Final Results

TEKMAR GROUP PLC

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

FINAL RESULTS

For the year ending 30 September 2024

The Group's financial performance is improving with FY24 in-line with market expectations for the Period

· Adjusted EBITDA of £1.7m (FY23: £0.6m) on revenue of £33m (FY23: £36m), in-line with market expectations, highlighting the successful execution of the Group's profit improvement plan.

· Gross profit of £10.5m (FY23: £8.3m), representing a materially improved gross profit margin of 32.1% (FY23: 23.3%) as remaining low margin backlog from previous years has been worked through in the offshore energy division.

· Operating loss reduced from £7.9m to £3.8m in the year, mainly reflects the profit improvement plan. FY24 includes an impairment charge of £1.5m, a provision of £0.5m in respect of an aged debt balance and £0.7m provision in respect of warranty claims. The prior year includes a £4.7m impairment charge.

· The Group held £4.6m of cash as at 30 September 2024 with net debt of £1.6m. This cash position excludes the SCF Capital Partners £18m convertible loan note facility which remains undrawn and is available to drive growth through acquisitions.

· During the year, the Group completed the divestment of its subsidiary, Subsea Innovation Limited for a total cash consideration of £1.9m. This divestment aligns with Tekmar's strategy to drive profitable growth and improve its financial performance. As at the year end, £0.2m cash was received with £1.7m being deferred.

· Order book as at the end of January 2025 of £16.4m and net debt of £0.4m.

Strategic plan in place to achieve a step-change in scale and transformation

· Refreshed three-year strategy in-place under new CEO, Richard Turner, who was appointed in September 2024. The plan focuses on achieving greater scale through accelerated profitable organic growth and complementary M&A.

· Robust M&A pipeline developed and the Board is actively assessing M&A opportunities.

· Warranty claims in relation to alleged CPS defects have progressed. The Group has recognised a net charge of £0.7m in FY24 from a £5.8m provision which is largely offset by insurance monies received post year end of £5.2m.

Financial KPIs

Commercial KPIs

Notes:

Current trading and outlook

The Board is encouraged that the market environment is improving and supports sustained demand for Tekmar's technology and engineering services across our markets. Moreover, we believe Tekmar's differentiated technology positions the Group to outperform this improving market. This is supported by the Group's developing sales pipeline, which the Board expects will convert to orders and revenue over time. 

Accordingly, we believe 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 our primary focus on increasing order intake through 2025 to position the Group for improved performance in 2026 and beyond.

The Company continues to maintain tight controls on managing the cash requirements of the business to support growth and working capital, including disciplined capex and targeted investment in products and services that represent the greatest opportunity for near-term growth.

Richard Turner, CEO, commented: "Overall, these results demonstrate we now have a stronger platform from which we can execute our medium-term plan to deliver true scale and diversification. FY24 was a transitionary year for Tekmar, where we focused on the basics - providing high-quality engineering, delivering on time and maintaining consistent commercial discipline. This supported the Group reporting its highest level of Adjusted EBITDA since FY20, and a material improvement in gross margin to 32%. Looking ahead, our markets are aligned for growth like never before. Our strategy looks to capitalise on our industry pedigree to drive organic growth across all revenue streams, leverage our operational gearing to enhance our returns on sales, drive value through strategic M&A and generate cash to build our reserves and fuel our growth."

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.

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.

Subscribe to further news from Tekmar Group at Group News.

Chairman's Statement

I joined the Board in April 2023, initially as Non-Executive Director, and was appointed Chair in June 2024. The period of time with which I have been involved with Tekmar has strengthened my conviction about the opportunity we have to make Tekmar a stand-out offshore energy business - a business that delivers exceptional value for customers and creates significant value for shareholders. This is what drives us as a Board. We start from a position of unmatched experience in the offshore wind market and a reputation across the broader industry for engineering and technical excellence. Our growth strategy builds on these strengths to create a business of much greater scale, through both organic growth and M&A. 2025 is where we underpin the foundations of this growth to support sustained and profitable growth in the years to follow.

2024 was a year of stabilisation for the business and for the industry more widely. The financial results for the year reflect this, with Adjusted EBITDA of £1.7m on revenue of £32.8m. Both divisions were profitable at the Adjusted EBITDA level such that the Group overall delivered its highest level of Adjusted EBITDA since FY20. This was achieved through disciplined execution of projects supporting higher gross margin.

Going forward, we are focused on fundamentally transforming the financial strength of the business through organic growth complemented by meaningful M&A.

Richard Turner was appointed as CEO in September 2024 and has set the strategic plan to build this value. Richard has been involved in the energy industry for over 15 years and brings a strong track record in driving true scale and transformation in his previous leadership roles. 

Our organic growth plan aims to deliver record financial performance for the Group through outperforming an improving and growing market and benefitting from our operational leverage.

Our M&A strategy is based on accelerating scale and strengthening our offering through a logical broadening of the portfolio. Overall, the successful execution of our strategy will build an exceptional and profitable platform with the attributes that investors value.

One of our primary responsibilities as a Board is to support and challenge Richard and the team to deliver from here - to scale the business effectively and to accelerate growth, whilst critically making Tekmar a durable business that will be successful "no matter what" the path of energy transition looks like.

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 in 2024 we were able to secure the 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 we have, and we look ahead with confidence and renewed purpose as we unlock the true potential of Tekmar.

During the year, and in light of the appointments of Lars and David, Ian Ritchey and Julian Brown stepped down from their roles on the Tekmar Board. Julian had been a member of the Board since the IPO in 2018, and Ian joined the Board in 2021.

In February 2025, Alasdair MacDonald stepped down from his position as Director of the Group. Alasdair had been on the Board of Tekmar for over a decade, both as Chairman and CEO.

On behalf of the Board, I would like to reiterate our thanks to Alasdair, Ian and Julian for their contributions to Tekmar over their respective periods, which included supporting the business to navigate the market-wide challenges of recent years.

A final comment on our people. Tekmar is dependent on the capability and commitment of its employees. We are fortunate that our colleagues bring unrivalled experience and expertise to address what can often be complex customer requirements. They demonstrate their commitment to Tekmar on a daily basis and this translates to long-standing service to the business and underpins our pedigree of engineering excellence.

This commitment to Tekmar has been sustained as the business has navigated its way through some challenging periods in recent years. As a Board, we appreciate the hard work of our colleagues as they've supported our improved performance for the benefit of all our stakeholders.

The pressures in the industry are abating and we have a focused growth strategy to deliver true scale for Tekmar as a leading global offshore energy services business.

Our commitment as a Board is to be careful stewards of capital and to promote the best interests of Tekmar's people and shareholders as we position the business for long-term success.

Thank you.

Steve Lockard

Chairman

Chief Executive Officer's Review

I joined the business as CEO in September 2024. Having worked across the offshore energy markets for more than 15 years, I know the Tekmar business, the customers and supply chain. It is clear to me that Tekmar has exceptional growth potential. 

In December 2024, alongside our trading update for FY24, we communicated to the market a summary of our three-year plan to transform Tekmar and realise this potential. We are executing this plan with a business that is positioned for growth and with great people and strong industry pedigree. The services we offer across the full lifecycle of offshore energy projects from front end engineering and design, installation, operation and decommissioning perform a critical role in ensuring security and certainty of supply from offshore assets. Our holistic offering across our protection and assurance technology and engineering services sets us apart in the market and puts us ahead of the competition.

FY24 Performance and FY25 Outlook

FY24 was a transitionary year for Tekmar, where we focused on the basics - providing high-quality engineering, delivering on time and maintaining consistent commercial discipline.

The Group reported Adjusted EBITDA of £1.7m, an increase of £1.1m on a like-for-like basis reflecting the disposal of Subsea Innovation. The improvement in EBITDA primarily reflects consistency of execution, with a material improvement in gross margin to 32% and was achieved despite market conditions which remained challenging in FY24. This is a stable and solid platform against which the business can drive profitable growth.

On a statutory basis, the Group's result for the period before tax from continuing operations was a loss of £4.5m, an improvement of £4m versus the previous year. FY24 includes an impairment charge of £1.5m, a provision of £0.5m in respect of an aged debt balance and £0.7m provision in respect of warranty claims. The prior year includes a £4.7m impairment charge. This reflects an underlying trading improvement of £0.8m.

The Group closed the year with £4.6m of cash at bank (2023: £5.2m) in addition to the availability of undrawn working capital debt facilities of £0.8m with Barclays. The Group's net debt position, including all debt except right of use property leases, was £1.6m at the end of the financial year (2023: £1.4m).

As we look ahead, we are encouraged that the market environment is improving and supports sustained demand for Tekmar's technology and engineering services across our markets. Moreover, we believe 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, we believe 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 our primary focus on increasing order intake through 2025 to position the Group for improved performance in 2026 and beyond.

The Company continues to maintain tight controls on managing the cash requirements of the business to support growth and working capital, including disciplined capex and targeted investment in products and services that represent the greatest opportunity for near-term growth.

Favourable Markets Support Sustained Demand for Tekmar's Technology

The key indicators across offshore energy markets are consistent with an improving market environment.

In offshore wind, there is now a higher volume of projects being sanctioned than ever before as the market moves into recovery and builds momentum after the challenges of recent years. The lead indicators support this improving trajectory, with record Final Investment Decision ("FID") in 2023 and 2024, with 12.3GW and 13.1GW respectively reversing the pause in 2022 when 0.8GW of offshore wind capacity was consented. Linked to this, industry analysts forecast 1,000 turbines per year will be installed through 2028, increasing to 2,000 by 2030. Demand is expanding globally, with Europe remaining the anchor growth market, particularly the UK. In addition, turbine OEMs are reporting improved financial performance and cable manufacturers are reporting stronger backlogs. Activity levels across the oil and gas industry highlight the continued high and sustained levels of CAPEX and OPEX, with this investment increasingly recognised as essential to support energy transition. These factors in turn indicate supply chain capacity will be stretched and supports sustained demand for Tekmar's technology and engineering services.

Our three-year plan supports a step-change in Tekmar's scale

We have developed a three-year plan rooted in driving significant organic growth across the Group's existing portfolio of products and services, along with an iterative product development programme and complementary M&A. This addresses the importance of Tekmar achieving greater scale with significant profitability gains driven by the benefit of operational gearing. The following opportunities are integral to the plan:

· capitalise on our industry pedigree and differentiated technology to drive order intake and outperform a growing market

· drive higher utilisation rates across the business, achieved through the balance of scale of projects and duration of projects

· reweighting of revenue streams, with a shift to higher margin services

· investment in our grouting capability which provides compelling near-term returns

· incremental investment in our technology roadmap to support product development and market diversification

· resolve outstanding legacy issues relating to notifications of potential defects

· continued refinement of the org model and deployment of Tekmar best practice programme across the business.

Our M&A strategy complements the organic growth opportunity 

The organic growth plan is complemented by the Group's ambitious M&A strategy to deliver additional scale and diversification. This plan is supported by the £18m of funding available through the SCF convertible loan note instrument and the relevant experience and relationships across the Board and the broader 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, strengthen the technology and services we offer customers, and expand our reach in targeted geographies. A robust acquisition pipeline has been developed and the Board is actively assessing complementary acquisition targets.

Ongoing legacy defect notifications

Tekmar has continued its commitment in working with relevant installers and operators to investigate further, the root cause of ongoing legacy defect notifications.

This has been undertaken without prejudice and on the basis that Tekmar has consistently denied any responsibility for these issues. Given the extensive uncertainties, the RCA investigations have not concluded that the Tekmar products are defective.

Working in collaboration with the relevant two customers, Tekmar has explored the insurance available for such matters notwithstanding Tekmar's position regarding responsibility and liability. In this regard, the Group has negotiated a commercial settlement with its EXPL insurance provider of £5.2m in relation to the above claims. The insurance proceeds are available for use at the discretion of the Group in settlement of the above claims, with any unused cash repayable to the insurer.

Within the result for FY24 there is a net charge of £0.7m recognised in the P&L. This represents the net impact of the provision of £5.8m offset by the insurance monies received post year end of £5.2m.

The business is positioned for growth, our markets are aligned for growth and our strategic plan focuses on delivering this growth. I have a track record of driving growth in my previous leadership roles and we have the opportunity to do the same at Tekmar building our financial strength. We have renewed purpose for what Tekmar can achieve and we look forward to updating investors with our progress over the course of the year.

Richard Turner

Chief Executive Officer

3 March 2025

CFO Review

The Group delivered further improvement in its financial performance in FY24, delivering the highest full-year Adjusted EBITDA reported by the Group since FY20. This was driven primarily as a result of significant improvement in gross profit margins despite market conditions remaining challenging during the period.

A summary of the Group's financial performance is as follows:

Note, due to the sale of Subsea Innovation Limited in the year, comparative figures have been restated to exclude Subsea Innovation Limited as this is now included as discontinued operations in the Statement of Comprehensive Income

(1) 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.

(2) Adjusted EPS is a key metric used by the Directors and measures earnings which 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, £160k (£508k FY23), amortisation on acquired intangibles £98k (£168k FY23), Impairment of goodwill £1,546k (£4,745k FY23), warranty provision £656k (2023: £nil), expected credit loss £520k (2023:£nil) and other one-off items £399k (FY23: £430k) and the tax impact of £351k (FY23: £22k).

On a statutory basis, the Group loss from continuing operations was £5.1m (FY23: £8.8m loss).

Overview

For the year ended 30 September 2024, the Group reported revenue of £32.8m, reflecting an 8% decrease compared to FY23. The decrease in revenue is due to the Marine Civils Division delivering lower revenue in the period as expected against a particularly strong prior year comparator.

Despite the revenue decrease, the Group achieved a 27% increase in Gross Profit to £10.5m versus £8.3m in the previous reporting period. This improvement in margin performance is attributable to the success of the Group's margin improvement action plans which have been focused on securing contracts with suitably attractive project economics followed by disciplined execution of these projects.

The Group's adjusted EBITDA for the year was £1.7m, compared to £0.6m in FY23. This was primarily as a result of stronger gross margins.

The Group's loss before tax from continuing operations of £4.5m has been impacted by a goodwill impairment charge in relation to the offshore energy division of £1.5m, net charge to the P&L of £0.7m in relation to the warranty related matters and £0.5m in relation to expected credit losses discussed below.

Discontinued Operation

As part of Tekmar Group's strategic focus on strengthening the Group's performance through efficient resource allocation and portfolio management, during the period, the Group completed the divestment of Subsea Innovation Limited to Unique Group for £1.9m. As a result of the disposal, the financial performance of Subsea Innovation Limited (sold in May-24) is classified as a discontinued operation and consolidated into a single line item in the Statement of Comprehensive Income. This line item includes the post-tax profit or loss of the discontinued operation, as well as any gains or losses from the sale or remeasurement of the assets associated with the discontinued operation. A loss from discontinued operations of £1.3m has been recognised in FY24, further details can be found in note 26 of the Group financial statements. The prior periods have been restated to reflect the discontinued operation ensuring consistency and comparability. 

Revenue and Gross Profit

It is encouraging to see a continuation of revenue growth in the Offshore Energy division during the period. Revenues in this division increased by 13% in FY24 and 24% in FY23. The Offshore Energy division incorporates Tekmar Energy and Ryder business units, both of which are beginning to benefit from the improvement in the offshore renewables market and a higher volume of projects being sanctioned.

Marine Civils division experienced a decline in revenue for the 12-month period of £13.3m, which is £5.0m lower compared with revenue of £18.3m for the previous 12-month period. The prior year performance had been particularly strong and included several large Middle East contracts which were completed in the prior period.

Consistent with the approach of the Offshore Energy division, the Marine Civils division, comprising Pipeshield International, has focused on delivering more profitable contracts. As a result, this has led to higher gross margin for the division in comparison to previous periods since acquisition, despite the decrease in revenue in the period.

Marine Civils has continued to supply the core Pipeshield product lines as well as further investment in the grouting service line offering. This diversification, which has predominantly been in the Middle East to date, is expected to continue as a growth area for the Group and will be replicated in other regions as the asset base is increased.

The gross profit for the reporting period for the Group increased by £2.2m to £10.5m, with a significant increase in gross profit percentage from 23% in FY23 to 32% in FY24. The growth in profit margins results from the Group's improved contracting policies and project execution. There was also a specific focus in the year on strategic supply chain initiatives which further contributed to the improvement.

Within the Offshore Energy division, gross margins increased from 17% for FY23 to 29% for FY24. FY23 was impacted as the opening order book included two, sizable, lower margin offshore wind contracts awarded in prior periods and had experienced material cost escalations from wider macro-economic factors since their award in 2021. One of these contracts was substantially complete in FY23 with the other being substantially complete in FY24 and will have no material impact on FY25 margin.

Gross profit margin within Marine Civils increased to 35.9% from 29.1%. This was primarily due to strong contribution from variation orders in the period and also service based income from equipment hire. Whilst this level of gross profit margin is not expected to be repeated in FY25 to the same extent, the Group is focused on the diversification of revenues to offshore services alongside traditional protection and stabilisation product sales and has incrementally invested in the asset base throughout the period to support this transition.

Operating expenses

Operating expenses for the 12-month period to 30 September 2024 were £14.4m compared to £16.3m for the previous 12-month period ending 30 September 2023. The decrease of £1.9m relates largely to a goodwill impairment relating to the offshore energy CGU of £4.7m in the prior period versus an impairment of £1.5m in FY24, offset by a £0.5m charge to the P&L for expected credit losses and £0.7m warranty provision charge to the P&L for ongoing defect notices. Other costs have been managed carefully and remained stable despite the inflationary environment.

Adjusted EBITDA

Adjusted EBITDA is a primary measure used by management to monitor and provide a consistent measure of trading performance from one period to the next. The adjustments to EBITDA remove 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 measure 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 FY23. The adjustment to EBITDA for foreign exchange is also shown in FY24 for consistency and comparability with FY23 results. For transparency of the FY24 result, details of foreign exchange transactions for FY24 are highlighted below. 

The below table shows the adjustments that have been made to calculate adjusted EBITDA in the year ended 30 September 2024.

EBITDA and Adjusted EBITDA have shown significant improvement from FY23 in line with our profit improvement focus. Growth in adjusted EBITDA is attributed to the growth in Gross Profit discussed above. Both divisions reported positive Adjusted EBITDA for FY24, which has resulted in an overall positive Adjusted EBITDA for the Group in the period.

Group costs increased by £0.9m largely due to an increase in staff costs of £0.4m; wage inflation and increased share based payments related to management incentive schemes launched, £0.2m increase in professional fees and £0.1m higher bank facility fees.

Subsea Innovation Divestment

In May 2024, Tekmar Group plc completed the divestment of Subsea Innovation Limited (SIL) to Unique Group for a cash consideration of £1.9m. This strategic move was part of Tekmar's broader plan to enhance its financial stability and focus on core operations. SIL, which specialises in subsea products and engineering consultancy for the energy sector, had previously reported an adjusted EBITDA loss of £1.4m in 2023. The sale has allowed Tekmar to reallocate resources more efficiently and invest in growth areas. Tekmar retained ownership of Innovation House, the premises previously occupied by SIL. As part of the transaction, the Group agreed for Subsea Innovation to use the property on a rent-free basis for a 12-month period following Completion, with an option for both parties to enter into a lease agreement for a further 12 months following the rent-free period. This divestment aligns with Tekmar's strategy to drive profitable growth and improve its financial performance. 

Profit/(loss) for the year

The result for the period is a loss of £6.6m (FY23: Loss of £10.1m) which is shown in the Statement of Comprehensive Income. The result includes a £1.3m loss attributable to the disposal of Subsea Innovation with the loss for the period from continuing operations being £5.3m.

Foreign currency

The Group has continued to see growth in international markets and, as a result, this increases the Group's exposure to fluctuations in foreign currency rates. During the year, the Group was impacted by foreign exchange losses of £0.6m. These losses have been accounted for within operating expenses. 

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 asset of £0.3m.

The Group predominately trades in pounds sterling with its principal currency exposures including approximately 17% of revenue denominated in Euros and 23% denominated in US dollars. In prior years there has been a material level of trading in Chinese RMB which has now reduced although the Group had £2m billed debtors in RMB at the FY24 period end. On certain overseas projects the Group can, in some cases, 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. The Groups net loss from FX in FY24 is generated predominantly from outstanding balances denominated in RMB, the uncertainty surrounding the recovery of these balances has resulted in the Group being unable to effectively hedge against these transactions which have resulted in FX losses of c.£0.5m over the past 2 financial years.

Cashflows and Balance Sheet

A summary balance sheet is presented below:

Other key balance sheet items

Included within other current liabilities is a provision of £5.1m and non-current liabilities a provision of £0.7m. The provision covers the warranty matters outlined in note 20 of the Group financial statements, with these matters having been disclosed as contingent liabilities in the prior year's financial statements. A corresponding receivable due from the Groups EXPL insurance of £5.2m is included within Trade and other receivables. The net charge in the year to the P&L is £0.7m.

Cashflows and cash balances

The gross cash balance at 30 September 2024 was £4.6m with net debt (gross cash less bank facilities) of £1.6m. The Group's cash position at year end is comparable to the prior period end, where gross cash was £5.2m with net debt of £1.4m.

The Group has extended its CBILs facility of £3.0m for a further 12 months to October 2025 and the UKEF backed trade loan facility of £4.0m remains available to Tekmar, with the next annual review date with Barclays Bank being in June 2025. 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 forms part of the Directors going concern assumptions which are detailed in the notes to the financial statements below.

Of the £4.0m trade loan facility available, £3.2m was drawn against supplier payments at the year end and is repayable within 90 days of drawdown. The FY23 comparative is £3.6m. The change in the value borrowed is dependent on the timing of the loan drawdowns and the Groups immediate funding requirements. The trade loan facility balance and the CBILS loan of £3.0m are reported within current liabilities as both are fully repayable within 12 months of the balance sheet date.

For FY24, the Group generated cash flows from operations of £3.3m. The main driver of the increase was the successful recovery of final milestone balances on completed contracts within the Middle East region. Historically these balances have taken longer to be recovered.

The Group's ageing profile for trade receivables significantly improved, with almost 50% of balances for FY24 being within standard credit terms compared to 21% in the comparative period. This benefit has arisen from the Group's enhanced contracting terms and cash collection processes implemented in previous periods.

The Group holds a debt of £2.0m outside of standard credit terms with a customer in China.

Historically, the Group has recovered 100% of receivable balances and no credit losses have previously been accounted for. However, at the year end, the Group has made a credit loss provision in line with IFRS9 of £0.5m in relation to a specific historic debt in China. The Group continues to operate in global markets where payment practices surrounding large contracts differ 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 30 September 2024 the value of these overdue trade receivables was £2.0m, of a total outstanding trade receivable balance for the entity was £2.2m. These amounts are not in dispute from the customer, however given the range of possible outcomes and duration of the outstanding debt, the Group have made an expected credit loss provision in relation to the outstanding China debt of £0.5m. Further details can be found in note 16 of the Group financial statements.

All other receivables are considered to be fully recoverable on the basis that previous trading history sets a precedent that these balances will be received. 

The net cash outflow from investing activities was £2.0m with Group capital expenditure in the period totalling £1.9m. These projects primarily relate to investment in Grouting equipment and other service-related assets which are able to provide near term cash and profit generation. An additional £0.2m also related to the Group's main manufacturing facility.

Relating to the sale of Subsea Innovation, the Group received £0.2m cash proceeds. The remaining deferred consideration of £1.7m relating to this disposal falls into FY25 and at the year-end is included within other receivables on the balance sheet. £1.2m of the deferred consideration has been received since the balance sheet date with a further £0.5m due 12-months following the transaction date.

Net cash outflows from financing activities of £1.6m related to £0.4m net movement on the Group's trade loan facility, £0.5m due to the repayment of lease borrowings with £0.8m attributable to interest payments on the Group's banking facilities.

As noted in the basis of preparation below in the notes to the financial statements, due to the required annual renewal of our banking facilities and the uncertain timing of contract awards the Group has disclosed a material uncertainty in relation to going concern. Management remains confident that the relationship with Barclays and positive growth outlook for the offshore energy market will ensure sufficient liquidity for the Group.

A continued focus on cash management remains to ensure growth and working capital can be supported as the business scales.

Summary

The business improvement measures implemented in recent years have led to a stabilised and streamlined business with both divisions now delivering profit at the Adjusted EBITDA level. There is a strong foundation now from which the Group can scale and become more resilient. The key drivers of this being diversified revenues and cashflows, operational gearing benefits and improving market conditions in sectors in which Tekmar operates. 

Leanne Wilkinson

Chief Financial Officer

3 March 2025

Consolidated statement of comprehensive income

for the year ended 30 September 2024

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.

2: Comparative period has been restated to reclassify Subsea Innovation Limited results as discontinued operations.

3: The statement of other comprehensive income comparative period has been restated to remove equity settled share-based payments, which has increased the total comprehensive loss by £548,000. This credit entry has now been presented within transactions with owners in the statement of changes in equity. This has no impact on retained losses.

Consolidated balance sheet

The Group financial statements were approved by the Board and authorised for issue on 3 March 2025 and were signed on its behalf by:

Leanne Wilkinson

Chief Financial Officer

Company registered number: 11383143

Consolidated statement of changes in equity

for the year ended 30 September 2024

Consolidated cash flow statement

for the year ended 30 September 2024

Notes to the Group financial statements

for the year ended 30 September 2024

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 Grindon Way, Aycliffe Business Park, Newton Aycliffe, DL5 6SH. 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.

Statement of compliance

The financial information set out in this preliminary announcement does not constitute the Group's statutory financial statements for the period ended 30 September 2024 or 30 September 2023 as defined in section 435 of the Companies act 2006 (CA 2006) but is derived from those audited financial statements. Statutory financial statements for 2023 have been delivered to the Registrar of Companies and those for 2024 will be delivered in due course. The auditors reported on those accounts; their reports were unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. For the year ended 30 September 2024 and period to 30 September 2023 their report contains a material uncertainty in respect of going concern without modifying their report.

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group.

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 2024 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 2023.

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 2025 and a trade loan facility of up to £4.0m that can be drawn against supplier payments, currently available to 31 July 2025. The latter is provided with support of 80% 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 £4.6m of cash at 30 September 2024 including draw down of the £3.0m CBILS loan and a further £3.1m 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 2026. 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 consistent 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 and refinanced respectively. Within the base case model management have modelled the outflow of cash of £5.8m in relation to note 9 Provisions within the going concern period which is offset against the corresponding insurance receivable within the same period, Management have not modelled anything in relation to the matter set out in note 9 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 17% (£10m equivalent) for 18 month the period to 31 March 2026, to model the potential loss or delay of a certain level of contracts in the pipeline that form the base case forecast, and a further 5% 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 include 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 £15m (60% of unsecured revenue) and increasing overheads by 7% against the base case. In addition, the delays of specific cash receipts have been modelled, this results in elimination of liquidity headroom in the final month in the going concern period. The severe but plausible case includes mitigating actions such as delayed capital expenditure spend.

Facilities - Within the base case, severe but plausible case and reverse stress test, management have assumed the renewal of trade loan facility in July 2025 and renewal or conversion of the CBILS loan into a term loan in October 2025. 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 2024, that these facilities will be renewed and will be available for the foreseeable future. The renewal of the two facilities in October 2025 and July 2025 are yet to be formally agreed and the Group's forecasts rely on their renewal.

Contract Award and timings - In the severe but plausible scenario, management has adjusted the base case forecast to account for the potential downside impact of order intake not being converted within the expected timescales. This adjustment results in a 17% reduction in revenue over the entire going concern period. This sensitised model shows that there is sufficient cash headroom to continue to operate the business. 

The Group operates on a contract basis and during the normal course of business, contracts are expected to be executed within specific timeframes during the forecast period. If the Group fails to secure a number of significant contracts, in line with its forecasted timeframes, during a period of lower cash reserves cash headroom would be breached. Management does not consider this to be a likely outcome based on current backlog levels being representative of prior periods coupled with a strong pipeline visibility, opportunities at preferred supplier status and further anticipated contracts awards within the required timescales. Such contract awards would provide sufficient cash resources for the going concern period.

Both the required renewal of the facilities and contract award timing represent events or conditions which would indicate a material uncertainty that may cast significant doubt on the Group's and the 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.

(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. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance 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, 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 received as the scope of contract changes, these variation orders are considered on a case by case basis to determine whether they form a separate performance obligation in their own right or an addition to the original performance obligation. The same revenue recognition criteria discuss above is then applied to the variation order.

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 orders 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.

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.

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 or output method. Further details on how the policy is applied can be found in note 2(e). 

(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 £116,830. Within 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 by £36,940. 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.

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. The Group have recognised a credit loss provision in relation to a specific historic aged trade receivable (See note 5)

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 6.

Provision for warranty costs and recognition of related insurance income

In accordance with IAS 37, the company recognises a provision when it has a present obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The estimation and calculation of the value of provisions involves significant judgement, particularly in determining the likelihood, cost and timing of warranty related issues.

Additionally, the company may receive insurance receipts to cover certain warranty claims. These receipts are recognised as an asset only when it is virtually certain that reimbursement will be received if the company settles the obligation. The timing and amount of such receipts can be uncertain, requiring careful assessment and judgement to ensure accurate financial reporting. Post year end, the Group had £5.2m of cash receipts from insurance in relation to warranty related matters. The Group recognised this balance within other receivables on the balance sheet at the financial year end.

4. REVENUE AND SEGMENTAL REPORTING

Management has determined the operating segments based upon the information provided to the Board of 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 2024.

Major customers

In the year ended 30 September 2024 there were two major customers within the Group that individually accounted for at least 10% of total revenues (2023: three customers). The revenues relating to these in the year to 30 September 2024 were £11,085,000 (2023: £13,913,000). Included within this is revenue from multiple projects with different entities within the Group.

At 30 September 2024, the Group had a total transaction price £15,471k (2023: £19,462k) 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 24 which was previously recorded in contract liabilities was £2,709k (2023: £3,188k)

EBITDA and cash are measured by division and the Board reviews this on the following basis.

The goodwill and other intangible assets allocated to Group for the purposes of internal reporting are £13,903k for Offshore Energy and £2,805k for Marine Civils.

Note - Comparative figures have been restated to remove Subsea Innovation Limited as reclassified as discontinued operations.

5. 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:

* 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.

6. GOODWILL AND OTHER INTANGIBLES

The remaining amortisation periods for software and product development are 6 months to 48 months (2023: 6 months to 48 months).

Goodwill has been tested for impairment. The method, key assumptions and results of the impairment review are detailed below:

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 is allocated to two CGUs being Offshore Energy and Marine Civils. Goodwill has been tested for impairment by assessing the value in use of the cash generating unit. The value in use has been calculated using budgeted cash flow projections for the next 5 years. The forecasts have been compiled at individual CGU level with the first year 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 years 2 to 5 are based on assumed compound annual growth rates (CAGR). The CAGR applied across the 5-year period were 15.1% for the Offshore Energy CGU and 10% for the Marine Civils CGU. Gross margin assumptions applied range from the overall group margin for FY24 to a level in line with the margin reported for the Marine Civils segment. The value in use calculation models an increase in revenue for both CGU's of 2% into perpetuity after year 5.

 The cashflow forecasts assume growth in revenue and a corresponding increase in gross margin levels across the Group to bring the overall group margin broadly in line with the margin reported for the Marine Civils segment. 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.

In addition to growth in revenue and profitability, the key assumptions used in the impairment testing were as follows:

· A post tax discount rate of 14.3 % WACC (FY23 15.5%) 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% (FY23: 2%)

The discount rate used to test the cash generating units was the Group's post-tax WACC of 14.3%. 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.

Marine Civils

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.

Offshore Energy

The value in use calculations performed for the impairment review were £1,546k lower than the carrying value of the Offshore Energy CGU. As a result, an impairment charge of £1,546k has been recognised in the P&L for the year ended 30 September 2024 against the goodwill apportioned to the Offshore Energy 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.

In the base case model, management have assumed varying growth rates across the 5 year period, with an average CAGR across the period of 15.1%. If the CGU fell short of the revenue growth by 1% in each year of the model a further impairment of £2,737k would be recognised.

In the base case model, management have assumed varying growth rates across the 5 year period, with an average CAGR across the period of 15.1%. If the CGU fell short of the revenue growth by 1% in each year and gross margin fell by 1% in each period of the model a further impairment of £4,707k would be recognised. If revenue is stable but gross margin fell by 1% in each period of the model a further impairment of £2,042k would be recognised.

All amortisation charges have been treated as an expense and charged to cost of sales and operating costs in the income statement.

7. TRADE AND OTHER RECEIVABLES

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.

The Group assesses on a forward-looking basis the expected credit losses (ECL) associated with its financial assets. The Group has the following types of financial assets that are subject to the expected credit loss model:

· Trade receivables arising from sale of goods and provision of consultancy services

· Contract assets relating to the sale of goods and provision of consultancy services

The Group recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:

1. An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes.2. The time value of money.3. Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions, and forecasts of future economic conditions.

Methodology The Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables. The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on days past due for Groupings of various customer segments that have similar loss patterns by geographical region and product type. The expected loss rates are based on the payment profiles of sales over a period of 5 years before 30 September 2024.

To measure the expected credit losses, trade receivables and contract assets have been Grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contract. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.

Key Assumptions The key assumptions used in estimating ECL are as follows: - Historical credit loss experience. - Adjustments for forward-looking information such as economic forecasts and industry trends. - The impact of macroeconomic factors on the creditworthiness of customers. On that basis, the loss allowance as at 30 September 2024 and 30 September 2023 was determined as follows for both trade receivables and contract assets: