Ahead of the curve

May 1, 2019

What Darlington-born James Ritchie has achieved in his twenties has taken most of his business peers a lifetime. At 21 years old, he led a management buy-out of Newton Aycliffe- based Tekmar Energy and, seven years later, listed it on the London Stock Exchange – in turn becoming the youngest CEO of an AIM-listed company. Here, James talks to Alison Cowie about his incredible journey and how becoming a plc heralds a new era for the subsea cable protection group

For James Ritchie – who in June last year became the youngest CEO of a listed company on the London Stock Exchange – his entrepreneurial tendencies began from a tender age.

“I used to do car boot sales, run market stalls and wash cars as a kid – anything that would earn me a few pounds,” says James, who was born and bred in Darlington.

The CEO says he was encouraged by his grandparents and his father who, after a career in the military, founded design consultancy Tekmar in 1985, working in the subsea oil and gas sector.

When James left school, he started his own company selling audio- visual equipment but, after a conversation with his father, his business ambitions took a different turn.

“Tekmar specialised in innovative cable protection for the oil and gas sector and it had been asked if it would develop a similar solution for an offshore wind farm,” James explains. “The team had come up with a prototype, which worked, but with offshore wind farms still in their infancy, there wasn’t much appetite to take it beyond what was a relatively small contract.”

The young entrepreneur, however, saw the potential in the burgeoning offshore wind energy market and, in 2009, convinced his father and fellow senior management team to let him lead Tekmar Energy – a subsidiary that would globally market the newly- developed TekLink Cable Protection System (CPS).

Within four years, James had built Tekmar Energy to a £25 million turnover company with 80 members of staff. The TekLink CPS also achieved a 100 per cent market share.

Meanwhile, in 2011, James led a management buy-out of Tekmar Energy, winning investment and support from private equity firm Elysian Capital. While James kept the Tekmar name, the original group was rebranded to Subsea Innovation.

The 21-year-old James recognised that he had to mature the fledgling business and wrote a three-year business plan to achieve this.

“TekLink had 100 per cent market share but as one of the investors said to me, that was a bit like saying he was the fastest person who could run the final three flights of stairs in his office. We were dominant, but in a very niche market.”

James continues: “I passionately believed in the future of the offshore wind sector, but, at the time, the market was volatile. Wind farms represented huge capital investments – anything up to £3 billion – and it was only really the UK and Germany that had offshore wind bases at that time. Other countries in Europe were very much emerging, and the rest of the world was pretty much non-existent.

“We decided to diversify back into the oil and gas sector. That was the company’s heritage and it made sense – but we wanted to offer a new set of product ranges.”

Diversifying the business to cater to both offshore wind and subsea oil and gas proved a savvy move as Tekmar has weathered the fluctuating energy markets over the last decade.

With limited business experience himself, James has had to lean on the team he has gathered around him, who have bought into the journey and vision of the young company.

“I know it sounds like a cliché, but you have to work with people who are better than you. Get a good CFO and she’ll take care of the numbers and advise you on that; get good engineers and they’ll engineer the right products for the market,” says James.

With the team’s dedication, the backing of Elysian Capital and the growing international momentum in renewable energy, Tekmar Energy was able to maintain its market-leading position in the offshore wind energy sector, supplying its TekLink CPS (now in its eighth generation) and supplementary products across Europe, Asia, the Middle East and the US.

By his late 20s, James began looking to the next phase in his company’s journey.

A natural step would have been to sell Tekmar Energy to a multinational. “With our dominance in a niche market, we would be an attractive option for a larger company that wants to get access in the offshore wind space,” the CEO says.

This path, however, didn’t interest James or his senior management team and in September 2017 – with the backing of Elysian Capital – they set their sights on an IPO (initial public offering) – achieving the remarkable feat just nine months later.

On June 20, 2018, Tekmar was listed on the London Stock Exchange with a market capitalisation of £65 million. In doing so, James became the youngest CEO of an AIM-listed company, which attracted the attention of the international business media.

Despite achieving so much, so young, James says that age has never phased him; “I don’t know why. I’ve just always felt that I was confident in what Tekmar was doing,” he says.

Tekmar’s flotation raised an initial £61.8 million – of which approximately £10 million was earmarked for acquisitions. In September 2018, Tekmar acquired back the original company, Subsea Innovation. This has since been followed by the acquisition of Ryder Geotechnical Limited, which provides subsea geotechnical design and consulting services.

With these acquisitions, James says, Tekmar is looking to capture more of the full life cycle of subsea cable protection, but maintains they are not part of a “buy and build” strategy.

“We’re not buying profitability,” he says. “We’re tactically acquiring businesses that we can leverage our brand and market exposure and which can complement our service and product offering.”

Tekmar Group plc now operates four divisions – Tekmar Energy, AgileTek Engineering, Subsea Innovation and Ryder Geotechnical. “Ultimately, we want to be the market leader in cable protection for anything man-made under the sea – whether that’s cables linking wind turbines to shore, oil and gas cables, umbilicals, water lines, telecoms or power transmissions,” James says.

While Tekmar’s CEO is relishing the opportunities and capital the IPO has brought, he is all too aware that the new shareholders have different expectations.

“With private equity, shareholders want you to deliver sustainable, long-term growth, but you can be restrained in terms of capital,” says James. “Whereas as a plc, you have the tools at your disposal to maintain a longer-term view, but your shareholders want more focused, short-term earning growth.”

These new expectations were tested in December when Tekmar posted lower than expected results in its first six months.

But with a record order book – and staffing soon to hit the 200 mark – James remains confident that the long-term vision will, literally, pay dividends.

“The industry is going to experience unprecedented growth, primarily because of the cost reductions of offshore wind,” says James. “The CFD (contract for difference) levels in the UK have dropped from £120 per megawatt hour of power in 2016 to £57.50 in 2018. That’s down from a high of over £200 six years ago.

“Offshore wind is now seriously cost competitive and there are now projects in Holland and Germany being tendered with zero government subsidy, so the shackles are off.

“There’s also increasing appetite from countries such as Taiwan, China and the US – and even in India and Australia.”

As well as leading Tekmar Group plc, James is a vocal advocate for the offshore wind energy sector and is chairman of Energi Coast, a representative group for the North East’s offshore renewables sector.

“There is a global need to develop clean, sustainable renewable energy sources and so offshore wind is an incredibly exciting industry to be in,” James says.

Tekmar’s CEO sees the recent announcement of the offshore wind sector deal between the Government and the UK industry as “incredibly positive,” adding, “it has given what the UK industry needed most, which is more certainty and commitment in terms of long-term planning.”

He maintains that the UK – and the North East – are global leaders in offshore wind energy talent and technology but admits he can sometimes be dismayed why local companies haven’t taken advantage of its dominant position more.

He explains: “The North East and the UK has a lot to offer but we’re not good at selling ourselves and as a result, can get beaten by competition from other countries.

“We have to get better at understanding our value proposition and be willing to stand up and sell ourselves in a way that will win work,” says James.

With the lifetime of business experience that James has already achieved before his 30th birthday, it would be wise to pay attention to Tekmar Group plc’s talisman.

Tekmar Group plc

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Monthly report - May 2019