TPG.L Regulatory News (TPG)

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

15 June 2021

TP Group plc

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

Full Year results for the year ending 31 December 2020

TP Group (AIM: TPG), the provider of mission-critical solutions for a more secure world, announces its audited results for the year ended 31 December 2020.

Financial and operational highlights

Revenue up 20% to £59.0m (2019: £49.4m)

· Organic growth, excluding Sapienza, of 9% (£3.5m), with Consulting & Programme Services up 30%, whilst Technology & Engineering reduced by 4%

· Added £6.1m revenues from the full year effect of the Sapienza1 and the acquisition of Osprey Consulting2 

Adjusted operating profit of £3.7m (2019: £6.2m)

· Margin erosion due to project execution timings, resource utilisation and supply chain issues materially caused by the coronavirus ("COVID-19") pandemic

· Investments made across the business and to strengthen AI and software products, focused on positioning TP Group to execute on compelling market opportunity to drive future growth

· £0.1m of profit contributed by acquisition of Osprey Consulting

Operating losses of £4.8m (2019: £1.0m)

· Lower adjusted operating profit

· Impairment charge £1.4m (2019: £nil)

· Earn-out provision of £0.5m (2019: £1.6m) relating to Sapienza and Osprey

Statutory loss after tax of £10.0m (2019: £2.0m)

· Higher operating losses

· Losses on discontinued operations of £5.0m (2019: £0.1m)

Closing cash of £7.4m (2019: £6.6 m)

· £2.0m cash used in the acquisition of Osprey

· Settlement of earn-out payments, £0.9m for Sapienza

· £2.3m invested in software and AI technologies, business systems, IP and infrastructure

· HSBC bank facility of £7.0m fully drawn

Order intake of £71.5m (2019: £62.5m)

· Existing business, including Sapienza, £64.3m (2019: £62.5m)

· Opening order book of £5.3m acquired with Osprey

· Additional £1.9m of new orders post-acquisition from Osprey

Group closing order book up 22% to £69.3m (2019: £56.8m)

· Organic growth of £6.7m (12%)

· Includes additional £5.8m from Osprey

Talks regarding the disposal of the Company's maritime engineering business continue. No formal agreement has yet been reached. The Company will provide a further update in due course.

Phil Cartmell, Chief Executive Officer of TP Group, commented:

"Through this period, we were able to grow our revenue by 20%, due to a strong opening order book, continuity of critical programmes, the addition of Osprey and Sapienza, and the continuing capture of new contracts, despite the backdrop of global uncertainty caused by the Covid-19 pandemic. We trust that the uncertain trading conditions of 2020 will eventually stabilise, and so we have taken the opportunity to prepare the Group to continue revenue growth and return to improving profit levels.

"We have invested in our business in Europe and secured new work in the Middle East and the United States. There is substantial pent-up demand from new and existing customers in these geographies to meet with the team and we hope to satisfy this once travel restrictions are lifted.

"In addition, we have focused on our growing activities in consulting and software with the acquisition of Osprey and the sale of TPG Engineering. The industries in which TP Group operates are investing heavily while rapidly digitising and integrating, leading to significant opportunity for our business.

"As a result, the Group is well prepared for the future and we are confident our excellent consulting, digital and technology capabilities will enable us to meet the exciting opportunities before us." 

Additional narrative to the results will be published in the Group's Annual Report and Accounts which is expected to be published and sent to the Company's shareholders on or around 21 June 2021 and will be available to view on the Company website at:

https://www.tpgroup.uk.com/investors/results-reports-presentations/ 

1 Sapienza Consulting Holdings B.V. acquired April 2019

2  Osprey Consulting Services Ltd. acquired 25 August 2020

For further information, please contact:

Notes to Editors

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

Chairman's statement

"The COVID-19 pandemic brought unprecedented pressures on businesses throughout the UK. Despite this, the Company was able to deliver a resilient performance. Our plan to make careful acquisitions with targeted investment has transformed this business into a more robust and energetic organisation."

Group revenue was up 20% at £59.0 million as a result of our position on several long-term programmes that continued through the pandemic, the acquisition of Osprey and the full year contribution of Sapienza. There are also encouraging signs for 2021 with a 14% growth in orders to £71.5 million. The Group's profit for the year was inevitably affected by the effects of the economic downturn caused by the COVID-19 pandemic, with an adjusted operating profit of £3.7 million. Statutory losses increased to £10.0 million, primarily due to the one-time effect of discontinued operations.

Our focus on higher margin technology and technical consulting from a wider geographical base has enhanced resilience and provided a platform for a stronger performance in 2021. We intend to build on this approach further in 2022 so that the Group emerges from this transition as a technically more focused and geographically more diversified business. Our goal will be to generate good growth with a strong cash performance which offers good returns for our shareholders.

These changes will deliver results only if we pay attention to our culture. Clear and, where appropriate, compassionate leadership from the executive team has encouraged a "can do" culture, which has enabled our employees to adapt more easily to the very demanding business conditions brought about by the pandemic. We are also developing a learning culture which enables us to enter each customer experience with enthusiasm and flexibility.

The board has been impressed by the openness of management and employees and it is very important I take this opportunity to thank them for their commitment and outstanding effort. People will always be at the heart of our growth ambitions, and we will continue to seek and develop talented people with distinctive skills. Great people need great tools, and our ongoing focus as a board is to make sure the business is able to continue to invest in our digital infrastructure to provide our employees with the resources they need. We have made progress here, but there is more to do.

Governance

The board provides an appropriate level of scrutiny of management and the safeguards within the business. Discussions are robust and working together we have developed a thoughtful and careful approach in navigating the business through these challenging times. The board has remained stable through the year and I would like to thank the other directors for their diligence and guidance over the period.

We have continued to meet as planned and additionally when required through the period, using technology to do so remotely in respecting lockdown requirements. Through all of this we have maintained transparency of our actions and decisions in line with the adopted Quoted Companies Alliance Corporate Governance Code and our Section 172 duties.

The year ahead

We began 2021 with a strong opening order book and have maintained our commitment to and relationships with key customers. This positions us well for the year ahead with a portfolio of technologies and skills that are in demand across our main markets and geographies. We are present on long-term and stable programmes and have access to emerging initiatives in artificial intelligence and renewable energy.

TP Group has been on a journey of change over the last few years. At the same time, partly because of COVID-19, our markets and customers have changed too. We now have strengths that we can be proud of and that our customers recognise. This gives us the confidence to be optimistic for the future. The board is very supportive of the Group's executive team who have driven this transition. We have a lot yet to do and a key priority is creating greater value for our shareholders in the future.

Chief Executive's statement

"2020 was a challenging year for all businesses and TP Group was able to adapt and perform against an unprecedented backdrop."

The COVID-19 pandemic has had a significant effect on people and businesses worldwide. We have focused our efforts on supporting customer programmes whilst protecting the health and wellbeing of our staff and all those we come into contact with.

Through this period, we were able to grow our revenue by 20%, due to a strong opening order book, continuity of critical programmes, the addition of Osprey and Sapienza, and the continuing capture of new contracts, despite the backdrop of global uncertainty. Unfortunately, the pandemic caused new working patterns for us, our customers and suppliers that increased costs and disrupted project execution to reduce our margins and impact our adjusted operating profit which reduced to £3.7m (2019: £6.2m).

Our exceptionally talented, flexible and resilient teams across the Group have combined to ensure that we ended the year strongly and with an increased order book that positions us very well for the coming year.

Strategy review

We continue to review the factors that drive our business and our success, and we have ensured that we focus on the distinctive technologies and skills that give us a competitive edge. We also appreciate the things that enable us to continue to operate through such a radical change of working practices whilst still delivering the highest standards of customer support and delivery.

The five pillars of our strategy remain as relevant today as ever. We have seen growth in our consulting and digital solutions activities and intend to pursue these with even more focus in the coming years.

We have worked hard to support our key customers and have added new accounts along the way to strengthen the depth and breadth of our reach. This is especially true with our investments in developing our European business, continuing to work with major customers in the Far East and opening new opportunities in the United States.

We extended our range and reach through the acquisition of Osprey and sharpened our focus through the sale of the loss-making TPG Engineering Limited and discontinuing the business activities of Lift BV, which was identified as non-core.

Response to the COVID-19 pandemic

The Group has shown its agility and flexibility in facing up to the changes arising from COVID-19. Our Group HR team were swift to connect with the operating leadership in each location to establish new working patterns that were appropriate to their activities and local regulations. We are proud to report that no staff were laid off or furloughed and customer deliveries continued wherever it was possible to do so.

Our people and culture

Now, more than ever, I must directly thank all our employees across the UK and Europe for their commitment to their customers, to our business and most importantly to each other through this most difficult of times.

This effort speaks volumes for the culture that we are building across the Group. As we continue to build our consulting and digital offerings, our people are the main asset in driving our performance, and their wellbeing and development is at the heart of all that we do.

Our Group HR team has taken the opportunity to implement several new support systems that provide services to staff consistently and wherever they may be. This includes transactional support such as expenses, absence and vacation tracking, developmental support through training and reference libraries and pastoral care via our online employee assistance programmes.

People will be at the heart of our growth ambitions. We will continue to seek and develop talented people with distinctive skills. We will provide them with a culture, infrastructure and support network that makes us an employer of choice, and in so doing build a stronger capability for our customers.

Organic growth

We have been very pleased to see our investment in consulting and advanced software solutions convert into new business and growth across our CaPS business. The team has developed their consulting customer base from nothing in 2015 to its current scale of £35.0m revenue, with substantial contract extensions in the UK, and new work in several European institutions. 

Our AI and ECLIPSE software solutions have developed with new AI applications in autonomy and decision support, whilst ECLIPSE has transitioned into aerospace manufacturers as a complementary activity alongside its use by the European Space Agency. These developments, plus ongoing work on high-integrity software within the defence sector, mean that our digital solutions activities have developed the critical mass to be recognised as a distinctive part of the business that we intend to promote actively in the future.

Acquisition and disposal

Osprey, which we acquired in August 2020 and was accretive to earnings in the year, is a consultancy and software company, operating in a similar way to our CaPS business.

We became aware of it as a potential acquisition in February of 2020 and recognised its potential as a good fit, both technically and culturally. This has led to us adding safety and mission critical air space management and regulation support in the defence, space and the emerging urban air mobility markets.

Osprey has growth potential in the management of unmanned aircraft, aerial activities around renewable energy installations and a growing space launch capability in the UK. Its business has been mainly in the UK, and so by joining TP Group we can introduce its capabilities across our wider European and international footprint.

Our ongoing focus is to maximise the growth potential of opportunities in our high-technology consulting, digital solutions and specialist engineering activities. This led us, strategically, to sell the loss-making Manchester fabrication business TPG Engineering, completing the sale to Rcapital in October 2020. We also discontinued the business activities of Lift BV, a subsidiary of Sapienza, which was identified as non-core to the future direction of the Group.

Subsequent to the end of the year we announced the possible disposal of TPG Maritime Limited and at the time of this report, discussions with a preferred bidder are ongoing.

Geographic expansion

We were very pleased to sign our first significant contract in the United States during 2020. The U.S. is a very attractive market, but also very challenging to enter and sustain a presence. Our advanced AI software has proved to be the asset that made this possible and led us to the first of what we hope to be many such contracts. Becoming active in America also brings us to the attention of the huge industrial and service community there, and we are actively discussing several partnership opportunities that will further develop our position in that market.

The Group has committed to build on our European footprint by investing in and expanding our operations across the continent. This has been rewarded by expanding our customer base among the European institutions with new business in organisations such as NATO, EUROCONTROL and Eurojust.

Outlook

We trust that the uncertain trading conditions of 2020 will eventually stabilise, and so we have taken the opportunity to prepare the Group to be in the best shape to continue revenue growth and return to improving profit levels. We have invested in our business in Europe, secured new work in the Middle East and the United States, and focused on our growing activities in consulting and software with the acquisition of Osprey and the sale of TPG Engineering.

The industries in which TP Group operates are investing heavily while rapidly digitising and integrating, leading to significant opportunity for our business.

There is substantial pent-up demand for me and my team to meet existing and new customers across the United States, Europe and the Far East. This can only be satisfied once we can travel more freely and engage once more in our normal fashion.

From this point, I believe that the Group is better prepared for what lies ahead and we can carry our excellent consulting, digital and technology capabilities with confidence towards the exciting opportunities before us. 

Financial and operational review

1 Refer to the Financial and operational review on page 31 "Adjusted operating profit" for the bridge from operating loss to adjusted operating profit

The focus in 2020 was on sustaining the business through a challenging period. Activity levels were maintained wherever possible to ensure the minimum disruption to our customers and our staff. Our strong opening order book led revenues to hold up well, however, margins were eroded as a consequence of lockdown and the general business climate in the year. Some improvement was noted in the later months of the year, but we remain cautious of the continuing impact of the pandemic.

Despite the above, we have continued to invest in shaping the business for long-term success, which included the acquisition of Osprey and other investments in AI and renewable energy capabilities.

Operating results

Order book

The Group's closing order book increased by 22% to £69.3m (2019: £56.8m). £6.7m (c.12%) was secured through organic growth and the remaining £5.8m was contributed by the acquisition of Osprey.

This growth was achieved through significant long-term new contract wins and extensions closed in the year as noted below, plus the addition of a significant new customer portfolio through the acquisition of Osprey

Despite the difficulties arising from COVID-19, 2020 was another strong year for the Group's order book, which positions us well for 2021 and beyond, and provides resilience against future challenges.

Order intake

The 2020 order intake increased by £9.0 m (14%) year-on-year to £71.5m, including a £5.3m opening order book acquired with Osprey.

Significant new contract wins and extensions include:

· Follow-on order worth at least £5.0m from Army HQ for consulting support for its multi-billion-pound transformation programme

· An extension to the European Space Agency ("ESA") framework contract until December 2022 and secured orders worth more than €30.0m

· Carbon dioxide solution contract worth £1.0m with a Southeast Asian customer alongside a contract worth £1.0m for Oxygen generation devices

· Contract signed with a German customer worth £1.7m for innovative mobile computing devices

· Five-year contract to supply ECLIPSE project management software to Airbus UK

· Initial contract worth £0.3m to develop an AI solution to optimise critical equipment in the energy sector in the United Arab Emirates

· £2.0m extension to the MoD LE TacCIS consulting contract

· Orders worth c.£4.0m to supply MoD with oxygen generation and carbon dioxide removal devices under the long-term c. £22m framework agreement announced in April 2017

Revenue

Revenue increased by 20% to £59.0m (2019: £49.4m). Organic growth was £3.5m (9%), with an additional £4.7m coming from a full year's contribution by Sapienza, and £1.4m from Osprey since its acquisition on 25 August 2020.

A good opening order book was supported by significant contract wins and extensions noted above. Many of these are on substantial programmes that provide a solid foundation for revenue conversion in the year, as well as delivering on our strategy for sector and geographic expansion.

The disposal of TPG Engineering (noted below) took the Group away from heavy fabrication and engineering for the energy sector. The sector itself, however, remains a key market for growth in consulting and software activities, and for the development of clean energy solutions which are anticipated to add incremental revenues from 2021 onwards.

The market sector breakdown year-on-year was:

· Aerospace grew by 57% to £18.9m (2019: £12.1m)

· Defence grew by 7% to £39.9m (2019: £37.3m)

· Energy sector added new business worth £0.2m (2019: £0.0m)

European expansion was achieved as well as domestic growth:

· UK £37.1m (2019: £32.6m)

· Europe £18.7m (2019: £13.1m)

· Rest of World £3.2m (2019: £3.7m)

Gross profit percentage

Gross profit percentage reduced to c.27% (2019: c.32%). This reflects a change in mix as well as pressure on margins across all sectors and activities, reflecting the challenging trading conditions brought about by the COVID-19 pandemic.

The impacts to the business were as follows:

· Recruitment of new employees to support growth, primarily in the consulting business, was hampered by availability and mobility of new hires leading to increased use of short-term third-party subcontractors.

· Mobility of people across borders in Europe to support delivery of existing contracts was constrained, causing contract delivery delays or reliance on short-term third-party subcontractors to cover immediate requirements.

· Delays in receipt of materials and components through our supply chain led to delays in project execution which not only impacted margins but also delayed milestone deliveries and cash collection.

· Delays in customer availability to approve project milestones or deliveries led to consequential delays in project execution and cash collection.

Furthermore, the business profile changed:

· A change in mix between the CaPS and T&E business streams, where CaPS contributed a greater proportion of total Group revenue but at a lower gross profit percentage than is typically generated by T&E.

· Delays in project execution noted above were typically in high margin projects with a disproportionate effect on the overall gross profit percentage. T&E revenue, however, remained consistent with prior year through the addition of lower margin consumables orders.

There were some signs of gross profit percentage recovery towards the end of the year. However, the conditions that caused the initial deterioration are still present and in some geographies are still at risk of further deterioration.

Operating loss

The Group's operating loss from continuing operations has increased to £4.8m (2019: £1.0m), due to items identified in adjusted operating profit noted below.

Other key movements included:

· Acquisition and non-operating expenses of £2.1m (2019: £1.8m) resulting from the acquisition of Osprey, the disposal of TPG Engineering Limited, the potential disposal of TPG Maritime Limited and restructuring costs associated with the integration of our European business.

· Earn-out provision of £0.5m (2019: £1.6m) relating to the Sapienza and Osprey acquisitions

· Depreciation, amortisation and impairment increased by £2.4m to £5.7m relating mainly to the Sapienza and Osprey acquisitions, and the impairment of the Lift BV intangibles (£1.4m) following the discontinuing of business activities

Adjusted operating profit

The directors believe that adjusted operating profit is more reflective of the underlying performance of the Group than equivalent GAAP measures. Adjusted operating profit is defined as operating loss adjusted to add back depreciation of property, plant and equipment and right-of-use assets, amortisation of intangible assets and impairment gains or losses on non-current assets, changes in fair value of contingent consideration, acquisition consideration accounted for as employment costs owing to ongoing service conditions, any other acquisition-related charges, share-based payment charges and non-operating costs. Non-operating costs are those items believed to be exceptional in nature by virtue of their size and/or incidence and include redundancy and restructuring costs. This provides shareholders and other users of the financial statements with the most representative year-on-year comparison of underlying operating performance attributable to shareholders. This measure and the separate components remain consistent with 2019. Refer below for details of the reconciliation of adjusted operating profit to operating loss.

Adjusted operating profit reduced to £3.7m (2019: £6.2m). This includes:

· gross profit materially similar to the prior year that reflects the increase in revenue but at a lower gross profit percentage for reasons noted above;

· an increase in operating expenses of c.£0.7m in support of growth initiatives including the opening of in-country operations in France and the investment in leadership positions in AI, renewable energy and the space sector;

· the full-year impact of Sapienza operating expenses (c. £1.1m); and

· additional costs from Osprey (c.£0.3m).

Despite the pressures of the COVID-19 pandemic, the board chose to continue investing prudently in selected growth areas to enable the business to thrive once the pandemic restrictions ease. The investment areas included:

· opening of an office in France to improve management of local customers and better access to delivery resources as well as market opportunities in the French aerospace and energy sectors;

· new initiatives to enter the hydrogen and clean energy markets; and

· business development and operational support to our emerging AI software capability.

Statutory loss

The statutory loss in the period increased to £10.0m (2019: £2.0m). The key components of this are:

· operating losses increased by £3.8m to £4.8m as noted above;

· tax credits of £0.2m (2019: tax charge of £0.7m); and

· loss from discontinued operations arising from the disposal of TPG Engineering increased to £5.0m (2019: £0.4m), of which £3.3m relates to the impairment of intangibles and loss on disposal of the underlying assets, with the balance being the trading activity of the business through to sale.

Cash and bank balances

Year-end Group cash of £7.4m (2019: £6.6m), was higher than the prior year. The key movements included:

· draw down of the HSBC banking facility of £7.0m;

· the cash element of the acquisition of Osprey of £2.0m;

· deferral of VAT payments in line with the government extension of £0.5m;

· the settlement of final earn-out payments of £0.9m for Sapienza; and

· £2.3m invested in business systems, infrastructure, equipment, IP and software development.

Note that working capital balances will vary through timing of operational delivery and receipts although these factors are typically short-term in nature.

Acquisitions, investments and disposals

On 24 August 2020 the Group completed the strategic acquisition of Osprey Consulting Services Limited for a maximum consideration of £3.5m on a debt-free, cash-free, normalised working capital basis, funded from its existing cash resources. This comprised an initial consideration of £2.25m on acquisition, with an additional £1.25m payable at the end of year one, subject to completion of certain transition activities by the vendors. 

Osprey is a consultancy company whose business centres on safety and mission-critical air space management and regulation in the defence, space and the emerging urban air mobility markets.

Following a strategic review of the Group's business, it was concluded that TPG Engineering Limited was no longer core to the Group's strategy. As a result, the Group disposed of the company to Rcapital for a nominal cash consideration of £1.00 on 29 October 2020. As noted above, the Group incurred losses on discontinuing operations of £5.0m. Furthermore, we also discontinued the business activities of Lift BV which was identified as non-core to the future direction of the Group.

The Group incurred £1.0m of transactional costs for acquisitions and disposals (2019: £1.5m) predominantly relating to the Osprey and TPG Engineering transactions both noted above, as well as costs incurred to date in relation to the possible sale of TPG Maritime Limited These were charged to the Statement of Comprehensive Income in the year.

A final earn-out payment of £0.9m has been made in the year relating to the acquisition of Sapienza in 2019.

We are pleased to note that despite challenging conditions, the Group continued its focus on technology and software development to position us better for current and future market opportunities. These investments included:

· ECLIPSE software £0.6m - to enhance the project management software suite for new users and markets

· AI software £0.2m - to develop algorithms for autonomy and decision support applications

· Maritime solution development £0.5m - covering noise and vibration reduction, and reduced toxicity of active ingredients

· Electronics product development £0.1m - high-performance cooling systems

Furthermore, the Group continues to invest in its facilities, equipment and systems to support business growth and new lean working practices arising from the pressures of COVID-19.

Non-operating items and earn-out costs

During the year, the Group incurred one-off non-operating and earn-out costs of £1.6m (2019: £1.9m). These relate to restructuring and integration costs associated with Sapienza, earn-out provisions relating to Osprey and Sapienza, and professional fees relating to strategic restructuring initiatives.

Finance costs

Finance costs of £0.3m (2019: £0.2m) were incurred, predominantly relating to:

· interest charges of £0.2m (2019: £0.2m) incurred following the adoption of IFRS 16 in 2018; and

· interest charges of £0.1m on the £7.0m HSBC bank loan draw down (2019: £nil).

Discontinued operations

Discontinued operations relate to the disposal of TPG Engineering Limited on 27 October 2020. Loss from discontinued operations was £5.0m (2019: £0.1m). Refer to the statutory loss section above for details.

Taxation

The tax credit for the financial year to 31 December 2020 is £0.2m (2019 tax charge of £0.7m).

The Group expects to incur in total cash tax payments of c. £0.1m net of expected R&D tax credits of £0.2m for the 2020 financial year (2019: £0.0m). The R&D tax credits assumed for 2020 are materially consistent with prior periods.

Results and dividends

The directors continually evaluate Group performance, and do not currently recommend the payment of a dividend (2019: £nil).

Brexit

Following the UK exit from the European Union at the end of 2020, the impact to the business has been minimal, as anticipated in last year's Annual Report.

Our strategic decision to establish a mainland European presence and location-based business activities has been a key contributor to this conclusion and positions us for future growth opportunities across the EU.

Our supply chain is distributed across the UK, EU and other global locations which allows us to balance requirements according to conditions at the time. We will continue to monitor and manage this closely.

Auditor

In December 2020 the board took the decision to replace RSM UK Audit LLP as auditor and appoint BDO LLP.

Going concern

The going concern position of the Parent Company is intrinsically linked to that of the Group and is therefore considered as part of the directors going concern assessment of the wider group.

In March 2020 the Group secured a £7m 3-year term loan facility that matures in 2023, which was fully drawn in year. This loan facility also includes a £5 million accordion option that may be made available by the lending bank but is not yet a committed facility. The bank has indicated their support of the business and as management progresses work to secure this line of funding, the directors see no reason why this facility will not be available to draw on if required. Furthermore, the Company could raise additional capital through its listing on the AIM, however, is mindful that the ongoing effects of the pandemic could affect stock markets and disrupt any fund-raising potential. The Company can raise 10% of its market capitalisation through a direct placing without the need for shareholder approval, so is able to react with reasonable speed in the event it was required to pursue this course of action.

The directors regularly review operating performance and cash generation projections for the Group which are based on delivery of the Group's secured order book, a reasonable expectation of success in ongoing and future bids for further contracts and an expectation of additional work from current and new customers.

A base case budget and cash flow projection has been prepared for 2021 and 2022, covering at least the 12-month period following the signing of the Group accounts. The budget builds from a strong opening order book which covered c.61% of budgeted 2021 revenues and c.29% of budgeted 2022 revenues. Prudent expectations of new business to be secured through that period, assuming standard rates of cash collection were added to this. The base cash budget does not assume the accordion is drawn and provides sufficient liquidity and bank covenant compliance throughout the period.

Performance in Q1 of 2021 has substantially been in line with the base case budget and orders received have improved 2021 budgeted revenue coverage to c.72% and 2022 to c.41%. This provides considerable comfort in the Group's ability to execute on its projections for the year. 

However, the business continues to navigate through the consequential effects of restrictions imposed by governments to combat COVID-19. These include ongoing travel disruption, the ability to source and recruit new talent, an expected surge in demand for raw materials and components, and the ability of logistics systems to deliver supplies, all of which may delay the timely execution of the Group's order book. Economic conditions caused by the pandemic may also impact the timing of new business opportunities coming to market that the Group would secure in the future.

The Group has taken steps to mitigate some of these effects, for example, the successful adoption of homeworking which has allowed us to mitigate, best possible, the travel restrictions across our territories. This has been specifically notable in the CAPs business stream, however, the requirement for some onsite customer presence could continue to see some disruption specifically in relation to cross border movement of people.

The above noted effects could result in revenue, margins and resulting cash inflows that are less and/or later than modelled, putting pressure on the Group's cash position at times.

The directors have, therefore, flexed and stress tested the base case budget and projection to account for operating scenarios that reflect the occurrence of various possible factors, these include:

· a reduction in revenue,

· a reduction in the Group's gross margin percentage,

· a deterioration in working capital cash conversion; and

· a blend of the above.

These scenarios assume similar and/or greater levels of disruption to the Group's business to those experienced to date since the onset of the COVID-19 pandemic, despite conditions starting to improve as lockdowns are eased and the Group and its markets emerge from a testing period. In all the above scenarios, for at least the 12-month period following signing of the financial statements, the bank covenants are achieved.

However, at their most severe, in the event they were to occur, these scenarios would place a strain on the Group's performance and cash reserves leading to periods when additional financing may be needed to maintain liquidity. Mitigating actions that could preserve available cash include deferring discretionary spend, R&D expenditure and investment capex. In the event additional funding was required, the Group would, in the first instance, look to secure this from the bank by making use of the £5million accordion facility. The ability of the Group and Parent Company to access this facility is dependent upon certain conditions being met at the time the funds are requested. However, given the relationship with the facility provider management consider it reasonable to conclude such facility will be obtained. Thereafter, if required, management would seek funding through a direct equity placing, as noted earlier. In all the above scenarios, for at least the 12-month period following signing of the Group accounts, the bank covenants are achieved.

The directors have reviewed the Group's overall position and outlook in respect of the matters identified above and are of the opinion that there are reasonable grounds to believe that operational and financial projections are achievable, including the base case budget, and that funding will be secured if required. Accordingly, the directors have a reasonable expectation that the Group and Parent Company will have adequate resources to meet their obligations as and when they fall due for the foreseeable future and are satisfied that it is appropriate to prepare the financial statements for the Group on a going concern basis.

However, considering all of the above factors, the directors have concluded that a down-side scenario could arise where the Group and Parent Company would require access to the accordion facility and is therefore reliant on the continuing support of its facility provider. These events and conditions indicate that a material uncertainty exists which may cast significant doubt on the Group's and Parent Company's ability to continue as a going concern and therefore their ability to realise their assets and discharge their liabilities in the ordinary course of business. These financial statements do not include the adjustments that would be necessary should the Going Concern basis of preparation no longer be appropriate. 

Operational review

Consulting & Programme Services ("CaPS")

Our Consulting & Programme Services business delivers professional services alongside software tools that allow our clients to understand their enterprise, solve challenging problems in dynamic and complex environments, make informed decisions and act on them with confidence to achieve high-performance and safe operations.

Business performance

· Revenue grew by 43% to £35.0m (2019: £24.5m)

· Adjusted operating profit materially consistent with prior year at £1.6m (2019: £1.5m)

· Closing order book more than doubled to £42.5m (2019: £17.4m), of which Osprey contributed £5.8m

2020 was another strong revenue year for the Group's consulting and software activities with year-on-year growth. Gross profit margins were, however, eroded by the effects of COVID-19. This, coupled with investment in operating expenses, led to an increase in adjusted operating profit but at a lower conversion rate than the prior year.

Sapienza was fully integrated into the business and we completed the acquisition of Osprey which adds complementary capabilities plus access to adjacent markets that the rest of the Group can now support.

2020 Key achievements

· First AI system project in the United States

· Extended key relationships in MoD contracts

· Entered the aviation market through the Osprey acquisition

· New European framework contract at EuroControl

· Extended long-term ESA framework agreement

· AI system project in the UAE energy sector

Outlook

The services businesses have delivered on their ambitious plans in 2020, even with the constraints of COVID-19 and have emerged as the greater part of the Group's revenue. From this foundation they have the potential to build upon their trusted relationships with established customers and serve a broader international base across a wider range of sectors and activities.

The growing Software and Digital Solutions part of the business has led us to identify it as a separate capability that can be reported on in its own right, and we are optimistic about the opportunities that have arisen in that area.

Technology & Engineering ("T&E")

Our Technology & Engineering business stream designs, builds and supports life-support systems and specialist electronics in critical workspaces, and hydrogen-based renewable energy solutions.

Business performance

· Revenue marginally down to £24.0m (2019: £24.9m)

· Adjusted operating profit £3.4m (2019: £5.9m)

· Closing order book £26.8m (2019: £39.4m)

The Group's engineering businesses remained strong despite the effects of COVID-19.

Business volume was broadly similar; however, margins were eroded as a result of delayed project execution timings, project mix, resource utilisation and supply chain issues. This had a direct impact upon adjusted operating profit which was down on the prior year.

The closing order book is down on the prior year due to the timing of orders related to major submarine programmes that were received in prior periods and which run across multiple years. The pipeline of future opportunities remains substantial with orders anticipated in line with the build plans over the coming years.

2020 Key achievements

· First hydrogen system project

· Established partnership for hydrogen fuelling

· Large European contract for military IT equipment

· Additional orders for submarine oxygen generation and carbon dioxide removal equipment in existing long-term programmes

Outlook

Our strategy is that the T&E businesses will:

· maintain its core business by continuously improving customer interaction, technical leadership, and delivery efficiency; and

· build upon early successes in new markets including carbon capture and hydrogen fuels.

Through these initiatives the Group sees a very healthy future for our complex systems capability.

Consolidated statement of comprehensive income

For the year ended 31 December 2020

Earnings per share:

Consolidated and Parent Company statements of financial position

As at 31 December 2020

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present the Parent Company's income statement. The Parent Company made a profit of £1,221,000 (2019 profit: £627,000) for the year.

Consolidated statement of changes in equity

For the year ended 31 December 2020

Parent Company statement of changes in equity

For the year ended 31 December 2020

Consolidated statement of cash flows

For the year ended 31 December 2020

Notes to the financial statements

1. Accounting policies

The Company

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

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

The Group currently reports as two core businesses streams at 31 December 2020:

· Technology & Engineering ("T&E") - the capability to design, manufacture and support mission-critical systems

· Consulting & Programme Services ("CaPS") - advising clients on strategic problems and implementing technology-driven solutions

However with the disposal TPG Engineering Ltd and because CaPS has become more material to the Group's performance and its capabilities have extended to include software and digital solutions alongside traditional consulting services, going forward we have decided to position the business as three complementary value streams:

· Atmosphere Management Systems - life support systems and specialist electronics in critical workspaces, and hydrogen-based renewable energy solutions (previously T&E)

· Consulting - specialist services to enable our clients to transform their enterprise and evolve their systems and services.

· Software and Digital Solutions - solving complex problems in dynamic and changing environments with AI and software tools.

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

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

Basis of preparation and statement of compliance

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2019 or 31 December 2020, but is derived from those accounts. Statutory accounts for 2019, which were prepared under accounting standards adopted by the EU, have been delivered to the registrar of companies and those for 2020 will be delivered following the Company's Annual General Meeting. The Auditor has reported on these accounts; its report (i) was unqualified, (ii) in respect of the year ended 31 December 2020 drew attention to a material uncertainty in respect of going concern without qualifying (no such matter was referred to in respect of the statutory accounts for 2019) and (iii) did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

This financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS"), in conformity with the requirements of the Companies Act 2006 and interpretations issued by the IFRS Interpretations Committee applicable to companies reporting under IFRS. The financial statements comply with IFRS as adopted by the EU.

The Parent Company financial statements have been prepared in accordance with Financial Reporting Standard ("FRS") 101 Reduced Disclosure Framework and in accordance with applicable accounting standards and the provisions of the Companies Act 2006.

FRS 101 sets out a reduced disclosure framework for a 'qualifying entity' as defined in the standard which addresses the financial reporting requirements and disclosure exemptions in the individual financial statements of qualifying entities that otherwise apply the recognition, measurement and disclosure requirements of adopted IFRSs.

FRS 101 sets out amendments to adopted IFRSs that are necessary to achieve compliance with the Companies Act and related Regulations

In preparing the Parent Company financial statements, the directors have taken advantage of the following exemptions for disclosures:

· A cash flow statement and related notes as required by IAS 7 'Statement of Cash Flows';

· To disclose related party transactions entered into between two or more members of the Group, provided that the subsidiary is wholly owned, under paragraphs 17 and 18A of IAS 24, and the requirements in IAS 24.

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below.

The Consolidated Financial Statements are presented in pounds sterling which is the Group's functional currency. Figures are presented to the nearest thousand pounds, unless otherwise stated.

The financial statements have been prepared on a historical cost basis, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, or when an impairment is recognised on non-current assets

The measurement bases and principal accounting policies of the Group and Parent Company are set out below. The accounting policies adopted are consistent with those of the previous financial year with exception of matters noted below.

New or amended Accounting Standards and Interpretations adopted

In the current year, the Group has adopted a number of amendments to Accounting Standards and Interpretations issued by the IASB that are effective for any period that began on or after 1 January 2020. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

· Amendments to IFRS 3: Definition of a Business

· Amendments to IAS 1 & IAS 8: Definition of Material

· Amendments to IAS 39 & IFRS 9: Interest rate Benchmark Reform - Phase 1

· Amendments to IFRS 16 Leases COVID-19-related Rent Concessions

· Amendments to references to the Conceptual Framework

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not been adopted early by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

Key areas of judgement and sources of estimation uncertainty

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on various other factors, including expectations of future events management believes to be reasonable under the circumstances. The actual outcome may differ from those originally calculated. The judgements, estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Going concern (judgement)

The going concern position of the Parent Company is intrinsically linked to that of the Group and is therefore considered as part of the directors going concern assessment of the wider group.

In February 2020 the Group secured a £7m 3-year term loan facility that matures in 2023, which was fully drawn in year. This loan facility also includes a £5 million accordion option that may be made available by the lending bank but is not yet a committed facility. The bank has indicated their support of the business and as management progresses work to secure this line of funding, the Directors see no reason why this facility will not be available to draw on if required. Furthermore, the Company could raise additional capital through its listing on the AIM, however, is mindful that the ongoing effects of the pandemic could affect stock markets and disrupt any fund-raising potential. The Company is able to raise 10% of its market capitalisation through a direct placing without the need for shareholder approval, so is able to react with reasonable speed in the event it was required to pursue this course of action.

The Directors regularly review operating performance and cash generation projections for the Group which are based on delivery of the Group's secured order book, a reasonable expectation of success in ongoing and future bids for further contracts and an expectation of additional work from current and new customers.

A base case budget and cash flow projection has been prepared for 2021 and 2022, covering at least the 12 month period following the signing of the Group accounts. The budget builds from a strong opening order book which covered c.61% of budgeted 2021 revenues and c.29% of budgeted 2022 revenues. Prudent expectations of new business to be secured through that period, assuming standard rates of cash collection were added to this. The base cash budget does not assume the accordion is drawn, and provides sufficient liquidity and bank covenant compliance throughout the period.

Performance in Q1 of 2021 has substantially been in line with the base case budget and orders received have improved 2021 budgeted revenue coverage to c.72% and 2022 to c.41%. This provides considerable comfort in the Group's ability to execute on its projections for the year. 

However, the business continues to navigate through the consequential effects of restrictions imposed by governments to combat COVID-19. These include ongoing travel disruption, the ability to source and recruit new talent, an expected surge in demand for raw materials and components, and the ability of logistics systems to deliver supplies, all of which may delay the timely execution of the Group's order book. Economic conditions caused by the pandemic may also impact the timing of new business opportunities coming to market that the Group would secure in the future.

The Group has taken steps to mitigate some of these effects, for example, the successful adoption of homeworking which has allowed us to mitigate, best possible, the travel restrictions across our territories. This has been specifically notable in the CAPs business stream, however, the requirement for some onsite customer presence could continue to see some disruption specifically in relation to cross border movement of people.

The above noted effects could result in revenue, margins and resulting cash inflows that are less and/or later than modelled, putting pressure on the Group's cash position at times.

The Directors have, therefore, flexed and stress tested the base case budget and projection to account for operating scenarios that reflect the occurrence of various possible factors, these include:

· a reduction in revenue,

· a reduction in the Group's gross margin percentage,

· a deterioration in working capital cash conversion; and

· a blend of the above.

These scenarios assume similar and/or greater levels of disruption to the Group's business to those experienced to date since the onset of the COVID-19 pandemic, despite conditions starting to improve as lockdowns are eased and the Group and its markets emerge from a testing period. In all the above scenarios, for at least the 12-month period following signing of the financial statements, the bank covenants are achieved.

However, at their most severe, in the event they were to occur, these scenarios would place a strain on the Group's performance and cash reserves leading to periods when additional financing may be needed to maintain liquidity. Mitigating actions that could preserve available cash include deferring discretionary spend, R&D expenditure and investment capex. In the event additional funding was required, the Group would, in the first instance, look to secure this from the bank by making use of the £5million accordion facility. The ability of the Group and Parent Company to access this facility is dependent upon certain conditions being met at the time the funds are requested. However, given the relationship with the facility provider management consider it reasonable to conclude such facility will be obtained. Thereafter, if required, management would seek funding through a direct equity placing, as noted earlier.

The Directors have reviewed the Group's overall position and outlook in respect of the matters identified above and are of the opinion that there are reasonable grounds to believe that operational and financial projections are achievable, including the base case budget, and that funding will be secured if required. Accordingly, the Directors have a reasonable expectation that the Group and Parent Company will have adequate resources to meet their obligations as and when they fall due for the foreseeable future and are satisfied that it is appropriate to prepare the financial statements for the Group on a going concern basis.

However, taking into account all of the above factors, the Directors have concluded that a down-side scenario could arise where the Group and Parent Company would require access to the accordion facility, and is therefore reliant on the continuing support of its facility provider. These events and conditions indicate that a material uncertainty exists which may cast significant doubt on the Group's and Parent Company's ability to continue as a going concern and therefore their ability to realise their assets and discharge their liabilities in the ordinary course of business. These financial statements do not include the adjustments that would be necessary should the Going Concern basis of preparation no longer be appropriate.

Assets held for sale (judgement)

Management has reviewed the Group's non-current assets and associated liabilities in line with IFRS 5. In particular management has assessed the Held for sale criteria in IFRS 5 with a view to determining whether reclassification of TPG Maritime Limited as a held for sale asset was required at the balance sheet date. Following management's assessment it was determined that no reclassification was required as TPG Maritime Limited did not meet the IFRS 5 held for sale criteria.

Discontinued operations (judgement)

For operations classified as discontinued operations, management has considered the facts and circumstances of each transaction, with consideration of IFRS 5 as to whether the disposal or ceased activity represents a 'discontinued operation'. In particular the IFRS 5 discontinued operation criteria was considered in respect of TPG Engineering Ltd and Lift BV and whether these CGUs met the requirements of a separate major business line. Following the assessment it was considered that TPG Engineering Ltd did meet the criteria and has been disclosed as discontinued operation, but Lift BV did not. 

Business combinations (judgement)

Management uses valuation techniques when determining the fair value of certain assets and liabilities acquired in a business combination (see note 7). In particular, for the acquisition of Osprey Consulting Services Limited there were a number of judgements around the inputs and assumptions in the cash flow forecasts, the growth rates and discount rates used. This also involved management's assessment of the intangible assets identified and the fair value allocated to each.

The determination of incremental borrowing rates used to measure lease liabilities (judgement)

The Group holds leases where the interest rate is not implicit in the lease. In these circumstances an incremental borrowing rate is used. The incremental borrowing rates used by the Group are based on assessment of rates to borrow over similar terms and with similar security to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

Revenue (estimate and judgement)

The Group values its costs and anticipated profits in excess of billings based on the time and materials charged into each project and anticipated future costs and revenues. The determination of revenues and contract assets involves estimates of the volume of work required to complete the project. On a monthly basis, management reviews the costs incurred on each project to determine whether the amount recognised as contract assets is a true reflection of the amount that will be earned on the projects. Where the review determines that the value of costs and anticipated profits in excess of billings exceed the amount that can be earned, adjustments are made to the contract asset.

Impairment of non-current assets (estimate)

Determining whether intangible assets and goodwill are impaired requires an estimation of the value in use of the cash-generating units to which intangible assets and goodwill have been allocated. Investment in subsidiaries is based on the estimation of recoverability based on the value in use calculation of the cash-generating unit (CGU) invested in.

The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

Useful economic life of intangible assets (estimate)

Given the nature of the operations performed by the Group, the useful life of an asset is determined as the period over which the asset is expected to be available for use by the entity. Estimated useful lives and amortisation method are reviewed by management at the end of each reporting period, with the effect of any change in estimate accounted for on a prospective basis.

Significant accounting policies

The Group's significant accounting policies are set out below and have been applied consistently to all periods presented in these Consolidated Financial Statements.

Basis of consolidation

The Consolidated Financial Statements include the Company's financial statements and those of its subsidiary undertakings made up to 31 December 2020. TP Group plc and its subsidiaries together are referred to in these financial statements as the 'Group'.

A subsidiary is an entity controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and is able to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date control ceases.

Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the Parent.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated Statement of Comprehensive Income, Statement of Financial Position and Statement of Changes in Equity of the Group. Losses incurred by the Group are attributed to the owners of the parent and to the non-controlling interest, even if this results in the non-controlling interest having a deficit balance.

When the Group loses control over a subsidiary, it derecognises the assets, including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.

Revenue

The Group's operations generate revenues through the design and manufacture of high integrity equipment, provision of services and provision of software.

Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer, excluding amounts collected on behalf of third parties, sales related taxes and trade discounts. The Group recognises revenue when it transfers control of a product or service to a customer as more fully explained below.

Technology and Engineering

Design and manufacturer of high-integrity equipment

The Group designs and manufactures mission-critical systems under long-term contracts with customers. The promises in these contracts include the design and manufacturer of systems for delivery to the customer and standard assurance warranties. The promises in these contracts are combined as a single performance obligation because the customer cannot benefit from the promises on their own, and they are not separately identifiable in the context of the contract. In some instances, the contract will also include a promise to install the equipment at the customer site. Where installation is included in the contract, this is not generally considered a separate performance obligation as the promise is not separately identifiable in the context of the contract.

Some contracts will include:

The systems that are designed and manufactured are bespoke for each customer and do not have an alternative use to the Group. Where the Group has an enforceable right to payment for performance completed to date, being recovery of costs incurred in satisfying the performance obligation plus a reasonable profit margin, the performance obligation is satisfied over time. The measurement of progress towards complete satisfaction of the performance obligation is measured using the input method, based on costs incurred compared to total contract costs.

Costs are only included in the measurement of progress towards satisfying the performance obligation where there is a direct relationship between the input and the satisfaction of the performance obligation.

The Group becomes entitled to invoice customers based on achieving a series of performance-related milestones. Any amount previously recognised as a contract asset is reclassified to trade receivables at the point at which it is invoiced to the customer. If the milestone payment exceeds the revenue recognised to date under the cost-to-cost method, then the Group recognises a contract liability for the difference. There is not considered to be a significant financing component in the design and manufacture of high-integrity equipment with customers as the period between recognition of revenue and milestone payment is always less than one year.

For contracts where the Group does not have an enforceable right to payment for performance completed to date, being recovery of costs incurred in satisfying the performance obligation plus a reasonable profit margin, revenue is recognised at a point in time. For these contracts, revenue is recognised at the point of customer delivery (as defined in each specific contract) of the system, as this is the point at which the customer is in control of the deliverable, has the risks and rewards of ownership and the Group has a present right for payment for the deliverable.

For storage services, the customer receives and consumes the benefit over the storage period. The performance obligation is satisfied over time. Revenue is recognised on an output basis, based on daily rate for the period of storage.

For extended warranties, the customer receives and consumes the benefit of the warranty over the extended warranty period. The performance obligation is satisfied over time, based on straight line recognition over the period of the warranty, which is used to measure progress towards complete satisfaction of the extended warranty performance obligation.

Payment terms under the contract are typically 30 days.

Parts management

The Group has a parts management contract, whereby the Group manages the parts supply chain for a customer. This contract contains two performance obligations being asset availability, and supply of consumables. 

In terms of asset availability, the Group's performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date, being recovery of costs incurred in satisfying the performance obligation plus a reasonable profit margin. The customer also simultaneously receives and consumes the benefits of the asset availability service as the

Group performs. Revenue is recognised as a provision of assets are provided and control passes to the customer on the sale of the goods. Where it is concluded that the customer has material rights under the contract for asset availability service then this will be assessed in measuring progress towards complete satisfaction of the performance obligation that depicts the Group's performance in providing the asset availability service to the customer.

The contract price for asset availability includes variable consideration in the form of rebates based on achievement of KPI's within the contract. The expected value approach, which is based on the sum of probability weighted amounts for a range of possible outcomes, has been used to estimate the transaction price. The variable consideration is trued up at the end of each reporting period to reflect changes in the period and conditions that exist at the period end.

For the supply of consumables, the customer receives the benefit of the service on delivery (as defined in the contract) of the consumable. This is the point at which the customer is in control of the deliverable, has the risks and rewards of ownership and the Group has a present right for payment for the deliverable.

Payment terms under the contract are typically 30 days.

Maintenance of equipment

The Group has contracts for the maintenance and servicing of customer vessels with a 12-month assurance warranty. These contracts contain a single promise and performance obligation. The assurance warranty is not a separate performance obligation.

The performance of the Group enhances the vessels, which are controlled by the customer, as the Group performs. Revenue is recognised over time. The Group uses an input method, based on labour hours, costs incurred and materials, to measure complete satisfaction of the performance obligation. Costs are only included in the measurement of progress towards satisfying the performance obligation where there is a direct relationship between the input and the satisfaction of the performance obligation. 

Payment terms under these contracts are typically 30 days.

Consulting and Programme Services

Consulting

The Group provides advisory, technical, project management and development services to customers for specialised business operations and technology-driven solutions.

Performance obligations are identified against each customer contract.

Where the contract is advisory, technical or project management, the customer receives and consumes the benefits of the service as the Group performs. Revenue is recognised overtime, using an input basis, based on costs incurred compared to total contract costs. Costs are only included in the measurement of progress towards satisfying the performance obligation where there is a direct relationship between the input and the satisfaction of the performance obligation.

Where the contract is time and materials, customer receives and consumes the benefits as the Group performs. Revenue is recognised over time, using an input method based on time and materials incurred.

Where the contract is for the provision of specified deliverables to the customer, none of the criteria in IFRS 15.35 are met. Revenue is recognised at a point in time, being the point at which the customer is in control of the specified deliverables under the project.

Payment terms under these contracts are typically 30 days.

Provision of software

The Group sells programme management software, including either basic or extended support, which is either hosted or non-hosted.

The hosted programme management software contains a single performance obligation, as the customer cannot benefit from either the software or the support without the hosting infrastructure. The customer receives and consumes the benefit of the service as the Group performs. Revenue is recognised over time. Revenue is recognised straight line over the life of the contract, as this best depicts the Group's performance in providing the service to the customer. 

For non-hosted programme management software, there are two performance obligations in the contract being the provision of software licence and licence keys for the specified modules and then provision of a basic support service.

The software licence grants the customer a right to use the intellectual property as it exists at the point in time at which the licence is granted. Revenue from the software licence is recognised at a point in time on delivery of the software and associated licence keys to access the software.

The basic support service is simultaneously received and consumed by the customer as the Group performs. Revenue is recognised over time. An output method, i.e. straight line over the contract, is used to measure progress towards complete satisfaction of the performance obligation.

For non-hosted contracts, there is a single price in the contract which has been allocated to the two performance obligations based on stand-alone selling prices. The stand-alone selling price for each of the performance obligation is not directly observable so has been determined using an adjusted market assessment approach. It has been concluded by the business that support services obligations equate to 20% of the software license fee.

For non-hosted programme management software, enhanced support services may also be provided which can include onsite services and/or training. Enhanced support services are either provided based for a fixed number of hours or on demand based on time and materials. Where enhanced support is purchased based on a fixed number of hours, the customer receives and consumes the benefits as the Group performs. Revenue is recognised over time as the hours are consumed by the customer. Where enhanced support is purchased on demand, revenue is recognised over time based on an input method i.e. time and materials incurred.

The Group invoices annually for all programme management software contracts (hosted and non-hosted). There is no significant financing component in these contracts as the period between invoicing and recognition of revenue is less than one year.

Payment terms under these contracts are typically 30 days.

Interest

Interest receivable/payable is credited/charged to the Income Statement using the effective interest method. Where borrowing costs are attributable to the acquisition, construction or production of a qualifying asset, such costs are capitalised as part of the specific asset.

Taxation

The tax charge/credit on the profit or loss for the year comprises current and deferred tax.

· Current tax is the expected tax payable for the year, based on the applicable income tax rate for each jurisdiction and using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years.

· Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for tax purposes and is calculated using the enacted or substantively enacted rates that are expected to apply when the asset or liability is settled.

Tax is charged or credited to the Income Statement or Other Comprehensive Income as appropriate, except when it relates to items credited or charged directly to equity in which case the tax is also dealt with in equity.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities settled, based on those tax rates that are enacted or substantively enacted, except for:

· When the deferred income tax asset or liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or

· When the taxable temporary difference is associated with interest in subsidiaries or associates, and the timing of the reversal can be controlled and is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

R&D tax credits

Companies within the Group have made claims for R&D tax credits under the large company Research and Development Expenditure Credit (RDEC) Scheme and under the SME R&D scheme.

The income tax recoverable in respect of R&D cash tax credits is based upon management estimates, judgements and assumptions considered reasonable at the time but the actual income tax recoverable may differ from those estimates.

Foreign currency translation

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which each entity operates ('the functional currency'). The consolidated financial statements are presented in British pounds sterling, which is the Group's presentation currency.

Transactions denominated in currencies other than the functional currency of the transacting Group undertaking are translated into the functional currency at the average monthly exchange rate when the transaction occurs. Monetary assets and liabilities denominated in foreign currencies are translated into the relevant functional currency at the rate prevailing at the end of the financial year. Exchange differences arising on foreign exchange transactions and the retranslation of assets and liabilities into functional currencies at the rate prevailing at the end of the financial year are included in profit before taxation.

The trading results of Group undertakings are translated into pounds sterling on a monthly basis at the average monthly exchange rate. The assets and liabilities of overseas undertakings, including goodwill and fair value adjustments arising on acquisition, are translated at the exchange rates prevailing at the transaction date or date of valuation. Exchange adjustments arising from the retranslation of the opening net assets, and from the translation of the profits or losses at average rates, are recognised in other comprehensive income.

Financial instruments

Financial assets and liabilities are recognised in the Statement of Financial Position when a member of the Group becomes party to the contractual provisions of the instrument.

Financial assets

Financial assets are classified according to the business model within which the asset is held and the contractual cash-flow characteristics of the asset.

All financial assets are classified as at amortised cost.

Financial assets at amortised cost

The Group's financial assets at amortised cost comprise trade receivables, loans, other receivables and cash and cash equivalents.

Financial assets at amortised cost are initially recognised at fair value including any directly attributable costs. They are subsequently measured at amortised cost using the effective interest method, less any impairment. No interest income is recognised on financial assets measured at amortised cost, with the exception of cash and cash equivalents, as all financial assets at amortised cost are short-term receivables and the recognition of interest would be immaterial. Financial assets are derecognised when the contractual right to the cash flows from the asset expire.

Trade and other receivables

Trade and other receivables are initially recorded at the fair value of the amount receivable and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Other receivables also represent client money required to meet settlement obligations.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, on demand deposits with banks and other short-term highly-liquid investments with original maturities of three months or less.

Impairment of financial assets

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables are considered on an individual basis due to the differing nature of complexity and scope of the contracts the Group enters into with its customers. Where balances are unpaid, the Group will engage with customers to understand the circumstances, and where these are considered unlikely to be resolved, will consider the debt to be in default.

The carrying amount of the financial assets is reduced by the use of a provision. When a trade receivable is considered uncollectable, it is written off against the provision. Subsequent recoveries of amounts previously written off are credited against the provision. Changes in the carrying amount of the provision are recognised in the income statement.

The Group has chosen to take advantage of the practical expedient in IFRS 9 when assessing default rates over its portfolio of trade receivables and contract assets, to estimate the expected credit loss ("ECL") based on historical default rates specific to groups of customers by type of service offering. Each individual trading entity within the Group has a unique service offering and as such are considered separate to each other.

At each reporting date, factors considered as part of the assessment of the expected credit loss provision for each entity include historical default rates, current and expected future economic conditions at the time of assessment such as the impact of COVID-19, any impact following Brexit and changes in announced Government funding; changes in credit risk, as well as review of cash receipts received post period end. Changes in the ECL provision are recognised in profit or loss.

Entities within the Group do not have a history of significant credit losses and as such generalised loss rates are not applied to each entity. To assess potential credit losses, the Group assesses each entity individually and recognises expected credit losses where specific knowledge of particular customers suggests it is appropriate to do so. Given the low levels of credit losses which have been historically incurred, the Group does not define customer default based on debtors reaching a defined level of ageing. Instead regular communication with customers and consideration of the various factors mentioned above will drive the Group's assessment of whether default is likely and an expected credit loss should be recognised.

Reviews for specific expected credit losses are assessed at each reporting date and recognised when the Group definition of default has been met.

The same approach as outlined above is also applied to ad hoc other receivables as they arise.

Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into.

Business combinations and goodwill

The acquisition method of accounting is used for business combinations. This has been applied to the acquisition during the year end 31 December 2020.

The consideration transferred for an acquisition is the sum of the acquisition date fair values of the assets transferred, value of goodwill and any contingent consideration, less the amount of non-controlling interest in the acquiree.

On acquisition, the financial assets acquired and liabilities assumed have been assessed for appropriate classification and designation in accordance with the contractual terms, economic conditions, in addition to assessment of the acquiree's operating or accounting policies and other pertinent conditions in existence at the acquisition date.

For each business combination which includes non-controlling interest in the acquiree, is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.

Where the business combination is achieved in stages, the consolidated entity re-measures its previously held equity interest in the acquiree and the difference between the revised fair value and the previous carrying amount is recognised in profit or loss.

Contingent consideration to be paid by the acquirer is recognised at the acquisition-date at fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not re-measured and its subsequent settlement is accounted for within equity.

Where additional consideration may be payable in cash on delivery by the vendors of certain transition activities within specified timeframes following completion of the acquisition, this amount is considered to be a financial instrument and is expensed in the Group's income statement over the specified timeframe, in line with IFRS 3 (paragraph 58).

The difference between the acquisition date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer.

Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and recognises additional assets or liabilities during the measurement period based on new information obtained about the facts and circumstances that existed at the acquisition date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition, or (ii) when the acquirer receives all the information possible to determine fair value.

Goodwill arising on a business combination is carried at cost as established on the date of acquisition less accumulated impairment losses, if any.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of profit or loss on disposal.

Research and development

Expenditure incurred on research and development is distinguished as relating either to a research phase or to a development phase. All research phase expenditure is charged to the Income Statement. Development expenditure is recognised as an internally generated intangible asset only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits.

More specifically, development costs are capitalised from the point at which all of the following conditions have been met:

· the technical feasibility of completing the programme and the intention and ability (availability of technical, financial and other resources) to complete the programme asset and use or sell it;

· the probability that future economic benefits will flow from the programme asset;

· the availability of adequate technical, financial and other resources to complete the development and to use or sell the programme asset; and

· the ability to measure reliably the expenditure attributable to the programme asset during its development.

Capitalisation continues until the point at which the asset meets its originally contracted technical specification. This is defined internally as the point at which the asset is capable of operating in the manner intended by management.

Subsequent expenditure is capitalised where it enhances the functionality of the asset and demonstrates an enhanced economic benefit to the Group. All other subsequent expenditure on assets is expensed as incurred.

Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 5 years.

Software

Software that is not specific to an item of property, plant and equipment is classified as an intangible asset, recognised at its acquisition cost and amortised on a straight-line basis of between 3 and 5 years.

Other intangible assets

These principally include intangible assets arising on acquisition of business. Amortisation of intangible assets is on a straight line basis over their useful economic lives, determined as follows

Estimated useful lives and amortisation method are reviewed by management at the end of each reporting period, with the effect of any change in estimate accounted for on a prospective basis. 

Property, plant and equipment

Depreciation is provided on a straight-line basis to write off the cost, less the estimated residual value, of property, plant and equipment over their estimated useful lives. No depreciation is recorded on assets in the course of construction. Estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any change in estimate accounted for on a prospective basis. 

Computer equipment 33% per annum

Office furniture and fittings 20% per annum

Plant and machinery 10% to 20% per annum

Motor Vehicles 25% per annum

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. 

Impairment of non-financial assets

Goodwill has an indefinite useful life and is not subject to amortisation and is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

Leases

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

· the contract involves the use of an identified asset either explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset;

· the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

· the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used.

This policy is applied to contracts entered into, or changed, on an ongoing basis.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset, less any lease incentive received.

The Group was not able to determine the interest rate implicit in the leases, and so has been determined based on research into external borrowing rates attached to available financing for similar asset purchases.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of less than 12 months and leases of low value assets. Instead, the Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Where extension options are available, these are accounted for as part of the recognition of a right of use asset and lease liability if it is reasonably certain that the extension will be taken up at time of assessment, and the extension term is defined. Otherwise any extension subsequently taken up is treated as a new lease when it is exercised.

Depreciation on right-of-use lease assets is charged on a straight-line basis over the shorter of the term of the lease and useful economic life, and is recognised in profit or loss.

Interest expense on the lease liability is recognised in profit or loss within finance costs.

Inventories

Inventories and work in progress are valued at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those direct overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling prices less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

Cash and cash equivalents

Cash and cash equivalents include cash at bank and in hand, investments in money-market funds and short-term. The Group considers overdrafts (repayable on demand) to be an integral part of its cash management activities and these are included in cash and cash equivalents for the purposes of the cash flow statement.

Borrowings

Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Subsequent recognition will be net of any cash payments made to settle in part or in full in line with the original agreement with the lender.

Finance charges, including premiums payable on settlement or redemption and direct issues costs are accounted for on an accruals basis in the income statement using the effective interest rate method and are disclosed within accruals to the extent they are not settled in the period.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Retirement benefit obligations

The Group operates a defined contribution stakeholder pension scheme for employees. Payments to the defined contribution retirement benefit plans are recognised as an expense when the employees have rendered service entitling them to contributions.

Share-based payments

The Group provides share-based payment arrangements to certain employees. These are equity-settled arrangements and are measured at fair value at the date of grant. 

Fair value is determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at the grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that determine whether the Group receives the services that entitle the employees to receive payment.

The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of the modification.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

Discontinued operations

A discontinued operation is a component of the Group's business, the operations and cash flows

of which can be clearly distinguished from the rest of the Group and which:

· represents a separate major line of business or geographic area of operations;

· is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or

· is a subsidiary acquired exclusively with a view to re-sale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale.

When an operation is classified as a discontinued operation, the comparative statement of profit

or loss and OCI is re-presented as if the operation had been discontinued from the start of the

comparative year.

Equity

Equity comprises the following:

· 'Share capital' represents the nominal value of equity shares.

· 'Share premium' represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

· 'Own shares held by EBT' represents Company shares purchased directly by the Group to satisfy obligations under the employee share plan.

· 'Share-based payment reserve' represents equity-settled share-based employee remuneration until such share options are exercised or lapse.

· 'Translation reserve' represents the foreign currency differences arising on translating foreign operations into the presentational currency of the Group.

· 'Retained earnings' represents retained profits.

· 'Non-controlling interest' represents the proportionate share of the identifiable net assets on acquisition and subsequent share of result following this of any subsidiary where the shareholding held by the Parent Company is less than 100%.

Employee benefit trust

The assets and liabilities of the Employee Benefit Trust ("EBT") have been included in the Group accounts.

Any assets held by the Employee Benefit Trust cease to be recognised in the Consolidated Statement of Financial Position when the assets vest unconditionally in identified beneficiaries.

The costs of purchasing own shares held by the Employee Benefit Trust are shown as a deduction against consolidated equity. The proceeds from the sale of own shares held increase consolidated equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the Consolidated Statement of Comprehensive Income.

The undiscounted amount of short-term benefits attributable to services that have been rendered in the period are recognised as an expense, unless specifically required or permitted within the scope of IFRS reporting to be included in the cost of an asset. Any difference between the amount of cost recognised and cash payments made is treated as a liability or prepayment as appropriate.

2020 includes an additional impairment to the brought forward unimpaired balance of the loan made by the parent company to the EBT, bringing the recoverable amount in line with the market value of the shares at the balance sheet date.

An operating segment, as defined by IFRS 8 'Operating segments', is a component of the Group that engages in business activities from which it may earn revenues and incur expenses. The Group has been managed through its two reporting segments, Technology & Engineering ("T&E") and Consulting & Programme Services ("CaPS") which to date have formed the operating segments on which the information below is prepared. The Group determines and presents operating segments based on the information that is provided internally to the chief operating decision maker, which has been identified as the Board of Directors of TP Group plc.

1 reconciliation between Group loss from operations, and adjusted operating profit by segment is shown below

Segment revenue reported above represents revenue generated from external customers.

The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 1. Segment profit or loss represents the profit or loss before tax earned by each segment without allocation of central administration costs and directors' salaries, other gains and losses, as well as finance costs. 

The following table shows how the Group loss from operations, adjusted operating profit and reconciling non-operating items for the financial year are split between the Group's reportable segments.

1 Adjusted operating profit / (loss) is defined as operating result adjusted to add back depreciation of property, plant and equipment and right-of-use assets, amortisation of intangible assets and impairment gains or losses on non-current assets, changes in fair value of contingent consideration, acquisition consideration accounted for as employment costs owing to on-going service conditions, any other acquisition-related charges, share based payment charges, and non-operating costs. Non-operating costs include £334,000 (2019: £253,000) in respect of termination payments, and the remainder due to restructuring of the Group. Non-operating costs are those items believed to be exceptional in nature by virtue of their size and or incidence. The directors of the Company believe this measure is more reflective of the underlying performance of the Group than equivalent GAAP measures. This is primarily due to the exclusion of non-cash items, such as share-based payments, impairment, depreciation and amortisation, as well as acquisition and non-operating costs. This provides shareholders and other users of the financial statements with the most representative year-on-year comparison of underlying operating performance attributable to shareholders. This measure and the separate components remain consistent with 2019. 

2 The segmental information has been updated to present only continuing operations following the disposal of TPG Engineering Limited in October 2020.

Analysis by timing of revenue recognition

As noted above, the business has reported its results as two reportable segments T&E and CaPS historically. However with the disposal TPG Engineering Ltd and because CaPS has become more material to the Group's performance and its capabilities have extended to include software and digital solutions alongside traditional consulting services, going forward we have decided to position the business as three complementary value streams to provide further information which the Board considers to be useful and will form the basis for segment disclosure for the financial year ended 31 December 2021:

· Atmosphere Management Systems - life support systems and specialist electronics in critical workspaces, and hydrogen-based renewable energy solutions (previously T&E).

· Consulting - specialist services to enable our clients to transform their enterprise and evolve their systems and services.

· Software and Digital Solutions - solving complex problems in dynamic and changing environments with AI and software tools.

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

1 reconciliation between Group loss from operations, and adjusted operating profit by stream is shown below

Revenue reported above represents revenue generated from external customers.

1 Adjusted operating profit / (loss) is defined as operating result adjusted to add back depreciation of property, plant and equipment and right-of-use assets, amortisation of intangible assets and impairment gains or losses on non-current assets, changes in fair value of contingent consideration, acquisition consideration accounted for as employment costs owing to on-going service conditions, any other acquisition-related charges, share based payment charges, and non-operating costs. Non-operating costs include £334,000 (2019: £253,000) in respect of termination payments, and the remainder due to restructuring of the Group. Non-operating costs are those items believed to be exceptional in nature by virtue of their size and or incidence. The directors of the Company believe this measure is more reflective of the underlying performance of the Group than equivalent GAAP measures. This is primarily due to the exclusion of non-cash items, such as share-based payments, impairment, depreciation and amortisation, as well as acquisition and non-operating costs. This provides shareholders and other users of the financial statements with the most representative year-on-year comparison of underlying operating performance attributable to shareholders. This measure and the separate components remain consistent with 2019. 

2 The information above has been updated to present only continuing operations following the disposal of TPG Engineering Limited in October 2020.

Analysis by geographical destination

The following is a geographical analysis of the Group's revenue from continuing operations from its products and services:

The following is a geographical analysis of the Group's non-current assets used as part of continuing operations:

Analysis by type of good or service

Analysis by industry

Information about major customers

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

3. Operating loss

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

1 Share-based payment expense arises from transactions accounted for as equity-settled share-based payment transactions and are non-cash in nature.

4. Earnings per share

The calculation of basic earnings per share for the year ended 31 December 2020 is based upon a loss after tax of £9,999,000 (2019: loss after tax of £2,009,000) and a weighted average number of shares of 779,178,719 (2019: 772,439,898). Further split between continued and discontinued operations is shown in the table below.

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

5. Discontinued Operations

Discontinued operations includes the business activity of TPG Engineering Limited prior to the disposal of the company from the Group on 29 October 2020 for nominal cash consideration of £1.00.

Financial performance and cash flow information for discontinued operations:

The post-tax gain/loss on disposal of TPG Engineering Limited was determined as follows

The carrying value of trade and other receivables is considered a reasonable approximation of fair value due to their short-term nature.

Impairment of trade receivables from contracts with customers

The ageing of past due but not impaired receivables is:

The average age of receivables is 29 days (2019: 26 days).

The Group's customers are predominantly government agencies and ministries, or blue-chip companies many of whose underlying customers are also government agencies. Management's assessment of the 12 month expected credit losses on trade receivables from these customers is based on past experience and future expectations of credit losses. The increase in over 61-90 days debtors (shown above) is considered low risk. These debtors have been assessed as part of the period end assessment of expected credit losses.

Given the diverse nature of the activities of each trading entity within the Group, it has been considered appropriate to assess each individual entity's receivables separately to determine whether any expected credit losses should be recognised. Most receivables are considered to be recoverable due to the Group's history of low levels of credit losses incurred (total credit losses for the three year period from 2017 to 2019 is £34,000 on turnover of £101,100,000), knowledge of and continued dialogue with the customers, assessment of changes in their credit risk, and knowledge of the impact of current economic conditions on these customers. Economic conditions considered includes the impact of COVID-19, Brexit and factors specifically affecting a customer's industry, such as Government funding levels in the case of government agencies. This assessment has been confirmed following review of post year end cash received.

The Group does not have a history of significant bad debt, and has identified the following percentages representing the expected credit loss provision utilised in the prior 3 years as a proportion of the total of the balance sheet date debtors from the prior 3 years due within each ageing bucket.

To assess potential credit losses, the Group has assessed each entity individually and recognised expected credit losses where specific knowledge of particular customers suggests it is appropriate to do so. Given the low levels of credit losses which have been historically incurred, the Group does not define customer default based on debtors reaching a defined level of ageing.

Instead regular communication with customers and consideration of the various factors mentioned above will drive the Group's assessment of whether default is likely and an expected credit loss should be recognised.

Modest expected credit losses have been recognised, expensed to the income statement during the 12 months to 31 December 2020. Expected credit losses recognised at the balance sheet date as a percentage of balance sheet gross trade receivables are shown below

At each reporting date, factors considered as part of the assessment of the expected credit loss provision for each entity include historical default rates, current and expected future economic conditions at the time of assessment, changes in credit risk, as well as review of cash receipts received post period end. Changes in the ECL provision are recognised in profit or loss.

The movement in the expected credit loss provision is shown in the following table:

To assess potential credit losses impacting on other receivables, the Group has assessed the balances within each entity individually. This is deemed appropriate given the exceptional nature of such balances. Expected credit losses would be recognised where specific knowledge of particular debtors suggests it is appropriate to do so. No expected credit losses have been recognised on other receivables at 31 December 2020 (2019: nil).

In 2020 rent deposits of £48,000 (2019: £67,000) due after more than one year are included within other debtors.

Trade receivables disclosed above are classified as assets measured at amortised cost. Credit terms are negotiated as part of each individual contract. No interest is charged on the receivables from the date of the invoice. The Group does not hold any collateral or other credit enhancements over any of its trade receivables nor does it have a legal right of offset against any amounts owed by the Group to the counterparty.

The amounts due by subsidiary undertakings to the Parent Company do not give rise to any material expected credit loss.

Osprey Consulting Services Limited

On 25 August 2020, the Group through its parent company TP Group plc, acquired 100% of the issued share capital of Osprey Consulting Services Limited ("Osprey") on a cash free, debt free, normalised working capital basis, for an initial consideration of £2,545,000. In addition, a maximum of £1,250.000 may also be payable in cash on delivery by the vendors of certain transition activities within one year following completion of the acquisition. This amount is considered a contingent consideration and will be expensed in the Group's income statement over the 12 months to 25 August 2021. Osprey was a privately-owned consultancy company whose business centres around safety and mission critical air space management and regulation in the defence, space and emerging urban air mobility markets.

The principal reason for the acquisition of Osprey is to bring into the Group substantial market presence in both the military and civil aerospace sectors, growth potential in the management of unmanned aircraft, aerial activities around renewable energy installations and a growing space launch capability in the UK.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows: