TPG.L Regulatory News (TPG)

This announcement contains inside information

TP Group plc

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

Business and Board Update

Following the investment by Science Group plc ("Science Group") and the recent changes to the Board of TP Group plc, the following update sets out the current position of the Company and the future direction.

Board Composition

Following the recent Board changes and the adoption of a new strategy for the business, detailed below, David Lindsay, Chief Executive Officer, has given notice of his intention to resign his position. Mr Lindsay has a 12 months' notice period, which will expire in October 2022. He will continue to support the Board, focusing on the continuing restructuring and realignment of the Group to provide a solid platform for the future. It is anticipated that he will leave the Company upon completion of that process, anticipated to be in March next year.

Martyn Ratcliffe has been appointed Executive Chairman of TP Group plc with immediate effect. Until a new CEO is appointed, if the Board consider that such appointment is necessary, he will take over the direction of the core business operations. Mr Ratcliffe's services will be charged to the Company by Science Group on the basis of 25 days per Quarter, which will reduce if/when a new CEO is appointed.

Derren Stroud continues in his role as Chief Financial Officer, with the full support of the new Board. Peter Bertram will chair the Audit Committee and until a new appointment is made will also chair the Remuneration Committee. Claire MacPherson will continue in her role as Company Secretary.

The Board will now commence a search for two independent non-executive directors, including a Senior Independent Director and at least one female director.

TP Group Strategy

The strategy for TP Group will be to focus on the UK-based Defence and Aerospace operations, comprising TPG Maritime, UK Consultancy and Osprey. These businesses constitute approximately 70% of the TP Group revenue and a greater proportion of the profit contribution. The organisation will be structured to improve operational corporate governance with checks and balances appropriate for a public company.

The Board will be reviewing the strategy of Sapienza, Westek and the Northstar operations. David Lindsay will lead these activities, together with the restructuring and cost reduction programme that he has already initiated.

In due course, opportunities for cooperation and collaboration between TP Group and Science Group, TP Group's largest shareholder, will be explored.

Current Trading

The Group's trading has been satisfactory during the third quarter ended 30 September 2021 and the forecast from the operating businesses for the full financial year remains broadly in line with market expectations and in compliance with banking covenants. Certain payments, including deferred consideration related to the Osprey acquisition, advisor fees and the payment to the former CEO, have been phased and deferred to assist cash flow through to Q1 2022.

To the end of September, TP Group has incurred exceptional costs totalling £2.1 million, including £0.5 million related to the termination of the former CEO in June 2021; £0.5 million in relation to the corporate defence in August/September 2021; and £0.8m associated with the Osprey deferred consideration. In view of the changes set out above, it is anticipated that further exceptional costs will be incurred in the current year. It is also anticipated that impairment of goodwill and intangibles may be required.

In conjunction with the CFO and the finance team, the newly appointed Chairman of the Audit Committee will conduct a thorough review of the Group's balance sheet along with accounting policies, including revenue recognition and R&D capitalisation. The Board is aware of a number of legacy contracts which are proving challenging and provisions may be required in order to address these matters and position TP Group on a solid foundation for the future.

Management and Employee Incentive Schemes

The Remuneration Committee of the Board will be reviewing incentive/reward scheme(s) for management and staff. From 2022, it is anticipated that such schemes will be based on the financial performance of the Group to align management and employee rewards with shareholder interests.

The TP Group share option scheme has expired. It is proposed that a new scheme, or alternative incentive arrangement, be introduced. Approval from shareholders will be sought at the next Annual General Meeting of the Company in relation to any new scheme proposed.

Warrant Agreement

On 30 September 2021, in lieu of advisory fees in relation to the possible offer by Science Group, an agreement was signed between TP Group and Cenkos granting warrants to Cenkos over 23,375,361 new ordinary shares in the Company, equivalent to approx. 3% of the Company's issued share capital. The warrants are exercisable at 5.8 pence and the exercise period is five years.

 Summary

The future direction of TP Group has now been resolved. Following recent events, the Board can now focus on implementing the strategy associated with the investment by Science Group. The opportunities for collaboration and cooperation between the two organisations will be explored in due course.

In the short term, the Board will be focused on completing the restructuring of the Group and addressing legacy issues to enable the Company to establish a solid platform for the future. This will require streamlining some operations to enable investment in the core, profitable UK-based businesses. Completing this realignment of the Group will be the priority.

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Notes to Editors

TP Group delivers complex equipment, software and services for mission-, business- and safety-critical applications in defence, space, intelligence & security and energy sectors. With more than 400 people in 6 European countries, it serves global customers through long-term contracts. The Company's shares have been traded on AIM since July 2001.