4th Dec 2018 11:04
LONDON (Alliance News) - Newly-listed engineering services company Tekmar Group PLC on Tuesday reported its first interim results, showing a drop in revenue and a resulting swing to a loss on the timing of contract awards.
Shares in Tekmar - which provides protection systems for subsea cables and offshore engineering services - were down 36% at 81.00 pence each on Tuesday. The stock is down 46% from its 150.00p listing price in June.
For the six months to September 30, Tekmar swung to a pretax loss of GBP2.6 million from a GBP15,000 profit the year before.
The company's revenue in the first half decreased 38% to GBP7.1 million from GBP11.4 million.
Meanwhile, Tekmar's operating expenses increased 27% in the period to GBP3.3 million from GBP2.6 million. However, one-off costs associated with the company's IPO accounted for the rise.
"We were delighted with the success of the IPO in June 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, delivered a solid performance," said Non-Executive Chairman Alastair MacDonald.
Tekmar's order book at September 30 was GBP12.9 million, up from GBP8.9 million last year.
The company also is currently in negotiations for preferred bidder contracts worth GBP18.1 million, up from GBP2.9 million last year.
Tekmar warned, however, there has been a "short term" delay in the award of some preferred bidder contracts - meaning revenue recognition will be moved to the second half of the year or the first half of financial 2020.
Tekmar said customer delays in procurement decisions have led to the delay in contract awards.
The company is expecting record revenue in the current financial year but a "short term" change in product mix will hurt profit, which is now expected to be similar to financial 2018.
For the financial year ended March 2018, Tekmar posted a pretax loss of GBP380,000.
MacDonald said: "Contracting activity has increased during the period and the group has a record order book of GBP12.9 million. 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 the first half. Within the period, approximately 38% of sales were from TekLink Cable Protection Systems and 62% from other products, which have a lower gross margin."
Tekmar said it is confident it will return to profitability in financial 2020 and believes the hit to profit in the current year is "purely a timing issue".
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