TIDMTPG
RNS Number : 5462N
TP Group PLC
21 May 2020
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 .
21 May 2020
TP Group plc
("TP Group" or the "Company" or the "Group")
Full Year results for the year ending 31 December 2019
TP Group (AIM: TPG), the providers of mission-critical
consulting, software and bespoke engineering solutions for a more
secure world, announces its audited results for the year ended 31
December 2019.
Financial and operational highlights
Revenue up 49% to GBP58.2m (2018: GBP39.0m)
-- Organic growth of 16% (GBP6.2m), with Technology &
Engineering up 10%, and Consulting & Programme Services up
29%
-- Added GBP13.0m revenues, or 33% growth, from the acquisition of Westek(1) and Sapienza(2)
Adjusted operating profit(3) up 48% to GBP5.9m (2018: GBP4.0m)
-- Organic growth of GBP1.1m (c. 28%)
-- Additional GBP0.8m of profit contributed by acquired companies, Westek and Sapienza
Operating losses(3) GBP1.7m (2018: nil), include:
-- Acquisition-related expenses of GBP1.5m (2018: GBP0.7m)
-- Earn-out provision of GBP1.6m (2018: GBP0.6m) relating to Westek and Sapienza
Closing cash of GBP6.6m (2018: GBP22.4m)
-- GBP7.7m cash used in the acquisition of Sapienza
-- Settlement of final earn-out payments, GBP2.0m for Polaris(4) and Westek
-- GBP1.5m invested in AI technologies, business systems and infrastructure
Order intake GBP73.8m (2018: GBP43.2m)
-- Organic growth of GBP8.4m (c. 20%)
-- Opening order book of GBP15.0m acquired with Sapienza
-- Additional GBP7.2m new orders post- acquisition from Westek and Sapienza
Group closing order book up 32% to GBP63.8m (2018: GBP48.3m)
-- Organic growth of GBP5.5m
-- Includes additional GBP10.0m from Sapienza
Throughout the COVID-19 outbreak we have continued to operate at
a sustainable level across the whole business. Our approach has
focused on:
-- protecting the health and wellbeing of staff and their families
-- sustaining the level of business activity on customer projects
-- working with customers on renewals, extensions and new business opportunities
-- managing investment in operating expenses and capital equipment where necessary
-- maintaining a healthy cash balance supplemented by a new GBP7m banking facility
-- protecting the long-term value of the business for investors
We participate in global multi-year strategic programmes with
government and institutional customers committed to supporting this
work. This provides assurance of our business continuity. For
further details, please refer to the CFO's report below.
Despite the resilience of the business, it was deemed prudent to
withdraw market forecasts given the highly uncertain impacts of
COVID-19.
Phil Cartmell, Chief Executive Officer of TP Group,
commented:
"I am very pleased with TP Group's performance in 2019, in which
we continued to deliver excellent service to our growing global
customer base, achieving our financial and strategic objectives and
investing in future growth. The core business demonstrated its
strength with good organic growth and we welcomed the Sapienza team
to the Group to cement our role in the space industry and build our
presence across Europe.
"More recently, I have been especially impressed by the
resilience and commitment of our team at all levels of the business
in response to the COVID-19 outbreak. The safety and wellbeing of
our staff and their families is of prime importance, and the team
has adapted quickly, constructively and creatively to the
challenges of new working arrangements whilst keeping safe, their
projects on track and supporting our customers, wherever they are
in the world.
"TP Group's diverse, resilient business model and financial
strength places us in a very strong position to navigate through
this period of uncertainty. The Group continues to have the value
streams, opportunities and capability for further development as a
global services and technologies business."
Additional narrative to the results will be published in the
Group's Annual Report and Accounts that will be available in due
course on the Company website at:
https://www.tpgroup.uk.com/investors/results-reports-presentations/
(1) Westek Technology Ltd. acquired November 2018
(2) Sapienza Consulting Holdings B.V. acquired April 2019
(3) Refer to the CFO Report section "Adjusted operating profit" for the bridge from operating
loss to adjusted operating profit
(4) Polaris Consulting Holdings Ltd. acquired December 2017
For further information, please contact:
TP Group plc Tel: 01753 285 810
Phil Cartmell, Chief Executive
Officer
Derren Stroud, Chief Financial
Officer
www.tpgroup.uk.com
Cenkos Securities plc Tel: 020 7397 8980
Stephen Keys / Callum Davidson
/ Mark Connelly
www.cenkos.com
Vigo Communications Tel: 020 7390 0230
Jeremy Garcia / Charlie Neish
www.vigocomms.com
Notes to Editors
TP Group is a global leader in consulting, digital solutions and
engineering services across the full lifecycle of defence, space
and energy programmes. With world class innovation, expertise and
experience, TP Group employs approximately 450 people in six
countries, with customers in more than 30 countries. The Company's
shares have been traded on AIM since July 2001.
Chairman's statement
During 2019 we have made significant progress. Our business is
now much more diversified and balanced, both geographically and in
the markets we serve. This gives us a more robust foundation in
uncertain times, and a solid platform from which to deliver
growth.
We outlined the Group's strategy over the last few years in last
year's Report. I am pleased to note that under our excellent
leadership team the business has executed this strategy with focus
and commitment.
We continue to drive the Group strategy by focusing on:
-- Organic growth : Our business development teams are winning
more new contracts and deepening our existing relationships with
key customers. We continue to invest in capability to maintain
competitive leadership and grow our core business.
-- Technology transfer : Our proven technologies and equipment
can be extended into new uses with careful investment. This becomes
even more valuable when we combine the separate assets of our
expanding Group and offer them in combination to meet new
requirements.
-- Acquisitive expansion : We will seek to make acquisitions
where the strategic fit is complementary to our existing activities
and/or will allow us to provide a more extensive and integrated
offering to existing and new customers.
The success of this approach is demonstrated by GBP19.2m revenue
growth in the year, of which 32% was through organic expansion of
the core business, with the remaining 68% added through our
acquired businesses.
We have expanded our operating footprint in Europe this year and
our goal is to extend this even further to become a truly global
company.
Governance
The Board has continued to drive transparency across the
business with a focus on financial robustness. This is demonstrated
by our adoption of the QCA Corporate Governance Code to operate
effectively within the current uncertain and evolving business
landscape.
We have also given priority to ensuring that the best available
talent is attracted to, retained and developed inside the
business.
People
We are committed to a performance culture, with high levels of
employee engagement across all our locations. Headcount has grown
steadily in all areas of the business, reflecting the Group's
growth in 2019.
We take great care to make TP Group a safe and attractive place
to work:
-- leadership development has been a priority with both
individuals and the team undertaking several training and
development programmes;
-- we invested in almost 1,000 training days in the year;
-- we are aiming to have 20 apprentices across the Group next year, up from five in 2019;
-- in 2019, we invested in an employee wellbeing programme and
trained 12 people as specialist responders; and
-- put in place suitable working patterns and home-working
arrangements to sustain activity through the COVID-19 outbreak.
We believe our investment in employee welfare, future talent and
career development has created a collaborative and positive working
environment. Our team members now have an average length of service
across the Group of more than five years, with 14 employees having
more than 25 years' service.
I would like to take this opportunity to thank all our employees
for a very strong performance this year. In particular, the Board
wishes to record its appreciation for the performance of the
executive team, led by the Chief Executive Officer, Phil
Cartmell.
Outlook
In the last four years we have made progress technically,
commercially and now geographically. We have also built a very
strong executive leadership and management team to drive us
forward. There are great opportunities ahead of us to apply our
technologies and skills in new and exciting areas.
Our priority in these challenging times is to remain financially
prudent and build a robust financial base. This has been
demonstrated through our responses to COVID-19 where we continue to
operate in a safe manner and at a sustainable level across both the
CaPS and T&E business streams to protect the health and welfare
of our staff and the interests of all our stakeholders. We will
continue to focus on building a successful business which is
attractive to customers, employees and investors. We will also
carefully seek acquisitions.
With the solid foundations we have built, and the talent
available to us, I am very confident in the prospects for the Group
for the year ahead and beyond.
Chief Executive's statement
I am very pleased to look back on another excellent year of
progress for TP Group. We have grown the business by almost 50%
over its 2018 revenues and converted that into Adjusted Operating
Profit, which is up 48%. This is the fourth consecutive year of
growth and we generated almost three times our Group revenues of
2015.
We now offer a broader technology and services proposition and
are significantly more diversified geographically. This was a
reflection of the substantial organic growth in the Group's core
business, as well as carefully selected acquisitions that have
taken us into new markets. These add value today and prepare us
well for future expansion.
We are, however, mindful of current circumstances in relation to
COVID-19 and the challenges it presents for our business, the
people within it and our plans for the future.
Strategy
We set out our strategy several years ago and have committed to
it fully. We are now seeing consistent growth and value creation as
a result.
Our clear focus is on the strength of our technologies and
services, our access to high-value market sectors and the expansion
of our geographic reach. We have invested in our core business to
provide solid foundations and took an entrepreneurial approach to
acquisitions and partnerships to make rapid progress where
opportunities arise.
Acquisitions and progress against strategic objectives
During the year, the Group took a big step forward with the
acquisition of Sapienza Consulting Holding B.V.. This group of
privately held companies provided us with a substantial presence in
the European space and defence sectors, new service and software
offerings and a mature footprint across six European countries.
With that acquisition we have significantly increased the
Group's capabilities and achieved a more balanced business in terms
of geography, market sectors served, and services offered. As ever,
our integration and cross-selling potential grows over time and we
are seeing this with Sapienza's excellent project management
software suite, ECLIPSE. This software originated in the space
sector and is now being picked up across TP Group's other customers
in the defence and energy sectors.
We will not stop there and continue to target advanced
technologies and services that are incremental to our position and
that will give us greater access to higher-value markets.
Organic growth remains important, and we will continue to
develop the capabilities and assets we have. As the acquired
companies join the Group, we have great potential to link them
together and take them to places that they could not reach alone.
This is the power of our approach and I am pleased to see it
delivering as it has in 2019.
Competitive leadership
TP Group succeeds by increasing our clients' performance through
the intelligent use of technology and information. Across the Group
we are seeing an increasing demand for integrated solutions that
combine software and systems (the technologies) with the actions of
skilled and experienced people (the services) to deliver something
that can be relied upon when it really matters. We see this as a
differentiating requirement for our support that strengthens our
competitive position.
Historically, TP Group has worked on physical systems that must
work well and reliably in difficult or harsh environments.
Increasingly volatile information and communications environments
have created new challenges for our customers, and so our
consulting-led approach becomes more relevant. We bring experience,
technical skills, creativity and flexibility to guide our customers
towards a suitable solution, confident that safety and performance
can be assured.
Consulting and technology support capabilities were demonstrated
this year by the award of contracts under the Skynet satellite
programme where TP Group consultants are helping to guide the
future of military communications.
Services
Our services businesses have become established as key providers
of consultancy services and methods that accelerate and assure our
customers' projects. Domain experience and insight, plus leadership
in specialist disciplines such as cost engineering and project
assurance, are important competitive advantages. These are key
factors in winning new business and in extending our relationships
into subsequent phases of major programmes that generate long-term
value for the Group.
We have framework agreements in place with the UK Ministry of
Defence, the European Space Agency and two Naval Design
Partnerships. We use these as pathways to valuable projects, and
through these we have become key contributors to the UK military
satellite programme Skynet, and the Army's end-to-end
communications system LE-TacCIS. As a result, the Consulting &
Programme Services business more than doubled its revenues in 2019
and is well placed to continue this growth in the coming years.
Technology
We have set out on a development path that will involve internal
investment in software and capabilities, alongside customer-funded
projects, to bring technology solutions to maturity as quickly as
possible to capitalise on market opportunities.
"Big data" environments open many new opportunities for
communications, digital transformation services, modelling and
simulation, and AI. We are already active in data and
communications management for defence clients like the British Army
and the Skynet satellite communications programme. AI and Machine
Learning expertise came with the Polaris acquisition in 2017, and
rugged IT for deployed computing came through the 2018 Westek
acquisition. Combining these forms the core of future diverse,
integrated and highly valuable solutions, and shows how we can
bring solution components together to form bigger and more
comprehensive offers to our customers.
Of course, it does not have to stop there, and options are
available to extend the proposition to include sensors and data
capture, other software services and systems including simulation
and emulation and onward transmission through 5G and other
channels. This technology horizon means that we stand on the brink
of a very exciting period for the Group.
The growing portfolio of technologies has led us to create a
centre of excellence for technology development that we believe
will be a focal point for innovation across the Group.
Engineering
Our engineering activity is differentiated by our unrelenting
focus on the quality and reliability of the solutions we deliver.
This was demonstrated by the Group's nuclear condenser work with GE
Baker Hughes. The first contract of GBP1.6m was awarded in 2016,
followed by a second contract received in 2019 for the balance of
the programme, valued at GBP6.4m to be delivered by 2023.
Similarly, we started the year with a follow-on order for carbon
dioxide equipment, a key part of the habitable environments we
support all around the world, which was the third in an ongoing
multi-unit programme.
Contracts like these are key to securing the business with
long-term and high-value relationships that offer greater
confidence in planning and visibility of future performance.
Geographic expansion
TP Group has always looked for market opportunities beyond our
UK origins. We are key suppliers to maritime programmes in Europe,
Australia and Asia, and support energy markets in the Gulf states
and elsewhere.
We have historically done this through partnerships and agency
agreements, and, as we enter the next phase of our growth plan, it
becomes necessary to have a more direct presence in our target
markets. The acquisition of Sapienza has immediately extended our
European base and we have committed to taking this further in
France to be part of their growing aerospace and defence
activities. We now have a national office in Toulouse, with a local
leadership team operating as a new TP Group subsidiary to
capitalise on the potential in that country.
The Sapienza acquisition also provided us with local presence in
other European countries through which we can offer the wider
capabilities of the Group. Business development discussions have
accelerated in Belgium and Germany and we look forward to building
future business relationships in those locations.
The United States is a key target for the Group, and we have
spent a significant amount of time researching our opportunities
and options. We have incorporated a subsidiary company in the US as
a base from which to operate, and we intend to move this forward in
2020 to access the significant opportunities in the space, security
and energy sectors that have opened up for us. In the defence
sector particularly, there are regulatory matters that must be
navigated, so we are proceeding carefully to ensure we can achieve
the best possible outcome.
Organisation
As we have grown, the Board has looked carefully at the way in
which it operates the business in order to understand strengths,
weaknesses and areas for improvement. As a result, the Group will
be making some improvements to its operational structures and
methods. These range from relatively simple steps that bring sales
and delivery teams closer together to maximise efficiencies and
conversion of opportunities to contracts, to changes in management
reporting lines that will simplify the business and better prepare
us for future growth.
These structural improvements will allow us to employ a more
country-based approach, where local management has accountability
for business performance and a small central team provides support,
consistency of methods, and a hub into which future acquisitions or
partners can be joined without disrupting the day-to-day operations
of the business.
The central team will also be able to plan investment and manage
strategic development projects within a governance framework that
allows us to balance effective business performance with a true
entrepreneurial approach to our growth ambitions.
Investing in people
The Group now employs almost 450 people and we take that
responsibility very seriously. Our recruitment processes have been
streamlined to bring people into the business smoothly and ensure
they are productive quickly. Our culture, benefits and training
programmes have been overhauled to make TP Group an attractive
place to work, and we aim to retain staff through the promotion of
career development and appointments to senior positions from within
the team wherever possible.
Our people are clearly key to our success, and through the
current Covid-19 outbreak we have taken extensive steps to support
their physical and mental health and wellbeing whilst supporting
our customers, maintaining our business activities and contributing
to the overall economy.
Outlook
We have come a long way in the last few years and have been
careful to buy, integrate and manage our businesses in order to
build a solid foundation, and enable ambitious future projects. We
have the culture, the resources and the team to look outward whilst
the core business performs well and without distraction. The
strength of our people, our customers and long-term contract
positions places us very well to manage the uncertainties arising
from the COVID-19 outbreak.
I believe that the next few years will be notably exciting for
TP Group, and I look forward to reporting again on our progress as
we expand the business further.
CFO's financial and operational review
Group Key Performance Indicators 2019 2018 Change
GBP'm GBP'm GBP'm
--------------------------------------- ------ ------ -------
Order intake 73.8 43.2 30.6
Closing order book 63.8 48.3 15.5
Revenue 58.2 39.0 19.2
Gross profit % 29% 29% -
Adjusted operating profit 5.9 4.0 1.9
Operating loss (1.7) 0.0 (1.7)
Cash 6.6 22.4 15.9
Closing order book by business stream 2019 2018 Change
GBP'm GBP'm GBP'm
--------------------------------------- ------ ------ -------
T&E 46.4 42.3 4.1
CaPS 17.4 6.0 11.4
Group closing order book 63.8 48.3 15.5
Revenue by business stream 2019 2018 Change
GBP'm GBP'm GBP'm
--------------------------------------- ------ ------ -------
T&E 33.7 27.7 6.0
CaPS 24.5 11.3 13.2
Group revenue 58.2 39.0 19.2
Adjusted operating profit(1) by 2019 2018 Change
business stream
GBP'm GBP'm GBP'm
--------------------------------------- ------ ------ -------
T&E 5.7 4.5 1.2
CaPS 1.4 0.6 0.8
Central unallocated costs (1.2) (1.1) (0.1)
Adjusted Group operating profit 5.9 4.0 1.9
(1) Refer to the CFO Report section "Adjusted operating profit"
for the bridge from operating loss to adjusted operating profit
We have delivered strongly against our KPIs, both organically
and through acquisition.
In concluding the Sapienza acquisition, we have established a
pan-European footprint which has doubled the size of our consulting
business and provided us with routes to future business across
Europe. The engineering side of the business has also grown, and
with Westek now firmly on board, we anticipate significant further
growth in this area.
We continue to invest across the business, through acquisition,
capital assets and operational resources to deliver on our
strategy.
Operating Results
Order book
The Group's closing order book increased by 32% to GBP63.8m
(2018: GBP48.3m). GBP5.5m (c.11%) was secured through organic
growth and the remaining GBP10.0m was from Sapienza.
Organic growth was achieved through a balanced approach to
business development across all our sectors. Significant long-term
contracts closed in the year included:
-- a contract worth approximately GBP16.9m with a leading UK
defence company, to be completed by late 2021, providing advanced
packaged equipment;
-- an order worth GBP6.4m over four years with Baker Hughes (a
GE company) within the nuclear sector;
-- GBP2.6m of new and follow-on consultancy orders from the Ministry of Defence;
-- EUR2.2m software license agreement for three years with the European Space Agency; and
-- a one-year, GBP1.4m consulting agreement for the Land
Environment Tactical Communication and Information Systems ("LE
TacCIS") programme.
2019 was yet another record high in the Group's closing order
book, reflecting the strong market demand for our technologies and
services, matched by our investments in business development
activities and updated propositions.
Order intake
The 2019 order intake increased by GBP30.6m (71%) year-on-year
to GBP73.8m. This includes the GBP15.0m opening order book value
that was acquired with the Sapienza transaction. An additional
GBP7.2m of new orders were secured post acquisition by Westek and
Sapienza. Excluding these, organic order intake growth was 20%.
Revenue
Revenue increased by 49% to GBP58.2m (2018: GBP39.0m), with
growth delivered across the Group. The existing business grew by
GBP6.2m (16%), with the balance of GBP13.0m coming from a full
year's contribution from Westek, and from Sapienza since its
acquisition.
A strong opening order book, coupled with good order capture in
the first half of the year and efficient operational execution, has
delivered another record year of revenue.
In line with our strategy we have diversified and developed both
geographically and across our markets.
All market sectors have grown revenue year-on-year:
-- GBP10.5m added in the space sector to GBP12.1m (2018: GBP1.6m)
-- GBP7.5m increase in the defence sector to GBP37.3m (2018: GBP29.8m)
-- GBP1.2m additional in the energy sector, rising to GBP8.8m (2018: GBP7.6m)
International expansion was achieved as well as domestic
growth:
-- Europe up GBP11.7m to GBP13.6m
-- Rest of World up GBP2.3m to GBP5.5m
-- UK up GBP5.2m from prior year to GBP39.1m
Operating loss
The Group has moved from a break-even position in 2018 to record
an operating loss of GBP1.7m in 2019. This was driven largely by
the impact of acquisition-related costs that accounting standards
require to be written off to profit and loss in the period and
masks the strong increase in the underlying profitability of the
business. Acquisition costs expensed during the year include:
-- transactional costs of GBP1.5m (2018: GBP0.7m) related to acquisitions; and
-- earn-out provision of GBP1.6m (2018: GBP0.6m) relating to Westek, Sapienza and Polaris.
Excluding these acquisition-related costs, the Group would have
made an operating profit of GBP1.4m (2018: GBP1.3m).
Adjusted operating profit
The directors of the Company 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, non-controlling interests 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 2018. Refer
below for details of the reconciliation of adjusted operating
profit to operating loss.
2019 2018
GBP'm GBP'm
Operating loss (1.7) (0.0)
Depreciation, amortisation and impairment 3.9 2.4
Acquisition-related costs 1.5 0.6
Non-operating costs 0.3 0.2
Earn-out payments 1.6 0.6
Share-based payments 0.2 0.2
----------------------------------------------------- ------- -------
Adjusted operating profit including non-controlling
interest 5.8 4.0
Non-controlling interest 0.1 0.0
----------------------------------------------------- ------- -------
Adjusted operating profit 5.9 4.0
===================================================== ======= =======
Adjusted operating profit increased by 48% to GBP5.9m (2018:
GBP4.0m). Profit from the existing business grew by 28%, or
GBP1.1m, with the balance of GBP0.7m improvement coming from the
acquisitions of Westek and Sapienza.
The adjusted operating profit percentage (as a percentage of
revenue) is 10.1% (2018 10.2%).
This reflects:
-- the stable gross profit margin percentage of 29% (2018: 29%)
which was derived from volume and efficiency improvements in our
manufacturing facilities, offset by a change in the product and
services mix through the acquisition of Sapienza; and
-- further investment in operating expenses, including business
development and marketing, proportionate to the prior year's
adjusted operating profit percentage.
Cash and bank balances
Year-end Group cash of GBP6.6m (2018: GBP22.4m), was lower than
the prior year. The key movements included:
-- the cash element of the acquisition of Sapienza of GBP7.7m;
-- the settlement of final earn-out payments of GBP2.0m combined for Polaris and Westek;
-- GBP1.5m invested in business systems, infrastructure, equipment and software development; and
-- working capital consumption of GBP4.8m arising from the
timing of material payments due from two customers at the year-end
that were received in early January 2020, and the over-performance
in cash collection that contributed to a GBP3.4m inflow achieved in
2018.
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
In May 2019, the Group acquired Sapienza Consulting Holdings
B.V. for an initial cash consideration of EUR10.0m plus EUR1.5m by
way of the issue of 20,612,865 new ordinary shares and a possible
earn-out of up to EUR2.0m over the next two years. The deal was
concluded on a debt-free, cash-free, normalised working capital
basis. Sapienza is a provider of highly complex solutions and
skills to the European space and defence markets. With such
specialist, technical services and skills, Sapienza is a highly
complementary business for TP Group, with significant cross-selling
opportunities. They have facilities in six European countries,
which immediately expands the Group's geographic presence,
improving proximity to existing customers and providing access to a
new international community. Once fully integrated, we believe
Sapienza will help further drive the Group's participation in
future European and global space programmes.
The Group incurred GBP1.4m of transactional costs for
acquisitions (2018: GBP0.7m) predominantly relating to the Sapienza
transaction noted above. These were charged to the Statement of
Comprehensive Income in the year.
Final earn-out payments of GBP2.0m have been made in the year
relating to the acquisitions of Polaris and Westek in prior
years.
The Group continues to invest in its facilities, equipment and
technologies (principally the North* Artificial Intelligence
toolset and the ECLIPSE project management software) to build
capability and develop our propositions. Across the Group, GBP1.5m
was invested in 2019 (2018: GBP0.9m).
On 1 July 2019, the Group invested c. EUR0.7m in the AI company
Lift BV ("Lift"). Lift is based in Den Haag in the Netherlands and
has developed an AI system to support rapid resourcing of
large-scale technical projects.
Sapienza had initially acquired a c. 33% stake in Lift in May
2017, as part of their strategy to invest in complementary
technology partners. This follow-on investment takes the Group's
holding in Lift to 69%.
Lift is highly active in a range of sectors including defence,
aerospace, security, government, medical and commercial, and we
believe that the Group will be able to develop a number of highly
complementary growth opportunities for the Lift technologies in our
wider operations.
Non-operating items and earn-out costs
During the year, the Group incurred one-off non-operating and
earn-out costs of GBP2.0m (2018: GBP0.8m). These relate to the
business transformation actions required by the strategic plan,
including employment-related restructuring costs (GBP0.4m), and
earn-out provisions relating to Polaris, Westek and Sapienza
(GBP1.6m).
Finance costs
Finance costs of GBP0.3m (2018: GBP0.1m) were incurred,
predominantly relating to fees in relation to investments in the
Manchester facility and lease interest charges following the
adoption of IFRS 16 in 2018.
Taxation
The tax charge for the financial year to 31 December 2019 is
less than GBP0.1m.
The Group expects to incur in total cash tax payments of c.
GBP0.2m net of R&D tax credits for the 2019 financial year
(2018: GBP0.2m).
Results and dividends
The directors continually evaluate Group performance, and do not
currently recommend the payment of a dividend (2018: GBPnil).
Brexit
As negotiations progress on the future trading relationships
between the UK and the EU, the Group has looked at the potential
impacts on the business in the event of no deal being agreed and
reversion to World Trade Organisation ("WTO") rules. We are
monitoring the negotiations and will consider the impact of any
alternative scenarios as they emerge.
Our strategy is to increase our presence outside the UK to
enable contracts to be placed with TP Group companies local to our
customers. This country-based model allows us to act as a global
enterprise to best mitigate any possible impacts of Brexit.
Initially, the acquisition of Sapienza has provided an operating
footprint in Europe to take local contracts in the EU, as well as
substantially increasing our revenues in the global space sector.
We are also in the process of establishing an operational business
in France and seeking to widen our physical footprint of operations
further within and outside of Europe that will help offset the
potential impact of Brexit.
The Group has significant revenue that originates in the UK
relating to the defence market, and therefore ultimately to UK
Government spending. The outcome of trade negotiations may have a
knock-on impact on the Group if it leads to a change in Government
decisions on current and future programmes.
Whilst we believe our exposure to be low, we are actively
managing our supply chain through a number of risk mitigation
approaches. Our main risk is in the supply of raw materials, most
notably steel, from the EU, where we are investigating alternate
sources as back-up. However, in any event, the nature of the goods
means that under WTO rules, we expect them to attract low levels of
tariffs (c. 2%). Furthermore, the nature of our projects means that
the business has excellent visibility of when these goods are
required and can plan receipts accordingly to tie into customer
build programmes.
Coronavirus
The advent of Coronavirus in recent months has placed a number
of challenges before the business.
The Group is approaching this situation on a number of fronts
to:
-- protect the health and wellbeing of staff and their families;
-- sustain the level of business activity on customer projects;
-- continue dialogue with customers regarding renewals,
extensions and new business opportunities; and
-- manage investment in operating expenses and capital equipment where necessary.
The business is robust as it participates in several long-term
strategic government and institutional programmes in the UK and
overseas. More than 80% of the year-end order book can be
ultimately traced to programmes from government and international
institutions and major prime contractors. Many of these
organisations have publicly stated their intentions to continue the
pursuit of current programmes and ensure continuity of payments and
integrity of the supply chains through this period, which is
proving to be the case. As such, a large percentage of our order
book and pipeline of opportunities are regarded as secure.
The Group's profile further protects us through the spread of
our business activities across multiple sectors, and the global
nature of the major industrial businesses we work with that we
expect to continue operating through such events.
The Group maintains a business continuity plan that includes
several relevant features:
-- flexible working practices and systems that support the
ability to work from home in many cases;
-- employee outreach initiatives to support as far as possible
the health, wellbeing and safety of our staff;
-- flexible shift patterns within the manufacturing facilities
to accommodate staggered activities and appropriate distancing
within the facilities; and
-- communications processes to facilitate and co-ordinate the
running of the business and the interaction with key
stakeholders.
The business is further insulated through:
-- a liquid cash balance that is retained predominantly within the UK operating businesses;
-- a banking facility of GBP7.0 m available to supplement our existing cash balance; and
-- our ability to flex our plans on operating expenses and capital investment.
As of 20 May 2020 the banking facility has been fully drawn to
insulate the business against any potential COVID-19 impact.
However, it must be noted that the Group's current cash flow
forecast indicates that none of these funds will be required to
support the Group's ongoing operational activities.
Auditor
As part of our continued drive to adopt the highest possible
standards of corporate governance, the directors undertook a
competitive tender process for the 31 December 2019 year-end audit.
The outcome of this process was the appointment of RSM UK Audit LLP
as auditors.
Going concern
The directors, having considered various scenarios for the
business over the foreseeable future, including the potential
impact of COVID-19, are satisfied that it is appropriate to prepare
the financial statements for the group on a going concern
basis.
In reaching this conclusion the directors have undertaken a
sensitivity analysis to reflect the potential impact of COVID-19,
over a period of at least twelve months from the date of the
approval of these financial statements, on our forecasts. This
analysis has been based upon market conditions and other received
intelligence, and the current operational conditions within the
business. Possible scenarios include:
-- execution of the 2020 budget as planned through managed operating procedures;
-- zero revenue growth in 2020 but continued investment in
capital equipment, technologies and operating expenses in line with
the 2020 budget; and
-- reduced capacity or capability which impairs revenues across
the business by 10% against prior year for a period of six months,
and reduced investment in capital equipment, technologies and
operating expenses.
In the last and most cautious of these scenarios, the Group has
secured revenue cover through its February 2020 order book of c.
80% of the impaired 2020 revenues and would carry c. GBP33m of this
order book forward into 2021. This provides considerable comfort in
the Group's ability to execute this scenario.
All of these scenarios take into account the Group's existing
cash resources of GBP6.6m, which along with the bank financing
facility of GBP7.0m established on 3 March 2020, provides
sufficient insulation against any reasonably plausible downside
scenarios and risks.
Brexit has also been considered as part of this review, and
whilst the decision to leave the EU has now been confirmed, the
ongoing negotiations related to a future trade agreement may lead
to some disruption in the short term on some TP Group projects.
However, the Group has limited concern that this could impact on
its ability to deliver against its forecast targets, based on:
-- the quality of TP Group's order book and the programmes it is
involved in (both globally and in the UK);
-- the acquired Sapienza business, which provides a European
footprint to offset some of the risk factors;
-- the mitigation actions the business is putting in place; and
-- the limited impact we expect Brexit to have on the defence
market (both in the UK and in the EU).
Through all of our analysis, the directors have concluded that
the Group is well placed to manage the business as a going concern
through the foreseeable future.
Consolidated statement of comprehensive income
For the year ended 31 December 2019
2019 2018
Note GBP'000 GBP'000
Revenue 2 58,218 39,037
Cost of sales (41,284) (27,806)
============================================== ===== ========= =========
Gross profit 16,934 11,231
Administrative expenses (18,633) (11,261)
============================================== ===== ========= =========
Operating loss 3 (1,699) (30)
Adjusted operating profit including
non-controlling interest 2 5,801 3,974
Depreciation, amortisation and impairment 2 (3,858) (2,377)
Acquisition-related costs 2 (1,527) (657)
Non-operating costs 2 (360) (192)
Share based payments 2 (176) (165)
Movement in expected earn-out payments 2 (1,579) (613)
Operating loss (1,699) (30)
----- ---------
Net finance cost (264) (80)
============================================== ===== ========= =========
Loss before taxation (1,963) (110)
Taxation (charge) / credit (46) 285
============================================== ===== ========= =========
(Loss)/profit after taxation for the
year (2,009) 175
============================================== ===== ========= =========
Attributable to:
============================================== ===== ========= =========
Equity holders of the parent company (1,927) 175
============================================== ===== ========= =========
Non-controlling interest (82) -
============================================== ===== ========= =========
Total (loss) / profit for the year (2,009) 175
============================================== ===== ========= =========
(Loss)/earnings per share (pence per
share)
Basic (loss)/earnings per share (pence
per share) (0.26) 0.02
Diluted (loss)/earnings per share
(pence per share) (0.26) 0.02
============================================== ===== ========= =========
(Loss)/profit for the year (2,009) 175
Other comprehensive income/(expense):
items that may be subsequently recycled
to the income statement:
Foreign exchange losses on translation of foreign (4) -
operations
----------------------------------------------------- --------- ---------
Total comprehensive (expense)/income
for the year (2,013) 175
============================================== ===== ========= =========
Attributable to:
Equity holders of the parent company (1,931) 175
Non-controlling interest (82) -
---------------------------------------------- ----- --------- ---------
(2,013) 175
============================================== ===== ========= =========
All income relates to continuing activities.
Consolidated and Parent Company statements of financial
position
As at 31 December 2019
Group Parent Company
2019 2018 2019 2018
Note GBP'000 GBP'000 GBP'000 GBP'000
============================= ===== ============= ============= ======== ========
Assets
Non-current assets
Goodwill 9,161 5,289 - -
Other intangible assets 19,466 12,800 141 85
Property, plant and
equipment 2,073 1,401 157 46
Right-of-use assets 5,808 5,423 363 94
Investments - - 33,874 18,806
Amounts owed by EBT - - 105 95
----------------------------- ----- ------------- ------------- -------- --------
36,508 24,913 34,640 19,126
============================= ===== ============= ============= ======== ========
Current assets
Inventories 2,036 2,727 - -
Trade and other receivables 13,031 4,295 1,200 4,823
Amounts due from contract
customers 10,042 5,596 - -
Taxation recoverable - 87 - -
Cash and bank balances 5 6,568 22,413 144 10,505
============================= ===== ============= ============= ======== ========
31,677 35,118 1,344 15,328
============================= ===== ============= ============= ======== ========
Total assets 68,185 60,031 35,984 34,454
============================= ===== ============= ============= ======== ========
Liabilities
Current liabilities
Trade and other payables (11,605) (10,614) (7,152) (8,312)
Amounts due to contract
customers (10,228) (4,837) - -
Current tax liabilities (180) - - -
Lease liabilities (1,022) (739) (120) (38)
============================= ===== ============= ============= ======== ========
(23,035) (16,190) (7,272) (8,350)
============================= ===== ============= ============= ======== ========
Non-current liabilities
Trade and other payables (286) - (285) -
Deferred taxation (2,738) (1,648) - -
Lease Liabilities (5,429) (5,198) (272) (59)
Provisions (231) (499) (20) (10)
(8,684) (7,345) (577) (69)
----------------------------- ----- ------------- ------------- -------- --------
Total liabilities (31,719) (23,535) (7,849) (8,419)
============================= ===== ============= ============= ======== ========
Net assets 36,466 36,496 28,135 26,035
============================= ===== ============= ============= ======== ========
Equity
Share capital 7,792 7,586 7,792 7,586
Share premium 18,529 17,438 18,529 17,438
Own shares held by the
EBT (561) (561) - -
Translation of foreign (4) - - -
operations
Share-based payments
reserve 1,142 1,441 1,142 1,441
Retained earnings 9,140 10,592 672 (430)
Non-controlling interest 428 - - -
----------------------------- ----- ============= ============= ======== ========
Total equity 36,466 36,496 28,135 26,035
============================= ===== ============= ============= ======== ========
Consolidated statement of changes in equity
For the year ended 31 December 2019
Own
shares
held Share- Non-
Share Share by based Translation Retained controlling
capital premium EBT reserve Reserve earnings interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 January 2018 7,586 17,438 (561) 1,553 - 10,882 - 36,898
Profit for
the year and
total comprehensive
income - - - - - 175 - 175
IFRS 16 cumulative
adjustment - - - - - (742) - (742)
Share-based
payments charge - - - 165 - - - 165
Share-based
payments reserves
transfer - - - (277) - 277 - -
---------------------- -------- -------- -------- -------- ------------ --------- ------------ --------
Balance at
31 December
2018 7,586 17,438 (561) 1,441 - 10,592 - 36,496
Loss for the
year - - - - - (1,927) (82) (2,009)
Other comprehensive
loss - - - - (4) - - (4)
---------------------- -------- -------- -------- -------- ------------ --------- ------------ --------
Total comprehensive
loss - - - - (4) (1,927) (82) (2,013)
Shares issued 206 1,091 - - - - - 1,297
Share-based
payments charge - - - 176 - - - 176
Share-based
payments reserves
transfer - - - (475) - 475 - -
Non-controlling
interest on
acquisition
of Lift BV - - - - - - 510 510
Balance at
31 December
2019 7,792 18,529 (561) 1,142 (4) 9,140 428 36,466
Parent Company statement of changes in equity
For the year ended 31 December 2019
Share-based
Share Share payments Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2018 7,586 17,438 1,459 4,165 30,648
Total comprehensive
loss - - - (4,778) (4,778)
Share-based payments
charge - - 165 - 165
Share-based payments
reserves transfer - - (183) 183 -
Balance at 31 December
2018 7,586 17,438 1,441 (430) 26,035
Total comprehensive
profit - - - 627 627
Shares issued 206 1,091 - - 1,297
Share-based payments
charge - - 176 - 176
Share-based payments
reserves transfer - - (475) 475 -
------------------------ -------- -------- ------------ --------- --------
Balance at 31 December
2019 7,792 18,529 1,142 672 28,135
Consolidated and Parent Company statement of cash flows
For the year ended 31 December 2019
Group Parent Company
=================== ===================
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
==================================== ========= ======== ========= ========
Operating activities
(Loss)/profit before taxation (1,963) (110) 782 (5,114)
Adjustments for:
Depreciation, amortisation
and impairment 3,865 2,377 198 193
Finance cost/(income) 264 81 (11) (56)
Share-based payment expense 176 165 176 165
Increase in impairment on
loan to the EBT - - 10 2
Provision against long term
inter-company loan - - - 4,876
Decrease in inventories 691 3,141 - -
(Increase)/decrease in trade
and other receivables (7,086) 1,490 (1,324) (6,100)
Increase/(decrease) in trade
and other payables 1,901 (1,277) 1,127 2,181
(Decrease)/increase in provisions (269) 62 10 97
Dividend received - - (5,000) -
------------------------------------ --------- -------- --------- --------
(2,421) 5,929 (4,032) (3,756)
Taxation paid (412) (211) - -
==================================== ========= ======== ========= ========
Net cash (used in) / generated
from operating activities (2,833) 5,718 (4,032) (3,756)
==================================== ========= ======== ========= ========
Investing activities
Acquisition of subsidiary,
net of cash acquired (8,282) (2,953) (9,002) (3,000)
Acquisition of subsidiary
- payment of earn out (2,000) (300) (2,000) (300)
Interest received 23 60 23 60
Purchase of property, plant
and equipment (932) (864) (174) (39)
Purchase of computer software (556) (79) (97) (35)
Dividend received - - 5,000 -
==================================== ========= ======== ========= ========
Net cash used in investing
activities (11,747) (4,136) (6,250) (3,314)
==================================== ========= ======== ========= ========
Financing activities
Interest payable (286) (254) (11) (4)
Repayment of lease liabilities (981) (846) (68) (38)
==================================== ========= ======== ========= ========
Net cash used in financing
activities (1,267) (1,100) (79) (42)
==================================== ========= ======== ========= ========
Effects of exchange rates 2 - - -
on cash and cash equivalents
==================================== ========= ======== ========= ========
Net (decrease) / increase
in cash and cash equivalents (15,845) 482 (10,361) (7,112)
Cash and cash equivalents
at beginning of year 22,413 21,931 10,505 17,617
Cash and cash equivalents
at end of year 6,568 22,413 144 10,505
==================================== ========= ======== ========= ========
1. Basis of preparation and statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") 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. In preparing the Parent Company financial statements,
the directors have taken advantage of the exemption for disclosures
under paragraphs 17 and 18A of IAS 24, and the requirements in IAS
24 to disclose related party transactions entered into between two
or more members of the Group, provided that the subsidiary is
wholly owned.
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 or
financial assets at fair value through other comprehensive
income.
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.
The Group adopted IFRS 16 early on 1 January 2018 and reflected
its impact in the financial statements for the year ended 31
December 2018.
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 2019. Their adoption has not had any material impact on the
disclosures or on the amounts reported in these financial
statements.
-- IFRIC Interpretation 23: Uncertainty over Income Tax Treatment;
-- Amendments to IFRS 9: Prepayment Features with Negative Compensation;
-- Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
-- Amendments to IAS 28: Long-term interests in associates and joint ventures
-- Annual Improvements 2015-2017 Cycle
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2019 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.
Going concern
The Chief Financial Officer's Review includes a review of going
concern, as well as separate consideration of the impact of Brexit
and the Coronavirus, which has not identified any material impact
on the values of any of the Group's assets or liabilities.
2. Segmental information
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 is
managed through its two reporting segments, Technology &
Engineering ("T&E") and Consulting & Programme Services
("CaPS") which form 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.
2019 2018
GBP'000 GBP'000
============================ ======== ========
Revenue
T&E 33,709 27,766
CaPS 24,509 11,271
============================ ======== ==========
Group revenue 58,218 39,037
Segment operating result
T&E 3,714 2,571
CaPS (487) (484)
Central unallocated costs (4,926) (2,117)
============================ ======== ==========
Group loss from operations (1,699) (30)
Finance cost (264) (80)
============================ ======== ==========
Loss before tax (1,963) (110)
Taxation (charge) / credit (46) 285
---------------------------- -------- ----------
(Loss)/profit after tax (2,009) 175
============================ ======== ==========
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 exceptional items for the
financial year are split between the Group's reportable segments
and central unallocated costs.
T&E CaPS Central unallocated
costs Group
GBP'000 GBP'000 GBP'000 GBP'000
============================ ======== ======== ==================== ========
2019
Segment operating
result 3,714 (487) (4,926) (1,699)
Depreciation, amortisation
and impairment 1,946 1,714 198 3,858
Acquisition-related
costs - - 1,527 1,527
Non-operating costs 66 91 203 360
Share based payments - - 176 176
Movement in expected
earn-out payments - - 1,579 1,579
---------------------------- -------- -------- -------------------- --------
Adjusted operating
profit / (loss)
including non-controlling
interest 5,726 1,318 (1,243) 5,801
Non-controlling
interest - 82 - 82
Adjusted operating
profit / (loss)
(1) 5,726 1,400 (1,243) 5,883
============================ ======== ======== ==================== ========
2018
Segment operating
result 2,571 (484) (2,117) (30)
Depreciation, amortisation
and impairment 1,629 555 193 2,377
Acquisition-related
costs - - 657 657
Non-operating costs 734 104 (646) 192
Share based payments - - 165 165
Movement in expected
earn-out payments - - 613 613
---------------------------- ------ ------ -------- ------
Adjusted operating
profit / (loss)
including non-controlling
interest 4,934 175 (1,135) 3,974
Non-controlling - - - -
interest
---------------------------- ------ ------ -------- ------
Adjusted operating
profit/ (loss) (1) 4,934 175 (1,135) 3,974
============================ ====== ====== ======== ======
(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, non-controlling interest and non-operating
costs. Non-operating costs include GBP253,000 (2018: GBP579,000) 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 2018.
Analysis by geographical destination
The following is an analysis of the Group's revenue from
continuing operations from its products and services:
2019 2018
GBP'000 GBP'000
================================= ======== ========
United Kingdom 39,094 33,979
Europe excluding United Kingdom 13,588 1,868
Asia 2,582 2,729
Middle East 2,521 -
Rest of the World 433 461
================================= ======== ========
Total revenue 58,218 39,037
================================= ======== ========
Revenue from continuing operations from external customers and
non-current assets are all generated from operations in the UK. All
segment assets are located in the UK.
Analysis by type of good or service
2019 2018
GBP'000 GBP'000
=============== ======== ========
Revenue
Engineering 33,709 27,766
Software 1,271 -
Consultancy 23,238 11,271
=============== ======== ========
Total revenue 58,218 39,037
=============== ======== ========
Analysis by timing of revenue recognition
T&E CaPS Total
================== ================== ==================
2019 2018 2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============== ======== ======== ======== ======== ======== ========
Over time 28,001 25,456 23,908 11,271 51,909 36,727
Point in time 5,708 2,310 601 - 6,309 2,310
--------------- -------- -------- -------- -------- -------- --------
Total revenue 33,709 27,766 24,509 11,271 58.218 39,037
=============== ======== ======== ======== ======== ======== ========
Analysis by industry
2019 2018
GBP'000 GBP'000
=============== ======== ========
Revenue
Defence 37,305 29,796
Energy 8,821 7,595
Space 12,092 1,646
=============== ======== ========
Total revenue 58,218 39,037
=============== ======== ========
Information about major customers
Revenue includes sales from customers who contributed 10% or
more to the Group's revenue:
2019 2018
GBP'000 GBP'000
=============== ======== ========
Customer 1 6,921 9,910
Customer 2 14,104 9,776
Customer 3 8,669 -
--------------- -------- --------
Total revenue 29,694 19,686
=============== ======== ========
3. Operating loss
The Group operating loss for the year is stated after charging
the following:
2019 2018
GBP'000 GBP'000
=============================================== ======== ========
Amortisation of intangible assets 2,500 1,435
Impairment of intangible assets - -
Depreciation of property, plant and equipment
and right-of-use assets 1,360 855
Impairment of trade receivables 36 87
Share-based payment expense(1) 176 165
=============================================== ======== ========
(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 2019 is based upon a loss after tax of GBP1,927,000
(2018: profit after tax of GBP175,000) and a weighted average
number of shares of 772,439,898 (2018: 758,565,854). The weighted
average number of shares has been reduced by the weighted average
number of shares held by the Employee Benefit Trust.
The issue of additional shares on exercise of employee share
options would increase the basic loss per share and there is
therefore no dilutive effect of employee share options.
5. Cash and cash equivalents
The funds were placed on floating interest rate deposit as
follows:
Group Parent Company
===================== ==================
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
=========================== ========= ========== ======== ========
Cash and bank balances 6,568 22,413 144 10,505
=========================== ========= ========== ======== ========
Cash and cash equivalents 6,815(1) 22,873(1) 144 10,505
=========================== ========= ========== ======== ========
(1) Restricted cash of GBP247,000 (2018: GBP460,000) is included
in Prepayments and Other Debtors
6. Business combinations
Sapienza Consulting Holdings B.V
On 30 April 2019, the Group through its parent company TP Group
plc, acquired 100% of the issued share capital of Sapienza
Consulting Holdings BV ("Sapienza") on a cash free, debt free,
normalised working capital basis, for a combined initial
consideration of EUR10 million in cash and EUR1.5 million by way of
the issue of 20,612,865 new ordinary shares of 1 pence each in the
Company. In addition, a maximum of EUR2.0 million may also be
payable in cash on delivery by the vendors of certain transition
activities within two years following completion of the
acquisition. This amount will be expensed in the Group's income
statement over the two years to 30 April 2021, in line with IFRS 3.
Sapienza was a privately-owned group of services and software
companies serving the space and defence sectors.
On 28 June 2019, the Group via its subsidiary Sapienza
Consulting Holdings BV acquired additional shares in Lift BV
("Lift"), increasing its shareholding from 33% to 69%. The
additional 36% was acquired for an initial consideration of
EUR486,000 in cash, paid from the Group's existing cash resources,
and a further consideration of EUR216,667 in cash to be paid over
an 18-month period, again from the Group's existing cash resources.
Lift is a software business that designs AI based conversational
technology.
The principal reason for the acquisition of Sapienza and the
increased investment in Lift is to support the Group's evolution as
a diversified engineering and services group. Sapienza and Lift
form part of the CaPS business segment.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Sapienza Consulting Lift BV
Holdings BV
Book Fair Value Book Value Fair Value
Value
GBP'000 GBP'000 GBP'000 GBP'000
============================= ========= =========== ========== ==========
Property, plant & equipment 167 167 73 73
Right-of-use assets - 781 - -
Investments 491 491 - -
Identifiable intangible
assets - 8,327 - 283
Cash and cash equivalents 1,178 1,178 31 31
Financial assets 5,934 5,828 77 184
Financial liabilities (6,671) (7,901) (59) (59)
Deferred taxation - (1,416) - (40)
============================== ========= =========== ========== ==========
Total identifiable
net assets 1,099 7,455 122 472
Non-controlling interest - (510)
Goodwill arising on
consolidation 2,696 1,176
------------------------------ --------- ----------- ---------- ----------
Total Consideration 10,151 1,138
============================== ========= =========== ========== ==========
Consisting of:
Consideration in cash 8,854 631
Consideration in shares 1297 -
Fair value of previously
held interest - 507
------------------------------ --------- ----------- ---------- ----------
Following the increase in shareholding in Lift B.V., no change
in fair value of the non-controlling interest has been recognised
in view of the short space of time between the two
transactions.
The non-controlling interest in Lift B.V. was valued as the
percentage of shares not owned by the Group on 28 June 2019
multiplied by the fair value of the net assets of Lift B.V. on this
date, including intangibles arising on acquisition. The fair values
were determined using the income approach to value of the
technology of the company, and the cost approach to value the
workforce and all remaining assets and liabilities of Lift B.V. at
acquisition.
The Group has identified intangible assets on the purchase of
Sapienza Holdings BV relating to customer relationships of
GBP5,727,000, internally developed software of GBP1,127,000, the
brand of GBP520,000 and order backlog of GBP953,000.
Goodwill of GBP2,696,000 is primarily applicable to the
assembled workforce acquired as part of the transaction to purchase
Sapienza Holdings BV. Acquisition costs of GBP799,000 arose as a
result of the transaction and these were settled in cash from the
Group's existing resources. These have been recognised as part of
administrative expenses in the Consolidated Statement of
Comprehensive Income.
Had the acquisition of Sapienza Holdings BV been effective from
1 January 2019, the consolidated revenue of the Group for the year
would have been approximately GBP63,000,000 and the operating loss
for the year would have been approximately GBP1,846,000. The
directors consider these values to represent an approximate measure
of performance of the combined Group on an annualised basis and to
provide a reference point for future periods. Since acquisition
Sapienza Holdings BV, including Lift B.V. reports revenue of circa
GBP9,900,000 and operating profit of circa GBP317,000.
The Group has identified intangible assets on the purchase of
Lift B.V. relating to internally developed software GBP283,000.
Goodwill of GBP1,176,000 is primarily applicable to the future
enhancements made to the core technology acquired to support future
revenue growth, and the highly skilled assembled workforce.
7. Subsequent events
On 3 March 2020, the Group entered into a new GBP7.0 million
revolving loan facility (the "Facility Agreement") with HSBC UK
Bank plc. This facility has a term of three years and carries an
option to increase the headroom to GBP12.0 million subject to
certain conditions. Under the terms of the Facility Agreement, the
Group will pay interest at a rate of between 1.75% and 2.25% over
LIBOR on the amount drawn down, depending on the Group's total
leveraged position. As of 20 May 2020 the facility had been fully
drawn to insulate the business against any potential covid-19
impacts. However it must be noted that the Group's current cash
flow forecast indicates that none of these funds will be required
to support the Group's ongoing operational activities.
The Chief Financial Officer's Review includes a review of going
concern, as well as separate consideration of the impact of Brexit
and the Coronavirus, which has not identified any material impact
on the values of any of the Group's assets or liabilities.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKKBNOBKDCPB
(END) Dow Jones Newswires
May 21, 2020 02:00 ET (06:00 GMT)
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