TGP Tekmar Group Plc

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. Upon the publication of this announcement via a Regulatory Information Service, this inside information is considered to be in the public domain.

Tekmar Group plc

("Tekmar", the "Company" or the "Group")

Trading and Strategy Update

Tekmar Group plc (AIM: TGP), the leading provider of technology and services for the global offshore energy markets, today outlines the Group's refreshed strategy under Richard Turner, who joined as CEO in September 2024, and provides an update on trading for the 12 months to 30 September 2024 ("FY24" or the "Period") and the outlook for FY25 and beyond.

Key headlines

·     The Group expects to report revenue of approximately £32 million for FY24 (FY23: £36 million), and Adjusted EBITDA in the region of £1.8 million (FY23: £0.6 million)⁽¹⁾⁽²⁾. This represents the highest full-year Adjusted EBITDA reported by the Group since FY20.

·     The expected increase in Adjusted EBITDA is primarily a result of significant improvement in gross profit margin, which is expected to be in excess of 30% for FY24 (FY23: 23%)⁽²⁾.

·     The Board has established a three-year plan to increase market share in an improving and growing market with a view to delivering record financial performance. Achieving greater scale is central to the plan through driving higher order intake across the Group's existing portfolio of products and services.

·     Successful execution of the organic growth plan achieves a fundamental change in the scale and quality of revenue and delivers significant profitability gains driven by the benefit of operational gearing.

·     This step-change in profit performance, improved cash flows and stronger returns on capital is central to the Board's value creation strategy to deliver exceptional investment returns for shareholders.

·     The value creation strategy is further supported by the Board's ambitious M&A strategy with an active acquisition pipeline in place.

·     The focus for FY25 will be on order book development to position the Group for sustained revenue growth in FY26 and beyond.

Richard Turner, CEO of Tekmar Group plc, said:

"Having worked across the oil and gas and offshore wind markets for more than 15 years, my enthusiasm for the opportunity we have ahead of us at Tekmar has only been strengthened by my initial weeks as CEO. We have differentiated technology that sets us apart in the market. Our holistic offering is a key enabler across the full lifecycle of offshore energy projects from front end engineering and design, installation, operation and decommissioning. We have delivered over 340,000 geotechnical engineering and analysis hours, supplied over 10,000 cable protection systems to over 40GW of offshore wind projects globally and lead the way in subsea stabilisation technology with more than 100,000 products in service.  Our know-how and industry expertise are hard-earned and our technology is without equal in the industry.

Like many others in our industry, our capability has not borne satisfactory results in recent years, evident by sub-scale order intake, earnings and weak cash flow. Market conditions have been challenging, in particular across the offshore wind sector as developers struggled to contend with systemic design issues, escalating material costs and higher interest rates - factors that were incompatible with historic low strike prices.

Despite the obvious toll of this period on our business, we have used this time wisely, taking the opportunity to realign and refocus our teams, whilst working proactively with customers to understand their evolving needs. Through doing so we have developed next generation protection and assurance technology that will be crucial in ensuring security and certainty of supply from offshore assets forming the backbone of future energy supply.

Many of the headwinds in offshore renewables and conventional energy markets are subsiding and there is a higher volume of projects now being sanctioned than ever before. We remain cautious on how this market recovery will translate to backlog in the short-term, but we believe that market demand is set to increase steadily into 2025 and beyond. This provides us with real enthusiasm about the role we can play in supporting energy transition whist maximising shareholder value.

2024 has been a transitionary year for Tekmar, where we have focused on the basics - providing high-quality engineering, delivering on time and maintaining consistent commercial discipline. Looking forward, we now have a structured organic growth plan which aims to progressively build a business with true strength and resilience. Resilience afforded to us by larger and more diversified revenue streams, with higher margins and positive cash flows. 2025 is where we underpin the foundations of growth where we focus on backlog expansion to support sustained and profitable growth in the years to follow.

This plan is borne out of thorough market analysis, that demonstrates its deliverability as well as the potential to aim higher. This organic growth plan runs concurrently with our strategic acquisition plan, where we will seek to bring further scale and complementary technology into our group.  As we execute on these plans, we are fortunate to draw on the experience, relationships and insights of our Board. It is a marker of our ambition that we were able to secure the recent appointments of Lars Bondo Krogsgaard and David Kemp as Non-Executive Directors. Both bring complementary and highly relevant experience gained at large, global organisations. That they chose to join Tekmar highlights the scale of the opportunity that we have and we look ahead with confidence and renewed purpose as we unlock the true potential of Tekmar."            

FY24 Trading Summary

The Group is expected to report revenue for FY24 of approximately £32 million (FY23: £36 million), gross profit in the region of £10 million (FY23: £8 million) and Adjusted EBITDA⁽¹⁾ in the region of £1.8 million (FY23: £0.6 million)⁽²⁾. This expected increase in Adjusted EBITDA for FY24 is primarily a result of stronger gross margins. This is consistent with the Group's focus on securing contracts with suitably attractive project economics and disciplined execution of these projects and was achieved despite market conditions which remained challenging in FY24.

Net debt⁽³⁾ as at 30 September 2024 was £1.6 million, with gross cash of £4.6 million and the Group order book⁽⁴⁾ as at 30 September 2024 was £16 million (FY23: £16 million)⁽²⁾.

FY25 Outlook  

The business starts FY25 with an order book of £16 million. The Board is encouraged that the market environment is steadily improving into 2025 and beyond. Moreover, Tekmar's differentiated technology positions the Group to outperform this improving market. This is supported by the Group's developing sales pipeline, however it will take time for this activity to convert to orders and revenue. 

Accordingly, the Board believes a reasonable expectation is for EBITDA for FY25 to be consistent with FY24, and for the phasing of EBITDA generation to be second half weighted.  This is aligned with the Board's primary focus on increasing order intake and backlog through 2025 to position the Group for improved performance in 2026 and beyond.

Summary of the 3-year strategic plan

·      The Board has developed a three-year plan rooted in driving higher order intake across the Group's existing portfolio of products and services, along with an iterative product development programme. This addresses the importance of Tekmar achieving greater scale with significant profitability gains driven by the benefit of operational gearing.

·     Integral to the plan is an anticipated reweighting of the Group's revenue streams from an historical reliance on product related revenues to a greater share of revenues generated by higher margin engineering services. Additionally, there will be a greater emphasis on higher utilisation rates across the business, achieved through the balance of scale of projects and duration of projects.

·      A key requirement to deliver on the plan is for Tekmar to be an efficient and effective organisation. Key changes being implemented include to:

-      More closely align Pipeshield and Tekmar Energy to further leverage product and geographical synergies allowing greater focus on growing the Group's existing market-leading protection and stability technologies.

-      Expand and scale Ryder. Ryder offers valuable engineering services which derisks customer investment and reduces overall project costs for critical offshore energy infrastructure projects. Ryder's technical capability has significant commercial potential which has not been realised to date.

·    The Board has developed a technology roadmap to expand the range of products and services delivered by the Group to capture greater customer value:

-      This investment will be largely self-funded, with the initial priority to invest in offshore grouting services, which offers the scope for material near-term profit improvement and attractive returns on capital.

-      Additional identified opportunities include subsea protection systems, greater use of digital technology and broadening the portfolio's advanced engineering analysis and services.

·    The organic growth plan is complemented by the Group's ambitious M&A strategy to drive additional scale and diversification:

-      This leverages the £18 million of funding available through the SCF convertible loan note instrument and the relevant experience and relationships across the business.

-      Accelerating the level of EBITDA and cash generation of the Group is key in our assessment of opportunities as we look to build scale, alongside strengthening the technology and services we offer customers, and seeking opportunities to expand our reach in targeted geographies. A robust acquisition pipeline has been developed and the Board is actively assessing complementary acquisition targets.

·     The plan emphasises a continued focus on managing the cash requirements of the business to support growth and working capital as the business scales.

Additional Information

The person responsible for arranging release of this announcement on behalf of the Company is Leanne Wilkinson, Chief Financial Officer.

Footnotes:

(1) Adjusted EBITDA is defined as profit before finance costs, tax, depreciation, amortisation, share based payments charge, and significant one-off items and is a non-GAAP metric used by management and is not an IFRS disclosure.

(2) The revenue, gross profit, gross profit margin and Adjusted EBITDA figures disclosed for FY23 are adjusted to exclude the full-year contribution of Subsea Innovation Limited ("SIL") which was subsequently disposed of by the Group in May 2024 and is therefore reported as a discontinued operation.

(3) Net debt is defined as total cash held by the Group less bank borrowings.

(4) Order Book is defined as signed and committed contracts with clients.

Enquiries:

About Tekmar Group plc

Tekmar Group plc collaborates with its partners to deliver robust and sustainable engineering led solutions that enable the world's energy transition.

Through our Offshore Energy and Marine Civils Divisions we provide a range of engineering services and technologies to support and protect offshore wind farms and other offshore energy assets and marine infrastructure. With near 40 years of experience, we optimise and de-risk projects, solve customer's engineering challenges, improve safety and lower project costs. Our capabilities include geotechnical design and analysis, simulation and engineering analysis, bespoke equipment design and build, subsea protection technology and subsea stability technology. 

We have a clear strategy focused on strengthening Tekmar's value proposition as an engineering solutions-led business which offers integrated and differentiated technology, services and products to our global customer base.

Headquartered in Newton Aycliffe, UK, Tekmar Group has an extensive global reach with offices, manufacturing facilities, strategic supply partnerships and representation in 18 locations across Europe, Africa, the Middle East, Asia Pacific and North America.

For more information visit: www.tekmargroup.com

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