2
Our vision
To enable the world’s energy transition,
reflecting our responsibility to future
generations.
3
Report Highlights
Financial Highlights
• Revenue of £39.9m (FY22: £30.2m) and Adjusted EBITDA loss of £0.3m (FY22: loss of £2.3m) highlights an improved
financial performance.
•
Gross profit of £9.3m (FY22: £7.0m) with gross profit margin of 23.3% consistent with prior year (FY22: 23.2%)
• On a statutory basis, the Group loss before tax for the Period was £9.9m (FY22: loss of £5.2m). This includes a non-cash
impairment charge of £4.7m to the value of goodwill in the Group’s Offshore Energy division.
•
•
The Group was also impacted by foreign exchange losses for the Period of £0.9m (FY22: gain of £0.2m), accounted for
within operating expenses.
The Group held £5.2m of cash as at 30 September 2023 with net debt of £1.4m. Net debt included the drawdown of bank
facilities from the £3.0m CBILS loan and £4.0m trade loan facility, available until at least July 2024. This cash position
excludes the SCF Capital CLN facility. Net debt at 31 January 2024 was £1.2m.
Stategic Highlights
•
•
During the year, the Group successfully completed the formal sales process and strategic review which culminated
with the strategic investment and related equity fundraising by SCF Partners and existing shareholders. This exercise
completed in April 2023 and raised £5.3m, net of expenses.
In addition, SCF Partners committed, with conditions, an additional investment of £18.0m which is available through the
convertible loan note facility (the “CLN facility”). The use of the CLN facility is targeted to drive growth including through
acquisitions, in-line with the ambition of the Board to build a leading offshore wind services company over time.
Operational Highlights
•
•
•
During the year, Pipeshield secured and delivered a combination of projects valued in excess of £8m for pipeline protection
systems in the Middle East.
The Group was also selected for Dogger Bank C Offshore Wind Farm (in continuation of the previously announced Dogger
Bank A & B contracts), which, when completed, will be the largest global Offshore Wind Project to date.
These contract awards have helped to support a Group orderbook of £19.7m at Jan-24 with a gross margin of 28%. The
Board is encouraged by the opportunities for material order intake in the remainder of the current financial year.
Contents
Strategic Report
- Chairman’s Statement
- Executive Reviews
- Strategic and Market Review
- Our Business Model
- Sustainability Report
Governance
Independent Auditor’s Report
Financial Statements
General Meeting
05
06
07
16
23
34
44
74
84
129
4
5
Strategic 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
Strategic Report
Contents
Chairman’s Statement
CEO Review
CFO Review
Strategic Review
Market Review
Our Business Model
Our Business Model in Action
Key Performance Indicators
Sustainability Report
06
07
11
16
19
23
27
32
34
6
7
Chairman’s Statement
To the share holders of Tekmar Group plc
Chief Executive Officer’s Review
Reflecting on our progress in 2023
2023 was a pivotal year for Tekmar. We
have stabilised the business and welcomed
SCF Partners (SCF) to the Board as a highly
respected strategic partner with a shared
ambition to transform Tekmar as a leading,
global offshore wind services company.
The underlying business is in much better shape than it
was two years ago and the business is now on the path
to deliver sustained and improving profitability. The hard
work of my colleagues means we are more in control of
our business. This is particularly important at the current
time with uncertainty in energy markets but sets us up
well for significant success ahead. Aligned with this, is
the benefit we have as a balanced business, addressing
the needs of the broad offshore energy market as it
transitions to meet the evolving commitments to lower
carbon intensity and net zero targets.
Instability in the offshore wind market has been a feature
of 2023. The pressures created by fiscal and regulatory
uncertainty, particularly in the UK and US, have been well
trailed by the media but this has been exacerbated by
supply chain constraints, inflationary pressure, permitting
delays and grid connection and infrastructure shortage.
We have been encouraged more recently to see
Governments adjust their subsidy regimes to enable
developers to proceed on a viable basis. Alongside this,
projected demand for offshore wind over the longer-term
remains strong with fixed seabed foundations expected to
continue as the dominant technology through until mid-
2030’s with floating foundations with dynamic cabling
solutions increasing market share from mid-2030’s
onwards.
As installations become more complex the attractiveness
of our integrated offering becomes stronger. With the
backing of SCF, we can, over time, transform the scale
and breadth of our platform, to offer more strategic
and commercial value to our infrastructure partners, the
developers and tier one contractors.
Julian Brown, Non-Executive Chairman
As the offshore wind industry continues to develop, we
are being disciplined in maintaining project margins, with
the strong technology capability of Tekmar’s services
and products underpinned by our consultancy expertise.
Alongside this, we value the ballast provided by our other
energy division, anchored by Pipeshield, a leading provider
of specialised subsea pipeline protection systems to oil
and gas majors and offshore contractors.
We have made substantial progress over the last two
years. There has been uncertainty along the way for our
employees, industry partners and shareholders. This is
now behind us and we are continuing to build a stronger
business. We are doing this from a good position in
terms or our competitive standing in the market and we
look forward with real confidence given the scale of the
opportunity ahead for Tekmar. On behalf of the Board, I
would like to thank all our staff for their hard work and
focus on improving the Group’s performance. I am pleased
they can see the fruits of these efforts coming through
and look forward to our strengthened Group delivering on
its full potential.
Overall, the business made further progress
in FY23 in improving operational and financial
performance and delivered results in-line with
market expectations. Importantly, we have
stabilised the business, with near breakeven
Adjusted EBITDA a significant improvement
on FY22 and FY21 and the net current assets
position strengthened.
We are confident we have established a clear and
sustainable path to improving profitability, with the Group
expected to be profitable at the Adjusted EBITDA level in
FY24. The primary objective for the management team
in FY24 is on driving consistent operational performance
to deliver improved profitability and cash generation
for the Group. We are doing this in a maturing market
environment for offshore wind which we anticipate should
support incremental market improvement in the current
year. Our balanced portfolio across energy markets gives
us valuable diversification as we work with developers
and industry partners on de-risking the delivery of critical
energy infrastructure projects and supporting the energy
transition journey.
Review of near-term priorities
Return to sustained profitability.
A key feature of these results is the business mix
reflected in the Group reporting an Adjusted EBITDA loss
of £0.3m for the year. Marine Civils delivered Adjusted
EBITDA of £3.5m on revenue of £18.3m. This represents
a very strong performance for this division which has
become an increasingly important part of the Group
since the acquisition of Pipeshield in 2019. Marine Civils
consistently generates profit and provides diversification
for the Group, which has been particularly valuable given
the headwinds and uncertainty in the offshore wind
market over the last couple of years. Our expectation
is for Marine Civils to deliver positive EBITDA in FY24,
albeit we see it as unlikely that it will meet or exceed the
contribution in the current financial year.
this part of the business, particularly in strengthening the
commercial and operating model of our Tekmar Energy
business. Supply chain cost escalation also impacted
project margins for two material contracts, weakening
H2 profitability in particular. Further detail on these
legacy contracts is set out in the CFO Review. We are
comfortable any residual exposure for these contracts has
been appropriately addressed such that our expectation
is for gross margin percentage for this division to recover
to the mid to high 20s in FY24. This, together with the
anticipated incremental volume growth in offshore wind
projects supports our confidence that Offshore Energy will
deliver positive EBITDA in 2024.
Improving the profitability of our Offshore Energy
business is an important marker in demonstrating we
are on track to deliver the trajectory of sustained profit
improvement we are driving for the Group. When we then
overlay the positive medium to long term fundamentals
of the offshore wind industry, and our balanced portfolio,
we believe Tekmar is well positioned to deliver sustainable
profit growth for shareholders through the medium to
long term.
Alasdair MacDonald, Chief Executive Officer
The Offshore Energy division by contrast generated an
Adjusted EBITDA loss for the year of £2.1m, with a broadly
similar loss across H123 and H223. This reflects market
delays and uncertainties in offshore wind projects and
masks the underlying improvements we have made in
Building a better quality pipeline and order book.
Consistent with our profit improvement focus, we are
focused on commercial discipline as we convert the
enquiry book into firm orders. New contracts are being
secured at more favourable gross margins at the outset
and include more favourable cost escalation protection...
8
...and milestone payments to de-risk the projects for
Tekmar.
Our current order book of £19.7m as at 31 January 2024,
reflects this disciplined approach, with a gross margin
of 26%. We are seeing the effects of legacy contracts
on margin diminishing in the order book, with 86% of
the January 2024 order book value represented by better
forecasted margins on live projects at a blended 30%
margin. There is more we can do here but we are more in
control of our business than we were two years ago.
Our pipeline and enquiry book is healthy across the
Group and we are in discussions with developers and
Tier 1 contractors on a number of significant projects.
The main risk to delivering on our expectations for FY24
is the market environment where delays with decisions,
extended negotiations and project starts continues to be
a feature.
On the offshore wind side, we secured an important
contract win with an established Tier 1 contractor
announced in January 2024. This contract award positions
us well for future phases of this project, as and when
they come to fruition. We were also selected to deliver
our flagship cable protection systems (CPS) for the 1
GW Hai Long Offshore Wind Farm, situated in Taiwan,
highlighting our presence in APAC. We see APAC as a key
near-term growth market for our offshore wind division.
Our Marine Civils division continues to win significant
and profitable contracts balancing our offshore wind
opportunity. This includes building a strong capability
in the Middle East in particular, where we secured
£15m of order intake for FY23, including our grouting
services, which we see as an attractive near-term growth
opportunity, where in FY23, Tekmar won contracts worth
over £1.5m.
Customer Engagement
With the strategic investment by SCF and related
fundraise placing Tekmar on a stronger financial standing,
there is encouraging alignment with our customers about
the leadership role a stronger Tekmar can play in the
industry - an industry which requires the delivery of larger
projects requiring more complex engineering solutions
that we are well set up to deliver. As part of this, an
increased focus of the Group is on embedding the Group’s
engineering consultancy capability through the lifecycle of
projects and on building more strategic partnerships with
our clients. It is worth highlighting that SCF’s diligence
at the time they were appraising their investment
highlighted the strength of Tekmar’s standing in the
industry and the scope to deepen and expand the services
and technology we offer customers and partners. We have
a significant opportunity ahead of us to grow with our
customers and help them support energy transition and
to manage the related risk of developing and managing
major infrastructure projects.
As previously reported, we are continuing to support our
industry partners to assess and address some issues
relating to legacy Offshore Wind Systems installed at
offshore wind farms. 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. We
remain committed to working with relevant installers
and operators, including directly with customers who
have highlighted any issues, 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.
Strengthening the Business
During FY23, we continued to implement our programme
of organisational efficiency and targeted cost reductions.
Across the Group there is a continued focus on
improvement and simplification, including full integration
of Group support functions. We also consolidated our
early stage design and engineering resources creating a
more efficient base to grow our engineering consulting
offering which is a key focus for the current year. We
streamlined the cost base removing annualised cost of
£0.8m, which has helped offset against staff inflation
costs and investment for growth in FY24. In addition, as
part of our discipline to maintain a tight control on costs,
we are targeting additional cost saving benefits in the
current year in the region of £500,000 from supply chain
initiatives.
We continue to look for opportunities to further
strengthen the business through more efficient resource
allocation.
Targeted investment and capex
We are also adopting a measured approach to capex and
investment in the core business, aligning our resources
to opportunities which provide the greatest near-term
benefits. We expect capex for the current financial year to
be in the region of £2m, with approximately half of that
covered by investment in strategic initiatives including
product development for our core Teklink cable protection
9
starts and contract awards post-FID and the residual risk
of subsequent cancellations post-FID. Overall, we see
the market moving in the right direction in 2024 with a
more balanced approach to developers and contractors
in managing project risk leading to incremental but
sustained improvement in demand. Longer-term, we
see demand for offshore wind remaining strong with
fixed seabed foundations continuing as the dominant
technology through until mid-2030’s.
Following a period of underinvestment, the Oil & Gas
industry is entering a new capex cycle, with market
conditions expected to remain supportive of an upturn
in global spend over the medium term. Tekmar is well
positioned to take advantage of this forecast growth.
Current trading and outlook
The Board anticipates the Group should return to
profitability at the Adjusted EBITDA level for the current
financial year. The absolute level of profitability will be
determined by conversion of the material opportunities
in our pipeline and by the timing of project awards and
starts. Whilst timing remains the key risk to our financial
performance in the current environment, we also remain
focused on managing the delivery of existing contracts
to budget and on maintaining a tight control of costs
and cash across the business. Our near-term plans and
targeted investments support the opportunity we have to
grow organically across our core markets.
We are alert to the opportunities to complement organic
growth through M&A that can increase our scale and
strengthen our services offering across our end-markets,
all consistent with building a leading, global offshore wind
services platform over time. We are fully committed to
delivering on the opportunity ahead for Tekmar to build a
platform for sustainable growth and creating significant
value for shareholders.
Alasdair MacDonald
CEO
3 March 2024
system and investment in our grouting services in support
of near-term revenue growth with Pipeshield including in
the Middle East. We have identified a number of other
strategic investment opportunities, with funding of
these initiatives subject to phasing as cashflow builds to
support the required investment.
M&A to strengthen and broaden the portfolio
With the path to profitability established, we considering
M&A opportunities to complement organic growth,
including opportunities to build scale and strengthen
the technology and services we offer to our customers.
The ambition is to build a leading global offshore wind
services company over time, and consistent with this, we
are alert to the potential value in acquiring capability that
can transition to servicing the needs of the offshore wind
industry over time. Building a stronger platform should, in
turn, create a business which the stock market can value
more highly.
We benefit significantly in this M&A context from having
SCF as a strategic partner, where we can leverage their
complementary industry knowledge and investment
expertise to help source and execute value-enhancing
acquisitions. We also benefit from SCF’s committed £18m
funding through the Convertible Loan Notes, which are
targeted to be deployed primarily for value-enhancing
M&A and strategic growth. Having this committed
funding in place puts Tekmar at a distinct advantage,
particularly given the current financing environment for
M&A.
Market Environment
The current instability in offshore wind investment has
been a theme that has been well trailed in the media.
Looking beyond the media headlines, 2023 was actually
a record year for offshore wind investment, with market
analysts highlighting Final Investment Decisions (“FID”)
on projects totalling 12.3 GW during the year globally
(excluding China and cancelled projects). This followed
only 0.8 GW of FID in 2022, the lowest level since 2012
and highlighting the volume constraints in the market.
(Source: TGS – 4C Offshore, 3 January 2024).
The rebound in FID approval for 2023 is clearly a positive
for Tekmar. With the lead-time typically 12-months
between a project receiving FID approval and the
contractors and suppliers being awarded contracts,
this should support the return to volume growth for
Tekmar over the next 12–18 months. The headline
data does require some caution, however, given the
prevailing environment for ongoing delays to project
10
11
Chief Financial Officer’s Review
2023 was a transformative year
Following my appointment to the role of CFO in
April 2023, having held the role on an interim
basis since December 2022, I am pleased to
present the Financial Review for the Group for
the year ended 30 September 2023.
A summary of the Group’s financial performance is as
follows:
to September 2022 and the eighteen-month period to
September 2021 respectively. FY23 continued to be a
transition year for the Group as expected, particularly
whilst some lower margin backlog projects continued to
be worked through and business improvement measures
continued. The cost base has been carefully managed
with further efficiencies achieved through wider group
integration.
Audited
12M ended
Sep -23
£m
Audited
12M ended
Sep-22
£m
Revenue
Gross Profit
Adjusted EBITDA(1)
(LBT)
EPS
Adjusted EPS(2)
39.9
9.3
(0.3)
(9.9)
(10.7p)
(4.5p)
30.2
7.0
(2.3)
(5.2)
(9.0p)
(8.1p)
1.
2.
Adjusted EBITDA is a key metric used by the Directors.
‘Earnings before interest, tax, depreciation and amortisation’ are
adjusted for material items of a one-off nature and significant
items which allow comparable business performance. Details of the
adjustments can be found in the adjusted EBITDA section below.
Adjusted EBITDA might not be comparable to other companies.
Adjusted EPS is a key metric used by the Directors and measures
earnings are adjusted for material items of a one-off nature and
significant items which allow comparable business performance.
Earnings for EPS calculation are adjusted for share-based payments,
£508k (£nil FY22), amortisation on acquired intangibles £168k
(£605k FY22), Impairment of goodwill £4,745k (£nil FY22).
On a statutory basis, the Group loss before tax was £9.9m
(FY22: £5.2m loss).
Overview
The Group delivered revenue of £39.9m for the 12-month
reporting period, a 32% increase from prior year and
continued growth per half year with £22.2m in revenue
delivered in the second half from the £17.7m reported
for the first half. The adjusted EBITDA loss of (£0.3m)
was largely in line with our expectations of being around
break-even at this level of trading profitability. This is a
much-improved position from the previous two reporting
years where adjusted EBITDA losses of (£2.3m) and
(£2.0m) were reported for the twelve-month period
Leanne Wilkinson, Chief Financial Officer
Revenue by operating segment
£m
Audited 12M
FY23
Audited 12M
FY22
Unaudited
LTM(1) FY21
Offshore
Energy
Marine Civils
Total
21.6
18.3
39.9
17.4
12.8
30.2
21.9
9.9
31.8
Revenue by market
£m
Audited 12M
FY23
Audited 12M
FY22
Unaudited
LTM(1) FY21
Offshore Wind
Other Offshore
Total
17.7
22.2
39.9
14.7
15.5
30.2
16.8
15.0
31.8
(1) LTM – Last twelve months
12
It has been encouraging to see revenues
grow in both Offshore Energy and Marine
Civils divisions in FY23, by 24% and 43%
respectively during the reporting period.
The Offshore Energy division, incorporating Tekmar
Energy, Subsea Innovation, AgileTek and Ryder
Geotechnical, all of which operate largely as a single unit,
has achieved a revenue increase of £4.2m. The growth
in offshore wind contributed to £3m of this increase
and was underpinned by revenues from windfarm
developments across a number of key regions for the
Group including Europe and emerging regions in offshore
wind such as Asia Pacific and the United States. The
remaining increase in revenue of £1.2m was largely from
work in the Middle East, whereby the Group’s brands and
track record which has been established, has enabled
further work to be secured with key clients in the region.
Marine Civils, comprising Pipeshield, saw continued
revenue growth for the 12-month period at £18.3m, which
is £5.5m higher compared with revenue of £12.8m for
the previous 12-month period. Consistent with prior year,
this growth was achieved through securing and delivering
further contracts for both the core Pipeshield product line
as well as a diversified grouting service line offering, in
the Middle East, which continues to be a growth market
for Pipeshield and the wider group demonstrating our
regional expansion strategy is delivering.
Gross profit by operating segment
£m
Audited 12M
FY23
Audited 12M
FY22
Unaudited
LTM(1) FY21
Offshore
Energy
Marine Civils
Total
4.0
5.3
9.3
4.4
2.6
7.0
4.4
2.1
6.5
Gross profit by market
£m
Audited 12M
FY23
Audited 12M
FY22
Unaudited
LTM(1) FY21
Offshore Wind
Other Offshore
Unallocated
Costs
Total
4.8
6.1
(1.6)
9.3
(1) LTM – Last twelve months
4.2
4.4
(1.6)
7.0
4.8
3.3
(1.6)
6.5
The gross profit increase of £2.3m reported for the
period is driven from the increase in revenue which is
£9.7m higher than the prior 12 months. The gross profit
percentage of 23% remains consistent with the prior year
as the opening order book for FY23 included two, sizable,
lower margin offshore wind contracts awarded in prior
periods and have subsequently experienced material cost
escalations from wider macro-economic factors since they
were awarded in 2021. This impacted gross profit margin
in Offshore Energy division which fell to 18% from 25%
in FY22. Regarding the two Offshore Energy projects
noted above, one was significantly progressed for revenue
recognition in FY23 and the other project which runs into
early FY25 has appropriate contract loss provisioning
(£0.4m) included in FY23. Management continue to
explore opportunities for margin improvement on this
contract over the remaining life of the project.
Gross profit margin within Marine Civils increased to 29%
from 20% in FY22 from the additional scale within the
Pipeshield business coupled with capturing the value of
contract variations in the year.
The focus on margin improvement in Offshore Energy
remains. Although there has continued to be pricing
pressure on some contracts from opening backlog
delivered in the year, newer contracts, some of which
have been delivered across FY23, have been awarded
at improved margins which have been maintained or
improved through contract execution. This expected
improved commercial and operational performance,
coupled with increased volume in the market and the
recent improvement in energy strike prices across the
industry, paves the way for the Offshore Energy division
to track back to a 30% gross margin in the next 3 years.
Operating expenses
Operating expenses for the 12-month period to 30
September 2023 were £18.6m compared to £11.6m for the
equivalent 12-month period ending 30 September 2022.
The increase of £7.0m relates largely to several one-off
items; £4.7m goodwill impairment relating to the offshore
energy CGU as detailed below, £1.2m foreign exchange
differences, a bonus payment of £0.4m was made to
staff upon the successful completion of the Group’s
strategic review and share based payments increased
by £0.5m, primarily as a result of share awards to
management on the completion of the Group’s strategic
review. In addition, there were £0.3m of restructuring
costs incurred. The share awards were approved by
shareholders when approving the investment by SCF.
Other cost increases in the year included higher
professional fees of £0.2m which have been offset by
staff cost savings of £0.2m (net of inflationary increase
of £0.5m) and £0.3m benefit from lower amortisation
expense year on year.
The £0.3m adjusted EBITDA loss for the 12 months ended
30 September 2023 was an improvement of £2.0m
when compared to the £2.3m adjusted EBITDA loss for
the 12 months to September 2022 and is a result of the
increased gross profit as above.
13
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
material items of a one-off nature or of such significance
that they are considered relevant to the user of the
financial statements as it represents a useful milestone
that is reflective of the comparable performance of the
business. Foreign exchange losses and gains form part of
the adjustment to EBITDA, this is due to the significant
influence of exchange rate fluctuations versus the group’s
reporting currency (GBP) in the first quarter of FY23.
EBITDA
Reconciliation
(£m)
Reported
operating
(loss)/profit
Amortisation
of intangible
assets
Amortisation
of other
intangible
assets
Depreciation
on tangible
assets
Depreciation
on ROU assets
Sep-23
Sep-22
Sep-21
(9.3)
(4.6)
(5.4)
0.1
0.6
0.8
0.6
0.5
0.9
0.8
0.9
1.4
0.5
0.5
0.6
EBITDA
(7.1)
(2.1)
(1.7)
£m
6m
Sep-23
6m
Mar-23
6m
Sep-22
6m
Mar-22
6m
Sep-21
6m
Mar-21
Revenue
EBITDA
22.2
(0.5)
17.7
0.2
17.2
(0.3)
13.0
(1.8)
17.9
(1.8)
13.9
(1.1)
H2 23 reported an increase revenue of £5m versus the
prior 6-month period, however, adjusted EBITDA (net of
fx impacts) was £0.7m lower due to the gross margin on
two offshore energy projects and higher overhead costs of
£0.4m versus H1 23 due to £0.3m professional costs and
£0.1m bank charges.
As we work through the remaining lower margin backlog
contracts, coupled with the increased volume in the
offshore wind sector, the profitability of the Group’s
Offshore Energy division has opportunity to improve
going forward, in support of management’s medium-
term target of 30% gross margin. The recent pricing
resets starting to be seen in the industry are also likely to
support this direction of travel, however, we are mindful
this will take time to fully take effect.
Adjusted EBITDA by division
£m
Audited 12M
FY23
Audited 12M
FY22
Unaudited
LTM(1) FY21
Offshore
Energy
Marine Civils
Group costs
Total
(2.1)
3.6
(1.8)
(0.3)
(1.8)
1.0
(1.3)
(2.1)
(2.7)
0.9
(1.1)
(2.9)
Adjusted
items:
Share Based
Payments
Impairment of
goodwill
Exceptional
items - Bonus
Foreign
exchange
losses & gains
Restructuring
costs
Adjusted
EBITDA
0.5
-
(0.4)
(1) LTM – Last twelve months
4.7
-
-
0.4
-
-
0.9
(0.2)
(0.2)
0.3
-
-
(0.3)
(2.3)
(2.3)
Result for the year
The result after tax is a loss of £10.1m (FY22: Loss of
£5.2m). The profit and loss account is on page 84 and the
loss includes an impairment charge of £4.7m to the value
of the goodwill in the Group’s Offshore Energy division.
Trading forecasts for the Offshore Energy division have
been reviewed and continue to grow inline with market
expectations for the offshore wind market , however
changes in economic conditions and specifically increases
in interest rates have led to a substantial increase in
the group’s Weighted average cost of capital (WACC),
increasing from 13.5% FY22 to 15.5% FY23. The increase
14
in the group’s WACC resulted in a deterioration in the
future expected cashflows leading to the impairment
being recognised.
Although the Group reports an improvement in adjusted
EBITDA of £2.0m and £0.4m lower depreciation and
Amortisation between FY22 and FY23, this is offset by
impacts of one-off items; Share based payments £0.5m,
bonus £0.4m, restructuring costs of £0.3m and the
movement in FX impacts of £1.2m.
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 were impacted by foreign
exchange losses of £0.9m. These losses have been
accounted for within operating expenses. In comparison,
FY22 had a foreign currency gain of £0.2m.
The Group mitigates exposure to fluctuations in foreign
exchange rates by the use of derivatives, mainly forward
currency contracts and options. At the year end the Group
held forward currency contracts to mitigate the risk of
receivables balances for both Euros and Dollars. Any gains
or losses on derivative instruments are accounted for in
cost of sales. At the year end the group had a derivative
liability of £20k.
The Group predominately trades in pounds sterling with
approximately 17% of revenue denominated in Euros,
23% denominated in US dollars, and significant trading
in Chinese RMB. On certain overseas projects the Group
can 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.
Cash and Balance Sheet
The Group’s balance sheet was stabilised in April 2023
following the conclusion of the strategic review. New
capital investment from SCF Partners and related parties
of £4.3m alongside a placing and retail fund raise of
£2.1m raised cash proceeds of £5.3m, net of expenses. In
addition, SCF Partners have committed, with conditions,
an additional investment of £18.0m available through the
convertible loan note facility.
The gross cash balance at 30 September 2023 was £5.2m
with net debt being (£1.4m). The Group has extended
its CBILs facility of £3.0m for a further 12 months to
October 2024 and the trade loan facility of £4.0m, which
is available until at least July 2024, aligning with the
annual review date of the facilities with Barclays Bank.
These facilities continue to support the working capital
requirements of the Group in delivering the projects the
Group undertakes. The expected continued renewal of the
banking facilities form part of the directors going concern
assumptions which are detailed on page 88.
Of the £4.0m trade loan facility, £3.5m was drawn against
supplier payments at the year end and is repayable within
90 days of drawdown. The FY22 comparative is £4.0m.
This balance and the CBILS loan of £3.0m is reported
within current liabilities.
The decrease in operational cashflows of £5.7m were
primarily driven by the increase in the year end trade
receivables of £6.4m. This position contributed to a net
decrease in cash and cash equivalents of £3.3m in the
year.
Inventories reduced by £2.5m in the year, however, net
working capital increased by £3.7m due to a £6.4m
increase in trade and other receivables which rose to
£19.7m (FY22: £13.4m). This was driven by specific
overdue debtor receipts in the Middle East and China. The
ageing of debtors has increased across the group due to
the specific debts in the Middle East and China. The group
has not provided for any credit loss provisions as these
debts are considered to be recoverable in full based on
prior trading history with these customers.
The Group has continued to enhance its contracting terms
and cash collection processes however, the year-end
position was impacted by the timing of certain material
receipts at the year-end related to these regions.
Cash generation continues to be a major focus for
the Group. We maintain our disciplined approach to
commercial management and debtor collections whilst
adopting a cautious and considered approach to ongoing
organic investment to support the growth plans of the
underlying business.
The business continuously invests in research and
development activity. The highlight during the financial
year was the continued development of the next
generation TekLink product in the offshore wind division.
A total of £353,000 of Research and Development costs
were incurred in year. All costs have been capitalised as
intangible assets under IAS36.
The annual impairment review of the goodwill on the
15
by the wider opportunity within the energy markets we
operate.
The hard work and improvements undertaken by
the Group in the last 3 years provides for a stronger
foundation and I look forward with optimism in
supporting the business in its continued growth and
return to sustainable profitability.
Leanne Wilkinson
Chief Financial Officer
3 March 2024
Our mission
We provide
innovative
engineering
solutions and
products for the
global offshore
energy market.
balance sheet has resulted in an impairment charge of
£4.7m which related to the offshore energy division. As
detailed in the P&L commentary, this was predominantly
due to a substantial increase in the Group’s weighted
average cost of capital (WACC) which has increased
from 13.5% in FY22 to 15.5% in FY23 due to changes in
economic conditions and especially increases in interest
rates.
During the year, Tekmar Energy Limited renewed a
property lease relating to its manufacturing facility. The
lease value was £1.1m and is accounted for as a right of
use asset under IFRS16, within fixed assets. To preserve
cash during the year a cautious approach has been taken
regarding wider investments and therefore other fixed
asset investments were largely in line with depreciation
charges within the year.
A provision of £0.5m has been recognised in the year
for onerous contracts. The group has assessed that the
unavoidable costs of fulfilling the contract obligations
exceed the economic benefits expected to be received
from the contract. The provision relates to two contracts
in the offshore energy division which are expected to be
largely completed in the year ending September 2024
A summary balance sheet is presented below:
Balance sheet
£m
FY23
Fixed Assets
Other non-current
assets
Inventory
Trade & other
receivables
Cash
Current liabilities
Other non-current
liabilities
Equity
6.8
19.4
2.1
19.7
5.2
(16.9)
(1.7)
34.6
FY22
5.9
24.6
4.6
13.4
8.5
(16.9)
(0.8)
39.2
Summary
The Group has achieved the planned stepped
improvement in financial results for FY23 and our
expectations of returning to profitability in FY24 remain.
The completion of the strategic review which culminated
in the new capital investment has reset the balance
sheet and allowed the business to move forward with the
organic growth plans previously set out and supported
16
Strategic Review
Tekmar’s strategy has been refreshed to reflect
the renewed ambition and opportunity for the
Group following the watershed investment by
SCF completed in April 2023.
In recommending the strategic investment by SCF and
related fundraise with existing shareholders, the Board
outlined how SCF and Tekmar have developed a shared
vision to use Tekmar as a platform to build a globally pre-
eminent offshore wind services business, focusing on
delivering value-added engineering and technology led
services to the offshore wind market across the project
lifecycle.
In delivering this ambition, the Tekmar Board remain
focused on:
The Board is confident that by focusing on these areas,
Tekmar is positioned to:
•
•
•
capitalise on the increase in investment in offshore
wind and the continued expenditure on broader
energy supply
strengthen its competitive market position as a
stronger partner with developers and OEMs
generate consistent and enhanced economic returns
for shareholders.
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 2023. 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.
•
•
•
•
•
•
•
•
the near-term priority of establishing sustained profit
improvement and stronger cash generation
Particular attention has been paid to key areas to ensure
sustainability:
doing business the right way, embedding the right
values and behaviour across the business
building a sustainable business and investing in and
growing the capabilities of the team
growing with our customers and developing the
solutions that meet their needs today and anticipating
and meeting their future needs
expanding Tekmar’s portfolio to address the changing
requirements of a maturing offshore wind industry to
support energy transition whilst also supporting the
energy industry’s near-term needs that enable security
and efficiency of energy supply
strengthening Tekmar’s value proposition as an
engineering solutions-led business which offers
integrated and differentiated technology, services and
products to its global customer base
continuous business improvement including
streamlining our business and a relentless focus on
costs and business efficiency
identifying and exploring M&A opportunities to
strengthen Tekmar’s value proposition, broaden the
portfolio and achieve greater scale as an industry
counter-party
•
•
•
•
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 the Group business website
(www.tekmargroup.com), the latter brings together the
Group’s portfolio of companies into one site, promoting a
17
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.
During the period the directors made key decisions in
relation to concluding the strategic review of the group.
This resulted in the recommendation of SCF Partners
investment in Tekmar Group Plc. The recommendation
was voted on and approved by shareholders.
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.
18
19
Market Review
An evolving offshore energy market
The last 12 months saw the offshore energy market
continue to evolve. The fallout from the invasion of
Ukraine, a conflict in the Middle East compounding the
ongoing energy crisis, and offshore wind projects being
postponed or cancelled, have dominated the headlines.
The supply chain still sees logistical, labour and supply-
constraints. Despite this, the offshore wind market
reported a record-breaking year following a difficult 2022(1)
and the wider offshore energy and marine civils market
have remained buoyant, supporting Tekmar Group’s
growth plan and ambition.
14
12
10
8
6
4
2
0
Global Offshore Wind Investment (FID in GW)*
13.1
12.3
9.1
6.6
6.4
4.2 3.8
3.2
3.1
1
0
1
0
2
0.2
2
1
0
2
1
1
0
2
2
1.6
2
0.8
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
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
accelerating their offshore wind targets due to market
conditions.
As timeframes to achieve carbon reduction targets
shorten, countries’ have begun looking at regulatory
reform to streamline processes. The tighter timeframe
will no doubt increase pressure on supply chains and
transmission grids, and heighten the risk associated with
variable market dynamics and inflation.
The EU formally adopted an update of the Renewable
Energy Directive in October 2023 that, among other
measures, increases the binding 2030 target from 32%
to 42.5%, with the aim of achieving 45%. Each Member
State will contribute to this common target, while no
targets were introduced for individual countries. However,
meeting the new target of 42.5% for 2030 will demand
more than doubling the rates of renewables deployment
seen over the past decade, and requires a deep
transformation of the European energy system(2).
To de-risk new projects, the British Government has
increased the subsidies available to offshore wind
developers by up to two-thirds in a sector that is
struggling with surging costs. This follows the last UK
auction round which did not see a single bid submitted for
a new project. Developers said that the maximum strike
price of £44 per MWh was too low to offset a surge in
costs which has impacted the market globally.
The UK Government wants to increase UK offshore wind
capacity almost fourfold to 50GW by 2030, requiring rapid
development of projects(3).
The US roadmap has seen its successes and failures
in recent months. Several offshore wind projects were
delayed or cancelled due to inflated costs. However,
Vineyard Wind and South Fork Wind have started
successfully, and Empire Wind 1 has begun awarding
contracts to its supply chain. Offshore wind remains an
exciting opportunity in the US, with President Biden’s
administration aiming for 30GW by the end of the decade.
Market momentum is increasing around the rest of the
world, with countries such as, South Korea, Vietnam,
India, and Brazil committing to ambitious targets,
whilst Australia has designated its first six offshore
wind development zones off the State of Victoria(4).
These newer markets will be looking to the more mature
markets for skills and expertise presenting significant
opportunity for the Group.
Tekmar Group at Global Offshore Wind, London
The offshore wind market reported a
record-breaking year following a difficult
2022(1) and the wider offshore energy
and marine civils market have remained
buoyant, supporting Tekmar Group’s
growth plan and ambition.
20
Global Offshore Wind Outlook
In the third quarter of 2023, the global offshore wind
build-out forecast was reduced for the next 4 years by
25% compared to previous forecasts. This was in response
to an extraordinary period for offshore wind, and with
some substantial projects being cancelled or delayed.
Regardless of the setback, the global offshore wind
outlook to 2030 still shows credible growth of an
additional 163GW by 2030, with a CAGR of 14.4%,
taking the total global offshore activity (operational and
underway) to 267GW by the end of 2030 – an additional
17GW more than reported in our last annual report.
At time of writing, 37.1GW of global capacity is either
under construction or has reached FID (Financial
Investment Decision). China also has the most under
construction (7.9 GW), which is up on last quarter,
followed by the UK (5.2 GW).
China has installed 32GW of capacity, matching Europe
(4), and has the most under construction (7.2GW), which is
up on last quarter, followed by the UK (5.2GW).
Our presence in Asia extends to Taiwan, South Korea, and
Japan, where Tekmar has supplied CPS or engineering
services to the countries’ first wind farms. We are
well prepared to support Asia in the future, including
embryonic markets such as Vietnam and the Philippines.
67GWfully commissed
67GW fully commissioned
3
33
32
37GW under construction / FID made
2
6
12
18
163GW entering construction by 2030
31
26
25
82
Americas
APAC Europe China
Global Offshore Wind O&M Market (£m)
12000
10000
8000
6000
4000
2000
0
2023
2024
2025
2026
2027
2028
2029
2030
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 overall scale of the global market is
valued at €11.2bn 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.
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.
Floating Offshore Wind - Annual Capacity Entering
Construction (MW)
12000
10000
8000
6000
4000
2000
0
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
2
0
3
0
2
1
3
0
2
2
3
0
2
3
3
0
2
4
3
0
2
5
3
0
2
6
3
0
2
7
3
0
2
8
3
0
2
9
3
0
2
0
4
0
2
Floating Offshore Wind
The total worldwide pipeline of planned floating wind
projects will reach a capacity of 31GW by 2035, over a
3000% increase from 0.3GW currently commissioned.
The market 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.
21
By 2040, 32GW of the planned 70GW floating capacity
will be developed or in development in Europe followed by
15.4GW in Asia-Pacific, 11GW in the Americas and 7GW in
China.
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, specifically in analysis and support. We are active
in all the regions’ where floating wind is happening and
have already supported several 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,
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 the stabilisation of the Brent spot
price. 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 2023 - 2028, with EPC spending expected to total
$91bn. This is a 21% increase compared to the preceding
five-year period(5).
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. Operators are committed
to the transition. We see many of these customers
moving into the offshore renewable market and there is
a significant presence of several large European oil and
gas companies investing in floating offshore wind. The
offshore fossil fuel and carbon reduction market will
continue to provide a balanced portfolio and foundation
for growth for Tekmar(6).
Source:
(1) 4COffshore report a record year for FID in offshore wind projects.
12.3GW awarded versus 6.6GW in 2022 and lowest since 2012.
(2) https://www.eea.europa.eu/
(3) https://www.ft.com/content/cb351788-377b-4ea7-aa0a-
9bcc28293e7d
(4) 4C Offshore POP Database
(5) Westwood SubseaLogix Q3 Update
(6) https://www.offshore-energy.biz/oil-gas-alongside-green-and-low-
carbon-energy-will-such-a-compass-lead-the-world-astray-or-steer-it-
in-the-right-direction/
22
23
Our Business Model
Enabling the world’s energy transition
Revenue Split by Product
Engineering,
7%
Other, 1%
O&M, 4%
Hang-offs, 5%
Cable
Protection
Systems
(TekLink),
32%
Marine Civils,
47%
Revenue Split by Market
Back Deck
Equipment,
4%
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.
Group Revenue Split
46%
54%
Offshore Energy
Marine Civils
Renewables
Other Offshore
44% Renewables (£17.7m)
56% Other Offshore (£22.2m)
(The Group operates within two operating segments in
accordance with IFRS8. We also track markets and areas
which our businesses operate in).
Applications: Subsea Cables, Rigid & Flexible Pipelines,
Umbilicals, Seabed, Vessel Back Deck, Structures.
Sectors: Offshore Wind, Oil & Gas, Interconnectors,
Wave & Tidal, Marine Civils, Telecoms
Customers: Developers & Operators, EPCI Contractors,
Product & Service Providers
Project Phases: DEVEX Development Expenditure,
CAPEX Project Build Phase, OPEX Project O&M.
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.
24
Product Categories: Geotechnical Design & Analysis,
Engineering Analysis & Software Innovation, Bespoke
Equipment Design & Build, Subsea Protection
Technology, Subsea Stability and Protection Solutions.
Revenue split by region:
35% EU, 8% USA,10% APAC, 43% ME, 5% Rest of world.
Locations include:
UK, Europe, Middle East and Asia Pacific.
25
Port of Mukran, Germany
Halifax, Canada
Baku, Azerbaijan
Manama, Bahrain
Doha, Qatar
Dammam, KSA
Dubai, UAE
Abu Dhabi, UAE
Mumbai, India
Busan, South Korea
Kurashiki, Japan
Shanghai, China
Johor, Malaysia
Singapore
Montrose, UK
Blyth, UK
Newcastle, UK
Newton Aycliffe, UK
Darlington, UK
Lowestoft, UK
London, UK
Head Office
Office/Facility
Representation
Mossel Bay, South Africa
26
27
Our Business Model in Action
Working together in offshore wind
experience to 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 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 designed for maintenance-free intervention,
eliminating 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.
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,
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 their 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 expertise with Tekmar Energy’s industry
This integrated approach offers
customers a single project interface which
removes third-party miscommunication
and delays to the decision-making
process.
28
29
Tekmar Group is confident in serving
as a key product and services supplier
across multiple regions and with several
developers.
Our Business Model in Action
Consolidating our global footprint
strategically positioning 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. In addition, in 2019 Tekmar delivered CPS for
another commercial scale offshore wind farm in Taiwan.
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.
A key aspect of Tekmar Group’s growth
strategy is to carefully expand the company’s
geographical reach to capitalise on growing
global offshore wind markets.
During FY23, Tekmar Group secured several major
contracts across established and growing regions,
presenting renewed confidence and ample future growth
opportunities as many major regions have begun to
execute their offshore wind plans. The rapidly expanding
US market is set to become one of the largest offshore
wind markets in the world, with a target of 50GW of
offshore wind capacity installed or underway by 2040.
Whilst still in its infancy, the Japanese offshore wind
market is targeting 24GW of offshore wind capacity by
2040. Likewise, the Taiwanese market is looking to jump
from 9GW full commissioned to 21GW fully commissioned
or underway by 2040. Our core markets remain strong and
present several opportunities in the short, medium and
long term.
Tekmar Group is confident in serving as a key product and
services supplier across multiple regions and with several
developers. This is evident in our existing relationships
which have seen many developers returning to Tekmar.
An example of this is in 2023 when Tekmar secured the
contract to supply CPS and engineering services for the
third phase of the Dogger Bank wind farm, the world’s
largest wind farm. Located more than 130km off the
North-East coast of England, Dogger Bank Wind Farm will
be capable of powering up to 6 million homes annually.
In the same vein, we have been trusted to deliver
engineering solutions through technology, products and
services to many countries’ first commercial wind farms
including US, Taiwan and Japan.
In addition to Block Island Offshore Wind Farm and the
Coastal Virginia Offshore Wind Projects, in 2023, work
began on America’s first utility-scale offshore wind
project, Vineyard Wind. The project will generate clean,
renewable, affordable energy for over 400,000 homes
and businesses across the Commonwealth, while reducing
carbon emissions by over 1.6 million tons per year. The
contract was won in 2022 and delivery for our 10th
generation CPS started in 2023.
Tekmar Group won contracts in Asia-Pacific due to
30
31
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.
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 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 $10bn CAPEX so far committed for
procurement and installation of subsea components
(pipelines, umbilicals, power cables, etc.) to 2028. 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.
Our Business Model in Action
A balanced portfolio
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 43% of revenue during
FY23, an increase of 26 percentage points versus FY22.
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.
32
33
FY23
£386m
£19.9m
£39.9m
£44.2m
1.11
£(0.3)m
£(0.3)m
267
$95
Key Performance Indicators
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
FY21(7)
£327m
£9.7m
£47.0m
£46.4m
0.99
£(2.3)m
£(2.1)m
244
$75
FY22
£370m
£15.6m
£30.2m
£33.3m
1.2
£(2.3)m
£(2.1)m
268
$85
(1) Enquiry book comprises all active lines of enquiry within the Tekmar Group. Expected revenue
recognition within 3 years if converted to a committed contract.
(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.
(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 significant one off items,
as defined in CFO review (18m period for FY21).
(7) FY21 accounting period is the 18 months ending 30 September 2021.
34
Sustainability Report
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.
35
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 is split into three sub-groups
(Environment, Social and Governance). The Committee
meets monthly to discuss and plan ESG initiatives that
link to our sustainable development goals.
Tekmar Group at Local Careers Fair, Darlington
Our ESG Strategy and our internal processes will be
regularly reviewed to ensure our people consider the
environmental, social and financial impacts of their
decisions.
FY23 Highlights
•
•
•
FY23 20% increase in revenue related to offshore
renewable projects
Further development in offshore wind product
offering and engineering solutions
Further expansion of our global footprint in
renewable energy sector
• Having previously being awarded the initial project
phases, we secured the contract for the final phase
of Dogger Bank Wind Farm – the world’s largest
offshore wind farm to date
•
•
•
•
•
The Group has supported several floating wind farm
feasibility studies including sites in Scotland and Italy
The leadership and wider team have produced several
technical papers, and have exhibited, attended or
spoke at various industry networking and learning
events
Successful delivery of an integrated engineering
solution, including Cable Protection System (“CPS”)
for the first commercial-scale offshore wind project in
the US
Supporting the affordability / levelized costs of
energy LCOE) in providing engineering analysis
to optimise rock berm solutions in turn reducing
environmental impacts
Continue to apply our knowledge and experience
to date to assist the offshore wind industry in its
maturity and in developing solutions to deal with
complex industry challenges
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.
36
37
Our long-term strategy and ambition
remains for Tekmar to build a leading,
global offshore wind services platform.
Energy Transition
Tekmar’s activities today reflect our deep
expertise in providing engineering support
services for critical offshore energy markets.
We do this for customers across offshore wind
and more traditional energy supply and related
infrastructure.
Our long-term strategy and ambition remains for Tekmar
to build a leading, global offshore wind services platform.
We are excited about this opportunity and the role we
can play in the decarbonisation of energy supply but
also recognise the important role we play in supporting
efficient and secure energy supply during the critical
period of energy transition.
As a business, we have benefitted from the rapid
transformation of, and investment in, clean energy over
the last two decades. With our leading position in the
offshore wind cable protection market, and our ability
to understand, analyse and help protect the cable in the
subsea environment, we will play our role in supporting
the necessary growth in investment in offshore wind
through 2030 and beyond.
Advances towards the long-term decarbonisation
targets established by the international community
have clearly been impacted more recently by the global
energy crisis and related energy security and supply
concerns. Whilst there has been an increase in activity
from traditional energy sources, the future of energy lies
in renewables and there is both a need and a desire to
ensure long-term supply from green energy sources. As a
business, we are committed to delivering offshore energy
technology solutions in a sustainable and responsible
way, whilst working with our customers to meet their
changing requirements and improving the sustainability
performance of our business..
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.
As tangible start to this process we have embarked on a
Carbon Footprint Measurement and reduction planning
exercise which will be completed in 2024. This will allow
us to pinpoint carbon hotspots within the business and
develop a suitably tailored carbon reduction plan as well
as establishing KPIs and process for monitoring.
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. Following
establishing our carbon footprint measurement we
envisage our next steps will be understanding the carbon
status of our supply chain and opportunities to offer
support where required.
As part of our continued global expansion our supply chain
strategy is focused on developing our regional production
and manufacturing and localised supply chain thus
managing our impacts from transportation and logistics
activity on work we undertake.
As a strategic supply chain partner to our customer
base, Tekmar supports its clients in managing their
sustainability risk and compliance by being part of the
Eco Vadis network. Eco Vadis is a trusted business
sustainability rating platform and provides insight to
organisations sustainability management performance.
We are committed to publishing an ambitious but
achievable transition plan, doing our part to protect our
planet for generations to come.
38
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.
As our business continues to expand globally including
in new product and service lines, we recognise the need
to continually review and evaluate our business risks and
compliance requirements. Similarly, we seek to evolve our
business policies and procedures accordingly and in line
with best practice.
We adhere to the QCA code regarding our corporate
governance to deliver value for shareholders over the
medium and long term.
Demonstrating our commitment to Safety, Quality
and the Environment our businesses are certified to
relevant international standards. These include, but are
not limited to ISO 45001:2018, ISO 14001:2015, and ISO
9001:2015.
Tekmar Group at Global Offshore Wind, London
Modern
Workplace
Culture &
Inclusion
Talent
Attraction
Talent
Development
Performance
Management
Health &
Happiness
Our People
Our People Strategy is centred around 6 pillars
of People Experience.
Talent attraction & development
A key focus during the year has been on employer
branding and visibility, including our LinkedIn campaigns
to attract talent and exhibiting at graduate careers
fairs and trade shows to raise our profile amongst our
communities and talent pools. We have fostered a strong
relationship with a local technical college UTC Durham to
support our talent pipeline, providing work experience,
factory tours, attending mock interviews, careers fairs,
judging projects.
Professional development and training opportunities
were provided and supported during the year as well
as two apprenticeship schemes and one degree level
apprenticeship. We continue to utilise the apprenticeship
levy for existing employee development as well as new
talent. Our aim is to offer more apprenticeships as
the business grows and the general business growth
and expansion will offer further opportunities for our
employees to develop.
Modern workplace
Performance management
We have conducted a policy and benefits review which
has led to improved family friendly time off policies and
an improved benefits offering. We have also undertaken
benefits and employee experience benchmarking against
our competitors and industry.
During the year we launched a new employee appraisal
system. The outcome is employee performance and
development reviews are more efficient, user friendly and
beneficial and the system has received positive feedback
from employees and managers.
Culture & Inclusion
Health and happiness
During the year we carried out a group wide HIVE
employee engagement survey. Pleasingly, we received
a positive employee net promoter score (eNPS) and our
overall engagement index was higher than the HIVE
customers benchmark and also our industry benchmark.
Nevertheless, recognising the opportunity for continued
improvement, specific actions plans are now in place to
target areas for improvement identified.
We conduct regular internal communications with our
employees including monthly townhall meetings whereby
employees are able to ask questions anonymously. In
2023 we launched Open Door, an identity protected, direct
line for employees to share any feedback, concerns or
ideas directly with the company. In addition, the business
also launched Hive Five, a recognition platform which
provides a way to encourage colleagues to recognise
and praise one another for hard work, good ideas and
collaboration in line with our company values.
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 6 years Lost Time Incident free, demonstrating
our commitment to a safe workplace.
The HIVE engagement survey was conducted during
the year, in this process we specifically set a focus
around the health and happiness of our people. We
continue our focus on health and wellbeing at all group
sites with targeted health campaigns including free flu
vaccinations. We offer a Health Shield benefits and
39
cash back scheme and an employee assistance program
for employees. Specific activities during the year have
included introducing a wellbeing questionnaire to improve
our stress management procedure and the initiation of a
group wide wellbeing walk which we hope to continue on
a twice annual basis.
Our focus for the year ahead is the introduction of a
financial well-being platform and virtual GP service
Tekmar Group at UK Offshore Wind Supplychain
Employment Practices
and 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.
We are proud of the diverse range of nationalities who
chose to work for Tekmar Group. We have 15 nationalities
working across Tekmar Group in a range of disciplines and
positions. During the year, the Group gained Tier 2 skilled
worker sponsor licence, enabling our talent pool to expand
overseas and enhance diversity across Tekmar Group.
40
41
Local communities
A highlight for the business in the last year
is the work we have undertaken with various
educational links we have established in our
local communities. We support our employees in
their engagement with local community projects
and initiatives that have a positive impact on
the areas we work in.
Our team have provided time and their commitment
to provide impactful volunteering working on STEM
related initiatives with our local education partners and
charities with some of our volunteers enrolling as STEM
Ambassadors. Activity during the year has included work
experience, hosting tours at our manufacturing facility,
conducting mock interviews, careers fairs and judging
projects and challenges set to young people.
Business Improvements
We are in our third year of working with
Sharing in Growth (SIG) through a programme
part funded by the Offshore Wind Growth
Partnership, targeting productivity
improvements for the UK offshore wind supply
chain.
The SIG team continue to work with our senior team to
drive our strategic execution plan, shape our culture and
achieve global growth plans. The current stage of the
programme is focused on supply chain management
strategy, engineering systems and process development
and operational excellence. We believe the outcome of
this work will increase the business’s ability to respond
rapidly and navigate the changing needs of the offshore
wind sector.
We have formed partnerships with UTC Durham and
North-East STEM Foundation and have established a
planned calendar of events for the coming year. Our
aim working with these organisations is to support
the younger generation into STEM careers and spread
awareness of opportunities and the various career paths
available in our industry and sectors we operate.
Where possible we procure products and services locally
with a view to supporting supply chains and sustaining
employment in each region.
Customers & 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.
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.
During the year we achieved further efficiencies in the
business through further integration of support functions
and engineering teams.
During 2023 we continued to see a positive trend in our
monthly customer satisfaction scorecard, which captures
feedback on safety, quality, and delivery performance
from live projects. Tekmar Energy also launched its first
annual Net Promotor Score (NPS) survey to get closer
to the voice of our customer. This is the foundation of
any business improvement program to ensure we focus
on creating value for our customers and to identify
and improve areas which are holding us back. We have
listened to the feedback and taken actions in a number
of key areas including (1) created a more responsive
technical organisation with additional capacity for sales
support and project execution; (2) structured our sales
processes and people around Key Account Management
(KAM) principles to give greater customer focus; and (3)
created a number of commercial framework agreements
to streamline the sales process, making us easier to do
business with. There will be a follow up NPS survey early
2024 for comparison, where we will again take further
actions to the feedback received.
Principal Risks and uncertainties
The principal risks and uncertainties of the group are
disclosed on page 45.
Our values
Work Together:
We foster teamwork without
boundaries, to ensure the best results
are delivered in an environment where
people feel empowered, safe, trusted,
confident and inspired to develop.
Do Things Right:
We take a united approach towards
Safety, Quality and Delivery. We lead by
example and constantly find ways to
raise standards. We challenge the norm
and have courage to stand up for what
is right.
Break the boundaries:
We collaborate with our customers
and constantly look for ways to
develop our technology and services to
make today’s impossible tomorrow’s
deliverable.
Goals for 2024
»
»
»
»
»
»
»
»
»
»
Complete Carbon Footprint Measurement and
reduction planning exercise
Commence activities to understand the carbon status
of our supply chain related to scope 3 emissions
Continue to grow our activity and investment in the
offshore renewable energy sector
Continue to develop and enhance our employee brand
to attract and retain high calibre and diverse talent to
support our growth plans
Ongoing development our business processes and
systems including further integration across group
subsidiaries to improve the efficiency of the business
and provide a solid platform for growth
Refresh of the employee well being offering including
participative activities such as group well-being walks
Continue to support our local education partners,
UTC Durham and North-East STEM Foundation in
delivering our planned calendar of events
Continue to promote diversity within STEM via our
approach to talent attraction, work with educational
partnerships, external relationships and local
communities
Continue to promote HSE engagement through
observation and incident reporting to drive accident
frequency rate (AFR) down and maintain our zero lost
time incident (LTI) record
Ongoing review and evaluation of our business risks
as our business evolves including further overseas
expansion and the introduction of new product and
service lines
Leanne Wilkinson
Chief Financial Officer
3 March 2024
42
43
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.
Our in-house engineering resources, including
60 industry experienced engineers, are
dedicated to solving customers’ engineering
challenges
Stage
FEED
Engineering
Project Execution
Disciplines
Feasibility
Simulation & Analysis
Detailed Design
Support & Services
• Geotechnical
• Structural
• Mechanical
• Hydraulic
• Electrical
• Civil
• Computer
• Robotic
• Electronics
• Front End Engineering &
Design
• Engineering Consultancy
• Geotechnical Consultancy
• Research and Development
• Foundation Design
• Mooring Analysis
Jack Up Analyis
•
• Cable Burial Risk
Assessment
• Geotechnical Route Design
•
Installation & Cable Lay
(Orcaflex)
• Structural, Stability, Fatigue
(FEM)
• Computational Fluid Dynamics
• Thermal & Electrical Analysis
• Scour Analysis
• Rigging Analyis
• Failure Mode Analysis (FMA)
• Software Development
• Cloud Architecture
• Data Monitoring
• Product Development
• Equipment Design
• Design Optimisation
• Detailed Drawings
• 3D Renders
• General Arrangements
• Deck Layout & Grillage
• Verification Engineering
• Build & Delivery
• Verification Testing
• Wet Trails
• Equipment Commissioning
• Testing & Inspection
• Maintenance & Repair
• Equipment Refurbishment
• Offshore Trained Personnel
• End User Training
• Offshore Supervision Support
44
45
Governance
A message from the Chairman
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
3 March 2024
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-
Corporate Governance Statement
The Board is 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 has 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
In April 2023, the Group completed a strategic investment
by SCF Partners and a related fundraise strengthening
the Group’s balance sheet. SCF and Tekmar Group have a
shared ambition to make Tekmar a leading global offshore
wind services company. In support of this strategy, SCF
have committed a further £18m of funding through
Convertible Loan Notes which are targeted to be deployed
primarily for value enhancing M&A and growth. Having
this committed funding in place puts Tekmar at a distinct
advantage, particularly given the current financing
environment for M&A. We benefit significantly in this
M&A context from having SCF as a strategic partner,
where we can leverage their complementary industry
connections and investment expertise to help source and
execute value-enhancing acquisitions.
We have identified further incremental investments to
support growth and will ensure the plan is self-funded
where possible, to protect the business and shareholder
interests. We will manage risk closely to limit any
potential adverse effects in the implementation of
our strategy. We do this by ensuring that we have a
framework in place to identify and monitor risk and
uncertainty in line with our business risk assessment
procedures.
Principle 2. Seek to understand and meet shareholder
needs and expectations
We are dedicated to communicating openly with
shareholders to ensure that our strategy, business model
and performance are clearly understood.
Understanding what analysts and investors think about
us, including the factors which drive their investment
decisions towards us, and helping our stakeholders
understand our business, is a key component in driving
our business forward.
Maintaining regular and positive engagement with
shareholders is a priority. Our primary methods of
communication are through the Annual Report; interim
and full-year results announcements; the Annual General
Meeting and other information shared on the Group’s
investor website. Where possible, we will continue to carry
out investor roadshows at significant times throughout
the year, attend investor conferences and host investors
for site visits.
46
47
If and when voting decisions at AGMs or General Meetings
deviate from the Company’s expectations, the Board
will communicate with shareholders to understand and
address any issues informing those decisions.
Requests for information on any of these matters,
including details of investor days, can be made to
investors@tekmar.co.uk. Note: no unpublished price
sensitive information will be provided by this email
address. All Tekmar Group plc communications will align
and accord with official AIM guidelines.
Principle 3. Take into account wider stakeholder and
social responsibilities, and implications for longer term
success
The Board strives to create a socially and ethically
responsible business and has developed an ESG Strategy
to formalise our alignment to the UN Sustainable
Development Goals. The Executive Team maintain
oversight over the delivery of this strategy going forward
including delivery against targeted improvements.
The Board appreciates the need to maintain effective
working relationships across a wide range of stakeholders,
including investors, employees, partners and local
communities. Our ESG Strategy will continue to evolve
as we respond to feedback from our wider stakeholders
and actions taken as a result seen as an essential part of
ensuring long term success.
Our operational processes are also externally audited and
reflected by the ISO accreditations within our subsidiary
businesses. Our commitment to these areas is shown
through their inclusion in our annual strategic planning
process, including a SWOT analysis, and thus they are
embedded into the Group’s strategy and business model.
Principle 4. Embed effective risk management,
considering both opportunities and threats, throughout
the organisation
The Board has overall responsibility for the determination
of the Group’s risk management objectives and policies,
as well as the Group’s risk appetite. This risk management
is included in and reviewed as part of our annual business
plan and Strategic Review. Operating in the offshore
energy sector, managing risk is fundamental to our
everyday responsibilities and our policies, procedures and
behaviours are continuously reviewed to ensure these are
appropriate.
The Board aims to set policies that provide a balance
between reducing risk as far as possible, without unduly
impacting the Group’s competitiveness and flexibility. The
Board believes this helps to sustain stakeholder value;
including the Group’s supply chain through to the end-
customer; while also protecting the Group’s established
corporate culture.
A breakdown of the Company’s key risk factors can be
found in the Risk Management report. Risk management,
including financial and non-financial controls; what the
Board does to identify, assess and manage risk and how it
obtains assurance that our risk management and control
systems are operating effectively, is covered by the
Group’s business risk assessment procedures.
Principle 5. Maintain the Board as a well-functioning,
balanced team led by the Chair
The Directors recognise the importance of high standards
of corporate governance and believe the QCA Code
provides the most appropriate guidance for the Group by
setting out a standard best practice for small and mid-
size quoted companies, particularly those listed on AIM.
The Chairman maintains overall responsibility for ensuring
the Group’s compliance with the QCA Code. The Non-
Executive Directors share responsibility for the effective
running of the Board’s committees which comprise an
important element of the governance process.
In line with QCA guidance, three of the Non-Executive
Directors, one of whom is the Chairman, are independent.
The Non-Executive Directors of the Board have been
selected with the desire to increase the breadth of skills
and experience of the Board and bring constructive
challenge to the Executive Directors.
The Company Directors are:
•
•
Julian Brown, Independent Non-Executive Chairman
David Wilkinson, Senior Independent Non-Executive
Director
•
Ian Ritchey, Independent Non-Executive Director
• Alasdair MacDonald, Chief Executive Officer
•
•
•
Leanne Wilkinson, Chief Financial Officer
Colin Welsh, Non-Executive Director
Steve Lockard, 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.
Principle 6. Ensure that between them, the Directors
have the necessary up-to-date skills, experience and
capability
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;
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.
Linked to the strategic investment in April 2023,
Colin Welsh and Steve Lockard joined the Board as
representatives of SCF. Colin is a Partner of SCF with
global energy sector experience and experience as an
advisor and investor. Steve is an Operating Partner within
SCF and has over 35 years’ experience in global operations
and executive leadership.
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.
•
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.
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.
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.
David Wilkinson minimum time commitment of two
or three days per month.
Ian Ritchey minimum time commitment of two or
three days per month.
Colin Welsh minimum time commitment of two days
per month.
•
•
•
•
•
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.
Steve Lockard minimum time commitment of two
days per month.
The Chairman’s performance is also appraised through a
process managed by a Chairman Appraisal Group,
48
49
Principle 10. Communicate how the company is
governed and performing by maintaining a dialogue with
shareholders and other relevant stakeholders
We are committed to communicating openly with our
shareholders to ensure our strategy, business model and
performance are all clearly understood. Understanding
what key stakeholders think about us, including the
drivers behind their investment decisions, is a key part of
developing our business. We also maintain a strong focus
on ensuring our stakeholders understand our business.
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.
comprising the Chief Executive Officer and the Chief
Financial Officer.
all stakeholders and we have a safety-first approach in
everything we do.
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
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
The Group is an equal opportunities employer and actively
encourages diversity at all levels. These values are
embedded in the Group’s leadership and throughout the
organisation.
Principle 9. Maintain governance structures and
processes that are fit for purpose and support good
decision making by the Board
Quality underpins everything we do. Within the offshore
energy industry, standards and the protection of
those standards are paramount and something which
the Tekmar Board has a wealth of experience in. Our
independently audited quality management systems and
ISO accreditations demonstrate our commitment in this
area.
The Group operates an effective governance framework.
Within this framework the Board encourages and
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.
Josh Borrows, Apprentice at Tekmar Energy
50
Board of Directors
51
Julian Andrew Brown
Independent Non-Executive Chair
Alasdair MacDonald
Chief Executive Officer
Leanne Wilkinson
Chief Finance Officer
David Wilkinson
Senior Independent Non-Executive Director
Remuneration Committee (Chair), Nomination Committee
(Chair), Audit Committee
Julian is a prominent figure 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.
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.
Leanne became Chief Financial Officer and an Executive
Director of the Board in June 2023. She joined Tekmar in
July 2020 as Tekmar Energy Finance Director within the
Group before taking up the role of Group Finance Director.
Leanne is a CIMA qualified accountant with over 20
years of experience as a senior finance professional and
business leader. Prior to joining Tekmar, Leanne previously
worked in the manufacturing and technology sectors and
has experience in business change, transformation, and
integration.
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.
52
Board of Directors continued
53
Ian Ritchey
Independent Non-Executive Director
Colin Welsh
Non-Executive Director
Steve Lockard
Non-Executive Director
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.
Colin is a Partner at SCF Partners. Prior to joining SCF
Partners in 2017, Colin Welsh served as Chief Executive
Officer and Head of International Energy Investment
Banking at Simmons & Company International. Colin
joined Simmons in 1999 and built the firm’s activities
outside of North America developing offices in Aberdeen,
London and Dubai. Simmons & Company International
was sold to Piper Jaffray (NYSE:PJC) in February 2016.
Colin is a Scottish Chartered Accountant. Prior to joining
Simmons & Company he spent 16 years at Ernst and
Whinney, Touche Ross and RMD.
Steve Lockard is an Operating Partner at SCF Partners
where he supports energy transition investments and
company platform building. Steve brings 40 years
of experience in global operations leadership to the
board. He is the former CEO and current Chairman of
TPI Composites (NASDAQ:TPIC) where Steve led the
company’s transformation from a New England based
boat builder to the largest independent global wind blade
manufacturer.
Steve is an advisor to Keystone Tower Systems, an
innovative manufacturer of wind turbine towers. He also
serves on the board of D2Zero, an SCF portfolio company.
Steve served for 10 years on the board of the American
Wind Energy Association (AWEA) and helped to create the
American Clean Power Association (ACP).
54
Senior Management
55
Dave Thompson
Managing Director of Subsea
Innovation / Group Engineering
Director
Fraser Gibson
Managing Director of AgileTek
Engineering and Ryder
Geotechnical
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.
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.
Steve Howlett
Managing Director of Pipeshield
International
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 Bell
Managing Director of Tekmar
Energy
Angela Lock
General Manager of Tekmar
China
Marc is a Mechanical Engineer with
a Master’s in Business Management
from the University of Durham. He
has over 25 years of technical and
operational leadership experience
within 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.
Gary Howland
Group Sales Director
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 Tekmar’s customers and
competitors.
Gary holds an engineering degree in
Marine Technology from Newcastle
University.
56
57
Senior Management continued
Tallulah Whitewood-Spedding
Group Legal Counsel/Company
Secretary
Tallulah has worked in-house
supporting businesses and public
corporations with a wide range of
science and engineering projects
for over ten years, with specific
experience in commercial law and
intellectual property in the offshore,
energy services and defence sectors.
In previous roles at Siemens and
Royal IHC Limited and as Head
of Legal and Procurement at the
National Physical Laboratory (NPL
Management Limited - the National
Measurement Institute for the
United Kingdom), Tallulah has gained
significant experience of leading
negotiations, advising on commercial
strategy and drafting complex cross
jurisdictional contracts.
Alistair Cutting
Group Head of Finance
Chloe Ainsworth
Group Head of People
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.
Chloe plays a pivotal role in driving
the company’s growth strategy
through strategic people centric
initiatives. With a first-class degree
and Chartered CIPD (MCIPD) status,
Chloe actively engages in the North
East HR community, contributing to
its advancement and championing
future-focused practices. Her passion
for people science, psychology,
and business strategy fuel her
commitment to nurturing talent,
fostering a culture of innovation that
aligns with Tekmar Group’s ambitious
targets, whilst making Tekmar Group
an employer of choice.
Michael Manning
Group Marketing Manager
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.
Furthermore, Michael has worked
alongside sales teams to achieve
company targets and financial goals.
58
59
Risk Management
Identifying, evaluating and monitoring
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:
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.
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.
The Group has experienced increased
supply chain costs and general cost
These Macroeconomic
inflation.
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 Board continues to closely
monitor the increased risks
macroeconomic risks which are
mitigated by enhanced controls.
60
Risk
2)
Risk Type
Description
Impact
Mitigation
Evaluation
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. 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. The
group is currently undertaking the implementation of a
new finance and business system which is scheduled to
be implemented by April 2024.
Risk remain low due to
continuous
review and
upgrade of systems as
required.
Strategic
Finance
61
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.
Monitored by board
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
88 there is a risk that bank facilities are not renewed.
The business has a strong relationship with Barclays
and as a result, management are confident that bank
facilities will continue to be available to the group for the
foreseeable future.
The Group’s balance sheet was stabilised in April 2023
following the conclusion of the strategic review. New
capital investment from SCF Partners and related
parties of £4.3m alongside a placing and retail fund
raise of £2.1m raised cash proceeds of £5.3m, net of
expenses. In addition, SCF Partners have committed,
with conditions an additional investment of £18.0m
available through the convertible loan note facility. The
strategic investment from a global institutional investor
in the energy sector provides funding for the Company
to follow an ambitious plan for growth, both organically
and by acquisition.
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.
Monitored by board
62
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.
63
Evaluation
Monitored by board
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 remain at a higher level than seen in
previous years in the short term. The recent increases 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.
Monitored by board
In addition, the People Strategy has been developed
to focus on the retention and development of talent.
Annual appraisal assessments are undertaken and a
skills matrix and succession plan developed from this,
including risk mitigation plans.
Annual review of remuneration and benefits to ensure
we are consistent across the Group and are competitive in
the relevant region. Executives and senior management
incentive plan in place.
Regular pulse surveys to invite feedback on a range of
issues over the period.
Contracts are reviewed extensively prior to signing, and
the likelihood of risks assessed by legal and technical
teams. Uncapped liabilities are kept to a minimum and
only agreed to for areas of the contract that Directors
believe are very low risk. Where possible the Group
insures against risks to minimise the potential financial
impact. There is a strong focus across the Group on high
quality project execution which is regularly reviewed
under independent ISO certification where appropriate.
The business has ongoing relationships with banks
and other financial institutions that offer the required
level of support. The Group has strengthened its cash
position with the extension on banking facilities. Cash
flow forecasts are updated and discussed regularly, with
analysis prepared at both a subsidiary and Group level.
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.
Monitored by board
Increased
economic
monitor.
risk due
to
environment,
64
Audit Committee Report
It is my pleasure to present the Audit
Committee Report for the year ended 30
September 2023. 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 second 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 for the Company and the wider Group 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
announcements 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, including those relating to cyber-crime, and
these are kept under constant review.
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 £8k, are considered to be
a low value and therefore do not impact on the auditor’s
independence.
Significant issues considered in relation to the financial
statements
Significant risks relate to those significant non-routine
transactions that are deemed complex and/or highly
judgmental. The significant risks 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 revenue recognised overtime.
•
Contract loss provision - There is a significant level of
management judgement and estimation needed to
assess the provisions. There is a significant level of
judgement, being the estimation in calculating future
expected costs on the contracts as the contracts are
bespoke in nature. As there are several multi-year
projects, the estimate around forecasting losses is
sensitive and has the potential for material error.
•
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. Additionally
macroeconomic factors this year have increased our
WACC, as it has done for most businesses, and this
is a key component in our calculations. This risk is
relevant to the offshore energy CGU.
• Accounting for defect notices – Identifying for
completeness all defect notices received and their
appropriate disclosure in accordance with IAS 37
is a significant risk. Whilst many of these notices
relate to an industry wide issue alleging CPS failures,
they are each considered separately on their own
merits in determining the appropriate accounting
treatment. This disclosure is based on management’s
assessment of whether a present obligation exists.
•
•
Going concern – Tekmar Group plc has additional risks
given the material uncertainty over the renewal of
bank facilities (p77).
Valuation of parent company’s investments in
subsidiaries – this risk associated with valuation of
subsidiaries is increased by the uncertainty caused by
the current economic climate.
• Management override of controls – this is a non-
rebuttable presumed risk for all companies and is
reviewed for all companies in the Group.
.
As Chair of the Audit Committee, I am satisfied that
the Audit Committee Report covers the activities of the
Committee over the year to 30 September 2023 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.
David Wilkinson
Chair of the Audit Committee
3 March 2024
65
Nathan Hardy, Apprentice at Tekmar Energy
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 October 2023.
Sharesave Plan 2023 (SAYE)
Following the success of our previous Sharesave plans in
we launched a fourth plan in March 2023. The scheme
was again open to all employees subject to a qualifying
service period. A total of 43 employees subscribed to
3,306,238 share options over a period of three years.
Group Remuneration Policy
The key components of the remuneration policy are:
66
Remuneration Committee Report
I, Julian Brown, Chair of the Remuneration
Committee, present the Directors’
Remuneration Report for the year ended 30
September 2023.
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
is 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, CFO and the remaining Executive
Management Team are based on Adjusted Earnings
Before Interest & Tax and Cash Generation.
67
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
FY23 Total
FY22 Total
Name of Director
£000
£000
£000
£000
£000
£000
£000
S Hurst
A MacDonald
C Gill
J Brown
D Bulmer
I Ritchey
D Wilkinson
L Wilkinson
C Welsh
S Lockard
-
214
-
57
57
32
37
124
18
21
-
214
-
-
-
-
-
44
-
-
-
58
-
6
12
3
4
25
2
-
-
-
-
-
50
-
-
23
-
-
-
-
-
6
3
3
-
18
-
-
-
486
-
69
122
38
41
234
20
21
174
327
28
67
260
39
17
-
-
-
-
68
69
IPO options
All share options with regards to the IPO scheme have no been exercised or have lapsed. The were no remaining options
outstanding at 30th September 2022 or 30th September 2023.
Nomination Committee Report
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.
Retention plan
Options b/fwd
Options lapsed
- employment
Options exercised
Remaining options
Alasdair MacDonald
Dave Thompson
17,073
10,760
-
-
-
(10,760)
17,073
-
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. All options with regards to the LTIPs Launched in
August 2020 have lapsed due to employment or performance criteria. No options were exercised.
In April 2023, the remuneration committee approved a Long term Incentive Plan to incentivise and reward management for
the three financial years, ending 31 March 2026. Management were granted awards for up to 4,819,666 ordinary shares. There
are no performance conditions for this tranche of LTIPs.
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.
LTIPS
Options Granted
Options lapsed -
performance
Option lapsed -
employment
Remaining options
Alasdair Macdonald
Leanne Wilkinson
Other Senior Management
2,427,600
375,000
1,454,565
-
-
-
-
-
(590,763)
2,427,600
375,000
863,802
The Tekmar Group plc Management shares awarded
Tekmar Group PLC awarded 4,075,788 shares to senior management team members in settlement of annual bonuses. These
share awards have been accounted for as share based payments under IFRS2. 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.
Julian Brown
Chair of the Remuneration Committee
3 March 2024
I, Julian Brown, Chair of the Nomination
Committee, present the Nomination Committee
Report for the year ended 30 September 2023.
The Committee comprises David Wilkinson
who is our Senior Independent Non-Executive
Director and myself as Chair.
Responsibilities
The Nomination Committee regularly reviews 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.
During 2023, 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 – April 2023
On 20 April 2023, we welcomed Steve Lockard and Colin
Welsh to the Board as Senior Independent Non-Executive
Director. We are delighted that Steve and Colin have joined
us as they brings a wealth of experience that has further
enhanced the knowledge and skills of the Board as a whole.
Appointment of Chief Financial Officer – June 2023
On 21 June 2023, we welcomed Leanne Wilkinson to the board
of directors in the role of Chief Financial Officer.
Other changes
On 17 November 2022, Derek Bulmer stepped down from the
role of Chief Financial Officer and stepped down from the role
of Non Executive director on 31 March 2023.
Julian Brown
Chair of the Nomination Committee
3 March 2024
70
Directors’ Report
for year ended 30th September 2023
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 2023.
Major shareholders
As at 15th February 2024 the following interests of
shareholders in excess of 3% have been notified to the
Company:
Directors
The directors who held office during the year and up to
the date of the approval of accounts were as follows:
1. Alasdair Macdonald
2. Leanne Wilkinson (Appointed 21 June 2023)
3.
Julian Brown
Ian Ritchey
4.
5. David Wilkinson
6. Colin Welsh (Appointed 20 April 2023)
7. Steve Lockard (Appointed 20 April 2023)
8. Derek Bulmer (Resigned 31 March 2023)
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
2023, 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.
Research and development
The business continuously invests in research and
development activity. The highlight during the financial
year was the continued development of the next
generation TekLink product in the offshore wind division.
A total of £353,000 of Research and Development costs
were incurred in year. All costs have been capitalised as
intangible assets under IAS38.
Number of
ordinary
shares
Ordinary
shares as a %
of issued share
capital
SCF-IX, L.P.
43,616,569
32.05%
Schroders plc
27,147,956
19.95%
J O Hambro Capital
Management Limited
12,683,333
9.32%
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 2024 and a trade loan facility of up to £4.0m
that can be drawn against supplier payments, currently
available to 31 July 2024. 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 £5.2m
of cash at 30 September 2023 including draw down of the
£3.0m CBILS loan and a further £3.6m 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 31
March 2025. 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 21 Contingent Liabilities, as management have
assessed there to be no present obligation.
71
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 31
March 2025, 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. In addition the delays
of specific cash receipts have been modelled. The base
case and sensitised forecast also includes discretionary
spend on capital outlay. 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 order intake by
22.5% and increasing overheads by 15% against the base
case. In addition the delays of specific cash receipts have
been modelled. The inputs applied to the reverse stress
are not considered plausible.
Facilities - Within the base case, severe but plausible case
and reverse stress test, management have assumed the
renewal of both the CBILS loan and trade loan facility in
October 2024 and July 2024 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 Directors are confident, based upon the
communications with the team at Barclays, the historical
strong relationship and recent bank facility renewal in
November 2023, that these facilities will be renewed
and will be available for the foreseeable future. However,
as the renewal of the two facilities in October 2024 and
July 2024 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:
Ordinary shares
of 1p each
A MacDonald
S Lockard
J Brown
Ian Ritchey
30 September 2023 30 September 2022
3,049,867
3,888,889
30,341
33,333
622,267
-
30,341
33,333
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 does not report under SECR as none of its
subsidiary undertakings are large companies. The parent
company is exempt from reporting as it is a low energy
user consuming less than 40MWh per annum.
73
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.
The Directors are responsible for preparing the annual report
in accordance with applicable law and regulations. Having
taken advice from the Audit Committee, the directors
consider the annual report and the financial statements,
taken as a whole, provides the information necessary to
assess the company’s performance, business model and
strategy is fair, balanced and understandable.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information in-cluded
on the company’s website. Legislation in the UK governing
the preparation and dissemination of finan-cial statements
may differ from legislation in other jurisdictions.
Leanne Wilkinson
Chief Financial Officer
3 March 2024
72
Relations with stakeholders
The Group considers its key stakeholders to be its
shareholders, employees and customers and suppliers. How
the Group engages with these, and broader, stakeholders is
described in the s172 statement on page 17.
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
27 March 2024 at Muckle LLP, Time Central, Gallowgate,
Newcastle Upon Tyne NE1 4BF. 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 to be held at 11.00am on
27 March 2024 at Muckle LLP, Time Central, Gallowgate,
Newcastle Upon Tyne NE1 4BF. 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 2023 and the publication of these financial
statements.
Independent auditor
The auditor, Grant Thornton UK LLP, has been re-appointed
and a resolution concerning their appointment will be
proposed at the AGM.
Disclosure of information to the auditor
The Directors confirm that at the time this report is approved:
Statement of Directors’ Responsibility
•
•
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 company’s auditor is aware of that information.
This Directors’ Report was approved by order of the Board.
Leanne Wilkinson
Chief Financial Officer
3 March 2024
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
and prudent;
•
•
•
for the Group financial statements, state whether
applicable UK-adopted International Accounting
Standards have been followed, subject to any
material departures disclosed and explained in the
financial statements;
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;
Prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Group and parent company will continue on
that basis;
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the parent Company’s transactions and disclose with
74
75
Independent auditor’s report to the
members of Tekmar Group plc
described in the ‘Auditor’s responsibilities for the audit
of the financial statements’ section of our report. We
are independent of the Group and the parent company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to 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 2024 and a trade loan facility of up
to £4.0m that can be drawn against supplier payments,
currently available to 31 July 2024. 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
however, the renewal of both facilities is not guaranteed.
As stated in Note 2(b), these events or conditions, along
with the other matters as set forth in Note 2(b), indicate
that a material uncertainty exists that may cast significant
doubt on the Group and parent company’s ability to
continue as a going concern. Our opinion is not modified in
respect of this matter.
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 2023 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 Group Financial Statements, including a
summary of significant accounting policies, the Parent
Company Balance Sheet, the Parent Company Statement
of Changes in Equity and 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 2023 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
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:
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 responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
•
•
•
•
•
•
•
•
•
Obtaining an understanding of how management
prepared their base case and sensitised forecasts for
the period to 31 March 2025;
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;
Considering the inherent risks associated with the
Group’s and the parent company’s business model
including effects arising from macro-economic factors
such as inflation and assessing how these factors
were incorporated into the base case and sensitised
forecasts;
Assessing the terms of the external debt held and
challenging management’s assessment of
the
possibility of renewal during the going concern period
including correspondence with 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, severe but
plausible and reverse stress test models; 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.
76
OUR APPROACH TO THE AUDIT
Overview of our audit approach
Overall materiality:
Group: £410,000 which represents approximately 1% of the
Group’s revenue.
Parent company: £316,000 which represents approximately
0.6% of the parent company’s total assets.
Materiality
Key audit
matters
Scoping
•
•
•
•
Key audit matters were identified as:
•
Occurrence of contract revenue (same as previous
period);
Going concern (same as previous period);
Valuation of goodwill and intangible assets (same as
previous period);
Consideration of accounting for defect notices (same
as previous period); and
Valuation of
company only) (same as previous period).
in subsidiaries (parent
investments
Scoping of the Group has been determined to ensure
appropriate coverage of the significant risks as well as
coverage of the key quantitative benchmarks used to
determine significance of components, specifically:
Group revenue: 98%
Group loss before tax: 96%
We performed the following audit work:
•
A full scope audit of the financial information of three
components using component materiality (full-scope
audit).
Specified audit procedures on the financial information
of three components.
Analytical procedures Group on
information of all other Group components.
the financial
•
•
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These
matters included those that had the greatest effect on:
the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters
Description
Audit response
KAM
Disclosures
Our results / Key
observations
77
In the graph below, we have presented the Group key audit matters and significant risks relevant to the audit. This is not a
complete list of all risks identified by our audit.
High
Potential financial
statement impact
Consideration of accounting
for defect ntoices
Valuation of goodwill
and intangible assets
Occurance of
contract revenue
Key audit matter
Significant risk
Going concern
Contract loss provision
Management override
of controls
Low
Low
Extent of management judgement
High
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.
Key Audit Matter - Group
How our scope addressed the matter – Group
Occurance of contract revenue
We identified the occurrence of contract revenue as one of the
most significant assessed risks of material misstatement due to
fraud and error.
The Group has entered into contracts with customers which span
the 30 September 2023 year end with varying terms and degrees
of complexity, generating revenue over time. The Group uses both
the input and output methods for recognising revenue over time.
There is a significant risk of material misstatement in open
contracts at 30 September 2023 due to the judgement involved
in the related estimates for revenue recognised over time in
accordance with International Financial Reporting Standard (‘IFRS’)
15 ‘Revenue from Contracts with Customers’ and the motivation to
meet market expectations. Management’s assessment includes
several key estimates including:
•
•
Estimated total contract costs; and
Estimated stage of completion derived from the outputs
satisfied.
This risk relates to the occurrence assertion.
Total revenue recognised over time
£20,143,000).
is £35,986,000 (2022:
In responding to the key audit matter, we performed the following
audit procedures:
Assessed the design and implementation of key controls in the
contract revenue recognition process;
Evaluated the revenue recognition policies for consistency with IFRS
15, through assessment of management’s IFRS 15 paper; including,
specifically, consideration of management’s
identification of
performance obligations and alloca-tion of the transaction prices to
the performance obligations;
For a sample of contracts, obtained and read management’s
IFRS 15 assessment of performance obligations and recording of
consideration to assess whether there was an indication of bias in
the amount of consideration recognised by performance obligation
and check the appropriateness of performance obligations
identified;
For a sample of input method contracts, challenged management’s
total expected costs to check that revenue had been recognised cor-
rectly by reference to the accuracy of the percentage of completion.
For those sampled, 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;
Tested the historical accuracy of forecasting by comparing final
outturn of completed contracts to prior year forecasts;
For a sample of output method contracts, agreed units inspected
to total units per the contract to check that revenue had been
recognised correctly by reference to the accuracy of the per-centage
of completion; and
Tested a sample of contracts held by the Group and recalculated
the revenue that should have been recognised and related contract
asset or contract liability.
78
Key Audit Matter - Group
How our scope addressed the matter – Group
79
Finance
Key observations
From the work performed, our challenge of management regarding the
stage of completion on certain input and output contracts resulted in a
material change in the revenue recognised.
Following the recording of the misstatements, we did not identify any
further material misstatement in the occurrence of contract revenue.
Relevant disclosures in the Annual Report 2023
•
•
Financial statements: Note 20 Contingent liabilities
Audit committee report: Significant issues considered in
relation to the financial statements
Our results
From the work performed, we did not identify any material
misstatement with regard to management’s recognition and
disclosure of defect notices.
Key Audit Matter - Company
How our scope addressed the matter – Parent Company
Relevant disclosures in the Annual Report 2023
•
Financial statements: Note 4 Revenue and Segmental
Reporting
Audit committee report: Significant issues considered in
relation to the financial statements
•
Valuation 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 carrying value of goodwill and other intangible assets at 30
September 2023 was £19,367,000 (2022: £24,564,000) after an
impairment charge of £4,745,000 (2022: £nil impairment charge).
There is an increased risk that the goodwill and intangible assets held
by the Group in relation to the offshore wind CGU is impaired as per
International Accounting Standard (‘IAS’) 36 ‘Impairment of Assets’.
This is due to the high level of estimation uncertainty in management’s
assessment of the future performance of the CGU and in determining
appropriate operating cash flows, long-term growth rates and discount
rate to apply in calculating the ‘value in use’ of the CGU.
We identified a significant risk within the offshore wind CGU as this
CGU has a significantly material carrying value, significant levels of
growth assumed, and actual performance has been below budget in
the current year.
In responding to the key audit matter, we performed the following audit
procedures:
•
Assessed the design and implementation of key controls for the
impairment review process;
Evaluated whether the assets and liabilities of the Group were
allocated to the CGUs appropriately and challenged whether the CGUs
identified were appropriate;
Assessed the integrity of the impairment models by testing the
mechanical and mathematical accuracy;
Assessed and challenged management’s impairment model to check
that appropriate costs are included or excluded as appropriate, 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;
Engaged internal valuation experts to assess the appropriateness of
the discount rate included in management’s impairment model;
Compared the actual results achieved in prior years to budgets to
assess historical forecasting accuracy and compared post year-end
actuals to post-year end forecasts included in the model;
Challenged the forecast cash flows, growth rates and fair value
less cost of disposal, where appropriate included in the model by
comparing to external market data;
Challenged management’s sensitivities and performed our own
sensitivity analysis on management’s impairment model, con-
sidering gross margin and EBITDA growth, to assess whether the
impairment recorded is appropriate; and
Assessed the adequacy of the disclosure and assessed accounting
policy for compliance with IAS 36.
Relevant disclosures in the Annual Report 2023
•
•
Financial statements: Note 11 Goodwill and Other Intangible
Audit committee report: Significant issues considered in relation
to the financial statements
Key observations
From the work performed, our challenge of management regarding the
cash flows and growth rates included in the impairment model resulted in
a material change in the impairment charge recorded.
Following the recording of the impairment charge, we did not identify
any further material misstatement in the valuation of the goodwill and
intangible assets related to the offshore wind cash generating unit.
Consideration of accounting for defect notices
We have identified the accounting for defect notices as a significant
risk, which was one of the most significant risks of material
misstatement due to error.
Following the receipt of defect notices on 13 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 is a significant judgement by management.
In responding to the key audit matter, we performed the following audit
procedures:
•
Assessed the design and implementation of key controls for the
assessment of the treatment of defect notices;
Made 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;
Assessed the competency, capability and objectivity of management’s
expert;
Assessed the completeness of defect notices through enquiries of
management and the Group’s internal and external legal advisors, and
through reading of board minutes;
Evaluated management’s assessment of the defect notices received
by agreeing the facts in management’s paper to supporting evidence;
Obtained and read the reports of management’s external expert to
determine whether the assessment made was consistent with the
reports; and
Considered management’s application of the requirements of IAS 37
and the adequacy of the disclosure.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Valuation of investments in subsidiaries
We identified the valuation of investments in subsidiaries for
Tekmar Group plc as one of the most significant assessed risks of
material misstatement due to error.
There is an increased risk that the valuation of investments in
subsidiaries are impaired as per IAS 36 because of the high level of
estimation uncertainty in management’s assessment of the future
performance of the Group and in determining appropriate operating
cash flows and long-term growth rates and discount rate to apply in
calculating the recoverable amounts of the investments.
We have pinpointed this significant risk to the investments in
Tekmar Limited, and Subsea Innovation Limited. This is on the
basis that actual performance has been below budget in the current
financial year for these 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
determine the recoverable amount for these assets.
For the year ended 30 September 2023, the company has processed
an impairment charge of £5,673,000. A prior period adjustment
has been processed of £4,690,000. At 30 September 2023 the
company has total investments in subsidiaries of £26,804,000
(2022 (Restated): £32,325,000).
In responding to the key audit matter, we performed the following
audit procedures:
•
Assessed the design and implementation of key controls for
the impairment review process;
Assessed the integrity of the impairment models by testing
the mechanical and mathemati-cal accuracy;
Obtained and evaluated management’s assessment of
whether there are indicators of impairment in the in-
vestments held to assess compliance with IAS 36;
Assessed and challenged management’s impairment model
to check that costs were included or excluded as appropriate,
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;
Engaged internal experts to assess the appropriateness of
the discount rate included in management’s impairment
model;
Compared the actual results achieved in prior years to budget
to assess historical forecasting accuracy and compared post
year-end actuals to post-year end forecasts included in the
model;
Challenged the forecast cash flows and growth rates included
in the model by comparing to external market data;
Challenged management’s sen-sitivities and performed
our own performed sensitivity analysis on man-agement’s
impairment model, considering gross margin and EBITDA
growth, and to assess whether the impairment recorded is
appropriate; and
Assessed the adequacy of the disclosure and assessed
accounting policy for compliance with IAS 36.
•
•
•
•
•
•
•
•
Relevant disclosures in the Annual Report 2023
•
Parent company financial statements: Note 3 Investment in
Subsidiary Undertakings
Parent company financial statement : Note 11 Correction of
material prior period errors
Audit committee report: Significant issues considered in
relation to the financial statements
•
•
Key observations
From the work performed, our challenge of management regarding
the cash flows and growth rates included in the impairment
model resulted in a material change in the impairment charge
recorded. A prior year error has been posted for the year ended 30
September 2022. Following the recording of the current and prior
period impairment charges, we did not identify any further material
misstatement in the valuation of the investments in subsidiaries.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on
the audit and of uncorrected misstatements, if any, on the financial statements and informing the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Materiality for financial statements as a
whole
Materiality threshold
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.
£410,000, which is approximately 1% of the
Group’s revenue.
£316,000, which is approximately 0.6% of
the parent company’s total assets.
80
81
Materiality measures
Group
Parent company
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
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;
• 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 loss before tax.
•
Materiality for the current year is higher than
the level that we determined for the period
ended 30 September 2022 to reflect the
increase in Group revenue.
•
The metrics most relevant to the users
of the financial statements which was
determined to be total assets for the
parent entity;
• 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 the parent company
is a holding company, which does not
trade.
•
Materiality for the current year is higher than
the level that we determined for the period
ended 30 September 2022 as a result of
materiality in the prior period being capped at
90% 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
£287,000, which is 70% of financial statement
materiality.
£221,200, which is 70% of financial statement
materiality
Significant judgements
made by auditor in
determining 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 strength of the control environment
based on our assessment of the design
and implementation of controls; and
Quantum and nature of misstatements
identified in prior year’s audit
•
In determining performance materiality, we
made the following significant judgements:
•
The strength of the control environment
based on our assessment of the design
and implementation of controls; and
Quantum and nature of misstatements
identified in prior year’s audit
•
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
level of specific
We determined a
materiality for the following areas:
Directors’ remuneration; and
•
Related party transactions outside the
•
normal course of business
lower
level of specific
We determined a
materiality for the following areas:
Directors’ remuneration; and
•
Related party transactions outside the
•
normal course of business
We determine a threshold for reporting unadjusted differences to the audit committee.
£20,500 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£15,800 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:
Understanding the group, its components, and their 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.
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 and loss before tax as well
as considering qualitative factors, such as a component’s specific
nature or circumstances.
Type of work to be performed on financial information of parent and other
components (including how it addressed the key audit matters)
•
Audits of the financial information of the component using
component materiality
(full-scope audit) procedures were
performed on the financial information of three components.
These procedures included a combination of tests of detail and
analytical procedures.
•
•
•
•
Audits of one or more account balances, classes of transactions
or disclosures of the component (specific-scope audit) procedures
were carried out on one component using component materiality.
These procedures included a combination of tests of details and
analytical procedures and were designed to increase coverage of
the Group’s financial statement line items.
Specified audit procedures were carried out on two components
using component materiality.
For the 8 components that were not individually significant to the
Group, or assessed as requiring specific-scope audits, analytical
procedures were carried out at Group level, using group materiality.
The full-scope and specific-scope audits included all our audit work
on the identified key audit matters as described in the key audit
matters section of our report.
Performance of our audit
• We communicated with a component auditor who attended an
inventory count at an overseas component, all remaining work
was completed by the Group engagement team.
Audit approach
Number of
components
% coverage
Revenue
Full-scope
audit
Specific-scope
audit
Specified audit
procedures
Analytical
procedures
Total
3
1
2
8
83
11
4
2
% coverage
Loss before
tax (absolute
figures)
60
3
30
7
14
100
100
82
83
Communications with component auditors
•
Grant Thornton China attended the inventory count for
inventory held in China. The Group engagement team
carried out the remaining procedures on this inventory,
including tie through of inventory count results to year-end
inventory listing.
Changes in approach from previous period
•
There has been a decrease in the number of full-scope
components, and an increase in the number of specific-
scope components, for the Group audit. This is due to
changes in the relative contribution of the components in
scope.
Other information
The other information comprises the information included in
the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for
the other information contained within the annual report. 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.
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
inconsistencies
misstated.
or apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements themselves. 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.
identify such material
If we
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 their 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.
Responsibilities of directors
in the statement of directors’
As explained more fully
responsibilities set out on page 73, 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 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. 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 UK corporation tax regulations.
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 the engagement team
including
consideration of the engagement team's:
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 the legal and regulatory requirements
specific to the Group and the parent company.
o
o
o
We had team communications in respect of potential non-
compliance with laws and regulations and fraud including
the potential for fraud in revenue recognition through
manipulation of deferred income.
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
3 March 2024
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 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.
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 posted by senior finance personnel;
journal entries above a set threshold which would
reallocate costs within the statement of comprehensive
income to
interest, tax,
increase earnings before
depreciation and amortisation (‘EBITDA’);
journal entries above a set threshold posted to revenue
from an unexpected general ledger code;
o material post-close and consolidating journal entries;
o
potential management bias in determining accounting
estimates, especially in relation to the assessment of
the valuation of intangible assets including goodwill; and
transactions with related parties outside the normal
course of business.
o
o
o
o
•
•
Audit procedures performed by the engagement team
included:
evaluating the processes and controls established to
address the risks related to irregularities and fraud;
journal entry testing,
journals
determined to be in respect of our principal risk
documented above; and
challenging assumptions and judgements made by
management in its significant accounting estimates.
in particular those
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
84
85
Consolidated statement of comprehensive income
for the year ended 30 September 2023
Consolidated balance sheet
as at 30 September 2023
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
Impairment of goodwill
Exceptional bonus payments
Foreign exchange losses
Restructuring costs
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
Note
4
6
6
4
12
11
25
11
7
9
12M
ended
30 Sep
2023
£000
39,908
(30,608)
9,300
(18,616)
26
(9,290)
(323)
(1,327)
(763)
(508)
(4,745)
(430)
(926)
(268)
(9,290)
(637)
4
(633)
(9,923)
(201)
(10,124)
548
-
(281)
(9,857)
(10,124)
(9,857)
(Loss) per share (pence)
Basic
Diluted
10
10
(10.69)
(10.69)
18M
ended
30 Sep
2022
£000
30,191
(23,153)
7,038
(11,623)
24
(4,561)
(2,308)
(1,370)
(1,112)
-
-
-
(229)
-
(4,561)
(685)
18
(667)
(5,228)
99
(5,129)
(97)
238
326
(4,662)
(5,129)
(4,662)
(9.04)
(9.04)
All results derive from continuing operations.
.1: Adjusted EBITDA, which is defined as profit before net finance costs, tax, depreciation, amortisation, share based payments charge in
relation to one-off awards, material items of a one off nature and significant items which allow comparable business performance is a
non-GAAP metric used by management and is not an IFRS disclosure.
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
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
Note
12
11
14
15
16
23
18
17
20
18
17
19
30 Sep
2023
£000
6,808
19,367
26,175
2,127
19,734
5,219
27,080
53,255
1,360
72,202
1,738
(12,685)
(108)
(27,854)
34,653
834
327
503
1,664
7,046
9,398
29
465
16,938
18,602
53,255
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
The Group financial statements were approved by the Board and authorised for issue on3 March 2024 and were signed on its behalf by:
Leanne WIlkinson
Chief Financial Officer
Company registered number: 11383143
86
87
Consolidated statement of changes in equity
for the year ended 30 September 2023
Consolidated cash flow statement
for the year ended 30 September 2023
Issue of shares
93
3,556
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
516
64,097
1,738
(12,685)
(153)
(13,290)
40,223
40,223
-
-
-
-
-
-
-
-
-
-
93
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
-
-
-
-
-
-
-
-
751
4,549
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,124)
(10,124)
(10,124)
548
548
548
(281)
-
(281)
(281)
(281)
(9,578)
(9,857)
(9,857)
-
-
5,300
5,300
5,300
5,300
-
Balance at 30 September
2021
Loss for the year
Share based payments
Revaluation of fixed
assets
Exchange difference on
translation of overseas
subsidiary
Total comprehensive
income for the year
Total transactions with
owners, recognised
directly in equity
Balance at 30 September
2022
(Loss) for the Period
Share based payments
Exchange difference on
translation of overseas
subsidiary
Total comprehensive
(loss) for the year
Issue of shares, net of
transaction costs
-
-
5,300
5,300
Total transactions with
owners, recognised
1,360
72,202
1,738
(12,685)
(108)
(27,854)
34,653
34,653
directly in equity
751
4,549
-
-
-
-
5,300
5,300
Balance at 30 September
2023
1,360
72,202
1,738
(12,685)
(108)
(27,854)
34,653
34,653
Cash flows from operating activities
(Loss) before taxation
Adjustments for:
Depreciation
Amortisation of intangible assets
Share based payments charge
Impairment of goodwill
Finance costs
Finance income
Changes in working capital:
Decrease / (Increase) in inventories
(Increase) / decrease in trade and other receivables
(Decrease) / Increase in trade and other payables
Increase in provisions
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
Facility Repayment
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 2023
18M Ended
30 Sep 2022
£000
(9,923)
1,327
763
537
4,745
552
(4)
(2,003)
2,496
(6,360)
(272)
465
(5,674)
-
(5,674)
(1,012)
(310)
29
4
(1,289)
11,526
(11,941)
(414)
5,300
(505)
3,966
(2,997)
8,496
(280 )
5,219
£000
(5,228)
1,370
1,112
(103)
-
685
(18)
(2,182)
(658)
4,561
178
-
1,899
240
1,899
(618)
(369)
-
18
(969)
991
-
(537)
3,649
(345)
3,758
4,688
3,482
326
8,496
Lease borrowings in relation to right of use assets have been offset against the asset additions within cashflows from investing activities.
88
89
Notes to the Group financial statements for the year ended 30 September 2023
1. GENERAL INFORMATION
Tekmar Group plc (the “Company”) is a public limited company
incorporated and domiciled in England and Wales. The registered
office of the Company is Innovation House, Centurion Way,
Darlington, DL3 0UP. The registered company number is
11383143.
The principal activity of the Company and its subsidiaries
(together the “Group”) is that of design, manufacture and
supply of subsea stability and protection technology, including
associated subsea engineering services, operating across the
global offshore energy markets, predominantly Offshore Wind.
Forward looking statements
Certain statements in this Annual report are forward looking.
The terms “expect”, “anticipate”, “should be”, “will be” and
similar expressions identify forward-looking statements.
Although the Board of Directors believes that the expectations
reflected in these forward-looking statements are reasonable,
such statements are subject to a number of risks and
uncertainties and events could differ materially from those
expressed or implied by these forward-looking statements.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The Group’s principal accounting policies have been applied
consistently to all of the years presented, with the exception
of the new standards applied for the first time as set out in
paragraph (c) below where applicable.
(a) Basis of preparation
The results for the year ended 30 September 2023 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 Freehold
property and certain financial instruments . The comparative
period represents 12 months to 30 September 2022.
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 2024 and a trade
loan facility of up to £4.0m that can be drawn against supplier
payments, currently available to 31 July 2024 . 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 £5.2m
of cash at 30 September 2023 including draw down of the
£3.0m CBILS loan and a further £3.6m 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 31 March
2025 . 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 21 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 31 March 2025 ,
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. In
addition the delays of specific cash receipts have been modelled.
The base case and sensitised forecast also includes discretionary
spend on capital outlay. 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 order intake by 22.5% and increasing
overheads by 15% against the base case. In addition the delays of
specific cash receipts have been modelled. The inputs applied to
the reverse stress are not considered plausible.
Facilities - Within the base case, severe but plausible case and
reverse stress test, management have assumed the renewal of both
the CBILS loan and trade loan facility in October 2024 and July 2024
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 Directors are confident, based upon the communications with
the team at Barclays, the historical strong relationship and recent
bank facility renewal in November 2023, that these facilities will be
renewed and will be available for the foreseeable future. However,
as the renewal of the two facilities in October 2024 and July 2024
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.
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).
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 reviewed 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.
(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:
1.
2.
3. Determining the transaction price
4. Allocating the transaction price to the performance
Identifying the contract with a customer
Identifying the performance obligations
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,
90
iii) Provision of consultancy services
The entities within the offshore energy division also provide
consultancy based services whereby engineering support is
provided to customers. These contracts meet one or more of
the criteria within step 5, including the right to payment for
the work completed, including profit should the customer
terminate. Revenue is recognised over time on these
contracts using the inputs method.
Tekmar Group PLC applies the IFRS 15 Practical expedient in
respects of determining the financing component of contract
consideration: An entity need not adjust the promised
amount of consideration for the effects of a significant
financing component if the entity expects, at contract
inception, that the period between when the entity transfers
a promised good or service to a customer and when the
customer pays for that good or service will be one year or less.
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.
Material items of a one-off nature or of such significance
they are considered relevant to the user of the financial
statements, and share based payment charge in relation to
one-off awards are excluded.
The Directors primarily use the Adjusted EBITDA measure
when making decisions about the Group’s activities. As these
are non-GAAP measures, EBITDA and Adjusted EBITDA
measures used by other entities may not be calculated in the
same way and hence are not directly comparable.
(g) 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.
(h) Classification of instruments issued by the Group
Instruments issued by the Group are treated as equity (i.e.
forming part of shareholders' funds) only to the extent that
they meet the following two conditions:
•
they include no contractual obligations upon the Group
to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party
under conditions that are potentially unfavourable to the
Group; and
• where the instrument will or may be settled in the
Company's own equity instruments, it is either a non-
derivative that includes no obligation to deliver a variable
number of the Company's own equity instruments
or is a derivative that will be settled by the Company
exchanging a fixed amount of cash or other financial
assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the items are
classified as a financial liability. Where the instrument so
classified takes the legal form of the Company's own shares,
the amounts presented in these financial statements for
called up share capital and share premium account exclude
amounts in relation to those shares.
Finance payments associated with financial liabilities are
dealt with as part of finance expenses. Finance payments
associated with financial instruments that are classified in
equity are dividends and are recorded directly in equity.
(i) Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment
loss.
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.
Revaluation gains and losses are recognised 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.
Leased property is accounted for as a “right-of-use” asset
under IFRS 16 Leases. The initial value of a right-of-use asset
is determined by the value of the lease liability.
Depreciation
Depreciation is charged to profit or loss over the
estimated useful lives of each part of an item of property,
plant and equipment. Depreciation is provided on the
following basis:
Freehold property
Leasehold improvements Over the life of the lease
Containers and racking
Plant and equipment
50 years straight line
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.
(j) Intangible assets
Goodwill
All business combinations are accounted for by applying
the purchase method. Goodwill represents the difference
between the cost of the acquisition and the fair value
of the net identifiable assets acquired. Identifiable
intangibles are those which can be sold separately, or
which arise from legal or contractual rights regardless
of whether those rights are separable and are initially
recognised at fair value. Other identified Intangible
assets include customer relationships and brands. These
are amortised on a straight-line basis over the useful
economic lives, which are estimated to be 3 and 10 years
respectively.
Goodwill is stated at cost less any accumulated
impairment losses. In cases where the fair value of the
net identifiable assets exceeds the cost of acquisition,
negative goodwill arises which is recorded immediately
in the income statement. Goodwill is allocated to cash-
generating units and is not amortised but is tested
annually for impairment.
Research and Product Development costs
Research costs are charged to the income statement in
the year in which they are incurred and are presented
within operating expenses. Internal development costs
costs that are incurred during the development of
significant and separately identifiable new technology are
capitalised when the following criteria are met:
91
•
It is technically feasible to complete the technological
development so that it will be available for use;
• Management intends to complete the technological
development and use or sell it;
•
It can be demonstrated how the technological
development will develop probable future economic
benefits;
• Adequate technical, financial, and other resources
to complete the development and to use or sell the
product are available; and
•
•
Expenditure attributable to the technological product
during its development can be reliably measured.
Capitalised development costs include costs of
materials and direct labour costs. Internal costs
that are capitalised are limited to incremental costs
specific to the project.
Other development expenditures that do not meet these
criteria are recognised as an expense as incurred and
presented within operating expenses, together with any
amortisation which is charged to the income statement
on a straight-line basis over the estimated useful lives of
product development intangible assets of 2-5 years.
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.
(k) 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.
92
93
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.
(l) 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.
(m) Defined contribution plans
Obligations for contributions to defined contribution
pension plans are recognised as an expense in profit or
loss as incurred.
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.
(n) 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.
The lease liability is measured at amortised cost using the
effective interest method. If there is a remeasurement
of the lease liability, a corresponding adjustment is made
to the carrying amount of the right-of-use asset, or is
recorded directly in profit or loss if the carrying amount of
the right of use asset is zero.
The Group has elected not to recognise right-of-use
assets and lease liabilities for short-term leases that have
a lease term of less than 12 months or leases of low value
assets. These lease payments are expensed on a straight-
line basis over the lease term.
(p) 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.
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.
(o) Leases
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for
consideration.
The Group recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-
(q) 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.
(r) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits..
(s) Financial instruments
Financial assets
Non-derivative financial assets are classified as either
financial assets at amortised cost, fair value through
profit or loss and fair value through other comprehensive
income. The Group derecognises a financial asset when
the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual
cash flows in a transaction in which substantially all of
the risks and rewards of ownership of the financial asset
are transferred. The basis of classification depends on
the Group’s business model and the contractual cash
flow characteristics of the financial asset. All financial
assets of the Group are held at amortised cost, with 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).
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.
94
95
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 assesses 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.
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.
(t) 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.
(u) 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.
(v) Share capital
Share capital represents the nominal value of shares that
have been issued.
(w) 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.
(x) 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.
(y) 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.
(z) Own shares held by ESOP trust
Transactions of the Group-sponsored ESOP trust are treated
as being those of the Group and are therefore reflected in
the financial statements. In particular, the trust’s purchases
and sales of shares in the Group are debited and credited to
equity.
(aa) Retained earnings
Retained earnings includes all current and prior year retained
profits and losses.
(ab) Government grants
Government grants are 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
credited to the income statement over the expected useful
lives of the assets to which they relate or in years to which the
related costs are incurred.
(ac) Share based payments
The Group operates equity-settled share-based
remuneration plans for certain employees. None of the
Group’s plans are cash-settled. All goods and services
received in exchange for the grant of any share-based
payment are measured at their fair values.
Where employees are rewarded using share-based
payments, the fair value of employees’ services is
determined indirectly by reference to the fair value of the
equity instruments granted. This fair value is appraised
at the grant date and excludes the impact of non-market
vesting conditions.
All share-based remuneration is ultimately recognised as
an expense in profit or loss with a corresponding credit
to retained earnings. If vesting years or other vesting
conditions apply, the expense is allocated over the vesting
year, based on the best available estimate of the number
of share options expected to vest.
3. CRITICAL ACCOUNTING JUDGEMENTS AND
ESTIMATES
The preparation of the Group financial statements under
IFRS requires the Directors to make estimates and
assumptions that affect the reported amounts of assets
and liabilities . 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
payment practices surrounding large contracts can be
different to those within Europe. The flow of funds on
large capital projects within China tend to move only
when the windfarm developer approves the completion of
the project. The group has a number of trade receivable
balances, within its subsidiary based in China, which have
been past due for more than 1 year. At 30th September
2023 the value of these overdue trade receivables was
£1.4m, of a total outstanding trade receivable balance for
the entity of £2.9m, These amounts remain outstanding
at the approval of the financial statements. Management
have not provided for the trade receivable balance or
made a credit loss provision on the basis that previous
trading history sets a precedent that these balances will
be received. Since 2020, the group has traded in China
generating £10.1m of revenue, of which £7.2m has been
fully received to date which represents full cash receipt on
older projects. The amounts which remain outstanding are
from more recent projects and none of the values in trade
receivables are in dispute with the customer.
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. 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.
96
(b) Critical accounting estimates
Revenue recognition – stage of completion when
recognising revenue overtime
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.
The forecast costs to complete also form part of the
judgement of management as to whether a contract
loss provision is required in line with IAS37. At year end a
contract loss provision has been recognised for 2 contracts
where the unavoidable costs of meeting the obligations
under the contract exceed the economic benefits expected
to be received under it . If the loss making contracts was
1% different to management’s estimate the impact on
the loss making contract provision would be £4,650.
Recoverability of contract assets and receivables
Management judges the recoverability at the balance
sheet date and makes a provision for impairment where
appropriate. The resultant provision for impairment
represents management’s best estimate of losses
incurred in the portfolio at the balance sheet date,
assessed on the customer risk scoring and commercial
discussions. Further, management estimate the
recoverability of any accrued income 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 group’s historic
recoverability of 100% of receivable balances, no provision
for bad debts or credit losses have been accounted for.
The group continues to operate in global markets where
97
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 2023.
Major customers
In the year ended 30 September 2023 there were three major customers within the group that individually accounted
for at least 10% of total revenues (2022: one customer). The revenues relating to these in the year to 30 September
2023 were £13,913,000 (2022: £7,243,000). Included within this is revenue from multiple projects with different
entities within the group.
Analysis of revenue by region
UK & Ireland
Germany
Turkey
Greece
Denmark
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
Note – Engineering consultancy services forms part of the offshore energy segment.
Analysis of revenue by recognition point
Point in Time
Over Time
12M ending
30 Sep 2023
£000
10,146
1,133
983
-
-
1,716
1,676
3,006
1,083
1,157
8,036
6,888
2,152
1,932
39,908
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
17,659
22,249
39,908
£000
20,119
18,320
1,469
39,908
£000
3,922
35,986
39,908
£000
14,705
15,486
30,191
£000
15,497
12,734
1,960
30,191
£000
10,048
20,143
30,191
98
99
At 30 September 2023, the group had a total transaction price £19,462k (2022: £15,488k) 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 23 which was previously recorded in contract liabilities
was £3,188k (2022: £1,168k)
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:
Profit and cash are measured by division and the Board reviews this on the following basis.
Offshore
Energy 2023
Marine
Civils
2023
Group/
Eliminations
Total 2023
£000
£000
£000
£000
Revenue
Gross profit
% Gross profit
Operating (loss)/ profit
Analysed as:
Adjusted EBITDA
Depreciation
Amortisation
Share based payments
Impairment of goodwill
Exceptional bonus payments
Foreign Exchange losses
Restructuring costs
Operating (loss)/ profit
Interest & similar expenses
Tax
(Loss) / profit after tax
Other information
Reportable segment assets
Reportable segment liabilities
The goodwill and other intangible assets allocated to group
for the purposes of internal reporting are £16,445 for Offshore
energy and £2,805 for Marine Civils
Revenue
Gross profit
% Gross profit
Operating (loss)/ profit
Analysed as:
Adjusted EBITDA
Depreciation
Amortisation
Foreign Exchange gains
Operating (loss)/ profit
Interest & similar expenses
Tax
(Loss) / profit after tax
Other information
Reportable segment assets
Reportable segment liabilities
21,588
3,975
18%
(9,554)
18,320
5,326
29%
2,798
-
-
-
(2,533)
(2,087)
3,544
(1,780)
(1,018)
(594)
(63)
(4,745)
(314)
(672)
(61)
(9,554)
(55)
521
(9,087)
(298)
-
(82)
-
(34)
(255)
(77)
2,798
(10)
(789)
1,999
39,908
9,301
23%
(9,289)
(323)
(1,327)
(763)
(508)
(4,745)
(430)
(926)
(268)
(12)
(168)
(363)
-
(82)
2
(130)
(2,533)
(9,289 )
(569)
67
(634)
(201)
(3,036)
(10,124)
17,391
(8,175)
10,169
(3,208)
25,695
(7,218)
53,255
(18,601)
Offshore
Energy
2022
17,455
4,442
25%
(3,405)
(1,988)
(1,099)
(506)
188
(3,405)
(318)
(237)
(3,960)
Marine
Civils
2022
12,736
2,596
20%
789
1,020
(271)
-
40
789
(185)
175
779
Group/
Eliminations
-
-
-
(1,945)
(1,339)
-
(606)
-
(1,945)
(164)
161
(1,948)
Total
2022
30,191
7,038
23%
(4,561)
(2,307)
(1,370)
(1,112)
228
(4,561)
(667)
99
(5,129)
19,029
(5,530)
9,541
(4,483)
28,175
(7,631)
57,766
(17,644)
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 25)
2023
No
6
9
53
58
46
172
2022
No
7
9
48
58
54
176
12M ending
30 Sep 2023
£000
8,606
891
408
658
10,563
12M ending
30 Sep 2022
£000
8,140
857
396
(103)
9,290
(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 2023
£000
12M ending
30 Sep 2022
£000
530
102
632
17
649
766
46
812
100
912
Share options were awarded in the year, see note 25 for details of share option plans.
Director
remuneration
Basic salary
/ fees
Share
awards
Social
security
Name of Director
S Hurst
A MacDonald
C Gill
J Brown
D Bulmer
I Ritchey
D Wilkinson
L Wilkinson
C Welsh
S Lockard
£000
-
214
-
57
57
32
37
124
18
21
£000
-
214
-
-
-
-
-
44
-
-
£000
-
58
-
6
12
3
4
25
2
-
Company
Pension
contributions
£000
-
-
-
6
3
3
-
18
-
-
Bonus
£000
-
-
-
-
50
-
-
23
-
-
FY23 Total
FY22 Total
£000
-
486
-
69
122
38
4 1
234
20
21
£000
174
327
28
67
260
39
17
-
-
-
Highest paid director
The aggregate remuneration of the highest paid Director was £486,000 (2022: £314,000), which includes pension contributions of
£nil (2022: £nil), and accrued bonus costs of £nil (2022: £nil). The number of Directors accruing pension benefits under a defined
contribution plan was four (202 2: four).
100
6. EXPENSES BY NATURE
Employee benefit expense
Amortisation (note 11)
Depreciation – leased (note 12)
Depreciation – owned (note 12)
Inventory recognised as an expense
Foreign exchange losses/(gains)
Other expenses
Impairment of Goodwill
Total cost of sales and administrative expenses
7. NET FINANCE COSTS
Interest payable and similar charges
On other loans
Fair value movement on derivatives
Total interest payable and similar charges
Interest receivable and similar income
Interest receivable
Total interest receivable and similar income
Net finance costs
12M ending
30 Sep 2023
12M ending
30 Sep 2022
£000
10,563
763
483
84 4
26,989
926
3,911
4,745
49,224
£000
9,290
1,112
482
887
19,992
(226)
3,239
-
34,776
12M ending
30 Sep 2023
12M ending
30 Sep 2022
£000
£000
636
-
636
(3)
(3)
633
290
395
685
(18)
(18)
667
Interest expense on lease liabilities was £48,599 (2022: £17,401).
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
An additional amount of £1k was billed by the company’s auditors as expenses.
12M ending
30 Sep 2022
£000
18M ending
30 Sep 2021
£000
145
100
8
245
170
78
5
253
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 25% (202 2: 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
101
12M ending
30 Sep 2022
18M ending
30 Sep 2021
£’000
-
-
-
201
-
201
201
(9923)
(2,183)
1,246
-
(290)
1428
-
-
-
(201 )
£’000
-
(245)
(245)
146
-
146
(99)
(5,228)
(994)
(10)
(168)
(250)
1,422
107
(245)
39
(99)
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. See note 20 Deferred Tax.
102
103
Weighted average number of shares for the purposes of diluted earnings per share
99,041,164
57,687,938
AMORTISATION AND IMPAIRMENT
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 2023
18M ending
30 Sep 2022
(10,124)
(5,219)
94,694,962
4,346,203
56,719,539
968,399
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:
Impairment of goodwill
Amortisation on acquired intangible assets
Share based payment on IPO and SIP at Admission
Exceptional bonus costs
Tax effect on above
Adjusted earnings
(10.69)
(10.69)
(4.49)
2023
£000
(10,124)
4,745
168
508
430
22
(9.04)
(9.04)
(8.06)
2022
£000
(5,129)
-
605
-
(12)
11. GOODWILL AND OTHER INTANGIBLES
Goodwill
Software
Product
development
Trade name
Customer
relationships
COST
As at 1 October 2021
Additions
Disposals
Forex on consolidation
As at 30 September 2022
Additions
As at 30 September 2023
As at 1 October 2021
Charge for the period
Eliminated on disposals
Forex on consolidation
As at 30 September 2022
Amortisation charge for the
year
Impairment charge
As at 30 September 2023
NET BOOK VALUE
As at 30 September 2021
As at 30 September 2022
As at 30 September 2023
£000
£000
26,292
-
-
-
26,292
-
26,292
4,109
-
-
-
4,109
-
4,745
8,854
22,183
22,183
17,438
394
16
(116)
-
294
-
294
132
139
(116)
-
155
139
-
294
262
139
-
£000
3,181
353
(34)
3
3,503
311
3,814
1,798
367
(34)
3
2,134
456
-
2,590
1,383
1,369
1,224
£000
1,289
-
-
-
1,289
-
1,289
326
129
-
-
455
129
-
584
963
834
705
Total
£000
33,026
369
(150)
3
33,248
311
33,559
7,719
1,112
(150)
3
8,684
763
4,745
14,192
£000
1,870
-
-
-
1,870
-
1,870
1,354
477
-
-
1,831
39
-
1,870
516
39
-
25,307
24,564
19,367
The remaining amortisation periods for software and product development are 6 months to 48 months (202 2:
6 months to 48 months).
(4,251)
(4,536)
Goodwill has been tested for impairment. The method, key assumptions and results of the impairment review
are detailed below:
*Adjusted earnings per share is calculated as profit for the period adjusted for amortisation as a result of business combinations,
one off 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.
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
2023
£000
14,848
2,590
2022
£000
19,593
2,590
104
Goodwill is allocated to two CGUs being Offshore
Energy and Marine Civils. Goodwill has been tested for
impairment by assessing the recoverable amount of
each cash generating unit. The recoverable amount is
the higher of the fair value less costs to sell (FVLCD) and
the value in use. 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 13.5%) are in line with expected market rate. The
value in use calculation models an increase in revenue for
the offshore energy division of 16% 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.
The group has used the fair value less costs to sell as the
estimate of recoverable amount for one subsidiary of the
offshore energy division, as the FVLCD was in excess of
the value in use.
The cashflow forecasts assume growth in revenue and
profitability across the Group. These growth rates are
based on a combination of business units returning to
previously experienced results combined with externally
generated market information. The 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 15.5 % WACC (FY22 13.5%)
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% (FY22: 2%)
The discount rate used to test the cash generating units
was the Group’s post-tax WACC of 15.5%. 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.
The value in use calculations performed for the
impairment review, together with sensitivity analysis
using reasonable assumptions, indicate sufficient
headroom for the goodwill carrying value in the Marine
Civils CGU.
The value in use calculations have a range of
assumptions, which if changed would lead to a change
in the impairment charge recognised. To assess these
changes management have run a model which sensitises
the assumption on EBITDA generated in the offshore
wind division. Management believes that the offshore
wind division will grow faster than market rates in
FY24 and FY25 due to contract visibility, however if the
product sales in the offshore wind GCU only grows inline
with market CAGR of 16% for the forecast period, the
impairment charge in offshore wind division would be
£12,136,000 as opposed to the £4,745,000 recognised
in the financial statements for FY23. Similarly if the
revenues generated in the consultancy business fell by
10% against the base case for the forecast period, the
impairment charge in Tekmar Limited would increase to
£5,979,000.
Management has considered the most likely worst-case
scenario in the Marine Civils CGU 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 in the Marine Civils
CGU.
Further sensitivity analysis performed by management
shows that free cashflows would have to reduce to 27%
(Marine Civils) of forecasted base case values to trigger
an impairment of goodwill. The post-tax discount rate of
15.5% would need to increase to 54% in Marine Civils to
trigger an impairment of goodwill. Management do not
consider either of these scenarios to be likely.
All amortisation charges have been treated as an expense
and charged to cost of sales and operating costs in the
income statement.
12. PROPERTY, PLANT AND EQUIPMENT
Freehold
property
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
105
COST
As at 30 September 2021
Additions
Disposals
Revaluation
Forex on consolidation
As at 30 September 2022
Additions
Disposals
Forex on consolidation
As at 30 September 2023
DEPRECIATION
As at 30 September 2021
Charge for the year
Eliminated on disposal
Revaluation
Forex on consolidation
As at 30 September 2022
Charge for the year
Eliminated on disposal
Forex on consolidation
As at 30 September 2023
2,886
-
-
102
-
2,988
70
-
-
3,058
146
51
-
(175)
-
22
54
-
-
76
NET BOOK VALUE
As at 30 September 2021
As at 30 September 2022
As at 30 September 2023
2,740
2,966
2,982
919
3
-
-
-
922
23
-
-
945
921
1
-
-
-
922
1
-
-
923
(2)
-
22
1,194
3
-
-
-
1,197
-
(919)
-
3,770
510
-
-
13
4,293
360
(133)
(3)
278
4,517
1,098
44
-
-
-
1,142
33
(901)
-
274
1,860
431
-
-
7
2,298
463
(131)
(2)
2,628
96
55
4
1,910
1,995
1,886
30
4
-
-
34
2
(4)
-
32
14
8
-
-
-
22
8
(4)
-
26
16
12
6
2,707
88
-
-
2,795
516
-
-
3,311
2,173
310
-
-
-
2,483
252
-
-
2,735
534
312
576
11
-
-
-
11
22
-
-
33
11
-
-
-
-
11
-
-
-
11
-
-
22
522
18
(50)
-
490
30
(26)
-
494
443
43
(50)
-
-
436
32
(26)
-
442
2,823 14,862
1,274
(112)
102
13
648
(62)
-
3,409
1,262
(1,549)
-
16,139
2,283
(2,631)
(3)
3,122 15,788
2,500
482
(62)
-
9,166
1,370
(112)
(175)
-
7
2,920 10,256
1,327
(2,601)
(2)
8,980
483
(1,540)
-
1,864
79
54
52
323
489
1,258
5,696
5,883
6,808
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 (£1,157k), computer software
(£68k) and plant and equipment assets (£33k).
As at 30 September 2023, freehold property with a carrying value
of £2,982k 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 IAS 16 Property, plant
and equipment.
The property was valued using 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 prior period.
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
2023
30 Sep
2022
£000
£000
2,988
(54)
2,934
2,656
(499)
2,157
2,988
(22)
2,966
2,656
(446)
2,210
106
13. INVESTMENTS
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:
Class of share
capital held
By Parent
Company
By the Group
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
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
-
-
100%
-
100%
-
-
-
-
-
-
-
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
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
Pipeshield International trading LLC
Design and manufacture of subsea asset protection
Pipeshield Company Limited
Tekmar Polyurethanes Limited
Tekmar GmbH
AgileTek Engineering Limited
Ryder Geotechnical Limited
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
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
107
30 Sep
2022
£000
1,962
1,954
707
4,623
30 Sep
2021
£000
2,698
1,948
3,279
1,620
9,545
3,194
203
433
13,375
30 Sep
2023
£000
1,489
28
610
2,127
30 Sep
2022
£000
2,963
4,822
5,547
650
13,982
4,628
328
796
19,734
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, USD, EUR and RMB.
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.
The group continues to operate in global markets where payment practices surrounding large contracts can be different
to those within Europe. The flow of funds on large capital projects within China tend to move only when the windfarm
developer approves the completion of the project. The group has a number of trade receivable balances, within its
subsidiary based in China, which have been past due for more than 1 year. At 30th September 2024 the value of these
overdue trade receivables was £1.4m, of a total outstanding trade receivable balance for the entity of £2.9m, These
amounts remain outstanding at the approval of the financial statements. Management have not provided for the trade
receivable balance or made a credit loss provision on the basis that previous trading history sets a precedent that these
balances will be received. Since 2020, the group has traded in China generating £10.1m of revenue, of which £7.2m has
been fully received to date which represents full cash receipt on older projects. The amounts which remain outstanding
are from more recent projects and none of the values in trade receivables are in dispute with the customer.
108
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
2023
£000
5,219
2023
£000
2,746
142
1,892
439
5,219
30 Sep
2023
£000
4,396
312
4,661
29
9,398
30 Sep
2023
£000
327
327
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
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.
18. BORROWINGS
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
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
109
30 Sep
2022
£000
3,990
208
3,000
7198
-
194
194
2022
£000
7,198
144
39
11
-
7,392
2022
%
3.25
3.75
2.40
30 Sep
2023
£000
3,575
471
3,000
7,046
-
834
834
2023
£000
7,049
327
290
214
-
7,880
2023
%
5.60
7.50
7.50
The CBILS Bank Loan was renewed in October 2023 and is due for maturity on 31 October 2024, The trade Loan
Facility has been renewed post year end and is due for Maturity on 31 July 2024, 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 discount rate between 3.25% and 6% based on the inception
date of the lease.
These leases are due to expire between May 2024 and August 2028.
110
Cash flows from financing activities
An analysis of cash flows from financing activities is provided as follows:
20. DEFERRED TAX
Balance at 1 April 2020
Changes from financing cashflows
Proceeds from loans & borrowings
Payment of lease liabilities
Total Changes from financing cashflows
Other Changes
New leases
Interest expense
Total other changes
Balance at 30 September 2022
Balance at 1 October 2022
Changes from financing cash flows
Proceeds from loans & borrowings
Repayment of Loans & Borrowings
Payment of lease liabilities
Total changes from financing cash flows
Other changes
New leases
Interest expense
Payment of interest
Total other changes
Balance at 30 September 2023
Lease liabilities
£000
Loans &
Borrowings
£000
291
-
(562)
(562)
656
17
674
402
402
-
(414)
(414)
1,270
47
-
1,317
1,305
6,052
907
-
907
-
31
31
6,990
6.990
11,526
(11,941)
-
(415)
-
505
(505)
-
6,575
Total
£000
6,343
907
(562)
345
656
48
705
7,392
7,392
11,526
(11,941)
(414)
(829)
1,270
552
(505)
1,317
7,880
19. PROVISIONS
All provisions are considered current. The carrying amounts and the movements in the provision account are as
follows:
Onerous contracts £000
Total £000
Carrying amount at 1 October 2022
Additional provision
Amounts utilised
Reversals
Carrying amount at 30 September 2023
-
465
-
-
465
-
465
-
-
465
The provision recognised in the year ending 30 September 2023 is for onerous contracts. The group has assessed that
the unavoidable costs of fulfilling the contract obligations exceed the economic benefits expected to be received from
the contract. The provision relates to two contracts in the offshore energy division which are expected to be completed
in the year ending September 2024.
111
Net
£000
(125)
(146)
(42)
(313)
Net
(265)
(218)
45
125
(313)
At start of year
(Charge) / Credit to income statement
Credit on other comprehensive income
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 2023
Liability
£000
(580)
(336)
2
(914)
Asset
£000
267
135
9
411
30 Sep 2023
Liability
Asset
-
-
190
221
411
(603)
-
-
(311)
(914)
Net
£000
(313)
(201)
11
(503)
Net
(603)
-
190
(90)
(503)
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)
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 £18,871,000
(2022: £13,742,119), hence an unrecognised deferred tax asset of £4,717,750 (2022: £3,435,780). 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.
21. 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 10 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, Tekmar have reviewed the assessments
and concluded that a present obligation does not exists.
112
Management acknowledges that there are many complexities with regards to the alleged defects which could lead to a range of possible
outcomes. 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 has received a further 2 defect notifications in relation to alleged defects with the loosening of VBR fasteners. The precise cause
of the issues are not clear and could be as a result of a number of factors, such as the incorrect placing of rock bag shielding and restraint.
Tekmar is committed to working with relevant customers, 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 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.
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.
Management acknowledges that there are many complexities with regards to the alleged defects which could lead to a range of possible
outcomes. Given the range of possible outcomes, management considers that determining whether a possible obligation exists, can 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 has received a further defect notification in relation to incorrect coating specification on 1 historic project. This defect notification
is in relation to units which had not yet been installed and have been recoated post year end at no cost to Tekmar. There are a number of
units which have been installed in relation to the same legacy project which may have the incorrect coating specification. At this stage
management do not consider that there is a present obligation arising under IAS37 as insufficient evidence is available to identify whether
any unresolved defects exist. Given the range of possible outcomes, management considers that determining whether a possible obligation
exists, can only be confirmed by further technical investigation to identify any further units which have may not have been coated to the
correct specification. 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.
22. 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.
At 30 September 2023
+5%
-5%
At 30 September 2022
+5%
-5%
Eur
£000
(215)
163
Eur
£000
(71)
33
USD
£000
(289)
319
USD
£000
(186)
206
QAR
£000
21
(23)
SAR
£000
13
(14)
AED
£000
5
(5)
AED
£000
(1)
1
SAR
£000
1
291
SAR
£000
-
-
RMB
£000
(263)
(1)
RMB
£000
(163)
181
113
Total
£000
(740)
744
Total
£000
(408)
407
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.
At 30 September 2023
Borrowings
Lease Obligations
Trade and other payables
At 30 September 2022
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
6,575
474
4,181
-
327
-
-
290
-
-
214
-
Less than 1 year
£000
Between 1 and 2
years
£000
Between 2 and 5
years
£000
Over 5 years
£000
6,990
208
4,859
-
144
-
-
39
-
-
10
-
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.
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.
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 and foreign currency options which match the expected receipt of foreign currency income. At 30
September 2023 this covers the period up to October 2024 (As at 30 September 2022 the period to April 2023).
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:
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. The Group continuously monitors the credit quality of customers based on a credit rating scorecard.
Where available, external credit ratings and/or reports on customers are obtained and used. The Group’s policy is to deal only with
credit worthy counterparties. The credit terms range between 30 and 90 days. The credit terms for customers as negotiated with
customers are subject to an internal approval process which considers the credit rating scorecard. The ongoing credit risk is managed
through regular review of ageing analysis, together with credit limits per customer.
114
Trade receivables consist of a large number of customers in various industries and geographical areas. The Group does not hold
any security on any trade receivables balance at each annual reporting date.
In addition, the Group does not hold any collateral relating to other financial assets (eg derivative assets, cash and cash
equivalents held with banks) at each annual reporting date.
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these
items do not have a significant financing component.
The Directors consider that the Group's trade receivables were not impaired for the year ended 30 September 2023 or 30
September 2022 and no provision for credit losses was made. See note 3 for critical accounting estimates made regarding
credit loss provisions and 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 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
19,807
5,219
25,026
2021
£000
12,942
8,496
21,438
(29)
(356)
(834)
(194)
(7,046)
(4,859)
(12,768)
(7,198)
(4,181)
(11,929)
12,258
9,509
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.
23. SHARE CAPITAL
Nominal value
At 30 September 2021
Issued during the period
At 30 September 2022
Issued during the period
At 30 September 2023
115
Ordinary shares
£0.01
Number
Ordinary Share
Total
£
51,608,603
9,351,631
60,960,234
75,112,392
516,086
93,516
609,602
751,124
136,072,626
1,360,726
The new shares issued during the period arose from the exercise of share options (35,760 shares) (see Note 2 5). The
nominal value of these shares £357.60 were not fully paid at year end, all other shares issued have been fully paid.
4,111,548 shares were issued during 2023 relating to share-based payments (see Note 25 for details on the Group’s
share-based employee remuneration programmes). These shares were issued for £0.09 per share.
The Group issued 71,000,844 shares on 19th April 2023, corresponding to 52% of total shares issued. Each share has
the same right to receive dividends and the repayment of capital and represents one vote at shareholders’ meetings of
Tekmar Group Plc. These shares were issued for £0.09 per share.
Proceeds received in addition to the nominal value of the shares issued during the year have been included in share
premium, less registration and other regulatory fees and net of related tax benefits. The value of new shares charged
to equity amounted to £5,300,000 (2022: £ Nil). The costs associated with with the issue of new shares amounted to
£1,141,593 and has been accounted for as a deduction to share premium.
24. RELATED PARTY TRANSACTIONS
The Directors consider there to be no ultimate controlling party following Admission in June 2018.
SCF – IX, L.P hold 32.1% shareholding in Tekmar Group PLC and are considered by the directors to be a Person with
significant control through ownership of more than 25% but not more than 50% of the ordinary share capital and voting
rights.
Related party transactions with the Company are as follows:
During the period, Tekmar Group PLC procured entertainment events from Sport2Group Limited, a business which
Alasdair Macdonald is a director. Costs relating to this purchase during the period were £24,000 (2022: £Nil). No amounts
were due at the period end.
Key management compensation is given in note 5 (b), this includes remuneration to S Lockard and C Welsh who are
partners of SCF – IX LP.
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 2022) and options
over 550,393 shares were granted to 21 staff.
On 31 March 2023 the Company launched a further SAYE
plan (SAYE 2023) and options over 3,306,238 shares were
granted to 43 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.
The Tekmar Group plc Management shares awarded
Tekmar Group PLC awarded 4,075,788 shares to senior
management team members in settlement of annual
bonuses. These share awards have been accounted for as
share based payments under IFRS2.
116
25. SHARE BASED PAYMENTS
During the year the Group operated four equity-settled
share-based payment plans as described below.
The Tekmar Group plc IPO Plan (“IPO Plan”)
As part of the admission to trading on AIM in June 2018,
the Group granted a total of 1,750,000 share options to key
executives. All of the options granted are subject to service
conditions, being continued employment with the Group
until the end of the vesting period. The options include
certain performance conditions which must be met, based
upon earnings per share and total shareholder return
targets for the financial year ending March 2020. The
awards became exercisable on 20 June 2020 to the extent
that the performance conditions have been satisfied. The
options were granted with an exercise price equal to the
nominal value of the share (£0.01).
The Tekmar Group plc Long Term Incentive Plan (“LTIP”)
The LTIP is a discretionary executive share plan under
which the Board may, within certain limits and subject to
any applicable performance conditions, grant to eligible
employees nil or nominal cost options, options with a
market value exercise price, conditional or restricted
awards. All employees are eligible for selection to
participate in the plan.
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.
1 October
2022
Granted in the
period
Exercised in
the period
Lapsed in the
period
30 September
2023 share
options
outstanding
Vesting period
-
53,589
481,410
27,833
-
-
-
3,306,238
-
4,819,666
-
-
-
(10,760)
-
-
(25,000)
(342,174)
-
(590,763)
-
28,589
3,445,474
17,073
4,228,903
2 years
3 years
3 years
3 Years
3 Years
117
Exercise
period
10 years
10 years
10 years
10 Years
10 Years
-
4,075,788
(4,075,788)
-
-
Nil
Nil
1 October 2021
Granted in the
period
Exercised in
the period
Lapsed in the
period
30 September
2022 share
options
outstanding
Vesting period
181,250
53,589
432,520
27,833
415,760
-
-
-
-
550,393
-
-
225,000
1,294,010
(118,750)
-
-
-
-
(43,042)
-
(62,500)
(501,503)
-
(415,760)
(154,125)
(878,250)
-
53,589
481,410
27,833
-
27,833
415,760
2 years
3 years
3 years
3 Years
3 Years
3 Years
3 Years
Exercise
period
10 years
10 years
10 years
10 Years
10 Years
10 Years
10 Years
Plan
IPO Plan
SIP
SAYE
Retention
LTIP
Management
Award
Plan
IPO Plan
SIP
SAYE
Retention
LTIP
Retention
LTIP
The weighted average share price at the date of exercise for share options exercised during the year was £0.09 (2022: £0.48).
The schemes had a weighted average remaining contractual life as follows:
Plan
IPO Plan
SIP
SAYE
Retention
LTIP
2023
6 Years
6 Years
8 Years
8 Years
8 Years
2022
6 Years
6 Years
8 Years
8 Years
8 Years
The Group has recognised a total expense of £658,427 (2022: £103,000 credit) in respect of equity-settled share-based payment
transactions in the period ended 30 September 2023. The share-based payment transactions for the IPO options, management award
options have been treated as an adjusted Item in the profit and loss account when calculating Adjusted EBITDA. These transactions
account for a £508,000 (2022: Nil) in the year to 30 September 2023. The remaining share based payment transactions are treated
as administrative expenses £151,000 (202 2: £103,000 credit).
118
119
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:
Parent company balance sheet
as at 30 September 2023
Plan
Grant Date
Share price at grant date
(P)
IPO Plan
SIP
SAYE20
SAYE21
SAYE22
Retention
LTIP
13/09/18
31/03/20
31/03/21
31/3/22
31/03/23
22/08/20
20/04/23
161.5
83
63.75
37.50
8.5
108
10.5
Expiry Date
13/09/28
31/03/30
31/03/31
31/03/32
31/03/33
22/08/30
20/04/23
Exercise price (P)
1.00
78.00
50.20
30.0
6.80
1.00
1.00
Expected Volatility (%)
44.02
45.02
78.95
45.67
165.50
53.85
165.71
Risk-free rate (%)
2.0 %
2.0 %
2.0 %
2.0%
2.0%
2.0 %
2.0 %
Expectation of meeting
performance criteria
80%
100%
85%
75%
61%
100%
85%
26. POST BALANCE SHEET EVENTS
There has been no events after the reporting date that require adjustment in line with IAS10 events after the reporting
period to the date of the approval of these financial statements.
On 13th November 2023, the group purchased a further 200 shares in Ryder Geotechnical limited representing the
remaining 20 per cent of share capital for £200,000. The group now owns 100 per cent of the share capital of Ryder
Geotechnical limited. There are no non-controlling interests.
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
35
26,804
112
15,869
42,820
9,481
1,425
10,906
53,726
1,361
72,201
1,738
(29,295)
46,005
6,586
1,112
7,698
23
23
53,726
46
32,325
5
15,869
48,245
5,946
2,702
8,648
56,893
609
67,652
1,738
(21,275)
48,724
7,003
1,133
8,136
3,052
3,052
56,893
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 £8.537m (2022 Restated: £6.108m).
The Parent Company financial statements were approved by the Board of Directors on 3 March 2024 and were signed on its
behalf by:
Leanne Wilkinson
Chief Financial Officer
Company registered number: 11383143
120
121
Parent company statement of changes in equity
for the year ended 30 September 2023
Notes to the parent company financial statements
for the year ended 30 September 2023
Share
capital
£000
Share
premium
£000
Merger
relief
reserve
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 October 2021
516
64,097
1,738
(15,076)
51,275
Loss for the year
Total comprehensive expense for the year
Issue of shares
Share based payments
Total transactions with owners, recognised directly in
equity
-
-
93
-
93
-
-
3,555
-
3,555
-
-
-
-
-
(6,108)
(6,108)
-
(91)
(91)
(6,108)
(6,108)
3,648
(91)
3,557
Balance at 30 September 2022
609
67,652
1,738
(21,275)
48,724
Loss for the period
Total comprehensive expense for the period
Issue of shares
Share based payments
Total transactions with owners, recognised directly in
equity
-
-
752
-
752
-
-
4,549
-
4,549
-
-
-
-
-
(8,537)
(8,537)
(8,537)
(8,537)
-
517
517
5,301
517
5,817
Balance at 30 September 2023
1,361
72,201
1,738
(29,295)
46,005
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 incorporated and domiciled in England and
Wales. The registered office of the Company is Innovation
House, Centurion Way, Darlington, DL3 0UP. The
registered company number is 11383143.
The principal activity of the Company and its subsidiaries
(together the “Group”) is that of design, manufacture and
supply of subsea 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:
• The following paragraphs of IAS 1 “Presentation of
Financial Statements”
o 10(d) (statement of cash flows);
o 16 (statement of compliance with all IFRS);
o 111 (cash flow statement information); and
o 134-136 (capital management disclosures)
• IFRS 7 “Financial Instruments : Disclosures”;
• IAS 7 “Statement of Cash Flows”;
• IAS 24 (paragraphs 17 and 18a) “Related Party
Disclosures” (key management compensation); and
• IAS 24 “Related Party Disclosures” – the requirement to
disclose related party transactions between two or more
members of a group.
• 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 £8,537m (2022: £6.108m).
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.
122
Share-based payments
The Group operates equity-settled share-based remuneration
plans for certain employees. None of the Group’s plans are
cash-settled. All goods and services received in exchange for
the grant of any share-based payment are measured at their
fair values.
Where employees are rewarded using share-based payments,
the fair value of employees’ services is determined indirectly
by reference to the fair value of the equity instruments
granted. This fair value is appraised at the grant date and
excludes the impact of non-market vesting conditions.
All share-based remuneration is ultimately recognised as
an expense in profit or loss with a corresponding credit to
retained earnings. If vesting years or other vesting conditions
apply, the expense is allocated over the vesting year, based on
the best available estimate of the number of share options
expected to vest.
The fair value determined at the grant date of equity-settled
share-based payments issued to employees of subsidiary
undertakings is recognised as an addition to the cost of
investment in subsidiary undertakings on a straight-line basis
over the vesting period, based on the Company’s estimate of
shares that will eventually vest and adjusted for the effect of
non-market-based vesting conditions.
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 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).
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.
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 for the prior year have been restated following
the identification of a prior period error.
During 2023, the Company discovered that the impairment
of investments model did not give consideration to the
repayment of intercompany loans, working capital and the
utilisation of tax losses between Tekmar Limited and Tekmar
Group PLC. If the correct assumptions had been applied to
the prior year model an impairment charge of £4,690,000
would have been recognised. The prior period error has been
corrected inline with IAS8, see note 11 for further details.
The carrying amount of the Company’s investments in
subsidiaries £26,804,000 as at 30 September 2023 (2022:
£32,325,000 Restated). The Directors have carried out an
impairment review in accordance with the accounting policies.
The forecast cash generation for each Cash Generating Unit
(“CGU”) and the Weighted Average Cost of Capital (“WACC”)
represent significant assumptions.
The cash flows are based on a four year forecast with a
compound average growth rate over the 4 year period of
13.5%. Subsequent years are based on a reduced growth rate
of 2.0% into perpetuity. The cashflows are adjusted for the
repayment of intercompany loans, working capital and the
utilisation of tax losses between Tekmar Limited and Tekmar
Group PLC.
The discount rate used was the Group’s pre-tax WACC of
15.5%.
The value in use calculations performed for the impairment
review, together with sensitivity analysis using reasonable
123
assumptions, indicate sufficient headroom for the
investments in Subsea Innovations Limited and Pipeshield
International Limited and therefore do not give rise to
impairment concerns.
The value in use calculations described above for Tekmar
Limited indicated that the recoverable amount was below the
carrying value at the period-end by £5,673,000. As a result,
an impairment charge of £5,673,000 has been recognised in
FY23.
The value in use calculations have a range of assumptions,
which if changed would lead to a change in the impairment
charge recognised. To assess these changes management
have run a model which sensitises the assumption on EBITDA
generated in the investment in Tekmar Limited. Management
believes that Tekmar energy limited and Ryder Geotechnical
Limited , which form the basis of the cashflows in Tekmar
limited will grow faster than market rates in FY24 and FY25
due to contract visibility, however if the revenues generated
only grow inline with market CAGR of 16% for the forecast
period, the impairment charge in Tekmar Limited would
increase by £10,902,000.
Management has considered the most likely worst-case
scenario in the Pipeshield business 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 the investment in Pipeshield.
124
125
2. REMUNERATION OF DIRECTORS AND AUDITORS
Details of Directors’ remuneration are shown in the Directors’ Remuneration Report on page 99 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 at 01 October 2022
Impairment of investment
Additions (Capital contribution in relation to share based payments)
Investment in subsidiaries at 30 September 2023
30 Sep
2023
£000
32,325
(5,673)
152
26,804
30 Sep
2022
£000
37,095
(4,690)
(80)
32,325
TThe carrying amount of the company’s investments in subsidiaries for the prior year have been restated following the
identification of a prior period error.
During 2023, the Company discovered that the impairment of investments model did not give consideration to the
repayment of intercompany loans, working capital and the utilisation of tax losses between Tekmar Limited and
Tekmar Group PLC. If the correct assumptions had been applied to the prior year model an impairment charge of
£4,690,000 would have been recognised. The prior period error has been corrected inline with IAS8, see note 11 for
further details.
The carrying amount of the Company’s investments in subsidiaries £26,804,000 as at 30 September 2023 (2022:
£32,325,000 Restated). The Directors have carried out an impairment review in accordance with the accounting
policies. The forecast cash generation for each Cash Generating Unit (“CGU”) and the Weighted Average Cost of Capital
(“WACC”) represent significant assumptions.
The cash flows are based on a four year forecast with a compound average growth rate over the 4 year period of 13.5%.
Subsequent years are based on a reduced growth rate of 2.0% into perpetuity.
The discount rate used was the Group’s pre-tax WACC of 15.5%.
The value in use calculations performed for the impairment review, together with sensitivity analysis using reasonable
assumptions, indicate sufficient headroom for the investments in Subsea Innovations Limited and Pipeshield
International Limited and therefore do not give rise to impairment concerns.
The value in use calculations described above for Tekmar Limited indicated that the recoverable amount was below the
carrying value at the period-end by £5,673,000. As a result, an impairment charge of £5,673,000 has been recognised
in FY23.
The value in use calculations have a range of assumptions, which if changed would lead to a change in the impairment
charge recognised. To assess these changes management have run a model which sensitises the assumption on
EBITDA generated in the investment in Tekmar limited. Management believes that Tekmar energy limited and Ryder
geotechnical limited, which form the basis of the cashflows in Tekmar limited will grow faster than market rates in
FY24 and FY25 due to contract visibility, however if the revenues generated only grow inline with market CAGR of 16%
for the forecast period, the impairment charge in Tekmar Limited would increase by £10,902,000 .
Management has considered the most likely worst-case scenario in the Pipeshield business 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 the investment in Pipeshield.
Tekmar Limited
Subsea Innovation Limited
Pipeshield International Limited
Total
Class of share
capital held
By Parent
Company
Ordinary
Ordinary
Ordinary
100%
100%
100%
Carrying
Value
FY22
17,430
2,124
7,250
26,804
Carrying
Value FY21
Restated
23,038
2,113
7,174
32,325
All the companies listed above are incorporated in England and Wales and have a registered address of Innovation
House, Centurion Way Darlington DL3 0UP. There are no restrictions on the Group’s ability to access or use the assets
and settle the liabilities of the Group’s subsidiaries. The principal activities of these undertakings for the last relevant
financial period were as follows:
Company
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 October 2021
Additions
As at 30 September 2022
Additions
As at 30 September 2023
DEPRECIATION
As at 1 October 2021
Charge for the year
As at 30 September 2022
Charge for the period
As at 30 September 2023
NET BOOK VALUE
As at 30 September 2021
As at 30 September 2022
As at 30 September 2023
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
-
-
-
11
11
-
46
35
2023
£000
15,869
9,410
71
9,481
25,350
-
46
46
-
46
-
-
-
11
11
-
46
35
2022
£000
15,869
5,912
34
5,946
21,815
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.
126
6. BORROWINGS
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
2023
£000
3,575
11
3,000
6, 586
-
23
23
2023
£000
6 ,586
23
6,609
2022
£000
3,990
13
3,000
7,003
-
33
33
2022
£000
7,003
33
7,036
The above carrying values of the borrowings equate to the fair values. The trade loan facility is provided at interest rate of 2% over
base rate pa and is available to the Company until 31 July 2024. The CBILS loan facility is provided at interest rate of 2% over base rate
pa and is available to the Company until 31 October 2024.
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
2023
£000
243
393
99
377
1,112
2022
£000
49
758
53
273
1,133
8. SHARE CAPITAL
Details of movements in shares are set out in note 23 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 25 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 expense of £486,036 in respect of the equity-settled share-based payment
transactions in the period ended 30 September 2023 (2022: £11,636).
127
11. CORRECTION OF MATERIAL PRIOR PERIOD ERRORS
During 2023, the Company discovered that the impairment of investments model did not give consideration to the
repayment of intercompany loans, working capital and the utilisation of tax losses between Tekmar Limited and
Tekmar Group PLC. If the correct assumptions had been applied to the prior year model an impairment charge of
£4,690,000 would have been recognised.
As a consequence, the carrying value of investments have been overstated in the prior period. The errors have been
corrected by restating each of the affected financial statement line items for prior periods. The following tables
summarise the impacts on the Parent Company’s financial statements:
30 September 2022
Previously reported
Adjustments
30 September 2022 Restated
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
£000
46
37,015
5
15,869
52,935
5,946
2,702
8,648
61,583
609
67,652
1,738
(16,585)
53,414
7,003
1,133
8,136
33
33
61,583
£000
-
(4,690)
-
-
(4,690)
-
-
-
(4,690)
-
-
-
(4,690)
(4,690)
-
-
-
-
(4,690)
£000
46
32,325
5
15,869
48,245
5,946
2,702
8,648
56,893
609
67,652
1,738
(21,275))
48,724
7,003
1,133
8,136
33
33
56,893
The loss for the prior year has been restated as a result of the impairment of investments from £1,418k loss to £6,108k
loss.
128
129
Retained earnings
Previously Reported
Total
Equity Previously
Reported
Adjustments to
retained earnings &
total equity
Balance at 1 October
2021
(15,076)
51,275
-
Retained
Earnings
(Restated)
£000
(15,076)
Total
Equity
(Restated)
£000
51,275
Loss for the year
(1,418)
(1,418)
(4,690)
(6,108)
(6,108)
Total
comprehensive
expense for the year
Issue of shares
Share based
payments
Total transactions
with owners,
recognised directly
in equity
Balance at 30
September 2022
(1,418)
(1,418)
(4,690)
(6,108)
(6,108)
-
(91)
(91)
3,648
(91)
3,557
-
-
-
-
(91)
(91)
3,648
(91)
3,557
(16,584)
44,034
(4,690)
(21,275)
48,724
12. 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.
Annual General Meeting
The AGM will be held at 10:30 on 27 March 2024 at Muckle LLP, Time Central, 32 Gallowgate, Newcastle upon Tyne NE1 4BF.
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
27 March 2024 - Annual General Meeting
131
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
investors@tekmar.co.uk
E:
W: investors.tekmar.co.uk
Innovation House
Centurion Way
Darlington
DL3 0UR
United Kingdom