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 half year results for the six months ended 30 September 2018 (HY19).
Key points:
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Successful Initial Public Offering (“IPO”) in June 2018, delivering a strong balance sheet
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Record order book of £12.9m at half year end with Tekmar Energy Limited (“Tekmar Energy”) securing 100% market share of all cable protection systems into European offshore wind projects awarded during the period
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Currently in final negotiations on larger higher margin contracts worth £18.1m, on which Tekmar Energy is the sole bidder (“Preferred Bidder”)
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Short term delay in award of Preferred Bidder contracts and revenue recognition from H1 to H2 19 or H1 20 due to delays in customer procurement decisions
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Product margins (1), strong market share and enquiry conversion targets maintained
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Subsea Innovation Ltd (“Subsea Innovation”), acquired in September 2018, delivered a solid performance in HY19
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Industry confidence high with market analysts upgrading forecasts for global offshore wind generation to 112GW by 2027
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Long-term framework agreements for offshore wind projects secured by Tekmar Energy with Boskalis and Ørsted
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AgileTek Engineering (“AgileTek”) increased external sales by 165%, compared with FY18
Financial overview:
Outlook:
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Short-term delay in Preferred Bidder contract awards and change in product mix expected to impact FY19 results with profit now likely to be closer to that achieved in FY18
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Anticipated return to forecast and profitability in FY20
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The Board remains confident in future growth and ongoing strategy
Alastair MacDonald, Non-executive Chairman of Tekmar Group, said:
“We were delighted with the success of the IPO in June 2018 and in many ways, the business has never been in a better position. We have extremely strong forward market visibility; Tekmar Energy is maintaining its unrivalled market share in our core market, Offshore Wind, having won every European array project awarded during the period; and Subsea Innovation, our first acquisition since IPO, delivered a solid performance.
“Contracting activity has increased during the period and the Group has a record Order Book of £12.9m. There has however, been a delay in the award of higher margin TekLink® offshore wind contracts, on which we have Preferred Bidder status. Our customers have changed lead times from order placement to delivery by up to six months, deferring the signing of contracts by a similar period. We have also experienced increased volume in smaller, lower margin, contracts in HY19. Within the period, approximately 38% of sales were from TekLink® Cable Protection Systems and 62% from other products, which have a lower gross margin. As a consequence, the Group is expecting to generate record revenues in FY19, ahead of current market expectations. However, due to the change in margin relating to product mix, the Board now expects profit for FY19 to be closer to that achieved in FY18. It is important to note that this impact on FY19 profit is purely a timing issue, which will be partially mitigated by profits generated by newly acquired Subsea Innovation.
“Given product margins have been maintained, our strong pipeline and market visibility, the Board is confident that the Group will return to forecast margin and profitability in FY20 and looks to the future with confidence.”
