19 Apr 2016 07:00
19 April 2016
TP Group plc
("TP Group" or the "Group")
Final results for year ended 31 December 2015
TP Group (AIM: TPG), the specialist technology, engineering and managed solutions group, announces final results for the year ended 31 December 2015.
Financial highlights
· Revenue £20.4m (2014: £21.7m)
o Robust performance in Aerospace & Defence sector with some deferred projects in the Energy & Process Industries sector
· Operating losses reduced by 41% to £2.3m (2014: £3.9m)
o Management focus on margin improvement
o Exit from loss-making R&D contracts
· Adjusted EBITDA* losses reduced to £nil (2014: £2.1m)
· Group cash closed at £7.0m (2014: £9.6m) leaves us ahead of expectations
o Tighter financial controls reduced cash burn rate
o Reduced burden of self-funded R&D
· Group order book £14.5m (2014: £17.3m)
o Deferred projects with downstream energy customers hit order book, yet pipeline remains strong for early 2016
o Timing of large defence contracts weighted into 2016
o Strong visibility of 2016 revenues
* 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 to the Preliminary Announcement.
Phil Cartmell, Chief Executive of TP Group commented:
"TP Group has been transformed through 2015 and continues to evolve as a valued Tier-2 provider of complex systems and through-life support in critical application areas. We ended the year in a very strong position, both financially and operationally.
"During the year we made strategic changes to our R&D approach to reduce costs and turn that activity into a revenue generating service. We also made changes to our management structure and approach in our sales channels and service delivery, with positive effects in both areas.
"From this opening position and with the prospects for our growing services businesses, we look forward to continuing our progress into profitability and growth in 2016."
For further information please contact:
TP Group Plc |
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Phil Cartmell, Chief Executive Officer Derren Stroud, Chief Financial Officer | 01753 285 810
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www.tpgroup.uk.com
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Cenkos |
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Stephen Keys / Mark Connelly www.cenkos.com
| 020 7397 8980 |
Vigo Communications |
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Jeremy Garcia / Fiona Henson | 020 7830 9700 |
www.vigocomms.com |
|
NOTES TO EDITORS
TP Group is a group of innovative UK based engineering companies, supplying technologies and support to global Aerospace & Defence and Energy & Process Industries markets. The Group designs and develops advanced technologies; engineers complex equipment and systems; and provides support throughout their operational life. TP Group shares have been traded on the London Alternative Investment Market (AIM) since July 2001.
Chairman's Statement
During 2015, the Group achieved its stated goal of reaching breakeven at an Adjusted EBITDA level. This was achieved ahead of schedule as a result of strategic changes and operational improvements.
This milestone is a notable step on our path to becoming a highly competitive Tier-2 engineering and services Group. This strategy delivers excellent capability that has greater scale than smaller specialists, yet is more flexible and responsive than major contractors.
We also took the opportunity to manage some of the structural aspects of the business to optimise the Group for growth. This included changes to our routes to market, our corporate branding, including a change of name, our facilities and some changes to the Board of Directors.
Moving into positive territory
Whilst facing widely reported economic and industry challenges over the last 12 months, the Group has maintained a strong trading performance, with continuing reduction in Adjusted EBITDA losses to perform ahead of expectations and achieve our goal of breakeven sooner than planned.
Group revenues for the year ended 31 December 2015 were £20.4m (2014: £21.7m). Operating losses reduced by 41% to £2.3m (2014: £3.9m) and the Adjusted EBITDA was nil (2013: £2.1m loss).
Board changes
In April, Simon Kings and Martin Blomley joined the Board, as Executive Directors of the Company.
Simon was previously Managing Director of Atmosphere Control International, and Martin was Group Corporate Development Director. These appointments were made to help drive both growth and operational performance and strengthen, at an executive level, the Company's focus on our strategic market sectors.
Both Martin and Simon have brought extensive operational and commercial experience in their markets and have greatly enhanced the Board and contributed to our strategic progress as a result.
In September, Julia Henderson stepped down from the Board as a non-Executive Director
Outlook
Following the notable achievements of 2015, the Board sees encouraging prospects for 2016.
The business is now organised to provide a full spectrum of through life services to our customers.
We look forward into 2016 with confidence albeit recognising that the business continues to face a challenging Energy and Process Industries sector. The through-life services proposition is gaining traction in our key markets. The opening order book contains both near-term and multi-year business which provides good visibility of revenues for 2016 and beyond.
To deliver our intended growth, the Board will pursue initiatives focused on organic development, developing transformational technologies and carefully selected acquisitions that are compatible with our technical and market positions and can bring near-term value to the Group.
The Board believes that TPG is well placed to return positive results for our investors and other stakeholders.
Richard King, Chairman
Chief Executive's Strategic Review
TP Group has been transformed through 2015 and continues to evolve as a valued Tier-2 provider of complex systems and through-life support in critical application areas. We ended the year in a very strong position, both financially and operationally.
During the year we made strategic changes to our R&D approach to reduce costs and turn that activity into a revenue generating service. We also made changes to our management structure and approach in our sales channels and service delivery, with positive effects in both areas.
Our role in the markets we serve
TP Group is a specialist technology and support services company that provides high-integrity solutions to end users and prime contractors.
Our customers have access to more responsive and flexible services than large suppliers can typically provide, whilst being more capable and cost effective than dealing with a collection of fragmented small companies - this defines our tier 2 position. The result is:
· trusted system performance and reliability
· focus on contributing to their performance
· consolidation of fragmented supply chains
· an integrated through-life support service.
Sector review and drivers
Aerospace & Defence
In this sector, our customers are typically armed forces, security services and large prime contractors. We provide them with atmosphere control systems, spares, through-life equipment support, specialist functional support and supply-chain management services.
In the 2015 Strategic Defence Spending Review, the government committed to reduce the number of civilians employed by the MoD by almost 30%, to 41,000, by the end of this Parliament. This, plus the growing role of industrial partners to provide the "Whole Force" approach has stimulated us to launch a Managed Solutions business unit. Initially focused in the Defence market through our existing equipment support contracts, the team will develop further prime contract business as well as providing specialist resources and capability into key programmes.
We are witnessing growing world-wide demand for more technically sophisticated submarines, and global defence budgets have grown year on year.
· In the UK, our Maritime business unit has been active supporting the ongoing Astute class build programme, supporting further operations of the Vanguard class whilst making preparations for the next generation Successor class.
· Our export business has also been active with further contracts in France and SE Asia, and continued positioning for new programmes in Brazil, Australia and elsewhere.
Growth in submarine systems exports drove a 22% rise in business conducted in Asia compared with 2014. European business also increased by 75%, primarily due to additional work on the French submarine programme.
Energy & Process Industries
In this sector we serve a diverse range of customers including upstream energy producers, downstream petrochemical processors and refiners, power generators, equipment manufacturers and engineering, procurement and construction companies (EPCs).
To this community we develop, build and support renewable energy technologies, thermal systems, pressure systems, turbomachinery, specialised fabrication and equipment support.
Energy demand remains high, and despite pressures on raw material prices, global refinery capacity is projected to grow, both by extending asset life or adding new capacity. Capital project deferrals have slowed the market in 2015, reducing Group revenues in this area. It is expected that additional refurbishment and maintenance of existing assets will increase as a result. This is good news for both our Engineering business unit for primary projects and our Managed Solutions team. Equipment support, as already delivered to the Defence sector, will emerge as managed or outsourced services in the energy sector.
Meanwhile in the renewables sector, the EU is investing €6 billion in energy projects between 2014 and 2020. The focus is on clean energy technologies, renewable generation and energy storage. TPG has been active in all these fields throughout the year, and demonstrated the transformation of our R&D activities by winning a place on the EU funded Cryohub project to develop energy storage solutions using liquid air.
The Design & Technology team has also been developing renewable energy and energy storage opportunities in Italy, Australia and the Middle East.
Shaping the business to succeed
In 2014 we set out a plan to co-ordinate our approach across different products and services which involved a technical services delivery to the early phases of a project, specialist engineering to build and deliver systems, plus a managed solutions approach to resourcing and ongoing support.
This vision is being realised and we now operate against a theme of through-life equipment support through four business units:
• TPG Design and Technology - front-end services in analysis, modelling and design
• TPG Maritime - delivery of high technology atmosphere management systems
• TPG Engineering - delivery of advanced thermal systems and fabricated structures
• TPG Managed Solutions - long-term support of equipment and operations
Transforming our routes to market means that all of these services are available to all of our markets. Customers can continue to work with them for a single system or service (as was generally the case in the past) or as we are increasingly seeing, in combination to provide a true end-to-end service.
These initiatives were centred around our drive to build the business as a specialist engineering company with best in class capability that is technically excellent and meets the needs of our clients.
Branding and Positioning
In June 2015, the Company was renamed as TP Group plc. This was another step in the Group's substantial progress migrating from a research and development driven company to a more balanced and diverse business providing specialist engineering, technical services and managed services throughout the life of programmes carried out by our global high technology customers.
The new name acknowledges our technology heritage and captures the partnership approach we enjoy with our long term customers, suppliers, collaborators, investors and staff.
Our focus
End-to-end support of customers' projects
The Group has the skills and capability to work in partnership with our customers throughout the life of their equipment or systems. We are flexible to support one, many or all of the phases from concept through analysis, design, manufacture, in-service support and eventually the disposal of equipment at end of life. This model allows us to overlap another lifecycle as it is most likely that replacement equipment will be designed, developed and installed to keep services running for the customer.
Solution sales across the portfolio
We have organised the Group to be more aware of the breadth of activities within a customer account. In the past, we had very effective but limited relationships that provided a single response to a specific need. We can now add value throughout the lifecycle by introducing service provision as well as the main equipment supply. We can also expand the scope of the equipment supplied by adding complementary engineering solutions from the Group portfolio.
Management of costs and margins
The value provided to our customers is improved year on year by working hard to improve our supply chain performance and by management focus on the operational performance of each business unit.
The supply chain has been subject to close attention through the year as we applied a central view to procurement of similar items across the different operating units. This has led to several new arrangements that will benefit the Group in future years.
We have also benefited from the effects of vertical integration arising from the acquisition of Shaw Sheet Metal in February 2015. Metal fabrications that were previously bought in through the supply chain can now be produced in-house with a knock-on effect on system costs.
People
The Group employs more than 170 people. They are a skilled and committed team who drive us forward on every site. We have implemented a range of common HR policies across the Group to ensure that we continue to develop their skills and keep them up to date with emerging trends and technologies. To support our growth plans, it is important that TPG continues to be a stimulating and rewarding place to work so that we retain this talent and recruit the right people when needs arise.
Looking forwards
Strategic progress with key accounts and markets
TPG continues to pursue active positions in our core markets and opportunities to grow into other areas.
In our defence sector, we captured £2.6m in two export orders at the beginning of the year. These were with our long-term partner DCNS, on the French Barracuda programme and with another south-east Asian main contractor. This was followed in May by an order from another south-east Asian main shipbuilder worth £3.4m. These system-build contracts were complemented by an order from Babcock in the UK for £1.95m for overhaul of equipment already in service on two Royal Navy submarines.
These orders are a clear representation of the breadth of the Maritime business, both geographically and in service type, being a mix of new build and through-life support. All these orders are with long-term partners for multi-year deliveries that contribute to the "lumpy" nature of the order book in this sector.
Whilst the energy markets have faced well reported issues, our continued presence in this sector has led to new prospects and pull-through of other Group capabilities with our established customers.
During the year we have progressed the development of turbo-generators for the gas pressure let-down application and provided technical guidance to Hayward Tyler at the early stages of an equipment development programme.
We have strengthened our relationship with Spirax Sarco towards volume system deliveries. In March 2015 we signed a ten-year, exclusive, global licensing and manufacturing agreement for packaged steam products containing TPG micro-turbines and compressors. This was followed in June by an initial order for five micro-turbine units and an additional spares package to begin the ramp up of system deliveries.
These three relationships demonstrate an emerging template for commercial development sales to large equipment manufacturers. They underline the strategic shift to revenue generating R&D rather than cash consuming as was the case in prior years.
Our team in Scotland has continued to develop equipment support services with Ineos at the Grangemouth site. This has proved to be a valuable proposition as new managed support solution opportunities have emerged at other similar facilities.
The Group was accredited under the Fit-4-Nuclear initiative by the Nuclear Advanced Manufacturing Research Centre which aims to position industry to succeed in civil nuclear power programmes. Through this activity we have been building connections with industry leaders such as Rolls Royce, where our shared presence in nuclear submarine activity can be translated into the UK's nuclear power sector.
Transforming the R&D model
In January 2015 we announced our exit from several development contracts for compressor systems. These actions removed our exposure to ongoing development costs in those projects and left the Group with a portfolio of commercially sustainable projects, with lower technical and financial risk.
To further rationalise our approach to R&D, particularly concerning the prototype build activities, we announced in March our intentions to optimise activities through closure of the Slough Technology Centre. The Design and Technology team has been reorganised and migrated to more suitable premises, also in Slough. The resulting savings in operating costs are approximately £0.8m per year. Physical build of prototypes will be carried out at the Group's other facilities, again making savings through use of existing capacity.
The focus of the Design and Technology team has been to maintain our innovative approach, and to apply it as a revenue generator with clear financial justification. This was demonstrated in December with the announcement of our participation in the Cryohub development programme alongside a consortium of industrial and academic leaders.
Adapting to shifting customer needs
The Group has successfully positioned itself to support the whole life of complex equipment in strategically important market sectors. This has been based upon excellent technical capability that creates systems built to the highest standards of quality and reliability. With the addition of through-life support services we can move with our established customers as their objectives change. We can respond quickly to new build requirements, yet if capital projects are constrained and customers look for refurbishment or life extension, we have the methods and processes in place to support this as well. When new horizons open for our customers, we have the analysis and design skills to explore the potential with them, and the experience to turn concepts into reality.
Working flexibly like this gives us advantages over larger and more cumbersome main contractors whilst having the breadth of capabilities that smaller companies lack. It is a true implementation of our previously stated strategic goal to build upon our close links with customers and markets to ensure we are positioned to meet their engineering challenges.
Development through M&A
We looked at our position in technology and capabilities to serve our market to the best effect, and identified both gaps and overlaps in our existing activities. One key gap was in metal fabrication, where a lot of the delivery was sent out to subcontractors for precision cutting and forming.
In February 2015, we announced the acquisition of Shaw Sheet Metal, a specialist laser cutting and sheet metal fabrication business based near Oldham, approximately ten miles from the Dukinfield plant. They have brought profitable business to the Group, and have absorbed some of the work that was previously outsourced. This means we have greater end-to-end control of our engineering delivery and enjoy positive effects on Group margins as a result.
The Group will continue to explore opportunities to add capability and value. Affordable scale opportunities will be qualified to meet suitability tests that demonstrate consistency with the Group's specialist engineering theme with products or services in adjacent spaces to our existing offerings and which can be reasonably linked into a connected proposition. Examples may include:
• electronic control systems, sensors & actuators - technologies and systems to work alongside our existing motors and generators to deliver larger system scope in-house
• national security technologies - extending the scope of our Defence systems and services into adjacent areas
• simulation, emulation and virtual systems - extending existing analysis, design and modelling capability with software tools
• outsourcing engineering services - extending the footprint of our managed services proposition with similar services in new markets
Suitable companies will have relationships that allow us to widen our presence into new markets, may offer vertical integration to improve delivery margins and have the potential to add immediate or short term value to the Group.
Summary and outlook
From this opening position and with the prospects for our growing services businesses, we look forward to continuing our progress into profitability and growth in 2016.
We have taken steps to structure the business around four connected business units to provide a true through-life engineering and services proposition to high value sectors. This approach allows us to compete in our markets for the best talent and to work with global customers to the fullest extent.
The company will continue to grow both commercially and technically through organic performance improvement, focused commercial R&D and selected merger & acquisition opportunities.
Phil Cartmell, Chief Executive Officer
Financial and Business Review
The business has reached a major milestone in 2015 achieving breakeven Adjusted EBITDA, driven by a focus on operational improvements, risk management and tighter cost control. This has been achieved in the face of challenging markets in our Energy & Process Industries sector. The key headline achievements that underpin the progress in year were:
• Delivered breakeven Adjusted EBITDA ahead of schedule.
• Closing cash ended higher than market expectations at £7.0m through tighter financial controls and reduced R&D spend from £2.4m to £1.3m
• A&D grew revenues by 6% and Adjusted EBITDA by 30% as well as securing a strong closing order book of £12.7m, providing good visibility of 2016 revenues.
• A&D delivered preliminary design work for the replacement Trident submarines, and expects a multi-year order to follow in 2016.
• E&P, leveraging off existing compressor technology, delivered a prototype machine for electricity generation from gas pressure changes at power stations.
• Improved profit margins through tighter cost control.
• Completed the acquisition of Shaw Sheet Metal enhancing the Group's service offering and supporting its evolution as a specialist engineering company.
• Exited from the Slough manufacturing site, relocating production facilities to Dukinfield. Achieved H2 2015 savings of £0.5m with expected annualised savings of £0.8m.
Financial review
2015 was a major breakthrough year for the Group delivering breakeven at an Adjusted EBITDA level.
| 2015 | 2014 |
Group KPIs | £M | £M |
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Revenue | 20.4 | 21.7 |
Operating loss | (2.3) | (3.9) |
Adjusted EBITDA loss | 0.0 | (2.1) |
Net Cash | 7.0 | 9.6 |
Closing order book | 14.5 | 17.3 |
Set against the backdrop of a contracting oil and gas market, revenues reduced by 6% to £20.4m (2014: £21.7m). The business achieved Adjusted EBITDA breakeven through strategic decisions to restructure the business and exit certain development contracts.
We have historically reported segment results by the following market sectors:
• Aerospace & Defence (A&D)
• Energy & Process Industries (E&P)
Following refinement of the Group's strategy, the business will report segment results along four business units:
• TPG Maritime
• TPG Design & Technology
• TPG Engineering
• TPG Managed Solutions
In this report, analysis is given by both the reported market sectors and also by the business units into which we are now structured.
Group operating losses improved by £1.6m to £2.3m in 2015 from a £3.9m loss in 2014 reflecting tighter financial control and reduced self-funded R&D. The Group will continue to manage its costs to support business performance. Improved results were returned by both market sectors, and central cost also reduced by £0.4m.
Market sector | 2015 | 2014 | Change |
Adjusted EBITDA | £M | £M | £M |
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|
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A&D | 3.0 | 2.3 | 0.7 |
E&P | (1.9) | (2.9) | 1.0 |
Central costs | (1.1) | (1.5) | 0.4 |
Adjusted EBITDA | 0.0 | (2.1) | 2.1 |
Business unit | 2015 | 2014 | Change |
Adjusted EBITDA | £M | £M | £M |
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|
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TPG Maritime | 2.7 | 2.1 | 0.6 |
TPG Managed Solutions | 0.2 | 0.2 | 0.0 |
TPG Design & Technology | (1.6) | (2.9) | 1.3 |
TPG Engineering | (0.2) | 0.0 | (0.2) |
Central costs | (1.1) | (1.5) | 0.4 |
Adjusted EBITDA loss | 0.0 | (2.1) | 2.1 |
Cash
Cash burn in the year was £2.6m versus prior year of £4.2m, an improvement of £1.6m driven by tighter financial control and a shift in focus to customer funded R&D projects. R&D spend within TPG Design & Technology, reduced to £1.3m (2014: £2.4m). The Group will continue to invest in commercially viable projects but at a level that supports the growth plans of the business.
At the year-end, strong cash collections resulted in a healthy trade receivables position, the balance of which comprised mostly current debt, which has subsequently been received. Amounts due from contract customers were elevated but reflect the nature of long term contracts with major blue chip and government customers where milestone payments are spread over the duration of the contract. Trade and other payables were lower than prior year reflecting the timing of supplier payment runs over the year end period.
Fluctuations in working capital during the year are driven by the nature of long term contracts across the Group. The first half negative cash outflow of £3.0m was balanced by a greater inflow in the second half as forecast by the business, underpinned by a strong last quarter mainly as a result of initial payments on a number of material contracts.
Movements like these in working capital are part of the nature of our business, and are not indicative of poor contracts or issues on recoverability of cash.
Overall, the Group's cash balance finished at £7.0m, significantly better than market expectations. The Directors believe that the Group has sufficient cash funds to support its underlying business needs.
Acquisition
The Company announced the acquisition of Shaw Sheet Metal Co. Ltd ("SSM") in February 2015. The purchase was completed for a cash consideration of £0.8m, funded using the Group's cash (£9.6m at 31 December 2014) with an expected payback of less than 3 years. SSM operates from two facilities in Oldham and is active in laser cutting and specialist sheet metal fabrication.
The acquisition supports TP Group's evolution as a specialist engineering company. It integrates added-value fabrication with specialist engineering services for our established energy and petrochemical processing customers. Beyond this, it allows us to open new opportunities for high-integrity fabricated products in TP Group's other markets, particularly in the Aerospace & Defence sector, and gain new customers through SSM's established relationships.
Order book
The Group order book closed at £14.5m. This was slightly down on the 2014 value of £17.3m and reflects a combination of factors that relate to the timing of large defence sector contracts and deferral of some activity in the oil & gas market.
The Group participates in major programmes such as the build of the UK submarine capability. These programmes are characterised by large, multi-year contracts which cause the order book to swing in this way. New build deferrals in the oil & gas market reduced the order intake for the Engineering business unit. World capacity is expected to at least be maintained, so projects will continue to be launched, and maintenance and refurbishment will increase, both of which will be positive for the Group.
We also enjoy a level of small scale work which comes from framework agreements and other long term relationships. This is expected to continue and when combined with the opening order book provides visibility of more than half of the forecast revenues for 2016.
Exceptional costs
During the year the Group incurred one off exceptional costs of £1.0m through the closure of the Slough manufacturing facility and re-organisation of the TPG Design & Technology business. £0.6m of this is non-cash.
Principal risks & uncertainties
In addition to 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 are successfully delivered to customers on time, on budget and to the highest quality specification.
• 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.
• General economic conditions and uncertainties on potential partners' plans for capital expenditure may affect both the scale and timing of new contracts.
• Technological change and the potential of competitors to develop alternative solutions may threaten the business. In key areas of technology, the Group has registered patents and continues to monitor relevant third party patents. In addition, developed know-how across the Group provides an effective barrier to competition.
• It is important to retain key employees in the development of the Group's technologies and execution of its business plan. The Group seeks to avoid over dependence upon specific employees and formally documents key areas. The Group seeks to retain staff and encourage their long-term commitment by providing competitive remuneration packages.
The principal financial risk is the management of cash during the development phase for the Group including:
• Liquidity risk - the Group seeks to manage financial risk by ensuring that sufficient liquidity is available to meet foreseeable needs and by investing cash assets safely and profitably. The Group's policy throughout the year has been to achieve this objective through management's day-to-day involvement in business decisions rather than setting maximum or minimum liquidity ratios. Group policies are aimed at maximising liquidity and return on cash through the use of short and medium term bank deposits.
• Foreign exchange risk - the Group undertakes contracts denominated in foreign currencies (principally Euro and US dollar) leading to an exposure in exchange rate movements for both sales and purchase transactions. Where they cannot be offset, forward exchange contracts are utilised to minimise the risk.
• Credit risk - the Group's principal financial assets are cash and trade receivables. The credit risk associated with cash is managed by ensuring that counterparties have high credit ratings assigned by international credit rating agencies.
• Interest rate risk - the Group's policy throughout the year has been to place funds on deposit directly with an approved list of UK banks.
Going concern
The directors are satisfied that, notwithstanding economic uncertainty, the Group has adequate resources to continue in business for the foreseeable future (being a minimum period of 12 months), 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 Design & Technology 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.
Infrastructure
The Directors' made the decision in early 2015 to optimise production facilities and engineering capability in line with the evolving business needs. This resulted in the Group exiting from the Slough Technology Centre exercising an early break clause in the lease. Manufacturing capability has been transferred to the Dukinfield plant whilst a smaller office facility has been retained in Slough to house the design team, focused on delivering chargeable applications for TP Group's existing technology and intellectual property.
The exceptional cost of exiting Slough was £1.0m, which was offset by in year savings of £0.5m with full year savings of £0.8m anticipated in 2016.
The exit has and will enable the business to benefit from cost synergies, whilst ensuring it has a sustainable operational footprint, capable of supporting a number of ongoing organic growth opportunities.
Heavy engineering and fabrication continues to take place at the Dukinfield and Oldham plants with Portsmouth continuing to provide high technology build, test and assembly functions.
Business Review - Market Sectors
Aerospace and Defence
In this sector, our customers are typically armed forces, security services and large prime contractors. We provide them with atmosphere control systems, spares, through-life equipment support, specialist functional support and supply-chain management services.
KPIs | 2015 | 2014 |
£m | £m | |
Revenue | 12.4 | 11.7 |
Operating profit | 2.2 | 1.4 |
Adjusted EBITDA | 3.0 | 2.3 |
Margin | 24% | 20% |
Closing order book | 12.7 | 14.4 |
During the year we delivered to global submarine operators and constructors:
• Preliminary design work for the atmosphere control equipment for the replacement Trident submarines. It is expected that a multi-year order for detailed design, development and qualification work will follow in 2016.
• One boat set of equipment built and tested for the continuing Astute class submarine.
• Combined Oxygen Generation System (COGS) commissioned and set to work on the next Astute submarine in the sequence.
• CO2 removal equipment to an existing Asian customer.
• Spares, system and in-service support to the UK fleet.
For surface fleets we delivered:
• Managed supply chain services for atmosphere filtration for chemical, biological agents
• Air distribution systems
We signed new contracts for:
• The build of four CO2 removal units from an Asian shipbuilder.
• Refurbishment and upgrade of complete atmosphere control equipment for several in-service UK submarines.
• Design work for a new CO2 removal unit for an existing customer for installation on new class of submarine with expected design and build contract to be placed in 2016.
• Development work of a CO2 removal unit with expected order for production units in 2016 from a new customer.
Energy and Process Industries
We develop, build and support high-integrity systems for a diverse range of customers including upstream energy producers, downstream petrochemical processors and refiners, power generators, equipment manufacturers and engineering, procurement and construction companies (EPCs).
KPIs | 2015 | 2014 |
£m | £m | |
Revenue | 8.0 | 10.0 |
Operating profit | (3.3) | (3.5) |
Adjusted EBITDA loss | (1.9) | (2.9) |
Margin | (24%) | (29%) |
Closing order book | 1.8 | 2.9 |
The business faces a climate of falling upstream energy production with consequential challenges downstream. Many new equipment contracts have been postponed and there appears to be a rebalancing of business with increasing short-term refurbishment to keep equipment operable.
Revenue therefore fell in 2015 with a similar effect on the closing order book.
The strategy for development activity changed to focus on commercial projects rather than self-funded programmes. This gave us the opportunity to manage costs more closely, allowing the business to deliver £1.0m improvement in the Adjusted EBITDA loss.
In the upstream markets:
• Completed design for a platform compressor for BP. This project awaits funding for equipment build and is a significant opportunity once the energy markets recover.
• Announced our exit from several development contracts for compressor systems.
In downstream refining and processing we:
• Completed the build of seven shell and tube heat exchangers for an EPC for onward deployment at an offshore UK refinery.
• Contracted for major refurbishment of multiple heat exchangers at an additional UK refinery, based upon our capability in specialised tubing.
In the renewable energy field we:
• Achieved three major milestones toward commercial rollout of the micro-turbine expander/generator product with Spirax Sarco Engineering plc.
• Delivered a prototype turbo-expander for electricity generation from gas pressure reductions at gas power stations.
• Joined an EU-funded project in energy storage which begins in 2016. This as an excellent fit for our core technologies.
Business Unit Commentary
TPG Maritime
TPG Maritime is the equipment supply and support business of Atmosphere Control International, based in Portsmouth.
It uses deep technical knowledge and intellectual property, as well as intimate knowledge of the submarine environment, to integrate systems into vessels at the design stage and support them through their lifetime.
The business has a track record of first class delivery and service over decades of system life.
KPIs | 2015 | 2014 |
£m | £m | |
Revenue | 10.9 | 9.6 |
Operating profit | 1.9 | 1.2 |
Adjusted EBITDA | 2.7 | 2.1 |
Margin | 25% | 22% |
Closing order book | 12.3 | 13.8 |
2015 was an excellent year with strong performance across all KPIs including Adjusted EBITDA growth of 29% on revenue growth of 14%. While Closing Order Book declined slightly, this is largely due to the nature of the Defence pipeline and timing of major contracts, one of which is now anticipated in mid 2016. The worldwide submarine market continues to grow with many major builders reporting strong order books for advanced submarines that are likely to use TPG's technology.
TPG Design & Technology
Design & Technology (D&T) is founded upon the development work undertaken by Corac Energy Technologies in Slough. The business has created a portfolio of patented IP, and these technologies are deployed either as a central part of an end-user system, or at the core of a volume commercial product, produced by an OEM with technology licensed to the manufacturer.
KPIs | 2015 | 2014 |
£m | £m | |
Revenue | 0.9 | 0.9 |
Operating loss | (2.8) | (3.4) |
Adjusted EBITDA loss | (1.6) | (2.9) |
R&D spend | 1.3 | 2.4 |
Closing order book | 0.4 | 0.5 |
In 2015, D&T continued the progress in its renewable energy activities. Challenges facing the Oil & Gas industry directly impacted our developments in the upstream sector.
Despite the challenges, revenues for the year remained stable at £0.9m (2014: £0.9m) which primarily came from closing out the BP design phase and ongoing projects in renewable energy. D&T continued its focus on commercially viable activities based on our core technologies. R&D spend reduced to £1.3m (2014: £2.4m). This, coupled with the business transformation activities has led to reduced operating losses of £2.8m (2014: £3.4m) and adjusted EBITDA losses fell by 45% to £1.6m (2014: £2.9m). D&T's order book is £0.4m (2014: £0.5m) at year end.
TPG Engineering
The Engineering business unit is the combined activity of Hunt Thermal Technologies in Dukinfield and Shaw Sheet Metal in Oldham. The business is a leading supplier of heat exchangers operating in demanding applications, with complex metallurgy and highly specialised technical requirements in markets like downstream oil and gas or chemical process industries.
The business operates with four primary business streams:
• large-scale shell and tube heat exchangers
• bespoke extended surface heat exchangers
• equipment support on-site at major installations
• sheet metal work and fabrication
KPIs | 2015 | 2014 |
£m | £m | |
Revenue | 7.1 | 9.1 |
Operating profit | (0.5) | (0.1) |
Adjusted EBITDA loss | (0.2) | 0.0 |
Margin | (3%) | 0% |
Closing order book | 1.3 | 2.5 |
The Engineering business unit faced difficult trading conditions during 2015 and saw revenues fall by £2.0m. The business mix changed as we developed activities in refurbishment and site support. We expanded our customer base for these services and anticipate that this will position the Group better at those sites for ongoing support and new build projects when they arise.
The order book reflects trading conditions as contract values have reduced, although the continuous feed of call-off orders from framework contracts and long term relationships remains strong.
TPG Managed Solutions
Managed Solutions is a new business area for TP Group, aimed at expanding our presence as a long-term service provider in our key markets.
The business unit origins are the Filter-HESS contract with the Ministry of Defence, which provides a managed supply chain and logistics support for atmosphere filters fitted on Royal Navy ships.
The intention is to work closely with the MoD to support additional areas of activity as their procurement and contract management resources are reduced. TPG has strong relationships in this sector and these will form the basis of our offer. Long-term objectives are to replicate these services outside the Aerospace and Defence sector.
KPIs | 2015 | 2014 |
£m | £m | |
Revenue | 1.5 | 2.1 |
Operating profit | 0.2 | 0.2 |
Adjusted EBITDA | 0.2 | 0.2 |
Margin | 13% | 10% |
Closing order book | 0.5 | 0.5 |
Derren Stroud, Chief Financial Officer
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2015
|
| Group | |
|
| 2015 | 2014 |
| Note |
|
|
|
| £'000 | £'000 |
|
|
|
|
Revenue | 3 |
|
|
Existing operations |
| 19,280 | 21,693 |
Acquisitions |
| 1,166 | - |
|
| 20,446 | 21,693 |
|
|
|
|
Cost of sales |
| (14,834) | (17,554) |
|
|
|
|
Gross profit |
| 5,612 | 4,139 |
|
|
|
|
Distribution costs |
| (304) | (233) |
Research and development costs |
| (76) | (928) |
Administrative expenses |
| (7,527) | (6,905) |
|
|
|
|
Operating (loss)/profit | 4 |
|
|
Existing operations |
| (2,364) | (3,927) |
Acquisitions |
| 69 | - |
|
| (2,295) | (3,927) |
|
|
|
|
Adjusted EBITDA | 3 | 45 | (2,112) |
Depreciation, amortisation and impairment |
| (1,328) | (1,339) |
Acquisition-related costs |
| - | (110) |
Exceptional items |
| (976) | (322) |
Share based payments |
| (36) | (44) |
Operating loss |
| (2,295) | (3,927) |
|
|
|
|
Finance income |
| 77 | 34 |
|
|
|
|
Loss before income tax |
| (2,218) | (3,893) |
|
|
|
|
Income tax credit |
| 311 | 172 |
|
|
|
|
Total comprehensive loss for the year attributable to shareholders |
| (1,907) | (3,721) |
|
|
|
|
Loss per share expressed in pence per share |
|
|
|
Basic and diluted loss per share |
| (0.45) | (0.88) |
|
|
|
|
Consolidated and Parent Company Statement of Financial Position
At 31 December 2015
|
| Group | Parent Company | ||
|
| 2015 | 2014 | 2015 | 2014 |
| Note | £'000 | £'000 | £'000 | £'000 |
ASSETS |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Goodwill |
| 4,953 | 4,953 | - | - |
Other intangible assets |
| 9,514 | 9,923 | - | - |
Property, plant and equipment |
| 560 | 1,007 | 130 | 3 |
Investments |
| - | - | 15,027 | 19,047 |
Amounts owed by EBT |
| - | - | 44 | 74 |
|
|
|
|
|
|
|
| 15,027 | 15,883 | 15,201 | 19,124 |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Inventories |
| 169 | 59 | - | - |
Trade and other receivables |
| 6,386 | 7,215 | 3,056 | 1,959 |
Derivative financial assets |
| 70 | - | - | - |
Taxation recoverable |
| 66 | 249 | - | - |
Cash and cash equivalents | 6 | 7,005 | 9,569 | 1,547 | 3,605 |
|
|
|
|
|
|
|
| 13,696 | 17,092 | 4,603 | 5,564 |
|
|
|
|
|
|
Total assets |
| 28,723 | 32,975 | 19,804 | 24,688 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
| (5,756) | (7,606) | (2,310) | (345) |
|
|
|
|
|
|
|
| (5,756) | (7,606) | (2,310) | (345) |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Deferred taxation |
| (1,713) | (1,985) | - | - |
Provisions |
| (1,096) | (1,355) | - | - |
|
|
|
|
|
|
|
| (2,809) | (3,340) | - | - |
|
|
|
|
|
|
Total liabilities |
| (8,565) | (10,946) | (2,310) | (345) |
|
|
|
|
|
|
Net assets |
| 20,158 | 22,029 | 17,494 | 24,343 |
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Share capital |
| 42,246 | 42,246 | 42,246 | 42,246 |
Share premium |
| 13,769 | 13,769 | 13,769 | 13,769 |
Capital redemption reserve |
| 575 | 575 | 575 | 575 |
Own shares held by the EBT |
| (561) | (561) | - | - |
Share-based payments reserve |
| 1,174 | 1,138 | 1,080 | 1,044 |
Retained earnings |
| (37,045) | (35,138) | (40,176) | (33,291) |
|
|
|
|
|
|
Total equity |
| 20,158 | 22,029 | 17,494 | 24,343 |
Consolidated Statement of Changes in Equity
For the year ended 31 December 2015
|
|
|
| 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 2014 | 42,246 | 13,769 | 575 | (561) | 1,094 | (31,417) | 25,706 |
| ||||
|
|
|
|
|
|
|
|
| ||||
IFRS 2 share option charge | - | - | - | - | 44 | - | 44 |
| ||||
|
|
|
|
|
|
|
|
| ||||
Total comprehensive loss | - | - | - | - | - | (3,721) | (3,721) |
| ||||
|
|
|
|
|
|
|
|
| ||||
Balance at 31 December 2014 | 42,246 | 13,769 | 575 | (561) | 1,138 | (35,138) | 22,029 |
| ||||
|
|
|
|
|
|
|
|
| ||||
IFRS 2 share option charge | - | - | - | - | 36 | - | 36 |
| ||||
|
|
|
|
|
|
|
|
| ||||
Total comprehensive loss | - | - | - | - | - | (1,907) | (1,907) |
| ||||
Balance at 31 December 2015 | 42,246 | 13,769 | 575 | (561) | 1,174 | (37,045) | 20,158 |
| ||||
|
|
|
|
|
|
|
|
| ||||
Parent Company Statement of Changes in Equity
For the year ended 31 December 2015
| 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 2014 | 42,246 | 13,769 | 575 | 1,000 | (31,340) | 26,250 | ||
|
|
|
|
|
|
| ||
IFRS 2 share option charge | - | - | - | 44 | - | 44 | ||
|
|
|
|
|
|
| ||
Total comprehensive loss | - | - | - | - | (1,951) | (1,951) | ||
|
|
|
|
|
|
| ||
Balance at 31 December 2014 | 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 | ||
|
|
|
|
|
|
| ||
Consolidated and Parent Company Statement of Cash Flows
For the year ended 31 December 2015
|
| Group | Parent Company | |||
|
| 2015 | 2014 | 2015 | 2014 | |
|
|
|
|
|
| |
| Note | £'000 | £'000 | £'000 | £'000 | |
Operating activities |
|
|
|
|
| |
Loss before income tax |
| (2,218) | (3,893) | (7,049) | (2,427) | |
Adjustments for: |
|
|
|
|
| |
Depreciation |
| 421 | 523 | 1 | 1 | |
Amortisation |
| 907 | 816 | - | - | |
Loss on disposal of fixed assets |
| 493 | - | - | - | |
Finance income |
| (77) | (34) | (8) | (34) | |
Share-based payment expense |
| 36 | 44 | 36 | 40 | |
Increase in impairment on loan to the EBT |
| - | - | 30 | 93 | |
Provision against long term inter-company loan |
| - | - | 5,872 | - | |
(Increase)/decrease in inventories |
| (86) | 162 | - | - | |
Decrease/(increase) in trade and other receivables |
| 1,098 | (3,191) | (933) | (800) | |
(Decrease)/increase in trade and other payables |
| (1,876) | 2,682 | 1,965 | (328) | |
(Decrease) in provisions |
| (259) | (507) | - | - | |
|
| (1,561) | (3,398) | (86) | (3,455) | |
Income tax received/(paid) |
| 64 | (25) | - | - | |
|
|
|
|
|
| |
Net cash used in operating activities |
| (1,497) | (3,423) | (86) | (3,455) | |
|
|
|
|
|
| |
Investing activities |
|
|
|
|
| |
Interest received |
| 8 | 34 | 8 | 34 | |
Purchase of property, plant and equipment |
| (204) | (165) | (128) | (1) | |
Purchase of subsidiary, net of cash acquired |
| (886) | - | - | - | |
Proceeds from sale of property, plant and equipment |
| 40 | - | - | - | |
Long term loan to subsidiary |
| - | - | (1,852) | (2,896) | |
|
|
|
|
|
| |
Net cash used in investing activities |
| (1,042) | (131) | (1,972) | (2,863) | |
|
|
|
|
|
| |
Financing activities |
|
|
|
|
| |
Expenses of issue of shares |
| - | (614) | - | (614) | |
Repayment of hire purchase liabilities |
| (25) | (12) | - | - | |
|
|
|
|
|
| |
Net cash from financing activities |
| (25) | (626) | - | (614) | |
Net decrease in cash equivalents |
| (2,564) | (4,180) | (2,058) | (6,932) | |
Cash and cash equivalents at beginning of year |
| 9,569 | 13,749 | 3,605 | 10,537 | |
|
|
|
|
|
| |
Cash and cash equivalents at end of year |
| 7,005 | 9,569 | 1,547 | 3,605 | |
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 May 2016.
The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2015, or year ended 31 December 2014, but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 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 (being a minimum period of 12 months), 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 as:
· Aerospace and Defence (A&D) - systems and services for armed forces, security services and large prime contractors
· Energy and Process Industries (E&P) - systems and services for upstream energy producers, downstream petrochemical processors and refiners, power generators, equipment manufacturers and engineering, procurement and construction companies (EPCs).
Following the refinement of the Group's strategy the business will be managed along four distinct business units.
· TPG Maritime - activities include the provision of air purification equipment for submarines including oxygen/hydrogen generation and purification, air handling and distribution systems.
· TPG Design and Technology - specialises in the design and development of high-speed turbomachinery. Innovative compressors and expander generators use patented technologies.
· TPG Engineering - activities include the manufacture of heat exchange equipment used in the heating and cooling of large scale industrial processes and other fabricated structures
· TPG Managed Solutions - services to major organisations through prime contracting and provision of specialist resources
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, profit and certain net asset information for each market and business units.
| 2015 | 2014 |
| £'000 | £'000 |
Revenue |
|
|
A&D | 12,477 | 11,676 |
E&P | 7,969 | 10,017 |
|
|
|
Group revenue | 20,446 | 21,693 |
|
|
|
Segment operating result 1 |
|
|
A&D | 2,180 | 1,351 |
E&P | (3,314) | (3,467) |
Central unallocated costs | (1,161) | (1,811) |
|
|
|
Group loss from operations | (2,295) | (3,927) |
|
|
|
Finance income | 77 | 34 |
|
|
|
Loss before income tax | (2,218) | (3,893) |
|
|
|
Income tax credit | 311 | 172 |
|
|
|
Loss after tax | (1,907) | (3,721) |
1 2014 Central unallocated costs have been restated to reflect the changes in segment reporting and to be consistent with 2015 methodologies.
| 2015 | 2014 |
| £'000 | £'000 |
Revenue |
|
|
TPG Maritime | 10,948 | 9,593 |
TPG Engineering | 7,067 | 9,081 |
TPG Design and Technology | 901 | 937 |
TPG Managed Solutions | 1,530 | 2,082 |
|
|
|
Group revenue | 20,446 | 21,693 |
|
|
|
Segment operating result |
|
|
TPG Maritime | 1,935 | 1,163 |
TPG Engineering | (473) | (85) |
TPG Design and Technology | (2,843) | (3,382) |
TPG Managed Solutions | 247 | 189 |
Central unallocated costs | (1,161) | (1,812) |
|
|
|
Group loss from operations | (2,295) | (3,927) |
|
|
|
Finance income | 77 | 34 |
|
|
|
Loss before income tax | (2,218) | (3,893) |
|
|
|
Income tax credit | 311 | 172 |
|
|
|
Loss after tax | (1,907) | (3,721) |
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:
|
| 2015 | 2014 |
|
| £'000 | £'000 |
| Geographical analysis - revenue |
|
|
| United Kingdom | 15,591 | 16,370 |
| Rest of European Union | 2,166 | 1,160 |
| North America | 292 | 675 |
| Asia | 2,122 | 1,678 |
| Middle East | 71 | 1,484 |
| Rest of the World | 204 | 326 |
|
|
|
|
| Total revenue | 20,446 | 21,693 |
Information about major customers
Revenue includes sales from customers who contributed 10% or more to the Group's revenue:
|
| 2015 | 2014 |
|
| £'000 | £'000 |
| A&D |
|
|
| Customer 1 | 6,013 | 4,174 |
| Customer 2 | 3,985 | 2,110 |
| Customer 3 | 2,191 | 4,642 |
|
|
|
|
| Total revenue | 12,189 | 10,926 |
Results by Segment
| A&D | E&P | Central unallocated costs |
Group
| |
| £'000 | £'000 | £'000 | £'000 | |
|
|
|
|
| |
2015 |
|
|
|
| |
Segment operating result | 2,180 | (3,314) | (1,161) | (2,295) | |
Depreciation, amortisation and impairment | 844 | 483 | 1 | 1,328 | |
Acquisition-related costs | - | - | - | - | |
Exceptional items | - | 976 | - | 976 | |
Share based payments | - | - | 36 | 36 | |
|
|
|
|
| |
Adjusted EBITDA1 | 3,024 | (1,855) | (1,124) | 45 | |
|
|
|
|
| |
2014 |
|
|
|
| |
Segment operating result | 1,351 | (3,467) | (1,811) | (3,927) | |
Depreciation, amortisation and impairment | 813 | 525 | 1 | 1,339 | |
Acquisition-related costs | - | - | 110 | 110 | |
Exceptional items | 152 | - | 170 | 322 | |
Share based payments | - | 4 | 40 | 44 | |
|
|
|
|
| |
Adjusted EBITDA1 | 2,316 | (2,938) | (1,490) | (2,112) | |
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. The Acquisition-related costs in 2014 of £110,000 relate to the acquisition of Shaw Sheet Metal Company Ltd (see note 29). 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 restructuring costs of £976,000, including impairment of fixed assets of £493,000 and termination costs of £146,000 (2014 - Exceptional items in 2014 comprised termination costs of £322,000).
| TPG Maritime | TPG Engineering | TPG D&T | TPG MS | Central unallocated costs |
Group
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
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 |
2014 |
|
|
|
|
|
| ||||
Segment operating result | 1,163 | (85) | (3,382) | 188 | (1,811) | (3,927) |
| |||
Depreciation, amortisation and impairment | 813 | 102 | 423 | - | 1 | 1,339 |
| |||
Acquisition-related costs | - | - | - | - | 110 | 110 |
| |||
Exceptional items | 152 | - | - | - | 170 | 322 |
| |||
Share based payments | - | - | 4 | - | 40 | 44 |
| |||
|
|
|
|
|
|
|
| |||
Adjusted EBITDA1 | 2,128 | 17 | (2,955) | 188 | (1,490) | (2,112) |
| |||
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. The Acquisition-related costs in 2014 of £110,000 relate to the acquisition of Shaw Sheet Metal Company Ltd (see note 29). 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 restructuring costs of £976,000, including impairment of fixed assets of £493,000 and termination costs of £146,000 (2014 - Exceptional items in 2014 comprised termination costs of £322,000).
4. Operating loss
The Group operating loss for the year is stated after charging the following:
|
|
|
| ||
|
| 2015 | 2014 |
| |
| Group | £'000 | £'000 |
| |
| Staff costs |
|
|
| |
| Wages and salaries | 7,669 | 7,779 |
| |
| Social security costs | 815 | 827 |
| |
| Other pension costs | 445 | 457 |
| |
| Share based payment | 36 | 44 |
| |
|
|
|
|
| |
|
| 8,965 | 9,107 |
| |
|
|
|
| ||
| Amortisation of intangible assets | 907 | 816 |
| |
| Depreciation of property, plant and equipment | 421 | 523 |
| |
| Loss on sale of fixed assets | 493 | - |
| |
| Research and Development | 76 | 928 |
| |
| Operating lease expense - rent | 939 | 775 |
| |
|
|
|
|
| |
| Auditor's remuneration: |
|
|
| |
| Audit fees |
|
|
| |
| fees payable for the audit of the company and consolidated financial statement | 21 | 21 |
| |
| fees payable to the audit of the subsidiary companies | 45 | 37 |
| |
| Total auditor remuneration | 66 | 58 |
| |
|
|
|
|
| |
| Non-audit fees |
|
|
| |
| Fees payable for statutory and regulatory services | 6 | 2 |
| |
| Corporate finance services | - | 11 |
| |
| Tax compliance services | - | 17 |
| |
| Tax advisory services | 15 | - |
| |
|
|
|
|
| |
| Total auditor remuneration | 87 | 88 |
| |
Share-based payment expenses of £36,000 (2014 - £44,000) 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:
|
| 2015 | 2014 |
| Group | Number | Number |
|
|
|
|
| Engineering | 121 | 119 |
| Business development | 10 | 10 |
| Administration | 41 | 42 |
|
| 172 | 171 |
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 £445,000 (2014 - £457,000). No contributions were prepaid or overdue at 31 December 2015 (2014 - £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 2015 is based upon a loss after tax of £1,907,000 (2014 - £3,721,000) and a weighted average number of shares of 420,857,956 (2014 - 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 | ||
|
| 2015 | 2014 | 2015 | 2014 |
|
| £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
| Cash and cash equivalents | 7,005 | 9,569 | 1,547 | 3,605 |
| The funds were placed on floating interest rate deposit as follows:
| ||||
|
| Group | Parent Company | ||
|
| 2015 | 2014 | 2015 | 2014 |
|
| £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
| Cash at bank and in hand | 7,005 | 9,569 | 1,547 | 3,605 |
7. Business combinations during the period
On 30 January 2015 the Group, through its subsidiary Hunt Thermal Technologies Ltd acquired 100% of the issued share capital of Shaw Sheet Metal Company Ltd for a consideration of £776,000, and costs of acquisition of £110,000, paid in cash, from the Group's existing cash resources. The company specialises in laser cutting and sheet metal fabrication. Payback of the investment is expected within three years.
The principal reason for this acquisition is to support the Group's evolution as a specialist engineering company. The acquired business is reported within the Energy and Process Industries segment and the TPG Engineering business unit.
Details of the fair value of identifiable assets and liabilities acquired are as follows:
|
| Provisional Book Value | Adjustment | Provisional Fair Value |
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
| Property, plant & equipment | 105 | 198 | 303 |
| Identifiable intangible assets | - | 498 | 498 |
| Financial assets | 295 | 15 | 310 |
| Financial liabilities | (250) | (4) | (254) |
| Deferred taxation | - | (81) | (81) |
| Total net assets | 150 | 626 | 776 |
|
|
|
|
|
| Goodwill arising on consolidation |
|
| - |
| Cash consideration |
|
| 776 |
The difference between the book values and fair values relates to the revaluation of certain plant and equipment and the fair value of acquired intangible assets. The acquired intangible assets relate to technical know-how.
The fair value of the acquired receivables was £281,000; there were no contractual cash flows at the date of acquisition. The costs of acquisition of £110,000 are included in the administration costs.
The amounts that would have been recognised in total comprehensive income if the acquisition had been at the beginning of the reporting period are:
|
|
| £'000 | £'000 |
|
|
|
|
|
| Revenue |
| 1,248 | 303 |
| Operating Profit |
| 87 | 310 |
8. Notice of Annual General Meeting
The Annual General Meeting of TP Group Plc will be held at 10.30 a.m. on 14 June 2016 at the offices of Deloitte LLP, Abbots House, Abbey St, Reading, West Berkshire RG1 3BD