Annual Report & Financial Statements
2017
Company Number: 3152034
03
TPG is a professional services and technology
partner to global prime contractors that are
active in security, energy and aerospace
programmes. We advise on and deliver
management and technology solutions using
advanced manufacturing skills and expertise.
Contents
STRATEGIC REPORT
Financial and Business Highlights
TP Group in Focus
Consulting & Programme Services
Engineering & Technology
Chairman’s Statement
ChiefExecutiveOfficer’sStrategicReview
CFO’sFinancialandBusinessReview
CorporateandSocialResponsibility
PrincipalRisksandUncertainties
04
07
10
11
12
15
18
25
28
FINANCIAL REPORT
32
34
Board of Directors
Financial Statements
55 Notes to the Financial Statements
OTHER INFORMATION
101
Company Information
Annual Report & Financial Statements 2017
05
04
Group revenue up 39%
(2016: £21.2m)
£29.5m
Adjusted EBITDA1 up 142%
(2016: £1.1m)
£2.6m
2
0
1
7
2
0
1
6
2
0
1
5
2
0
1
4
2
0
1
3
29.5
21.2
20.4
21.7
19.3
Revenue £m
2.6
2
0
1
7
2
0
1
6
2
0
1
5
1.1
0.0
2
0
1
4
2
0
1
3
-2.1
-2.9
Adjusted EBITDA £m
Group closing order book up 89%
(2016: £17.0m)
2
0
1
7
32.2
£32.1m
2
0
1
6
2
0
1
5
2
0
1
4
2
0
1
3
17.0
14.5
17.3
14.2
Closing Order Book £m
Notes
1
AdjustedEBITDAisdefinedasoperatingprofitadjustedtoaddbackdepreciationofproperty,plantandequipment,amortisationandimpairmentof
acquiredtangibleandintangibleassetsandanyotheracquisition-relatedcharges,sharebasedpaymentchargesandnon-operatingitems.Non-operating
itemsarethoseitemsbelievedtobeexceptionalinnaturebyvirtueoftheirsizeandorincidence.Thedirectorsbelievethismeasureismorereflective
oftheunderlyingperformanceoftheGroupthanequivalentGAAPmeasures.Thisisprimarilyduetotheexclusionofnon-cashitems,suchasshare-
basedpayments,impairment,depreciationandamortisation,aswellasnon-operatingitems.Thisprovidesshareholdersandotherusersofthefinancial
statementswiththemostrepresentativeyear-on-yearcomparisonofoperatingperformance.Thismeasureandtheseparatecomponentsremain
consistentwith2016.
Financial and
Business Highlights
An excellent year that delivered the
firstphaseofourambitiousgrowthplans.
Revenue up 39% to £29.5m (2016: £21.2m)
• Convertedstrongorderintakeintorevenue
• Addedrevenuesfromacquiredcompanies
Adjusted EBITDA up 142% to £2.6m (2016: £1.1m)
• Operational focus on improving margins and delivery performance
Operating loss £0.5m (2016: £0.3m)
• Includesbusinesstransformationcostsof£0.7million
• One-timeimpairmentchargeof£0.5million
Closing cash of £21.9m (2016: £9.2m)
• £20.8madditionalfundingsecuredthroughequityraise
Order intake up 88% to £44.7m (2016: £23.8m)
• Concludednegotiationsonlong-termdefencecontracts
Closing Group order book up 89%
to £32.1m (2016: £17.0m)
• Goodvisibilityoffuturecorebusiness
2017 achievements
• Continuedimplementationofgrowthstrategyacrossthebusiness
• Strengthened management team
• Raised£20.8mtofundacquisition-ledgrowthplans
• InvestedinAdvancedManufacturingCentre(£1.3m)
• Completedtwoacquisitionsforaninitialcombinedconsiderationof£2.75m
onadebt-free,cash-free,normalisedworkingcapitalbasis
Annual Report & Financial Statements 2017
06
Widening our geographic reach
World-class skills in complex
technologies with modern design
and manufacturing facilities.
07
TP Group
in Focus
TPGisaprofessionalservicesandtechnologypartnertoglobalprime
contractorsthatareactiveinsecurity,energyandaerospaceprogrammes.
Weadviseonmanagementandtechnologysolutionsanddeliverwith
advancedmanufacturingskillsandexpertise.
Ourteamlinksworld-classskillsincomplextechnologieswithmoderndesign
andmanufacturingfacilitiestoprovideafullybalancedandagilesupport
networktoourcustomersandpartnerswherevertheymaybe.
Therearetwomainthemeswithinourbusiness:
• Consulting & Programme Services-advisingclientsonstrategicproblems
andimplementingtechnology-drivensolutions
• Engineering & Technology-capabilitytodesign,manufactureandsupport
mission-criticalsystems
Thesethemesarefoundedontheprinciplesoftechnologyandpartnership,
anexpressionthatunderpinswhatwedoandhowwedoit.
Ourspecialistconsultingandadvisoryservicesfocusonsecureinformationsystems,
hightechnologyprojectsandthrough-lifeequipmentsupport.Workingwithglobal
primecontractors,wegoontomanufacturespecialistequipmentaspartofmajor
programmes.
Ourexperiencespanscriticalequipmentandsystemsinmanysectorsandgeographies.
Theseincludesecurecommunicationssystems,missionsystemssoftware,aircraft
cockpitintegration,autonomousvessels,highintegrityequipmentinrefineriesand
powerstationsandatmospheremanagementsystemstoprotectsubmariners.
TheGroupiscommittedtoagrowthstrategy,inboththescaleofoperationsand
thenatureandrangeoftheworkwedo.Thisbuildsonourheritageofinnovating
commercially,technicallyandoperationally.
Annual Report & Financial Statements 2017
08
09
Outsourcing and availability contracts
Long-term equipment supply
TheGrouphasbeenworkinghardtoextendthescopeofactivityaroundtheequipment
wesupplyandsupport.Outsourcingandavailabilitycontractsarebecomingan
importantpartofourbusinessanddemonstratehowwecanblendservicesand
engineeringcapabilitieswithinaservices-ledapproach.
On3April2017,theGroupannouncedanagreementwiththeMinistryofDefence
(“MoD”)tomanageequipmentavailabilityandsparesprovisionforTPGequipmenton
boardRoyalNavysubmarines.Thiscontractcomprisesaframeworkagreementandso
iscalledoffprogressivelyoveritsterm,withthefinalvaluedependentonsparesusage.
Thefive-yearcontracthasanoptionforafurthertwo-yearextensionandisestimated
bytheCompanyandtheMoDtobeworthatleast£22.0million(at2017prices)over
sevenyears.Thevalueofordersbookedin2017was£9.0million.
WehavesimilararrangementsinplacewithPetroIneosattheGrangemouthrefinery
inScotlandandwillbelookingtoextendthiskindofcustomerengagementinthe
comingyears.
Technical services framework agreements
Duringtheyear,wegrewourservicesbusinessthroughthesupplyofadditional
specialistconsultantstoanumberofdefenceandsecuritycustomers.Akeypartof
thisapproachistoqualifyandbelistedoncustomerservicecatalogues.Theseallow
theMoDandotherstoprocuretechnicalserviceworkpackagesfrompre-approved
participants.
InJune2017,theGroupwasawardedlistingontheMoD’sMulti-ParticipantFramework
AgreementforTechnicalSupport(FATS/5).ThisprovidestheGroupwithreadyaccessto
apipelineoffuturebusinessopportunitiesfromcustomertechnologyprojects.Wewere
alsoadmittedasoneofjust11partnersintheMoD’sSubmarineEnduringNavalDesign
Partneringframework.
Advanced manufacturing services
TheGroup’sfacilityinManchesterhasbeentransformedthroughtheyearwiththe
installationoftwoadvancedmachiningcentresandoneoftheUK’slargestco-ordinate
measuringmachinesaspartoftheGroup’sAdvancedManufacturingCentre(“AMC”).
Workingcloselywithpartnersinthenorth-west,thefirstcomponentsweremachined
inAugustandthisworkhasintroducedustosixneworganisationswithincomplex
equipmentsupplychainsduring2017.Thisisimportantinthreeways-itisbuildingthe
experienceandmarketpositionfortheAMCasapartofthesesupplychains,thenew
relationshipsthatarebeingbuiltoutsideourtraditionalheatexchangeractivityandit
allowsustoconnectthesecompaniestothewidercapabilitiesoftheGroup.
Ourengineershavebuiltlong-lastingrelationshipswithcustomerssothattheycan
performatthehighestlevels.Thisallowsustoprovideafullrangeofservices,from
designtomanufacture,installationandongoingsupport.Whenequipmentreaches
itsendoflifeorneedstobemodifiedorreplacedtomeetnewrequirements,weare
theretorespondtotheserequirements.On11April2017,weannouncedaframework
contractwiththeMoD,tosupplymultipleCombinedOxygenGeneratingSystemsto
upgradein-serviceRoyalNavysubmarines.Thiswork,worthupto£22.5moverthe
next5to8years,providescontinuityofserviceforthiscriticalequipmentandthe
submarineswithinwhichtheyoperate.Thefirstcall-offfromthiscontract,worth
£9.7million,wasreceivedinMay2017.
International markets
TheGrouphasenjoyedlongtermrelationshipswithinternationalcustomersthroughits
workondefenceequipmentandwasabletosecurethreefurthercontractsinEurope
andSouth-EastAsiaworthinaggregatemorethan£3.3min2017.Twooftheseare
withglobalshipbuildingprimecontractorswhoalsohaveinterestsinciviliansectors
likeenergyandtransportation.Theserelationshipsandcontactsallowustoenterinto
discussionstosupportthemintheirwideractivities.
Secure network services
TheTPGServicesteamhasbeensteadilybuildingitspresenceinmajorinformation
programmeswiththeArmyHeadquartersandtheMaritimeandCoastguardAgency.
Thisworkisonthedemandsidewhereourconsultantsassistthecustomertospecify,
procureandimplementacomplexITorcommunicationssystem.Therangeofservices
requiredisbroadandincludestechnical,commercialandprojectmanagementactivities
atbothanadvisoryandfunctionallevel.
Annual Report & Financial Statements 2017
10
Consulting &
Programme Services
Engineering &
Technology
11
OurConsultingandProgrammeServicesbusinessunit(“TPGServices”)
OurEngineeringandTechnologybusinessunit(“TPGEngineering”)
workswithexecutivesandleaderstohelpthemmakebetterdecisionsand
combinesarangeofhigh-endcapabilitiestoproducehigh-integrity
thentotranslatethosedecisionsintosuccessfulhigh-technologyprojects.
equipmentfromfactoryfacilitiesinPortsmouthandManchester.
Weworkthroughspecialistserviceteams:
• Advisory services – analysis and guidance on project approach and performance
• Programme delivery services (demand side)–workingonbehalfofend-usersto
specify,procureandimplementtechnologysolutions
• Programme delivery services (supply side)–developingsoftwareandother
technologysolutionsfordeliverytoend-usercustomers
Ourteamscompriseofindustryandsubjectmatterexpertswhoareresponsiveand
alignedtotheircustomers’needsandlocations.Theapplicationareasarediverseand
ourcapabilitiesareappliedto:
• Space systems – project support for ground and mission systems
• Maritime platforms – innovation and deployment of integrated systems and services
• Control systems to guide autonomous vehicles
• ArtificialIntelligence-machinelearningwithintelligencegatheringandprocessing
• Secureinformationsystemsspecification,procurementandimplementation
• Cost engineering and project controls to assure programme performance
and delivery
• Simulation and emulation of complex systems for training and testing
• Championingsmallenterpriseengagement–makingthemostofsmallspecialist
companieswithinlargecustomerprogrammes
Weconducttechnicalanalysisandusethistoguideelectrical,thermalandmechanical
designofcomponentsandequipment.Manufacturingincludesmachining,electrical
andmechanicalassembly,avastarrayoftestingandverificationtechniqueswithinan
overarchingqualitymanagementsystemtodeliverexcellentproductstoourcustomers.
Theengineeringteamcontinuestoinnovate,andiscurrentlyworkingon:
• Advancedmachiningandmetrology–aservicebaseduponhighlyaccuratemachining
centresandmeasurementsystemsthatareamongthelargestintheUKforphysically
large components
• Alternativecarbondioxidemanagement–anumberofmethodsunderreviewusing
differentchemicaltechniquestoproducethenextgenerationofsmaller,safer,more
efficientsystems
• Hydrogenprocessing–demonstratingtheuseofhydrogenwithintheatmosphere
managementwithinthefuelcellsofsubmarinesandpotentiallyothervehicles
• Outsourcingequipmentmanagement–monitoringthestatusofequipmentand
supplyingconsumables,orrefurbishingmainequipmentunderamanagedprocess
onbehalfofthecustomer
Our capability is at the heart
of complex programme
delivery and ongoing support
for our customers.
Specialist services to define
and deliver technology
programmes.
Annual Report & Financial Statements 2017
13
We have built our capabilities,
invested in our teams and
facilities to capitalise on these
exciting opportunities.
12
Chairman’s Statement
Andrew McCree
“These are excellent results and underline the potential of the Group
toworksuccessfullywithinourestablishedmarketsandtechnologies.”
Inlastyear’sreportIcommentedthatwehadcreatedastrongplatformforgrowththat
benefitsfromourreputationforreliabilityandengineeringexcellence.Overthecourse
of2017wehavemadegoodprogressandIampleasedtoreportthattheexecutive
teamhasrespondedwelltothechallengesandopportunitiesfortheGroup.Revenue
grewby39%to£29.5m(2016:£21.2m),orderintakealmostdoubledto£44.7m
(2016:£23.1m)andAdjustedEBITDAroseto£2.6m(2016:£1.1m).
TheseresultsareunderpinnedbyabusinesstransformationledbytheCEO,whichhas
seenmanagementstrengthened,investmentinfacilitiesandthesuccessfulacquisition
andintegrationofnewbusinesses.
Fund-raising and acquisitions
TheGroup’sstrategyistoexpandthebusinessthroughacombinationoforganicgrowth
andacquisitions.Inpractice,wewillgrowbusinesswithexistingaccountswhilelooking
foracquisitionswhichwillstrengthenourpositionandenhancemargins.
TheprocessbeganwiththeacquisitionofALSTechnologiesLimited(“ALS”)andFlexible
SoftwareSolutionsLimited(“FSS”)inFebruary2017.
InJuly2017weundertookanequityfundraisingprocessthatraisedapproximately
£20.8millionnetofexpenses,fromexistingandnewshareholders,tofundinvestment
inacquisitionsandorganicgrowthinitiatives.
Sincethefundraising,wehavecompletedonefurthertransaction–theacquisitionof
PolarisConsultingHoldingsLtd.(“Polaris”)foramaximumconsiderationof£3.5mwhich
weannouncedon13December2017.Polarissatisfiedourbusiness,technicaland
operationalcriteriaandwillfurtheraddtotheGroup’sServicesbusinesscapability.
Managementhas,throughouttheyear,beenintroducedtomanyacquisition
opportunitiesfromanumberofsources.Marketconditions,particularlyinthedefence
sector,haveputpressureonmanySMEsthatmayhavebeenpotentialacquisitions.
Thedirectorsworkcarefullythroughtheopportunitiesandenterintonegotiationsonly
whereclearvalueandbenefitisvisibleatapricethatisappropriatetotheinterestsof
theGroupandourinvestors.
Theacquisitionprocesscontinues,andshareholderswillbenotifiedofsignificantevents
astheyoccur.
Annual Report & Financial Statements 2017
14
Board changes
PhilHollandandJeremyWarner-AllenjoinedtheboardinFebruary2017as
Non-ExecutiveDirectors.TheybringawealthofM&A,industryandcapitalmarkets
expertiseasweseektocapitaliseonouracquisitionspipelineandexecuteourgrowth
strategy.
Postyear-end,SimonKingssteppeddownfromtheBoardandleftthecompany.
Wewishhimeverysuccessinhisfutureendeavours.
Outlook
TheGrouphasmadeasuccessfulstartinexecutingourambitiousplansforgrowth.
Aswelookforward,weseebothorganicandacquisitivegrowthopportunities.
• Organic growth–withmanylong-termcontractsalreadysignedandwiththe
prospectofmoretocomefrombothourUKandinternationalcustomers,wehave
builtourcapabilities,andinvestedinourteamsandfacilitiestocapitaliseonthese
excitingopportunities.
• Acquisition growth–theGroupcontinuestoengageonseveralacquisition
opportunities.TPGhasbeenselectiveinreviewingtheseopportunitiesandwillact
quicklyontransactionsthatsatisfythedirectors’criteriatoenhancetheGroup’s
offeringandbuildshareholdervalue.
OnbehalfoftheboardIwouldliketothanktheentireGroup,includingmanagement
andemployeesfortheircontributiontoasuccessfulperformancein2017,andfortheir
commitmenttodeliveringourgoalsoverthenextthreeyears.
15
Chief Executive Officer’s
Strategic Review
Phil Cartmell
“WehavebuiltastrongsetofcapabilitiesacrosstheGroupandourplan
nowistobuildonoursuccessandaccelerategrowthwhereitisavailable.”
TheGrouphasrespondedstronglytotrendsinourcoremarkets,havingsecured
significantmajorordersinkeyprogrammes.Thishasledtogrowthinbothrevenueand
adjustedEBITDAandopenedroutestonewtechnicalpropositions,newmarketareas
andawiderinternationalpresence.
Theexecutiveteamhasledandimplementedabusinesstransformationoverthelast
fewyearsthathasdeliveredthesefinancialresultsandsetthebusinessupforcontinued
growth.Ourfocusnowistopursuethispaththroughthedeliveryofpremiumservices
andengineeringprojects.
Thismeansachievingorganicgrowththroughenhancedaccountmanagement–
continuingtodeliverexcellenceinexistingactivities,doingmorewithourexistingclients,
buildingnewaccountrelationshipsandworkinginnewsectorswhereourskillsare
transferable.
Wearealsocontinuingtoidentifyandevaluatesuitablecompaniesforacquisitionthat
willaddbusinessvolume,furthercapabilities,furthercustomerrelationshipsorany
combinationofthesebenefits.
TheplacingandopenofferinJulyraised£20.8millionandwaswellsupportedbyexisting
shareholdersandalsobynewshareholders.Theproceedsofthefundraisinghave
supportedinternalinvestmentprogrammesandanacquisitionstrategythatyieldedits
firstsuccessfulconclusionwiththepurchaseofPolarisinDecember2017.
Positioning
Themajorityofourworkiswithselectedhigh-endglobalprimecontractorsandend-
users.Weareanactiveplayerinthemarketsweserve,committedtounderstanding
customerneedsbetterthanourcompetitors,risingtotheirchallengesandleadingthem
forwardthroughinnovationandexcellentservice.
Weenjoyverygoodrelationshipswithourglobalcustomerbasethatincludes
equipmentend-usersandalsomajorprimecontractorsthatdelivertop-levelcontracts
totheend-users.Weconsultwidelywithourcustomerbaseandtheirfeedbackhas
triggeredmuchofourtransformationaroundnewleadership,andinvestmentinpeople
andfacilities.
Endusersoroperatorsareincreasinglylookingtousforlong-termperformanceor
managementoftheirequipment.Thesearetherelationshipsthatprovidesteadyactivity
overlongperiodsandgoodrevenuevisibilitytounderpinthebusinessthroughmarket
fluctuations.
Withtheprimecontractorsweactasspecialistcontributorstotheirsupplychain.This
isanadvantageouspositionbecauseoncewequalifyasapreferredsupplierorpartner,
webenefitfromtheiroutreachandcontinuingsuccess.Forexample,Europeanprime
contractorsbuildsubmarinesfordefenceforcesallovertheworld,theyalsoworkinother
non-defenceprojectsanditisouraimtogrowintotheseareaswiththem.Thisleverageis
animportantpartofourstrategytoactonaglobalscalefromourUKfacilities.
Annual Report & Financial Statements 2017
16
A winning team
Asalways,itisthroughourpeoplecomingtogetherthatwecandeliverexcellent
performance.Aswefocusourcapabilitiesandapplythemmorewidelythaninthe
past,wehavetestedthecreativityandenterpriseofourteams.Theyhaverisentothis
challengeinallareasofthebusiness.
Wesimplifiedtheinternalstructurebyaligningsitesunderacommonleadershipwithin
theServicesandEngineeringstreams.Thishascreatedclearerreportinglinesand
stimulatedcloserco-operationbetweentheteamsunderacommonbanner.
Fromthiswehaveformalisedanexecutivemanagementteamtoberesponsibleforthe
hands-onrunningofthebusinessandtoprovidegreateropportunitytocross-sellthe
widerGroupofferings.Thisinturncreatesmorecapacityforthedirectorstoworkon
acquisitionandotherstrategicdevelopments.
Acquisitions
Ouracquisitionstrategyistoengagewithtechnologyandservicesbusinessesthat
operateinmarketsweknowandunderstand.Theyshouldbeadditivetoourexisting
offeringsandhelpustoimprovescaleandmargins.Thisapproachdelivereditsfirst
successearlyintheyearwiththepurchaseofALSandFSS,followedinDecemberbythe
acquisitionofPolaris.
ALS,basedinWincanton,Somerset,providessystemsengineeringandassurance
capabilityformissionsupport,flightcontrol,combatsystemsandtacticalinformation
systemsintheaerospaceanddefencemarkets.FSS,alsobasedinWincanton,develops
safety-criticalsoftwareforthedefenceandcommercialsectors.Polaris,withbases
inFarehamandBristol,deliverstechnicalconsultancyincludingoperationalanalysis,
projectcontrolsandcostengineeringservicesacrossthedefenceandsecuritysectors,
withadditionalactivityinenergyandtransportation.
TheseacquisitionsaddedscaletotheGroup’sServicesbusinessandaddedsignificant
newaviationactivity.
Asdiscussedinmoredetailbelow,wecontinuetoreviewandassessacquisition
opportunitiesthatwillbothcomplementand/oraddtotheGroupofferingandenhance
value.Shareholderswillbeinformedofanysignificantdevelopmentsinthisregard.
Cross-Group integration
AsthenewlyacquiredbusinesseswerebroughtintotheServicesteam,webeganto
seethepositiveeffectsofcombiningfrontandback-officebusinesscapabilitiesand
processes.Thisprovidesatemplateforfutureacquisitions.
Similarly,inTPGEngineering,PortsmouthandManchesternowsharemanufacturing
capacity,qualityprocessesandprojectmanagementresources.Synergiesarebeginning
toberealised,withfabricationtasksthatthePortsmouthsitewouldpreviouslyhave
boughtfromtheirsupplychainbeingincreasinglydeliveredbytheManchesterfacility.
Wehavealsolinkedourbusinessdevelopmentresourcesacrossdeliverycentres.The
combinedpropositionsoftheGrouparenowbeingofferedtocustomerswhopreviously
mayhaveknownusforasingleproductorserviceoffering.
A platform for success
Duringthefirsthalfoftheyear,weconfirmedtwolargedefencecontracts,onetosupply
multipleatmospheremanagementsystemsandtheotheraframeworkcontractfor
sparesandsupport,whichprovideslong-termrevenuevisibility.Thebreadthofthese
contractsdemonstrateshowourservicesextendbeyondsimplebuildandsupply
projectssothatwealsolockinfutureactivitiesandrevenuepossibilitiesoverthe
long-termuseandperformanceoftheequipmentweworkwith.
TheGrouphasalsoinvestedinmanufacturingandinspectionequipmenttolaunchthe
AdvancedManufacturingCentreinManchester.TheAMCwassetupinitiallytosupport
theGroup’scontractwithGEOil&Gas(nowBakerHughes,aGEcompany)securedin
17
December2016.Itisequippedwithhighprecision,highcapacitymachiningcentres,
metrologyandmanufacturingsystemsthatwillserveawiderangeofopportunitiesin
energy,defenceandotherhigh-integrityapplications.
Our markets
WecontinuetoseestrongdemandforourcoreproductsandservicesintheUKand
overseas.
IntheUK,weareactiveoncertaincriticalprotectedprogrammesthatareidentified
throughtheGovernment’songoingrefreshoftheUK’sStrategicDefence&Security
Reviewof2015.Theseprogrammessuchasthenewsubmarinereplacementhavebeen
protectedwhilstotherareasofthedefenceestablishmentareunderincreasingpressure
withbudgetsseverelycut.
Wearealsowitnessingsomemodestrecoveryinthedownstreamoilandgasmarket
andanever-presentfocusonsecureinformationandcommunicationssystemsinboth
defenceandcivilgovernmentdepartments.
Delivering the strategy
Inlastyear’sannualreportwecommittedtoagrowthstrategyandhaveprogressedthis
planbypursuingfurtheracquisitionstocomplementtheorganicgrowthopportunities
thatwerevisiblewithintheexistingbusinessunits.Thetypicalprofileofattractive
companiesisprivatelyowned,successfulyetconstrainedinsomewayandwherethe
ownersareseekingtorealisevalue.
Wehavecontinuedtopursueseveralacquisitionopportunitiesinourtargetsectorsof
security,energyandaerospace.Wehavealsoexpandedoursearchparametersasthe
traditionalsmalldefencecontractorswehaveexaminedhaveeitherbeenstrugglingfor
performance,or,ifsuccessful,havecarriedveryhighvaluations.Ourstrategyremains
cleartomakebestuseofthefundswehaveavailableanddoesnotincludepursuing
recoveryplaysatthistime.
Theacquisitionteamhasexploredawiderangeofengineeringandservicesbusinesses
intheUK,EuropeandtheUnitedStates.Thesebusinesseshavespannedanumberof
sectorsincludingspace,aviation,complexcontrolsystems,transportationandcyber
security.Thisactivitywillcontinuetoidentifysuitablecompaniesthatwillcontributeto
ourgrowthplans.
Our next steps
Aswelooktowardtheyearaheadweseeawiderangeofopportunitiesandincreased
marketinterestinwhatwearedoing.Ourgoalistocapitalisefullyonthisbuoyant
positionandsoanumberofactionshavebeenplanned:
• Pursueinnovationinservicesandpropositionstoworkcreativelywithourcustomers
• Communicatethebreadthofourcapabilitiestodemonstratethepotentialvalue
ofworkingwithTPG.Thisisimportantforbusinessdevelopment,attractingtalent
thoughourrecruitmentandtalkingclearlytoourinvestors
andrealisethetruevalueofourcapability
add complementary resources to their activities
• FullyintegratethePolaristeamtomobilisetheirskillstoourwidercustomerbaseand
• Widen our geographic reach through agents in various territories opening their
horizonstothegreaterrangeofcapabilitiesacrosstheGroupandsupportingthem
fullytocarrythesetolargeclientsallaroundtheworld
• AcquireandintegratesuitablebusinessestotheGroup-thereareinteresting
opportunities,buttheymustbecarefullyassessedtofindsuitabletechnicalor
operationalalignmentalongsideleadershipthatsharesourviewsandapproaches,
andofcourseatasensibleprice
WithallthattheGrouphasachievedinthelastfewyears,theteamandtheplatform
wehavebuilt,andtherangeofopportunitieslaidoutbeforeus,welookforwardtoan
excitingyearaheadwithconfidencethatwecancontinuetodeliveronourplans.
Annual Report & Financial Statements 2017
18
Group Key
Performance
Indicators (KPIs)
2017
£M
2016
£M
Change
£M
Revenue
29.5
21.2
Adjusted EBITDA
2.6
1.1
Operating loss
(0.5)
(0.3)
Cashandbankbalances
21.9
9.2
Closingorderbook
32.1
17.0
Orderintake
44.7
23.8
8.3
1.5
(0.2)
12.7
15.1
20.9
Revenue
TPG Engineering
TPG Services
Group revenue
Adjusted EBITDA
TPG Engineering
TPG Services
Central costs
2017
£M
23.7
5.8
29.5
2017
£M
4.5
(0.8)
(1.1)
2016
£M
Change
£M
19.0
2.2
21.2
4.7
3.6
8.3
2016
£M
3.2
(1.0)
(1.1)
Change
£M
1.3
0.2
0.0
1.5
AdjustedEBITDAprofit
2.6
1.1
19
CFO’s Financial and
Business Review
Derren Stroud
“IampleasedtoreportthatTPGrouphascontinuedtodelivergrowthand
builtanorderbooktosecurefuturebusinessvolume.TheGroupmadea
profitonanAdjustedEBITDAbasisof£2.6million,morethandoublethe
2016result.“
FollowingtherefinementoftheGroup’sstrategy,thebusinesshasbeenmanaged
duringtheyearthroughtwodistinctbusinessunits,ConsultingandProgrammeServices
(“Services”)andEngineeringandTechnology(“Engineering”).
Theprincipalactivitiesofthesebusinessunitscomprise:
• Services–theprovisionofknow-howandexperiencetoaddvalueinlargeandcomplex
enterprises.Servicesincludetechnicalprojectmanagement,systemsengineering,
design,softwaredevelopmentandassurance.Thissegment,for2017revenueand
AdjustedEBITDA,isacombinationofthepriorsegmentsTPGDesign&Technology,TPG
ManagedSolutionsandtheacquiredbusinessesofALSandFSS,andwillincludePolaris
infutureperiods.
• Engineering–activitiesincludethedesign,manufacture,installationandsupport
ofcomplexequipment.Theseincludeairpurificationequipmentforsubmarines
includingoxygen/hydrogengenerationandpurification,airhandlinganddistribution
systems,heatexchangeequipmentusedintheheatingandcoolingoflargescale
industrialprocesses,andotherfabricatedstructures.Thissegmentisacombination
ofthepriorsegmentsTPGMaritimeandTPGEngineering.
Operating Results
Group KPIs
2017deliveredsignificantimprovementinallourKPIs,whichreflectsabalanced
approachtostrategicdevelopmentalongsideoperationalfocusonthebusiness
fundamentals.Theleadershiphasconcentratedongeneratingdemandforour
resources,efficientexecutionofcontracts,tightcontrolofcostsandcontinuous
improvementthroughoutthebusiness.
Revenue
Revenueincreasedby39%to£29.5million(2016:£21.2m),withgrowthinallpartsof
thebusiness.Organicgrowthcontributedmorethanhalfofthisincrease(£4.7m),the
balancecomingfromacquisitions.
Engineeringrealisedgrowthof24%inrevenues,drivenbyincreasedactivityatbothour
PortsmouthandManchesterlocations.Wehavebenefittedfromourroleinprotected
long-termprogrammesforsubmarinebuildintheUKandourembeddedpositionwith
internationalprimecontractorsdeliveringsubmarineprogrammesaroundtheworld.
Theserelationshipsdeliveredmajorlong-termcontractwinsthatareconvertingto
revenueattheintendedrate.
Annual Report & Financial Statements 2017
20
21
Modestimprovementinconditionsinthedownstreamoil&gasandchemicalprocessing
sectorsdeliveredadditionalordersandrevenuetotheManchesterfacility.
Servicesrevenuesgrewstronglythroughacombinationofnewcontractsinthelegacy
defenceconsultingactivity,newworkoutsidedefenceintheDepartmentofTransport
andtheadditionoftheacquiredALSandFSSbusinesses.
Adjusted EBITDA
GroupAdjustedEBITDAincreasedby£1.5millionto£2.6million,anincreaseof142%on
the2016resultof£1.1million.Organicgrowthcontributed£1.4mofthisincrease,the
balancecomingfromacquisitions.
IntheEngineeringbusinessunit,revenuegrowth,executedataconsistentgrossmargin,
deliveredanimprovedAdjustedEBITDApositionof£4.5million(2016:£3.2million).
StrongperformanceinourUKandoverseasdefencesectorprojectshasbeentempered
slightlybyweakerresultsfromouractivityintheoil&gassector.Whilstvolumesin
thissectorareimproving,itremainsverypricecompetitiveinourtraditionalareasof
activity.Thishascausedgrossmarginstosufferandsupportsourdecisiontodevelop
intopremiummarketareaswherecompetitionbecomesmorecapabilityandquality
driventhanpurelyprice.ThiswasdemonstratedbytheGroupwinningitsfirstmulti-unit
longtermcontractinnuclearpowergenerationattheendof2016,andthesubsequent
investmentintheAMCduring2017todrivethebusinessinthisdirection.
TheServicesbusinessisakeypartofourgrowthstrategy.Havinglaunchedthe
propositionin2016,theGrouphascontinuedtoinvestinpeople,processesand
systemstosupportlong-termbusinessgrowth.Newcontractsandrelationshipshave
startedtoyieldbenefitsin2017andsowehaveseenanimprovementinbusiness
volumeandsomeflowthroughtothegrossmarginlevel.Thisdoesnot,however,fully
translatetoAdjustedEBITDAbecausethereisalagofuptoayearfrominvestment
inthebusinessinfrastructureandpeopletothedeliveryofbothtop-linegrowthand
operatingmargins.Weanticipatethatthesebenefitswillbeseenfrom2018onwards.
Asaresult,AdjustedEBITDAimprovedby£0.2millionin2017toalossof£0.8million
(2016:loss£1.0m).
Group Operating Loss
Groupoperatinglossincreasedby£0.2millionto£0.5million.Thiswasdrivenby
year-on-yearincrementalnon-operatingexpensesinrelationtobusinesstransformation
of£0.5million,aone-timenon-cashimpairmentchargeof£0.5millionrelatingtothe
tangibleandintangibleassetsofourlow-endfabricationactivity,basedinOldham,
Lancashireandanincreasednon-cashshare-basedpaymentschargeof£0.4million
arisingfromthereplacementandissueofmanagementshareoptionsin2017.
Cash and bank balances
Year-endGroupcashof£21.9million(2016:£9.2m),wasprimarilyduetoreceipts
fromtheequityplacementreceivedattheendofJuly2017.Thiswasmarginallybelow
expectationsduetothetimingofamajorcustomerpayment(£2.6m)whichwasreceived
inearlyJanuary2018.
Order book
During2017,theGroup’sclosingorderbookincreasedby89%to£32.1million
(2016:£17.0million)asaresultofthesuccessfulcaptureofstrategiclong-term
contracts.Investmentinbusinessdevelopmentresourceshasdrivenenhancedaccount
managementmethodsandconversionofsalescampaignsintheServicesbusiness.
Annual Report & Financial Statements 2017
22
Equity raise
On28July,TPGroupplcissued336,101,128newordinarysharesatanissuepriceof
6.5pencepershare.Thisraisedatotalof£21.85millionbeforeexpenses,which
providedtheGroupwith£20.8million,netofexpenses,tobeusedprimarilytohelp
fundtheGroup’sacquisitionprogrammeandotherinternalinvestments.
Followingthefundraising,theGroupnowhas758,565,854ordinarysharesinissue,and
admittedtotradingonAIM.
Acquisitions, investments and disposals
TheCompanyannouncedtheacquisitionofALSandFSSinFebruary2017.Thepurchase
wascompletedforacombinedinitialconsiderationof£1.25milliononadebt-free,cash-
free,normalisedworkingcapitalbasis,fundedfromtheGroup’scashresources.Further
considerationofupto£1.5millionmayfalldueonachievingprofitrelatedearn-out
targetsoverthefirst20monthsfromcompletion.Themaximumconsiderationpayable
forALSandFSS,assumingallearn-outtargetsaremet,is£2.75million.
BothcompaniesoperatefromWincanton,Somerset,andbetweenthemprovide
systemsengineeringandassurancecapabilitysafety-criticalsoftwareforthedefence,
aerospaceandcommercialsectors.
WeannouncedtheacquisitionofPolarisinDecember2017foraninitialconsiderationof
£1.5milliononadebt-free,cash-free,normalisedworkingcapitalbasis,withamaximum
additional£2.0millionpayablealsocontingentonprofitrelatedearn-outtargetsover
thefirst21monthsfromcompletion.
PolarisoperatesfromofficesinFarehamandBristolanddeliverstechnicalconsultancy
includingoperationalanalysis,projectcontrolsandcostengineeringservicesacrossthe
defenceandsecuritysectors,withadditionalactivityinenergyandtransportation.
TheGroupincurred£0.2millionofacquisition-relatedcosts(2016:£0.0m)predominantly
relatingtothetransactionsnotedabove.ThesewerechargedtotheStatementof
ComprehensiveIncomeintheyear.
TheGrouphascommittedtoinvestinthefacilitiesandstaffalreadyinthebusiness
tobuildcapabilityanddevelopourpropositions.AcrosstheGroup,£2.0millionwas
investedoncapitalequipmentandnewsystemsandfacilitiesimprovementsin2017.
ThemajorinvestmentwasthecommissioningoftheAdvancedManufacturingCentre
inManchester,totalling£1.3million.TheAMChasthelatestprecisionengineering
equipmentincludinghigh-precisionmachinetoolsandmetrology,whichbetterpositions
TPGrouptodelivercomplexengineeringsolutionsinhighvaluesectors.Alocal
governmentgrantof£0.2millionwassecuredtowardthefinancingofthisinvestment.
OthersignificantinvestmentsweremadeinITsystemsandbusinesstransformation
activitiesacrosstheGroup.
Postyear-end,thedirectorshavereachedanagreementwiththelocalmanagementto
disposeofthetradeandassetsofourlow-endfabricationactivity,basedinOldham,
Lancashire,underamanagementbuy-out.Theseassets,followingtheirimpairment,
23
arevaluedatlessthan£0.1millionasat31December2017andwillbedisposedof
foratotalconsiderationof£0.3millionpayableoverthenext3years.Theseactivities
achievedbreakevenatanoperatingprofitlevelin2017.
ThesetransactionsallcontributetotheGroup’stransformationandgrowthstrategy
thatfocusesonhightechnologyservicesandengineeringbusinessesinsectorsthatthe
Groupknowsandunderstands.
Non-operating items
Duringtheyear,theGroupincurredone-offnon-operatingcostsof£0.7million
(2016:£0.2m).Theserelatetothebusinesstransformationactionsrequiredbythe
strategicplan,andincludestaffandcontractterminationcosts,andfacilityliabilities
relatingtotheclosureofthelegacyTPGDesign&Technologyoffice.
Finance costs
Financecostsof£0.1millionwereincurred,predominantlyrelatingtothefairvaluation
ofaforwardcurrencyexchangecontract.
Taxation
TheGroupexpectstoincurcashtaxpaymentsof£0.1mforthe2017financialyear
(2016:£nil).
Results and dividends
Thedirectorsdonotrecommendthepaymentofadividend(2016:£nil).
Going concern
ThedirectorsaresatisfiedthattheGrouphasadequateresourcestocontinuein
businessfortheforeseeablefutureandaccordinglycontinuetoadoptthegoing
concernbasisinpreparingtheaccounts.Inreachingthisconclusion,thedirectorshave
consideredforecaststhatcoveraperiodofatleasttwelvemonthsfromthedateofthe
approvalofthesefinancialstatements.
TheforecaststakeintoaccounttheGroup’sexistingcashresourceswhich,asaresult
oftheequityraiseof£20.8millioninJuly2017,providessufficientinsulationagainstany
reasonabledownsidescenariosandrisks.
Annual Report & Financial Statements 2017
24
25
Corporate and
Social Responsibility
AtTPGroup,wetakeprideinourglobalreputationforprovidingspecialist
services and engineering solutions in a manner that never compromises our
integrityorourhighstandardsofbusinessconduct.Wetakeseriouslyour
responsibilitytobehaveinamannerwhichisbothresponsibleandethical.
Thiscodeappliestoallofficers,employees,workers,contractorsandall
thoserepresentingTPGroup(includingitssubsidiaries)inanycapacity.
Equality of opportunity
Wecreateanenvironmentwhereindividualsaretreatedwithdignityandrespect,inline
withourdutytoprovideequalopportunitiestoall.
Werespecthumanrightsanddonotdirectlyorindirectlydiscriminatebetweenpersons
basedonreasonsofrace,creed,sex,gender,sexualorientation,socialstatus,religion,
nationality,pregnancy,ageorbodilyormentaldisability.
Werespectthecultures,customsandhistoryofeverycountryinwhichweoperateor
withwhomwemaycomeintocontact.
Healthy work environment
Werespectoneanotherandmakeeveryefforttoensurethattheworkenvironment,
whetherinanoffice,workshoporotherlocationwhereworkiscarriedout,isanopen
andcomfortableenvironment.
Nooneshoulddisturbthesounddiscipline,environmentandgoodorderofthework
environmentbyconduct,suchassexualharassment,whichiscontrarytopublicorder
andgoodmoralstandards.
Wedonottolerateanyformsofbullying.Fortheavoidanceofdoubt,bullyinginvolves
anyoffensive,intimidatingorinsultingbehaviourinvolvingthemisuseofpowerthatcan
makeapersonfeelvulnerable,upset,humiliated,underminedorthreatened.
Ifsomeone’sactionsintheworkenvironmentareoffensiveandhostile,weencourage
otherstospeakupwithoutfearsothatwecanremedythesituationquicklyand
sensitively.
Service standards to clients/customers
Welistenwithsinceritytotheopinionsofcustomersandshallreflectupontheminthe
carryingoutofbusinessaffairsinthefuture.
Weshallprovidecustomerswithaccurateinformation(properlabellingand
representation)relatingtoproducts,services,etc.inordertoachievecustomer
reassuranceandsatisfaction.
Annual Report & Financial Statements 2017
26
27
Compliance with anti-corruption law
Inourbusinessdealingsweneveractinamannerwhichresultsinanillegalrestraintof
trade,suchascollusionintenderorcollusionwithaviewtothefixingofpricelevelsor
levelsofproductionorsupplyorthedivisionofmarkets.
Weneverconductunfairtradepractices,suchasboycott,resalepricemaintenanceor
paymentofunjustifiedrebates.
Anti-bribery, gift and favour
Wetakeazero-toleranceapproachtobriberyandarecommittedtoacting
professionally,fairlyandwithintegrityinallourbusinessdealingsandrelationships
whereverweoperate.
Weconductourselvesinanethicalandresponsiblemannerinthecommunitiesinwhich
wework.Inparticular,wedonot:
• renderpublicofficialsorpersonsinasimilarposition,anyeconomicfavoursuchas
money,giftorotherfavourinreturnforperformanceoftheirduties.
• payanyagent,advisororconsultantanycommissionwhichtheyhavereasonto
knowwillbeusedforinfluencingpublicofficialsorpersonsinasimilarpositioninan
unlawfulmanner.
• renderemployeesorofficersofcustomersanyeconomicfavoursuchasmoney,gift
orotherfavour,thevalueofwhichisgreaterthanagenerallyacceptedcommercial
level,norreceivesucheconomicfavourfromemployeesorofficersofcustomers.
Conflicts of interest
Ourbusinessjudgementisfreefrombias,conflictsofinterestorundueinfluenceof
others.Anysituationthatmightinterferewithourabilitytoperformourjobseffectively,
orevencreateanappearanceofbias,shouldbeavoided.Inparticular,employees
shouldnot:
• participateinanyactivityorassociationwhichcreatesorappearstocreateaconflict
betweenhisorherpersonalinterestandTPGroup’sbusinessinterest.
• useTPGroup’sproperty,assetsorinformationsystemforanypurposeotherthan
thatofTPGroup’sbusiness.
Treatment of confidential information
Westrivetoprotectthosewhohaveplacedtheirtrustinus.Wethereforeconductour
businesswithtransparencyandhonesty.Assuch,employeesshould:
• holdanysecretinformationofTPGroupasstrictlyconfidentialandshouldnotdivulge
suchinformationtoanythirdparty,norshouldtheyusethesameforanypurpose
otherthanthatofthebusinessofTPGroup.
• notinfringetheintellectualpropertyrightsofanythirdparty,includingthecopyingof
computersoftware,withoutexpresspermissionofsuchthirdparty.
• timelydiscloseanyinformationofTPGroupinaccordancewithanylawsand
regulations protecting the interests of investors including the rules of any relevant
stockexchanges.
IfemployeesbecomeacquaintedwithanyinformationoftheTPGrouporitscustomers
whichmaymateriallyinfluencethejudgementofinvestorsintheTPGrouporin
suchcustomers,theyshouldnotsellorpurchaseanystockofTPGrouporstockof
suchcustomersunlessanduntilsuchinformationbecomespublicandinanyevent
employeesshouldcomplywithallrelevantinsiderdealinglawsincludingbutnotlimited
totheMarketAbuseRegulations2016.
Weunderstandtheimportanceofensuringtheprivacy,securityandappropriate
handlingofthedataofandrelatingtoemployees,customersandsuppliers,including
allpersonaldataandweensurethatthisismanagedeffectivelythroughpolicies,
procedures,educationandauditsthroughoutourbusinesses.Preparationfor
compliancewithGeneralDataProtectionRegulation2016/679startedinAugust2016
andisontracktoensurewearefullypreparedforitsintroductioninMay2018.
Governmentagenciesrelyontheaccuracyoftherecordswehold.Assuch,
employeesshould:
• makeaccurateandtimelyaccountingreportsandshouldnotmakeanyfalseor
misleadingentriesinthecompany’sbooksandrecords.
• notusetheassetsorfundsofthecompanyforanyunlawfulpurpose,norshouldthey
establishormaintainundisclosedorunrecordedassetsorfunds.
No modern slavery
Modernslaverytakesvariousforms,suchasslavery,servitude,forcedorcompulsory
labourandhumantrafficking,allofwhichinvolveaviolationoffundamentalhuman
rightsbyanotherinordertoexploitthemforpersonalorcommercialgain.
Wetakeazero-toleranceapproachtomodernslaveryandarecommittedtoacting
ethicallyandwithintegrityinallourbusinessdealingsandrelationships.Assuch,
employees:
• areencouragedtoraiseconcernsaboutanyissueorsuspicionofmodernslavery
inanypartsofourbusinessorsupplychainsofanysupplierattheearliest
possiblestage.
• iftheybelieveorsuspectabreachofthispolicyhasoccurredorthatitmayoccur
theymustnotifytheirmanagerorreportitinaccordancewithourWhistleblowing
Policyassoonaspossible.
Protection of the environment
Wecomplywithalllawsandregulationsconcerningtheprotectionoftheenvironment
andmakeeveryefforttobeinformedandawareofenvironmentalissuesconcerning
TPGroupanditsbusiness.
AllbusinessundertakenbyTPGroupshouldbeconductedinaccordancewiththelaws
andregulationsconcerningtheprotectionoftheenvironmentandeveryeffortshould
bemadetotrytoensure,sofarasreasonablypossible,thatTPGroup’sbusinessdoes
notcausedamagetotheenvironment,andtherelevantemployeesshouldalways
conductanenvironmentalassessmenttoensurethatthisisthecase.
Report and sanction
Ifanemployeefindsevidenceofviolationoftheseguidelines,heorsheshouldinform
thebusinessimmediately.Employeesshouldcooperateinanyinvestigationofsuch
allegedviolation.
If,asaresultoftheinvestigation,itbecomesclearthattherewasaviolationofthe
guidelines,sanctionswillbeimposedontheviolator(andpossiblyonhisorher
superiors)inaccordancewiththeregulationsofTPGroupinforcefromtimetotime.
Thepersonsconcernedwiththeinvestigationofsuchallegedviolationshouldmake
everyefforttopreventsuchinformantandotheremployeeswhocooperateinsuch
investigationfromsufferinganydisadvantage.
Annual Report & Financial Statements 2017
28
Principal Risks
and Uncertainties
Inadditiontothefinancialriskmanagementthatisdetailedinnote27to
thefinancialstatements,managementhasidentifiedanumberofkeyrisks
anduncertaintiesthatcouldhaveamaterialimpactontheGroup.Risksare
reviewedbytheBoardandappropriateprocessesandcontrolshavebeen
implementedinrespectofmonitoringandcontrol.
TheGroup’sstrategyisimplementedtoachievethefollowingkeyobjectives:
Deliverpremiumservicesandengineeringinhigh-technologyapplications
andmarketsectors
Growthebusinessorganicallythroughinvestmentinpeople,systemsandfacilities
Growthebusinessbytheacquisitionofsuitablyalignedcompanies
Concentrateonhigh-valuemajoraccounts
Develop our international footprint
1
2
3
4
5
Thetablebelowdetailskeyrisksthathavebeenidentifiedandthestrategicthemes
theymostimpact.Theyarealsocharacterisedintermsofthedirectors’perceptionsof
changesintherisksfacingthebusiness.
Increasinglikelihoodorseverityofimpact
Nochangeinlikelihoodorseverityofimpact
Decreasinglikelihoodorseverityofimpact
Risk
Management strategy Change
1. Government policy, regulation and legislation
2
3
5
29
Brexit
Brexit is expected to have limited impact on the
Group as a result of our competitive position in
thekeyprogrammeswesupportacrossEurope.
Wewillcontinuetomonitorourpositionasthe
exitdatedrawscloser.
Revenuegeneratedfrom
defence and energy industry
contractsareimpactedby
government policies and
legislation.
Defencecontractsarewithlong-termcustomers
withwhomwehavewellestablishedandclose
workingrelationships.Defencepolicy,atleastin
theUK,hasprotectedthekeyprogrammeswe
areactiveon.Thisrisktypicallyimpactsrevenue
timingonly.
Thereareunderlyingrisks
associatedwithhealth,safety,
environmental,privacyandsocial
regulations.
TheserisksaremanagedbytheGroup’s
accreditationunderBSENISO14001
(EnvironmentalManagementSystem)and
OHSAS18001(OccupationalHealthandSafety
ManagementSystem).TheGroupisimplementing
measurestocomplywithGDPRduringthefirst
halfof2018.
2. Customers, competitors and commercial relationships
1
2
4
Commercial contracts for
customersmaybelargeand
longterm,withrisksrelating
to contract delivery and
performance,includingcost.
Internal procedures are in place to ensure that
risksaremanagedonacase-by-casebasisso
thatcontractscanbesuccessfullydeliveredto
customersontime,onbudgetandtothehighest
qualityspecification.
TheGrouphasanumberof
majorcompetitorsinitskey
marketswithvaryinglevels
ofcapabilityandcompetitive
proposition.
TheGroup’sapproachistomanagebusiness
developmentprimarilythroughthebusiness
unitteamswhoarecloselyalignedtotheir
propositions and the competitive threats
theyface.
Know-howhasbeenbuiltupovertime,andclose
relationshipswithcustomersprovideinsightinto
trendsintherequirementwhichcreatebarriersto
entryforcompetitors.
TheGroupisaffectedbythe
commercial conditions in the
energyanddefencemarkets.
TheGroupcarriesoutreviewandanalysisof
emergingtrendsinourkeymarketsincluding
politicalandeconomicaspects.Thismarket
intelligence informs strategy and planning
decisionsattheGroupandbusinessunitlevels.
The Group has a niche position
inthenavaldefencemarket.The
mainexternalmarketrisksrelate
topoliticalandsocio-economic
factors.
Closelinkswithcustomersandsuppliersprovides
insightintofuturetrendsandissuesthatallow
managementactionstobetakenattheearliest
opportunity.
Groupdiversificationreducestheoverallextentof
thisriskandourinvolvementincertainprotected
UKprogrammes,andgrowthinoverseas
opportunitiesworksinourfavour.
Annual Report & Financial Statements 2017
Risk
Management strategy Change
30
3. Acquisitions
Issues may arise from an
acquisitionthatcouldadd
unexpectedcostsorliabilitiesto
theGroup.
Suchriskscannotbeeliminated,howeverthey
aremitigatedthrough,amongstotherthings,
duediligence,vendorwarrantiesandintegration
plansdevelopedandexecutedinatimelyfashion.
Allacquisitionsaredirected,approvedand
monitoredbytheBoard.
4. Availability of key resources
Keyemployeeknowledgeand
skillbase
Majorcapitalassets-theGroup
dependsontheperformance,
reliabilityandavailabilityof
certainkeyequipmentand
informationtechnologysystems.
TheGroupseekstoavoidsinglepointsoffailure
orcapacityconstraintsbyattractingandretaining
suitablyskilledandexperiencedstafftosupport
thebusinessperformance.
This is achieved through appropriate and
competitiveremunerationpackages,aframework
for personal and professional development
andworkingenvironmentsthatmakeTPGan
attractiveplacetowork.
TheGroupseekstoavoidsinglepointsoffailure
orcapacityconstraintsbymanagingtechnical
focusacrossteams.
Attractionofsuitablyskilledandexperienced
stafftosupportthegrowthofthebusinessmay
lead to increased costs or constraints on delivery
ofcustomerprojects.TheGrouphasgood
relationshipswithanapprovedlistofrecruiters
withgoodmarketcoverage,utilisesthenetworkof
existingexperiencedstafftoidentifycandidates,
andhastakenstepstopositionandpresentthe
Groupasanappealingplacetowork.
5. Technology and security
Cybersecuritythreatscomeina
numberofforms,posingariskto
sensitive data held in the normal
courseofbusiness,aswellas
businessinterruptionrisk.
TheGrouphasimplementedCyberEssentials
acrossitsbusinessesandcontinuouslyreviews
thequalityofitssecurityshieldsandprotocolsto
mitigatethethreat.
3
1
1
31
The Report and Accounts are approved by the board of directors and signed on their
behalf on 16 April 2018 by:
Derren Stroud
Chief Financial Officer
Registered number: 3152034
Registered office: A2/1064, Cody Technology Park, Farnborough, Hampshire GU14 0LX
Annual Report & Financial Statements 2017
32
Board of Directors
33
Executive directors
Phil Cartmell
Chief Executive Officer
PhilCartmellwasappointedtotheBoardinSeptember2009.Hehasahighlyactive
careerinbusiness,havingformerlybeenChiefExecutiveofVegaGroupplcbetween
2001and2008,wherehegrewthecompanyintoaleadingEuropeanaerospaceand
defencebusiness.InFebruary2008,VegaGroupwasacquiredbyItalianmulti-national,
Finmeccanica,forasubstantialpremium.PhilhasservedasaNon-ExecutiveDirector
andadviserforanumberofcompaniesincludingAlterianplcaleadingproviderof
GlobalInformationManagementSolutions,wherehewasNon-ExecutiveChairmanuntil
itsacquisitionbySDLplcinJanuary2012andTrafficmaster.
Derren Stroud
Chief Financial Officer
DerrenStroudwasappointedtotheBoardinMarch2016.Derren,amemberof
theCharteredInstituteofManagementAccountantshasover20yearsofindustry
experience,includingseniorfinancerolesatRetailDecisions,EnvoxandSafenet.Hehas
workedwithinarangeofspecialistinnovationandengineeringbusinesses,withboth
publicandprivateequitybacking,servingaglobalcustomerbasefrommanufacturing
andcommercialsitesworldwide.
Non-executive directors
Andrew McCree
Non-Executive Chairman
AndrewMcCreewasappointedtotheBoardinOctober2014andhasover35years’
experienceofenergyandenvironmentaltechnologyandconsultingbusinesses,with
anextensiveknowledgeoftechnologiesandmarkets.Followinghisearlycareerwith
BPExploration,hethenjoinedtheUKAtomicEnergyAuthority(UKAEA)andin2005
becameChiefExecutiveofAEATechnology.Since2011hehasworkedforGustin
Partners,aUSspecialistconsultingbusiness.Hisprincipalrolehasbeentoadviseon
arangeofdefence,energyandclimatechangemattersworkingwithbothgovernment
agenciesandprivatesectorclients.
Phil Holland (appointed 21 February 2017)
Non-Executive Director
PhiljoinedtheGroupinFebruary2017.Heisacharteredaccountantandhasover
20years’experienceinboard-levelfinanceroles,previouslywithAtlasEstatesLimited,
LaingO’Rourkeplc,TeeslandplcandEstates&Generalplc.In2011,PhilbecameFinance
DirectorandDeputyManagingDirectorofPrimaryHealthPropertiesPLC(‘PHP’),a
leadinginvestorinprimarycarerealestate,withaportfolioofover300medicalcentre
propertiesacrosstheUKandRepublicofIreland,untilleavingthatroleon31March
2017.PhiljoinedPrimeplc,ahealthcarerealestatedeveloperasChiefInvestment
Officeron10April2017.PhilchairstheAuditCommitteeandhasheldthispositionsince
appointment.
Jeremy Warner-Allen (appointed 27 February 2017)
Non-Executive Director
JeremyjoinedtheGroupinFebruary2017.Hehasover25years’experienceincapital
markets,mostrecentlyasExecutiveDirector,BoardMemberandHeadoftheGrowth
CompaniesTeamatCenkosSecuritiesplc,whereheadvisedanumberofAIMcompanies
overaperiodof11years.PriortojoiningCenkos,hewasafoundingmemberofBeeson
GregoryLimitedandresponsiblefortheUKsalesdesk,aroleheretainedwhenBeeson
GregorymergedwithEvolutionSecuritiesin2002.JeremychairstheRemuneration
Committeeandhasheldthispositionsinceappointment.
Annual Report & Financial Statements 2017 Report of the Directors
34
The directors present their report together with the audited financial statements for the year ended
31 December 2017.
Report of the Directors (continued)
Capital management (continued)
(cid:3)
(cid:3)
35
Principal activity
TP Group is a professional services and technology partner to global prime contractors that are active in
security, energy and aerospace programmes. We advise on management and technology solutions and
deliver with advanced manufacturing skills and expertise. Our team combines world-class skills in
complex technologies with modern design and manufacturing facilities to provide a fully balanced and
agile support network to our customers and partners wherever they may be. The Group consists of two
interlinked business units:
Consulting & Programme Services - advising clients on strategic problems and implementing
technology-driven solutions; and
Engineering & Technology - capability to design, manufacture and support mission-critical
systems.
Results and dividends
In July 2017, the Group raised further funds through an issuance of ordinary shares. On 28 July,
336,101,128 shares were issued for trading on AIM at an issue price of 6.5 pence per share. This raised
gross proceeds of £21.8 million, realising £20.8 million net of fees and expenses, to be used primarily to
help fund the Group's acquisition programme and other internal investments.
Following the fundraising, the Group now has 758,565,854 ordinary shares in issue admitted to trading
on AIM.
Creditor payment policy
The Group and Parent Company seek to agree payment terms with their suppliers in advance of a
transaction and will pay in accordance with the agreed terms as long as the Group and Parent Company
are satisfied that the supplier has provided goods and services in accordance with the order.
The Group’s creditor payment period was 31 days (2016 - 31 days). The Parent Company’s creditor
payment period was 31 days (2016 - 35 days).
The directors do not recommend the payment of a dividend (2016 - £nil).
Employees
The results of the financial year and future developments of the Group are detailed in the Strategic Review
and the Financial and Business Review.
Research and development
Total R&D expenditure in the year was £0.2m (2016 - £0.8m), all of which was charged to the income
statement in the year.
Capital management
Capital consists of equity attributable to the shareholders of TP Group plc (the “Parent Company”).
The primary objective of the Group’s capital management actions is to ensure that it maintains sufficient
capital to support the on-going expenditure requirements of the business with a view to future
commercial success from these activities in order to maximise shareholder value.
The Group manages its capital structure and makes adjustments to it in light of working capital
requirements. To adjust the capital structure, the Group may issue new shares or raise debt capital.
The success of the Group depends on maintaining a highly qualified and well-motivated workforce. Every
effort is made to achieve a common awareness of the financial and economic factors affecting the
performance of the Group. Regular communication with all employees is essential and achieved by
informal meetings, email updates and internal briefings.
The Group’s Equality Policy encourages recruitment, training, career development and promotion on the
basis of professional capability and is committed to retaining and retraining as necessary employees who
become disabled during the course of their employment.
Directors' and Officers' liability insurance
The Group has purchased liability insurance covering the directors and officers of the Parent Company
and its subsidiaries.
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Report of the Directors (continued)
Directors and their Interests
36
The directors during the year and up to the date of this report were as follows:
Executive
P Cartmell
S Kings (resigned 9 February 2018)
D Stroud
Non-executive
A McCree
P Holland (appointed 21 February 2017)
J Warner-Allen (appointed 27 February 2017)
Directors’ interests in shares are shown in the Remuneration Report.
Related party transactions
These have been disclosed within note 30 to the accounts.
Auditor
Each of the persons who is a director at the date of approval of this report confirms that:
so far as the directors are aware, there is no relevant audit information of which the Group’s auditor
is unaware; and
the directors have taken all the steps that they ought to have taken as a director to make
themselves aware of any relevant audit information to establish that the Group’s auditor is aware of
that information.
The confirmation is given and should be interpreted in accordance with the provisions of s418 of the
Companies Act 2006.
Deloitte LLP have expressed their willingness to be re-appointed for another term. A resolution to re-
appoint them as the Group’s auditor will be proposed at the next annual general meeting.
By order of the board
Claire MacPherson
Company secretary
Cody Technology Park
Old Ively Road
Farnborough
Hampshire
GU14 0LX
16 April 2018
(cid:3)
Corporate Governance Report
Principles of Good Corporate Governance
(cid:3)
37
The Group is committed to high standards of corporate governance. It has adopted procedures to
institute good governance insofar as it is practical and appropriate for an organisation of its size and
nature, notwithstanding the fact that companies that have securities traded on the AIM market operated
by the London Stock Exchange are not required to comply with the Combined Code as appended to the
Listing Rules issued by the Financial Conduct Authority. Whilst not required to comply with the Combined
Code, the Group has chosen to give selected disclosures which they believe are necessary or valuable to
readers.
As the Group grows, it will regularly review the extent of its corporate governance practices and
procedures. At its current stage of development, the Parent Company does not consider it appropriate
to be fully compliant with the Combined Code.
On 9 March 2018 the London Stock Exchange announced that all AIM companies will be required to
apply a recognised corporate governance code from 28 September 2018. The Group is reviewing the
small selection of recognised corporate governance codes that are proportionate to a company of its
size, such as the Quoted Companies Alliance “Corporate Governance Code for Small and Mid-Size
Quoted Companies”, and will select and apply and appropriate code at the earliest opportunity ahead of
the required date.
Application of Principles
Directors
Following the departure of Richard King at the end of 2016 and Andrew McCree assuming the role of
non-executive Chairman, two new independent non-executive directors were appointed to the board in
February 2017, taking the total to three. Until February 2018 the board included three full time executive
directors, which was then reduced to two. The board met 9 times in the year and is provided with relevant
information on financial, business and corporate matters sufficiently prior to meetings to enable it to
properly discharge its duties.
The board is responsible for overall Group strategy, acquisition and divestment policy, approval of the
budget, approval of major commercial contracts and capital expenditure projects and consideration of
significant operational and financial matters.
The board is responsible for effective risk management across the Group and retains ownership of the
significant risks that are faced by the Group. This includes ultimate responsibility for determining and
reviewing the nature and extent of the principal risks faced by the Group and assessing the Group’s risk
management processes and controls. These systems and controls are designed to identify, manage and
mitigate risks that the Group faces but will not eliminate such risks and can provide reasonable but not
absolute assurance. The Group’s risk management processes include the close involvement of the executive
directors in the day-to-day running of the business and regular reports submitted to and considered at
meetings of the board and its committees. The board also considers employee issues, key appointments
and compliance with relevant legislation.
The board has both an Audit and a Remuneration Committee. The board does not consider it necessary
to constitute a separate Nominations Committee and all members of the board are consulted on the
potential appointment of a new director or a company secretary.
All directors can receive appropriate training as necessary and are able to take independent professional
advice in relation to their duties if necessary at the Parent Company’s expense. Directors are subject to
re-election in accordance with the Articles of Association.
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Corporate Governance Report (continued)
Corporate Governance Report (continued)
Application of Principles (continued)
38
Relationship with shareholders
Application of Principles (continued)
Responsibility statement
We confirm that to the best of our knowledge:
(cid:3)
(cid:3)
39
The board attaches a high importance to maintaining good relationships with all shareholders. The board
holds regular meetings with institutional shareholders to keep them updated on the Group’s
performance, strategy, management and board membership. In addition, the board welcomes as many
shareholders as possible to attend the Parent Company’s Annual General Meeting and encourages an
open discussion after the formal proceedings. The executive directors give regular briefings to a number
of analysts, who cover the Group’s sector and actively encourage more analysts to follow the Group.
Directors' responsibilities
The directors are responsible for preparing the Annual Report and the financial statements in accordance
with applicable law and regulations.
Company Law requires the directors to prepare financial statements for each financial year. Under that
law, the directors are required to prepare the Group financial statements in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the European Union and have also chosen to
prepare the parent company financial statements under IFRSs as adopted by the EU.
Under Company Law, the directors must not approve the accounts unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that
period. In preparing these financial statements, International Accounting Standard 1 requires that
directors:
properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information;
provide additional disclosures when compliance with the specific requirements in IFRSs are
insufficient to enable users to understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial performance; and
assess the Group’s ability to continue as a going concern
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position
of the Group and Parent Company and enable them to ensure that the financial statements comply with
the Companies Act 2006. They are also responsible for safeguarding the assets of the Parent Company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Parent Company’s website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other jurisdictions.
the financial statements, prepared in accordance with International Financial Reporting Standards
as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position
and profit or loss of the Parent Company and the undertakings included in the consolidation taken
as a whole;
the strategic report includes a fair review of the development and performance of the business and
the position of the Parent Company and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties that they face; and
the annual report and financial statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess the Parent Company’s position
and performance, business model and strategy.
Audit Committee
The Audit Committee, comprises three non-executive directors and is chaired by Philip Holland, being
appointed as chair in February 2017 upon his appointment to the board. The Committee has specific
terms of reference that deal with its authority and duties. It meets at least twice a year, with the executive
directors, and the auditor attending by invitation. The Committee reviews the independence and
objectivity of the auditor each year. The Committee reviews the adequacy of the Group and the Parent
Company's internal controls, accounting policies and financial reporting and provides a forum through
which the Parent Company's external auditor reports to the non-executive directors. The chair of the
committee meets periodically with the auditor away from management to discuss matters relevant to the
Group.
The board has decided that the size of the Group does not justify a dedicated internal audit function.
This position will be reviewed as the Group's activities increase.
Going Concern
A review of going concern is included within the accounting policies described in note 2 to the Financial
Statements.
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
(cid:3)
Corporate Governance Report (continued)
Internal Control and Risk Management
40
The board has overall responsibility for ensuring that the Group and the Parent Company have processes
to identify, evaluate and manage key risks. The nature of the Group’s business comprises a mix of
commercial design, manufacturing, system engineering and through life support. The processes are
designed to manage and minimise risk of failure to achieve the Parent Company's strategic objectives,
and can only provide reasonable, and not absolute, assurance against material misstatement or loss.
The Audit Committee is delegated responsibility for reviewing the Group’s systems of risk management
and their effectiveness on behalf of the Board. These systems and processes have been in place for the
year under review and remained in place up to the date of approval of the Annual Report and accounts.
The directors consider that the present system of internal control is sufficient for the needs of the Group
and the Parent Company and adequately addresses the risks to which the Group is perceived to be
exposed.
On behalf of the board
Philip Holland
Chairman, Audit Committee
16 April 2018
Remuneration Report
Unaudited Information
Remuneration Committee
(cid:3)
41
The Remuneration Committee, as of April 2018, is made up of three non-executive directors and is
chaired by Mr Jeremy Warner-Allen. Meetings were attended by the Chief Executive by invitation. The
Remuneration Committee sets and annually reviews the terms and conditions of employment of the
executive directors. The remuneration of non-executive directors is fixed by the board as a whole.
Remuneration Policy
The Parent Company's policy on executive directors' remuneration is to attract and retain high quality
executives by paying competitive remuneration packages relevant to each director's role, experience and
the external market. The packages include a basic salary, pension contributions, bonus scheme and share
options. Share options are granted with performance conditions.
Service Agreements
Executive directors are employed on service contracts with either 6 or 12 month notice periods. Non-
Executive directors are appointed on three year contracts, with no notice period.
Audited Information
Directors' Emoluments
Basic
salary
or fees
£000
Pension
contributions
£000
Other
benefits
£000
Total
emoluments
2017
£000
Total
emoluments
2016
£000
257
161
140
-
-
52
27
25
-
12
11
10
-
-
-
-
-
-
36
17
14
-
-
-
-
-
-
305
189
164
-
-
52
27
25
-
460
216
146
69
222
32
-
-
52
Executive
P Cartmell
S Kings
D Stroud1
M Blomley2
M Crawford2 3
Non-executive
A McCree
P Holland4
J Warner-Allen4
R King2
662
33
67
762
1,197
1 Directors’ 2016 emoluments recorded relate only from date of appointment to the board in March 2016.
2 Directors resigned during 2016 and emoluments relate to the period through to resignation.
3 Includes a termination payment of £201,050.
4 2017 emoluments are for the period from the date of appointment to the board in February 2017.
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Remuneration Report (continued)
Directors' Share Options
42
(cid:3)
Remuneration Report (continued)
Directors' Interests
(cid:3)
43
The interests of the directors, who were in office during the financial year, in options over the new
Ordinary Shares at 31 December 2017 and 31 December 2016 were:
As at 31
December
2016
Exercised
in year
number Number
Cancelled
in year
number
Issued
in year
Number
As at 31
December
2017
number
Exercise
price (p)
Lapse date
Executive
P Cartmell
P Cartmell
P Cartmell
P Cartmell
D Stroud
S Kings
S Kings
Non-
executive
A McCree
3,000,000
4,000,000
2,300,000
-
-
250,000
-
250,000
-
-
-
-
-
-
-
-
(3,000,000)
(4,000,000)
(2,300,000)
-
-
-
-
-
-
15.00 9 December 2020
10.00 9 April 2024
10.00 21 May 2025
-
22,179,398
22,179,398
7.00 9 May 2027
-
9,980,729
9,980,729
7.00 9 May 2027
(250,000)
-
-
10.00 5 October 2024
-
9,980,729
9,980,729
7.00 9 May 2027
-
-
250,000
10.00 30 September 2024
The closing mid-market price of an Ordinary Share as quoted on the Daily Official List as published by
the London Stock Exchange was 6.000p at 31 December 2017 and in the period 1 January 2017 to
31 December 2017 was a closing mid-market high of 8.375p per Ordinary Share and a low of 5.250p per
Ordinary Share.
The directors who were in office during the financial year, and appointed prior to the date of this report,
had the following beneficial interests in the Ordinary Shares of the Parent Company at
31 December 2017, at 31 December 2016 and at the date of this report:
Number held at
Number held at
Number held at
31 December 2017
16 April 2018
31 December 2016
Ordinary Shares of
Ordinary Shares of
Ordinary Shares of
1 pence each
1 pence each
1 pence each
P Cartmell
A McCree
S Kings1
D Stroud
P Holland
J Warner-Allen
3,136,105
333,847
1,557,693
653,847
421,978
1,854,945
3,136,105
333,847
n/a
653,847
421,978
1,854,945
2,520,700
180,000
1,250,000
500,000
-
350,000
1 S Kings resigned as a director on 9 February 2018 and therefore only his shareholdings as of 31 December 2017 and
31 December 2016 are disclosed.
On behalf of the Remuneration Committee
Jeremy Warner-Allen
Chairman, Remuneration Committee
16 April 2018
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TP GROUP PLC
Conclusions relating to going concern
(cid:3)
Report on the audit of the financial statements
44
Opinion
In our opinion:
the financial statements give a true and fair view of the state of the group’s
and of the parent company’s affairs as at 31 December 2017 and of the group’s
loss for the year then ended;
the group financial statements have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the
European Union;
the parent company financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union and as applied in
accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of TP Group plc (the ‘parent company’) and its
subsidiaries (the ‘group’) which comprise:
the Consolidated statement of comprehensive income;
the Consolidated and Parent company statement of financial position;
the Consolidated statement of changes in equity;
the Parent company statement of changes in equity;
the Consolidated and Parent Company statement of cash flows;
the Consolidated and Parent Company financial statement related notes 1 to 31;
The financial reporting framework that has been applied in their preparation is applicable law and
IFRSs as adopted by the European Union and, as regards the parent company financial
statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’)
and applicable law. Our responsibilities under those standards are further described in the auditor’s
responsibilities for the audit of the financial statements section of our report.
We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
- Revenue recognition on long-term contracts; and
- Provision for warranty.
Materiality
Scoping
The materiality that we used for the Group financial statements was
£400,000, which equates to 1.5% of Revenue.
We have performed full scope audits of all components excluding non-
trading entities, providing full coverage of the Group’s revenue, Group’s
net assets and the Group’s profit before tax.
(cid:3)
We are required by ISAs (UK) to report in respect of the following
matters where:
•
the directors’ use of the going concern basis of accounting
in preparation of the financial statements is not appropriate;
or
•
the directors have not disclosed in the financial statements
any
identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s
ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the
date when the financial statements are authorised for issue.
We have nothing to report in
respect of these matters
45
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue recognition on long-term contracts
Key audit matter
description
How the scope of
our audit
responded to the
key audit matter
Revenue in the engineering and services businesses is recognised when
significant risks and rewards of ownership are transferred to the buyer in
line with IAS 18. The key audit matter relates to contracts accounted for
under the percentage-of-completion method per IAS 18. There is a
heightened risk around the accuracy of the cost to complete estimates for
contracts spanning the year end and the recoverability of accrued income
of £5.7m as disclosed in note 15.
These estimates are reviewed by Management and represent their best
estimate of the stage of completion on open contracts at 31 December
2017.
The accounting policy is described in more detail in note 2.5.
We have performed the following procedures in order to address this key
audit matter:
- Inspected a sample of contracts to establish the terms and conditions,
along with the milestones for revenue recognition.
- Made enquiries of lead engineers for each project to assess the stage of
completion and estimated costs to complete.
- Recalculate revenue recognised on the contract as at 31 December 2017
based on stages of completion and costs incurred to date.
- Contracts have been assessed for post balance sheet performance and
out-turn against that forecast.
- Assessed the recoverability of any accrued income by verifying to signed
contract, post year-end billing/payment and third-party correspondence
where appropriate.
Annual Report & Financial Statements 2017
Key observations
From the work performed, we concluded that revenue recognised on the
contracts spanning the year end is appropriate.
46
Provision for warranty
Key audit matter
description
Since 2014, a subsidiary of the Group has been providing for the
rectification of a faulty component provided to one customer.
How the scope of
our audit
responded to the
key audit matter
The Group has provided £436,000 in note 23 in these financial statements
under IAS 37 Provisions. This is its best estimate of the expected outflow
associated with this obligation. The provision requires a significant amount
of estimation owing to the inherent uncertainty in the cost and time required
to amend the component, and as such this represents an area of judgement
for Management.
We have reviewed the assumptions used in management’s calculation in
the provision. Our procedures included the following:
- Discussed with the CFO and operational staff involved in the project with
the customer and reviewed their documentation in order to understand the
process and costs to resolve the identified issue.
- Reviewed the probability of the best and worst case scenario in terms of
costs to be incurred in order to resolve the identified issue.
- Assessed the value calculated by Management on each of the scenarios
presented and assessed their relative likelihood based on past experience
within the Group.
Key observations As a result of our work, we have concluded that the provisions held by the
Group in relation to the provision for future costs appear reasonable based
on the evidence available.
Group financial statements
Parent company financial
statements
Materiality
£400,000
£160,000
47
Basis for
determining
materiality
Our materiality of £400,000
is
determined based on 1.5% of
consolidated revenue.
Our materiality of £160,000 equates to
1.3% of the parent company equity.
This has been capped at 40% of Group
materiality.
The parent company’s principal activity
is not to generate revenue, but more
to provide the subsidiary entities with
expertise through the experience of
the Board and Management.
As such, the investments are the key
component of the individual financial
statements and therefore equity is
deemed to be a more representative
and stable view of how the company is
performing.
Rationale
for the
benchmark
applied
In determining our benchmark we
considered the focus of the principal
users of the financial statements and
the stability of the metrics.
Revenue is a key performance measure
for the Group, as this is one of the key
metrics reported to the markets and
considered to be a key share price
driver. We considered alternative
benchmarks such as profit/loss before
tax and adjusted EBITDA. Loss before
tax
are
considered to be too volatile year-on-
year for us to form a consistent and
representative view on materiality.
adjusted EBITDA
and
We therefore concluded that Revenue
is the most appropriate basis on which
to determine materiality.
We agreed with the audit committee that we would report to them all audit differences in excess of
£20,000 for the Group and £8,000 for the parent company, as well as differences below that
threshold that in our view, warranted reporting on qualitative grounds. We also report to the audit
committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
Our application of materiality
An overview of the scope of our audit
We define materiality as the magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our audit work and in evaluating the
results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a
whole as follows:
Our group audit was scoped by obtaining an understanding of the group and its environment,
including group-wide controls, and assessing the risks of material misstatement at the Group level.
Based on that assessment we focused our group audit scope primarily on audit work at all
components of the group, inclusive of the parent company but excluding non-trading entities of
the Group. All of these companies were subject to a full audit. These components represent the
principal business units and account for 100% of the Group’s net assets, revenue and pre-tax
profit. They were selected to provide an appropriate basis for undertaking audit work to address
the key matters identified above. Our audit work at the components was executed at levels of
materiality applicable to each individual entity which were lower than group materiality, ranging
between £160,000 and £300,000.
At the parent company level we tested the consolidation process and performed analytical review
procedures on entities outside of those subject to full scope audit procedures to confirm that there
were no significant risks of misstatement relating to those entities.
Annual Report & Financial Statements 2017 Other information
Report on other legal and regulatory requirements
(cid:3)
48
The directors are responsible for the other information. The other
information comprises the information included in the annual
report other than the financial statements and our auditor’s report
thereon.
We have nothing to report in
respect of these matters.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and
the parent company’s ability to continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on
the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
(cid:3)
49
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year
for which the financial statements are prepared is consistent with the financial statements;
and
the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the group and or the parent company and their
environment obtained in the course of the audit, we have not identified any material
misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
we have not received all the information and explanations
we require for our audit; or
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns.
We have nothing to report in
respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in
our opinion certain disclosures of directors’ remuneration have not
been made.
We have nothing to report in
respect of this matter.
SIMON OLSEN FCA
(SENIOR STATUTORY AUDITOR)
For and on behalf of Deloitte LLP
Statutory Auditor
Reading, United Kingdom
16 April 2018
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Consolidated Statement of Comprehensive Income
Consolidated and Parent Company Statement of Financial Position
50
For the year ended 31 December 2017
At 31 December 2017
51
Revenue
-Continuing operations
-Acquisitions
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating loss
-Continuing operations
-Acquisitions
Adjusted EBITDA
Depreciation, amortisation and impairment
Acquisition-related costs
Non-operating costs
Share based payments
Operating loss
Net finance cost
Loss before income tax
Income tax (charge)/credit
Total comprehensive loss for the year attributable to
shareholders
Note
3
4
3
6
7
Group
2017
2016
£'000
£'000
25,900
3,560
29,460
(21,232)
21,226
-
21,226
(14,748)
8,228
6,478
(67)
(8,693)
(665)
133
(532)
2,582
(1,842)
(242)
(655)
(375)
(532)
(65)
(597)
(122)
(719)
(361)
(6,381)
(264)
-
(264)
1,066
(1,051)
(44)
(231)
(4)
(264)
(69)
(333)
134
(199)
Loss per share expressed in pence per share
Basic and diluted loss per share
8
(0.12)
(0.05)
All comprehensive
All comprehensive income relates to shareholders of the Parent Company and all amounts relate to continuing activities. The
notes on pages 55 to 100 form part of these financial statements.
ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred taxation
Investments
Amounts owed by EBT
Current assets
Inventories
Trade and other receivables
Taxation recoverable
Cash and bank balances
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Obligations under hire purchase contracts
Non-current liabilities
Deferred taxation
Obligations under hire purchase contracts
Provisions
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Own shares held by the EBT
Share-based payments reserve
Retained earnings
Note
9
10
11
17
12
13
14
17
18
20
21
22
21
23
24
Group
Parent Company
2017
£'000
4,170
11,759
2,126
-
-
-
2016
£'000
3,918
8,775
667
130
-
-
2017
£'000
-
180
33
-
15,435
96
2016
£'000
-
177
13
-
11,681
104
18,055
13,490
15,744
11,975
230
13,798
10
21,931
116
7,161
71
9,160
-
3,130
-
17,617
35,969
16,508
20,747
-
2,984
-
714
3,698
54,024
29,998
36,491
15,673
(10,962)
(211)
(8,391)
(7)
(5,833)
-
(3,040)
-
(11,173)
(8,398)
(5,833)
(3,040)
(1,425)
(747)
(561)
(823)
(13)
(1,101)
(2,733)
(1,937)
-
-
(10)
(10)
-
-
(10)
(10)
(13,906)
(10,335)
(5,843)
(3,050)
40,118
19,663
30,648
12,623
7,586
17,438
(561)
1,553
14,102
4,225
-
(561)
1,178
14,821
7,586
17,438
-
1,459
4,165
4,225
-
-
1,084
7,314
Total equity
40,118
19,663
30,648
12,623
The financial statements were approved and authorised for issue by the board of directors and were signed on its behalf
on 16 April 2018. The notes on pages 55 to 100 form part of these financial statements.
Phil Cartmell
Chief Executive
(Company number: 3152034)
Derren Stroud
Chief Financial Officer
Annual Report & Financial Statements 2017 Consolidated Statement of Changes in Equity
Parent Company Statement of Changes in Equity
52
For the year ended 31 December 2017
For the year ended 31 December 2017
53
Group
Share
Share
capital premium
£'000
£'000
Capital
Own
shares
redemption held by
EBT
£'000
reserve
£'000
Share-
based
Payments
Reserve
£'000
Retained
earnings
£'000
Total
£'000
Parent Company
Share
capital
£'000
Capital
Share redemption
reserve
£'000
premium
£'000
Share-
based
payments
reserve
£'000
Retained
earnings
£'000
Total
£'000
42,246
13,769
575
(561)
1,174
(37,345)
19,858
Balance at
1 January 2016
42,246
13,769
575
1,080
(40,176)
17,494
(38,021)
(13,769)
(575)
52,365
-
-
4
Capital reduction
(38,021)
(13,769)
(575)
IFRS 2 share option charge
-
-
-
-
4
-
(199)
(199)
Total comprehensive loss
(561)
1,178
14,821
19,663
Balance at
31 December 2016
-
-
4,225
-
-
-
-
-
-
-
375
-
-
20,799
375
-
(719)
(719)
(561)
1,553
14,102
40,118
Share issue
3,361
17,438
IFRS 2 share option charge
Total comprehensive loss
Balance at
31 December 2017
-
-
-
-
7,586
17,438
The notes on pages 55 to 100 form part of these financial statements.
-
4
-
52,365
-
-
4
(4,875)
(4,875)
1,084
7,314
12,623
-
375
-
20,799
-
375
-
(3,149)
(3,149)
1,459
4,165
30,648
-
-
-
-
-
-
-
Balance at
1 January 2016
Capital reduction
IFRS 2 share option
charge
Total comprehensive loss
-
-
-
-
-
Balance at
31 December 2016
4,225
Share issue
IFRS 2 share option
charge
Total comprehensive loss
Balance at
31 December 2017
3,361
17,438
-
-
-
-
7,586
17,438
-
-
-
-
-
-
-
The notes on pages 55 to 100 form part of these financial statements.
Annual Report & Financial Statements 2017 Consolidated and Parent Company Statement of Cash Flows
54
For the year ended 31 December 2017
Notes to the Financial Statements
1 Nature of operations
(cid:3)
55
Group
Parent Company
2017
2016
2017
2016
Note
£'000
£'000
£'000
£'000
(597)
(333)
(3,149)
(4,875)
Operating activities
Loss before income tax
Adjustments for:
Depreciation
Amortisation
Impairment losses on tangible and intangible
assets
Finance cost/(income)
Share-based payment expense
Increase in impairment on loan to the EBT
Provision against long term inter-company loan
Decrease in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
Income tax received
Net cash (used)/generated in operating
activities
Investing activities
Acquisition of subsidiary, net of cash acquired
Interest received
Purchase of property, plant and equipment
Purchase of computer software
Long term loan to subsidiary
217
1,132
493
65
375
-
-
66
(5,277)
(264)
(540)
(4,330)
(87)
98
953
-
69
4
-
-
53
(836)
2,563
5
2,576
-
15
44
-
(14)
375
8
1,055
-
(146)
1,370
-
(442)
-
(4,417)
2,576
(442)
(2,564)
14
(908)
(47)
-
-
1
(313)
(106)
-
(3,071)
14
(35)
(47)
(315)
13
12
25
Net cash used in investing activities
(3,505)
(418)
(3,454)
Financing activities
Proceeds from issue of ordinary share capital
Interest payable
Repayment of hire purchase liabilities
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
20,799
(26)
(80)
20,693
12,771
9,160
21,931
-
-
(3)
(3)
2,155
7,005
9,160
20,799
-
-
20,799
16,903
714
17,617
The notes on pages 55 to 100 form part of these financial statements.
9
37
-
(1)
4
(60)
3,998
-
72
730
10
(76)
-
(76)
-
1
-
(106)
(652)
(757)
-
-
-
-
(833)
1,547
714
The Group is a professional services and technology partner to global prime contractors that are active
in security, energy and aerospace programmes. The Group advises on management and technology
solutions and deliver with advanced manufacturing skills and expertise.
The Group’s team links world-class skills in complex technologies with modern design and manufacturing
facilities to provide a fully balanced and agile support network to our customers and partners wherever
they may be.
The Group consists of two interlinked business units:
Consulting & Programme Services - advising clients on strategic problems and implementing
technology-driven solutions; and
Engineering & Technology - capability to design, manufacture and supports mission-critical systems.
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 traded on AIM.
2 Summary of Significant Accounting Policies
2.1 Basis of preparation
The consolidated and Parent Company financial statements have been prepared in accordance with
applicable International Financial Reporting Standards (“IFRS”) issued by the International Accounting
Standards Board as adopted by the European Union. The Group presents the consolidated financial
statements in pounds sterling, which is the Parent Company’s functional and presentation currency, and
all values are rounded to the nearest thousand except when otherwise indicated.
The financial statements have been prepared under the historical cost convention. 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.
Changes in accounting policies
a) New standards, interpretations and amendments effective from 1 January 2017
There were no new standards or interpretations effective for the first time for periods beginning on or
after 1 January 2017 that had a significant effect on the Group’s financial statements, although an
amendment to IAS 7 Statement of Cash Flows has resulted in a reconciliation of liabilities disclosed for
the first time in note 20.
b) New standards, interpretations and amendments not yet effective
There are a number of standards and interpretations which have been issued by the International
Accounting Standards Board that are effective in future accounting periods that the Group has decided
not to adopt early. The most significant of these are:
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers (both
mandatorily effective for periods beginning on or after 1 January 2018); and
IFRS 16 Leases (mandatorily effective for periods beginning on or after 1 January 2019).
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
2 Summary of Significant Accounting Policies (continued)
56
(cid:3)
2.1 Basis of preparation (continued)
b) New standards, interpretations and amendments not yet effective (continued)
The Group has progressed its projects dealing with the implementation of these three key new
accounting standards since reporting its interim annual results for the 6 months ended 30 June 2017 and
is able to provide the following information regarding their likely impact:
IFRS 9 Financial Instruments
The Group has identified that the adoption of IFRS 9, which replaces IAS 39 Financial Instruments
Recognition and Measurement from 1 January 2018, will have no material impact to its consolidated
financial statements.
IFRS 15 Revenue from Contracts with Customers
The Group’s operations generate revenues through both the provision of services and the production
of high-integrity equipment. Due to the nature of its business the Group recognises revenue on
contracts both at point in time, and as the order progresses.
The Group has reviewed its open contracts in line with the requirements of IFRS 15 and in the case of
TPG Services concluded that the adoption of IFRS 15 has no material impact. However, in the case of
TPG Engineering, a number of contracts have been identified where either the terms do not permit
recoverability of profit when the contract allows termination for convenience or costs incurred through
the Group’s supply chain cannot be taken as incurred until receipt of the good or service that will need
to be accounted for differently.
The board has decided that it will apply IFRS 15 retrospectively, making use of any practical expedient
available. The Group is still gathering data to finalise the impact on its 2017 result had IFRS 15 been
applied this year, but estimates that revenue would have been approximately £1,300,000 lower than
reported in these financial statements, with operating loss and Adjusted EBITDA approximately
£400,000 lower in the current financial year. The recognition of this revenue and associated operating
profit and Adjusted EBITDA following the Group’s revised revenue recognition policy in accordance with
IFRS 15 is deferred to subsequent financial periods. There is no impact on the cash position of the Group
from these adjustments.
IFRS 16 Leases
Adoption of IFRS 16 will result in the Group recognising right of use assets and lease liabilities for all
contracts that are, or contain, a lease. For leases currently classified as operating leases, under current
accounting requirements the Group does not recognise related assets or liabilities, and instead spreads
the lease payments on a straight-line basis over the lease term, disclosing in its annual financial
statements the total commitment.
The board has decided it will apply the modified retrospective in IFRS 16, and will adopt the standard
one year early on 1 January 2018. In addition, it has decided to measure right-of-use assets by reference
to the measurement of the lease liability on that date. This will ensure there is no immediate impact to
the net assets on this date. At 31 December 2017 operating lease commitments amounted to £4,847,000
before the application of any discount rate to these future cash flows. However, further work needs to
be carried out to determine whether and when extension and termination options are likely to be
exercised, which may result in the actual liability recognised being higher than this.
Instead of recognising an operating expense for the operating lease payments, the Group will instead
recognise interest on its lease liabilities and amortisation on its right-of-use assets. This will increase
reported Adjusted EBITDA and reduce operating loss by the current operating lease cost, which for the
year ended 31 December 2017 was approximately £579,000.
(cid:3)
2.1 Basis of preparation (continued)
Other
At the date of authorisation of these financial statements, the following other Standards and
Interpretations which have not been applied in these financial statements were in issue but not yet
effective (and in some cases had not yet been adopted by the EU):
IFRIC 22 Foreign Currency Translations and Advance Consideration (effective 1 January 2018)
Amendments to IFRS 2 classification and Measurement of Share-based payment Transactions
(effective 1 January 2018)
Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
(effective 1 January 2018)
Annual Improvements to IFRS Standards 2014-2016 cycle dealing with matters in IFRS 1
First-time Adoption and IAS 28 Investments in Associates and Joint Ventures (effective 1 January
2018)
IFRIC 23 Uncertainty over Income Tax Positions (effective 1 January 2019)
Amendments to IFRS 9 Prepayment Features with Negative Compensation (effective 1 January
2019)
Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures (effective 1 January
2019)
At the date of authorisation of these financial statements, the directors have considered the other
standards and interpretations which have not been applied in these financial statements, were in issue
but not yet effective (and in some cases, had not yet been adopted by the EU). Application of these
standards may result in some changes in presentation of information within the Group’s financial
statements, but they are not expected to have a material impact on the results of the Group.
Going concern
The directors are satisfied that the Group has adequate resources to continue in business for the
foreseeable future, and accordingly continue to adopt the going concern basis in preparing the
accounts. In reaching this conclusion, the directors have considered forecasts that cover a period of
at least twelve months from the date of the approval of these financial statements and mitigating
actions available to them, including the ability of management to make certain reductions to the
Group’s discretionary expenditure if required.
2.2 Significant management judgements in applying accounting policies
The directors do not believe there to be any material judgements made in the process of applying the
Group’s accounting policies which are likely to lead to a material change to the amounts recognised
in the consolidated financial statements in the next twelve months.
57
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
2 Summary of Significant Accounting Policies (continued)
58
2.3 Key sources of estimation uncertainty
2.4 Basis of consolidation (continued)
(cid:3)
(cid:3)
59
The following are the key assumptions concerning the future activities of the Group, and other key
sources of estimation uncertainty at the end of the reporting period that may have a significant risk
of causing a material adjustment to the carrying amounts of the assets and liabilities with the next
financial year.
Impairment of intangible assets, goodwill and investments in subsidiaries
i)
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 are based on the estimation of recoverability based on the value in use
calculation of the cash-generating unit 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.
ii) Warranties
Provisions for the expected cost of warranty obligations under local sale of goods legislation are
recognised at the date of sale of the relevant products, or at the date that the need for remediation
under warranty becomes known, at the directors’ best estimate of the expenditure required to settle
the Group’s obligation.
iii) Deferred contingent consideration
During the year, the Group acquired ALS Technologies Limited, FSS Limited and Polaris Consulting
(Holdings) Limited. The consideration for the purchase of shares includes an initial cash payment and
capped contingent consideration value.
The contingent consideration calculation requires management to estimate the value based on facts and
circumstances that existed at the reporting date and a suitable discount rate in order to calculate present
value. The value will be updated at each applicable reporting date and the initial estimate is based on
expected future earnings which may differ to final reported numbers and therefore the actual
consideration may differ to the initial estimated value.
2.4 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Parent Company
and all entities controlled by the company (its subsidiaries) and the TP Group Employee Benefit Trust
(see note 26) made up to 31 December each year.
The results of subsidiaries acquired or disposed of during the year are included in the Consolidated
Statement of Comprehensive Income from the effective date of acquisition or up to the effective date
of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used in to line with those used by the Group. All intra-
Group transactions, balances, income and expenses are eliminated on consolidation.
Subsidiary undertakings are entities over which the Group has the power to control the financial and
operating policies to obtain benefits from its activities. The Group obtains and exercises control
through voting rights.
The TP Group Employee Benefit Trust, which is managed by an independent trustee, is an employee
share scheme established for the benefit of and as an incentive for the employees of the Group.
Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where
necessary to ensure consistency with the accounting policies adopted by the Group.
The Parent Company has taken advantage of the exemption available under section 408 of the
Companies Act 2006 and has not presented its Statement of Comprehensive Income. The Parent
Company’s result for the year was a loss of £3.1m (2016 - £4.9m).
2.5 Revenue
Revenue is measured by reference to the fair value of consideration received or receivable by the
Group for goods supplied and services provided, excluding sales related taxes and trade discounts.
Revenue is recognised upon the performance of services or transfer of risk to the customer.
i)
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
the Group retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the entity;
and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
ii)
Long term contracts
Where the outcome of a long-term contract can be estimated reliably, revenue and costs are
recognised by reference to the stage of completion of the contract activity at the end of the reporting
period, measured based on the proportion of contract costs incurred for work performed to date
relative to the estimated total contract costs, except where this would not be representative of the
stage of completion. Variations in contract work, claims and incentive payments are included to the
extent that the amount can be measured reliably, and its receipt is considered probable.
Where the outcome of a long-term contract cannot be estimated reliably, contract revenue is
recognised to the extent of contract costs incurred where it is probable they will be recoverable.
Contract costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is
recognised as an expense immediately.
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
60
2.5 Revenue (continued)
ii)
Long term contracts (continued)
When contract costs incurred to date plus recognised profits less recognised losses exceed progress
billings, the surplus is shown as amounts due from customers for contract work. For contracts where
progress billing exceeds contract costs incurred to date plus recognised losses, the surplus is shown
as the amounts due to customers for contract work. Amounts received before the related work is
performed are included in the Consolidated Statement of Financial Position, as a liability as advances
received. Amounts billed for work performed but not yet paid by the customer are included in the
Consolidated Statement of Financial Position under trade and other receivables.
2.6 Cost of sales
Cost of sales represents the actual costs of materials, direct labour and overheads incurred with
reference to the stage of completion of the contract at the reporting date.
2.7 Finance income
Finance income represents interest earned on cash deposits that is earned over the relevant financial
period and ‘mark to market’ adjustments in respect of derivative financial assets for forward currency
exchange contracts.
2.8 Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated depreciation and any accumulated
impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets, less their residual values
over their useful lives (as below), using the straight-line method. The 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
Office furniture and fittings
Plant and machinery
33% per annum
20% per annum
10% to 20% per annum
Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets or, where shorter, over the term of the relevant lease. An impairment loss is recognised
for the amount by which the assets carrying amount exceeds its recoverable amount.
An item or property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item or property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount and is recognised in Statement of
Comprehensive Income.
(cid:3)
(cid:3)
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
2.9 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all of the
risks and rewards of ownership. All other leases are classified as operating leases.
Assets held under finance leases, are initially recognised as assets of the Group at their fair value at
the inception of the lease or, if lower, at the present value of the minimum lease payments. The
corresponding liability to the lessor is included in the Consolidated Statement of Financial Position
as a finance lease obligation.
Lease payments are apportioned between the finance lease expenses and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance lease expenses are recognised immediately in the Statement of Comprehensive Income,
unless they are directly attributable to qualifying assets, in which case they are capitalised in
accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised
as expenses in the period in which they are incurred.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are incurred.
In the even lease incentives are received to enter into operating leases, such incentives are recognised
as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a
straight-line basis, except where another systematic basis is more representative if the time pattern
in which economic benefits from the leased asset are consumed.
2.10 Taxation
Income tax expense represents the sum of the tax currently payable and deferred taxation.
Current tax
i)
Current taxation is based on taxable profit for the year. Taxable profit differs from ‘profit before
taxation’ as reported in the Consolidated Statement of Comprehensive Income because items of
income or expense that are taxable or deductible in other years and items that are never taxable or
deductible. The Group’s current tax is calculated using tax rates that have been enacted or
substantively enactive by the end of the reporting period.
Income tax recoverable in respect of R&D tax credits is recognised when the decision has been taken
to claim such amounts in cash. The Group has made claims for R&D tax credits under the large
company Research and Development Expenditure Credit (RDEC) 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.
(cid:3)
61
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
2 Summary of Significant Accounting Policies (continued)
62
2.10 Taxation (continued)
2.12 Financial instruments
(cid:3)
ii) Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for all deductible temporary differences to
the extent that it is probable that taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and liabilities are no recognised if the
temporary difference arises from the initial recognition (other than in a business combination) of assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In
addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial
recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period
in which the liability is settled or the asset realised, based on tax rates (and laws) that have been
enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Group expects, at the end of the reporting period, to recover or settle
the carrying amount of its assets and liabilities.
iii) Current and deferred tax for the reporting period
Current and deferred tax are recognised in profit or loss, except where they related to other
comprehensive income or directly in equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in equity respectively. Where current tax or
deferred tax arise from the initial accounting for a business combination, the tax effect is included in
the accounting for the business combination.
2.11 Cash and bank balances
Cash and bank balances comprise cash on hand and demand deposits, together with other short-
term, highly liquid investments that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value.
Financial assets and financial liabilities are recognised when the Group or Parent Company becomes
a party to the contractual provisions of the financial instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added or deducted from
the fair value of the financial assets or liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or financial liabilities at fair value
through profit or loss are recognised immediately in profit or loss.
Loans and receivables
i)
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. Loans and receivables (including trade and other receivables,
bank balances and cash), are measured at cost using the effective interest method, less any
impairment.
Interest income is recognised by applying the effective interest rate, except for short-term receivables
when the effect of discounting is immaterial.
Impairment of financial assets
ii)
All financial assets are assessed for indicators of impairment at the end of each reporting period.
Financial assets are considered to be impaired when there is objective evidence that, as a result of
one or more events that occurred after the initial recognition of the financial asset, the estimated
future cash flows of the investment have been affected.
iii) De-recognition of financial assets
The Group derecognises a financial asset when the contractual right to the cash flows from the
financial asset expire, or when the financial asset and all substantial risks and rewards of ownership
are transferred to another party. If the Group neither transfers nor retains substantially all the risks
and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Group
retains substantially retains all the risks and rewards of ownership of a transferred financial asset, the
Group continues to recognise the financial asset and also recognises the collateralised borrowing for
the proceeds received.
On de-recognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss
that had been recognised in other comprehensive income and accumulated in equity is recognised
in profit or loss.
On de-recognition of a financial asset other than in its entirety, the Group allocated the previous
carrying amount of the financial asset between the part it continues to recognise under continuing
involvement, and the part it no longer recognises on the basis of the relative fair values of those parts
on the date of transfer. The difference between the carrying amount allocated to the part that is no
longer recognised and the sum of the consideration received for the part no longer recognised and
any cumulative gain or loss allocated to it that had been recognised in other comprehensive income
is recognised to profit or loss. A cumulative gain or loss that had been recognised in other
comprehensive income is allocated between the part that continues to be recognised and the part
that is no longer recognised on the basis of the relative fair values of those parts.
(cid:3)
(cid:3)
(cid:3)
63
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
64
2.12 Financial instruments (continued)
iv) Classification as debt or equity
Debt and equity instruments issued by a Group entity are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of a
financial liability and an equity instrument.
Financial liabilities
v)
The Group and Parent Company’s financial liabilities comprise trade and other payables.
Financial liabilities are measured subsequently at amortised cost using the effective interest rate
method except for financial liabilities held for trading or designated at fair value through profit or
loss, that are carried subsequently at fair value with gains or losses recognised in profit or loss.
Discounting is omitted where the effect of discounting is immaterial.
vi) Derivative financial instruments
The Group enters into derivative financial instruments to manage its exposure to foreign exchange
risks.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into
and are subsequently re-measured to their fair value at the end of the reporting period. The resulting
gain or loss is recognised in the Statement of Comprehensive Income immediately unless the
derivative is designated and effective as a hedging instrument, in which event the timing or the
recognition in the Statement of Comprehensive Income depends on the nature of the hedge
relationship.
vii) De-recognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or have expired. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is recognised in profit or loss.
2.13 Equity
Equity comprises the following:
“Share capital” which represents the nominal value of equity shares;
“Share premium” which 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 Employee Benefit Trust” which represents the costs of purchasing own
shares held by the Employee Benefit Trust;
“Share-based payment reserve" which represents equity-settled share-based employee
remuneration until such share options are exercised or lapse; and
“Retained earnings” which represents retained profits and losses.
(cid:3)
(cid:3)
(cid:3)
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
2.14 Employee benefits
i)
Retirement benefit costs
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.
ii)
Share-based payment
All equity-settled share-based payments are measured at fair value at the date of grant, which is
ultimately recognised as an expense in the Consolidated Statement of Comprehensive Income with
a corresponding credit to reserves.
Options with only time-based vesting conditions are valued using a Black-Scholes model. Share
options issued with market based vesting conditions are measured using the Monte Carlo method.
The expected life used in the model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restrictions, and behavioural considerations. Market vesting
conditions are factored into the fair value of the options granted.
If vesting periods or other non-market vesting conditions apply, the expense is allocated over the
vesting period, based on the number of share options expected to vest. This estimate takes into
account a number of factors including performance conditions applying to the relevant options.
Estimates are subsequently revised if there is any indication that the number of share options
expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period.
No adjustment is made to any expense recognised in prior periods if share options ultimately
exercised are different to that estimated on vesting. Upon exercise of share options, the proceeds
received net of attributable transaction costs are credited to share capital, and where appropriate
share premium.
iii) 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 on the Group 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
Group Consolidated Statement of Comprehensive Income.
(iv) Short-term employee benefit costs
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.
(cid:3)
65
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
66
2.15 Foreign currency translation
In preparing the financial statements of each individual Group entity, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange
prevailing at the dates of the transactions. At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date.
Exchange differences on monetary items are recognised in the Statement of Comprehensive Income
in the period in which they arise.
2.16 Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of the
acquisition-to-date fair values of the assets transferred to the Group, liabilities incurred by the Group
to the former owners of the acquired and the equity interests issued by the Group in exchange for
control of the acquired. Acquisition related costs are generally recognised in the Statement of
Comprehensive Income as incurred.
At the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognised at
their fair value, except deferred tax assets or liabilities, and assets or liabilities related to employee
benefit arrangements which are recognised and measured in accordance with IAS 12 Income Taxes
and IAS 19 respectively.
Goodwill is measured as the excess of the sum of the consideration transferred over the net of the
acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and
liabilities assumed exceeds the sum of the consideration transferred, the excess is recognised
immediately in the Statement of Comprehensive Income as a bargain purchase gain.
When the consideration transferred by the Group in a business combination includes assets or
liabilities resulting from a contingent consideration arrangement, the contingent consideration is
measured at the acquisition-date fair value and included as part of the consideration transferred in a
business combination.
Changes in the fair value of the contingent consideration that qualify as measurement period
adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.
Measurement period adjustments are adjustments that arise from additional information obtained
during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about
facts and circumstances that existed at the acquisition date.
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period
(see above), or additional assets or liabilities are recognised, to reflect new information obtained
about facts and circumstances that existed as of the acquisition date that, if known, would have
affected the amounts recognised as of that date.
(cid:3)
(cid:3)
(cid:3)
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
2.17 Goodwill
(cid:3)
67
Goodwill arising on an acquisition of a business is carried at cost as established at the date of
acquisition of the business (see note 2.16 above) less accumulated impairment losses, if any.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of
the profit or loss on disposal.
2.18 Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less
accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives (being 3, 5, 10 and 15 years). The estimated useful
life and amortisation method are reviewed at the end of each reporting period, with the effect of any
changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful
lives that are acquired separately are carried at cost less accumulated impairment losses.
Intangible assets acquired in a business combination
i)
Intangible assets acquired in a business combination and recognised separately from goodwill are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported
at cost less accumulated amortisation and accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
ii) De-recognition of intangible assets
An intangible asset is derecognised on disposal, or when no economic benefits are expected from use
or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the
difference between the net disposal proceeds and the carrying amount of the asset, and are recognised
in profit or loss when the asset is recognised.
2.19 Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). When it is not possible to estimate the
recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-
generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can
be identified, corporate assets are also allocated to individual cash-generating units, or otherwise
they are allocated to the smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested
for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks
specific to the assets for which the estimates of future cash flows have not been adjusted.
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
68
2.19 Impairment of tangible and intangible assets other than goodwill (continued)
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash generating unit) is reduced to its recoverable
amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-
generating unit) is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the reversal of the impairment loss is treated as a
revaluation increase.
2.20 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials
and, where applicable, direct labour costs and those overheads that have been incurred in bringing
the inventories to their present location and condition. Cost is calculated using the weighted average
method. Net realisable value represents the estimated selling price less all estimated costs of
completion and costs necessary to make the sale.
2.21 Government Grants
Government grants are recognised at fair value when there is reasonable assurance that the Group
will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which
the Group recognises as expenses the related costs for which the grants are intended to compensate.
Grants related to purchase of assets are treated as deferred income in the Statement of Financial
Position and allocated to the Income statement and transferred to profit or loss on a systematic and
rational basis over the useful lives of the related assets.
2.22 Non-operating expenses
Items which are material either because of their size or their nature and are non-recurring, are
presented within their relevant consolidated income statement category, but highlighted separately
on the face of the income statement within the section showing adjusted EBITDA (as detailed and set
out in note 3); to help provide a better picture of the Group’s underlying performance. The tax and
cash flow implications of non-operating items are identified wherever necessary.
(cid:3)
(cid:3)
(cid:3)
Notes to the Financial Statements (continued)
2 Summary of Significant Accounting Policies (continued)
2.23 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, 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.
3 Segmental information
Following the refinement of the Group’s strategy, the business has been managed throughout the
year along two distinct business units, Consulting and Programme Services (“TPG Services”) and
Engineering and Technology (“TPG Engineering”). Segmental information is presented in a consistent
format with management information considered by the Chief Operating Decision Maker.
The principal activities of these business units comprise:
TPG Services – the provision of know-how and experience to add value in large and complex
enterprises. Services include technical project management, systems engineering, design,
software development and assurance. This segment is a combination of the prior segments TPG
Design & Technology, TPG Managed Solutions and the acquired businesses of ALS Technologies
Limited and Flexible Software Solutions Limited, and will include Polaris Consulting (Holdings)
Limited in future periods.
TPG Engineering – activities include the design, manufacture, installation and support of
complex equipment. These include air purification equipment for submarines including
oxygen/hydrogen generation and purification, air handling and distribution systems, heat
exchange equipment used in the heating and cooling of large scale industrial processes, and
other fabricated structures. This segment is a combination of the prior segments TPG Maritime
and TPG Engineering.
The directors of the Parent Company had previously chosen to organise the Group around four
interconnected business units. The presentation of the segmental results for the year ended
31 December 2016 have been reclassified to be consistent with the current year presentation in line
with the Group's refined strategy. The overall reported loss for the period has not changed.
(cid:3)
69
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
3 Segmental information (continued)
70
3.1 Segment revenues and results
3 Segmental information (continued)
3.1 Segment revenues and results (continued)
(cid:3)
(cid:3)
71
The following is an analysis of the Group’s revenue and results from the continuing operations by
reportable segment.
Revenue
TPG Engineering
TPG Services1
Group revenue
Segment operating result
TPG Engineering
TPG Services
Central unallocated costs
Group loss from operations
Finance cost
Loss before income tax
Income tax (charge)/credit
Loss after tax
2017
£'000
23,694
5,766
29,460
2,734
(1,223)
(2,043)
(532)
(65)
(597)
(122)
(719)
2016
£'000
19,080
2,146
21,226
2,168
(1,008)
(1,424)
(264)
(69)
(333)
134
(199)
1 Included with TPG Services segmental results are the results of the acquisitions of ALS Technologies
Limited (renamed TPG Services Limited) and Flexible Software Solutions Limited.
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 2. Segment profit or loss represents the profit before tax earned by each segment
without allocation of central administration costs and directors’ salaries, other gains and losses, as well
as finance costs.
TPG
Engineering
TPG
Services
£'000
£'000
Central
unallocated
-costs
£'000
Group
£'000
2,734
(1,223)
(2,043)
(532)
1,602
-
124
-
10
-
420
-
230
242
111
375
1,842
242
655
375
2017
Segment operating
result
Depreciation,
amortisation and
impairment
Acquisition-related
costs
Non-operating costs
Share based payments
Adjusted EBITDA1
4,460
(793)
(1,085)
2,582
2016
Segment operating
result
Depreciation,
amortisation and
impairment
Acquisition-related
costs
Non-operating costs
Share based payments
2,168
(1,008)
(1,424)
(264)
1,032
-
-
-
19
-
-
-
-
44
231
4
1,051
44
231
4
Adjusted EBITDA1
3,200
(989)
(1,145)
1,066
1 Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment,
amortisation and impairment of acquired tangible and intangible assets and 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. The directors believe this measure is more reflective of the underlying performance
of the Group than equivalent GAAP measures. This is primarily due to the exclusion of non-cash items, such as share-based
payments, impairment, depreciation and amortisation, as well as non-operating costs. This provides shareholders and other
users of the financial statements with the most representative year-on-year comparison of operating performance. This
measure and the separate components remain consistent with 2016.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
(cid:3)
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
3 Segmental information (continued)
72
3.1 Segment revenues and results (continued)
3 Segmental information (continued)
3.1 Segment revenues and results (continued)
The following is an analysis of the Group’s revenue and results from the continuing operations as
reportable segment, presented under the format disclosed in the financial statements for the year
ended 31 December 2016.
TPG
Maritime
TPG
Engineering
TPG
D&T
TPG
MS
£'000
£'000
£'000
£'000
Central
unallocated
-costs
£'000
Group
£'000
(cid:3)
73
Revenue
TPG Maritime
TPG Engineering
TPG Design and Technology
TPG Managed Solutions1
Group revenue
Segment operating result
TPG Maritime
TPG Engineering
TPG Design and Technology
TPG Managed Solutions1
Central unallocated costs
Group loss from operations
Finance cost
Loss before income tax
Income tax (charge)/credit
Loss after tax
2017
£'000
16,119
7,575
381
5,385
29,460
4,818
(2,084)
(800)
(423)
(2,043)
(532)
(65)
(597)
(122)
(719)
2016
£'000
12,229
6,851
757
1,389
21,226
3,335
(1,167)
(975)
(33)
(1,424)
(264)
(69)
(333)
134
(199)
1 Included with TPG Managed Solutions segmental results are the results of the acquisitions of ALS
Technologies Limited (renamed TPG Services Limited) and Flexible Software Solutions Limited.
Segment revenue reported above represents revenue generated from external customers.
2017
Segment
operating result
Depreciation,
amortisation and
impairment
Acquisition-
related costs
Non-operating
costs
Share based
payments
Adjusted
EBITDA1
2016
Segment
operating result
Depreciation,
amortisation and
impairment
Acquisition-
related costs
Non-operating
costs
Share based
payments
Adjusted
EBITDA1
4,818
(2,084)
(800)
(423)
(2,043)
(532)
853
-
-
-
749
-
2
-
124
420
-
-
8
-
-
-
230
242
111
375
1,842
242
655
375
5,671
(1,211)
(378)
(415)
(1,085)
2,582
3,335
(1,167)
(975)
(33)
(1,424)
(264)
859
173
16
-
-
-
-
-
-
-
-
-
3
-
-
-
-
44
231
4
1,051
44
231
4
4,194
(994)
(959)
(30)
(1,145)
1,066
1 Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment,
amortisation and impairment of acquired tangible and intangible assets and 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. The directors believe this measure is more reflective of the underlying performance
of the Group than equivalent GAAP measures. This is primarily due to the exclusion of non-cash items, such as share-based
payments, impairment, depreciation and amortisation, as well as non-operating costs. This provides shareholders and other
users of the financial statements with the most representative year-on-year comparison of operating performance. This
measure and the separate components remain consistent with 2016.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
(cid:3)
3 Segmental information (continued)
74
3.2 Geographical segments
The following is an analysis of the Group’s revenue from continuing operations from its products and
services:
Geographical analysis – revenue
United Kingdom
Rest of the European Union
North America
Asia
Middle East
Rest of the World
2017
£'000
24,860
2,073
-
2,034
341
152
2016
£'000
16,588
2,156
6
2,092
136
248
Total revenue
29,460
21,226
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.
Information about major customers
Engineering
Customer 1
Customer 2
Total revenue
2017
£'000
6,794
4,747
2016
£'000
4,715
3,883
11,541
8,598
Revenue includes sales from customers who contributed 10% or more to the Group’s revenue:
Total audit fees
(cid:3)
75
4 Operating loss
The Group operating loss for the year is stated after charging the following:
Group
Staff costs
Wages and salaries
Social security costs
Other pension costs
Share based payment
Amortisation of intangible assets
Impairment of intangible assets
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Operating lease expense – rent
Auditor's remuneration:
Audit fees
fees payable for the audit of the Group and consolidated financial
statements
fees payable to the audit of the subsidiary companies
Non-audit fees
Fees payable for statutory and regulatory services
Tax advisory services
Total auditor remuneration
2017
£'000
2016
£'000
8,835
1,016
595
375
10,821
1,132
192
220
301
579
42
61
103
5
20
128
7,521
810
430
4
8,765
953
-
98
-
778
21
45
66
3
15
84
Share-based payment expense of £375,000 (2016 – expense £4,000) all arises from transactions
accounted for as equity-settled share-based payment transactions and are non-cash in nature.
Staff numbers
The average number of employees, including directors, employed by the Group during the year was
as follows:
Group
Engineering
Business development
Administration
2017
Number
2016
Number
140
17
44
201
111
12
40
163
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
4 Operating loss (continued)
76
Retirement benefits
The Group operates a defined contribution retirement benefit plans for all qualifying employees of
the Group. The assets of these plans are held separately from those of the Group in separately
administered funds.
The total expense recognised in profit or loss of £595,000 (2016 - £430,000) represents
contributions payable to these plans by the Group at rates specified in the rules of the plans. As at
31 December 2017, contributions of £88,000 (2016 - £112,000) due in respect of the 2017 (2016 -
£nil) reporting remained outstanding. The amounts were paid subsequent to the end of the
reporting period.
5 Directors' emoluments
Key management of the Group are members of the board of directors. Key management personnel
remuneration includes the following expenses:
Group
Emoluments
Pension contributions paid to defined contribution pension
schemes
Other benefits
1 Includes bonus payments of £228,000.
2017
£'000
2016
£'000
662
33
67
762
871
45
2811
1,197
During 2017 three directors (2016 - four) accrued pension benefits during the year. No director
exercised share options during the year (2016 - none).
Remuneration of the highest paid director included above is as follows:
Group
Emoluments
Pension contributions
Other benefits
2 Includes bonus payments of £160,000.
2017
£'000
257
12
38
307
2016
£'000
257
18
1852
460
(cid:3)
(cid:3)
(cid:3)
Notes to the Financial Statements (continued)
6 Net finance cost
Group
Interest on bank deposits
Loss on foreign exchange derivative financial assets
2017
£'000
14
(79)
(65)
2016
£'000
1
(70)
(69)
7 Taxation
(Charge)/credit to the Consolidated Statement of Income
Group
2017
£'000
2016
£'000
UK corporation tax at 19.25% (2016 - 20.00%)
(137)
(24)
Adjustments in respect to prior year
Corporation tax - R&D charge:
Prior year under/(over) provision
Deferred tax:
Arising on amortisation of acquired intangibles
Reversal of timing differences
Release of deferred tax asset
Effect of tax rate change on opening balance
Adjustments in respect to prior year
Tax (charge)/credit for the year
24
-
-
3
(113)
(21)
130
(45)
(95)
-
1
(122)
118
6
-
31
-
134
The tax charge for the period is lower than (2016 – higher than) the standard rate of corporation
tax in the UK of 19.25% (2016 – 20.00%). The differences are explained as follows:
(cid:3)
77
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
7 Taxation (continued)
78
Group
Loss on ordinary activities before tax
Loss on ordinary activities at the standard rate
of corporation tax in the UK of 19.25% (2016 – 20.00%)
Effects of:
Expenses not deductible for tax purposes
Income not taxable
Other timing differences
Share based payments
Adjustment to deferred tax in respect to change in tax rates
Deferred tax not recognised
Adjustment in respect of prior years
2017
£'000
2016
£'000
(597)
(333)
115
67
(84)
23
(97)
(65)
(8)
(32)
26
(34)
2
18
(1)
(229)
306
5
Tax (charge)/credit for the year
(122)
134
At the reporting date, the Group has approximately £20.5m (2016 - £20.4m) of unrelieved tax losses
for offset against future taxable profit. No deferred tax asset has been recognised in respect of the
£20.5m losses (2016 - £19.9m), Trade generated through TPG Design & Technology Limited created
£18.1m of these losses through a trade that is no longer being pursued. Losses can only be utilised
against the same trade and management do not expect there to sufficient trade to recover these
losses against future taxable profit. The remaining £2.4m has been generated through ongoing
trade but has not been recognised due to the uncertainty of timing of the generation of future
taxable profits.
8
Earnings per Share
The calculation of basic earnings per share for the year ended 31 December 2017 is based upon a
loss after tax of £719,000 (2016 – loss after tax of £199,000) and a weighted average number of shares
of 588,908,520 (2016 - 420,857,956). The weighted average number of shares has been reduced by
the weighted average number of shares held by the Employee Benefit Trust.
The issue of additional shares on exercise of employee share options would decrease the basic loss
per share and there is therefore no dilutive effect of employee share options.
(cid:3)
(cid:3)
(cid:3)
Notes to the Financial Statements (continued)
9 Goodwill
Cost and net book value
At 1 January 2016 and 31 December 2016
Acquired through business combination
At 31 December 2017
(cid:3)
Total
£'000
3,918
252
4,170
79
Goodwill arose on the acquisition of TPG Maritime Limited and TPG Engineering Limited on 5 April
2012. Goodwill arising in current year on the acquisition of Polaris Consulting (Holdings) Limited on
12 December 2017.
In accordance with the requirements of IAS 36, Impairment of Assets, goodwill is allocated to the
Group’s cash generating units, or groups of cash generating units, that are expected to benefit from
the synergies of the business combination that gave rise to the goodwill as analysed in the table below:
TPG Maritime Limited
TPG Engineering Limited
Polaris Consulting (Holdings) Limited
Total
£'000
3,316
602
252
4,170
The goodwill balance has been tested for annual impairment on the following basis:
The carrying values have been assessed by reference to value in use.
Cash flows based on forecast information for the next financial year, which have been approved
by the board.
The key assumptions on which the impairment tests are based on are a pre-tax discount rate of
11.5% (2016 – 12%), a return to profitability of TPG Engineering Limited in 2019 and a long-term
growth rate of 2% (2016 – 2%) on forecast cash flows.
The 2017 pre-tax discount rate has been verified by independent advisors.
No impairments were identified as a result of both testing and sensitivity analysis performed.
Furthermore, the Group is unaware of any possible change to the business that would cause an
impairment.
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
10 Other intangible assets
80
Technical
know how
£'000
Customer
relationships
£'000
Trade name
£'000
Computer
software
£’000
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
Acquired through business
combination
12,239
-
12,239
-
324
-
324
-
-
4,261
At 31 December 2017
12,239
4,585
Accumulated amortisation
and impairment
At 1 January 2016
Charge for year
At 31 December 2016
Charge for year
Impairment
3,021
883
3,904
883
192
At 31 December 2017
4,979
82
22
104
194
-
298
Net book value
At 31 December 2016
8,335
220
At 31 December 2017
7,260
4,287
171
-
171
-
-
171
117
11
128
11
-
139
43
32
(cid:3)
Total
£'000
12,842
106
12,948
47
4,261
108
106
214
47
-
261
17,256
-
37
37
44
-
81
177
180
3,220
953
4,173
1,132
192
5,497
8,775
11,759
Intangible assets brought-forward above arose on the acquisition of TPG Maritime Limited and TPG
Engineering Limited on 5 April 2012. Brought-forward acquired intangible assets are amortised on a
straight-line basis over their useful life of fifteen years.
Intangible asset additions in the current year arose on the acquisition of ALS Technologies Limited and
Flexible Solutions Software Limited on 6 February 2017 and Polaris Consulting (Holdings) Limited on
12 December 2017. Customer relationships additions in the current year are amortised on a straight-line
basis over their useful life of ten years.
Technical Know How is recognised as TPG Maritime Limited’s proprietary expertise and experience of
atmosphere management techniques in the defence environment.
Computer software represents externally acquired computer software licences and associated installation
costs. Externally acquired computer software are capitalised and amortised on a straight-line basis over
their useful life of three years. When the software is available for its intended use, these costs are amortised
in equal annual amounts over the estimated useful life of the software.
Notes to the Financial Statements (continued)
10 Other intangible assets (continued)
(cid:3)
81
Parent Company
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Charge for year
At 31 December 2016
Charge for year
At 31 December 2017
Net book value
At 1 January 2016
Computer
software
£'000
Total
£'000
108
106
214
47
261
-
37
37
44
81
108
106
214
47
261
-
37
37
44
81
108
108
At 31 December 2016
177
177
At 31 December 2017
180
180
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
11
Property, plant and equipment
82
Group
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
Acquired through
Business combinations
Transfers
Disposals
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Charge for year
At 31 December 2016
Charge for year
Disposals
Impairments
Transfers
At 31 December 2017
Net book value
At 1 January 2016
At 31 December 2016
Computer
equipment
£'000
Office
furniture
and fittings
£'000
Plant and
machinery
and motor
vehicles
£'000
Total
£'000
1,410
313
1,723
1,928
52
-
(594)
766
214
980
1,558
-
37
(138)
2,437
3,109
411
46
457
145
(135)
287
3
958
98
1,056
217
(591)
301
-
757
983
355
452
523
667
565
57
622
301
5
1
(456)
473
492
44
536
61
(456)
7
(2)
146
73
86
79
42
121
69
47
(38)
-
199
55
8
63
11
-
7
(1)
80
24
58
At 31 December 2017
327
119
1,680
2,126
The Group’s obligations under finance leases (see note 21) are secured by the lessors’ title to the
leased assets, which have a carrying value of £1,136,000 at 31 December 2017 (2016 - £18,000).
Assets still in use with an net book value of zero are £583,000 (2016 - £1,357,000).
(cid:3)
(cid:3)
(cid:3)
Notes to the Financial Statements (continued)
11 Property, plant and equipment (continued)
Parent Company
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Charge for year
At 31 December 2016
Charge for year
At 31 December 2017
Net book value
At 1 January 2016
At 31 December 2016
At 31 December 2017
(cid:3)
83
Computer
equipment
£'000
Total
£'000
25
-
25
35
60
3
9
12
15
27
22
13
33
25
-
25
35
60
3
9
12
15
27
22
13
33
At 31 December 2017 there are no assets held under finance leases (2016 - £nil).
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
12
Investments in Subsidiary Undertakings
84
The Parent Company’s investments comprise interests in group undertakings, details of which are
listed below. The companies are wholly owned and are incorporated in England and Wales.
12
Investments in Subsidiary Undertakings (continued)
(cid:3)
(cid:3)
85
Proportion of
nominal value
of shares
Parent Company
Cost and net book value
At 1 January
Investment during year:
Investment in shares in group undertakings
Long term loan to subsidiary
Provision against long term inter-company loan
At 31 December
The total cost of investment in subsidiary undertakings can be analysed as:
Investment in shares in group undertakings
Long term loan to subsidiary net of provision
Share options granted to subsidiary employees
2017
£'000
2016
£'000
11,681
20,899
4,494
315
(1,055)
-
652
(9,870)
15,435
11,681
2017
£'000
15,404
-
31
15,435
2016
£'000
10,910
740
31
11,681
The increase in investments in shares in Group undertakings relates to the acquisitions of ALS
Technologies Limited, Flexible Software Solutions Limited and Polaris Consulting (Holdings) Limited,
please refer to note 25.
The long-term loan has been made to TPG Design & Technology Limited (“TPGD&T”). The loan is
interest free and has no fixed date for repayment. Following a review of the future expected
performance of TPGD&T and timings thereof, the Parent Company has assessed that there is some risk
in the full recoverability of the loan. As such, an impairment review was undertaken and an increase in
the provision of £1,055k was deemed to be required in the current year, in addition to provisions of
£3,998k and £5,872k recognised in 2016 and 2015 respectively.
The key assumptions on which the impairment tests are based are a pre-tax discount rate of 11.5%
(2016 - 12%) and a long-term growth rate of 2% (2016 - 2%) on forecast cash flows.
The remaining carrying value of the assets is based on the value in use.
Name of undertaking
TPG Maritime Limited
TPG Design & Technology Limited
TPG Engineering Limited
TPG Services Limited
Flexible Software Solutions Limited
Polaris Consulting (Holdings) Limited
Polaris Consulting Limited
ALS Technologies Limited (previously Shaw Sheet
Metal (Holdings Limited)
Shaw Laser Company Limited
Shaw Sheet Metal Group Limited
Hunt Thermal Technologies Limited (previously
Corac Group Limited)
Atmosphere Control International Limited
(previously Corac Engineering Limited)
Corac Energy Technologies Limited (previously
Compact Radial Compressors Limited)
Wellman Defence Limited
Description of
shares held
£1.00 ordinary shares
£1.00 ordinary shares
£1.00 ordinary shares
£0.01 ordinary shares
£1.00 ordinary shares
£1.00 ordinary shares
£1.00 ordinary shares
£1.00 ordinary shares
£1.00 ordinary shares
£1.00 ordinary shares
£1.00 ordinary shares
held by the Principal
activity
Parent
Company
100%
100%
100%
100%
100%
100%
100%
1
2
3
4
4
4
4
100% Dormant
100% Dormant
100% Dormant
100% Dormant
£1.00 ordinary shares
100% Dormant
£0.0001 ordinary shares
100% Dormant
£1.00 ordinary shares
100% Dormant
The registered office for all subsidiary undertakings is A2/1064 Cody Technology Park, Farnborough, Hampshire,
GU14 0LX.
1 Provision of air purification equipment for submarines including oxygen/hydrogen generation and
purification, air handling and distribution systems.
Innovation and development of turbomachinery systems.
Design and manufacture of heat exchangers and other critical equipment used in large scale industrial
2
3
processes.
4 The provision of services including technical project management, systems engineering, design, software
development and assurance.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
13
Amount owed by Employee Benefit Trust
86
Parent Company
Amounts owed by EBT
Less: impairment
(cid:3)
2016
£'000
600
(496)
104
2017
£'000
600
(504)
96
The loan to the Employee Benefit Trust is interest free and unsecured. Details of the Employee Benefit
Trust are provided in note 26. The loan is repayable under the following circumstances:
i)
ii)
From receipt of consideration from the sale of shares in the Parent Company purchased with the
loan; and
Following any lapses in options granted by the Employee Benefit Trust over shares in the Parent
Company, the Parent Company can force the sale of shares to repay the loan.
The loan is not expected to be fully repaid within the next 12 months.
Under the terms of the loan facility, should the Employee Benefit Trust be unable to repay the loan
following disposal of all its assets then the loan shall be considered waived.
The impairment against the loan is a result of movements in the number and open market value of
the shares in the Parent Company held by the Employee Benefit Trust, which could affect its ability to
fund future loan repayments.
14
Inventories
Raw materials
Work in progress
Group
2017
£'000
162
68
230
2016
£'000
91
25
116
The cost of inventories recognised at the reporting date is not materially different to the replacement
cost. There has been no write-down of inventory to net realisable value.
Notes to the Financial Statements (continued)
15 Long term contracts
(cid:3)
87
The carrying amounts presented in the Group's Statement of Financial Position for long term contracts
relate to the following categories of assets and liabilities:
Group
Contracts in progress at the reporting date:
Work in progress included in inventories
Amounts due from contract customers included in
trade and other receivables
Amounts due to contract customers included in trade and other
payables
Contract losses included in provisions
Contract costs incurred plus recognised profits less recognised
losses to date
Less progress billings
2017
£'000
2016
£'000
-
25
5,741
(2,737)
3,052
(3,329)
-
(85)
3,004
(337)
46,282
(43,278)
46,236
(46,573)
3,004
(337)
16 Financial assets and liabilities
The carrying amounts presented in the consolidated and Parent Company Statement of Financial
Position relate to the following categories of assets and liabilities:
Financial assets
Amounts owed by EBT (note 13)
Trade and other receivables (note 17)
Cash at bank and in hand (note 18)
Financial liabilities
Trade payables and other payables
(note 20)
Obligations under hire purchase
contracts
Group
2017
£'000
-
12,484
21,931
Parent Company
2016
£'000
-
6,366
9,160
2017
£'000
96
2,985
17,617
34,415
15,526
20,698
2016
£'000
104
2,872
714
3,690
4,313
2,539
4,160
2,243
958
20
-
-
5,271
2,559
4,160
2,243
See note 2.12 for a description of the accounting policies for each category of financial instruments.
The fair values are presented in the related notes. A description of the Group’s risk management
and objectives for financial instruments is given in note 2.12.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
17 Trade and other receivables
88
Financial assets:
Trade receivables
Amounts owed by subsidiary undertakings
Amounts due from construction contract
customers (see note 15)
Non-financial assets:
Prepayments and other debtors
Other taxes
Group
Parent Company
2017
£'000
2016
£'000
2017
£'000
2016
£'000
6,743
-
3,314
-
84
2,901
16
2,856
5,741
3,052
-
-
12,484
6,366
2,985
2,872
1,314
-
795
-
77
68
47
65
13,798
7,161
3,130
2,984
The carrying value of trade and other receivables is considered a reasonable approximation of fair
value due to their short-term nature. During 2017, the Group has made a provision of £33,000 in
respect of doubtful receivables (2016 - £31,000). This exception aside, no other allowances for
doubtful receivables have been made because there has not been a significant change in credit
quality and the amounts are still considered recoverable. The average age of these receivables is
31 days (2016 - 32 days). The ageing of past due but not impaired receivables is:
0-30 days
31-60 days
61-90 days
>90 days
Group
Parent Company
2017
£'000
2016
£'000
2017
£'000
2016
£'000
387
223
184
24
729
832
418
-
818
1,979
-
-
-
-
-
-
-
-
-
-
In 2017 a rent deposit of £67,000 (2016 - £67,000) due after more than one year is included within
prepayments and other debtors.
Trade receivables disclosed above are classified as loans and receivables and are therefore
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.
(cid:3)
(cid:3)
(cid:3)
Notes to the Financial Statements (continued)
17 Trade and other receivables (continued)
Deferred tax comprises:
Group
Accelerated capital allowances and other temporary differences
Trading losses
(cid:3)
89
2017
£'000
-
-
-
2016
£'000
35
95
130
18
Cash and bank balances
The funds were placed on floating interest rate deposit as follows:
Group
2017
£'000
Parent Company
2016
£'000
2017
£'000
Cash and bank balances
21,931
9,160
17,617
Group
2017
£'000
Cash and cash equivalents
22,4621
Parent Company
2016
£'000
9,3161
2017
£'000
17,617
1 Restricted cash of £531,000 (2016 – £156,000) is included in Prepayments and Other Debtors
2016
£'000
714
2016
£'000
714
19 Borrowings
The book value and fair value of loans and borrowings are as follows:
Book value
2017
£'000
Group
Fair value
2017
£'000
Book value
2016
£'000
Fair value
2016
£'000
Secured
Other loans1
Finance lease liabilities2 (note 21)
Current
Non-current
66
958
66
958
1,024
1,024
237
787
237
787
Total loans and borrowings
1,024
1,024
-
20
20
7
13
20
-
20
20
7
13
20
1 Fixed interest rate loan at 8.3% over a 48-month term from 11th October 2016. The loans were
acquired on the purchase of Polaris Consulting (Holdings) Limited and settled in January 2018.
2 Secured by the assets leased. The borrowings are fixed with repayment periods not exceeding 5 years.
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
20 Trade and other payables
90
Group
2017
£'000
Parent Company
2016
£'000
2017
£'000
2016
£'000
Financial liabilities:
Amounts falling due within one
year
Other borrowings
Trade payables
Amounts owed to subsidiary
undertakings
26
4,247
-
Amounts falling due after one
year
Other borrowings
40
-
2,539
-
195
-
243
-
-
3,965
2,000
-
-
Non-financial liabilities:
Accrued expenses
Amounts due to construction
contract customers
(see note 15)
Contingent consideration
(see note 25)
Corporation tax
Other taxes and social security
4,313
2,539
4,160
2,243
1,569
2,737
1,423
156
764
1,632
3,329
-
24
867
10,962
8,391
183
-
1,423
-
67
5,833
454
3
-
-
340
3,040
The carrying values of trade and other payables are considered to be a reasonable estimate of their
fair values.
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and
ongoing costs. The average credit period taken for trade purchases is 31 days (2016 - 31 days). For
most suppliers no interest is charged on the trade payables. The Group has financial risk
management policies in place to ensure that all payables are paid within the pre-agreed credit
terms.
(cid:3)
(cid:3)
(cid:3)
Notes to the Financial Statements (continued)
21 Obligations under finance leases and hire purchase contracts
The Group uses finance leases and hire purchase contracts to acquire plant and machinery. Future
minimum lease payments under hire purchase contracts are as follows:
(cid:3)
91
Future minimum payments due:
Not later than one year
After one year but not more than five years
Less finance charges allocated to future periods
Present value of minimum lease payments
The present value of minimum lease payments is
analysed as follows:
Not later than one year
After one year but not more than five years
Group
2017
£'000
2016
£'000
243
883
(168)
958
211
747
958
8
14
(2)
20
7
13
20
The average lease term is 5 years. For the year ended 31 December 2017, the average effective
borrowing rate was 5.73% (2016 – 5.75%). Interest rates are fixed at the contract date. All leases are on
a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
All lease obligations are denominated in sterling. The Group's obligations under finance leases are
secured by the lessors' rights over the leased assets as disclosed in note 11.
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
22
Deferred taxation
92
24 Share capital
(cid:3)
(cid:3)
93
At 1 January
Arising on business combination
Accelerated capital allowances
Credit to comprehensive income
Group
2017
£'000
823
724
8
(130)
2016
£'000
978
-
-
(155)
At 31 December
1,425
823
The deferred tax liability arose in respect of intangible assets acquired on the acquisition of
TPG Maritime Limited and TPG Engineering Limited on 5 April 2012, and Shaw Sheet Metal Company
on 30 January 2015, ALS Technologies Limited and Flexible Solutions Software Limited on 6 February
2017 and Polaris Consulting (Holdings) Limited on 12 December 2017. In the year to
31 December 2017, the credit to Comprehensive Income of £130,000 (2016 - £155,000) comprises the
release of deferred tax liability arising on the amortisation of acquired intangibles.
23 Provisions
At 1 January 2017
Utilised
Released to income statement
Charged to income statement
At 31 December 2017
Group
Warranty
£'000
Contracts
£'000
Property
£'000
Total
£'000
686
-
(250)
15
451
85
(85)
-
-
-
330
1,101
(220)
-
-
(305)
(250)
15
110
561
The warranty provision recognises future claims for rectification and repair to goods sold and
remaining under a contractual warranty period, the majority of which are expected to be incurred in
the next one to three years.
The property provision recognises future costs of building dilapidations arising under the terms of
property leases expiring over the next 15 years.
Allotted, called up and fully paid
2017
Number
2016
Number
2017
£'000
2016
£'000
Ordinary shares of 1 pence each
758,565,854
422,464,726
7,586
4,225
In accordance with the Articles of Association for the Parent Company adopted on 19 May 2011, the
share capital of the Parent Company at the start of the year consisted of an unlimited number of
ordinary shares of nominal value 10 pence each.
The Parent Company on 28th September 2016 reduced the nominal value of its share capital from
10 pence to 1 pence per share by way of a capital reduction.
This reduction of capital received approval at the General Meeting of the Shareholders at the offices
of Nabarro LLP, 125 London Wall, London EC2Y 5AL on 8th September 2016, was confirmed on the
28th September by the courts and the order has been registered with Companies House on that
date. The Parent Company has given certain undertakings to the court in relation to the reserve
arising on the reduction of capital for the protection of the Parent Company's creditors at the date
on which the reduction of capital took effect.
All shares are equally eligible to receive dividends and the repayment of capital and represent one
vote at the shareholders' meeting of TP Group plc. None of the Parent Company shares are held by
any company in the Group. The Employee Benefit Trust holds shares in the Parent Company as set
out in note 26.
In July 2017, the Group completed an exercise to raise funds through an issuance of ordinary shares.
On 28 July, 336,101,128 shares were issued for trading on AIM at an issue price of 6.5 pence per share.
This raised gross proceeds of £21.8 million pounds, realising £20.8 million net of fees and expenses,
to be used primarily to help fund the Group's acquisition programme and other internal investments.
Following the fundraising, the Group now has 758,565,854 Ordinary Shares in issue admitted to trading
on AIM.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
(cid:3)
(cid:3)
95
94
24
Share capital (continued)
Options
The Group has two unapproved share option schemes and an Enterprise Management Incentive (EMI)
scheme. Share options have been granted by both the Parent Company and the Corac Employee
Benefit Trust (note 26) under the rules of these schemes. The share options granted by the Employee
Benefit Trust have no dilutive effect on the Parent Company's share capital.
Unapproved schemes
EMI scheme
Total
Number of options
Parent
Company
Parent
Parent
EBT
Company
EBT
Company
EBT
Total
Number
Number
Number
Number
Number Number
Number
At 1 January 2017
10,835,068
Granted during the year
32,640,856
Lapsed during the year
(1,484,062)
Cancelled during the year
(6,800,000)
At 31 December 2017
35,191,862
-
-
-
-
-
7,828,360
286,666
18,663,428
286,666
18,950,094
14,777,000
-
47,417,856
-
47,417,856
(2,246,774)
(160,000)
(3,730,836)
(160,000)
(3,890,836)
(4,230,448)
(100,000)
(11,030,448)
(100,000)
(11,130,448)
16,128,138
26,666
51,320,000
26,666 51,346,666
The exercise of options granted prior to April 2010, those granted during 2014 and 2015 and those
granted to the directors during 2017 are subject to the satisfaction of the applicable performance
conditions. At 31 December 2017, performance conditions not satisfied relate to the market price of
the ordinary shares of the Parent Company as quoted on AIM. Options vest over a three-year period
and generally will lapse on cessation of employment or ten years from issue.
The movement on the Group's share option scheme is summarised in the table below:
2017
Weighted
average
exercise
price
(pence)
15.62
28.42
11.80
7.00
2017
Number
of options
18,950,094
(3,890,836)
(11,130,448)
47,417,856
2016
Weighted
average
exercise
price
(pence)
15.50
37.50
13.07
-
2016
Number
of options
23,514,134
(366,667)
(4,197,373)
-
At 1 January 2017
Lapsed during the year
Cancelled during the year
Granted during the year
At 31 December 2017
7.52
51,346,666
15.62
18,950,094
Exercisable at 31 December 2017
13.45
4,152,144
16.75
15,776,097
No share options were exercised during the year (2016 - none). The options outstanding at
31 December 2017 had exercise prices as shown in the following table and a weighted average
remaining contractual life of 8.93 years.
24 Share capital (continued)
At 31 December 2017 options over ordinary 1p shares together with the fair value per option granted
and the assumptions used in the calculation of fair value for awards made after 7 November 2002, are
set out in the table below.
The closing market price of the Parent Company's shares at 31 December 2017 was 6.000p and the
range during the year was between 5.250p and 8.375p.
Expected volatility is a measure of the amount by which a share price is expected to fluctuate during
a period. For options issued after 2009, expected volatility was based on the volatility of the Parent
Company's shares during the previous 12 months. For options issued in earlier periods, the volatility
of the Parent Company's share price was calculated as the average of annualised standard deviations
of daily continuously compounded returns on the Parent Company's stock, calculated over
1, 2 and 3 years back from the date of grant where possible.
The risk-free rate is the yield to maturity on the date of grant of a UK Gilt Strip, with term to maturity
equal to the expected life of the option.
The Group recognised total expenses of £375,000 and £4,000 related to equity-settled share-based
payment transactions in 2017 and 2016 respectively.
Option
price
per share
pence
Closing
share
price
at grant
pence
Exercise
price
pence
Expected
volatility
%
Risk-free
interest
rate
%
Fair value
per share
pence
14.90
21.75
15.00
11.25
10.00
14.00
10.00
10.00
7.00
7.00
7.00
7.00
16.75
22.00
14.80
11.25
9.50
14.00
9.75
5.50
7.25
7.25
7.25
7.25
14.90
21.75
15,00
11.25
10.00
14.00
10.00
10.00
7.00
7.00
7.00
7.00
79.50
50.63
37.43
36.28
36.28
42.23
19.57
42.28
56.89
56.89
56.89
56.89
2.76
1.20
0.80
0.47
0.51
0.35
0.53
0.76
0.66
0.66
0.66
0.66
7.96
6.31
3.04
2.27
1.73
3.25
0.99
0.38
3.12
3.14
3.26
3.57
Date of
grant
2008
2010
2010
2012
2012
2013
2014
2014
2017
2017
2017
2017
Number
26,666 *
200,000
1,950,000
500,000
166,667
295,810
789,667
250,000
24,080,490
12,040,245
6,020,121
5,027,000
51,346,666
* These options were issued to the Employee Benefit Trust.
All options expire 10 years after the date of grant.
The dividend yield of 0% in all cases reflects the absence of dividends and of a clear dividend policy
statement at the relevant dates of grant.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
(cid:3)
(cid:3)
97
96
25 Business combinations
ALS Technologies Limited (renamed TPG Services Limited) and Flexible Software Solutions
Limited
On 6 February 2017 the Group, through its Parent Company, acquired 100% of the issued share capital
of ALS Technologies Limited (“ALS”) and Flexible Solutions Software Limited (“FSS”) for a combined
initial consideration of £1,571,000 and a maximum further deferred contingent consideration of
£1,500,000 based on the combined performance of both businesses. The initial consideration, paid in
cash from the Group’s existing cash resources, reflects a normalised working capital position and
includes cash retained in the business of £425,000. The companies specialise in providing consulting
services to the public and private sectors.
The principal reason for this acquisition is to support the Group’s evolution as a diversified services
and engineering group providing not only design and manufacture of bespoke engineering solutions
but also technical support and management to both the public and private sectors.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and
goodwill are as follows:
ALS Technologies Limited
Property, plant & equipment
Identifiable intangible assets
Cash and bank balances
Trade and other receivables
Trade and other payables
Deferred taxation
Total net assets
Book value
£'000
Adjustment
£’000
Fair value
£'000
21
-
425
663
(547)
-
562
-
1,850
-
-
-
(314)
1,536
21
1,850
425
663
(547)
(314)
2,098
Flexible Software Solutions Limited
Book value
£'000
Adjustment
£'000
Fair value
£'000
Property, plant & equipment
Identifiable intangible assets
Cash and bank balances
Trade and other receivables
Trade and other payables
Deferred taxation
Total net assets
Fair value of consideration
Cash
Deferred contingent consideration
Total consideration
Goodwill
1
-
15
35
(13)
-
38
-
21
-
-
-
(4)
17
1
21
15
35
(13)
(4)
55
£'000
1,571
582
2,153
-
Acquisition costs of £89,000 in year arose as a result of the transaction. These have been recognised
as part of administrative expenses in the Statement of Comprehensive Income.
Included in the operating loss for the year is £133,000 of profit attributable to the additional business
generated through the acquisition. Revenue for the year includes £3,560,000 in respect of ALS
Technologies Limited and Flexible Software Solutions Limited.
25 Business combinations (continued)
Polaris Consulting (Holdings) Limited
On 12 December 2017, the Group, through its Parent Company, acquired 100% of the issued share
capital of Polaris Consulting (Holdings) Limited for an initial consideration of £1,499,000 and a
maximum deferred contingent consideration of £2,000,000 based on the performance of the business.
The initial consideration, paid in cash using the Group’s existing cash resources, has been adjusted for
net debt retained in the business.
The acquisition further extends the Group’s services capabilities in the defence and security markets.
The acquisition will enable the enlarged group to offer a wider range of services and capabilities,
further supporting the broader customer base, alongside delivering greater levels of operational
expertise to existing customers.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and
goodwill are as follows:
Book value
£'000
Adjustment
£’000
Fair value
£'000
Property, plant & equipment
Identifiable intangible assets
Cash and bank balances
Trade and other receivables
Trade and other payables
Borrowings
Deferred taxation
Total net assets
Fair value of consideration
Cash
Deferred contingent consideration
Total consideration
Goodwill
31
-
66
854
(775)
(66)
(6)
104
-
2,390
-
-
-
-
(406)
1,984
31
2,390
66
854
(775)
(66)
(412)
2,088
£'000
1,499
841
2,340
252
Goodwill of £252,000 is primarily applicable to the assembled workforce acquired as part of the
transaction. Acquisition costs of £118,000 arose as a result of the transaction. These have been
recognised as part of administrative expenses in the Statement of Comprehensive Income.
The initial accounting for the acquisition of Polaris Consulting (Holdings) Limited has only been
provisionally determined at the end of the reporting period. At the date of finalisation of these
consolidated financial statements, the necessary market valuations and other calculations had not
been finalised and they have therefore only been provisionally determined based on the directors’
best estimate of the likely values.
Had the acquisitions of ALS, FSS and Polaris Consulting (Holdings) Limited been effective from
1 January 2017, the revenue for the Group would have been approximately £33,500,000, and the
operating loss for the year would have been approximately £67,000. The directors consider these
values to represent an approximate measure of the performance of the combined Group on an
annualised basis and to provide a reference point for future periods.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
26 Employee Benefit Trust
98
On 8 November 2002, the Parent Company established the Corac Employee Benefit Trust, an
employee benefit trust, as an employees' share scheme for the benefit of and as an incentive for the
employees of the Group. The Corac Employee Benefit Trust is managed by an independent trustee.
At 31 December 2017 the Parent Company had loaned £600,000 (2016 - £600,000) to the Corac
Employee Benefit Trust. With this loan the Trustee purchased shares in the Parent Company and, at
31 December 2017, the Corac Employee Benefit Trust held 1,606,769 (2016 - 1,606,769) ordinary
shares in TP Group plc with a book cost of £653,352 (2016 - £653,352) which had a market value of
£96,406 (2016 - £104,440). As set out in note 2.15(iii), neither the purchase nor sale of shares in the
Parent Company leads to a gain or loss being recognised in the Consolidated Statement of
Comprehensive Income but instead these are shown as movements on consolidated equity.
Options have been granted over 26,666 (2016 – 286,666) shares to certain employees being: 26,666
at 14.9p per share until 30 December 2018. At 31 December 2017, performance conditions not
satisfied relate to the market price of the ordinary shares of the Parent Company as quoted on AIM.
The Parent Company intends to fund any shortfall should the Employee Benefit Trust need to
purchase more shares to fulfil its obligations to option holders.
Dividends on the shares owned by the Employee Benefit Trust, the purchase of which was funded by
an interest free loan to the Employee Benefit Trust from the Parent Company, are waived on the
condition that the Trustee shall not be liable for any losses to the Employee Benefit Trust as a result
of the waiver.
27 Risk management objectives and policies
Liquidity risk
The Group holds investments in bank deposits as a liquid resource to fund its operations. The Group's
strategy for managing cash is to maximise interest income whilst ensuring availability to match the
profile of the Group's expenditure. Liquidity is further managed by tight controls over expenditure.
Credit risk
The Group's exposure to credit risk arises from holding cash and cash equivalents. The Group places
funds on deposit directly with banks. Group credit policy limits deposits to an approved list of specific
banks, which is compiled taking into account various factors including credit ratings.
The Group's exposure to credit risk is also attributable to its trade receivables, which, as set out in
note 17, at 31 December 2017 were £6,743,000 (2016 - £3,314,000). The amounts presented in the
balance sheet are net of allowances for doubtful receivables, estimated by the Group's management
based on prior experience and their assessment of the current economic environment. There are
doubtful receivables of £33,000 at the end of 2017 (2016 - £31,000).
Interest rate risk
A further risk arising from the Group's financial instruments is interest rate risk. The directors
consider the principal element of risk directly arising from changes in interest rates relates to the
level of interest income earned on bank deposits. Funds are invested to maintain a balance between
accessibility of funds and competitive rates of return whilst investing funds safely.
It is, and has been throughout the period under review, the Group’s policy that no trading in
financial instruments shall be undertaken.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
99
Notes to the Financial Statements (continued)
27
Risk management objectives and policies (continued)
Foreign currency risk
The Group undertakes contracts denominated in foreign currencies (principally Euro and US dollar)
leading to an exposure in exchange rate movements for both sales and purchase transactions.
Where they cannot be offset, forward exchange contracts are utilised to minimise the risk.
28
Financial commitments under operating leases
Future minimum lease payments under non-cancellable operating leases are as follows:
Land and buildings
Within one year
From one to five years
In more than five years
Office equipment and motor vehicles
Within one year
From one to five years
In more than five years
Group
2017
£'000
Parent Company
2016
£'000
2017
£'000
2016
£'000
579
1,313
2,831
4,723
43
2
79
587
1,672
3,479
5,738
60
22
-
4,847
5,820
15
-
-
15
-
-
-
15
36
15
-
51
-
-
-
51
No company in the Group sub-leases any of their leased premises.
Land and building operating lease payments represent rentals payable by the Group for all of its
properties. Leases are negotiated for periods of between 1 and 25 years and rentals are fixed for an
average of 5 years.
At 31 December 2017, the Group had no capital commitments (2016 - none).
29
Contingent liabilities
As part of the Group’s long-term contract trading activities, £531,000 of performance and warranty
bonds (2016 - £156,138) have been issued to customers. No liability is expected to arise and no
provision is made in the accounts.
30
Related party transactions
There were no related party transactions during the reporting period.
During the prior year, the Parent Company incurred £30,000 of expense with BIE Executive Limited.
Richard King was the Chairman of both BIE Executive Limited and TPG Group Plc at the time the
expense was incurred (resigned as director on 31 December 2016).
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Company Information
(cid:3)
31
Subsequent events
100
Post-period, the directors have reached an agreement with the local management to dispose of the
trade and assets of our low-end fabrication activity, based in Oldham, Lancashire, under a management
buy-out. The disposal will be completed for a total consideration of £0.3m, payable over the next
3 years.
Company Number
3152034
Directors
P Cartmell - Chief Executive Officer
A McCree - Non-executive Chairman
S Kings – Executive Director (resigned 9 February 2018)
D Stroud – Chief Financial Officer (appointed 1 March 2016)
P Holland – Non-executive Chairman (appointed 21 February 2017)
J Warner-Allen – Non-executive Chairman (appointed 27 February 2017)
Secretary
C MacPherson
Registered Office
Cody Technology Park
Old Ively Road, Farnborough, Hampshire, GU14 0LX
Nominated Adviser and Broker
Cenkos Securities plc
6-8 Tokenhouse Yard, London EC2R 7AS
Auditor
Deloitte LLP
Abbots House, Abbey Street, Reading, Berkshire, RG1 3BD
Solicitor
CMS Cameron McKenna Nabarro Olswang LLP
Cannon Place, 78 Cannon Street, London, EC4N 6AF
Bankers
National Westminster Bank plc
1 Penn Road, Beaconsfield, Buckinghamshire HP9 2PU
Barclays Bank plc
One Snowhill, Queensway, Birmingham B4 6GN
Patent Agent
Mathys & Squire LLP
The Shard, 32 London Bridge Street, London, SE1 9SG
Registrar
Equiniti
PO Box 4630 Aspect House, Spencer Road, Lancing, West Sussex BN99 6QQ
Financial PR
Vigo Communications
180 Piccadilly, London, W1J 9HF
(cid:3)
(cid:3)
(cid:3)
101
(cid:3)
(cid:3)
Annual Report & Financial Statements 2017
TP Group Plc
A2/1064
Cody Technology Park
Farnborough
GU14 0LX
tel: +44 (0)1753 285810
email: info@tpgroup.uk.com
www.tpgroup.uk.com
Registered in England & Wales No. 3152034
© Copyright TP Group 2018