Coronavirus wipes out Tekmar's profit growth

Tekmar warned that the impact of coronavirus would wipe out earnings growth in 2020 after the disease delayed shipments to China, cut off supplies of components and shut down its Shanghai office serving Asia.

The maker of underwater protection systems for offshore wind farms said earnings would be broadly unchanged in the year to the end of March.

The warning marks a stark change from early December when the company said record revenue would outstrip forecasts and that it was confident about meeting profit expectations. Analysts at Berenberg said Tuesday's warning meant annual profit would be about £2.5m, or 35%, lower than expected.

Tekmar shares fell by a third to 102.99p at 10:52 GMT. The shares had risen steadily from 80.0p over the past year as business picked up and the company gained new business, including from a Taiwan windfarm operator.

The company said its previous guidance was based on expected sales to China and the cost of sourcing components from China.

All projects destined for China have been delayed by travel restrictions and it is unclear when shipments might resume, Tekmar said. Buying components in Europe will affect margins and when revenue is booked and the group's Shanghai office, which serves the Asia Pacific (APAC) region "has been placed on official shutdown" along with many customers and suppliers, the company said.

China accounted for about 10% of Tekmar's 2020 revenue forecast and 20% of outstanding supply chain commitments, it said. Tekmar left its 2021 guidance unchanged for now.

Alasdair MacDonald, Tekmar's chairman, said: "The disruption caused by the outbreak of the coronavirus on the group's activities and performance has been unpredictable and rapid, impacting the group materially in our crucial, heavily weighted Q4 period. With the situation in China and the surrounding APAC countries evolving, we are not yet able to evaluate the full impact of the virus on FY21 and will provide further updates as necessary."

Tekmar is the latest company to warn about the potential impact of coronavirus on its results following Burberry, HSBC and Apple. The UK's accounting watchdog has told companies to be rigorous in reporting coronavirus risks as concerns increase about its effect on supply chains and the global economy.

"If the coronavirus situation is resolved quickly then some delays could simply shift into FY 2021," Berenberg's analysts wrote in a note to clients. "However, there are several major risks to consider, including the potential longer-term impact on the supply chain, such as delays to European offshore wind projects and inflationary cost pressures."