Tekmar Group (LSE:TGP) — Final Results for the year ended 31 March 2020

0:03 Good afternoon, ladies and gentlemen, and welcome to the TEKMAR GROUP PLC Investor Presentation relating to the final results for the year ending 03/31/2020. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated on the right hand corner of your screen. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard.

0:34 I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. And I'd now like to hand over to James Ritchie, CEO Sue Hurst, CFO and Alastair MacDonald, Chairman of TEKMAR. Good afternoon.

0:54 Thank you, Mark, and welcome everybody to the presentation today. As Mark has said, on on my left is James Ricci, CEO, who will give us a run through the presentation overview and any detail required and answer any questions as we come to the end of the presentation. On my right hand side is Sue, our CFO and I'm Alastair MacDonald, our Chairman. Process today is, as I said, we'll run through the presentation. At the end. As you've seen the RNS to regarding James' handover, we'll cover that at the end of the presentation and we'll follow that by Q and A. So a brief overview on the FY twenty twenty results. I would say a satisfactory performance in line with revised guidance, particularly recognizing the uncertainty of the pattern market over the last four to five months.

1:48 Headlines are revenue up 46 at £41,000,000 with a £47,000,000 EBITDA, order book up 39% at £10,000,000 and inquiry book up at a pleasing level of 22,000,000 and 24,000,000 Pleasing to see the expansion into the international markets as part of our growth strategy resulting in a 25% coverage in the revenue for the year, which was a strategic move in our part. We're particularly pleased to see the contribution and performance of the Pipe Shield acquisition, which is going well. And no further work on that one as part of the integration going forward into FY 2021.

2:28 As you see from the presentation, we're delivering a healthy balance sheet with cash at 2,100,000. I have to compliment the team on the strong performance we've seen through the, what we call the COVID-nineteen of the China disruption we've seen in the business, which is a sort of anotherness February, March this year. So I just like to recognize the contribution of the team in particular for dealing with that challenge that was presented to the business. In terms of looking forward, clearly, we still have a bit of near term uncertainty in the market, so we are h two loaded. And we are taking a of a cautious look into the market as we move forward into f y twenty one. Our focus going forward for the next year is very much on the integration of the acquisitions, you know, very much focusing on some of the parts and getting more contribution from the businesses and focus very much on the process system side of the business.

3:27 On the earning side, we're looking for improvements in the earnings and an improvement in cash cost division as a result to also improvements in terms of the integration process that we're we're planning to move forward in in this financial year. And having said that, we still will look at m and a activity. I would probably say we're more looking at smaller technology bolt ons rather than any large m and a acquisitions, although we'll we'll have a look at any any large that come along, very much our focus is on technology bolt ons. And our continued focus is very much on the offshore wind space. You know, as you see from the presentation, a 15% CAGR over the next ten years, and that kind of justifies our presence primarily in the offshore wind market, which will will continue.

4:14 And with that, I'll hand over to James, who will give us a bit of an overview with a bit more detail. Good afternoon, everybody. It's a pleasure to be presenting to you today. I hope we could have done this in person, but here we are on the on the Zoom calls. And I appreciate some of you are shareholders and may know the business quite well, some of you aren't. So I'm gonna talk fairly quickly. I hope that you get the chance to ask more questions at the end. But I thought I'd just start by giving you a bit of overview as the group as it sits today because there's been a a major transformation in the business since the IPO nearly two years ago, just over two years ago. We now have six operating businesses within the group. We obviously have the TEKMAR Energy business, which was the core company that I've worked in for the past twelve years, and that was what we originally brought to market as the centerpiece, which was focused on the subsea cable protection systems within offshore wind farms. But what we've done since then is we've really expanded the technology portfolio to be able to leverage our dominant customer position to increase the revenue that we attract on any given project. And our simple focus strategy as it were, if I wanted to oversimplify this, was to attempt to protect any subsea assets. Anything that moves under the sea with the exception of the fish, of course, is what we're looking to protect here with the collective group of TEKMAR companies.

5:38 So from left to right, we have Ryder Geotechnical, who we acquired just over a year ago, who provide a geotechnical consultancy. So they model the seabed. They look and assess the sand soil conditions and look at what is needed for the foundation design and indeed the stability that's required for the cables. We have AgileTech, which is our engineering software consultancy firm. These guys do the analysis. So they do modeling of the subsea assets. They model the power cables and and assess them how much dynamic loading and fatigue life they're expected to see. Working in harmony then, so passing the bat and all as it were, we have obviously TEKMAR Energy, which have the core subsea protection systems and are very well known by the TEKLINK cable protection system, which is one of the core products that we sell into the offshore wind farms. We also have Pipe Shield, which provide we acquired them just six months ago.

6:32 They provide concrete mattresses, which are used to stabilize assets on the seabed. Now some find it slightly counterintuitive that we have one business that protects things that move and one business that's there to try and stop things from moving, but actually they very often work in conjunction with one another. And it's horses for courses depending on the application where one product is used instead of the other. We also acquired subsea innovations very shortly after the IPO and have operated them for the last eighteen months. And these guys provide the equipment and tools and the back deck equipment, as it's called, that goes on board the vessels that support the installation of the equipment as they're being deployed. Just to strongly emphasize, we are a technology provider. All we focus on is around the technology. It's the IP.

7:22 It's the products and and and the services around the products. We are not the marine contractor. We do not go offshore and conduct the installations. We're very focused around the technology piece. So a quick overview of our locations. We're now operating across 17 sites globally. One of the core focuses since the IPO was to look at the global expansion piece, particularly with much of the increasing demand in renewables that's coming online further field. The police report we now have 17 locations worldwide with sales representatives in all the major regions. So technology overview. When we first came to market, we had 14 products in the mix. We now have 60, and it is just a plethora of technology that's used for the protection of critical subsea infrastructure.

8:17 In 2017,100% of our revenue was driven from cable protection system sorry, 90% of our revenue was driven from cable protection systems going into European offshore wind farms. I'm really pleased to report that we've diversified that model by increasing revenue in the projects, but having a much wider product mix. We've done about GBP 1,000,000 this year for the first time in floating offshore wind farms, which is a new area of the market that's expected to expand quite rapidly in about five years' time. We've done about GBP 2,000,000 in Hangoff Solutions, which is a record sales for equipment that protects the cables topside inside the foundations. We've obviously grown the sales with our core product, TEKLINK, which saw a circa 50% increase in sales volumes this year compared to last at about GBP 18,000,000 in sales. We've delivered in excess of 6,000,000 of vessel equipment that's been used on the back deck of the vessels that supports the deployment of our products.

9:14 We've done about 3,000,000 since acquiring Pipe Shield. We managed to rapidly upsell their products into our existing renewables customers, and I've got a great example of that in some slides later on where we've done about 3,000,000 of sales. I think what's really exciting when we first pitched the business out there, we talked a lot about the fact that we sell our products into the CapEx market. So the new build offshore wind farms as they're being constructed and there's many of these coming online globally as we'll talk about very shortly. But we've also been looking back retrospectively at the maintenance and O and M operations and maintenance side of the wind farms as well. And I'm pleased to report that this year, we saw an increased volume. 6% of our group revenue was driven from maintenance supply of equipment, which was about 2,500,000 pounds And that again is a growing area of opportunity. So the whole strategy is born around trying to increase revenue per project, getting earlier, staying longer, maximize the benefit of the sum of the parts that we've now created with this expanded product range and and expanded group.

10:22 PLC's Quick recap on TEKMAR for those who don't know, I'll try to do this very quickly. So TEKMAR primary focus is on the protection of subsea power cables going into offshore wind farms. The simple way I like to explain it, I am gonna steal your charger there from me, one of them. I should have had this ready earlier. Thank you very much. Is essentially what we do, for those of you who see me on camera, is we make really big ones of these. So if you get look at the back of any one of your USB cables or power cables or what's on the back of your iron at home, you will naturally see that where a cable goes from a fixed static point into a dynamic point, there is normally a transitional little bit of plastic there that that creates that rigid sorry, that dynamic transition from fixed to dynamic.

11:10 We essentially provide really big ones of them. But in real life, these things are 10 to 20 meters in length. They are half up to half a meter in outer diameter. You can see a picture of one of them being installed from a vessel there into

11:24 a European offshore wind farm, and they weigh between one to two tons. And they transition the if I skip on the slide, they transition the power cable from the seabed where it's buried as it transitions into the base of the foundation. And as many of you will well know and appreciate, cables often fail in the most dynamic area. And still on your laptop chargers and iPhone cables at home today, you will probably find that their most point of failure is always at that critical point where it goes from fixed to dynamic points and where it's been flopping around. I have to emphasize that our product is designed to last twenty five years. So there isn't a reoccurring revenue for replacement of our systems, but there is still an opportunity to repair historic projects that have experienced cable failures.

12:14 The cost benefit analysis of of utilizing cable protection systems in in wind farms is very clear now and has been evidenced over the

12:22 track record that we've established, particularly over the last ten years. But to put this in broad perspective for you, cables as a package represent around about 7% of the capital cost of the wind farm. And you can see on the pie chart there, there's a very clear breakdown that was kindly provided by, one of our largest clients in in in offshore wind farms as to where the spends are typically on a project. And you can see it broke down even further on the left hand side with regards to the cables package itself. The CPS on a billion pound wind farm, which is a very true example of a 300 megawatt UK project of 46 turbines, represents less than 0.15%. It's 1,500,000, But it's mitigating against the highest failure point.

13:07 Your old analogy of the chain is only as strong as the weakest link. And if that cable fails, then you lose your entire revenue stream from the asset, which is the wind turbine. And of course, as you will appreciate, building these wind farms out at sea in very un inhabitable environments, very hostile environments means that any maintenance or repair that needs to go on is is very difficult. We've actually seen examples in UK projects where cable a single cable failure has cost in excess of £5,000,000. So really, we like to think of the protection product as an insurance policy mitigating against that critical risk of of what would happen in the event that the cables were to fail. TEKMAR Energy has a staggering track record in offshore wind, one of the largest technology providers to date. We've worked on over 80 named projects. We protect over 24 gigawatts. There's about 26, 27 gigawatts of live energy production out there in the world right now, and we are protecting around 24 gigawatts of that across three continents. Just in the last twelve months alone, we've provided systems to one of the largest projects in China, the largest U. S. Project, the largest project in The UK. We recently, since closing the year end accounts, have reported the successful award of the largest project in Japan and the largest project to commence in France. So we got a lot of experience there. Roundabout, it's estimated to be about 75%

14:40 of the market share in offshore wind globally today. A little bit hard to predict exactly what's happening in China, but with our presence in Shanghai and the TEKMAR business unit there, we do have good penetration into the Chinese market as well. So going back, that's a quick overview on TEKMAR. Going back to the group, just to give you a breakdown of revenues, it's around two thirds to a third is where we really want it to be. This year, we're about 63% in offshore wind, 33% in other. We call it other and not to be mistaken that that thirty three percent thirty seven percent, sorry, is in oil and gas. It's a plethora and a mixture of different sectors.

15:26 Within that, we have it's basically, we strategically focus on offshore wind. This is where the business is is focused towards. We've got good unique selling point advantages, good IP. We've got a very well established and focused dedicated strategy towards that. But of course, at the end of the day, some of our customers are sector agnostic, and at the end of the day, the product is suitable to a range of subsea applications. And there is many other offshore markets out there. We have power interconnects. We have fiber optic telecommunications. We have other renewables devices such as wave and tidal. Of course, we do have some elements of oil and gas. And more increasingly, we're starting to do more in marine civils. We don't tend to break out these markets as much, say, because it's not a focus for the group. The focus is primarily on offshore wind. But just to be transparent, and many investors have been asking us this question, what exposure do we have to oil and gas? We say about 20% of the group turnover now would be directly attributed to hydrocarbon productions.

16:32 We're not dependent on that by any means. There is ample opportunity to go out, particularly as we're increasing the sales volumes from the other businesses into the renewables mix. And with the massive increase in volume that we're seeing coming online now in offshore wind, there's a lot more to go at focusing on that core market. But it's always good to have a bit of diversification in the mix as it were. Really pleased to report the progress we've made in splitting out, not just on the product side, which we've clearly diversified from that single product into European market. We've got a much wider spread of technology there now, but also on the regions. One of the strategic focuses we've been developing over the last few years is expanding globally.

17:18 And 25% of group sales this year was driven from outside of Europe. That's 25% on 41,000,000. I think last year, it was probably 88% Yeah. On twenty Twenty eight. 28,000,000. So a a a much larger increase. And I would say that, you know, and we reported this in the RNS previously, that was slightly subdued by the impacts of COVID in the final quarter. Q four for us is our busiest stage because there is seasonality in the products we supply. Everybody wants to go offshore in the summer campaigns. So springtime for us is is usually where all of the goods are delivered, and we tend to be manufacturing them heavy h two weighted. So when we had the impact of the China shutdown, and particularly Asia went into major lockdown, that probably knocked about 5% of opportunities. So I'd really like to have seen that more two thirds, a third again.

18:17 And certainly, we've created the global presence now to be able to take advantage of these emerging markets as they come more mainstream online. I think it's fair to say as a business, we are region agnostic as well. We go where the projects are. We've successfully penetrated into China, into The USA, across The Middle East, and and and you'll see we've had great success this year. If projects start to emerge in other regions, then then we will we will head there. We'll talk some numbers. Yeah. Just picking up on the the details behind the financials then, clearly, very pleased with the impressive revenue growth and not only across the sectors that we operate in, offshore wind and everything else, subsea, but also across all of the businesses as well. So we we've shown the revenue bridge showing the progress made within each of the subsidiaries that James highlighted earlier.

19:10 So in the new acquisitions, subsea and and pipe shield, which are to the right of that revenue bridge contributing well. We are a business that is half two weighted, and the the weighting this year was probably sixty-forty. It would have been higher had we not been impacted by COVID. And I just wanted to touch on that in a little bit more detail. What happened in our Q4 being impacted by China shutting down so quickly, we were not only impacted on the cost base, but also on the revenue opportunities, which meant our overall targeted revenue would have been higher and our overall targeted profit would have been higher too. So we were heading towards more of a gross margin contribution of close to 35% and and ended up being impacted by about 5% there. So a 2,000,000 hit to EBITDA.

20:05 Yeah. One off hit source. So we are we are finding that now China's opened and supply chain has opened up again. The impact on our cost base, you know, was very much a a one off hit then. We're We're back to normal kind of levels of trading now. So disappointing that it happens in February right towards our year end where we didn't really have an awful lot of time to mitigate that impact. So we're being cautious in terms of guidance going forward because the world's a strange place at the minute, and who knows what could the impacts of a second lockdown could be. But we're we're confident that, you know, the areas that are in our control now, we're back on track in terms of the normal run rates.

20:55 And as Ali touched upon earlier, focusing internally now on the business, getting the acquisitions to be integrated into the group more seamlessly, and that will drive profits and margin growth as well. So just to add to that confidence as well, obviously, finish the year. These are the KPI metrics that we look at. Very pleased to report that safety is paramount to everything we do. Obviously, it's important for our customers and stakeholders to know that we're a well functioning business and we're accredited to some of the highest standards, but employees are the most vital asset and resource that we have in the business and to ensure their safety. And even with doubling in headcount in the last two years and increasing globalization and with a more diversified mix of products, managed to sustain a zero lost time incident, which is an absolute credit to the team.

21:51 And I'm immensely proud that we continue to operate safely in everything that we do. Inquiry book is growing confidently, and and that's a real good indicator of of the opportunities that are that are coming down the pipeline. Preferred bidder status and order book. So just to give you a bit of definition as to what these metrics are. Inquiry book for us is a tender submission. It's not a quote. It's not like we've just been very are strong

22:22 on then we we the engineers have have a of when the team. Likely award is due to be placed. In some of the smaller other subsea areas or some of the smaller packages of consultancy work that we provide where we get involved earlier on in the life cycle of the project, these inquiries could have a much shorter cycle. The quickest cycle from inquiries to award would be, I would say, six weeks. But on the bigger £1,000,000 plus scopes, they tend to come in up to a year to two years in advance. Preferred bidder status for us is where we are out of competitive tender. The client has issued us with a contract. They are intending to place the award with us as the supplier. We are notified to have been the preferred bidder, and effectively, we're going into an exclusive negotiation.

23:14 So there is a 99% likelihood there that we will then subsequently receive that order, and it will be signed. Order book, backlog, signed contract, ready to be

23:27 manufactured effectively in our control, so then we can, under our discretion, then execute the work through the operations of the business. And revenue obviously is where we've completed the contractual obligations and usually at the point where the goods are in what we define as ex works, which is they are completed, ready for shipment for the client to receive their goods. So timing on preferred bid, I would say the longest that anything would sit in there would be up to a maximum of say six months. And then order book typically would be burned off also within six months. So in worst case scenario, preferred bidder would be executed over the coming twelve months. But just to remind you, there is still run rates of inquiries coming through quicker than that, like on some of the smaller stuff.

24:13 If you look at where we were in FY 2019, at the end of the year, we had roughly speaking 22,000,000 between preferred bidder and order book. And then we obviously delivered a full year position of GBP 41,000,000, slightly subdued again, I would repeat on the impacts of COVID or more specifically, the hard lockdown that's affected us in China. But this year, you can see we've got roughly speaking 25,000,000 of security between preferred bidder and order book. And that gives us a much higher degree of confidence going into this year, which is good because obviously, the world's been shook up a little bit in the first half, particularly the first quarter of this year. So it's good to have that security of order book coming through. We, as a metric, tend to add all these free because there's always a big swings and roundabouts between where it sits in preferred, where it sits in order book, where it's being booked into revenue. So what we do is underlying that, we just add them up and you get this market visibility metric, which is basically all three of the points combined. Like the underlying growth rate, isn't that shown Yes. Across time.

25:21 Showing you here a little bit more detail about the revenue breakdown and as it's evolved over the duration since the IPO. And, again, pleased to see the level of diversification that we brought into the mix there. I think this is about the right balance that we're at now. This is where we sort of want to be. Obviously, we're trying to increase the revenues from some of the other subsidiaries. But in terms of sector product mix, this looks a healthy position to be in. Just to reiterate, as Sue has already mentioned there, we are we have seasonality in the business. We tend to be H2 loaded, and we expect that this current financial year would be no different. If anything, maybe slightly more one third, two thirds, in terms of H1, H2, just based on a bit of the impact that we've had in the first quarter of this year relating to COVID.

26:09 Give you an individual breakdown analysis of the of the businesses there so you can see some of the key clients that each of the businesses works with. Just to strongly emphasize, there is no client unique to any one company. All the companies work with all the same customers. There's no sector unique to any one company, and and and we've created this group because, really, they can work collaboratively. There's a lot of cohesion and synergy benefits to working as as a as a collective group and and and very often work in tandem to each other. I could see one of the questions popping up on on the q and a there was asking when we get involved in the projects. Well, AgileTech are the vanguard for us as a business. These are the this is the company that provides the analysis and geotechnical survey, which would get in at the earliest possible point, typically a year, if not more, in advance of when the cable protection scope would be acquired from TEKMAR and subsea innovations are involved in the installation and maintenance phase of the wind farm. So they're the company that gets involved at the back end. And it's where we've got some great examples where all these business have worked in collaboration with each other. We don't really have and and and people often struggle when I try to explain this stuff. We don't really have a direct competitor because as a group of companies, as a collective, there's nobody else yet on the market providing this package of work. But what we do have is for every one of the individual products or services, there is many different competitors who compete in that individual spaces. But the

27:39 real value proposition here that we're driving towards

27:42 as a group of companies is to try and get the packages of work to increase the value to the customer on any given single project. And I'll come back to that point on my next slide. Just to go through the individual business metrics, TEKMAR Energy grew 14%, which is bang on where you want them to be because the market's growing at circa 15% compound annual growth rate, as Ali already highlighted. So TEKMAR is roughly growing in line with that. AGILETEK saw a rapid increase in sales volume this year, partly contributed by the acquisition of Ryder, which we bought for a nominal consideration of £2.

28:19 But the the guys there were willing to sell us the shares in their business because they recognized the exposure we could give them to our existing customer base to rapidly increase the sales of their service into the wind farm state. Looking at riders growth that and and Agiltech's growth, that is a real good clear indication of what's to come because these guys are the vanguard. Like I said, they go in at the earlier stages of of the wind farm. Great to see after eighteen months of earning subsea innovations, we've managed to rapidly increase their sales volume, bringing a lot more of their sales into the renewables piece as well. It's a record year for that business with 147% growth year on year. And we've only had Pipe Shield for the last six months, but already we've had some early wins and success where we've managed to take their products and sell them into the existing customer base that we have in offshore wind. And this is a great example of what I've been trying to explain to you here, which is this was the first project for Allsets in The U. S. It was the largest offshore wind farm in The U. S. To

29:17 date. It's the first to be constructed in federal waters. We're very excited about this project because although it's only small in terms of turbines or plate capacity or even value for that matter, it's very strategic in terms of getting first mover advantage into these emerging market opportunities, and we managed to do it by combining all of the group services into the project. So Rider was in at the start. They did the seabed assessment. Agile Tech did the analysis on the cable. They passed it on to TEKMAR, who provided the dynamic protection with the the the sheathing of the cable with the cable protection, and then Pipeshield provided the stability with the rock bags and the mattresses. Subsea innovations kit was used on the installation vessel. So we had all the group companies coming together, working at different points of the project, but providing a package, which is really the strategy that we're really focused on here.

30:14 So just to talk quickly now about the markets, hopefully, you already know a bit about offshore wind farms. You know, it's it's a clear winner. One of the big benefits of wind farms is obviously it's a domestic energy source. But one of the often overlooked major technical advantages to offshore wind is if you looked at a map of the world today, you looked at a heat map of the world today, you would see that the most densely populated parts of our planet are the coastal regions. And offshore wind gives you a major technical advantage because you can build major power production center projects right next to some of the most densely populated parts of the planet. And that's why it doesn't matter how much onshore solar or wind you can get out in Nevada, in The USA or in the center Of America, and it doesn't actually matter if Trump thinks that climate change is made up. You are seeing projects happening in The US because it makes commercial sense to build these power production units so close to densely populated parts of the planet. You can do it at mass scale. You can build gigawatt power productions in really quick succession. It takes under two years to construct a 1.2 gigawatt site, which is a third of the time it would to get the equivalent power out of nuclear, and you could do it at a cost, which is a fraction. One of the most compelling arguments towards offshore wind farms today is what's happened most recently in The UK with the announcement of the latest CFD auctions, which have been allocated for the Dogger Bank wind farm being built up here, just 40 miles that way from where I'm sat right

31:44 now. And they were awarded a free gigawatts of projects under £39 per megawatt hour. The reason that £39 is so substantial is because it's £6 under the average wholesale price of electricity. So it used to be around about £45 per megawatt hour in 2019. That means that for the first time ever, offshore wind isn't just the cheapest form of electricity, not one of the most reliable in terms of renewables applications, but it's actually driving down the cost to consumers and is lower than the level of pricing that's in the market today. Hence, the reason why you're seeing more projects coming online globally now and you're seeing a lot more projects coming to market subsidy free as well. And that's what's really driving these staggering growth figures. You look at we've got around 27 gigawatts, as you can see on the pie chart here, installed generating capacity in in the world today. We've got about 22 gigawatts under construction right now or at least in preconstruction phases, and gives you a good indication of of what's coming in the very near term. But you've got a staggering 170 gigawatts in approved committed planning.

32:56 That is giving us in excess of 15% compound annual growth rate in the net over the next ten years for new generating capacity coming online. But that doesn't include other emerging opportunities, and we're seeing more countries talk about renewables now. We're talking about India, Australia, Brazil, who have no offshore wind farm in planning at present in these forecasts, but have great potential. And that could easily give an additional 2030% upside to the forecasts that are out there in the market. I think there's some great news just this morning from BP talking about the upgrading outlook towards offshore wind. Yeah. Just read an article this morning with another 20 gigawatts complete for 2030. So

33:40 going back to the growth strategy, this is what we set out at at the IPO phase. You know, we said there's three there's three elements to our growth strategy here in TEKMAR GROUP. There's the organic piece. Clearly, we've a good product. We we've got a good dominant position in the market, and we can and the market's growing. There's good structural growth heading in this market. And in fact, it's it's ever increasing in outlook as as Ali just said. So really, where we have to do anything there other than just keep protecting that position and investing in that business, and and it will continue to grow organically. We've got the acceleration piece, which is we're investing in developing new technologies, we're expanding our operational capabilities and more strategically, we're focusing on the overseas expansion, which we've already described in many of the previous slides. But the way we're also developing this plan is being through acquisitions as well. And we've had three acquisitions to date of very complementary technology businesses, and we bolted these M and A businesses

34:39 into the group and seamlessly being able to increase their revenues as a result of our expanded network and regional presence. So I'd just like to, from my side and end on this last slide, which is really just to just to describe, you know, we at IPO where we were obviously, you you heard there what the strategy was and and where we're up to now, you know. Since IPO, we've increased sales by 19,000,000. We've nearly tripled the range of products that we brought into the mix. We've now got six companies within the group, which are all working

35:14 very well together. We've doubled in headcount. We've now operating across six additional sites, so nine sites in total within The UK. We've added nearly a 100,000,000 back onto the inquiry book, which is is the growth in the times to come. We've more than or we haven't. Sorry. But the market has more than doubled in outlook. And this is what's most exciting to me personally because I was very passionate about selling the belief in in offshore wind and and the scale that's to come. And that you can really see that coming online now and and hence the the record revenue growth that we've had this year. And clearly, there is a lot more to come as the gigawatt output is increasing dramatically. And we've doubled almost in size also on the balance sheet. So we've done I think what's fair to say is we've built this platform now. We've built a really good diversified platform with a good product mix, with good regional coverage, in a good high structural market.

36:06 We're still profitable. We're still cash generative. But now what we need to do is focus on not so much the top line, but getting the benefit of these parts now and really focusing down on improving on the bottom line, which is, of course, what in the public market is saying shareholders care about most. I must say everything I've done over the last two years has been very much primarily focused on the longer term strategic trajectory and getting these pieces in place there. But of course, now we've really got to make sure we deliver that in terms of good margins and high cash flow returns. Great to see, though, that we are still a profitable business in a high structural growth market with good IP and a very, very healthy balance sheet to be able to weathering out these storms. That said, Ali, I'll hand back to you for your Okay. Thanks, James. So in summary then in kind of concluding the presentation, pleased with the top line growth as you've seen.

37:04 Clearly, we've seen that the earnings were impacted in f y twenty, and as James and Sue have alluded to them myself, key focus going forward. Obviously, we've got the structure is in place now to capitalize on the opportunity James has alluded to in the market. We're pleased with the complementary technologies that we've got, so we've got a good foundation to move forward with. We've got an encouraging market outlook despite the short term challenges that we see ahead of us.

37:34 We've built a very experienced team to complement the tech technologies that we've got off the marketplace. So I think we're we're well positioned, in summary, to capitalize on the growth ahead of us. So the RNS we issued on Monday, if I could move switch gears a wee bit there to talk about James' handover. And, maybe I'd like James to kinda give a bit of, an update from his side, and then I'll kind of add my views thereafter.

38:05 Yeah. Thanks, Ali. I'm gonna script here. So I've I've just been talking very openly with with with all the shareholders and and and everyone who's been asking me about my intentions. But just to make absolutely clear, there is nothing untoward with the business. I'm not being pushed out. This is a a personal decision that that that I've made. For me, personally, I've been with the business for twelve years now. We started life as a family owned business back in 2008.

38:33 I subsequently led a management buyout in 2011, did seven years with within private equity, where I was immensely grateful to be joined by Sue and Ali around eight years ago. And then together, we obviously brought this business into the public market some two and a bit years ago. And and that twelve year journey has been absolutely fantastic, and I've enjoyed every minute of it. But right now, where I'm sat, I'm 30 years old. This is all I've ever done in my life. I am immensely proud of the growth and success that we brought into this. I don't think that's fairly reflected in the valuations on the market, but we'll talk about that another day maybe. But I think it's the appropriate time for me to sort of acknowledge that the business is is growing in in very different areas now. You know, I look at what we've achieved. We've got over 40,000,000 of sales with 200 staff in 17 locations, and that all started with with me in this office somewhat twelve years ago. And I I think it's now appropriate that I hand over the range. I don't like to say that I'm quitting or I'm leaving. You know, I'm I'm gonna do an amicable orderly handover.

39:36 I'm really pleased that we have a really strong, exceptionally great management team, a team that we've built over the many years who are more than capable now of executing the business operationally day to day and have done so successfully for for the past years few years. And I'm even more grateful to Ali sat here with me today who's been with the business now for seven years. He knows the business very well. The people know him very well. He knows the market very well. He knows the public market very well and has the experience in running these much larger or larger organizations. And I'm grateful that he's agreed to step in as executive chairman and allow me to hand over and transition to him. Some people get confused because, hopefully, you recognize even now, I'm still speaking with passion and enthusiasm, and truthfully, that will never ever change. I will remain a an active shareholder in the business. I'll remain an active supporter in the business in any way I can. I just feel like it's appropriate now that I hand over as as the leader of the business.

40:36 Thanks, James. So if I could just add to my views on that. So, you know, it's a personal decision by James. We have had some feedback from some of the shareholders that were our investors a bit shocked, but it sounded like a a quick exit. And the teams was asked to leave the business. Can I just assure that that's absolutely not the case? And we've got an orderly transition in place with James. I'm pleased to go and see the team exactly we'd stay on as long as it's required. K. I've stepped in as exec chair with immediate effect, and really that's around single point leadership and accountability. I I very much believe that there should be a single leader in any business and rather than have two people managing the team around one. James will work with me very closely for the foreseeable future for as long as it takes.

41:24 We decided we will go ahead for that process to recruit a new CEO. I guess the right thing to do for the business just to see the cargo of CEOs that are interested in the role that will do the best thing for the shareholders for the business. I've offered my to consider for the role also. As Steve says, I've been with the business for seven years, so I know the business fairly well. Prior to that, I was involved with a company called Wealthstream International, which was a fifth fifty two fifty business, so public sector exposure in that regard. And prior to that, you know, it's thirty odd years. I've I've stopped counting now with thirty odd years. You said that when you joined us early. So it's probably probably timing up a week before now. And, Jebi, he said, we'll we'll remain a shareholder in the business. You know, there's nothing wrong with the business, so it's a it's an amicable, friendly transition that we're going through here. And we'll we'll report accordingly as we go through the recruitment process.

42:23 So I hope that clarifies our RNS statement we issued on Monday. And with that, I think we'll open it up to Q and A. Thank you. James, Sue, Ali, thank you very much. Ladies and gentlemen, please continue to submit your questions using the Q and A tab that's situated on the right hand corner of your screen. But just while the company take a few moments to review the investor questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your investment company dashboard. Lastly, before I hand back to James, Sue and Ali, I'd like to remind you that your feedback is important to the company. Immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations, and we would very much encourage you to take the time to do that.

43:16 James, Sue, Ali, I know I haven't given you a lot of time to review the questions that have come in today. Obviously, they are visible by you and not other attendees. So I would be grateful. If you could select perhaps the questions that you're happy to answer, Perhaps if I could ask you to read out the question then you guys give your responses as appropriate. And of course, management review all questions submitted today. And these, as we say, will be published if they don't get answered in the live event on the dashboard post event. So if I could hand back to you. Thank you very much. Yeah. So I think what I'll do is I'll I'll read out the questions, and I'll ask James or Sue or or I'll answer them. So the first question that James touched on it related to views on floating offshore wind. James touched on it. So maybe I'll just ask James to expand on that one.

44:07 Yeah. It certainly is an area of of interest for for TEKMAR GROUP and Not highlighted within the numbers that you had in the offshore wind forecast there. There is an indicative target to have around about 20 gigawatts of floating wind by 2040. That's the rough global outlook floating offshore wind. I'm a little bit more skeptical on that. I think that it's going to take a little bit longer to get to that level. But for us, strategically speaking, floating wind farms are a lot more dynamic and therefore require a lot more analysis and a lot more protection and our products and services services are are absolutely suited towards that. I think the commercial growth in floating offshore will be about three to five years out. We're doing stuff now and you'll see, we did a million this year. You'll see a steady increase in that volume, I think, going forward. In terms of whether you're going to see that playing a big part in terms of a diversification part of our revenue stream, I'd say it's about three to five years out. Agile tech on the analysis side are heavily involved in that area because there's a lot of dynamic analysis there. And again, that's just showing you that as a strategy, they're the vanguard. They get into the new territory, the new products first, and then the rest of the of the products follow.

45:20 Okay. Next question is well done to the management team and the results. So thank you for that comment. It's much appreciated. In terms of the bolt ons, are there any particular areas of new technology that you see would be of particular benefit to TEKMAR? So let me take that one. I alluded to it as one of our key initiatives going forward into FY twenty one and beyond. We are looking for the smaller bolt ons as their affair to them. So the areas we're looking for there are a specific engineering, small technology bolt ons that are complementary to a product offering that we can merge in with the existing offering for the business. The other area on the OpEx side is on the services side. We we're starting to touch on the service side, you know, the half sales side. So that's an area of growth for us that we don't do much in at the moment.

46:10 And the other one I would say is on the engineering consultant side. Now James has referred it a number of times, that kind of front end capability, early stage input at the concept stage. That's an area we'd like to expand as well to complement our existing offering that AgileTech and Rider have presented value to the business through FY 'twenty. I think just to add to that, Adi, we haven't touched on it in a great deal till we've done three acquisitions. Acquisitions are still under consideration. We do have shopping list of products that we'd we'd like to expand into. Yeah. Absolutely. And that that question did relate to the bolt on acquisition. So at what stage do you get into the wind farm build? And therefore, what visibility do you have on revenue?

46:58 So I think you've touched it. Maybe expand a little bit more. Yeah. I mean, typically, we get the inquiries two years before construction, and Agile Tech would get involved in the preliminary feed design, which would be up to a year preconstruction. Then the main bulk of our revenue would be in sort of six to nine six to twelve months before construction, then subsea comes in post construction. So we are getting involved in all stages, but the earliest we get involved in is about two years preconstruction, I would say, which gives us that great visibility of inquiries. But obviously, what's great about wind farms is the pipeline you can track out for the next ten years. I can see projects now that are planning to be installed in seven, eight years time. We know where they are, who they are. We've got relationships with these customers.

47:45 So we get some we get really good long term visibility on on the project pipeline. And if I could, just because it's the Nick asked the same question. Do you want me to just answer that in in as as well? On the competitive landscape in offshore wind, I think I've already, again, mentioned that offshore wind is highly competitive. And that's really one of the reasons that's been driving innovation, driving down costs, increasing demand as well. Within our product segment, you know, we've got a very good market share in excess of 70%. And there's probably around about four or five active competitors in other areas. But where we differentiate ourselves from is the package service offering and also the increased performance based on our track record. This product is relatively inexpensive compared to the risk, and therefore, it's not as price sensitive as some might assume in that regard. It's a lot more driven around the quality and the assurance of the engineering capability that the business has, and and that's one of the key differentiators that we've been offering.

48:52 Next question relates to IP protection for each of the pieces of equipment and we're trading in China. So we I think you just touched on China already, but maybe just expand a bit on that. So IP, yeah, we have the we have the usual IP protection that you'd expect. We have lots of great patents protecting the mechanical aspects of the individual design on many of our products. We probably got about 15 or more patents, and we're continually renewing and refreshing new IP as as we have a dedicated r and d team looking at innovation as as a continuous improvement program. I think one of the more defensive means of intellectual property is also the material know how, the secret sauce, as I like to call it, and the recipes that we've created as the chemical structures for some of the designs and some of the application knowledge in terms of understanding the offshore and subsea environment. So IP doesn't always relate directly to patent protection, although we do have some. It also relates to know how. And I think that nicely answers your second question, Barry, about what we're doing in China at the moment. China is a very it's a great market. It's a very different market. And you're absolutely right. There will be copycats, and and and we have to be very careful about how we deliver into China. For China, we have a Chinese product for the China market.

50:12 China market is very commoditized. They hold less regard to the engineering, which is held in much higher regard, particularly in Europe and rest of world projects. So we have a much more basic standard product that we ship out to China. We don't give away any of the designs. We don't do the manufacturing in country. We did the manufacturing of the polymers in The UK. And that gives us a defense because if the Chinese were to copy the China product that we sell in China, it would only be fit for the Chinese market. And therefore, as a defensive means against it coming back in Europe. But just to say, we are very competitive in China, and we do win work. And I think that's based on the fact that we have a strong local presence. We have a wholly owned foreign entity established there. We have a sales team. We have a projects team based in Shanghai, and we have locals selling to locals, and we procure as well. So it's a symbiotic relationship.

51:03 We, as a business, are a net exporter into China and but we also import from China as well some of the goods for the commodity parts of the fasteners fixings for the assembly. I'm sorry, if I may, Andrew, somewhere down the list here, asked a question on China as well. And I'll just tackle that now. He asked about what do I feel the tensions of the trade relationships in China may play on the business longer term. I think it's fair to say that given that we have a presence there, we're less concerned about that. From a supply chain perspective, it has no effect because we have supply chain components that we could procure from all around the world. The hard lockdown affected us because of the timing impacts of that and the decisions that were needed to be made quickly that increased our cost base. But we if China was no longer an option to us, then we can very easily tap into other supply chain markets. From a sales perspective, we're dealing with the Chinese sales domestically, and therefore, I think has less risk to trade tensions that are ongoing.

52:06 Okay. I think there was a question there regarding inventory and response as a result of COVID and h two loading. We'll let James take a brief, and we will let you tackle that one. Yeah. So the the question around improving return on capital employed, We we're not a very high capital intensive business. The the sort of the cash the cash flow the cash that we've used over the last couple of years, some of that has really been around the acquisitions and and putting the cash into the, the new businesses that we bought. But it's not, a heavy manufacturing based business as as Jane just said earlier. It's more about the technology solutions and and getting the margins on the the the wider offering.

52:56 So in intense investment in new infrastructure and capital isn't required to expand this business. It's really more about chasing the market and the the opportunities to to get more across, you know, each wind farm getting more in in earlier and staying longer. That doesn't take an awful lot more capital investment. But, clearly, keeping investing in in new products is is something that is on the horizon. We don't need to keep a lot of inventory of finished products. We we manufacture for each project, so we don't hold high levels of finished goods at any one point in time because, actually, every solution for each client is a bespoke project based solution.

53:45 So even though the products looks look similar for each job, we we make sure they're tailored for each job so we build for projects and and don't hold high levels of inventory. And maybe partly related to that was the our plans for any impact regarding Brexit. I mean, I'll probably take that one. We we benefited as a result of our contingency planning for Brexit as a result of the COVID lockdown. We we did carry a small amount of in inventory, which we put to good use to to help us through the COVID crisis. So, yeah, our contingency planning really will be around some stock controls, and and we will want to really limit that to the percent of cash, obviously. Mhmm.

54:32 I'd like to read out Charlie's question. Yeah. I did see a comment there from one of of our old employees. Her employees progressing yesterday. Nice to hear from you, Charlie. Always good to hear from some old employees, and we appreciate the contribution you've made to these numbers as well prior to your departure. China trade question, can take that one. Okay. By the way? Yes. So Miguel asked about the impact on Taiwan in the offshore wind market and the risk to upsetting Chinese Mainland market getting involved in Taiwan. Great question. And we've got to be very sensitive to cultures, and we operate not just between China and Taiwan, which there is an embargo between the two countries doing business, but we have similar effects in The Middle East and in other regions as well. So we're very sensitive to these. And I think someone else in the questions I just saw popped up was asking about nationalistic views going forward. So maybe I'll tackle these two questions together.

55:27 For us as a business, as you have seen on the slide where we really try to embed ourselves culturally in local representation. And we have to be very sensitive. So for example, we don't have any of our Chinese nationals working on the Taiwanese projects. We have to make sure that the Taiwanese market, we always look to utilize where possible as much local content. Simon asked about this about the nationalistic view and and championing local players as opposed to global leaders like ourselves. And I completely agree, Simon. But that's actually our strategy. We're bringing domestic opportunity by utilizing our technology and our package servicing, but then trying to procure as much locally as possible and partnering in these regions, and we're doing this very effectively. We've got many projects in Taiwan. In fact, if I missed that off the list, we've supplied the biggest project this year. One of our largest contracts this year actually with Subsea seven was into Taiwan.

56:25 And again, we managed to source an element of local componentry. I myself have been out to Taiwan many times with the sales team, and we would often look when assessing new markets, we would look to establish local presence in these markets to try and provide as much local content as possible and to support them as they are emerging because The UK standard is regarded very highly in the world, particularly in subsea and even more so now within offshore wind. We are still today the world market leaders as The UK in offshore wind farms, we've got the earliest projects and we've got the biggest projects and we've got the most projects. And we can really leverage that quality stamp, but trying to also utilize where easily possible as much local content to get that that encouragement from a nationalistic sense of point of view.

57:16 Thank you. I think that's it. Think you found So we've answered all the questions we've Yes. And within the hour, most impressed with the timing. Thank you very much indeed. I think you've, as you say, you've addressed all the questions from investors today. And of course, should any company in as we're closing up a good Perhaps I could think ask you just to wrap up, and then I will take back and redirect investors' feedback. Thank you. Yeah. I'll just say just to repeat what you just said there, feedback is greatly important. We we do review it. So please, please do give us some feedback.

58:03 Or if there's anything that you've heard here today that didn't sound quite right or we haven't really given you the the proper explanation, then then oh, one more question came in. I'll answer it quickly. Is New Daycliff the best place to manufacture as opposed to be near the coast? We have coastal production and facilities as well. We have a facility in the Port Of Live. But from the cable protection goods, it really doesn't matter because we ship everything in 20 foot containers, which is road transportable. But, yeah, if there's if there's anything else we haven't addressed, then please, please let us know. We'll be we'll be happy to respond. Just picking up on the there's a final question here on ESG. And the the feedback that we're getting from some of the the rating advice is that because we are predominantly renewables based and and our share of of of the oil industry parts of our revenue is quite small, We're we're getting quite a positive view in terms of, you know, how that will be looked at in terms of ESG rating.

59:05 And if it hasn't come across apparent, our focus is towards that. It is just about having a smooth revenue profile as well. So we, you know, we can't we don't want to have everything in one basket, but because we've got to manage a business across the whole the whole period. But our our focus is always predominantly offshore wind. Thank you. With that, we'll just wrap up, and we do appreciate your feedback and your input. We are here to listen to what your views are, and we look forward to catching up with you all in due course. Hope to meet some of you one day. Thank you very much indeed, guys. Thank you. Thank you for giving investors the opportunity to be part of your investor roadshow. That's greatly appreciated, I'm sure. Could I ask investors please not to close the session as you'll be automatically redirected for the opportunity to provide your feedback.

59:55 If you access this meeting via our website, the feedback form will appear. If you access it via the email link, we would, you'll receive notification to just log back in, to submit your feedback. We'd be very grateful if you could, please do that. So on behalf of TEKMAR GROUP, Ali, James, and Sue, I'd like to thank you for attending today. That now concludes today's session.