Tekmar Group Plc (LON:TGP) Chief Executive Officer Richard Turner caught up with DirectorsTalk to discuss H1 performance, outlook for the full year & beyond, and how the group is positioning itself to capitalise on growing opportunities in offshore wind and oil & gas.
Q1: Richard, how did the business perform in the first half, and what’s the outlook for the full year?
A1: The first half is largely as anticipated, i.e. the weighting being more towards the second half. It’s fair to say that some contract awards did move to the second half, but that supports what we’re saying to the market with regards to a healthy pipeline for the remainder of this calendar year and beyond into 2026, as we see the markets steadily grow and increase in demand.
The first half of the year as well, I’m also really pleased with our operational performance, and we made steady progress with Project Aurora, the strategy which we launched earlier in this calendar year. We’ve made significant cost reductions, meaning we have a business that’s really fit for the future. We made major progress in terms of closing out legacy warranty issues, we’ve just launched a simplified business structure and also progressed with M&A discussions.
So, all in all, I’m very pleased with the progress we’ve made in the first half.
Q2: Now, there’s been some news flow around Orsted retrenching from offshore wind projects, the Trump administration pulling back from renewables, and obviously the geopolitical tensions in the Middle East that could impact on oil and gas markets. How should we think about the broader backdrop for Tekmar Group?
A2: There’s been a lot of headlines, and the Orsted announcement to cancel Hornsea 4 is a key one, which I do admit was a major surprise. But if you look behind the headlines, the macro effects in markets and the key offshore energy markets, being oil and gas and offshore wind, is this still a steady and sustained growth for not just the next five years, but the next five to ten years, I think, certainly.
There’s one of the key metrics that we look at and measure is the number of projects that are actually formally financially sanctioned, so rather than political commitments or even industry forecasts, we look at the projects which are sanctioned, and they’re definitely going to go ahead. There’s been a significant increase in the last two years versus the two years prior, the number of projects that have been given the go-ahead.
So, between 2021 and 2022, there was 7.6 gigawatts of projects approved and received financial investment decision and in the last two years, 2023 and 2024, that’s increased to just below 20 gigawatts. So, that’s a sure sign of a very healthy pipeline of projects to participate in in the coming years. We’re very confident about the offshore wind side of the market.
In oil and gas, in some respects, any slower deployment of offshore wind will be to the benefit of the oil and gas markets. There is, I would say, a disruptive market in the Americas and also in the Middle East but I think the long-term profile of those markets looks particularly good.
On the US, from a tech point of view, we have very low exposure in the USA, it’s only about 4% of our pipeline that we see from the USA so if anything, in particular, the oil and gas market in the US is more of an opportunity, I think, than a risk.
So, all in all, I believe the aggregated demand across those two markets is steadily growing and will continue to grow for the long term.
Q3: With that in mind, does Tekmar Group have the capacity to grow? Is M&A still part of the plan?
A3: We have significant available capacity to us, and that’s one of the challenges in terms of our financial performance currently.
So, we’ve performed well operationally, but in reality, we’re still only running at about 30% of our capacity so that’s not a good thing for today but in terms of the future, it means we can more than treble our manufacturing output without spending any money on expansionary capex. We have the capacity, we have the capability to deliver more and as we grow and develop, a sustainably larger backlog will benefit from that and the operational gearing that comes from having that inbuilt capacity already.
In terms of M&A, absolutely still part of the plan. We’re spending a lot of time in active discussions at the moment with potential acquisitions and although it’s too early for us to talk specifically at this stage, we have some really good opportunities ahead of us.
As a business, we’re very, very focused on growing our offshore services revenue streams, which is about 6% of our turnover today and we have the stated aim to increase that 6% of sales to more than 25% in the next three to five years. That’s a key area of focus for both organic growth and investment, and also M&A.
