appointed as Interim CFO. We would like to reiterate our
thanks to Chris and Derek for their considerable contribution
in strengthening Tekmar.
On behalf of the Board, I would like to thank all our staff
for their resolute commitment and tenacity in focusing on
improving the Group’s performance. I am pleased they can
see the fruits of their hard work coming through as the
business recovers and continues to strengthen.
06
Chairman’s Statement
Net Zero by 2050. The scale of the opportunity ahead that
this investment presents for Tekmar is highlighted by the
over 200GW increase in offshore capacity expected to be
installed by 2030. This increase is from a current installed
base globally of 55GW, which highlights the expected
growth and opportunity we have in a market in which
we have a critical role to play in supporting the required
offshore infrastructure.
industry
The
is moving from a recovery phase to
an accelerated growth phase to achieve the above
commitments and aspirations for offshore wind continue to
grow globally, with increased activity seen in Asian markets
and the Americas as well as emerging opportunities across
the project life-cycle. Tekmar has the market leadership
and superior engineering and technology-based offering
to develop our footprint in these new markets, which
complements the significant growth opportunity that lies
ahead in our more established markets. We will maintain our
close relationships with the developers and tier 1 contractors
as we continue to lead the way as a trusted partner across
these important, sizeable and growing markets.
As we focus on our strategy of restoring sustainable
profitable growth for the business, we are encouraged by
the strength of our enquiry book, which is consistent with
a recovering market, and are seeing signs of improving
supply chain pricing to acceptable margin levels. Consistent
with our margin improvement focus, we are leveraging our
commercial discipline and technology leadership to capture
more favourable project economics as we convert the
enquiry book into firm orders.
Whilst we are on the right path and can clearly see the
improvement in the underlying business, we remain very
focused on managing the business prudently and on
balance sheet stability. We have taken a number of steps
over the last 12-18 months to improve the financial stability
of the business. The Board has also remained focused
on assessing additional measures and opportunities to
strengthen the balance sheet and support its opportunities
for growth.
Consistent with this approach, on 13 June 2022, we
announced we would be conducting a formal sale process
and strategic review process to identify a partner to support
the Company’s opportunities for growth and provide
additional balance sheet strength. We anticipate drawing
this process to a successful conclusion for the benefit of all
stakeholders.
Julian Brown
Non-Executive Chairman
In my introduction to last year’s Annual Report, I highlighted
how the business was navigating a business transition
during a period when market conditions have been difficult.
I am pleased to start this year’s report by acknowledging
the good progress that has been made by the business
in delivering improved results over the last financial year,
despite ongoing market challenges. Whilst we recognise the
business has not yet returned to profitability, the recovery
in sales and reduction in the Group’s EBITDA losses during
the in the second half of the year and the improvement
in gross profit delivered in FY22 are important markers
of business improvement. It is a clear positive to see the
hard work of the team being reflected in this improved
performance, with further improvement anticipated as the
market recovers and grows.
This performance is particularly encouraging in the context
of a market environment that continues to present
challenges in a maturing industry. We are starting to see
the anticipated recovery in the planned investment required
to deliver the offshore wind capacity required to support
energy transition, as envisaged by global initiatives such as
StrategicGovernanceFinance
08
CEO Review
in
interim results announced
June 2022, we
In our
highlighted that we see 2022 and 2023 as transition
years as we stabilise the business to navigate short term
industry headwinds ahead of benefiting from the attractive
structural growth drivers offered across our core offshore
wind and broader energy markets.
The results we are announcing today for the year to
30 September 2022 should be seen in the context of
this business transition. Today’s results report a £2.1m
Adjusted EBITDA loss for FY22, with an improved financial
performance during the second half of the year where
increased revenue supported a £0.3m loss at the Adjusted
EBITDA level. This highlights the operating leverage we
have in our business and that our business improvement
initiatives are impacting key metrics. We recognise there is
continued work ahead on the path to securing a sustained
level of profitability and related cash generation for the
business. We are confident the business will deliver on this
objective, and that the positive industry outlook supports
this. The level of our enquiry book, being at a record high,
is a positive indicator of supportive market trends but it
is taking time to see these enquiries convert to contract
awards.
“
We are developing a more
integrated, engineering-
led offering to meet the
maturing requirements
of the offshore wind
industry.
Alasdair MacDonald, CEO
“
As we manage the business through this transition
period, we continue to focus on managing cashflows and
improving profitability through our business improvement
programmes and securing and delivering high quality
contracts with commercial discipline.
We are developing a more integrated, engineering-
led offering to meet the maturing requirements of the
offshore wind industry.
The strategy we are executing is anchored on Tekmar
maintaining and strengthening our market
leadership
position, particularly in the offshore wind industry – an
industry which is forecast to grow from the current 55GW of
global offshore wind capacity to over 250W by 2030.
these
requirements
We are developing our customer value proposition in
line with evolving market requirements as the industry
matures, with
including more
complex installations and an emerging and growing opex
requirement. We are doing this by offering differentiated
and integrated engineering-led solutions that add value to
our customers. The success of this approach is highlighted
by a number of recently awarded significant contract
wins. These contract awards highlight Tekmar’s continued
position as a trusted partner alongside strengthening the
business through diversification and regional expansion.
Recent contract awards of particular note include:
•
•
•
•
The extension of our partnership with DEME Offshore,
announced in December 2022, to design, manufacture
and supply CPS for the Dogger Bank C offshore wind
farm in the UK to be delivered in FY24 and FY25. The
Dogger Bank windfarm is set to become the world’s
largest offshore wind farm by capacity. This builds on
the initial contract award to provide CPS for the Dogger
Bank A and B projects announced in December 2021;
The £8m combined contract awards, announced
in January 2023, to provide pipeline support and
protection materials for major subsea construction
projects in the Middle East. This builds on Tekmar’s
success in securing larger, profitable pipeline activity in
the region, which represent some of Tekmar’s largest
contracts awarded to date;
The award, announced in July 2022, to provide CPS for
an offshore wind farm project in Japan. This contract
represents an important strategic milestone as we
extend our geographical reach into the Japanese
offshore wind market and is expected to be delivered
in 2023; and;
the award of a design and build launch and recovery
(LAR) system, further extending our capabilities as
a leader within this specialist market (announced in
January 2023)
These recent contract wins underpin the current order
book of £22.9m (as of December 2022), supported by a
record enquiry book of £370m. We see these as important
indicators of an improving market outlook for new projects,
as the industry emerges from the lag in offshore wind
capacity investment we have highlighted with previous
results announcements.
Industry analysts highlight
visibility on over 300 projects for construction by 2030 as the
industry invests US$520bn(1) to build over 200GW(2) of new
offshore wind capacity by 2030. Additionally, the offshore
wind market is a maturing industry with installations and
ongoing maintenance becoming more technically complex
and challenging. We believe this is positive for Tekmar as we
are using our engineering expertise to provide the industry
leading solutions in our field, complementing our wider group
strategy and offering. It can, however, also lead to extended
timelines for securing contracts as clients assess the impact
of technology transition and the changing value proposition
from a product-led approach to a more holistic integrated
solutions and services led approach. This continues to be a
feature of the current market environment, with extended
contract negotiation timeframes remaining a feature of our
commercial discussions.
We are currently 18 months into a programme of business
wide improvement initiatives in areas such as engineering
discipline, project risk management, contract negotiations
and sales effectiveness, disciplined cash management,
supply
chain strategy and operational excellence.
These initiatives are all in support of our defined wider
group strategy including to strengthen our integrated,
engineering-led offering and gross margin stabilisation
and improvement. In support of the business improvement
programme, Tekmar is one of a select group of offshore
wind supply chain companies currently being supported
by the Offshore Wind Growth Partnership (OWGP) via
their Sharing in Growth (SiG) business transformation
programme. The SiG programme is aimed at promoting
growth and profitability within the UK Offshore Wind
Supply Chain through business excellence across a range of
disciplines. As part of the business improvement strategy,
we have strengthened the leadership team in line with our
focus on establishing a stronger engineering culture across
the business. The industry investments in our core markets
provides significant forward opportunity for us and we will
continue to look to strengthen the team to deliver on the
strategic plan and on these exciting opportunities ahead.
We continue to work with industry partners to assess and
address the issues relating to legacy cable installations
installed at off-shore windfarms. As we have previously
highlighted, 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 remains 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. Whilst this consumes company resource and
senior management attention, it is consistent with our
responsible approach to supporting the industry to resolve
these legacy issues.
In addition, we are embedding the industry learnings to
support our superior technical offering for new installations
alongside using our expertise and capability to support
clients across the wider lifecycle of offshore wind projects,
supporting our aim to diversify into the opex market
StrategicGovernanceFinance 10
We continue to focus on strengthening the balance sheet
As we manage the business through the transition period,
a key priority for the Board remains balance sheet stability
and cash. We completed the equity fundraise in March
2022 and, in addition, have implemented a number of
internal steps to improve cash management. We updated
shareholders in October 2022 on cash collection in the
second half of FY22, with a net improvement in cash of over
£2.0m compared to 31 March 2022. Post the period-end, the
Group extended the maturity dates of its banking facilities,
which includes a CBILs loan of £3.0m, currently available to
31 October 2023, and a trade loan facility of up to £4.0m
that can be drawn against supplier payments. This facility
is currently available to July 2023, aligning with the annual
review date of the banking facilities.
Whilst the Group meets its day-to-day working capital
requirements through the availability of these banking
facilities, the Board recognises the material uncertainty
which exists around the renewal of banking facilities and
continues to consider that the Group would benefit from
investment to provide additional balance sheet strength
as well as supporting its opportunities for growth. Whilst
discussions relating to the formal sale process and strategic
review process remain ongoing, we continue with business
as usual, prioritising the stability of the business through
a focus on cash and a disciplined commercial approach,
and offering our clients a superior and engineering led
integrated offering.
Market overview
•
•
•
•
•
The global market for offshore wind, the Group’s core
market, continues to strengthen as energy markets
are aligned to the commitment of the United Nation’s
global coalition for net-zero emissions by 2050. Most
notably:
Global capacity is forecast to reach over 268GW
(installed or underway) by 2030, from a commissioned
capacity of 55.4GW today, with current visibility of over
300 projects in development.(1)(2)
Considering growing energy security concerns triggered
by Russia’s invasion of Ukraine, the market’s mid-term
outlook could be revised upwards again.
Over 45% of projects entering construction by 2032 is
expected to be in the UK, US and China, markets where
Tekmar is already active and well-positioned to benefit
from future growth.(1)
The global operation and maintenance (O&M) market
continues to scale up and is now expected to reach
£11.8bn per year by 2030, offering significant growth
potential for the Group. (1)
•
In the last six months, market expectations for the
emerging floating wind market have grown to 14.1GW,
installed or underway by 2030, and 63GW by 2035,
driven by a requirement to cut carbon emissions and
reduce dependency on Russian energy.(1)
Adjacent offshore energy markets are strengthening,
reflecting a stronger oil price.
Summary
FY22 represents a transitional year for the Group. Our second
half performance highlights the operational improvements
we are making are working as we stabilise the business.
There is still work to do to complete the transition and
our order book provides good visibility as the transition
continues in 2023. We continue to prioritise the stability
of the business through a focus on cash, a disciplined
commercial approach and seeking to strengthen the Group’s
balance sheet. Our differentiated offering resonates with
the industry and this puts us in a lead position as the market
accelerates its investment in offshore wind through 2030.
In terms of outlook, we are encouraged that we continue
to secure landmark contract awards at improved project
margins and at lower execution risk. We remain cautious,
however, in the near-term on the likely lead times for project
awards and starts in the offshore wind market and we expect
this is likely to suppress the volume required to restore
profitability for the current financial year. We also recognise
that it will take some time for improved contractual and
commercial discipline to impact financial results, as the
impact of existing legacy contracts diminishes over time.
Taking these factors into account, and anticipated business
mix for the current financial year, the Board’s expectation
is for the business to break even at an Adjusted EBITDA
level for the current financial year. This is based on expected
revenue for the current financial year to be in the region of
£40m, of which approximately 70% is already secured. The
Board expects the business to generate positive Adjusted
EBITDA in FY24.
Alasdair MacDonald
CEO
14 March 2023
Sources:
(1) 4C Offshore, Offshore Wind Farms Project Opportunity Pipeline Database,
Version Q4 2022
(2) 4C Offshore - Offshore Wind Farm Database (06-Apr-2021 to 12-Sep-2022)
(3) MarketWatch – Brent Crude Oil Continuous Contract
StrategicGovernanceFinance
12
CFO Review
Having joined Tekmar in June 2020, and having been
appointed Interim CFO on 1 December 2022, it is my
pleasure to present the Financial Review for the Group for
the year ended 30 September 2022. I start by thanking
Derek Bulmer, as my predecessor CFO, for his contribution
in strengthening the business in support of our growth
strategy.
A summary of the Group’s financial performance is as
follows:
Audited
12M ended
Sep -22
Unaudited(1)
12M ended
Sep-21
Audited(1)
18M ended
Sep-21
£m
30.2
7.0
(2.0)
(5.2)
£m
31.8
6.5
(2.9)
(5.5)
(7.4p)
(10.8p)
£m
47.0
11.2
(2.1)
(5.8)
(9.1p)
Revenue
Gross Profit
Adjusted
EBITDA(2)
(LBT)
Adjusted
EPS(3)
On a statutory basis, the Group loss before tax was (£5.2m)
(FY21: £5.8m loss).
Overview
The Group reported revenue of £30.2m for the 12-month
reporting period, with an encouraging increase to £17.2m
in revenue delivered in the second half from the £13.0m
reported for the first half. The business has continued to
be impacted by cost pressures driven by current volumes
along with supply chain and logistics impacts from wider
geopolitical events, in particular the Russia and Ukraine
conflict. We have managed the impact of these pressures
on our business with discipline and we continue to work
hard as a team to drive margin improvement through our
business improvement plans, including through our focus
on improved contracting process, building a stronger team
and enhanced contract execution and reporting.
The improved financial performance of the Group in the
second half of FY22 is also reflected by the business
reporting a £0.3m Adjusted EBITDA loss for H2 22, an
improvement from the Adjusted EBITDA loss of £1.8m as
reported for H1 22. In effect an increase in revenue over the 6
months of £4.2m saw an Adjusted EBITDA improvement of
£1.5m, showing the benefit of operational gearing through
scale and the work on margin improvement noted above.
Nonetheless, we recognise that the industry continues to
experience headwinds, so we remain cautious and alert to
the challenges and opportunities ahead.
(1) Year ending 30 September 2021 was an 18 month period.
(2) 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.
(3) 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, £nil FY22 (£364k FY21) and amortisation on acquired intangibles £605k
(£1,128k FY21)
Revenue
Revenue by Division
£m
Offshore Energy
Marine Civils
Total
Revenue by market
£m
Offshore Wind
Other Offshore
Total
Audited
12M
FY22
17.4
12.8
30.2
Unaudited
LTM(1)
FY21
21.9
9.9
31.8
Audited
12M
FY22
14.7
15.5
30.2
Unaudited
LTM(1)
FY21
16.8
15.0
31.8
Audited
18M
FY21
33.8
13.2
47.0
Audited
18M
FY21
26.9
20.1
47.0
Gross Profit
Gross profit by Division
£m
Offshore Energy
Marine Civils
Total
Gross Profit by market
£m
Offshore wind
Other offshore
Unallocated costs
Total
Audited
12M
FY22
4.4
2.6
7.0
Audited
12M
FY22
4.2
4.4
(1.6)
7.0
Unaudited
LTM(1)
FY21
4.4
2.1
6.5
Unaudited
LTM(1)
FY21
4.8
3.3
(1.6)
6.5
Audited
18M
FY21
8.2
3.0
11.2
Audited
18M
FY21
8.9
5.0
(2.7)
11.2
(1) LTM - Last twelve months
(1) LTM - Last twelve months
Offshore Energy, incorporating Tekmar Energy, Subsea
Innovation, AgileTek and Ryder Geotechnical, all of which
operate largely as a single unit, continued to be impacted
by the lower volume of large-scale offshore wind projects
in construction phase as this market continues to recover.
Despite the lower revenue of £17.4m, compared to revenue
of £21.9m for the last twelve months of FY21, this division
saw an improved H2 22 revenue of £9.6m (H1 22: £7.8m)
which was underpinned by revenues from Dogger Bank,
which is set to become the world’s largest offshore wind
farm once fully operational. In addition, Vineyard Wind,
a strategically important US windfarm project, awarded
during the year, has commenced through early stages and
further revenues from China highlighting the importance
of our continued and growing international presence.
Marine Civils, comprising Pipeshield, saw revenue growth
for the 12-month period at £12.8m compared with revenue
of £9.9m for the previous 12-month period. The underlying
growth in FY22 was driven by a contract of in excess of
£10m, for the provision of pipeline support and protection
materials for a major construction project in the Middle
East, which was largely delivered in the financial year.
Despite the revenue for FY22 being £1.6m lower than the
prior 12 months, the gross profit of £7.0m was an increase
of £0.5m versus the prior 12 month period. As a result, the
gross profit percentage of 23% achieved in FY22 was an
improvement on the 20% achieved in the prior 12 month
period.
run
Whilst this level of gross profit is lower than the pre-
pandemic historical
rate, gross profit margin
improvement has been and continues to be a key focus
for the management team, across the project lifecycle
from negotiation of initial contracting terms to improved
project execution and stronger commercial management
throughout the life of the projects. Coupled with volume
returning to the Offshore Wind sector, this underpins our
gross profit improvement plans which we continue to
progress.
Within Offshore Energy, the gross profit margin increased
to 25% (FY21 LTM: 20%). Offshore Energy continued to be
particularly impacted due to lower volumes of sales as it
carries fixed manufacturing costs of an annual equivalent of
£2m. The gross profit margin within Marine Civils remained
consistent with the prior 12 month period at 20%.
StrategicGovernanceFinance 14
Operating expenses
Operating expenses for the 12-month period to 30
September 2022 were £11.6m compared to £11.9m for the
equivalent 12-month period ending 30 September 2021.
The reduction of £0.3m is due to cost cutting initiatives
undertaken in FY22 which have a cost saving impact of
£0.5m, which has been offset by one off costs of £0.2m in
the year.
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. No adjustments
have been made to calculate Adjusted EBITDA in the year
ended 30 September 2022. For the 18-month period ended
30 September 2021, the adjustment included the removal
of share-based payment charges relating to the IPO options
and SIP schemes launched at IPO.
The £2.1m EBITDA loss for the 12 months ended 30
September 2022 was an improvement of £0.8m when
compared to the £2.9m EBITDA loss for the 12 months to
September 2021 and is a result of the increased gross profit
as above.
H2 22 reported an increase in revenue of £4.2m versus the
prior 6-month period and as a consequence of the resulting
benefits of higher operational gearing and gross profit
improvement achieved, a break-even EBITDA position was
reached, an improvement of £1.76 when compared to the
results of the previous two 6 month periods.
Adjusted EBITDA by 6month period (UNAUDITED)
6m
6m
6m
6m
6m
Sep-22
Mar-22
Sep-21
Mar-21
Sep-20
17.2
(0.3)
13.0
(1.8)
17.9
(1.8)
13.9
(1.1)
15.2
0.8
Revenue
(£m)
EBITDA
As we await the volume to return in the offshore wind
sector, the cost base and opportunities for increased
efficiency across the Group will continue to be reviewed
accordingly, however, management remain mindful this
needs to be balanced with retaining capacity and key
capability within the business to support the future growth
in a recovering market.
Adjusted EBITDA by division
Balance Sheet
12M
FY22
(1.8)
1.0
(1.3)
(2.1)
12M
FY22
-
-
LTM(1)
FY21
(2.7)
0.9
(1.1)
(2.9)
LTM(1)
FY21
(805)
18M
FY21
(1.9)
1.2
(1.4)
(2.1)
18M
FY21
(364)
(805)
(364)
Offshore Energy (£m)
Marine Civils (£m)
Group costs (£m)
Total (£m)
Adjusted items
Share based payment
charge (£000)
(1) LTM - Last twelve months
Profit
The result after tax is a loss of £5.2m (FY21: Loss of
£5.4m). The impacts of movements reported within
EBITDA have been discussed above and account for £0.1m
of the movement in the loss for the year. The remaining
£0.1m relates to the net movements in amortisation,
depreciation and interest charges.
Foreign currency
The Group has continued to see growth in international
markets and, as a result, this growth increases the
Group’s exposure to fluctuations in foreign currency
rates. During the year the Group benefitted from gains
in foreign exchange of £0.2m. These gains have been
accounted for within operating expenses. The Group
mitigates exposure to fluctuations in foreign exchange
rates through placing forward currency contracts. At the
year end the Group held forward currency contracts to
mitigate the risk of receivables balances for both Euros
and Dollars. The Group predominately trades in pounds
sterling with approximately 17% of revenue denominated
in Euros and 23% denominated in US dollars. On certain
overseas projects the Group is able to create a natural
hedge by matching the currency of the supply chain to the
contracting currency, this helps to mitigate the Group’s
exposure to foreign currency fluctuations.
Fixed Assets
investments were
Fixed asset
line with
depreciation levels with an overall modest increase of
£0.2m. There was no major capital expenditure project or
disposal in the year.
largely
in
Fixed Assets (£m)
Other non-current assets (£m)
Inventory (£m)
Trade & other receivables (£m)
Cash (£m)
Current liabilities (£m)
Other non-current liabilities (£m)
Equity (£m)
FY22
5.9
24.6
4.6
13.4
8.5
(16.9)
(0.8)
39.2
FY21
5.7
25.3
4.0
18.0
3.5
(12.5)
(3.7)
40.2
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 remaining balance relates to the
acquisitions of Subsea Innovation during FY19 and Pipeshield
during FY20. The reduction in other non-current assets in
FY22 relates to the amortisation of intangible assets.
Trade and other receivables
Trade and other receivables fell to £13.4m (FY21: £18.0m)
reflecting improvements in our contracting process and
strengthening of the credit control function. Revenue in FY22
has been more evenly spread throughout the year with more
favourable invoicing terms including upfront milestones on
contracts leading to lower levels of trade receivables at the
year end. Further to this, the Group has enhanced its cash
collection controls and processes where I am pleased to see
a lower level of aged debt of £2.2m in FY22 in comparison to
£3.3m past due in FY21.
Cash
The gross cash balance at 30 September 2022 was £8.5m
with net cash being £1.5m. The Group has extended its CBILs
facility of £3.0m for a further 12 months to October 2023 and
the trade loan facility of £4.0m, which is available until at
least July 2023, aligning with the annual review date of the
banking facilities. These facilities will continue to support the
working capital requirements of the Group in delivering the
type of contracts that it undertakes in this industry.
Significant focus has remained to stabilise the Group’s
balance sheet including a Firm Placing and Open Offer of new
ordinary shares which completed in March 2022 which raised
cash proceeds of £3.7m, net of expenses.
Cash continues to be a major focus for 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 established a dedicated
credit control function.
The short to medium term business pipeline includes sizable
Oil and Gas related projects, however, the availability of
working capital funding and performance guarantee facility
for fossil fuel related activity continues to be challenging.
Therefore, the business may need to look to alternative
sources of support whilst the wider transition to renewable
energy sources takes place.
Current liabilities
Current liabilities rose by £4.6m to £17.1m (FY21: £12.5m).
Within the FY22 balance of £16.9m, £4.0m relates to a
Trade Loan Facility with Barclays Bank which is drawn
against supplier payments and is repayable within 90 days
of drawdown. The FY21 comparative is £3.0m. Current
liabilities also includes the CBILS loan of £3.0m which was
renewed post year end to October 2023. In FY21 the CBILs
was classified as non-current.
Additionally, the balance at 30 September 2022 included
£3.1m of deferred income against a comparative of £1.2m.
The increase in deferred income is due to our improved
contracting terms with customers. The above movements
are offset by the decrease in trade payables of £1.7m from
£5.8m in September 2021 to £4.1m in September 2022. This
is driven primarily by the timing of project receipts at the year
end.
Non-current liabilities
Other non-current liabilities of £0.8m at 30 September
2022 shows a reduction from 30 September 2021 balance of
£3.7m. The main reason being 30 September 2021 included
CBILs of £3m, which was due for renewal in October 2022
and therefore is included in current liabilities in the current
financial year.
Summary
The results for FY22 present a financial performance which
is in line with the planned transition period for the business,
which will continue into FY23. These results have been
delivered against the volatility in the global energy supply
chain which has caused significant inflationary cost pressures
against which the business has worked hard to mitigate.
The positive improvements underway in the business and
the new regions and customers we are reaching reflects the
commitment, capability and knowledge of our employees. I
am proud of the progress made by the team in strengthening
the business and building the foundations for growth
underpinned by our strong culture and shared values. I very
much look forward to the next phase and taking the Group
back into profitability and sustained growth.
Leanne Wilkinson
Interim Chief Financial Officer
14 March 2023
StrategicGovernanceFinance
16
Vision and Mission
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.
Values
WORK
TOGETHER
DO THINGS
RIGHT
BREAK THE
BOUNDARIES
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.
We collaborate with our
customers and constantly
look for ways to develop our
technology and services to
make today’s impossible
tomorrow’s deliverables.
StrategicGovernanceFinance 18
Strategic Review
Our strategy is to achieve a doubling of organic revenue and mid to high teens
EBITDA margin over the medium term.
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 facilities, along
with exponential growth in the associated Operations and
Maintenance (O&M) market.
The Board have developed a 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 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 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
Our VALUE PROPOSITION:
•
•
•
•
Superior global reach
Solve customer’s engineering challenges
Optimise and de-risk projects
Improve safety and lower project costs
Delivery of the strategy will see us capitalise on our market-
leading position diversifying further into the Offshore Wind
industry by disciplined investment in new technology and
innovation.
KEY FOCUS AREAS within our growth strategy:
01. Organic Growth
Strengthen the core business
•
• Maintain and enhance market leading positions
•
•
Expand Tekmar’s technical capability
Diversify Tekmar’s offering
02. Sustainable Business
•
•
•
Deliver People strategy
Deliver ESG strategy
Ongoing business improvement
03. Acquisition Strategy
•
•
•
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
Diversification
To deliver the strategy we have identified five priority areas
to diversify the business over the medium term:
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 strong solutions
capability and market position
5. New Geographies – leverage existing customers
and relevant track record to expand footprint into
new markets and increase revenue generating
opportunities
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.
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.
During the year, we have identified the opportunity to
accelerate our plans and therefore undertake a strategic
review to seek a strong and relevant partner to support the
opportunities for growth and provide additional balance
sheet strength. The latter being extremely important given
the size of contracts the Group could pursue and to also
deliver the turnaround within the targeted timescales.
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 year
ended 30 September 2022. 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. Since the Group’s Capital Markets
Day, the Group has reviewed its plans with the underlying
strategy remaining unchanged.
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, where practicable. 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
StrategicGovernanceFinance 20
Market Review
The world has changed significantly in the last 12 months.
We are amid an energy crisis driven by surging energy prices,
post-pandemic inflation and a war in Ukraine. Countries
now face the challenge of ensuring secure energy supplies
whilst still meeting their carbon reduction targets. As a
result, the Offshore Energy and Marine Civils markets are
buoyant with an upward trend supporting our growth plan
and ambition.
Offshore Wind
Offshore wind is now considered a solution to energy security
and affordability, not just climate change. This is reflected
in the rapid expansion of offshore wind ambitions, with
governments around the world setting offshore wind targets
for the first time or increasing existing targets in response to
the energy crisis.
In the second quarter of 2022, Europe released the REPowerEU
plan to rapidly reduce dependence on Russian fossil fuels
before 2030 and fast forward its green transition. The plan is
set to increase the EU’s 2030 renewable target from 40% to
45%, of which offshore wind will play a significant role (1).
Denmark, Belgium, Germany and the Netherlands signed the
“Esbjerg Declaration”, committing them to new targets for
offshore wind generation. The declaration aims to more than
double the total capacity of offshore wind to at least 150 GW
by 2050. This will deliver more than half of the capacity needed
to reach EU climate neutrality(2).
The UK Government has doubled down on offshore wind with
its latest energy strategy increasing capacity targets from
40GW to 50GW by 2030. An Offshore Wind Acceleration
Task Force has also been set up in the UK to help deliver the
additional capacity by streamlining the planning and permitting
process and introducing fast tracks for consenting(3) .
In the US, landmark federal policy, record investments, and
new state-level action have led the US offshore wind industry
to increase its long-term offshore wind targets by 58%.
This underpins the beginnings of a National Offshore Wind
Industrial Strategy and puts the US in a position to achieve its
goal of 30GW by 2030(4).
Global offshore wind market outlook - source: 4COffshore
26
55GW fully
commissioned
29
1
11
26W under
construction /
FID made
14
12
12
190GW entering
construction by
2030
90
90
28
28
59
59
EUR
APAC
USA
Other
Tekmar benefits from an unrivaled track record in the US and
our partnership with US-based subsea buoyancy manufacturer,
Deepwater Buoyancy, further improves the Group’s access to
the region.
Market momentum is building around the rest of the world,
with countries such as China, South Korea, Vietnam, India, and
Brazil committed to ambitious targets, whilst Australia has
designated its first six offshore wind development zones off
the State of Victoria(5). These newer markets will be looking to
the more mature markets for skills and expertise presenting
significant opportunity for the Group.
Global Offshore Wind Outlook
into China, having established an office and manufacturing
capability in Shanghai resulting in a strong track record in the
region.
Our presence in Asia extends to Taiwan, South Korea, and
Japan, where Tekmar has supplied CPS or engineering services
to country’s first wind farms. We are well prepared to support
Asia in the future, including embryonic markets such as
Vietnam and the Philippines.
Operations & Maintenance (O&M)
The offshore wind O&M market continues to accelerate as the
offshore wind market matures and more assets are installed.
The global offshore wind outlook to 2030 shows credible
growth of an additional 200GW by 2030, with a CAGR of
15.5%, taking the total global offshore activity (operational and
underway) to over 250GW by the end of 2030(6).
The overall scale of the global market is valued at €13bn per
year by 2030. The UK market alone is valued at €1.9bn per year
by 2030 (7). Europe remains the biggest O&M market by region,
with expanding markets in Asia and US.
At the time of writing, 26GW of global capacity is either
under construction or subject to FID (“Financial Investment
Decision”). Emergent growth is expected to be strongest in
China, US, Germany, UK, and The Netherlands(7).
China has installed 24GW of capacity, almost equaling Europe
(5), and has the most under construction (5.6GW), followed
by the UK (2.8GW). Tekmar benefits from an early move
The growth in O&M provides a significant opportunity
for Tekmar to grow in this OPEX market by deploying our
complementary technologies and leveraging existing customer
relationships to support their asset management during the
project’s operational phase . Securing a larger section of this
market is a key part of our strategy going forward.
Estimated Global Offshore Wind O&M Value - £bn (Source: 4COffshore)
Estimated global offshore wind O&M value (£bn) - source: 4COffshore
16000
14000
12000
10000
8000
6000
4000
2000
0
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
StrategicGovernanceFinance
22
Floating Offshore Wind
The total worldwide pipeline of planned floating wind projects
has more than doubled in the past 12 months, from 91GW to
185GW in terms of capacity (8).
The floating market is expected to grow at a commercial scale
from 2026 onwards. It is supported by ambitious government
growth targets and high supply and demand activities as
countries look to increase domestic energy output, reduce
energy imports, and cut carbon emissions.
107GW (58%) of floating capacity is being developed in Europe.
33.3GW (18%) of the global floating portfolio is in the UK, of
which 29GW is in Scottish waters. Outside Europe, leasing
areas off the west coast of the USA, project proposals off
the south east coast of Australia, and South Korea make up
most of the rest of the capacity. By the end of 2030, floating
wind capacity could reach 11GW in the UK, 30GW in Europe and
41GW globally(8).
The floating market has parallels with the fixed-bottom
market, where Tekmar enjoys strong relationships with key
operators and installers and has a solid global track record. We
are active in all the regions’ where floating wind is happening
and have already supported eight floating wind projects in
Europe, Asia, and the US. We are positioned to benefit from
this exciting market.
Other offshore
Upstream oil and gas still dominate the energy landscape(7),
and the energy crisis highlights the world’s ongoing need for
large volumes of fossil fuels.
Offshore oil and gas markets are enjoying a flurry of investment
following a strong recovery of the Brent spot price and Covid
easing. Markets are also set for robust growth as countries
increase output to counter supply issues, high energy costs
and dependency on Russian fossil fuels.
We see a sustained upcycle in the offshore EPC (Engineering,
Procurement and Construction) forecast through 2022-26, with
EPC spending expected to total $276bn. This is a 71% increase
compared to the preceding five-year period(9). An upward
market trend for subsea CAPEX spending is also expected, an
area in which Tekmar Group is active and will benefit from the
growth opportunity.
A concern in the energy markets is that the ongoing energy
crisis will derail the energy transition, but data suggest that
spending on green energy will still grow faster than on fossil
fuels(10). Subsea markets are committed to the transition. We
see our subsea customers in the offshore renewable market
and a significant presence of several large European oil and
gas companies investing in floating offshore wind. The subsea
markets will provide balanced growth for Tekmar in fossil fuels
and carbon reduction.
Market Fundamentals
•
•
•
•
•
•
•
Energy crisis increasing global demand for offshore
energy
Healthy upward trend and outlook across all markets
Vigorous political support and substantial investment
across all markets
Acceleration in fixed and floating wind activity
Steady growth and sizeable opportunity in O&M
Resurgence of the oil and gas market
Energy transition still top of the agenda
Source:
(1) REPowerEU Plan, European Commission
(2) The Esberg Declaration, European Policy Solutions
(3) UK Energy Strategy, Wind Europe
(4) The US sees a 60% increase in offshore wind long-term target, Business Network Offshore
Wind
(5) GWEC Global Offshore Wind Report 2022
(6) 4C Offshore, Global Market Overview, Q3 2022
(7) 4C Offshore POP Database, September 2022
(8) Offshore Wind, EnergyPulse, Renewable UK, October 2022
(9) Westwood Energy Insight
(10) O&G to catapult global energy spending in 2022, Rystad, Offshore Energy
Floating Wind - Annual capacity (MW) entering construction
Floating Wind - Annual capacity (MW) entering construction
Floating Wind - Annual Capacity (MW) entering construction - source: 4COffshore
8000
7000
6000
5000
4000
3000
2000
1000
0
8000
7000
6000
5000
4000
3000
2000
1000
2022
0
2023
2022
2024
2023
2025
2024
2026
2025
2027
2026
2028
2027
2029
2028
2030
2029
2031
2030
2032
2031
2032
Europe
Americas
Europe
APAC
Americas
APAC
Subsea component CAPEX ($M) by installation year - source: SubseaLogix
Subsea Component CAPEX ($M) by Installation Year
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Africa
Asia
Australasia
Eastern Europe & FSU
Latin America
Middle East
North America
Western Europe
StrategicGovernanceFinance 24
Our Business Model
A world-leading subsea technology business built on innovation
Tekmar Group plc collaborates with its partners to deliver
robust and sustainable engineering led solutions that enable
the world’s energy transition. We have a clear strategy
focused on strengthening Tekmar’s value proposition as an
engineering solutions-led business that offers integrated
and differentiated technology, services and products to our
global customer base.
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.
42%
51%
Group revenue
split
Offshore Energy
Marine Civils
Revenue split
by market (1)
Renewables
Other offshore
58%
49%
4%
4%
5%
6%
Revenue split
by product
39%
41%
Marine Civils
Back Deck Equipment
CPS(TekLink)
Hang-offs
Engineering
O&M
Other
6%
32%
Revenue split
by region
46%
Europe
APAC
Middle East
North America
16%
(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, Europe, Middle East and Asia Pacific
Product Categories
Geotechnical Design & Analysis
Engineering Analysis & Software Innovation
Bespoke Equipment Design & Build
Subsea Protection Technology
Subsea Stability and Protection Solutions
StrategicGovernanceFinance Our success in the Middle East
comes from our ability to deliver
services and technology locally.
26
Our Business Model in Action
and are disturbing the status quo by unseating established
competitors in the area.
The Middle East is investing heavily in its subsea industries,
with over $14bn CAPEX committed for procurement and
installation of subsea components (pipelines, umbilicals,
power cables, etc.) to 2026. The UAE, Saudia Arabia, and Qatar,
Tekmar Group’s key markets in the region, account for most of
the CAPEX spending.
With Europe’s growing need for energy security, and a strong
market outlook, we are confident that the market sentiment
for the Middle East will remain positive. We are committed to
building on our success in the region.
Consolidation in the Middle East
Tekmar Group plc has begun to consolidate its position as
a leading provider of subsea protection and stabilisation
products to the Middle East’s subsea markets. Building on our
extensive regional experience, with thousands of Pipeshield’s
and Tekmar Energy’s products installed on offshore projects
in the UAE, Qatar, Saudi Arabia, and Bahrain, we continue to
nurture our local manufacturing and supply chain capability and
bridge new relationships to secure and deliver new contracts.
The Middle East accounted for 32% of revenue during FY22, an
increase of 15% percentage points, on the previous year. During
the financial period and more recently, Tekmar Group secured
several major project awards to design, manufacture and
supply subsea protection and support products in the Middle
East, most notably for the prestigious Marjan Field Expansion
Project in Saudia Arabia and North Field Expansion Project in
Qatar. Amongst the awards was the Group’s largest valued
contract to date. The contracts further consolidate our position
in the region and create a basis for further expansion in the
Middle East, supporting our growth strategy.
Our success in the Middle East comes from our ability to
deliver global expertise locally. We have established strategic
partnerships with local manufacturers who are highly regarded
in their area of operation and understand their local markets.
By combining our expertise, we can manufacture and supply
a range of Group products and services in-country from
several strategic supply bases in Abu Dhabi and Dubai (UAE),
Dammam (Saudi Arabia), Doha (Qatar) and Manama (Bahrain).
We have personnel working alongside our strategic partners
who share a like-minded approach to ensure high quality
and on-time delivery by doing things right. Our strategic
partnerships are sustainable, providing local employment
opportunities and supporting domestic supply chains. This
optimises project delivery as manufacturing close to the work
site reduces logistics, time, and overall cost, ensuring customer
deadlines and expectations are met.
Additionally, we have established legal entities in Saudia Arabia
and the UAE, where we are accredited as a preferred supplier
to their offshore energy markets. We continue to develop
relationships with leading EPCI (Engineering, Procurement,
Construction, and Installation) contractors in the region
StrategicGovernanceFinance
28
Integrated Engineering Solutions:
technical-led decisions based on
simulation, analysis and experience.
Our Business Model in Action
possible volume of rock berm material, thus significantly
reducing initial CAPEX costs.
The CPS was manufactured at Tekmar Energy’s state-of-the-
art manufacturing facility in the North East of England. Before
commencing production of over 2,300 components, Tekmar
Energy created a sample of each component section and
subjected them to impact, bend and axial load tests to confirm
they performed as expected. Pull-in tests were also performed
using the facility’s full-scale pull-in rig and a fully assembled
30-metre-long CPS. Factory acceptance tests (FAT) were
performed on all pre-assembled CPS sections before packing
and delivering to the customer.
The end solution consisted of a robust cable protection solution
engineered to meet specific site conditions. The solution was
intervention, eliminating
designed for maintenance-free
associated OPEX costs throughout the wind farm’s life.
The Group’s integrated approach provides complete visibility
across the CPS design and delivery cycle. This significantly
improves our ability to problem solve, react, and identify
optimisation opportunities throughout the process, resulting
in the optimum solution for the customer. This integrated
approach offers customers a single project interface which
removes third-party miscommunication and delays to the
decision-making process.
Our operating companies share a single understanding, vision,
and overall objective.
Working together in Offshore Wind
Tekmar Group plc is a leading provider of cable protection
systems (CPS) for the global offshore wind markets. Our
ability to deliver holistic subsea cable protection solutions that
overcome challenging offshore environments sets the company
apart. We achieve this by combining our comprehensive in-
house technology offering with our unrivalled industry track
record of over 100 offshore wind projects to make informed
engineering-led decisions based on simulation, analysis, and
experience.
For example, Tekmar Energy, part of Tekmar Group plc, was
awarded a contract to design, manufacture, and deliver a
subsea cable protection solution for one of the world’s largest
offshore wind farms. The CPS was required to protect the wind
farm’s inter-array cables when transitioning from the seabed
to the offshore foundations. This project was characterised
by challenging subsea conditions; therefore, a solution was
also needed to secure the CPS/cable on the seabed to restrict
movement and avoid damage. This solution could only be
achieved through an integrated approach to the engineering
design phase within the overall project life cycle.
Working alongside Group companies AgileTek Engineering
and Subsea Innovation, Tekmar Energy established a CPS
design premise and a basis for analysis aligned to the project
specification and conditions. A system was subsequently
designed by Tekmar Energy and Subsea Innovation’s integrated
engineering team based on the company’s Generation 10
TekTube CPS technology.
Following the initial design stage, AgileTek combined traditional
engineering principles with cutting-edge software to simulate
how the CPS would behave in the offshore environment and
verified that the system was fit for purpose. Tekmar Energy
used the findings to optimise the CPS.
Tekmar Group company, Ryder Geotechnical, proposed
installing a rock berm over each CPS to secure them on the
seabed and restrict movement. Ryder applied its geotechnical
industry experience to
expertise with Tekmar Energy’s
demonstrate to the customer that, whilst not necessarily
the easiest or cheapest; it was the right solution. Ryder used
advanced geotechnical engineering software to design and
optimise a stabilisation solution that resulted in the minimum
StrategicGovernanceFinance We look forward to supporting
these growing offshore wind
markets and other emerging
markets in Europe, Asia, and
North America.
30
Our Business Model in Action
Tekmar Group has also strategically positioned itself in Japan
from its offshore wind markets’ early development stage. In
2020 Tekmar Group secured its first major CPS supply contract
from Sumitomo Electric for the Akita and Noshiro offshore
wind farms. The wind farms were Japan’s first utility-scale
offshore wind projects and marked a significant milestone
for the country. Building on the back of this success, Tekmar
secured its second significant CPS supply contract in Japan for
an undisclosed offshore wind farm in June 2022.
Local representation was established in Japan in 2022 to help
the Group maintain a market-leading position and help secure
future project awards. Our local representation is crucial in
helping us navigate Japan’s business culture, develop our
market knowledge, and build relationships with key market
players.
We look forward to supporting these growing offshore wind
markets and other emerging markets in Europe, Asia, and
North America.
Global Expansion
A key aspect of Tekmar Group’s growth strategy is to expand
the company’s geographical reach to capitalise on the
expanding global offshore wind markets.
During FY22, Tekmar secured landmark offshore wind projects
in the US and Japan, two emerging markets presenting ample
growth opportunities for the Group. The rapidly expanding
US market is set to become one of the largest offshore wind
markets in the world, with a target of 30GW of offshore
wind capacity installed or underway by 2030. Whilst still in
its infancy, the Japanese offshore wind market is targeting
14.3GW of offshore wind capacity by 2035, with 6.6GW of
capacity installed or underway by 2030.
Tekmar Group has been active in the US offshore wind market
from the beginning, participating in many of the country’s
offshore wind projects. In 2015, Tekmar secured its first US
contract to supply CPS for Block Island Offshore Wind Farm,
the first commercial-scale offshore wind project in the US.
In 2020 Tekmar Group was awarded contracts to provide
services and technologies for the Coastal Virginia Offshore
Wind Project (CVOW). CVOW was the first utility-scale offshore
wind farm in US federal waters and helped determine the best
practices for future offshore wind projects on the East Coast.
CVOW demonstrated Tekmar Group’s integrated approach
to subsea power cable protection, with Ryder, AgileTek,
Tekmar Energy and Pipeshield supporting multiple stages
of the offshore project. Ryder performed a Cable Burial
Risk Assessment (CBRA) during the project’s design stage.
Tekmar Energy supplied CPS, AgileTek performed product
design verification analysis, and Pipeshield provided concrete
mattresses.
In 2022 Tekmar Group secured a landmark contract to provide
an integrated engineering solution for a large offshore
wind farm in the US. The contract represents an important
milestone in expanding our regional position.
Tekmar Group partnered with US-based subsea buoyancy
manufacturer Deepwater Buoyancy to strengthen our regional
presence. The partnership improves access to the US market,
increases our local knowledge and provides potential state-
side manufacturing capability for the future.
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
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)
Adjusted EBITDA (6)
Market measures
OWF outlook GW
Oil price $/bbl
FY20
FY21
FY22
£224m
£327m
£370m
£10.0m
£9.7m
£15.6m
£40.9m
£47m
£36.1m
£43.7m
£46.4m
£33.3m
1.07
0.99
1.2
£4.7m
£(2.1)m
£(2)m
216
$22.7
244
$75
268
$85
(1) Enquiry book comprises all active lines of enquiry within the Tekmar Group. Expected revenue recognition within 3 years.
(2) Order Book is defined as signed and committed contracts with clients
(3) Revenue is the value of sales recognised in the financial statements in the year (18m period for FY21).
(4) Order intake is the value of contracts awarded in the in the year (18m period for FY21).
(5) Book to Bill is the ratio of order intake to revenue.
(6) Adjusted Earnings before interest, tax, depreciation, amortisation and exceptional items, as defined in CFO review (18m
period for FY21).
(7) The FY20 accounting period is the 12 months ending 31 March 2020.
(8) FY21 accounting period is the 18 months ending 30 September 2021.
StrategicGovernanceFinance 38
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 Strategic Review is underpinned
by two key components, our ESG Strategy and our People
Strategy, which set out our goals in these areas. We continue
to recognise that in showing respect for our people, the
community, and the environment we are establishing a strong
foundation for our growth ambitions.
Transitioning Forward
As a key player in the renewables sector, it is crucial that we lead
the way to a more sustainable future. Taking responsibility for
the reduction of our direct greenhouse gas emissions is a vital
first step in achieving a carbon neutral Tekmar.
As part of a wider and continued commitment to reducing
our environmental impact and playing our part in the urgent
challenge that is climate change, Tekmar is committed to the
development of a transition plan to carbon neutrality.
This plan will utilise a variety of strategies to help us achieve
an ambitious goal, with a target date for neutral scope one
(direct greenhouse gas) emissions by 2030. This will include
feasibility assessments for onsite power generation and the
continued development of our people policies to encourage
more sustainable behaviour amongst our employees.
Working closely with our supply chain will also be a crucial part
of this plan as we look further into the future, tackling our
scope two and three emissions.
We are committed to publishing an ambitious but achievable
transition plan, doing our part to protect our planet for
generations to come.
ESG Strategy
By implementing our formalised ESG Strategy, which is aligned
to the UN Sustainable Development Goals (UN SDG’s), we
continue to work towards our goal to make sustainability a
natural part of everything we do.
Our ESG Strategy is implemented by our ESG committee with
the support of employee representatives from all businesses
across the Group.
We have made significant progress in implementing our
action plan for those areas we can positively impact, whilst
continuing to identify many areas where we are already
achieving results. 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
The ESG Committee
into three sub-groups
is split
(environment, social and governance). The Committee meets
monthly to discuss and plan ESG initiatives that link to our
sustainable development goals.
Tekmar Group ESG Committee
Chaired by Leanne Wilkinson
Interim CFO, TGP
Tekmar Group ESG Committee Sub-Groups
Environment
Social
Governance
Led by Lewis Barnes
Supply Chain Manager,
TEL
Led by Chloe
Ainsworth
Head of People, TGP
Led by Jim Yare
Group Assistant Legal
Counsel, TGP
•
•
•
•
•
Climate change and greenhouse
gas emissions
Emissions to air, water and land,
pollutions, and waste
Biodiversity, deforestation and
land use
Energy efficiency
Resource depletion (including
water)
•
•
•
•
•
Human rights (including modern
slavery and child labour)
Health and safety
Diversity and inclusion (D&I) and
equal pay
Conflict zones and conflict
minerals
Stakeholder and community
engagement
•
•
•
•
•
Bribery and corruption
Executive pay
Board independence, diversity,
and structure
Conflicts of interest
Anti-money laundering
Our ESG Strategy and our internal processes are regularly
reviewed to ensure our people think about the environmental,
social and financial impacts of their decisions.
People Strategy
Our 2023 People Strategy is centred around 6 pillars of People
Experience. Naturally, many of the ESG actions will help tackle
or contribute towards our pillars, and vice versa.
As we focus on the continuous development of our people and
culture, we identified six key areas of activity and structured a
3 year plan to deliver this. This is underpinned by implementing
Business Partnering relationships across Tekmar Group, and
delivering the People Strategy which focuses on both core HR
improvements alongside key HR projects delivery.
Health and
Happiness
Modern
Workplace
Performance
Management
Culture and
Inclusion
Talent
Development
Talent
Attraction
StrategicGovernanceFinance
40
As we focus on the continuous development of our people
and culture, we identified six key areas of activity and
structured a 3 year plan to deliver this. This is underpinned
by implementing Business Partnering relationships across
Tekmar Group, and delivering the People Strategy which
focuses on both core HR improvements alongside key HR
projects delivery.
Our 2023 Hive Engagement Survey will help drive the areas
of focus for both Tekmar Group and each entity. The survey
collects anonymous responses from all employees across
the business and is collated into action plans to drive
positive change and improvements.
Our goal is to create a culture where our people thrive and
our performance excels in a collaborative and trusting
environment, underpinned by our core values; Do Things
Right, Break the Boundaries and Work Together. 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.
Local Communities
We support local communities across our many 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. This shall be further developed and supported into 2023.
We also support our local communities from a STEM
learning and talent perspective. It is our goal to educate
the young minds in our local areas of the opportunities
that exist within our industry. We recently hosted a careers
talk at a specialist STEM college in Country Durham, and
plan to extend these visits to across the UK. We have also
sponsored STEM events and played as judges in STEM
competitions.
This year, in conjunction with our customer for the Dogger
Bank Project, we participated in World Clean Up day whereby
production time was given up to volunteer to litter pick in
our local area.
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. Health and Safety forms part of monthly reporting in
Board and Executive meetings with accelerated action plans
and KPIs analysed and monitored.
This year, Tekmar Group company Tekmar Energy Limited
celebrated 5 years Lost Time Incident free, demonstrating
our commitment to a safe workplace.
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.
Educate and reiterate
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.
We have rolled out Tekmar Group e-learning modules on
Equality, Diversity and Inclusion, Bullying and Harassment
and GDPR. The purpose of these modules is to educate our
people on these important topics and to promote a positive
culture free from these issues.
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 52.
Leanne Wilkinson
Interim Chief Financial Officer
14 March 2023
StrategicGovernanceFinance 42
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 Chairman
10 March 2023
StrategicGovernanceFinance 44
Corporate Governance Statement
The Board are focussed 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
to communicating openly with
We are dedicated
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.
regular and positive engagement with
Maintaining
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.
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.
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.
The Company Directors are:
•
•
•
•
•
Julian Brown, Independent Non-Executive Chairman
David Wilkinson, Senior Independent Non-Executive
Director
Ian Ritchey, Independent Non-Executive Director
Alasdair MacDonald, Chief Executive Officer
Derek Bulmer, Non-Executive Director
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 is updated regularly with information 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.
46
•
•
•
David Wilkinson minimum time commitment of two or
three days per month.
Ian Ritchey minimum time commitment of two or
three days per month.
Derek Bulmer minimum time commitment of four or
five 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
ISO
audited
accreditations demonstrate our commitment in this area.
quality management
systems
and
The Group operates an effective governance framework.
Within this framework the Board encourages and challenges
the Executive Team in developing and 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
is
governed and performing by maintaining a dialogue with
shareholders and other relevant stakeholders
the company
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 48
Board of Directors
Julian Brown
Independent
Non-Executive Chair
is a prominent figure
Julian
in the UK
Renewables market with a wealth of
experience. In addition to Tekmar, he has
NED roles with BW Ideol AS, ORE Catapult
and SENSE Wind Ltd. He is the former Vice
President and UK Country Manager for MHI
Vestas Offshore, the leading wind turbine
manufacturer 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
8.2 Aarufield 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
Non-Executive Director
Ally has over 30 years of 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 products to
customers in the offshore oil industry. He
spent 19 years with Technip UK Limited, 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. Most recently, as
Chief of Financial Officer and in-house counsel
at AIM-listed radiation detection technology
company Kromek Group plc for ten years
between 2010 and 2020. Before Kromek, Derek
built significant financial and legal experience
at Bass plc, AWG plc and Ibstock plc, as well
as several privately-owned companies across
a range of industries, 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.
David Wilkinson
Senior Independent
Non-Executive Director
Ian Ritchey
Independant
Non-Executive Director
David is a Fellow of the Institute of Chartered
Accountants and holds the ICAEW’s Corporate
Finance qualification. He was a Partner at
Deloitte for almost 30 years, initially being
responsible for Corporate Finance advisory
and transaction support work, but later in his
career undertook audits as the Responsible
Individual for large private companies and
plcs within a diverse range of industries,
including the technology, manufacturing, and
engineering sectors. In recent years, David has
taken up several Non-Executive Director roles
in Technology and engineering companies.
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 of 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 of 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.
Remuneration committee
Nomination committee
Audit committee
StrategicGovernanceFinance
50
Senior Management
Leanne Wilkinson
Interim CFO
Tekmar Group
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
Leanne is CIMA qualified accountant with over
20 years’ experience as a senior professional and
business leader. Having joined Tekmar Group in June
2020 as Finance Director for Tekmar Energy, Leanne
then held the position of Group FD prior to interim
CFO. Prior to joining Tekmar, Leanne previously
worked in manufacturing and technology sectors and
has experience of business change, transformation
and integration.
Fraser is a Chartered Engineer with the Institution
of Civil Engineers and has worked 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 two 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 of
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 joined Subsea Innovation initially
as Technical Director in 2014, moving into the role of
Managing Director in 2016.
Steve established Pipeshield in 1999. Over the past
20 years, Steve has overseen the company’s growth
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
leadership experience within
and operational
manufacturing, service and project engineering-
focused organisations, the past 15 years in the
Global Energy Sector. Before taking up the Managing
Director position with Tekmar Energy in 2021, Marc
held the positions of Global Operations Director for
JDR Cables, Head of Offshore Wind UKI for Siemens
Gamesa and Global Manufacturing Manager for
Technip Umbilicals.
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 in entering China. Endorsed by the
UK Department for International Trade, Scotland
Development International, and RenewableUK, she
founded UK-China Hub for Offshore Wind in January
2017. Angela is also a member of the Sino-British
Offshore Wind Collaboration Advisory Committee
Meeting since 2016.
Jim Pearson
General Counsel & Company Secretary
Tekmar Group
Gary Howland
Group Sales Director
Tekmar Group
Chloe Ainsworth
Head of People
Tekmar Group
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
and specialised in commercial law on qualification,
with other 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 in the
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 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
several of Tekmar’s customers and competitors. Gary
holds an engineering degree in Marine Technology
from Newcastle University.
Chloe has 10 years of experience in business and
HR, with a first-class honours degree in Business
and a diploma in UK and International Employment
Law. Chloe has gained broad experience in the
people profession across multiple
industries,
including FMCG, chemical processing, and corporate
legal. Chloe takes an active role in the CIPD and is a
qualified CIPD mentor to those looking to progress
their career.
Michael Manning
Group Marketing Manager
Tekmar Group
Alistair Cutting
Group Head of Finance
Tekmar Group
With over a decade of marketing experience, both in
the private and public sectors, Michael has a proven
track record of success in driving brand awareness
and growth. Michael’s passion for design and brand
identity has helped him create marketing campaigns
that not only capture the attention of the target
audience, but also effectively communicate the
unique value proposition of products and services.
Alistair is a member of the Institute of Chartered
Accountants in England and Wales, with 10 years of
experience in finance. Alistair joined Tekmar group
as Financial Controller of Subsea Innovation Limited
and held the role of Group Financial Controller. Alistair
has a strong background in financial reporting,
audit and the development and implementation of
financial controls.
Furthermore, Michael has worked alongside sales
teams to achieve company targets and financial
goals.
StrategicGovernanceFinance 52
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
General economic conditions: This risk relates to the Group’s
exposure to short-term macroeconomic conditions in our
sector such as inflation, cost increases and supply chain
logistics. The factors driving the market changes can be
outside of the Group’s control and difficult to forecast.
Covid-19: In FY22, the Group continued to face economic and
operational risks associated with the impact of Covid-19.
The Group has experienced increased
supply chain costs and general
cost inflation driven by increased
fuel costs related in part to the
Russia-Ukraine conflict.
These
Macroeconomic changes have the
potential to reduce the financial
resources available to the Group.
The Group cannot control the market conditions in which
it operates. The Group has implemented effective cost
initiatives, enhanced controls surrounding pricing and
gross margin management.
The Group continues to monitor any business disruption
caused by Covid-19 and is prepared to implement
mitigating actions inline with recommended business
practices.
Board
closely
increased
continues
The
monitor
to
risks
the
macroeconomic
risks
which are mitigated by
enhanced controls.
StrategicGovernanceFinance 54
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.
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.
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 and
the equity fundraise. 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
72, 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.
Whilst the Group meets its day-to-day working capital
requirements through the availability of these banking
facilities, the Board continues to consider that the Group
would benefit from investment to provide additional
balance sheet strength and support its opportunities
for growth. In line with previous announcements, the
Board is continuing to explore exclusive discussions
with a potential strategic partner. The proposal being
considered represents a strategic investment from a
global institutional investor in the energy sector, which
would provide funding for the Company to follow an
ambitious plan for growth, both organically and by
acquisition.
Evaluation
No change.
No change.
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.
There
is an associated risk that
the fulfilment of any contract,
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 for the specific period.
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.
StrategicGovernanceFinance 56
Risk
5)
Risk Type
Description
Impact
Mitigation
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.
Reduced volume of sales. Increase in
capital expenditure to develop new
products. Resulting in a reduction in
the Group’s financial performance.
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.
Evaluation
No change.
6)
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 impact on the future growth
aspirations for the Group.
7)
Risk of claims
and failure
to meet
contractual
obligations
8)
Financial
management
risks
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 Groups control can have an impact of the trading
conditions and environment in which the Group operates.
Interest Rate Risk: The current economic position within the
UK has led the Bank of England to increase the base interest
rate. Current economic outlook suggests that borrowing
rates are likely to continue to increase in the short term. An
increase in interest rates will lead to higher annual borrowing
costs for the Group.
Exchange Rate Risk: The Group’s continued expansion into
international markets increases the Group’s exposure to
risks associated with changes in foreign currency exchange
rates on sales and operations. The proportion of revenue
denominated in currencies other than pound sterling is
expected to increase. Exchange rate variations could have an
impact on the Groups reported financial results.
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.
Key KPI’s are reviewed monthly by the Executive Team
and Board.
No change.
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.
Exchange Rate Risk: Where revenues are generated
in international markets, with contracts denominated
in non-sterling currencies, the Group aims to create a
natural hedge by matching the currency of the supply
chain to the currency of the revenue stream. Where
natural hedges are not available or do not sufficiently
cover the exposure, management will consider the use
of forward currency contracts to mitigate exchange rate
risks.
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.
No change.
Increased
economic
monitor.
risk due
to
environment,
StrategicGovernanceFinance 58
Audit Committee Report
David Wilkinson, Chair of the Audit Committee
It is my pleasure to present the Audit Committee Report for
the year ended 30 September 2022. 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 this is my first year as Audit Chair
for the Company.
Responsibilities
The Audit Committee oversees the formal and transparent
arrangements for considering how the Board should apply
the financial reporting and internal control principles of the
Company and it maintains an appropriate relationship with the
Company’s auditors.
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, including
reviewing any significant financial reporting
issues and
judgements which they contain.
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
Internal Controls and Risk Management Systems
The Audit Committee supports the Board in reviewing the risk
management methodology and the effectiveness of internal
controls. During the year the Group has continued to enhance
its financial internal controls and governance procedures.
External auditor
The Audit Committee monitors the relationship with the
external auditor, Grant Thornton UK LLP, to ensure that auditor
independence and objectivity are maintained. Through this
review, the Audit Committee monitors the provision of non-
audit services by the external auditor. The non-audit services
provided by Grant Thornton UK LLP are disclosed in Note 8
of the financial statements. These fees, which amounted to
£5,000, are considered to be a low value and therefore do not
impact on the auditor’s independence.
judgmental. The significant risks and key audit matters
relating to the financial statements for this year were
considered, discussed with the auditors and concluded upon.
Details can be found in the Independent Auditor Report and
are summarised below:
•
•
•
•
Revenue Recognition – 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 year end.
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. This risk is relevant to the
offshore wind CGU.
Going concern – Tekmar Group plc has additional risks
given the material uncertainty over the renewal of bank
facilities (p72).
Valuation of investments in subsidiaries – this risk
associated with valuation of subsidiaries is increased by
the uncertainty caused by the economic uncertainty post
pandemic.
• Management override of controls – this is a non-
rebuttable presumed risk for all companies and is
reviewed for all companies in the Group.
•
Disclosure of Contingent liabilities - This risk relates
to the disclosure of a contingent liability regarding
the alleged CPS failures. This disclosure is based on
management’s assessment of whether a present
obligation exists.
As Chair of the Audit Committee, I am satisfied that the Audit
Committee Report covers the activities of the Committee over
the year to 30 September 2022 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.
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
David Wilkinson
Chair of the Audit Committee
14 March 2023
StrategicGovernanceFinance 60
Remuneration Committee
Report
Julian Brown, Chair of the Remuneration Committee
Employee remuneration
Annual Pay Review
In recognition of the hard work and loyalty of our people
during the last twelve months, and to assist with cost
of living, we confirmed an inflationary award of 5% to all
eligible staff from 1 July 2022.
Sharesave Plan 2022 (SAYE)
Following the success of our Sharesave plans in 2020 and
2021 we launched our second plan in March 2022. The
scheme was again open to all employees subject to a
qualifying service period. A total of 21 employees subscribed
to 550,393 share options over a period of three years.
I, Julian Brown, Chair of the Remuneration Committee,
present the Directors’ Remuneration Report for the year
ended 30 September 2022. I chair the Remuneration
Committee and am joined by David Wilkinson, 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.
Responsibilities
The Remuneration Committee ensures that 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 the responsibilities of the role,
along with experience and skills required.
Inflationary pay rises tracking national indicators
Pension
To provide a contributory pension scheme in
line with or exceeding statutory requirements,
to provide employees with support after
retirement.
The Group continues to contribute 5% to employees’
pensions and has transitioned to a salary sacrifice
scheme within the year
Other benefits
Additional benefits to support the health and
wellbeing of our employees.
Life assurance, healthcare scheme, wellbeing
programme.
Annual bonus
To reward high-performing individuals
Annual bonus with performance criteria based upon
financial targets, to support the Group’s growth
strategy.
The key criteria for performance is based on revenue
growth, Adjusted EBITDA and cash generation.
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 remuneration of the CEO and CFO during the period,
along with the Non-Executive Director roles, and confirm they remain in line with appropriate benchmarks.
Director remuneration
Basic salary
/ fees
Benefits
Social
security
Bonus
Company
Pension
contributions
FY22 Total
FY21 Total
Name of Director
£000
£000
£000
£000
£000
£000
£000
J Ritchie
S Hurst
A MacDonald
C Gill
J Brown
D Bulmer
I Ritchey
D Wilkinson
-
71
214
27
60
182
35
17
-
-
-
-
-
-
-
-
-
13
13
1
5
11
3
-
-
-
100
-
-
60
-
-
-
90
-
-
2
7
1
-
-
174
327
28
67
260
39
17
174
343
300
63
80
62
20
-
Bonus payment on completion of placing and open offer in March 2022
1.
2. S Hurst resigned on 30 November 2021
3.
4. D Wilkinson appointed on 6 May 2022
C Gill resigned on 6 May 2022
StrategicGovernanceFinance 62
IPO Options
The table below shows the activity in relation to the IPO options from 2018.
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 and those lapsing due to the employment conditions not being met.
IPO options
Share options b/fwd.
Options lapsed
- employment
Options exercised
Remaining options
LTIPS
Options bfwd
Options lapsed
- performance
Option lapsed
- employment
Remaining options
Susan Hurst
Steven Rossiter
87,500
31,250
-
-
(87,500)
(31,250)
-
-
Fraser Gibson
Dave Thompson
Marc Bell
Leanne Wilkinson
136,585
182,112
51,086
45,977
(136,585)
(182,112)
(51,086)
(45,977)
-
-
-
-
-
-
-
-
Retention Plan
Following the resignation of the former CEO, James Ritchie, on 3 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.
The Board recognises the need to ensure the Executive Management Team remain incentivised going forward and will be launching
the FY24 LTIP once clear of the financial closed period. This will include the arrangements for the current CEO and CFO.
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.
Retention plan
Options b/fwd
Options lapsed
- employment
Options exercised
Remaining options
Alasdair MacDonald
Dave Thompson
17,073
10,760
-
-
-
-
17,073
10,760
Julian Brown
Chair of the Remuneration Committee
13 March 2023
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:
FY21 LTIP
FY22 LTIP
FY23 LTIP
Ordinary shares
391,108
446,980
455,922
StrategicGovernanceFinance 64
Strategic
Finance
Governance
Nomination Committee Report
Julian Brown, Chair of the Nomination Committee
I, Julian Brown, Chair of the Nomination Committee, present
the Nomination Committee Report for the year ended 30
September 2022. The Committee comprises David Wilkinson
who is our Senior Independent Non-Executive Director and
myself as Chair.
Responsibilities
regularly
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
During 2022, the Committee maintained its focus on the
careful succession planning of the Board and Executive
Management Team to ensure that they remain effective in
driving forward the strategy of the Company.
There has been one change to the Board this year and I provide
more detail as to the Nomination Committee’s involvement
and process below.
Non-Executive director – May 2022
On 6 May 2022, we welcomed David Wilkinson to the Board
as Senior Independent Non-Executive Director. David also
joined as a Member of this Committee, the Remuneration
Committee and Chair of the Audit Committee on the same
date. We are delighted that David has joined us as he brings
with him a wealth of experience that has further enhanced
the knowledge and skills of the Board as a whole.
On 6 May 2022, Chris Gill stepped down from the Board
as Senior independent Non-Executive Director. Chris also
stepped down from the responsibilities of Nomination
Committee member, Remuneration Committee member and
Chair of the Audit Committee.
Other changes
On 17 November 2023, Derek Bulmer stepped down from the
role of Chief Financial Officer and assumed the role of a Non-
Executive Director.
Julian Brown
Chair of the Nomination Committee
14 March 2023
66
Directors’ Report
for the year ended 30 September 2022
The Directors present their report together with the audited
Group financial statements of the Parent Company (‘the
Company’) and the Group for the year ended 30 September
2022.
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
Julian Brown
Ian Ritchey
David Wilkinson (Appointed 6 May 2022)
Christopher Gill (Resigned 6 May 2022)
Susan Hurst (Resigned 30 November 2021)
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 2022, 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.
Major shareholders
As at 24th February 2023 the following interests of
shareholders in excess of 3% have been notified to the
Company:
Number of
ordinary
shares
Ordinary
shares as a %
of issued share
capital
Schroders plc
12,400,247
20.34%
J O Hambro Capital
Management Limited
BGF Investment
Management Limited
Columbia Threadneedle
Investments
Phillip J Milton & Company
plc
6,016,667
9.87%
3,955,000
6.49%
4,755,828
7.83%
2,944,883
4.83%
Moneta Asset Management
2,200,000
3.61%
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 2023 and a
trade loan facility of up to £4.0m that can be drawn against
supplier payments, currently available to 31 July 2023. 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 £8.5m of cash at 30 September 2022 including full draw
down of the £3.0m CBILS loan and a further £4.0m 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 2024. 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
increases of 5% 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. Within the base case
model management have not modelled anything in relation
to the matter set out in note 20 Contingent Liabilities,
as management have assessed there to be no present
obligation.
The Directors have sensitised their base case forecasts for
a severe but plausible downside impact. This sensitivity
includes reducing revenue by 15% for the period to 30
September 2024, including the loss or delay of a certain level
of contracts in the pipeline that form the base case forecast,
and a 10% increase in costs across the Group as a whole for
the same period. The base case and sensitised forecast also
includes discretionary spend on capital outlay. 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, the reverse
stress test included reducing revenue by 20% and increasing
overheads by 15% against the base case. The inputs applied
to the reverse stress are not considered plausible.
Ordinary shares
of 1p each
A MacDonald
J Brown
D Bulmer
Ian Ritchey
30 September 2022 30 September 2021
622,267
30,341
68,297
33,333
509,526
19,230
-
*Note – the table above shows only Directors that have an
interest in the Group in the period.
There have been no changes to the above shareholdings
since the period end.
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 a medium sized company and
therefore does not fall under the scope of the Streamlined
Energy & Carbon Reporting (SECR) requirements.
Relations with stakeholders
The Group considers
its
shareholders, employees and customers and suppliers. How
the Group engages with these, and broader, stakeholders is
described in the s172 statement on page 19.
its key stakeholders to be
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 October 2023 and July
2023 respectively. In the unlikely case that the facilities
are not renewed, the Group would aim to take a number
of co-ordinated actions designed to avoid the cash deficit
that would arise. The Group announced a sales process in
June 2022. This could have the impact of triggering change
in ownership clauses in the facilities which again, would
remove the required funding. The Directors do not believe
this would happen based on current communications.
The Directors are confident, based upon the communications
with the team at Barclays, the historical strong relationship
and recent bank facility renewal in November 2022, that
these facilities will be renewed and will be available for
the foreseeable future. However, as the renewal of the
two facilities in October 2023 and July 2023 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.
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
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:
StrategicGovernanceFinance
68
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.
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 10.30am on 31
March 2023 at Innovation House, Centurion Way, Darlington,
DL3 0UP. The Notice of Annual General Meeting which sets
out the resolutions to be proposed at the forthcoming AGM
has been posted to shareholders.
These Group financial statements will be laid before the
Company in a general meeting be held at 11.00am on 31
March 2023 at Innovation House, Centurion Way, Darlington,
DL3 0UP. The Notice of General Meeting which sets out the
resolutions to be proposed at that meeting accompanies
these Group financial statements .
Events after the reporting date
There have been no significant events in the year from
30 September 2022 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:
So far as each director is aware, 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.
Alasdair Macdonald
Chief Executive Officer
14 March 2023
Statement of Directors’ Responsibilities
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 also responsible for safeguarding the assets
of the parent company and hence for taking reasonable
steps for the prevention and detection of 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.
Alasdair Macdonald
Chief Executive Officer
10 March 2023
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 UK-adopted International Accounting
Standards (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
StrategicGovernanceFinance
70
Financial Statements
Page Numbers
72
82
83
84
85
86
118
119
120
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Group Financial Statements
Parent Company Balance Sheet
Parent Company Statement of Changes in Equity
Notes to the Parent Company Financial Statements
StrategicStrategicGovernanceFinance 72
Independent auditor’s report to the
members of Tekmar Group plc
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.
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 COVID Business
Interruption Loan (CBIL) of £3.0m, currently available to 31
October 2023 and a trade loan facility of up to £4.0m that
can be drawn against supplier payments, currently available
to 31 July 2023. The note also confirms that it is not certain
that the facilities will be renewed, although it is expected.
The cash flow 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.
As stated in note 2(b), these events or conditions, indicate
that a material uncertainty exists that may cast significant
doubt on the group and the parent 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 evaluation of management’s assessment of the
entity’s ability to continue as a going concern
Our evaluation of the directors’ assessment of the group’s
and the parent company’s ability to continue to adopt the
going concern basis of accounting included:
•
•
•
•
•
•
•
•
Obtaining an understanding of how management
prepared their base case and sensitised forecasts for
the period to September 2024;
Assessing the accuracy 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
the reliance we can place upon the forecasts provided;
Obtaining an understanding of key trading, balance
sheet and cash flow assumptions and testing those
key assumptions to underlying historical financial
data, post year end trading information and market
analysis data;
Assessing the terms of the external debt held and
challenging management’s assessment of
the
possibility of renewal during the going concern period
and obtaining correspondence from the lender;
Assessing the plausibility of the mitigating actions
available to management to continue as a going
concern if downside sensitivities were to crystalise;
Evaluating management’s reverse stress test and
worse-case forecasts and management’s consideration
of the magnitude of a decline in cash that would
give rise to the elimination of the headroom in the
borrowing facilities;
Performing arithmetical and consistency checks on
management’s going concern base case model; and
Assessing the adequacy of related disclosures within
the annual report for consistency with management’s
assessment of going concern and whether they are in
line with the accounting standards.
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 year ended 30 September 2022, which comprise
the Consolidated statement of comprehensive income, the
Consolidated balance sheet, the Consolidated statement of
changes in equity, the Consolidated cash flow statement,
the notes to the consolidated financial statements including
a summary of significant accounting policies, the Parent
company balance sheet, the Parent company Statement
of changes in equity and the notes to the parent company
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 UK-adopted
international accounting standards. 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:
•
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 2022 and of the group’s loss
for the year then ended;
the group financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards;
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.
•
•
•
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
StrategicStrategicGovernanceFinance 74
OUR APPROACH TO THE AUDIT
Overview of our audit approach
Materiality
Key audit
matters
Scoping
Overall materiality:
Group: £300,000, which represents approximately 1.0% of
the group’s revenue.
Parent company: £270,000, which is capped at 90% of
group materiality and represents approximately 0.4% of
the parent company’s gross assets.
Key audit matters were identified remain the same as last
year and are as follows:
•
Revenue recognition (same as previous period);
• Material uncertainty related to going concern (same as
•
•
•
previous period);
Impairment of goodwill and intangible assets (same as
previous period);
Disclosure of contingent liabilities (new this year); and
Impairment of investments in subsidiaries (parent
only) (same as previous period).
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
four components using component materiality (full-scope
audit). We performed analytical procedures at group level
(analytical procedures) on the financial information of all
the remaining group components
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 year 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.
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
Revenue recognition
Key audit matter
Accuracy of
staff costs
Disclosure of
contingent liabilities
Going concern
Impairment of
investments in
subsidiaries (Parent only)
Significant risk
Other risk
Potential financial
statement impact
Existence and
valuation of trade
receivables and
contract assets
Completeness
and accuracy of
trade payables and
accurals
Management override
of controls
Impairment of goodwill
and intangible assets
Existence of cash
balances
Existence and
valuation of
inventory balances
held
Low
Low
Accuracy of the
share based
payment charge
Extent of management judgement
High
Key Audit Matter - Group
How our scope addressed the matter – Group
Revenue recognition
We identified the risk of fraud in revenue recognition as one of the
most significant assessed risks of material misstatement due to
fraud.
We determined that the risk of material misstatement lies within
the two types of revenue recognised as follows:
Revenue recognised over time
Revenue is recognised in accordance with International Financial
Reporting Standard (IFRS) 15 ‘Revenue from Contracts with
Customers’ and recognition of revenue requires management
to make
judgement relating to allocation of consideration,
assessing the stage of completion for a contract and forecasting
management’s margin. These judgements increase the associated
risk of fraud in relation to revenue recognition.
This risk relates to the occurrence assertion.
Total revenue recognised over time is £20.1m (2021: £40.2m).
Revenue recognised at a point in time
The significant risk identified is in relation to cut off and
fraudulently or erroneously accelerating revenues that should not
be recognised in the year ending 30 September 2022 and increases
the associated risk of fraud in relation to revenue recognised. This
impacts revenue recognised at the end of the financial year.
Total revenue recognised at a point in time is £10.0m (2021: £6.8m).
In responding to the key audit matter, we performed the following
audit procedures on revenue recognition:
•
Evaluating 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;
Obtaining and reading management’s IFRS 15 assessment
of performance obligations and recording 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;
Challenging management’s total expected costs 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 year end results and
tested a sample of forecasted costs to supporting evidence
such as purchase orders and supplier quotations;
Testing the historical accuracy of forecasting by comparing
final outturn of completed contracts to original forecasts;
Testing 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 year;
Recalculating the year-end deferred income balance based
on management’s schedules, and performing procedures
on a sample basis to ensure schedules were complete and
accurate;
Selecting a sample from sales made around the year end and
determined whether cut off points identified are appropriate;
and
Testing a sample of credit notes raised throughout the year
and post year end to ensure revenue is not being artificially
inflated at the year end. Where we identify unusual credit
notes, we tested them to supporting evidence.
•
•
•
•
•
•
•
StrategicStrategicGovernanceFinance
76
Key Audit Matter - Group
How our scope addressed the matter – Group
Key Audit Matter - Parent
How our scope addressed the matter – Parent
Our results
Based on our audit work performed, we have not identified any
material misstatements relating to the revenue recognition.
Impairment of investments in subsidiaries
We identified Impairment of investments in subsidiaries for Tekmar
Group plc as one of the most significant assessed risks of material
misstatement due to error.
Relevant disclosures in the Annual Report and Accounts 2022
•
Financial statements: Note 4 Revenue and Segmental
Reporting
Audit committee report: Significant issues considered in
relation to the financial statements
•
Impairment of goodwill and intangible assets
We identified valuation of intangible assets, including goodwill as one
of the most significant risks of material misstatement due to error,
specifically in relation to the offshore wind cash generating unit (CGU).
The risk associated with intangible asset valuation is increased by
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
(CGUs).
In addition, this is assessed as a significant risk because of the
underperformance of the group in the year. There is a risk that
intangible assets may be impaired in line with International Accounting
Standards (IAS) 36 ‘Impairment of Assets’. This risk is relevant to the
offshore wind CGU.
The Group recorded goodwill and other intangible assets in the
Offshore wind CGU with a carrying value of £21.5m as at 30 September
2022 (2021: £22.2m).
In responding to the key audit matter, we performed the following
audit procedures on the CGU’s identified:
•
for
Assessing management’s assessment of the CGU’s and the
assignment of assets to those CGU’s;
Assessing management’s workings
the annual
impairment review to determine those CGU’s that are most
at risk and include the most judgment. This was those with
limited headroom, significant growth or high susceptibility to
changes in assumptions;
Assessing and challenging 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 global macro
factors including, but not limited to supply chain delays, the
impact of inflation and the UK economic outlook;
Recalculating and challenging the implied growth rates
included in the model by comparing the actual results to
historical forecasting, evidencing accuracy;
Performing sensitivity analysis on management’s impairment
model and own sensitivities;
Engaging our Valuations team to assess the appropriateness
of the discount rate included in management’s impairment
model; and
Assessing whether the disclosure included for the headroom
sensitivities
is appropriate and assessing whether the
accounting policy is in line with IAS 36.
Relevant disclosures in the Annual Report and Accounts 2022
•
•
Financial statements: Note 11 Goodwill and Other Intangible
Audit committee report: Significant issues considered in relation
to the financial statements
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.
Disclosure of Contingent liabilities
We identified the disclosure of contingent liabilities as one of the
most significant assessed risks of material misstatement due to
error. Following the receipt of defect notices on 8 historical contracts,
management have considered the existence of a contingent liability
to be appropriate.
No provision has been recorded within the financial statements in
relation to this as management consider there to be no present
obligation. However, disclosure has been made in accordance with IAS
37 ‘Provisions, Contingent Liabilities and Contingent Assets’ relating to
the existence of a contingent liability.
The assessment of whether the requirements of IAS 37 have been
appropriately applied requires significant judgement by management.
Relevant disclosures in the Annual Report and Accounts 2022
Financial statements: Note 20 Contingent liabilities
Audit committee report: Significant issues considered in relation to
the financial statements
In responding to the key audit matter, we performed the following
audit procedures on the disclosure of the contingent liabilities:
•
Making enquiries of management and the group’s internal
and external
legal advisors to understand and assess
management’s conclusion in relation to the nature of the
matter and obligations of the Group;
Evaluating management’s assessment of the defect notices
received by agreeing the facts in management’s paper to
supporting evidence;
Challenging management’s interpretation of information
used in assessing the disclosures made with supporting
evidence;
Obtaining and reading the reports of external experts and
internal experts to determine whether the assessment made
was consistent with the reports; and
Considering management’s application of the requirements
of IAS 37 and the adequacy of the disclosure.
Our results
From our audit work performed we are satisfied with management’s
disclosure and its compliance with IAS 37.
•
•
•
•
•
•
•
•
•
•
There is an increased risk that the valuation of investments
in subsidiaries are impaired as per IAS 36 because of the
underperformance of the group in the year 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 2022 the Company has total investments of
£37.0m (2021: £37.1m).
In responding to the key audit matter, we performed the following
audit procedures on the impairment of investments:
•
Obtaining and reading management’s assessment of whether
there are indicators of impairment in the investments held to
assess compliance with IAS 36;
Testing 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 impacts from the economy such as inflation;
Recalculating and challenged the implied growth rates
included in the model by comparing the actual results to
historical forecasting, evidencing accuracy;
Performing sensitivity analysis on management’s impairment
model and own sensitivities; and
Engaging our Valuations team to assess the appropriateness
of the discount rate included in management’s impairment
model.
Relevant disclosures in the Annual Report and Accounts 2022
•
Parent company financial statements: Note 3 Investment in
Subsidiary Undertakings
Audit committee report: Significant issues considered in
relation to the financial statements
•
Our results
From our audit work performed we are satisfied with management’s
judgement that the investments are held at an appropriate value and
are not materially impaired.
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
£300,000, which is approximately 1.0% of the
group’s revenue.
£270,000, which is approximately 0.4% of the
parent company’s gross assets, capped at 90%
of group materiality.
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
78
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 materially
influenced by matters such as
economic uncertainty or changes in the
marketplace; and
• Whether the metric has been materially
influenced by matters such as economic
uncertainty 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 is considered the most
appropriate because the parent company
is a holding company.
Materiality for the current year is lower than
the level that we determined for the period
ended 30 September 2021 to reflect reduction
in group revenue and shorter accounting
period.
Materiality for the current year is lower than
the level that we determined for the period
ended 30 September 2021 to reflect reduction
of group materiality.
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
£180,000, which is 60% of financial statement
materiality.
£162,000, which is 60% of financial statement
materiality.
Significant judgements
made by auditor
in determining the
performance materiality
Specific materiality
Specific materiality
Communication of
misstatements to the audit
committee
Threshold for
communication
In determining performance materiality, we
made the following significant judgements:
•
The quantum and number of errors
identified in the prior year audit were
consistent with the prior year calculated
threshold and significant enough for us to
not consider increasing the performance
materiality basis.
Changes in management and ongoing
sales process.
•
In determining performance materiality, we
made the following significant judgements:
•
The quantum and number of errors
identified in the prior year audit were
consistent with the prior year calculated
threshold and significant enough for us to
not consider increasing the performance
materiality basis.
Changes in management and ongoing
sales process.
•
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.
lower
We determined a
materiality for the following areas:
Directors’ remuneration; and
•
Related party transactions
•
level of specific
lower
We determined a
materiality for the following areas:
Directors’ remuneration; and
•
Related party transactions
•
level of specific
We determine a threshold for reporting unadjusted differences to the audit committee.
£15,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£13,500 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:
their
the group,
its components, and
Understanding
environments, including group-wide controls
• 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.
Performance of our audit
•
All KAMs were addressed with the full-scope audit
procedures where relevant to the component;
• We performed the full-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.
Audit
approach
Number of
components
% coverage
Revenue
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 four components we responded with a full-scope audit
of their financial information. For the remaining nine
components we performed analytical procedures.
•
Full-scope
audit
Specified
audit
procedures
Analytical
procedures
Total
4
-
9
13
95
-
5
100
% coverage
Loss before
tax
108
-
(8)
100
StrategicStrategicGovernanceFinance 80
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual
report, 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.
Responsibilities of directors for the financial statements
As explained more fully
in the statement of directors’
responsibilities, the directors are responsible for the 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.
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 year 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
In the light of the knowledge and understanding of the group and
the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in
the strategic report or the directors’ report.
Matters on which we are required to report by exception
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.
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.
Irregularities, including fraud, are instances of non-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).
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 UK-adopted international accounting
standards (for the group), United Kingdom Generally
Accepted Accounting Practice (for the parent company)
and relevant tax regulations.
• We obtained an understanding of the legal and regulatory
frameworks applicable to the company and the industry
in which it operates through our general and commercial
and sector experience, discussions with management,
inspection of the company’s health and safety records
and legal correspondence. We also discussed the relevant
frameworks with company legal advisors as appropriate.
• We obtained an understanding of how the company is
complying with those legal and regulatory frameworks by
making inquiries of management and of those responsible
for legal and compliance procedures. We corroborated
our inquiries through our review of board minutes.
•
•
Our audit procedures involved: journal entry testing,
with a focus on manual consolidation journals and
journals indicating large or unusual transactions based
on our understanding of the business; enquiries of legal
counsel, group management, component management
at locations where full scope audit procedures and
specified audit procedures were performed. In addition, we
completed audit procedures to conclude on the compliance
of disclosures in the annual report and accounts with
applicable financial reporting requirements. 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:
o
o
o
journal entries that increased revenues or that
reclassified costs from the income statement to
the balance sheet that are posted by senior finance
personnel;
in determining
potential management bias
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.
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.
•
The engagement partner’s assessment of
the
appropriateness of the collective competence and
capabilities of
including
the engagement
consideration of the engagement team’s:
team
o
o
o
understanding of, and practical experience with, audit
engagements of a similar nature and complexity
through appropriate 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.
• 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.
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.
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
14 March 2023
StrategicStrategicGovernanceFinance
82
Consolidated Statement of
Comprehensive Income
for the year ended 30 September 2022
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Group operating (loss)
Analysed as:
Adjusted EBITDA[1]
Depreciation
Amortisation
Exceptional Share based payments charges
Group operating (Loss)
Finance costs
Finance income
Net finance costs
(Loss) before taxation
Taxation
(Loss) for the period
Equity-settled share-based payments
Revaluation of property
Retranslation of overseas subsidiaries
Total comprehensive income for the period
(Loss) attributable to owners of the parent
Total Comprehensive income attributable to owners of the parent
(Loss) per share (pence)
Basic
Diluted
Note
4
6
6
4
12
11
24
7
9
10
10
12M
ended
30 Sep
2022
£000
30,191
(23,153)
7,038
(11,623)
24
(4,561)
(2,079)
(1,370)
(1,112)
-
(4,561)
(685)
18
(667)
(5,228)
99
(5,129)
(97)
238
326
(4,662)
(5,129)
(4,662)
(9.04)
(9.04)
18M
ended
30 Sep
2021
£000
47,034
(35,794)
11,240
(16,721)
48
(5,433)
(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)
All results derive from continuing operations.
1: Adjusted EBITDA, which is defined as profit before net finance costs, tax, depreciation, amortisation, exceptional share based payments charge, and excep-
tional items is a non-GAAP metric used by management and is not an IFRS disclosure.
Consolidated Balance Sheet
as at 30 September 2022
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
22
18
17
19
18
17
30 Sep
2022
£000
5,883
24,564
30,447
4,623
13,375
8,496
26,494
56,941
609
67,653
1,738
(12,685)
173
(18,278)
39,210
194
331
313
838
7,198
9,669
26
16,893
17,731
56,941
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)
40,233
3,183
343
125
3,651
3,160
9,121
267
12,548
16,199
56,422
The Group financial statements were approved by the Board and authorised for issue on 14 March 2023 and were signed on its behalf by:
Alasdair Macdonald
Chief Executive Officer
Company registered number: 11383143
StrategicStrategicGovernanceFinance 84
Consolidated Statement of
Changes in Equity
for the year ended 30 September 2022
Share
capital
Share
premium
Merger
relief
reserve
Merger
reserve
Foreign
currency
translation
reserve
Retained
earnings
£000
£000
£000
£000
£000
£000
Total equity
attributable
to owners
of the
parent
£000
Total
equity
£000
Balance at 31 March
2020
Loss for the year
Share based payments
Exchange difference on
translation of overseas
subsidiary
Total comprehensive
income for the year
Issue of shares
Total transactions with
owners, recognised
directly in equity
Balance at 30 September
2021
(Loss) for the Period
Share based payments
Revaluation of fixed
assets
Exchange difference on
translation of overseas
subsidiary
Total comprehensive
income for the year
Issue of shares
Total transactions with
owners, recognised
directly in equity
Balance at 30 September
2022
513
64,100
1,738
(12,685)
-
-
-
-
3
3
-
-
-
-
(3)
(3)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,690)
45,976
45,976
(5,436)
(5,436)
(5,436)
(164)
(164)
(164)
(153)
-
(153)
(153)
(153)
(5,600)
(5,753)
(5,753)
-
-
-
-
-
-
-
-
516
64,097
1,738
(12,685)
(153)
(13,290)
40,223
40,223
-
-
-
-
-
-
-
-
-
-
93
93
3,556
3,556
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,129)
(5,129)
(5,129)
(97)
238
(97)
238
(97)
238
326
-
326
326
326
(4,988)
(4,662)
(4,662)
-
-
-
-
3,649
3,649
3,649
3,649
609
67,653
1,738
(12,685)
173
(18,278)
39,210
39,210
Consolidated Cash Flow
Statement
for the year ended 30 September 2022
Cash flows from operating activities
(Loss) 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 (outflow) / inflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds on sale of property, plant and equipment
Interest received
Net cash (outflow) from investing activities
Cash flows from financing activities
Facility drawdown
Lease Obligation borrowings
Repayment of borrowings under Lease obligations
Shares issued
Interest paid
Net cash inflow from financing activities
Net increase 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
12M ended
30 Sep 2022
18M Ended
30 Sep 2021
£000
£000
(5,228)
(5,830)
1,370
1,112
(103)
685
(18)
(2,182)
(658)
4,561
178
1,899
-
1,899
(1,274)
(369)
-
18
(1,625)
991
656
(537)
3,649
(345)
4,414
4,688
3,482
326
8,496
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
StrategicStrategicGovernanceFinance
86
Notes to the Group Financial Statements
for the year ended 30 September 2022
1. General Information
incorporated and domiciled
Tekmar Group plc (the “Company”) is a public limited
in England and
company
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.
held £8.5m of cash at 30 September 2022 including full draw
down of the £3.0m CBILS loan and a further £4.0m of the
trade loan facility. There are no financial covenants that the
Group must adhere to in either of the bank facilities.
(a) Basis of preparation
The results for the year ended 30 September 2022 have
been prepared in accordance with UK-adopted International
Accounting Standards (“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 18 months
from 1 April 2020 to 30 September 2021.
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 2023 and a
trade loan facility of up to £4.0m that can be drawn against
supplier payments, currently available to 31 July 2023. 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
The Directors have prepared cash flow forecasts to 30
September 2024. 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 increases of 5% 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. Within the base case model management have not
modelled anything in relation to the matter set out in note 20
Contingent Liabilities, as management have assessed there to
be no present obligation.
The Directors have sensitised their base case forecasts for a
severe but plausible downside impact. This sensitivity includes
reducing revenue by 15% for the period to 30 September 2024,
including the loss or delay of a certain level of contracts in the
pipeline that form the base case forecast, and a 10% increase in
costs across the Group as a whole for the same period.
The base case and sensitised forecast also
includes
discretionary spend on capital outlay. 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, the reverse
stress test included reducing revenue by 20% and increasing
overheads by 15% against the base case. The inputs applied
to the reverse stress are not considered plausible.
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 October 2023 and July
2023 respectively. In the unlikely case that the facilities are
not renewed, the Group would aim to take a number of co-
ordinated actions designed to avoid the cash deficit that
would arise. The Group announced a sales process in June
2022. This could have the impact of triggering change in
ownership clauses in the facilities which again, would remove
the required funding. The directors do not believe this would
happen based on current communications.
The Directors are confident, based upon the communications
with the team at Barclays, the historical strong relationship
and recent bank facility renewal in November 2022, that
these facilities will be renewed and will be available for the
foreseeable future. However, as the renewal of the two
facilities in October 2023 and July 2023 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.
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.
(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 offshore 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
1.
2.
Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance
obligations
5. Recognising
revenue when / as performance
obligation(s) are satisfied
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. 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).
StrategicStrategicGovernanceFinance 88
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 purchase order’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
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:
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.
•
•
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 in
relation to IPO share options 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
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.
identified
Other
include customer
intangible assets
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.
Properties whose fair value can be measured reliably are held
under the revaluation model and are carried at a revalued
amount, being fair value at the date of valuation less any
subsequent accumulated depreciation and subsequent
impairment losses. The fair value of land and building is
considered to be their market value.
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
income
statement. Goodwill is allocated to cash-generating units
and is not amortised but is tested annually for impairment.
immediately
is recorded
in the
losses are recognised
Revaluation gains and
in other
comprehensive income and accumulated in equity, except
to the extent that a revaluation gain reverses a revaluation
loss previously recognised in profit or loss, or a revaluation
loss exceeds the accumulated revaluation gains recognised in
equity; such gains and losses are recognised in profit or loss.
The latest valuation was carried out on 25 August 2022.
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:
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.
•
It is technically feasible to complete the technological
development so that it will be available for use;
• Management intends to complete the technological
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
Plant and equipment
Production tooling
Fixtures & fittings
Motor vehicles
Computer equipment
4 years straight line
6 years reducing balance or
15–25% straight line
3 years straight line
4 years straight line
4 years reducing balance or
straight line
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.
•
•
•
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.
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.
StrategicStrategicGovernanceFinance 90
(l) 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.
Impairment losses recognised in respect of cash-generating
units are allocated first to reduce the carrying amount of
any goodwill allocated to the cash-generating unit and then
to reduce the carrying amount of the other assets in the unit
on a pro rata basis. A cash generating unit is the smallest
identifiable group of assets that generates cash inflows that
are largely independent of the cash inflows from other assets
or groups of assets.
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.
(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.
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.
(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 and contingent liabilities
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.
A contingent liability is a possible obligation that arises from
past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the entity. A contingent
liability is a disclosure in the notes to the financial statements
only. As part of our normal contractual terms, warranties are
issued to customers. No provision is recognised in relation to
this due to there being no history of claims in this area.
(p) Leases
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
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
for the year, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustment to tax payable
in respect of previous years.
Deferred tax is provided on temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes, except to the extent that it arises on:
•
•
•
the initial recognition of goodwill;
the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit other than in a
business combination;
differences relating to investments in subsidiaries to
the extent that they will probably not reverse in the
foreseeable future.
The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that
it is probable that future taxable profits will be available
against which the asset can be utilised.
(s) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits. Bank borrowings that are repayable on demand
and form an integral part of the Group’s cash management
are included as a component of cash and cash equivalents
for the purpose only of the statement of cash flows.
(r) 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
thereafter at amortised cost using the effective interest
rate method.
Financial derivatives
The Group uses derivative financial instruments to hedge
its exposure to risks arising from operational activities,
principally foreign exchange risk.
In accordance with
treasury policy, the Group does not hold or issue derivative
financial instruments for trading purposes. The Group does
not hedge account for these items. Any gain or loss arising
from derivative financial instruments is based on changes
in fair value, which is determined by direct reference to
active market transactions or using a valuation technique
where no active market exists. At certain times the Group
has foreign currency forward contracts that fall into this
category. Movement in fair value is recognised in profit and
loss.
StrategicStrategicGovernanceFinance 92
(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 and Merger relief 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 other reserves of the Company as if it had always
existed, with the difference presented as the merger reserve.
The Merger relief reserve was created on acquisition of Pipeshield
International Limited and Subsea Innovation Limited as a result
of part of the consideration being settle in equity of the plc.
(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.
Government grants are recognised in the income statement
so as to match them with the related expenses that they are
intended to compensate.
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 equity-settled share-based remuneration
plans for certain employees. None of the Group’s plans are cash-
settled. All goods and services received in exchange for the grant
of any share-based payment are measured at their fair values.
Where employees are rewarded using share-based payments,
the fair value of employees’ services is determined indirectly by
reference to the fair value of the equity instruments granted.
This fair value is appraised at the grant date and excludes the
impact of non-market vesting conditions.
All share-based remuneration is ultimately recognised as an
expense in profit or loss with a corresponding credit to retained
earnings. If vesting years or other vesting conditions apply, the
expense is allocated over the vesting year, based on the best
available estimate of the number of share options expected to
vest.
3. Critical accounting judgements and estimates
The preparation of the Group financial statements under IFRS
requires the Directors to make estimates and assumptions
that affect the reported amounts of assets and liabilities.
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
As described in note 2, Group expenditure on 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 £106,590. 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 £5,720 and
£39,100 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
impairment
resultant provision
appropriate. The
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. Given the groups historic
recoverability of 100% of receivable balances, no provision
for bad debts or credit losses have been accounted for. 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.
StrategicStrategicGovernanceFinance 94
4. Revenue and 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 for the year ended 30
September 2022
Major customers
In the period ended 30 September 2021 there was One
major customer[s] within the offshore energy segment that
Analysis of revenue by region
UK & Ireland
Germany
Turkey
Greece
Denmark
France
Other Europe
China
USA & Canada
Japan
Philippines
Qatar
KSA
Other 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
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.
12M ending
30 Sep 2022
£000
8,028
1,230
499
409
757
-
2,721
3,847
674
561
534
8,716
509
468
1,238
30,191
£000
14,705
15,486
30,191
£000
15,497
12,734
1,960
30,191
£000
10,048
20,143
30,191
18M ending
30 Sep 2021
£000
21,492
538
-
-
418
2,874
2,684
6,942
4,375
1,580
-
-
3,245
-
2,886
47,034
£000
26,899
20,135
47,034
£000
30,584
13,196
3,254
47,034
£000
6,791
40,243
47,034
At 30 September 2022, the group had a total transaction price £15,488k (2021: £9,724k) 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 year to 30 September 22 which was previously recorded in contract liabilities was £1,168k (2021:
£991k)
Profit and cash are measured by division and the Board reviews this on the following basis.
Revenue
Gross profit
% Gross profit
Operating (loss)/ profit
Analysed as:
Adjusted EBITDA
Depreciation
Amortisation
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
Operating profit/(loss)
Interest & similar expenses
Tax
(Loss) / profit after tax
Other information
Reportable segment assets
Reportable segment liabilities
Offshore
Energy
2022
Marine
Civils
2022
Group/
Eliminations
£000
£000
£000
Total
2022
£000
30,191
7,038
23%
(4,561)
-
-
-
(1,945)
(1,339)
(2,079)
-
(606)
(1,945)
(164)
161
(1,948)
(1,370)
(1,112)
(4,561)
(667)
99
(5,129)
Total
2021
47,034
11,240
24%
(5,433)
(2,115)
(2,031)
(1,651)
364
-
-
-
(2,136)
(1,429)
-
(1,128)
421
(2,136)
(5,433)
(104)
389
(1,851)
(397)
394
(5,436)
17,455
4,442
25%
(3,405)
(1,800)
(1,099)
(506)
(3,405)
(318)
(237)
(3,960)
12,736
2,596
20%
789
1,060
(271)
-
789
(185)
175
779
33,837
8,208
24%
(4,266)
(1,881)
(1,805)
(523)
(57)
(4,266)
(285)
235
(4,316)
13,197
3,032
23%
969
1,195
(226)
-
-
969
(8)
(230)
731
19,029
(5,530)
9,541
(4,483)
28,175
(7,631)
57,766
(17,678)
Offshore
Energy
2021
Marine
Civils
2021
Group/
Eliminations
25,048
(6,755)
6,793
(2,832)
25,542
(7,072)
57,383
(16,659)
StrategicStrategicGovernanceFinance 96
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 24)
2022
No
7
9
48
58
54
176
2021
No
5
9
41
69
63
187
12M ending
30 Sep 2022
£000
8,140
857
396
(103)
9,290
18M ending
30 Sep 2021
£000
11,967
1,219
568
205
13,959
(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
12M ending
30 Sep 2022
£000
18M ending
30 Sep 2021
£000
766
46
812
100
912
1,023
116
1,139
20
1,159
Share options were awarded in the year, see note 24 for details of share option plans.
Director
remuneration
Basic salary
/ fees
Benefits
Social
security
Name of Director
J Ritchie
S Hurst
A MacDonald
C Gill
J Brown
D Bulmer
I Ritchey
D Wilkinson
£000
-
71
214
27
60
182
35
17
£000
-
-
-
-
-
-
-
-
£000
-
13
13
1
5
11
3
-
Company
Pension
contributions
£000
-
90
-
-
2
7
1
-
Bonus
£000
-
-
100
-
-
60
-
-
FY22 Total
FY21 Total
£000
-
174
327
28
67
260
39
17
£000
174
343
300
63
80
62
20
-
Highest paid director
The aggregate remuneration of the highest paid Director was £314,000 (2021: £343,000), which includes pension contributions
of £nil (2021: £11,000), and accrued bonus costs of £nil (2021: £276,000). The number of Directors accruing pension benefits
under a defined contribution plan was four (2021: five).
StrategicStrategicGovernanceFinance
98
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
– Other non-audit services
- Nominated advsior before being appointed as statutory auditor
12M ending
30 Sep 2022
£000
18M ending
30 Sep 2021
£000
170
78
5
-
253
100
69
6
34
203
Employee benefit expense
Amortisation (note 11)
Depreciation – leased (note 12)
Depreciation – owned (note 12)
Inventory recognised as an expense
Other expenses
Total cost of sales and administrative expenses
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
Interest receivable
Total interest receivable and similar income
Net finance costs
Interest expense on lease liabilities was £17,401 (2021: £19,356).
12M ending
30 Sep 2022
18M ending
30 Sep 2021
£000
9,290
1,112
482
887
19,992
3,013
34,776
£000
13,959
1,651
606
1,425
31,873
3,001
52,515
12M ending
30 Sep 2022
18M ending
30 Sep 2021
£000
£000
290
395
685
(18)
(18)
667
298
104
402
(5)
(5)
397
StrategicStrategicGovernanceFinance
100
9. Taxation
Analysis of credit in year
Current tax
Current taxation charge for the year
Adjustments in respect of prior periods
Total current tax
Deferred tax
Origination and reversal of timing differences
Adjustments in respect of prior periods
Total deferred tax
Tax on (loss) on ordinary activities
Reconciliation of total tax credit:
(Loss) on ordinary activities before tax
(Loss) on ordinary activities multiplied by the rate of corporation tax in the UK of 19%
(2021: 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
Effect of changes of tax rate in deferred tax
Total taxation credit
12M ending
30 Sep 2022
18M ending
30 Sep 2021
£’000
-
(245)
(245)
146
-
146
(99)
(5,228)
(994)
(10)
(168)
(250)
1,422
107
(245)
39
(99)
£’000
-
(18)
(18)
(376)
-
(376)
(394)
(5,830)
(1,108)
294
(147)
(267)
1,228
(376)
(18)
-
(394)
Factors that may affect future tax charges
Following the Governments announcement in October 2022 to increase the corporation tax rate to 25% from 19% with effect
from April 2023, deferred tax has been calculated at a rate of 25%. Our expectation is that the Group will utilise its losses in
future accounting periods at the higher rate.
10. Earnings per share
Basic earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted average
number of ordinary shares in issue. Diluted earnings per share are calculated by including the impact of all conditional share
awards.
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
12M ending
30 Sep 2022
18M ending
30 Sep 2021
(5,219)
(5,436)
56,719,539
968,399
51,284,412
1,545,392
Weighted average number of shares for the purposes of diluted earnings per share
57,687,938
52,829,804
Profit per ordinary share (pence)
Basic profit per ordinary share
Diluted profit per ordinary share
Adjusted earnings per ordinary share (pence)*
The calculation of adjusted earnings per share is based on the following data:
(Loss) for the period attributable to equity shareholders
Add back:
Amortisation on acquired intangible assets
Share based payment on IPO and SIP at Admission
Tax effect on above
Adjusted earnings
(9.04)
(9.04)
(7.44)
2022
£000
(5,129)
605
-
(12)
(10.60)
(10.60)
(9.11)
2021
£000
(5,436)
1,128
(364)
2
(4,536)
(4,670)
*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 102
11. Goodwill and other intangibles
Goodwill
Software
Product
development
Trade name
Customer
relationships
£000
£000
COST
As at 1 April 2020
Additions
As at 30 September 2021
Additions
Disposals
Forex on consolidation
As at 30 September 2022
AMORTISATION AND IMPAIRMENT
As at 1 April 2020
Charge for the year
As at 30 September 2021
Charge for the period
Eliminated on disposals
Forex on consolidation
As at 30 September 2022
NET BOOK VALUE
As at 1 April 2020
As at 30 September 2021
As at 30 September 2022
26,292
-
26,292
-
-
-
26,292
4,109
-
4,109
-
-
-
4,109
22,183
22,183
22,183
270
124
394
16
(116)
-
294
88
44
132
139
(116)
-
155
182
262
139
£000
2,641
540
3,181
353
(34)
3
3,503
1,319
479
1,798
367
(34)
3
2,134
1,322
1,383
1,369
£000
1,289
-
1,289
-
-
-
1,289
133
193
326
129
-
-
455
1,156
963
834
£000
1,870
-
1,870
-
-
-
1,870
419
935
1,354
477
-
-
1,831
1,451
516
39
Total
£000
32,362
664
33,026
369
(150)
3
33,248
6,068
1,651
7,719
1,112
(150)
3
8,684
26,294
25,307
24,564
The remaining amortisation periods for software and product development are 6 months to 48 months
(2021: 6 months to 48 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
2022
£000
19,593
2,590
2021
£000
19,593
2,590
Goodwill is allocated to two CGUs being Offshore Energy and Marine Civils. 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 CGU 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 are likely 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 21%) are in line with expected market rate.
The value in use calculation models an increase in revenue for the offshore energy division of 18% across year 3 and year 4 and
then 2% into perpetuity. The growth rates for year 3 and 4 are comparable to the expected market CAGR. A less significant
growth rate for the offshore energy division in year 3 and 4 of 5% would lead to an impairment charge being recognised.
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 13.5 % WACC (FY21 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
Terminal growth rate percentage of 2% (FY21: 2%)
The discount rate used to test the cash generating units was the Group’s post-tax WACC of 13.5%. The goodwill impairment
review has been tested against a reduction in free cashflows. The Group considers free cashflows to be EBITDA less any
required capital expenditure and tax . Management has considered the most likely worst-case scenario to be to be a reduction
in free cashflows to 80% of the base case. 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 69% (offshore
energy) and 61% (Marine Civils) of forecasted base case values to trigger an impairment of goodwill. The post-tax discount
rate of 13.5% would need to increase to 19% (offshore energy) and 24% (Marine Civils) 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 104
12. Property, Plant and Equipment
13. Investments
Freehold
property
Leasehold
improvments
Containers
and racking
Plant and
equipment
£000
£000
£000
£000
Fixtures
and
Fittings
£000
Production
tooling
Motor
vehicles
Computer
equipment
Right of
use asset
Total
£000
£000
£000
£000
£000
COST
As at 31 March 2020
Additions
Disposals
As at 30 September 2021
Additions
Disposals
Revaluation
Forex on consolidation
As at 30 September 2022
DEPRECIATION
As at 31 March 2020
Charge for the year
Eliminated on disposal
As at 30 September 2021
Charge for the year
Eliminated on disposal
Revaluation
Forex on consolidation
As at 30 September 2022
2,886
-
-
2,886
-
-
102
-
2,988
70
76
-
146
51
-
(175)
-
22
NET BOOK VALUE
As at 31 March 2020
As at 30 September 2021
As at 30 September 2022
2,816
2,740
2,966
921
3
(5)
919
3
-
-
-
922
904
17
-
921
1
-
-
-
922
17
(2)
-
1,141
77
(24)
1,194
3
-
-
-
1,197
1,053
69
(24)
1,098
44
-
-
-
1,142
2,701
1,069
-
3,770
510
-
-
13
4,293
1,384
476
-
1,860
431
-
-
7
2,298
88
96
55
1,317
1,910
1,995
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 (£317k), computer software
(£118k) and plant and equipment assets (£54k).
As at 30 September 2022, the freehold property with carrying value
of £2,966k were subject to a fixed and floating charge that forms
security for the bank borrowings disclosed in note 18.
The following information relates to tangible fixed assets carried on
the basis of revaluations in accordance with ISA16 Property, plant
and equipment.
The property was valued by an independent valuer (G F White LLP)
on 25th August 2022. The revaluation of freehold property in the
year resulted in a revaluation gain of £238k in the period.
21
9
-
30
4
-
-
2,314
393
-
2,707
88
-
-
34
2,795
1
13
-
14
8
-
-
-
22
20
16
12
1,474
699
-
2,173
310
-
-
-
2,483
840
534
312
11
-
-
11
-
-
-
11
11
-
-
11
-
-
-
-
11
-
-
-
493
30
(1)
522
18
(50)
-
2,685
258
(120)
13,173
1,839
(150)
2,823 14,862
1,274
(112)
102
13
648
(62)
-
490
3,409
16,139
369
75
(1)
443
43
(50)
-
-
436
123
79
54
2,014
606
(120)
7,280
2,031
(145)
2,500
482
(62)
-
-
9,166
1,370
(112)
(175)
7
2,920 10,256
671
323
489
5,892
5,696
5,883
Freehold Property
At fair value
30 September 2022
Aggregate depreciation thereon
Net book value
Historical cost of revalued assets
Aggregate depreciation thereon
Historical cost net book value
30 Sep
2022
30 Sep
2021
£000
£000
2,988
(22)
2,966
2,656
(446)
2,210
2,886
(146)
2,740
2,656
(393)
2,263
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 the Group
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
No non-controlling interest has been recorded in relation to Ryder Geotechnical Limited as this is not material to split out.
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
Pipeshield International trading LLC
Pipeshield Company Limited
Tekmar GmbH
Country of
Incorporation
UAE
Saudi Arabia
Germany
Tekmar Marine Technology Company Limited
China
Address
C2 Al Buttien Building, Office 642
Dammam, KSA, Po Box 130 31952
Möllneyer Ufer 17, 45257 Essen, Germany
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
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
Tekmar Marine Technology Company Limited
Sales and project management for Asia Pacific region
StrategicStrategicGovernanceFinance 106
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 not yet due (retentions)
Trade receivables net
Contract assets
Other receivables
Prepayments and accrued income
Derivative financial assets
30 Sep
2022
£000
1,962
1,954
707
4,623
30 Sep
2022
£000
2,698
1,948
3,279
1,620
9,545
3,194
203
433
-
13,375
30 Sep
2021
£000
2,222
1,488
256
3,966
30 Sep
2021
£000
4,861
3,192
3,344
-
11,397
5,432
563
542
37
17,971
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 counterparty 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
US Dollar
Other
17. Trade and other payables
Current
Trade payables
Tax and social security
Accruals and contract liabilities
Derivative financial liability
Non-current
Accruals and contract liabilities
30 Sep
2022
£000
8,496
2022
£000
6,054
12
2,420
10
8,496
30 Sep
2022
£000
4,181
269
4,863
356
9,669
30 Sep
2022
£000
331
331
30 Sep
2021
£000
3,482
2021
£000
2,219
585
42
636
3,482
30 Sep
2021
£000
5,845
222
3,054
-
9,121
30 Sep
2021
£000
343
343
Trade and other payables are all current and any fair value difference is not material. The derivative financial liability relates to
forward foreign currency contracts. Forward currency contracts are revalued using the period end spot rate.
StrategicStrategicGovernanceFinance 108
18. Borrowing
Current
Trade Loan Facility
Lease liability
CBILS Bank Loan
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
2022
£000
30 Sep
2021
£000
3,990
208
3,000
7,198
-
194
194
2022
£000
7,198
144
39
11
-
-
7,392
2022
%
3.25
3.75
2.40
2,999
161
3,160
3,053
130
3,183
2021
£000
3,160
3,141
42
-
-
-
6,343
2021
%
3.25
3.10
2.25
The CBILS Bank Loan was renewed in October 2022 and is due for maturity on 31 October 2023, The trade Loan Facility has
been renewed post year end and is due for Maturity on 31 July 2023, 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 and computer software.
The asset and liability have been calculated using a 3.25% discount rate.
These leases are due to expire between December 2022 and September 2026.
Cash flows from financing activities
An analysis of cash flows from financing activities is provided as follows:
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 1 October 2021
Changes from financing cash flows
Proceeds from loans & borrowings
Payment of lease liabilities
Total changes from financing cash flows
Other changes
New leases
Interest expense
Total other changes
Balance at 30 September 2022
Lease liabilities
£000
Loans &
Borrowings
£000
814
(790)
(790)
247
20
267
291
-
(562)
(562)
656
17
674
402
-
6,000
-
6,000
-
52
52
6,052
907
-
907
-
31
31
6,990
Total
£000
814
6,000
(790)
5,210
247
72
319
6,343
907
(562)
345
656
48
705
7,392
StrategicStrategicGovernanceFinance 110
19. Deferred Tax
At start of year
Credit to income statement
Credit on share based payments
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 2022
Liability
£000
(530)
(9)
(41)
(580)
Asset
£000
405
(137)
(1)
267
30 Sep 2022
Liability
Asset
-
-
45
222
267
(265)
(218)
-
(97)
(580)
Net
£000
(125)
(146)
(42)
(313)
Net
(265)
(218)
45
125
(313)
30 Sep 2021
Liability
£000
(500)
(30)
-
(530)
Asset
£000
31
405
(31)
405
30 Sep 2021
Liability
Asset
-
-
-
405
405
(119)
(358)
-
(53)
(530)
Net
£000
(469)
375
(31)
(125)
Net
(119)
(358)
-
352
(125)
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 £13,742,119 (2021:
£7,598,735), hence an unrecognised deferred tax asset of £3,435,780 (2021: £1,899,684). 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. Contingent Liabilities
Contingent liabilities are disclosed in the financial statements
when a possible obligation exists, the existence will be confirmed
by uncertain future events that are not wholly within the control
of the entity. Contingent liabilities also include obligations that
are not recognised because their amount cannot be measured
reliably or because settlement is not probable.
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 off-shore windfarms. 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. The decision not to apply this second
layer of rock, which was standard industry practice, was taken
by the windfarm developers independently of Tekmar. Tekmar
is committed to working with relevant installers and operators,
including directly with customers who have highlighted this
issue, to investigate further the root cause and assist with
identifying potential remedial solutions. This is being done
without prejudice and on the basis that Tekmar has consistently
denied any responsibility for these issues. However, given these
extensive uncertainties and level of variabilities at this early
stage of investigations no conclusions can yet be made.
Tekmar have been presented with defect notifications for
8 legacy projects on which it has supplied cable protection
systems( “CPS”). These defect notifications have only been
received on projects where there was an absence of the second
layer of rock traditionally used to stabilise the cables.
At this stage management do not consider that there is a
present obligation arising under IAS37 as insufficient evidence is
available to identify the overall root cause of the damage to any
of the CPS. Independent technical experts have been engaged
to determine the root cause of the damage to the CPS and upon
completion of these technical assessments, Tekmar will review
the assessment as to whether a present obligation exists.
Given the range of possible outcomes, management considers
that a possible obligation exists which will only be confirmed
by further technical investigation to identify the root cause of
alleged CPS failures. As such management has disclosed a
contingent liability in the financial statements.
Tekmar Group plc has taken exemption under IAS37, Paragraph
92 to not disclose information on the range of financial
outcomes, uncertainties in relation to timing and any potential
reimbursement as this could prejudice seriously the position of
the entity in a dispute with other parties on the subject matter
as a result of the early stage of discussions.
21. 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 2022 this covers the period up to April 2023 (As at 30 September 2021 the period to January 2022).
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 2022
+5%
-5%
At 30 September 2021
+5%
-5%
Eur
£000
(71)
33
Eur
£000
(79)
89
USD
£000
(186)
206
USD
£000
(132)
145
SAR
£000
13
(14)
SAR
£000
-
-
AED
£000
(1)
1
AED
£000
-
-
CAD
£000
-
-
CAD
£000
(132)
146
RMB
£000
(163)
181
RMB
£000
(223)
246
Total
£000
(408)
407
Total
£000
(566)
626
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 112
At 30 September 2022
Borrowings
Lease Obligations
Trade and other payables
At 30 September 2021
Borrowings
Lease Obligations
Trade and other payables
Less than 1 year
£000
Between 1 and 2
years
£000
Between 2 and 5
years
£000
Over 5 years
£000
6,990
208
4,181
-
144
-
-
39
-
-
10
-
Less than 1 year
£000
Between 1 and 2
years
£000
Between 2 and 5
years
£000
Over 5 years
£000
2,999
160
5,845
3,053
88
-
-
43
-
-
-
-
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 2022 or 30
September 2021 and no provision for credit losses was made. See note 15 for further information on financial assets that are
past due.
Summary of financial assets and liabilities by category
The carrying amount of financial assets and liabilities recognised at the balance sheet date of the reporting periods under
review may also be categorised as follows:
Financial assets
Financial assets measured at amortised cost
Trade and other receivables
Cash and cash equivalents
Financial assets measured at fair value through profit or loss
Forward foreign exchange contracts
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
2022
£000
12,942
8,496
-
21,438
2021
£000
17,342
3,482
37
20,861
(356)
-
(194)
(3,183)
(7,198)
(4,181)
(11,929)
(3,160)
(5,845)
(12,188)
9,509
8,673
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
114
22. Share Capital
Nominal value
At 31 March 2020
Issued during the year
At 30 September 2021
Issued during the period
At 30 September 2021
Ordinary shares
£0.01
Number
Ordinary Share
Total
£
51,261,685
346,918
51,608,603
9,351,631
60,960,234
512,617
3,469
516,086
93,516
609,602
The new shares issued during the period arose from the exercise of share options in the IPO (118,750 shares) (see Note 24) and
the sale new of shares (9,232,881 shares at £0.45 per share).
23. 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 £nil (2021: £40,000). 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 £nil (2021: £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).
24. 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).
On 7 October 2021 31,250 of the share options were exercised at £0.01, and on 6 December 2021 the 87,500 share options were
exercised at £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.
On 31 March 2022 the Company launched the a further SAYE plan (SAYE 2021) and options over 550,393 shares were granted
to 21 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 116
A summary of the options granted is shown in the table below:
1 October
2021
Granted in the
period
Exercised in
the period
Lapsed in the
period
30 September
2022 share
options
outstanding
Vesting
period
Exercise
period
181,250
53,589
432,520
27,833
415,760
-
-
550,393
-
-
(118,750)
-
-
-
-
(62,500)
(501,503)
-
(415,760)
-
53,589
481,410
27,833
-
2 years
3 years
3 years
3 Years
3 Years
10 years
10 years
10 years
10 Years
10 Years
1 April
2020
Granted in the
period
Exercised in
the period
Lapsed in the
period
30 September
2021 share
options
outstanding
Vesting
period
Exercise
period
1,625,000
67,691
428,983
-
-
-
-
190,252
225,000
1,294,010
(62,500)
-
-
(43,042)
-
(1,381,250)
(14,102)
(186,715)
(154,125)
(878,250)
181,250
53,589
432,520
27,833
415,760
2 years
3 years
3 years
3 Years
3 Years
10 years
10 years
10 years
10 Years
10 Years
Plan
IPO Plan
SIP
SAYE
Retention
LTIP
Plan
IPO Plan
SIP
SAYE
Retention
LTIP
The weighted average share price at the date of exercise for share options exercised during the year was £0.48 (2021:£0.51).
The schemes had a weighted average remaining contractual life as follows:
Plan
IPO Plan
SIP
SAYE
Retention
LTIP
2022
6 Years
6 Years
8 Years
8 Years
8 Years
2021
7 Years
7 Years
8 Years
9 Years
9 Years
The Group has recognised a total credit of £103,000 (2021: £140,058 expense) in respect of equity-settled share-based
payment transactions in the period ended 30 September 2022. 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 £nil (2021: 364,000
credit) in the year to 30 September 2022. The remaining share based payment transactions are treated as administrative
expenses £103,000 credit (2021: £224,000 charge).
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
IPO Plan
SIP
SAYE20
SAYE21
SAYE22
Retention
LTIP
Grant Date
20/06/18
13/09/18
31/03/20
31/03/21
31/3/2022
22/08/20
04/08/20
Share price at
grant date (P)
130
161.5
83
63.75
37.50
108
110
Expiry Date
20/06/18
13/09/28
31/03/30
31/03/31
31/03/32
22/08/30
04/08/30
Exercise price (P)
1.00
1.00
78.00
50.20
30.0
1.00
1.00
Expected
Volatility (%)
Risk-free rate
(%)
Expectation
of meeting
performance
criteria
44.02
44.02
45.02
78.95
45.67
53.85
53.57
2.0 %
2.0 %
2.0 %
2.0 %
2.0%
2.0 %
2.0 %
75%
80%
61%
61%
61%
100%
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 118
Parent Company Balance Sheet
as at 30 September 2022
Non-current assets
Property, plant and equipment
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
Total non-current liabilities
Total equity and liabilities
Note
30 September
2022
30 September
2021
£000
£000
4
3
5
5
6
7
6
46
37,015
5
15,869
52,935
5,946
2,702
8,648
-
37,095
49
15,869
53,013
6,655
589
7,244
61,583
60,257
609
67,652
1,738
(16,585)
53,414
7,003
1,133
8,136
33
33
61,583
516
64,097
1,738
(15,076)
51,275
3,000
2,930
5,930
3,052
3,052
60,257
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 £1.418m (2021: £3.156m)
The Parent Company financial statements were approved by the Board of Directors on 14 March 2023 and were signed on its
behalf by:
Alasdair Macdonald
Chief Executive Officer
Company registered number: 11383143
Parent Company Statement of
Changes in Equity
for the year ended 30 September 2022
Share
capital
£000
Share
premium
£000
Merger
relief
reserve
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 April 2020
513
64,100
1,738
(11,756)
(54,595)
Loss for the year (Restated)
Total comprehensive expense for the year
(Restated)
Issue of shares
Share based payments
transactions with owners,
Total
directly in equity
recognised
-
-
3
-
3
-
-
(3)
-
(3)
-
-
-
-
-
(3,156)
(3,156)
-
(164)
(164)
(3,156)
(3,156)
-
(164)
(164)
Balance at 30 September 2021
516
64,097
1,738
(15,076)
51,275
Loss for the period
Total comprehensive expense for the period
Issue of shares
Share based payments
transactions with owners,
Total
directly in equity
recognised
-
-
93
-
93
-
-
3,555
-
3,555
-
-
-
-
-
(1,418)
(1,418)
-
(91)
(91)
(1,418)
(1,418)
3,648
(91)
3,557
Balance at 30 September 2022
609
67,652
1,738
(16,585)
53,414
StrategicStrategicGovernanceFinance 120
Notes to the parent company financial statements
for the year ended 30 September 2022
1. Significant Accounting Policies
The Group has consistently applied the following accounting
policies to all periods presented
in these financial
statements.
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:
•
•
•
•
•
•
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”
o
o
o
o
IFRS 7 “Financial Instruments : Disclosures”;
IAS 7 “Statement of Cash Flows”;
IAS 24 (paragraphs 17 and 18a) “Related Party
Disclosures” (key management compensation); and
IAS 24 “Related Party Disclosures” – the requirement
to disclose related party transactions between two or
more members of a group.
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
£1.634m (2021: £3.156m).
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.
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.
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
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.
Group
operates
Share-based payments
The
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
rewarded using share-based
Where employees are
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 of
its financial assets at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that arise principally
through the provision of services to customers. They
are initially recognised at the transaction price, and are
subsequently stated at amortised cost using the effective
interest method. They are included in current assets, except
StrategicStrategicGovernanceFinance 122
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 investments
The carrying amount of the Company’s investments in
subsidiaries £37,015,000 as at 30 September 2022 (2021:
£37,095,000 restated). The Directors have carried out an
impairment review in accordance with the accounting
policies. The forecast cash generation for each investment
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
21%. 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
13.5%.
The value in use calculations performed for the impairment
review, together with sensitivity analysis using reasonable
assumptions,
the
investments in subsidiaries and therefore do not give rise to
impairment concerns.
indicate sufficient headroom
for
2. Remuneration of Directors and Auditors
Details of Directors’ remuneration are shown in the Directors’ Remuneration Report on page 85 of the Group financial
statements. Details of auditor remuneration are shown in note 8 of the Group financial statements.
3. Investments in subsidiary undertakings
Investment in subsidiaries
Capital contribution related to share-based payments for subsidiaries
30 Sep
2022
£000
36,745
270
37,015
30 Sep
2021
£000
36,745
350
37,095
The c arrying amount of the Company’s investments in subsidiaries £37,015,000 as at 30 September 2022 (2021: £37,095,000).
The Directors have carried out an impairment review in accordance with the accounting policies. The forecast cash generation
for each investment 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 21%.
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 13.5%.
The value in use calculations performed for the impairment review, together with sensitivity analysis using reasonable
assumptions, indicate sufficient headroom for the investments in subsidiaries civils and therefore do not give rise to
impairment concerns. A reduction in free cashflows of 2% and 6% respectively on the Pipeshield International Limited and
Tekmar Limited value in use calculations would give rise to an impairment of the investments.
The Company directly owns the whole of the issued ordinary shares of the following subsidiary undertakings:
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
By Parent
Company
Ordinary
Ordinary
Ordinary
100%
100%
100%
Carrying
Value
FY22
27,505
2,066
7,174
36,745
270
Carrying
Value FY21
27,505
2,066
7,174
36,745
350
37,015
37,095
StrategicStrategicGovernanceFinance 124
All the companies listed above are incorporated in England and Wales and have a registered address of Innovation House,
Centurion Way Darlington DL3 0UP.
6. Borrowings
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
Subsea Innovation Limited
Pipeshield International Limited Design and manufacture of subsea asset protection
Principal activity
Holding of shares in subsidiary companies and the management thereof
Design and manufacture of equipment for the offshore subsea industry
4. Property, plant and equipment
COST
As at 1 April 2020
Additions
As at 30 September 2021
Additions
As at 30 September 2022
DEPRECIATION
As at 1 April 2020
Charge for the year
As at 30 September 2021
Charge for the period
As at 30 September 2022
NET BOOK VALUE
As at 1 April 2020
As at 30 September 2021
As at 30 September 2022
5. Trade and other receivables
Amounts owed by Group undertakings – non-current
Amounts owed by Group undertakings – current
Prepayments and accrued income – current
Total - Current
Motor
Vehicles
£000
Total
£000
-
-
-
46
46
-
-
-
-
-
-
-
46
-
-
-
46
46
-
-
-
-
-
-
-
46
2022
£000
15,869
5,912
34
5,946
21,815
2021
£000
15,589
6,578
77
6,655
22,524
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 historically no balances have been
defaulted on.
Current
Trade Loan Facility
Finance lease
CBILS Loan Facility
Non-current
CBILS Loan Facility
Finance lease
Amount repayable
Within one year
In more than one year but less than two years
2022
£000
3,990
13
3,000
7,003
-
33
33
2022
£000
7,003
33
7,036
2021
£000
3,000
-
-
3,000
3,052
-
3,052
2021
£000
3,000
3,052
6,052
The above carrying values of the borrowings equate to the fair values. The trade loan facility is provided at interest rate of
2.25% over base rate pa and is available to the Company until 30 November 2023. 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 2023.
Finance leases related to electric vehicles purchased as part of an employee benefit scheme. These have been discounted at
a rate of 3.25%.
7. Payables: amounts falling due within one year
Trade payables
Amounts due to group undertakings
Other taxation and social security
Accruals and deferred income
2022
£000
49
758
53
273
1,133
2021
£000
81
2,408
48
393
2,930
StrategicStrategicGovernanceFinance 126
8. Share Capital
Details of movements in shares are set out in note 22 to the Group financial statements.
9. 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.
10. Share-based payments
The Company operates a number of share option arrangements for key executives and employees, further details of which
can be found in note 24 to the Group financial statements. Further details of the arrangements for senior executives can be
found in the Directors’ Remuneration Report in the Group financial statements.
The Company recognised total credit of £11,636 in respect of the equity-settled share-based payment transactions in the
period ended 30 September 2022 (2021: £446,030).
11. 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 128
Annual General Meeting
The AGM will be held at 10am on 31 March 2023 at Innovation House, Centurion Way, Darlington, DL3 0UP.
The Notice of Meeting will be separately distributed to shareholders.
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
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
Muckle LLP
Time Central
32 Gallowgate
Newcastle upon Tyne NE1 4BF
Financial calendar
31 March 2023 - Annual General Meeting
StrategicStrategicGovernanceFinance 130
Glossary
Adjusted EBITDA earnings before interest, tax, depreciation
and amortisation, and non-recurring and exceptional items
QCA the Quoted Companies Alliance
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
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
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
LTIP Long Term Incentive Plan
StrategicStrategicGovernanceFinance
investors@tekmar.co.uk
E:
W: investors.tekmar.co.uk
Innovation House
Centurion Way
Darlington
DL3 0UR
United Kingdom