Interim Results

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

14 September 2021

TP Group plc

("TP Group" or the "Company" or the "Group")

Unaudited interim results for the six months ended 30 June 2021

TP Group (AIM: TPG) today announces its unaudited interim results for the six months ended 30 June 2021.

TP Group overall delivered a much improved performance in a difficult market and is well positioned to deliver good growth that will increase shareholder value. UK Consulting grew revenues and margins. Our recent acquisition of Osprey Consulting Ltd ("Osprey") delivered an excellent performance despite COVID-19 ("C-19") shutting down a large part of the aviation market. TPG Maritime's profits increased. Central costs were historically too high and have since been reduced by £1m per annum, the benefit of which will fall straight to the bottom line. Looking forward we are confident of good growth within the UK Consulting market and across Europe.

H1 Performance Summary

David Lindsay, Chief Executive Officer of TP Group, commented: 

"TP Group will significantly increase shareholder value by focussing on Aerospace & Defence clients that place great trust in our excellent people, expert technical knowledge and secure processes & systems. 

"TP Group has successfully grown its UK Consulting business despite the C-19 pandemic and aims to replicate this success across Europe using Sapienza as an important stepping stone.

"I have already streamlined our management structure and reduced our central costs by £1m per annum that will directly benefit the bottom line in 2022. We will also improve profitability by increasing knowledge transfer, resource sharing and use of common systems across our businesses.

"I am very optimistic about TP Group's future because we have great people and operate in good markets where important clients value our services highly."

For further information, please contact:

Business Review

Introduction

TP Group overall delivered a much improved result with revenue and adjusted operating profit both up by 23% despite the difficult market that was severely impacted by the C-19 pandemic.

Consulting:

· The Osprey acquisition in August 2020 has strengthened Consulting, adding both specialist safety assurance capability and aviation market access. Osprey's performance improved thanks to its entry into the space, drone and digital technology markets and despite the devastating impact of C-19 on the civil aviation sector.

Engineering:

· TPG Maritime's profits increased despite delays in new contract awards and cost overruns in European contracts that are now addressed, and we are confident that the business has a good future.

· Westek disappointed due to product design difficulties and delayed order intake. We are currently reviewing how best to realise value from this business.

Northstar/Optimiser, our artificial intelligence software suite continues to offer the potential of profitable growth but has not, to date, generated significant revenues. We are currently reviewing the costs and potential benefits of this activity and how they can best be monetised.

Central costs were too high and action has already been taken to address this by the Company's new CEO, who joined post period end.

Financial summary

Group revenue increased 23% to £33.8m (H1 2020: £27.5m):

The Group's gross profit margin remained consistent at 24% year on year:

Operating expenses increased from £8.4m to £10.0m in the period. The key drivers include:

The Group's H1 2021 £1.9m (H1 2020: £1.7m loss) operating loss includes the £0.5m termination cost for the former CEO.

Adjusted operating profit rose by 23% to £1.7m (H1 2020: £1.4m). The £0.3m improvement in adjusted operating profit was driven by a £1.4m increase in gross profit partially offset by an increase in operating expenses of £1.1m.

Earn-out payments relate to the acquisition of Osprey.

The Group's net debt position as at 30 June 2021 was £3.5m (31 December 2020 net cash of £0.4m). Cash performance is tracking in line with market expectations, providing sufficient liquidity and bank covenant compliance.

Group order intake of £25.5m was £7.9m lower than that secured in the same period last year (H1 2020: £33.4m). Included in the 2020 figures, however, was the renewal of the 2½ year European Space Agency ('ESA') agreement which contributed c. €18.0m (c. £16.0m) to H1 2020 order intake. Excluding this, order intake across both the Consulting and Engineering business streams was up on the prior period.

The closing order book reduced by £8.4m to £60.9m from the 2020 year-end position of £69.3m because of the timing of multi-year contracts won in prior years, including ESA as noted above. The current order book provides 95% coverage of market revenue expectations for the 2021 financial year.

Post period-end

David Lindsay was appointed as the Company's permanent CEO on 26 July 2021.

Following his in-depth review of the business, David has identified a number of measures which will immediately improve the business and provide an initial upgrade in the market forecasts for 2022 to £6.1m adjusted Operating Profit. He sees a number of opportunities to further improve performance.

The Company was the subject of a speculative takeover approach by Science Group in August, which the Board regarded as opportunistic and seeking to capitalise on the short-term impact suffered by TP Group as a result, primarily, of the C-19 pandemic. No formal offer was made by Science Group, and they withdrew interest in making an offer for the Company on 3 September 2021.

During the past several weeks, Science Group has acquired more than 27% of the shares of the Company and, despite the possible offer for the Company being withdrawn, has requested that the business call a General Meeting proposing that two of the current Non-Executive Directors, Andrew McCree and Jeremy Warner-Allen, are replaced by two of Science Group's directors Martyn Ratcliffe (Executive Chairman and CEO of Science Group) and Peter Bertram (non-executive Director of Science Group). The General Meeting has been convened for 1 October 2021. The Board is vehemently challenging the resolutions proposed by Science Group and further details can be found in the circular posted to shareholders on 6 September 2021 and which is available on the Company's website.

Market outlook

Our UK Consulting business is well established in the defence market, and we expect to see growth in its recurring revenues through the frameworks agreements already in place.

Osprey will grow as airports and the aviation market generally returns to normal operations as the C-19 impact subsides. Osprey will also benefit from its entry into adjacent markets such as spaceports.

Sapienza will continue to benefit from recurring revenues from ESA. Sapienza will also serve as a stepping stone as we explore transferring skills and services across Europe to target the aerospace and defence markets. Sapienza's offices in France, Germany, Italy, Netherlands and North Macedonia offer potential in-country bases.

TPG Maritime is expected to perform well in FY22 with an established submarine order book and potential opportunities within the hydrogen market.

David Lindsay

14 September 2021

Condensed consolidated statement of comprehensive income

1 The comparative condensed statements of comprehensive income have been presented to reflect continuing operations and exclude the results of TPG Engineering Limited which was disposed of on 29 October 2020. The comparative results for TPG Engineering Limited are presented above as 'Loss for the period from discontinued operations'.

2 A reclassification between Cost of Sales and Administrative expenses of £172,000 has been made for the six months to 30 June 2020 to reflect gross profit on a consistent basis.

Condensed consolidated statement of financial position

1 The comparative Statement of Financial Position shows current assets and liabilities held for sale due to the planned disposal of TPG Engineering which was ultimately completed on 29 October 2020. 

Condensed consolidated statement of changes in equity

Condensed consolidated statement of cash flows

Notes to the condensed set of unaudited interim financial statements

1. General information

TP Group is a consulting, software and technologies business, working to make the world a safer place, employing more than 400 highly skilled individuals across six European countries. We combine to deliver mission, business and safety critical services and solutions across three high growth sectors - Defence, Space and Energy.

Our customers trust us to ensure the safety, reliability and performance of complex systems in the most challenging or arduous situations. With global presence and proven field experience, TP Group is a leading choice for platform builders, integrators and users of both military and industrial systems.

The Group currently reports as three complementary value streams:

This structure allows us to be clearer in the nature of our offerings to support customers through the full lifecycle of their projects or programmes. Our consultants can support initial planning, justification and project management whilst specialist teams can deliver software or equipment as required.

TP Group plc (the 'Company') is the Group's ultimate parent company, is incorporated under the Companies Act and domiciled in the United Kingdom. The address of the registered office of the Company is Cody Technology Park, Old Ively Road, Farnborough, Hampshire, GU14 0LX. The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange.

2. Basis of preparation

The financial information for the six months ended 30 June 2021 presented in these unaudited condensed consolidated interim financial statements (the 'interim report') has been prepared under the historical cost convention using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the European Union and is presented in pounds sterling, which is the currency of the primary economic environment in which the Group operates. All amounts have been rounded to the nearest thousand, unless otherwise stated.

While the financial figures included in the interim report have been computed in accordance with IFRS applicable to interim periods, the report does not contain sufficient information to constitute interim financial statements as defined by International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted by the European Union (the 'EU').

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2020, prepared under IFRS as adopted by the EU, have been delivered to the Registrar of Companies. The auditor's report on the 2020 financial statements was unqualified, did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006 but did draw attention to a material uncertainty related to going concern. The audit opinion was not modified in respect of this matter.

These unaudited condensed consolidated interim financial statements were approved for issue by the Board of Directors on 13 September 2021.

Going concern

The Directors have reviewed the Group's cash position, trading outlook and projections for a period of 12 months from the date of approving these unaudited interim consolidated financial statements. The Group has positive cash resources and has met, and is projecting to continue to meet, all its banking covenants. The Group is performing in line with market expectations and management projects that there is no requirement for further funding from its facility provider to support working capital.

Accordingly, the Directors are of the opinion that there are reasonable grounds to believe that operational and financial projections are achievable and have a reasonable expectation that the Group will have adequate resources to meet its obligations as and when they fall due for the foreseeable future. The Directors are satisfied that it is appropriate to prepare these unaudited interim consolidated financial statements for the Group on a going concern basis.

The Directors made specific statements in the Company's 2020 Annual Report concerning going concern. The Company's auditor drew attention to the Directors disclosure of a material uncertainty related to going concern and issued an unqualified audit opinion on the 2020 consolidated Group financial statements.

Accounting policies

The accounting policies adopted by the Group in these unaudited consolidated interim financial statements are consistent with those applied by the Group in its audited consolidated financial statements for the year ended 31 December 2020.

The following Standards and Interpretations are effective. Application of these standards has no material impact on the results of the Group:

Notes to the condensed set of unaudited interim financial statements (continued)

3. Segmental reporting

The following is an analysis of the Group's revenue and results from the continuing operations by reportable segment.

Notes to the condensed set of unaudited interim financial statements (continued)

3. Segmental reporting (continued)

1 Revenue generated in the Digital Solutions segment to 30 June 2021 is lower than reported for the period to 30 June 2020 due to the discontinuation of the Lift BV business previously disclosed here.

2 Central unallocated costs are specific costs associated with the Group's AIM listing and other Group operational costs that are not charged out to the operating companies.

3 Adjusted operating profit is defined as operating result adjusted to add back depreciation of property, plant and equipment and right-of-use assets, amortisation of intangible assets and impairment gains or losses on non-current assets, changes in fair value of contingent consideration, acquisition consideration accounted for as employment costs owing to on-going service conditions, any other acquisition-related and disposal-related charges, share based payment charges, and non-operating costs. Non-operating costs are those items believed to be exceptional in nature by virtue of their size and or incidence. The directors of the Company believe this measure is more reflective of the underlying performance of the Group than equivalent GAAP measures. This is primarily due to the exclusion of non-cash items, such as share-based payments, impairment, depreciation and amortisation, as well as acquisition and non-operating costs. This provides shareholders and other users of the financial statements with the most representative year-on-year comparison of underlying operating performance attributable to shareholders. This measure and the separate components remain consistent with 2020.

4 The comparative segment for the six months to 30 June 2020 has been restated to present the segments in line with the financial statements to 31 December 2020.

4. Loss per share

The calculation of the basic loss per share is based on the loss after tax for the period divided by the weighted average number of shares in issue during the period as follows:

The weighted average number of shares in issue has been reduced by deducting the weighted average number of shares held by the Employee Benefit Trust of 1,606,769 shares (six months ended 30 June 2020 and year ended 31 December 2020: 1,606,769 shares).

The issue of additional shares on exercise of employee share options would decrease the basic loss per share and there is therefore no dilutive effect of employee share options.