TIDMTGP
RNS Number : 2605D
Tekmar Group PLC
25 June 2019
25 June 2019
TEKMAR GROUP PLC
("Tekmar Group", the "Group" or the "Company")
FINAL RESULTS 2019
Tekmar Group (AIM: TGP), a market-leading technology provider of
protection systems for subsea cable, umbilical and flexible pipes
and offshore engineering services, announces its final results for
the year ended 31 March 2019 ("FY19").
Highlights:
-- Strong result in H2 with FY19 in line with revised market
expectations
-- Revenue growth of 28.3% with Compound Annual Growth Rate over
last five years at 21.5%
-- Strong balance sheet, following successful IPO in June 2018,
enabling the Group to deliver on its growth and diversification
strategy
-- Adjusted EPS of 6.0p
-- 100% market share of all cable protection systems into European
Offshore Wind ("OWF") maintained by Tekmar Energy
-- Two acquisitions completed in the year:
Subsea Innovation in September 2018, adding complementary
products in shared markets with specialist engineers to aid
new product development
Ryder Geotechnical on 28 March 2019 bringing earlier engagement
to customers.
-- Diversification strategy has broadened the Group's technology
offering to 47 products (FY18: 20)
-- Market Visibility(2) at a record high of GBP50m a 44% increase
year on year
-- Long term global outlook in the Group's markets continues
to be positive with oil price stable above $50 a barrel and
the offshore wind outlook(7) up by 51.3%
Key financials:
FY19 FY18
-- Revenue GBP28.1m GBP21.9m
-- Adjusted EBITDA(1) GBP4.8m GBP4.9m
-- Cash GBP4.2m GBP2.6m
-- Market Visibility(2) GBP50.2m GBP34.9m
Sales KPIs:
As at 31.03.19 As at 31.03.18
-- Order Book(3) GBP7.2m GBP5.4m
-- Preferred Bidder(4) GBP15m GBP7.6m
-- Enquiry(5) GBP195m GBP145m
-- LTM(6) sales conversion 62% 56%
Alasdair MacDonald, Non-executive Chairman of Tekmar Group,
said:
"The market outlook for offshore wind and oil and gas are both
strong, with offshore wind CAGR forecasts above 20% between
2018-2028 and demand for products for the oil and gas market at a
three-year high.
"The Group remains focused on its strategy as stated at IPO to
deliver long-term growth through the expansion of new products,
organic growth and by selective and complementary acquisitions. On
behalf of all the directors, I am pleased to report that the new
financial year has started well and, with current order visibility
levels, believe that the Group is making good progress to deliver
results in line with market expectations in FY20."
1. Adjusted EBITDA is defined as profit before finance costs,
tax, depreciation, amortisation, share based payments charge, and
exceptional items. This is a non-GAAP metric used by management and
is not an IFRS disclosure.
2. Market Visibility is defined as: Revenue + Order Book +
Preferred Bidder. This measure is calculated from the sum of the
previous 12 months' turnover plus pending contracts under
negotiation on which we have Preferred Bidder Status and the
Group's Secured Order Book.
3. Order Book is defined as signed contracts with clients.
Expected revenue recognition within 6 months.
4. Preferred bidder is defined as out of competitive tender
process, selected as sole bidder in active contract negotiations.
Expected revenue recognition within 12 months.
5. All active lines of enquiry within the Tekmar Group. Expected
revenue recognition within three years.
6. LTM is defined as Last Twelve Months conversion rate; Total
Bid to Win ratio.
7. Improvement in Offshore Wind Market Outlook March 2018 vs
March 2019, Source: 4C Offshore Wind Farm Global Market Overview
Report - April 2019
For further information contact:
Tekmar Group plc Tel: +44 (0)1325 379
James Ritchie-Bland, Chief Executive Officer 520
Sue Hurst, Chief Financial Officer
Grant Thornton UK LLP (Nominated Adviser) Tel: +44 (0)20 7383
Philip Secrett / Samantha Harrison 5100
Berenberg (Broker) Tel: +44 (0)20 3207
Chris Bowman / Ben Wright 7800
Belvedere Communications (Financial PR)
Cat Valentine (cvalentine@belvederepr.com) Tel: +44 (0) 7715
Llew Angus (langus@belvederepr.com) 769 078
Keeley Clarke, (kclarke@belvederepr.com) Tel: +44 (0) 7407
023 147
Tel: +44 (0) 7967
816 525
About Tekmar Group plc - https://investors.tekmar.co.uk/
Tekmar Group plc's vision is to be the partner of choice for the
supply and installation support of subsea protection equipment to
the global offshore energy markets. The Group has four primary
operating companies; these are Tekmar Energy Limited, Subsea
Innovation Limited, AgileTek Engineering Limited and Ryder
Geotechnical Limited.
Tekmar Energy is a global market leader in subsea cable,
umbilical and flexible pipe protection systems. Tekmar have been
trusted to protect billions of Euros worth of assets in the
offshore wind, oil & gas, wave, tidal and interconnector
markets since 1985: https://www.tekmar.co.uk/
Subsea Innovation is a global leader in the design, manufacture
and supply of complex engineered equipment and technology used in
the offshore energy market. Its products include large equipment
handling systems which operate on the back of pipelay installation
vessels; emergency pipeline repair clamps (EPRC) which protect
major oil and gas pipelines, and bespoke equipment for use in the
construction of offshore energy projects:
https://www.subsea.co.uk/
AgileTek Engineering is an award-winning subsea engineering
consultancy for offshore energy projects. AgileTek helps its
clients de-risk projects through advanced computer simulation and
analysis. https://agiletek.co.uk/ AgileDat, a division of AgileTek,
provides software development, cloud architecture and data
analytics services. https://agiledat.co.uk/
Ryder Geotechnical provides expert geotechnical design and
consulting services to the offshore wind and subsea oil and gas
sectors. Services include offshore structure foundation design,
geohazard assessment and subsea cable routing and burial
assessment. https://www.rydergeotechnical.com/
Tekmar Energy and Tekmar Group plc is headquartered in Newton
Aycliffe in the United Kingdom; AgileTek operates from an office in
London; Subsea Innovation have their head office and manufacturing
centre in Darlington, United Kingdom. Tekmar Group plc also has
representation in South Korea, USA, China and the Middle East.
CHAIRMAN'S STATEMENT
I am pleased to present Tekmar Group's results for the year
ended 31 March 2019 ("FY19"), the first since our successful IPO in
June last year. It has been an exciting and productive year for the
Group, though not one without its challenges, which I am pleased to
report that the team successfully addressed. The Group showed its
resilience in FY19, delivering substantial revenue growth of 28%,
despite facing a rapid change in the procurement pattern from its
major offshore wind customers, which is detailed in the CEO's
Statement. This industry-wide change, which we reported in our H1
19 results, created a delay in the award of major contracts for our
core product TekLink(R).
In line with our strategy to broaden the Group's technology
offering, we completed two complementary acquisitions during the
year; Subsea Innovation in September 2018 and Ryder Geotechnical
just prior to the year end. Both businesses have been successfully
integrated and we are delighted with their contribution to the
Group.
Whilst the level of growth in profitability in FY19 was affected
by the timings in procurement activity in the offshore wind
industry, our continued track record in offshore wind array
projects in Europe demonstrates the business' unique presence in
this market place and provides a strong platform for growth over
the next five years.
I believe the Group's results for the full year demonstrate the
strength of the management team and the people within the business.
Whilst the level of profitability expected at the outset of the
year has unavoidably been affected by the change in product mix,
the management team has worked hard to deliver record revenues,
making good progress on the diversification of revenue streams,
both organically through innovation and via complementary
acquisitions supporting the overall Group's long term vision.
Delivery on strategy
The successful IPO strengthened the Group's balance sheet
considerably, enabling us to deliver on our stated strategic
objective to diversify revenue streams and build a solid foundation
for expansion and growth.
Maintain dominance in the existing and growing offshore wind
market
I am pleased to report that, once again, we maintained our 100%
market share for Array Cable Protection Systems in Europe. We
achieved this through TekLink's(R) intrinsic value proposition,
which offers a total solution to customers, not just a product. In
addition, we continue to harness technology and evolve the product
which is now in its eighth generation.
Our overall market share of the global offshore wind market is
circa 75%. We have an office in Shanghai, where we are seeing
significant growth opportunities, supported by sales agents in
Busan, Singapore and Abu Dhabi to support our global position.
Overseas growth
We continued our expansion into international markets and
established an entity in China, a country where we expect to see
significant growth for the Asia Pacific offshore wind market.
In the Middle East, we delivered a first 'In-Kingdom' project to
National Petroleum Construction Company, as part of its long-term
agreement with Saudi Aramco.
Grow market share in subsea oil and gas
The acquisition of Subsea Innovation, shortly after the IPO,
increased the Group's access to the oil and gas market, brought
significant potential for cross-selling opportunities and increased
our technical capabilities and engineering capacity. The Group
businesses have already worked together on a number of high profile
projects, adding intrinsic customer value.
Add new product variations
During the year, we increased the number of products that we are
able to offer to new and existing clients from 20 to 47 across all
sectors.
Make selective acquisitions
We made two strategic acquisitions in FY19. In September, we
acquired Subsea Innovation and, in March 2019, Ryder Geotechnical.
Both companies met our strategic objectives of increasing the
Group's technology and customer base and extending the Group
offering into full lifecycle revenues on projects.
Governance
We adopted the QCA Corporate Governance Code, which is available
to view on the Group's website. The Board recognises the importance
of high standards of corporate governance and has appointed
In-House Legal Counsel to support this.
The Group has a strong culture of excellence and safety first,
which is supported by detailed and audited policies and I am
pleased to note that Tekmar Energy was one of the first UK
businesses to be accredited to ISO 45001, awarded by DNV. During
this period of increased activity, the Group also achieved zero
lost time incidents, putting its people and their safety first.
People
I would like to take this opportunity to thank all our people.
Events beyond the Board's control made this a more challenging 12
months than anticipated. Our people have shown spirit and
resilience to produce a strong H2 performance and, thanks to their
efforts, the Group has delivered the best possible outcome for its
shareholders.
Outlook
Market Visibility, our primary measure for Group outlook, was up
44% at GBP50.2m. This measure is calculated from the sum of the
previous 12 months' turnover plus pending contracts under
negotiation on which we have Preferred Bidder Status and the
Group's Secured Order Book.
We expect the Group's FY20 results to follow similar weighting
to that which we experienced in FY19 with the majority of revenue
and profit being secured in the second half of the year. This
seasonality has two primary drivers: offshore projects are
generally executed during the summer months and the timing of the
award of Government subsidies. As our diversification strategy
develops through acquisition and product development, we anticipate
that the Group's results performance will smooth out over future
years.
At the year end, our Order Book, which reflects the seasonality
of contract awards as outlined above, stood at GBP7.2m - an
increase of 33% on FY18. Pending contracts, on which we hold
Preferred Bidder Status, have increased by 97% to GBP15m. The
Group's Enquiry Book improved by 35% to GBP195m and our conversion
rate on the bid to win ratio has increased from 56% to 62%.
The market outlook for offshore wind and oil and gas are both
strong, with offshore wind CAGR forecasts of above 20% between
2018-2028 and demand for products for the oil and gas market at a
three-year high.
The Group remains focused on its strategy as stated at IPO to
deliver long-term growth through the expansion of new products,
organic growth and by selective and complementary acquisitions. On
behalf of all the directors, I am pleased to report that the new
financial year has started well and, with current order visibility
levels, believe that the Group is making good progress to deliver
results in line with market expectations in FY20.
Alasdair MacDonald
Non-Executive Chairman
CEO STATEMENT
Our vision is to be the partner of choice for the supply and
installation support of subsea protection equipment to the global
offshore energy market. We aim to achieve this by developing a
portfolio of complementary businesses serving shared markets and
leveraging the enhanced skills and relationships these operations
bring.
We are very pleased with the strategic progress that the Group
has made since IPO last June and are confident of the long-term
prospects of the Group. The solid foundations that we built prior
to the Group's IPO have been strengthened further in the year under
review with two strategic acquisitions, further product development
and continued overseas expansion. The Board is focused on building
a robust and diversified business, which generates revenues across
the full lifecycle of projects and furthers the opportunities for
the Group's growth.
We remain committed to the three strategic growth areas: organic
growth within our core markets; accelerated growth through overseas
expansion and new technologies in our product mix; and by
acquisitions, which complement Tekmar Group's overall vision.
In the first half of FY19, the Group was impacted by a
fundamental change in the procurement patterns of our major
offshore wind customers for TekLink(R). Previously, the procurement
lead times on offshore wind projects were typically 12-18 months.
As the major industry operators drive maximum cost efficiencies,
contract negotiations have become more protracted and lead times
shorter. Whilst these changes have brought short term frustrations
for the Group, it is a clear sign of maturation in the industry as
renewable energy becomes cost competitive with fossil fuels. This
procurement pattern, along with the aforementioned seasonality, is
likely to prevail and we have aligned our business operations
accordingly.
Despite these challenges, we have delivered growth in Group
revenue of 28%. This growth has been generated from new offshore
wind products, increased volume in the oil and gas market and from
the acquisition of Subsea Innovation, which contributed GBP3.5m to
revenue.
It is important to note that Tekmar Energy has maintained its
unrivalled supplier position winning 100% share of the European
offshore wind market in FY19 for our core product TEKLINK(R) cable
protection system.
I am pleased to report that we have made impressive progress on
new product development, increasing the number of products we can
offer to new and existing customers from 20 to 47. This is an
important step for the Group; it increases our ability to grow
organically and broadens the Group's addressable market, expanding
our offering to customers and our ability to increase revenue per
project across the lifecycle.
To support the Group's growth ambitions and improving Market
Visibility, we have increased our headcount by 65% to 180 through
the introduction of Tekmar Group (4) acquisition of Subsea
Innovation (28) and Ryder Geotechnical (4), as well as organically
to create additional engineering capacity.
I am delighted to report that we achieved an excellent record of
zero lost time safety incidents, during the year, and improved our
quality performance indicators, adhering to our core values of
excellence and 'safety first' - a vital requirement for suppliers
in our markets.
Markets
The market and product split for the full year was, as indicated
in our Half Year results, 70% offshore wind (FY18: 84%) and 30% oil
and gas (FY18: 16%) with 40% coming from our core TekLink(R) CPS
product (FY18: 61%). With 60% of our sales in FY19 coming from
other products, this demonstrates the success of our
diversification strategy in terms of product mix.
All businesses in the Group supply both the offshore wind and
oil and gas markets. Our aim is to create a Group in which no
customer is unique to one portfolio business.
Our core markets continue to show strong long-term growth
potential. Global cumulative capacity in offshore wind is expected
to rise from 25 GW to 227 GW, creating a CAGR of above 20% from
2018 to 2028. Demand for products for the oil and gas market is at
a three-year high with oil prices sustained above $50 price per
barrel, which is assumed to be above the trigger for new offshore
capital expenditure approvals.
Operational review
Tekmar Energy - 84% of Group revenue
Tekmar Energy is a technology specialist focusing on the design,
engineering and manufacture of subsea protection for dynamic
products across multiple subsea markets including offshore wind,
oil and gas and telecoms. The business is the world market leader
in subsea cable protection system for offshore wind and is renowned
for its patented TekLink(R) technology, which is used on 75% of the
world's installed offshore wind farms.
The business has, as previously mentioned, maintained its
unrivalled position in OWF with our 8th Generation securing seven
new projects for 850 systems during the year within the EU. Outside
TEKLINK(R), Tekmar Energy secured three new projects for 168
systems, including, as reported in an RNS in February, a large
scope for a bespoke remedial cable protection system for
replacement subsea cables. Tekmar Energy also successfully
delivered 132 systems into China for one of the largest Chinese
wind farms. The business secured its largest order to-date for 226
hang-off systems onto the world's largest offshore wind farm
Ørsted's Hornsea 1 project.
Two strategic frameworks with customers Ørsted and Royal
Boskalis Westminster N.V. (formally VBMS) were secured during the
year. Ørsted is the world's biggest offshore wind developer and
Royal Boskalis Westminster is market leader in offshore cable
installation. The award of these agreements increases our
confidence in securing our future pipeline.
On the back of recent offshore wind success in China, Tekmar
Energy opened a dedicated office in Shanghai and established a
Wholly Foreign-Owned Enterprise, "Tekmar Marine Technology Company
Limited". This office now employs four native speakers, who also
support the wider Tekmar Group on sales activity for the APAC
region. The strategy for China is to export core polyurethane
products from the UK, whilst project managing the build and
procurement of metallic parts in-country, to provide local content
value. Local content (also called in-country value) is often a
stipulation for overseas contracts, ensuring long term benefit to
the economic prosperity in the host region.
Following on from previous agency agreements, Tekmar Energy has
continued to develop within the Middle East. As part of the
business's strategic plan, local content arrangements have been
established in Saudi Arabi. The first "In-Kingdom" project was
delivered in November 2018, as part of the recently awarded, long
term agreement that National Petroleum Construction Company (NPCC)
has with Saudi Aramco.
Tekmar Energy contributed 33% to total Group revenues from
non-core (excluding TekLink(R)) products, comprising 16% subsea, 5%
OPEX cable protection repair solutions, 5% other OWF and 4%
hang-off product solutions, increasing its respective market share
within these product groups.
Subsea Innovation - 12% of Group revenue:
Subsea Innovation is a global leader in the design, manufacture
and supply of complex engineered equipment and technology used in
the offshore energy market. Its products include large equipment
handling systems which operate on the back of pipelay installation
vessels; emergency pipeline repair clamps (EPRC) which protect
major oil and gas pipelines, and bespoke equipment for use in the
construction of offshore energy projects.
We completed the acquisition of Subsea Innovation in September
2018 for a maximum consideration of GBP4m, with circa GBP3m in
fixed assets. The integration has gone seamlessly. Under the
ownership of the Group, Subsea Innovation has turned around from a
loss-making position in FY18 to contributing GBP3.5m in revenue and
GBP0.5m in Adjusted EBITDA in the six months of the financial year
following completion.
We have invested in people in this business, adding engineers to
meet demand and build capacity to fulfil the clear growth
opportunities. Since we acquired Subsea Innovation, it has secured
a record order book of new work with a new Dutch customer, Royal
IHC, for the design and build of pipeline installation tools and
back-deck equipment. In addition, the business has generated a
three-year record level of customer spend on proprietary
technology, primarily with existing customers, such as Subsea 7 for
pipeline repair equipment and Saipem for back-deck
refurbishments.
AgileTek Engineering ("AgileTek") - 4% of Group revenue:
AgileTek is an award-winning subsea engineering consultancy for
offshore energy projects, which helps its clients de-risk projects
through advanced computer simulation and analysis.
AgileTek's scope for analytical engineering analysis enables the
Group to differentiate itself from other technology providers and
give us earlier involvement in a project's lifecycle, giving us a
clear competitive advantage. In addition, its strategic value, this
business grew revenues by 50% to GBP1m in FY19, contributing
Adjusted EBITDA of GBP117,000, while also more than doubling its
own independent customer base to 18.
In March, AgileTek completed its first acquisition of an 80%
share in Ryder Geotechnical Limited for a nominal consideration of
GBP2 with an option to buy the remaining 20% for a maximum
consideration of GBP2m. The acquisition of Ryder increases the
Group's ability to generate greater revenue per project, extends
our involvement in the project lifecycle and provides a further
opportunity to leverage our existing customers, with Group
companies now joint bidding on multiple up-and-coming offshore wind
projects.
Outlook
The Group's strategy, primary focus and vision remain unchanged.
We are confident that the long-term growth prospects of the global
offshore wind market are strong and that Tekmar Group is well
positioned to capitalise on this opportunity.
The Group is focused on building a strategic portfolio of
products and services, which will strengthen its value proposition
further. We continue to focus on our three areas of sustainable
growth: organic with the pending uplift in market demand;
accelerated with more focus overseas and increase in our technology
offering; and acquisitive supporting our vision and broadening our
technology offering, to create full life cycle revenues which can
leverage Group support.
James Ritchie
CEO
FINANCIAL REVIEW
I am pleased to report that, during our first year as a plc, we
increased revenue by 28% and moved the business from loss making to
profitability on a PBT basis. The IPO in June 2018 strengthened the
Group's balance sheet and has enabled us to invest in growth and
diversification. Whilst acquiring two strategically important
businesses during the year, the Group ended FY19 with healthy cash
balances.
Year ended 31 March 2019 Year ended 31 March 2018
GBPm Adjusted Adjusted GBPm Adjusted Adjusted
items items
Revenue 28.1 28.1 Revenue 21.9 21.9
EBITDA 4.2 0.6 4.8 EBITDA 4.8 0.1 4.9
PBT 2.0 0.6 2.6 PBT (0.4) 0.1 (0.3)
PAT 2.4 0.6 3.0 PAT (0.1) 0.1 0.0
Adjusted 6.0p Adjusted N/A
EPS * EPS
---------- ----- --------- --------- --------- ------ --------- ---------
* Adjusted EPS is a key metric used by the Directors since IPO
as it aligns to the analysts' method of calculation. This measure
differs from that in Note 6 as it is based on Adjusted PAT and the
shares in issue at the end of the year.
Overview
When we provided our first interim plc statements in December
2018 it was disappointing to report a loss at Adjusted EBITDA level
for the six months to 30 September, particularly as we had been
extremely successful in winning work during the period. As
discussed at the time, this was due to changes in the procurement
patterns of customers, particularly within the offshore wind
sector, which impacted the timings of projects and pushed some
expected revenues into the second half of the year and some into
FY20. We developed and executed a plan to ensure a strong result in
H2, in line with revised market expectations.
Revenue
Revenue increased by 28%. The acquisition of Subsea Innovation
accounted for half of this with the balance driven by the second
half plan to mitigate the delays experienced in offshore wind
projects. This delivered a different product mix, with more
emphasis on lower margin non-offshore wind markets, ensuring we
maintained Adjusted EBITDA at last year's level, rather than the
year on year growth originally expected.
Costs
The increase in operating expenses from GBP5.2m to GBP7.0m was
largely due to the expansion of the Group, following our
acquisition of Subsea Innovation and additional expenses associated
with listing on AIM and running a plc.
Adjusted EBITDA
We focus on Adjusted EBITDA as a primary KPI across the
businesses to provide a consistent measure of trading performance.
We adjust EBITDA to remove certain non-cash and exceptional items
to provide a more accurate reflection of underlying earnings. The
Board reviews all exceptional items to ensure resulting Adjusted
EBITDA achieves this. For the period ended 31 March 2019, the
adjustment includes costs relating to the IPO and acquisition
activities. We also adjust for share based payment charges,
relating to the IPO options and SIP schemes. The gain on bargain
purchase relates to the Ryder acquisition.
Adjusted items
GBP000 FY19 FY18
IPO costs 204 -
Professional
fees - acquisition 117 52
Gain on bargain (95) -
purchase
Other fees - 71
Share based payment 418 -
charge
Total 644 123
---------------------- ----- -----
Profit before tax
Depreciation charges increased due to the early adoption of IFRS
16 Leases, which moved costs from operating expenses for this year.
Amortisation includes the charge relating to the acquisition of
intangible assets on the purchase of Subsea Innovation.
The improvement year over year is largely due to the reduction
in interest charges, arising from the repayment of the debt
instruments in place under the previous private equity ownership.
Funds raised from the IPO allowed us to repay all debt in June 2018
with the interest reflecting the first quarter charge only . As the
Group is now debt free, the only remaining sources of interest
costs are from interest recognised to increase the lease liability
under IFRS16 and derivatives relating to foreign currency
transactions (see below).
Profit after tax
Taxation is a major focus across the Group, as we capture the
benefits available to us under the R&D tax credit and patent
box regimes, along with loss relief from previous periods. These,
combined with prior year adjustments, resulted in a tax credit in
the year of GBP0.4m.
Foreign currency
Whilst we trade internationally, the majority of our contracts,
both customers and supply chain, are in GBP. In the year under
review, we delivered three sizeable contracts in Euros and
purchased forward currency transactions to mitigate this risk. The
closing rate for revaluation of Euro balances at the year end was
1.1605 (FY18: 1.1410).
Our businesses
Revenue by business Revenue by market
GBPm FY19 FY18 FY19 FY18
Offshore
Tekmar Energy 24.1 21.6 wind 19.2 18.1
Subsea Innovation 3.5 - Subsea 8.4 3.5
AgileTek 1.0 0.7 Engineering 0.5 0.3
Intercompany
elimination (0.5) (0.4)
-------------------- ------ ------ ------------ ----- -----
Total 28.1 21.9 Total 28.1 21.9
-------------------- ------ ------ ------------ ----- -----
Gross profit by business Gross Profit by market
GBPm FY19 FY18 FY19 FY18
Offshore
Tekmar Energy 8.2 8.5 wind 9.0 9.6
Subsea Innovation 1.1 - Subsea 2.8 1.2
AgileTek 0.6 0.4 Engineering 0.6 0.4
Unallocated
costs (2.5) (2.3)
Total 9.9 8.9 Total 9.9 8.9
------------------- ----- ----- ---------------- ------ ------
Adjusted EBITDA by business
GBPm FY19 FY18
Tekmar Energy 4.6 5.1
Subsea Innovation 0.5 -
AgileTek 0.1 (0.2)
Group (0.4) -
Total 4.8 4.9
-------------------- ------ ------
Tekmar Energy
We achieved growth of 6% in offshore wind despite the delays to
project timings. This was achieved with additional revenue from new
products developed for this market. Revenue also increased as a
result of expanding our customer base in other subsea sectors,
predominantly oil and gas.
In the drive to maintain our competitive position, we
continually review our product design and supply chain
relationships to ensure we provide the most robust cost-effective
solution to customers.
Unallocated costs in the table above (gross profit by market)
mainly relate to the manufacturing costs within this business,
which were in line with previous years despite the additional
throughput.
Subsea Innovation
Following the acquisition in September 2018, the team at Subsea
Innovation has made considerable progress. Prior to acquisition,
the business was loss making. The team have turned this round by
securing profitable projects on accelerated customer timelines, the
majority coming from the oil and gas sector. The integration of
Subsea Innovation into the Group has been seamless and it has made
a strong financial contribution in the six months since
joining.
AgileTek
In addition to external sales, AgileTek provides support to the
other businesses in the Group with internal sales of GBP0.5m to
Tekmar Energy in the year.
We completed the acquisition of 80% of the share capital in
Ryder Geotechnical at the end of March 2019, which significantly
complements the engineering skills within AgileTek. Given the
timing of the deal, there is no trading impact in this year's
P&L.
Acquisitions
We completed two acquisitions during the year.
Subsea Innovation - 100% of the share capital of Subsea
Innovation Limited was acquired in September 2018. Consideration
was made up of GBP66k in cash, GBP1m of Group shares and GBP1m of
contingent consideration based on the business performance to 31
March 2020. Funding of GBP1.8m was also provided to the business
for the repayment of director and bank loans. The contingent
consideration is considered highly likely to be paid so the fair
value of the acquisition is deemed to be the total amount payable
and has not been discounted due to the timeframe for payment being
short. All consideration was recognised as either tangible or
intangible assets and the deferred tax liability on the acquired
intangibles is treated as goodwill.
Ryder Geotechnical - 80% of the share capital of Ryder
Geotechnical Limited was acquired at the end of March 2019 for
consideration of GBP2, with a working capital facility being
provided to the business by the Group to fund growth. This gave
rise to a gain on bargain purchase of GBP95k, which was recognised
as an exceptional credit in the Income Statement. The Group holds
an option to purchase the remaining 20% of the business by the end
of the third full year of ownership, subject to certain financial
conditions being met. This option has not been valued in the
financial statements at year end as it vesting is wholly within our
discretion.
Balance Sheet
Balance Sheet
GBPm FY19 FY18
Fixed Assets 5.5 1.4
Other non-current
assets 21.8 20.2
Stock 1.9 1.8
Trade & other
receivables 20.0 8.8
Cash 4.2 2.6
Trade & other
payables 9.8 6.7
Other non-current
liabilities 0.8 38.0
-------------------- ----- -----
Fixed Assets
We acquired GBP3m of fixed assets as part of the Subsea
Innovation deal with GBP2.7m relating to the property, Innovation
House. We also invested GBP0.8m in new production equipment within
Tekmar Energy, predominantly being new tooling to support the
efficiency programme being rolled out in the manufacturing plant.
In addition, the net impact of adopting IFRS16 was GBP0.7m.
Other non-current assets
This relates primarily to the goodwill arising on the original
management buy-out in 2011 (GBP19.6m). During the year, there has
been significant investment within Tekmar Energy on new product
development (GBP0.8m) and additional intangible assets arising on
the acquisition of Subsea Innovation (GBP1.2m).
Trade and other receivables
We closed the year with unusually high levels of accrued income
reflecting the significant volume of production activity in the
final quarter (GBP13.5m). The majority of this relates to offshore
wind projects previously delayed from the first half of the year.
This balance unwinds into trade receivables as the contractual
milestones are achieved.
Cash
As part of the IPO, we raised additional funding for the
business to invest in growth (GBP8.2m after costs). We invested
GBP2m of cash in the acquisition of Subsea Innovation and a further
GBP2m to support the businesses in their investment plans. We
closed the year with a healthy cash balance across the Group, which
is forecast to improve significantly as the current high levels of
working capital unwind. The majority of the balance is held in GBP
with GBP0.4m held in Euros.
Trade and other payables
Trade and other payables includes the deferred consideration
(GBP1m) under the Subsea Innovation acquisition which we expect to
pay within twelve months.
Other non-current liabilities
Other non-current liabilities relates to the lease liabilities
in relation to IFRS16 and deferred grant income. Last year reflects
the equity debt instruments that were repaid following the IPO.
Sue Hurst
CFO
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2019
Note 2019 2018
------- --------- ---------
GBP'000 GBP'000
Revenue 4 28,082 21,891
Cost of sales (18,190) (12,962)
--------- ---------
Gross profit 9,892 8,929
Operating expenses (6,987) (5,177)
Other operating income - 56
--------- ---------
Group operating profit 2,905 3,808
Analysed as:
Adjusted EBITDA([1]) 4,833 4,947
Depreciation 9 (808) (563)
Amortisation 8 (476) (453)
Share based payments charge (418) -
Exceptional items (226) (123)
-------------------------------------- ------- --------- ---------
Group operating profit 2,905 3,808
-------------------------------------- ------- --------- ---------
Finance costs (1,066) (4,192)
Finance income 147 4
--------- ---------
Net finance costs 5 (919) (4,188)
Profit/(loss) before taxation 1,986 (380)
Taxation 7 407 270
--------- ---------
Profit/(loss) for the year and total
comprehensive income/(expense) 2,393 (110)
========= =========
Attributable to owners of the parent 2,393 (59)
Attributable to the non-controlling
interest - (51)
--------- ---------
2,393 (110)
========= =========
Profit/(loss) per share (pence)
Basic 6 4.75 (0.22)
Diluted 6 4.63 (0.22)
========= =========
There are no items of Other Comprehensive Income.
Note 1: Adjusted EBITDA, which is defined as profit before
finance costs, tax, depreciation, amortisation, share based
payments charge, and exceptional items is a non-GAAP metric used by
management and is not an IFRS disclosure.
All results derive from continuing operations.
CONSOLIDATED BALANCE SHEET
as at 31 March 2019
Note 2019 2018
------- --------- ---------
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 9 5,501 1,401
Goodwill and other intangibles 8 21,837 20,005
Deferred tax asset - 177
--------- ---------
Total non-current assets 27,338 21,583
--------- ---------
Current assets
Inventory 1,914 1,842
Trade and other receivables 10 19,537 8,493
Corporation tax recoverable 459 263
Cash and cash equivalents 4,190 2,617
--------- ---------
Total current assets 26,100 13,215
--------- ---------
Total assets 53,438 34,798
========= =========
Equity and liabilities
Share capital 507 -
Share premium 64,100 -
Merger relief reserve 993 -
Merger reserve (12,685) 2,886
Retained losses (10,098) (12,704)
--------- ---------
Total equity/(deficit) 42,817 (9,818)
Non-current liabilities
Borrowings 487 32,521
Trade and other payables 358 5,430
Deferred tax liability 3 -
--------- ---------
Total non-current liabilities 848 37,951
--------- ---------
Current liabilities
Other interest-bearing loans and borrowings 378 -
Trade and other payables 9,395 6,665
Total current liabilities 9,773 6,665
--------- ---------
Total liabilities 10,621 44,616
--------- ---------
Total equity and liabilities 53,438 34,798
========= =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2019
Total equity
Merger attributable
Share Share relief Merger Retained to owners of Non-controlling Total
capital premium reserve reserve earnings the parent interest equity
---------- ---------- ---------- ---------- ---------- ------------ --------------- -----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
April 2017 - - - 2,886 (12,645) (9,759) 51 (9,708)
========== ========== ========== ========== ========== ============ =============== ===========
Loss for the
year - - - - (59) (59) (51) (110)
Total
comprehensive
expense for
the year - - - - (59) (59) (51) (110)
Balance at 31
March 2018 - - - 2,886 (12,704) (9,818) - (9,818)
========== ========== ========== ========== ========== ============ =============== ===========
Adjustment on
adoption of
IFRS 16 - - - - (163) (163) - (163)
---------- ---------- ---------- ---------- ---------- ------------ --------------- -----------
Adjusted
balance at 1
April 2018 - - - 2,886 (12,867) (9,981) - (9,981)
---------- ---------- ---------- ---------- ---------- ------------ --------------- -----------
Profit for the
year - - - - 2,393 2,393 - 2,393
---------- ---------- ---------- ---------- ---------- ------------ --------------- -----------
Total
comprehensive
income for
the year - - - - 2,393 2,393 - 2,393
---------- ---------- ---------- ---------- ---------- ------------ --------------- -----------
Issue of
shares on IPO 500 64,500 - (15,571) - 49,429 - 49,429
Expenses of
the IPO - (400) - - - (400) - (400)
Issue of
shares post
IPO 7 - 993 - - 1,000 - 1,000
Share based
payments - - - - 376 376 - 376
Total
transactions
with owners,
recognised
directly in
equity 507 64,100 993 (15,571) 376 50,405 - 50,405
Balance at 31
March 2019 507 64,100 993 (12,685) (10,098) 42,817 - 42,817
========== ========== ========== ========== ========== ============ =============== ===========
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2019
2019 2018
--------- --------
GBP'000 GBP'000
Cash flows from operating activities
Profit/(Loss) before taxation 1,986 (380)
Adjustments for:
Depreciation 808 563
Amortisation of intangible assets 476 453
Share based payments charge 345 -
Other operating income - (54)
Gain on bargain purchase (95) -
Finance costs 1,066 4,192
Finance income (147) (4)
--------- --------
4,439 4,770
Changes in working capital:
Decrease/(increase) in inventories 176 (605)
(Increase) in trade and other receivables (10,493) (40)
Increase in trade and other payables 2,876 2,318
(Decrease) in provisions (131) (300)
--------- --------
Cash (used in)/generated from operations (3,133) 6,143
Tax recovered / (paid) 180 (250)
--------- --------
Net cash (outflow) inflow from operating
activities (2,953) 5,893
--------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (996) (248)
Purchase of intangible assets (865) (124)
Proceeds on sale of property, plant
and equipment 3 1
Acquisition of subsidiary net of cash (168) -
acquired
Interest received 147 4
--------- --------
Net cash outflow from investing activities (1,879) (367)
--------- --------
Cash flows from financing activities
Repayment of borrowings (33,282) (2,250)
Repayment of other borrowings (1,771) -
Proceeds from issues of shares 49,429 -
Expenses of the IPO (400) -
Interest paid (7,571) (2,194)
--------- --------
Net cash inflow/(outflow) from financing
activities 6,405 (4,444)
--------- --------
Net increase in cash and cash equivalents 1,573 1,082
Cash and cash equivalents at beginning
of year 2,617 1,535
Cash and cash equivalents at end of
year 4,190 2,617
--------- --------
NOTES TO THE GROUP FINANCIAL STATEMENTS
for the year ended 31 March 2019
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 Unit 1, Park 2000, Millennium Way,
Aycliffe Business Park, Newton Aycliffe, County Durham, DL5 6AR.
The registered company number is 11383143.
The principal activity of the Company and its subsidiaries
(together the "Group") is that of design, manufacture and supply of
subsea cable, umbilical and flexible protection systems operating
across the Offshore Wind, Oil & Gas and other energy sectors,
including associated subsea engineering services.
Initial public offering ("IPO")
The Company's shares were admitted to trading on the AIM Market,
a market operated by the London Stock Exchange, on 20 June 2018.
These Group financial statements are the Company's first subsequent
to its admission to AIM and followed a group reorganisation to
facilitate the IPO. The consolidated financial statements were
approved and authorised for issue by a duly appointed and
authorised committee of the Board of Directors on 24 June 2019.
These Group financial statements have been prepared under merger
accounting principles because the transaction under which the
Company became the holding company of Tekmar Limited, the previous
parent undertaking of the Tekmar trading operations, was a group
reorganisation as the Company did not actively trade at that
time.
The result of the application of the capital reorganisation is
to present the financial statements as if the Company had always
owned the Tekmar trading operations.
Group reorganisation
The principal steps of the Group reorganisation were as
follows:
The Company was incorporated on 25 May 2018 as a private company
limited by shares in England and Wales, with the allotment of 1
share of GBP0.01.
The Company issued 5,000,000 redeemable shares of GBP0.01 each
in the capital of the Company which were redeemed shortly after
Admission.
Under an Escrow agreement dated 14 June 2018, the selling
shareholders agreed to sell their shares in Tekmar Limited to the
Company immediately on Admission and the selling shareholder of
AgileTek Engineering Limited agreed to sell his shares to Tekmar
Holdings Limited immediately on Admission.
The acquisition by the Company of the shares in Tekmar Limited
and AgileTek Engineering Limited constitutes a group reorganisation
and the transaction is accounted for as a capital reorganisation.
Under merger accounting principles, the assets and liabilities of
the subsidiaries are consolidated at book value in the financial
statements and the consolidated reserves of the Group are adjusted
to reflect the statutory share capital, share premium and the
reserves of the Company as if it had always existed.
The Company issued 50,000,000 shares of GBP0.01 each on
Admission to AIM on 20 June 2018. The consideration in excess of
the nominal value of GBP500,000 has been recorded as share premium.
An amount was also recorded in merger reserve in respect of the
element of the IPO proceeds to acquire the existing group. IPO
costs of GBP400,000 have been charged to the share premium
account.
Forward looking statements
Certain statements in this Annual report are forward looking.
The terms "expect", "anticipate", "should be", "will be" and
similar expressions identify forward-looking statements. Although
the Board of Directors believes that the expectations reflected in
these forward-looking statements are reasonable, such statements
are subject to a number of risks and uncertainties and events could
differ materially from those expressed or implied by these
forward-looking statements.
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.
(a) Basis of preparation
The results for the year ended 31 March 2019 have been prepared
in accordance with International Financial Reporting Standards
("IFRS"), and their interpretations adopted by the European Union.
It should be read in conjunction with the Historical Financial
Information for the three years ended 31 March 2018 within the
Company's Admission Document and which was prepared in accordance
with International Financial Reporting Standards as endorsed by the
European Union ('IFRS'), International Financial Reporting
Standards Interpretation Committee ('IFRS IC') interpretations and
those provisions of the Companies Act 2006 applicable to companies
reporting under IFRS. The financial statements have been prepared
on the going concern basis and on the historical cost convention
modified for the revaluation of certain financial instruments.
Tekmar Group plc ("the Company") has adopted all IFRS in issue
and effective for the year.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of IFRS, this announcement does not itself
contain sufficient information to comply with IFRS. The Company
expects to publish full financial statements that comply with IFRS
in July 2019.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 March 2019 or
2018, but is derived from those accounts for 2019 and should be
read in conjunction with the Historical Financial Information for
the three years ended 31 March 2018 within the Company's Admission
Document. The comparatives for the full year ended 31 March 2018
are not the Company's full statutory accounts for that year. They
have been extracted from the Historical Financial Information
within the Company's Admission Document. The Reporting Accountants
have reported on those accounts: their reports were unqualified,
did not draw attention to any matters by way of emphasis and did
not contain statements under s498 (2) or (3) of the Companies Act
2006.
The financial information presented in respect of the year ended
31 March 2019 has been prepared on a basis consistent with that
presented in the Company's Admission Document.
(b) Going concern
The Group meets its day-to-day working capital requirements
through its available banking facilities. The Directors have
prepared cash flow forecasts and projections for the years ending
31 March 2021. There is currently no external debt and the Group
has no covenants which it needs to comply with. Taking account of
reasonably foreseeable changes in trading performance, these
forecasts and projections show that the Group is expected to have a
sufficient level of financial resources available through current
and future facilities. Furthermore, the Directors have assessed the
future funding requirements of the Group and compared them with the
level of available borrowing facilities. Based on this work, the
Directors are satisfied that the Group has adequate resources to
continue in operational existence for the foreseeable future. For
this reason they continue to adopt the going concern basis in
preparing the interim financial statements.
(c) New standards, amendments and interpretations
The Group has adopted the following new standards and
interpretations:
-- IFRS 16 - Leases (effective 1 January 2019 and early adopted).
IFRS 16 "Leases" replaced IAS 17 "Leases" and sets out the
principles for the recognition, measurement, presentation and
disclosure of leases and has been applied from 1 January 2018 using
the modified retrospective approach. Under IFRS 16 the main
difference for the Group is that all leases that the Group holds as
a lessee are recognised on the balance sheet, as both a
right-of-use asset and a largely offsetting lease liability. The
right-of-use asset is depreciated in accordance with IAS 16
'Property, Plant and Equipment' and the liability is increased for
the accumulation of interest and reduced by lease payments. There
is no impact on cashflow.
On the income statement the Group recognises a depreciation
charge and an interest charge instead of a straight-line operating
cost. This changes the timing of cost recognition on the lease,
resulting in extra cost in early years of the lease, and reduced
cost towards the end of the lease.
The Group elected to exclude all short-term leases and all
leases for which the underlying asset is of low value.
There are no standards endorsed but not yet effective that will
have a significant impact going forward.
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group financial statements under IFRS
requires the Directors to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities. Estimates and
judgements are continually evaluated and are based on historical
experience and other factors including expectations of future
events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The Directors consider that the following estimates and
judgements are likely to have the most significant effect on the
amounts recognised in the Group financial statements.
(a) Critical judgements in applying the entity's accounting policies
Revenue recognition
The recognition of revenue on contracts requires judgement and
estimates on the overall contract margin. This judgement is based
on contract value, historical experience and forecasts of future
outcomes. Judgement is applied in determining the most appropriate
method to apply in respect of recognising revenue over-time as the
service is performed using either the input or output methods. For
the large, offshore wind projects in the Tekmar Energy business
which were not complete at year end, and require the most judgment,
if the percentage completion was 1% different to management's
estimate the revenue impact would be GBP116,000. However, the
likelihood of this is small, as the percentage completion is based
upon items that are physically counted at year end.
Share based payments
The weighted average fair value of equity options granted is
determined using various fair value models, including
Black-Scholes-Merton and Monte Carlo models. The Group makes
assumptions in identifying the appropriate inputs. The assumptions
are subject to estimation and are considered for reasonableness at
each balance sheet date. If the fair value assumption on the
options was changed by 5% this would lead to a GBP17,000 difference
in the share-based payment charge.
IPO accounting
For the reasons set out in note 1 the Group applied merger
accounting principles to the IPO accounting. This treatment was
mandatory and therefore no reasonable sensitivity can be applied to
the numbers involved.
(b) Critical accounting estimates
Subsea Innovation acquisition accounting
Accounting for the purchase price allocation on the Subsea
Innovation acquisition was a critical accounting estimate made
during the year. In particular, deriving the value of the
intangible assets acquired (GBP1,184,000) and goodwill attributed
(GBP234,000) were critical estimates. If these intangibles had not
been identified as such, and instead the balance recognised as
goodwill, profit for the year would have been higher by
GBP109,000.
4. SEGMENTAL REPORTING
The trading operations of the Group are only in the global
offshore energy industry and are all continuing. This includes the
activities of Tekmar Energy Limited, Subsea Innovation Limited, and
AgileTek Engineering Limited. In addition, the centralised group
services and assets provided to Group companies are considered
incidental to the activities of the Group and have therefore not
been shown as a separate operating segment but have been subsumed
within the global offshore energy industry. All assets of the Group
reside in the UK.
Major customers
In the year ended 31 March 2019 there were three major customers
that individually accounted for at least 10% of total revenues
(2018: five customers). The revenues relating to these in the year
to 31 March 2019 were GBP11,217,000 (2018: GBP17,047,000). Included
within this is revenue from multiple projects with different
entities within each customer.
Analysis of revenue
2019 2018
------- -------
GBP'000 GBP'000
UK & Ireland 10,483 5,379
Rest of the World 17,599 16,512
------- -------
28,082 21,891
======= =======
5. NET FINANCE COSTS
2019 2018
------- -------
GBP'000 GBP'000
Interest payable and similar charges
On loan notes 144 624
On other loans 664 2,392
On preference shares classed as liabilities 258 1,123
Fair value movement on forward foreign
exchange contracts - 53
------- -------
Total interest payable and similar charges 1,066 4,192
Interest receivable and similar income
Fair value movement on forward foreign
exchange contracts (142) -
Interest receivable (5) (4)
------- -------
Total interest receivable and similar income (147) (4)
Net finance costs 919 4,188
======= =======
6. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the earnings
attributable to equity shareholders by the weighted average number
of ordinary shares in issue. Diluted earnings per share are
calculated by including the impact of conditional share awards
granted during the year.
The calculation of basic and diluted profit/(loss) per share is
based on the following data:
2019 2018
------------ -------------------------------
Earnings (GBP'000)
Earnings for the purposes of basic and
diluted earnings per
share being profit/(loss) for the year
attributable to equity shareholders 2,393 (110)
------------ -------------------------------
Number of shares
Weighted average number of shares for the
purposes of basic earnings per share 50,351,745 50,000,000
Weighted average dilutive effect of conditional
share awards 1,336,986 -
------------ -------------------------------
Weighted average number of shares for the
purposes of diluted earnings per share 51,688,732 50,000,000
------------ -------------------------------
Profit/(loss) per ordinary share (pence)
Basic profit/(loss) per ordinary share 4.75 (0.22)
Diluted profit/(loss) per ordinary share 4.63 (0.22)
------------ -------------------------------
The denominators used to calculate basic earnings per share are
the same as those shown above for both basic and diluted earnings
per share.
Adjusted EPS is calculated as follows:
2019
-----------
Earnings (GBP'000)
Earnings for the purposes of basic and diluted
earnings per
share being adjusted profit for the year attributable
to equity shareholders 3,037
-----------
Number of shares
Number of shares in issue at year end 50,687,852
Profit per ordinary share (pence)
Basic profit per ordinary share 6.0
7. TAXATION
Analysis of credit in year 2019 2018
------- -------
GBP'000 GBP'000
Current tax
Current taxation charge for the year - 250
Adjustments in respect of prior periods (384) (383)
Total current tax (384) (133)
------- -------
Deferred tax
Origination and reversal of timing differences (23) (23)
Adjustments in respect of prior periods - (114)
------- -------
Total deferred tax (23) (137)
------- -------
Tax on profit/(loss) on ordinary activities (407) (270)
======= =======
Reconciliation of total tax credit:
Profit/(loss) on ordinary activities before
tax 1,986 (380)
------- -------
Profit/(loss) on ordinary activities multiplied
by the rate of corporation tax in the UK
of 19% (2018: 19%) 377 (72)
Effects of:
Non-deductible expenses 178 660
Non-taxable income (55) (238)
Enhanced R&D tax relief (373) (129)
Impact of unrecognised deferred tax assets (145) 3
Effect of change in rates (5) 3
Adjustments in respect of previous periods (384) (497)
------- -------
Total taxation credit (407) (270)
======= =======
The current year's Adjustments in respect of previous periods
relates to tax accruals held at the end of the prior year which did
not crystallise as liabilities upon submission of the final tax
computations for the previous financial year (GBP250,000) coupled
with a prior year R&D claim received during the year
(GBP134,000).
Factors that may affect future tax charges
Changes to the UK corporation tax rates were substantively
enacted as part of Finance Bill 2015 (on 26 October 2015) and
Finance Bill 2016 (on 7 September 2016). These included reductions
to the main rate to reduce the rate to 17% from 1 April 2020, and
this has been reflected in these financial statements.
Our expectation is that the Group will continue to benefit from
incentives, such as Patent box, and this will lead to an effective
tax rate that is lower than the main rate of corporation tax for
future years.
8. GOODWILL AND OTHER INTANGIBLES
Product Trade Customer
Goodwill Software development name relationships Total
-------- -------- ------------ ------- -------------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
COST
As at 1 April 2017 23,471 151 1,105 - - 24,727
Additions - - 124 - - 124
As at 31 March 2018 23,471 151 1,229 - - 24,851
On acquisition 234 25 - 738 446 1,443
Additions - 93 772 - - 865
Disposals - (88) - - - (88)
As at 31 March 2019 23,705 181 2,001 738 446 27,071
-------- -------- ------------ ------- -------------- -------
AMORTISATION AND IMPAIRMENT
As at 1 April 2017 4,109 80 204 - - 4,393
Charge for the year - 50 403 - - 453
-------- -------- ------------ ------- -------------- -------
As at 31 March 2018 4,109 130 607 - - 4,846
Charge for the year - 36 331 36 73 476
Eliminated on disposals - (88) - - - (88)
As at 31 March 2019 4,109 78 938 36 73 5,234
-------- -------- ------------ ------- -------------- -------
NET BOOK VALUE
As at 31 March 2017 19,362 71 901 - - 20,334
======== ======== ============ ======= ============== =======
As at 31 March 2018 19,362 21 622 - - 20,005
======== ======== ============ ======= ============== =======
As at 31 March 2019 19,596 103 1,063 702 373 21,837
======== ======== ============ ======= ============== =======
The remaining amortisation periods for software and product
development are 6 months to 36 months (2018: 5 months to 26
months).
The goodwill, brand and customer relationships additions in the
year relates to the acquisition of Subsea Innovation Ltd as set out
in note 11.
Goodwill has been tested for impairment. The method, key
assumptions and results of the impairment review are detailed
below:
Goodwill is attributed to the only CGU within the Group,
services to the subsea Offshore Wind and Oil and Gas sectors.
Goodwill has been tested for impairment by assessing the value in
use of the cash generating unit. The value in use calculations were
based on projected cash flows in perpetuity. Budgeted cash flows
for 2019 to 2021 were used. These were based on a three-year
forecast with growth rates of 13.2% and 14.9% applied for the
following years. Subsequent years were based on a reduced rate of
growth of 2.0% into perpetuity.
These growth rates are based on past experience and market
conditions and discount rates are consistent with external
information. The growth rates shown are the average applied to the
cash flows of the individual cash generating units and do not form
a basis for estimating the consolidated profits of the Group in the
future.
The discount rate used to test the cash generating units was the
Group's pre-tax WACC of 10.0%.
The value in use calculations described above, together with
sensitivity analysis using reasonable assumptions, indicate ample
headroom and therefore do not give rise to impairment concerns.
Having completed the impairment reviews no impairments have been
identified. Management does not consider that there is any
reasonable downside scenario which would result in an
impairment.
All amortisation charges have been treated as an expense and
charged to cost of sales and operating costs in the income
statement.
9. PROPERTY, PLANT AND EQUIPMENT
Plant Right
Freehold Leasehold Containers and Production Motor Computer of use
property improve-ments and racking equipment tooling vehicles equipment asset Total
---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
COST
As at 1 April
2017 - 873 1,135 1,873 905 11 328 - 5,125
Additions - 5 - 26 177 - 40 - 248
Disposals - - - - - - (1) - (1)
---------
As at 31
March
2018 - 878 1,135 1,899 1,082 11 367 - 5,372
Arising on
acquisition 2,760 - - 234 - - - - 2,994
Right of use
asset
adjustment - - - - - - - 2,360 2,360
Additions - 41 13 176 600 - 60 106 996
Disposals - - (30) (3) - - - (97) (130)
--------- -------------
As at 31
March
2019 2,760 919 1,118 2,306 1,682 11 427 2,369 11,592
DEPRECIATION
As at 1 April
2017 - 623 1,079 753 718 11 224 - 3,408
Charge for
the year - 195 34 160 118 - 56 - 563
As at 31
March
2018 - 818 1,113 913 836 11 280 - 3,971
Right of use
asset
adjustment - - - - - - - 1,439 1,439
Charge for
the year 20 50 16 194 188 - 48 292 808
Eliminated
on disposal - - (30) - - - - (97) (127)
--------- -------------
As at 31
March
2019 20 868 1,099 1,107 1,024 11 328 1,634 6,091
NET BOOK
VALUE
========= =============
As at 31
March
2017 - 250 56 1,120 187 - 104 - 1,717
========= ============= =========== =========== ========== ========= ========== ======= =======
As at 31
March
2018 - 60 22 986 246 - 87 - 1,401
========= ============= =========== =========== ========== ========= ========== ======= =======
As at 31
March
2019 2,740 51 19 1,199 658 - 99 735 5,501
========= ============= =========== =========== ========== ========= ========== ======= =======
Depreciation charges are allocated to cost of sales and
operating expenses in the income statement.
The Group has elected to early adopt IFRS 16 using the modified
retrospective approach. At the start of the year this led to the
recognition of right of use assets with a net book value of GBP0.7m
and a lease liability of GBP0.8m. As a result of the change the
Group recognised GBP30,000 of interest and GBP292,000 of
depreciation, offset by a saving in operating costs of GBP357,000
of rental charges. As a result of timing differences between
recognition of the operating expense and depreciation and interest
related to the capitalised lease an adjustment of GBP163,000 was
required to equity. This can be seen in the Statement of changes in
equity. The right of use assets all relate to building leases. Cash
flows during the year in relation to these leases totalled
GBP357,000.
10. TRADE AND OTHER RECEIVABLES
2019 2018
------- -------
GBP'000 GBP'000
Amounts falling due within one year:
Trade receivables not past due 3,279 984
Trade receivables past due 1,462 2,358
Trade receivables net 4,741 3,342
Contract assets 13,515 4,432
Other debtors 693 404
Prepayments and accrued income 441 315
Derivative financial assets 147 -
19,537 8,493
======= =======
Trade and other receivables are all current and any fair value
difference is not material. They are considered past due once they
have passed their contracted due date and are assessed for
impairment based upon the expected credit losses model.
The carrying amounts of the Group's trade and other receivables
are all denominated in GBP. The derivative financial asset relates
to forward foreign currency contracts.
There have been no provisions for impairment against the trade
and other receivables noted above.
11. BUSINESS COMBINATIONS
On 20 September 2018, the Company acquired the entire share
capital of Subsea Innovation Limited for an initial cash payment of
GBP65,923, shares in the Group of GBP1,000,000 and contingent
consideration of GBP1,000,000. Subsea Innovation Limited is an
innovation leader in the design, manufacture and supply of complex
engineered equipment and technology used in the installation of
subsea equipment for the offshore oil and gas market. Its products
include large equipment handling systems, which operate on the back
of installation vessels; including cable, pipeline and SURF (subsea
umbilical riser and flowline); pipeline repair clamps, which
protect major oil and gas pipelines, and equipment for the
construction of offshore oil and gas projects.
Consideration as at 20 September 2018 GBP'000
Cash 66
Shares 1,000
Contingent consideration to be settled 1,000
--------
Total consideration 2,066
--------
For cash flow disclosure purposes, the amounts are disclosed as
follows:
GBP'000
Cash consideration 66
Overdraft acquired 115
--------
181
--------
Recognised amounts of identifiable assets acquired and
liabilities assumed
Values recognised at acquisition
Book value Adjustments Fair value
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 3,323 (329) 2,994
Other intangibles - software 25 - 25
Other intangibles - customer
relationships - 446 446
Other intangibles - brand - 738 738
Trade and other receivables 314 (11) 303
Inventories 248 - 248
3,910 844 4,754
Liabilities
Borrowings - overdraft (115) - (115)
Trade and other payables (182) (489) (671)
Directors Loan Account (2,623) 1,200 (1,423)
Borrowings (348) - (348)
Deferred tax liabilities - (234) (234)
Provisions (131) - (131)
(3,399) 477 (2,922)
Total identifiable assets 511 1,321 1,832
Goodwill 234
Total 2,066
----------
Subsea Innovation Limited contributed GBP3,572,000 to revenue
and GBP365,000 to profit before tax.
The fair value adjustments reflect:
-- Uplift in the valuation of freehold property to fair value;
-- Finalisation of the purchase price allocation and presentation
of the identified other intangible assets of customer relationships
and brand, with the associated deferred tax liability provided;
and
-- Settlement of certain liabilities on acquisition.
On 28 March 2019, the Group acquired 80% of the share capital of
Ryder Geotechnical Limited for a cash payment of GBP2. Ryder
Geotechnical Limited is involved in geotechnical consulting for
subsea environments.
Consideration as at 28 March 2019 GBP'000
Cash -
Total consideration -
--------
For cash flow disclosure purposes, the amounts are disclosed as
follows:
GBP'000
Cash consideration -
Cash acquired 13
--------
13
--------
Recognised amounts of identifiable assets acquired and
liabilities assumed
Values recognised at acquisition
Book value Adjustments Fair value
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 11 - 11
Trade and other receivables 90 - 90
Cash and cash equivalents 13 - 13
114 - 114
Liabilities
Trade and other payables (14) - (14)
Borrowings (5) - (5)
(19) - (19)
Total identifiable assets 95 - 95
Gain on bargain purchase (95)
Total -
----------
Ryder Geotechnical Limited contributed GBPnil to revenue and
GBPnil to profit before tax due to the close proximity of the
acquisition to the year end.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LLFLTRFISFIA
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