TPG.L Regulatory News (TPG)

RNS Number : 4534B

TP Group PLC

04 April 2017

 

4 April 2017

TP Group plc

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

 

Final results for year ended 31 December 2016

 

TP Group (AIM: TPG), the specialist services and engineering group, announces its audited results for the year ended 31 December 2016.

 

Revenue up 4% to £21.2m (2015: £20.4m)

· Growth in defence equipment sales and strong second half performance across the Group

 

Operating losses reduced by £2.0m to £0.3m (2015: £2.3m)

· Ongoing improvements in manufacturing efficiency and better control of legacy contracts

 

Adjusted EBITDA* up to £1.1m (2015: £0.0m)

 

Net cash up 31% to £9.2m (2015: £7.0m)

· Strong conversion of Adjusted EBITDA to cash

· Close management of stage payments from major contracts

 

Group order book up 17% to £17.0m (2015: £14.5m)

· Strong second half performance with continuing conversion of pipeline into 2017

 

Strategy and organisation

· Ongoing investment in facilities and capabilities to enter new markets and improve performance and margins

· Focus on strategic acquisitions which complement our existing activities; completed acquisition of ALS and FSS in February 2017

· Reshaped Board of Directors to position the Group for growth

 

2016 Achievements

· Won first major contract in the nuclear power sector

· Built upon heritage to sign major design contract for submarine atmosphere equipment

· Entered into sole-source negotiations for two large MoD equipment contracts - one signed in Q1 2017

· Won first resource contracts in the Managed Solutions area

 

Andrew McCree, Non-Executive Chairman commented:

 

"2016 was a year of significant progress for the Group. We posted our first profitable year at the adjusted EBITDA level and finished the year with a significantly strengthened cash position. I am very excited about our prospects."

 

Phil Cartmell, Chief Executive of TP Group commented:

 

"We have established ourselves as a global services and engineering business that is respected for technical excellence, customer relationships and shareholder value. We will continue to build on this platform through organic growth, partnerships and acquisitions that support our strategic ambitions.

 

"The team has worked very hard throughout 2016 to build on past progress and deliver a positive Adjusted EBITDA result. The future bodes well for 2017 and beyond."

 

* Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment, amortisation and impairment of acquired intangible assets and any other acquisition-related charges, share based payment charges and exceptional items. Exceptional items are those items believed to be exceptional in nature by virtue of their size and or incidence. See note 3. The directors 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 exceptional items. This provides shareholders and other users of the financial statements with the most representative year-on-year comparison. This measure and the separate components remain consistent with 2015.

 

 

For further information, please contact:

 

TP Group plc	Tel: 01753 285 810
Phil Cartmell, Chief Executive Officer
Derren Stroud, Chief Financial Officer
www.tpgroup.uk.com
Cenkos	Tel: 020 7397 8980
Mark Connelly / Callum Davidson
www.cenkos.com
Vigo Communications	Tel: 020 7830 9700
Jeremy Garcia / Fiona Henson
www.vigocomms.com

 

 

Notes to Editors

 

TP Group designs and develops advanced technologies, engineers complex equipment and systems, and provides support throughout their operational life. The Company's shares have been traded on AIM since July 2001.

 

 

 

 

Chairman's statement

 

"2016 was a year of significant progress for the Group. We posted our first profitable year at the adjusted EBITDA level and generated a significantly strengthened cash position. I am very excited about our prospects."

 

Board changes

 

During the year we reshaped the Board to equip the Group better for the growth opportunities that lie ahead.

 

In January 2016, Mark Crawford stepped down as Chief Financial Officer and left the Group, to be replaced by Derren Stroud. Derren brings international finance experience, with specialist innovation and engineering businesses, with both public and private equity backing.

 

In June 2016, Martin Blomley stepped down from the Board, but remained a key member of the management team, focussed on the growth of the Services businesses. At the end of the year, Richard King stood down as Non-Executive Chairman of the Board. I took over his responsibilities and would like to thank Richard, Mark and Martin for their contributions to the Group Board.

 

Subsequent to the year-end, Phil Holland and Jeremy Warner-Allen joined the Board as non-Executive Directors, adding a wealth of M&A, industry and capital markets expertise as we seek to capitalise on our new business pipeline and execute our stated growth strategy.

 

Capital re-structuring

 

In September, the Group created distributable reserves through a court approved capital reduction to allow the Parent Company (TP Group plc) the flexibility to pay dividends and make other returns of capital to the Shareholders.

 

The Board's view was that, with the Group's operational progress, it was an appropriate time to reduce the nominal value of the Parent Company's ordinary shares to facilitate the issue of new ordinary shares at a price below the previous nominal value of 10 pence per ordinary share. This will support acquisition and growth activity and facilitates the implementation of appropriate incentive schemes to attract, retain and reward high performing individuals.

 

Outlook

 

2016 has been a pivotal year for the Group. We have made significant operational progress, recruited key personnel, improved margins and followed a highly focussed growth strategy. 

 

During the year, we explored several M&A opportunities and completed the acquisition of ALS Technologies and Flexible Software Solutions in February 2017, which provide us with significant additional services capability and immediate additional revenue and profit contribution.

 

TP Group has built a strong reputation for reliability and engineering excellence. Close customer relationships provide us with a strong platform for growth in the exciting defence and nuclear power markets. The Board looks forward with confidence to the years ahead, and to generating significant value for our shareholders.

 

Andrew McCree

Chairman

3 April 2017

 

 

Chief Executive Officer's Strategic Review

 

"We have established ourselves as a global services and engineering business that is respected for technical excellence, customer relationships and shareholder value. We will continue to build on this platform through organic growth, partnerships and acquisitions that support our strategic ambitions.

 

"The team has worked very hard throughout 2016 to build on past progress and deliver a positive Adjusted EBITDA result."

 

Exciting market opportunities

 

The Group is active in three primary markets - Defence, Government and Industrial.

 

The Defence market has continued to show strong support for submarine programmes around the world. The UK government voted to support the next generation submarine programme, Asian markets have been active and the DCNS Group, the French shipbuilder with whom TPG has a long-standing supply relationship, has been identified as the preferred supplier of the new Australian submarine programme.

 

We are seeing increasing activity in communications and information systems to support intelligence and command and control activities. Several government departments are taking action to become more closely aligned with national security requirements and working to the exacting standards of our traditional defence customers. This emerging development within the public sector is allowing us to expand our systems engineering services coverage into civil departments.

 

In the industrial markets, we are seeing a recovery in the downstream oil & gas markets both in the UK and abroad. Whilst 2015 and early 2016 were dominated by refurbishment of existing heat exchangers, the trend is moving towards a more balanced combination of new equipment and life extension of the installed base. As this market remains fiercely competitive, we have also noted signs of stress among some of our competitors and these factors have combined to feed an expanding pipeline of new business opportunities.

 

The acceleration of the UK nuclear power programme has also had a significant positive effect on the Group. Several large opportunities have emerged and the bidding and review processes have prompted us to make additional investment with the aim to become a leading part of this premium market. New skills, equipment, business and manufacturing processes have helped the Engineering business in Dukinfield to compete effectively for this work. The reward was the first contract announced in December with GE Oil & Gas.

 

Working for growth

 

TP Group is a specialist services and engineering company that provides high-integrity solutions and through-life support for critical applications in defence, industrial and government sectors.

 

The business works across the lifecycle of major projects, so we can act as consultants and designers at the beginning, or as equipment manufacturers and maintainers later in the cycle. In some cases, our teams combine to deliver a one-stop service solution specifically tailored to the client's often complex requirements.

 

We are able to do this because we understand the challenges surrounding mission-critical and safety-critical systems and have the skills, systems, people and equipment to support our customers and partners and to meet these challenges. We also took the opportunity in 2016 to invest in our future, with additional resources focussed on facilities, staff and resources and at a time when other market participants appeared to be struggling.

 

As oil prices fell and refining projects slowed, TP Group looked at other markets with long term growth potential such as nuclear power, aerospace and secure information systems and invested to position the Group in those areas with a view to securing long term and profitable business.

 

Building a great team

 

We made several key appointments during the year. These were across the business including at executive Board level with Derren Stroud joining the Board as Chief Financial Officer. New leadership was installed at the Engineering business in Dukinfield and several consultants joined the Managed Solutions team to deliver customer contracts.

 

The Group continues to support staff development and was accredited by the IMechE under their Mentoring Professional Development Programme. In addition, the Group has an apprenticeship programme with an engineering apprentice in Portsmouth and an office apprentice in Dukinfield.

 

As ever, the commitment and support of our team, in all corners and at all levels of the business, has been a vital contributor to our success.

 

A business that customers can trust

 

The Group has great experience on safety and mission-critical equipment in the defence sector and so is subject to closely managed processes that require strict inspection and verification. We have set out to harmonise quality management at the highest common level possible to provide greater consistency across Group operations and qualify us for work in the nuclear sector.

 

The Group has been accredited under a wide range of national, international and prime contractor standards and is committed to maintaining and extending this recognition to build our competitive advantage.

 

In 2016, the Group achieved full certification under Cyber Essentials, a government-backed, industry supported scheme to help organisations protect themselves against cyber-attack.

 

Strategy starting to deliver

 

Last year we set out our plans to succeed as a Tier 2 engineering and services group. The goal was to deliver excellent capability that has greater scale than smaller specialists yet is more flexible and responsive than the major or prime (Tier 1) contractors.

 

This strategy drove much of our operational and business development during the year and continues to drive us forward with emphasis on:

 

· Building a balanced services and engineering business

· Developing scalability of the services proposition

· Reinforcing the high-quality aspects of the specialist engineering offer

· Building critical mass presence in high value markets such as nuclear, aerospace and secure communications & information systems

 

The Group explored several acquisition opportunities during the year. They were identified on the basis that they were:

 

· Technically consistent with the Group's services or engineering propositions

· Able to make positive contributions to Group performance in the near term

· Economically efficient in terms of acquisition and ongoing management costs

 

One such opportunity closed shortly after the year end with the acquisition of ALS Technologies and Flexible Software Solutions for a maximum cash consideration of £2.75 million.

 

We believe that this acquisition will deliver significant benefits to the Group, which include:

 

· Extending TPG's existing services business activity in the provision of specialist resources in systems engineering and technical project support to defence and other sectors

· The addition of software solutions that will enhance and strengthen TPG's existing capabilities

· Access to additional strategic customers and programmes

· The ability to cross sell new capabilities to existing TPG customers

 

The Board continues to explore opportunities with suitable engineering and service companies that support our stated strategy for growth.

 

Our next steps

 

In the last year, TP Group has established a secure platform for growth and success that will deliver value to our key stakeholders. We believe there is strength across our core services and engineering businesses and remain committed to evaluating strategic acquisition opportunities within our markets.

 

We have an ambitious and experienced leadership team focused on growth, with an entrepreneurial focus to pursue technical and commercial opportunities as they arise.

 

Our business development activity has positioned us with a very strong sales pipeline for projects that vary from a few weeks' duration to multi-year partnerships.

 

Major negotiations are ongoing with the Ministry of Defence for submarine systems and support and future business growth is visible through:

 

· Nuclear power in civil and defence applications

· Communications and information systems engineering support to defence and civil government departments

· Asia Pacific - upstream energy and defence developments

· Clean manufacturing cell for nuclear and other high spec requirements

· Hydrogen fuel cell applications

· Waste heat recovery technologies

· Project management and outsourcing services

 

Positioned for accelerated growth

 

The Group has delivered a breakthrough performance in 2016 and is well positioned to continue this trajectory to achieve sustainable growth, profit and generate positive cash flows.

 

Business development was strong in the second half in 2016 and this has continued into 2017. We have consolidated in our traditional sectors and entered new areas with strong propositions.

 

Internal efficiencies have delivered better margins and a simpler leadership structure makes us better able to explore new opportunities.

 

We have challenged ourselves technically and operationally and, as an executive team, invested carefully to be the best we can be to serve the premium markets in which we work.

 

We have made excellent progress during 2016, capturing several new strategic orders and generally increasing margins across the business. We have established a series of compelling offerings and the positive momentum we saw in 2016 has continued into 2017. Management will continue to look for acquisition opportunities and we look forward to the future with much confidence.

 

Phil Cartmell

Chief Executive Officer

3 April 2017

 

 

 

CFO's Financial and Business Review

 

I am pleased to report that TP Group has continued its transformation during the 2016 financial year. The Group made a profit on an adjusted EBITDA basis of £1.1 million, up from a breakeven position in 2015, primarily driven by a 15% improvement in gross profit to £6.5 million (2015: £5.6 million).

 

	2016	2015	Change
Group KPIs	£M	£M	£M
Revenue	21.2	20.4	0.8
Operating loss	(0.3)	(2.3)	2.0
Adjusted EBITDA	1.1	0.0	1.0
Net Cash	9.2	7.0	2.2
Closing order book	17.0	14.5	2.5
Order Intake	23.8	17.4	6.4

 

	2016	2015	Change
Revenue	£M	£M	£M
TP Engineering	6.8	7.1	(0.3)
TP Maritime	12.2	10.9	1.3
TP Managed Solutions	1.4	1.5	(0.1)
TP Design & Technology	0.8	0.9	(0.1)
Group Revenue	21.2	20.4	0.8

 

	2016	2015	Change
Adjusted EBITDA	£M	£M	£M
TP Engineering	(1.0)	(0.2)	(0.8)
TP Maritime	4.2	2.7	1.5
TP Managed Solutions	(0.0)	0.2	(0.2)
TP Design & Technology	(1.0)	(1.6)	0.6
Central costs	(1.1)	(1.1)	0.0
Adjusted EBITDA profit	1.1	0.0	1.1

 

Operating Results

 

Group KPIs: This performance has been achieved through continued focus on the efficient deployment of operational resources, tight cost control and applying the principles of continuous improvement.

 

Revenue: Revenue increased by 4% through strong growth in the Maritime business, which offset challenges to the Engineering business in the Oil & Gas sector during the early part of the year. Although Engineering revenue was marginally lower than prior year, the strong order intake through the second half of the year saw revenues improve by c. 52% to £4.1 million in H2 from £2.7 million in H1.

 

Managed Solutions was down marginally as a result of a legacy 10-year contract concluding during the first half of the year. The business qualified on several resourcing frameworks in Government and Defence and the first resulting contracts were secured during H2 with additional opportunities in progress for 2017. Design & Technology was largely flat as the business completed its transition out of loss making projects and repositioned itself to deliver only chargeable services activity.

 

Group Operating Loss: reduced by £2.0m to £0.3m (2015: £2.3m) primarily as a result of ongoing improvements in manufacturing efficiency and control of legacy contracts.

 

Adjusted EBITDA: The Group has invested in both people and capability at TPG Engineering, which has had a positive impact on performance and profitability during the second half of the year. This investment has improved order capture and enabled the business to diversify into the more lucrative nuclear supply chain with the capture of the GE contract. Other similar prospects in this sector are currently in progress. These moves overcame challenges in the first half year, where a low opening order book caused low factory utilisation. The Oil & Gas market remains competitively tight and, although we have seen improved order intake, margins continue to be low.

 

The Maritime business delivered improved performance and double digit growth for the third consecutive year from activities with UK and international customers. This has been enabled by both operational efficiencies and additional volume in major submarine programmes.

 

The Group invested in Managed Solutions to set up new resource propositions, which led to profitable contracts being secured and the development of a sustainable sales pipeline.

 

Design and Technology benefited from the restructuring that started in 2015, which has improved operational efficiency and continued cost management during 2016. The business has completed its exit from several legacy loss-making R&D engagements and is beginning to see improving volumes of commercial service contracts leading to increasing utilisation of resources.

 

Cash

 

Closing cash improved significantly to £9.2 million (2015: £7.0 million), driven primarily by the timing of a small number of major collections shortly before the year end. The business invested £0.4 million of capital expenditure, mainly in Engineering, both on new systems and facility improvements. Further material investment is planned in 2017 to follow through on the commissioning of the Advanced Manufacturing Cell which underpins the improving competitive position of the Engineering business, specifically in the nuclear market.

 

Order book

 

During 2016, the Group's order book increased by 17% to £17.0 million (2015: £14.5 million) as a result of investment in business development resources and the successful conclusion of some long-term sales campaigns.

 

Most notably, the Engineering business improved its order intake in the second half of the year, to close at circa three times the 2015 closing order book value.

 

Investments

 

In line with our strategy the Group invested in key staff and manufacturing equipment to drive us forward in our chosen markets.

 

Key staff appointments were made in Manchester in leadership and business development to strengthen in both operational and commercial disciplines. The Group has invested in further management and delivery staff in the Managed Solutions business to support the strategic plan.

 

To compete in the nuclear supply chain, the Group is investing in high-precision machine tools and metrology that positions us well for future opportunities in this and other high value sectors. The first contract was signed in December with GE Oil & Gas for heat exchangers in the nuclear market.

 

Exceptional items

 

During the year the Group incurred a one off cost of £0.2 million in relation to Mark Crawford's Service contract termination.

 

Taxation

 

The Group does not expect to incur any cash tax payments for the 2016 financial year.

 

Results and dividends

 

The directors do not recommend the payment of a dividend (2015: £Nil).

 

Capital re-structuring

 

In September, the Group completed an exercise to reduce the Parent Company's share premium account to zero, and create distributable reserves to allow the Company the flexibility to issue new shares, pay dividends and make other returns of capital to shareholders, should it be considered desirable to do so in the future.

 

This was achieved through reduction of the Parent Company's capital by way of:

 

•	the cancellation of 9 pence of paid-up capital on each issued ordinary share of 10 pence each in the Parent Company;
•	the cancellation of the amount standing to the credit of the Parent Company's share premium account; and
•	the cancellation of the amount standing to the credit of the Parent Company's capital redemption reserve.

 

This created distributable reserves to the value of approximately £12.2 million immediately following the Reduction of Capital becoming effective.

 

Following the implementation of the Reduction of Capital, there was no change to the number of ordinary shares in issue.

 

The Board's view was that, with the Group's operational progress, it was an appropriate time to reduce the nominal value of the ordinary shares. This would allow the Parent Company the flexibility to issue ordinary shares at a new lower price below the nominal value of 10 pence per share in place prior to the capital reorganisation. This would support acquisition and growth activity, as well as allowing the Group to put in place appropriate incentive schemes to attract, retain and reward high performing individuals.

 

Going concern

 

The directors are satisfied that the Group has adequate resources to continue in business for the foreseeable future and accordingly continue to adopt the going concern basis in preparing the accounts. In reaching this conclusion, the directors have considered forecasts that cover a period of greater than twelve months from the date of the approval of these financial statements.

 

The forecasts take into account the Group's existing cash resources, and include consideration of certain downside scenarios and risks.

 

The directors have also considered the mitigating actions available to them, including the ability of management to make certain reductions to the Group's discretionary expenditure if required.

 

Derren Stroud

Chief Financial Officer

3 April 2017

 

 

 

Corporate and Social Responsibility

 

It is the Group's responsibility to behave in a manner which is both responsible and ethical. This applies to all stakeholders, including shareholders, employees, customers, suppliers and the communities that are affected by us or benefit from our activities.

 

Health and Safety

 

TP Group companies have accredited management systems to control health and safety risks to OHSAS 18001. As part of our health and safety systems, each business monitors incidents and prepares improvement plans on a monthly basis. The safety, health, environmental and quality performance of the Group is reviewed on a monthly basis both at subsidiary and Group level.

 

People

 

The Group is committed to preventing discrimination amongst our workforce. Our objective is to create a working environment in which there is no unlawful discrimination and all decisions are based on merit. These principles are extended to include our interactions with visitors, customers, suppliers and any others coming into contact with our staff.

 

TPG has signed a pledge to the Armed Forces Corporate Covenant. This pledge gives our commitment to honour the Armed Forces Covenant and support the Armed Forces Community.

 

Communities

 

TP Group operates throughout the UK and aims to be a good neighbour and supporter of the communities in which we operate. We are often an important local employer and make a valuable contribution to the local economy. Our businesses are proactive in engaging with the local communities and sharing their ambitions for the local area.

 

Environment

 

Group companies operate Environment Management Systems that are accredited to BS EN ISO 14001 and pay very close attention to the environmental aspects of our operations.

 

Within the workspace, for example, the Dukinfield factory has upgraded its shop floor lighting system with highly efficient LED lamps that provide much better lighting conditions for the workforce whilst being more energy efficient.

 

Principal risks and uncertainties

 

In addition to the financial risk management that is detailed in note 26 to the financial statements, there are a number of risks and uncertainties that could have a material impact on the Group. Risks are reviewed by the Board and appropriate processes and controls have been implemented in respect of monitoring and control.

 

Principal business risks are as follows:

 

• Commercial contracts for customers may be large and long term, with risks relating to contract delivery and performance, including cost. Internal procedures are designed to ensure that risks are managed on a contract-by-contract basis so that contracts can be successfully delivered to customers on time, on budget and to the highest quality specification. A failure to do so may have a material adverse effect on the Group's business.

• The Group has a niche position in the naval defence market supplying specialist equipment to a relatively narrow customer base and the main external market risks relate to political and socio-economic factors. We have no direct management control over these risks, however close working relationships with major customers and suppliers provides insight into future trends and issues that allow management actions to be taken at the earliest opportunity.

• General economic conditions and uncertainties on potential partners' plans for capital expenditure may adversely affect both the scale and timing of new contracts. Close working relationships provide insight into the future plans of customers and partners to allow management actions to be taken at the earliest opportunity.

• Technological change and the potential of competitors to develop alternative solutions may threaten the business. The Group is involved in a number of highly specialised activities, where know-how has been built up over time and close relationships with customers provide insight into trends in the requirement. This retained knowledge, insight and shared development approach is a barrier to entry for competitors and protects the Group in this regard.

• It is important to retain key employees in the development of the Group's technologies and execution of its business plan. This falls to two areas - leadership, where succession planning is a key mitigation strategy; and technical, where the Group seeks to avoid single points of failure or capacity constraints by managing technical focus across teams. In general, the Group seeks to mitigate these risks by seeking to retain staff and encourage their long-term commitment by providing competitive remuneration and benefits packages. Notwithstanding these actions, the risk that the Group may suffer material loss through the loss of, for example, key personnel, cannot be eliminated.

• In certain market sectors there is a competitive risk that fluctuates with the health of that sector and the suppliers to it. TPG companies monitor their bid performance and competitive position through win/loss reviews under the common bid process. The Group strives to minimise exposure to price-led competition by operating in markets with high technical and quality criteria which creates significant barriers to entry and permits premium pricing in many cases.

• The Group will look to undertake selective acquisitions that support its strategic ambitions and, in doing so, will incur some level of risk. Whilst such risk cannot be eliminated, risk will be mitigated through, amongst other things, due diligence on the best available information, appropriate warranties from vendors, integration plans developed and executed in a timely fashion and trading activity tracked against targets presented at acquisition. All acquisitions are approved, managed and monitored by the Board.

• Cybersecurity threats come in a number of forms, from a variety of different sources, target a range of different systems, making them difficult to mitigate. These threats pose a risk to sensitive data held in the normal course of business, as well as business interruption risk. In order to mitigate this risk, the Group has implemented Cyber Essentials across its businesses and continuously reviews the quality of its security shields and protocols to mitigate the threat.

• There are underlying risks associated with health safety and environmental regulations which are managed by the Group's accreditation under BS EN ISO 14001 (Environmental Management System) and OHSAS 18001 (Occupational Health and Safety Management System).

 

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

 

		Group
		2016	2015
	Note
		£'000	£'000
Revenue	3	21,226	20,446
Cost of sales		(14,748)	(14,834)
Gross profit		6,478	5,612
Distribution costs		(361)	(304)
Research and development costs		-	(76)
Administrative expenses		(6,381)	(7,527)
Operating loss	4	(264)	(2,295)
Adjusted EBITDA	3	1,066	45
Depreciation, amortisation and impairment		(1,051)	(1,328)
Acquisition-related costs		(44)	-
Exceptional items		(231)	(976)
Share based payments		(4)	(36)
Operating loss		(264)	(2,295)
Finance (cost)/income		(69)	77
Loss before income tax		(333)	(2,218)
Income tax credit (2015 restated - see note 8)		134	266
Total comprehensive loss for the year attributable to shareholders		(199)	(1,952)
Loss per share expressed in pence per share
Basic and diluted loss per share	5	(0.05)	(0.45)

 

 

 

Consolidated Statement of Financial Position

At 31 December 2016

 

		Group
		2016	2015 Re-stated1	2014 Re-stated1
	Note	£'000	£'000	£'000
ASSETS
Non-current assets
Goodwill		3,918	3,918	3,918
Other intangible assets		8,775	9,622	9,923
Property, plant and equipment		667	452	1,007
		13,360	13,992	14,848
Current assets
Inventories		116	169	59
Trade and other receivables		7,291	6,386	7,215
Derivative financial assets		-	70	-
Taxation recoverable		71	66	249
Cash and cash equivalents	6	9,160	7,005	9,569
		16,638	13,696	17,092
Total assets		29,998	27,688	31,940
LIABILITIES
Current liabilities
Trade and other payables		(8,411)	(5,756)	(7,606)
		(8,411)	(5,756)	(7,606)
Non-current liabilities
Deferred taxation		(823)	(978)	(1,205)
Provisions		(1,101)	(1,096)	(1,355)
		(1,924)	(2,074)	(2,560)
Total liabilities		(10,335)	(7,830)	(10,166)
Net assets		19,663	19,.858	21,774
EQUITY
Share capital		4,225	42,246	42,246
Share premium		-	13,769	13,769
Capital redemption reserve		-	575	575
Own shares held by the EBT		(561)	(561)	(561)
Share-based payments reserve		1,178	1,174	1,138
Retained earnings		14,821	(37,345)	(35,393)
Total equity		19,663	19,858	21,774

 

1 Refer to note 8 for details on restatement

 

 

Parent Company Statement of Financial Position

At 31 December 2016

 

		Parent Company
		2016	2015	2014
	Note	£'000	£'000	£'000
ASSETS
Non-current assets
Other intangible assets		177	108	-
Property, plant and equipment		13	22	3
Investments		11,681	15,027	19,047
Amounts owed by EBT		104	44	74
		11,975	15,201	19,124
Current assets
Trade and other receivables		2,984	3,056	1,959
Cash and cash equivalents	6	714	1,547	3,605
		3,698	4,603	5,564
Total assets		15,673	19,804	24,688
LIABILITIES
Current liabilities
Trade and other payables		(3,040)	(2,310)	(345)
		(3,040)	(2,310)	(345)
Non-current liabilities
Provisions		(10)	-	-
		(10)	-	-
Total liabilities		(3,050)	(2,310)	(345)
Net assets		12,623	17,494	24,343
EQUITY
Share capital		4,225	42,246	42,246
Share premium		-	13,769	13,769
Capital redemption reserve		-	575	575
Share-based payments reserve		1,084	1,080	1,044
Retained earnings		7,314	(40,176)	(33,291)
Total equity		12,623	17,494	24,343

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2016

	Group
			Capital	Own shares	Share-based
	Share	Share	redemption	held by	payments	Retained
	capital	premium	reserve	EBT	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2015 (Re-stated)1	42,246	13,769	575	(561)	1,138	(35,393)	21,774
IFRS 2 share option charge	-	-	-	-	36	-	36
Total comprehensive loss	-	-	-	-	-	(1,952)	(1,952)
Balance at 31 December 2015 (Re-stated)1	42,246	13,769	575	(561)	1,174	(37,345)	19,858
Capital reduction	(38,021)	(13,769)	(575)	-	-	52,365	-
IFRS 2 share option charge	-	-	-	-	4	-	4
Total comprehensive loss	-	-	-	-	-	(199)	(199)
Balance at 31 December 2016	4,225	-	-	(561)	1,178	14,821	19,663

 

1 Refer to note 8 for details on restatement

 

 

Parent Company Statement of Changes in Equity

For the year ended 31 December 2016

 

	Parent Company
			Capital	Share-based
	Share	Share	redemption	payments	Retained
	capital	premium	reserve	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2015	42,246	13,769	575	1,044	(33,291)	24,343
IFRS 2 share option charge	-	-	-	36	-	36
Total comprehensive loss	-	-	-	-	(6,885)	(6,885)
Balance at 31 December 2015	42,246	13,769	575	1,080	(40,176)	17,494
Capital reduction	(38,021)	(13,769)	(575)	-	52,365	-
IFRS 2 share option charge	-	-	-	4	-	4
Total comprehensive loss	-	-	-	-	(4,875)	(4,875)
Balance at 31 December 2016	4,225	-	-	1,084	7,314	12,623

 

 

 

Consolidated and Parent Company Statement of Cash Flows

For the year ended 31 December 2016

 

			Group		Parent Company
			2016	2015	2016	2015
		Note	£'000	£'000	£'000	£'000
Operating activities
Loss before income tax			(333)	(2,218)	(4,875)	(7,049)
Adjustments for:
Depreciation			98	421	9	1
Amortisation			953	907	37	-
Loss on disposal of fixed assets			-	493	-	-
Finance cost/(income)			69	(77)	(1)	(8)
Share-based payment expense			4	36	4	36
(Decrease)/increase in impairment on loan to the EBT			-	-	(60)	30
Provision against long term inter-company loan			-	-	3,998	5,872
Decrease/(increase) in inventories			53	(86)	-	-
(Increase)/decrease in trade and other receivables			(836)	1,098	72	(933)
Increase/(decrease) in trade and other payables			2,563	(1,876)	730	1,965
Increase/(decrease) in provisions			5	(259)	10	-
			2,576	(1,561)	(76)	(86)
Income tax received			-	64	-	-
Net cash generated /(used) in operating activities			2,576	(1,497)	(76)	(86)
Investing activities
Interest received			1	8	1	8
Purchase of property, plant and equipment			(313)	(96)	-	(20)
Purchase of computer software			(106)	(108)	(106)	(108)
Purchase of subsidiary, net of cash acquired			-	(886)	-	-
Proceeds from sale of property, plant and equipment			-	40	-	-
Long term loan to subsidiary			-	-	(652)	(1,852)
Net cash used in investing activities			(418)	(1,042)	(757)	(1,972)
Financing activities
Repayment of hire purchase liabilities			(3)	(25)	-	-
Net cash used in financing activities			(3)	(25)	-	-
Net increase/(decrease) in cash and cash equivalents			2,155	(2,564)	(833)	(2,058)
Cash and cash equivalents at beginning of year			7,005	9,569	1,547	3,605
Cash and cash equivalents at end of year			9,160	7,005	714	1,547

 

 

 

Notes to the Preliminary Announcement

 

1. Basis of preparation

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognized and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in April 2017.

 

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2016, or year ended 31 December 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's annual general meeting. The auditor has reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

 

2. Going concern

 

The directors are satisfied that the Group has adequate resources to continue in business for the foreseeable future, and accordingly continue to adopt the going concern basis in preparing the accounts. In reaching this conclusion, the directors have considered forecasts that cover a period of greater than twelve months from the date of the approval of these financial statements. The forecasts take into account the Group's existing cash resources, and include consideration of certain downside scenarios, in particular in relation to TPG D&T where there is inherently greater uncertainty as to the future cash flows of that business. The directors have also considered the mitigating actions available to them, including the ability of management to make certain reductions to the Group's discretionary expenditure if required.

 

3. Segmental reporting

 

Business segments

 

For management purposes, the Group reports along four interconnected business units.

 

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.

 

The following table presents Group revenue and profit information for each business units.

 

	2016	2015
	£'000	£'000
Revenue
TPG Maritime	12,229	10,948
TPG Engineering	6,851	7,067
TPG Design and Technology	757	901
TPG Managed Solutions	1,389	1,530
Group revenue	21,226	20,446
Segment operating result
TPG Maritime	3,335	1,935
TPG Engineering	(1,167)	(473)
TPG Design and Technology	(975)	(2,843)
TPG Managed Solutions	(33)	247
Central unallocated costs	(1,424)	(1,161)
Group loss from operations	(264)	(2,295)
Finance (cost)/income	(69)	77
Loss before income tax	(333)	(2,218)
Income tax credit	134	266
Loss after tax	(199)	(1,952)

 

Geographical segments

 

The Group's operations are solely in the United Kingdom although some of the Group's revenues are to customers outside the UK. All segment assets are located in the UK. The Group's revenues from external customers are analysed into the following geographical areas:

 

	2016	2015
	£'000	£'000
Geographical analysis - revenue
United Kingdom	16,588	15,591
Rest of the European Union	2,156	2,166
North America	6	292
Asia	2,092	2,122
Middle East	136	71
Rest of the World	248	204
Total revenue	21,226	20,446

 

Information about major customers

 

Revenue includes sales from customers who contributed 10% or more to the Group's revenue:

 

	2016	2015
	£'000	£'000
Maritime
Customer 1	4,715	6,013
Customer 2	3,883	2,191
Total revenue	8,598	8,204

 

 

 

Results by Segment

 

	TPG  Maritime	TPG Engineering	TPG  D&T	TPG  MS	Central  unallocated  costs	Group
	£'000	£'000	£'000	£'000	£'000	£'000
2016
Segment operating result	3,335	(1,167)	(975)	(33)	(1,424)	(264)
Depreciation, amortisation and impairment	859	173	16	3	-	1,051
Acquisition-related costs	-	-	-	-	44	44
Exceptional items	-	-	-	-	231	231
Share based payments	-	-	-	-	4	4
Adjusted EBITDA1	4,194	(994)	(959)	(30)	(1,145)	1,066

 

 

 

2015
Segment operating result	1,933	(471)	(2,843)	247		(1,161)	(2,295)
Depreciation, amortisation and impairment	844	229	254	-		1	1,328
Acquisition-related costs	-	-	-	-		-	-
Exceptional items	-	-	976	-		-	976
Share based payments	-	-	-	-		36	36
Adjusted EBITDA1	2,777	(242)	(1,613)	247		(1,124)	45

 

1 Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment, amortisation and impairment of acquired intangible assets and any other acquisition-related charges, share based payment charges and exceptional items. Exceptional items are those items believed to be exceptional in nature by virtue of their size and or incidence. Exceptional items in the current year comprise termination costs of £231,000 (2015 - exceptional items in 2015 comprised restructuring costs of £976,000, including impairment of fixed assets of £493,000 and termination costs of £146,000). The directors 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 exceptional items. This provides shareholders and other users of the financial statements with the most representative year-on-year comparison. This measure and the separate components remain consistent with 2015.

 

 

 

 

4. Operating Loss

 

The Group operating loss for the year is stated after charging the following:

	2016		2015
Group	£'000		£'000
Staff costs
Wages and salaries	7,521		7,669
Social security costs	810		815
Other pension costs	430		445
Share based payment	4		36
	8,765		8,965
Amortisation of intangible assets	953		907
Depreciation of property, plant and equipment	98		421
Loss on sale of fixed assets	-		493
Research and Development	-		76
Operating lease expense - rent	778		939
Auditor's remuneration:
Audit fees
fees payable for the audit of the Group and consolidated financial statement	21		21
fees payable to the audit of the subsidiary companies	45		45
Total audit fees	66		66
Non-audit fees
Fees payable for statutory and regulatory services	3		6
Tax advisory services	15		15
Total auditor remuneration	84		87

 

Share-based payment expenses of £4,000 (2015 - £36,000) all arises from transactions accounted for as equity-settled share-based payment transactions and are non-cash in nature.

 

Staff numbers

 

The average number of employees, including directors, employed by the Group during the year was as follows:

 

	2016		2015
Group	Number		Number
Engineering	111		121
Business development	12		10
Administration	40		41
	163		172

 

 Pension costs

 

The Group operates a money purchase and a group stakeholder pension scheme. The assets of these schemes are held separately from those of the Group in separately administered funds. The pension charge represents contributions payable by the Group to these funds and amounted to £430,000 (2015 - £445,000). No contributions were prepaid or overdue at 31 December 2016 (2015 - £Nil). The nature of the Group's scheme ensures no further payment obligations exist relating to past services.

 

5. Loss per Share

 

The calculation of basic loss per share for the year ended 31 December 2016 is based upon a loss after tax of £199,000 (2015 - £1,952,000) and a weighted average number of shares of 420,857,956 (2015 - 420,857,956). The weighted average number of shares has been reduced by the weighted average number of shares held by the Employee Benefit Trust.

 

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.

 

6. Cash and Cash Equivalents

 

	Group				Parent Company
	2016		2015		2016		2015
	£'000		£'000		£'000		£'000
Cash and cash equivalents	9,3161		7,005		714		1,547

1 Restricted cash of £156,000 is included in Other Debtors and prepayments

 

The funds were placed on floating interest rate deposit as follows:

 

	Group		Parent Company
	2016	2015	2016	2015
	£'000	£'000	£'000	£'000
Cash at bank and in hand	9,160	7,005	714	1,547

 

7. Subsequent Events

 

The following events have taken place between the year end and the signing of these accounts:

 

On 6 February 2017, the Group through its parent company TP Group plc, acquired 100% of the issued share capital of ALS Technologies Limited ("ALS") and Flexible Solutions Software Limited ("FSS") on a cash free/debt free basis, for a combined initial consideration of £1,250,000 and a maximum further deferred consideration of £1,500,000 based on the combined performance of both businesses. The acquisition costs will be paid in cash from the Group's existing cash resources. The companies specialise in providing consulting services to both the public and private sectors. Payback of the investment is expected within four years.

 

The principal reason for this acquisition is to support the Group's evolution as a diversified engineering group providing not only design and manufacture of bespoke engineering solutions but also technical support and management to both the public and private sectors. Both FSS and ALS will form part of the Managed Solutions business unit segment.

 

 

Initial estimates of the fair value of identifiable assets and liabilities acquired are as follows:

 

ALS Technologies Limited		Book Value (Provisional)	Fair Value (Provisional)
		£'000	£'000
Property, plant & equipment		21	21
Identifiable intangible assets (not yet valued)		-	-
Financial assets		1,088	1,088
Financial liabilities		(547)	(547)
Deferred taxation		-	-
Total identifiable net assets		562	562
Goodwill arising on consolidation		1,612	1,612
Estimated consideration		2,174	2,174

 

FSS Limited		Book Value (Provisional)	Fair Value (Provisional)
		£'000	£'000
Property, plant & equipment		1	1
Identifiable intangible assets (not yet valued)		-	-
Financial assets		51	51
Financial liabilities		(13)	(13)
Deferred taxation		-	-
Total identifiable net assets		39	39
Goodwill arising on consolidation		36	36
Estimated consideration		75	75

 

The Group has not recognised any difference between the book values and fair values of the identifiable assets acquired in this assessment due to the timing between acquisition and the signing of these financial statements. We anticipate intangible assets relating to Technical Know How and Customer Relationships when our assessment is finalised. A fair valuation exercise will be undertaken to value the identified intangible assets. The estimated consideration payable includes the initial consideration of £1,250,000 (£1,194,000 ALS and £56,000 FSS) and a fair value estimate of the contingent consideration.

 

8. Prior Year Re-statement

 

In the current year, the Group identified that a deferred tax liability previously recognised upon acquisition of TPG Maritime on 5 April 2012 and Shaw Sheet Metal Company on 30 January 2015, had been incorrectly accounted for. This also affected the value of goodwill identified as part of the business combination accounting.

 

The business combination accounting treatment has, therefore been re-stated in the prior years' financial statements.

 

The effects of the re-statement are as outlined below:

 

	2015 Re-stated	2015 Original		2014 Re-stated	2014 Original
	£'000	£'000		£'000	£'000
Goodwill	3,918	4,953		3,918	4,953
Deferred tax liability	(978)	(1,713)		(1,205)	(1,985)
Tax credit /(charge)	266	311		(83)	172
Retained earnings	(37,345)	(37,045)		(35,393)	(35,138)
Total comprehensive loss for the year attributable to shareholders	(1,952)	(1,907)		(3,766)	(3,721)

 

9. Notice of Annual General Meeting

 

The Annual General Meeting of TP Group Plc will be held at 10.30 a.m. on 25 May 2017 at the offices of Deloitte LLP, Abbots House, Abbey St, Reading, West Berkshire RG1 3BD.

 

 

 

 

 

 

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