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TP Group Annual Report 2019
Introduction
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TP Group is a technology services business,
working to make the world a safer place,
employing more than 400 highly skilled
individuals across six European countries.
Our people deliver mission, business and safety-critical
services and equipment across three high growth sectors
- defence, space and energy.
We operate through two distinct but highly
complementary integrated business units - Consulting &
Programme Services and Technology & Engineering.
Our profitable and growing business has significant
revenue visibility through long-term contracts and
has amassed a significant order book and future
business pipeline.
This approach has helped to insulate us from extreme
events such as the COVID-19 outbreak; further details are
contained in the relevant section of the CFO’s report.
Our strategy is to leverage our expanding geographical
footprint and to continue to build upon our ongoing
investment programmes, focusing on internal capability
improvements alongside external partnerships
and acquisitions in order to continue delivering
shareholder value.
Strategic Report
01 Highlights
02 At a glance
04 Automation & intelligent
decisions
06 Chairman’s statement
08 Market review
12 A strategy for growth
14 Business model
16 Space sector
18 Chief Executive’s statement
In-situ clean gas production
22
24 Financial and operational review
31 Key performance indicators
32 Corporate social responsibility
38 Section 172 statement
40 Principal risks and uncertainties
Governance
44 Board of Directors
46 Directors’ report
49 Statement of Directors’
responsibilities in respect of
the Annual Report and the
Financial Statements
50 Corporate governance report
54 Remuneration report
Financial Statements
56
Independent auditor’s report
to the members of TP Group plc
62 Consolidated statement
of comprehensive income
63 Consolidated and Parent Company
statement of financial position
64 Consolidated statement
of changes in equity
65 Parent Company statement
of changes in equity
66 Consolidated and Parent
Company statement of cash flows
67 Notes to the financial statements
111 Company information
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Group revenue1 up 49%
(2018: £39.0m)
£58.2m
Adjusted operating profit1,2 up 48%
(2018: £3.8m)
Group closing order book up 32%
(2018: £48.2m)
£5.9m
£63.8m
Group closing order book (£m)
2019
63.8
2018
2017
2016
2015
17.0
14.5
48.3
41.7
Revenue up 49% to £58.2m
(2018: £39.0m)
• Organic growth 16% (£6.2m), Technology &
Engineering up 10%, and Consulting and
Programme Services up 29%
• Added £13.0m revenues, or 33% growth
from acquisition of Westek3 and Sapienza4
Adjusted operating profit2
up 48% to £5.9m
(2018: £4.0m)
• Organic growth of £1.1m (c. 28%)
• Additional £0.7m of profit contributed by
acquired companies, Westek3 and Sapienza4
Operating losses2 £1.7m
(2018: nil) include:
• Acquisition-related expenses of £1.5m
(2018: £0.7m)
• Earn-out provision of £1.6m (2018: £0.6m)
relating to Westek3 and Sapienza4
Closing cash of £6.6m
(2018: £22.4m)
• £7.7m cash used in the acquisition of Sapienza4
• Settlement of final earn-out payments,
£2.0m for Polaris5 and Westek3
• £1.5m Invested in AI technologies, business
systems and infrastructure
Order intake £73.8m
(2018: £43.2m)
• Organic growth of £8.4m (c. 20%)
• Opening order book of £15.0m acquired with Sapienza4
• Additional £7.2m new orders post- acquisition from
Westek3 and Sapienza4
Group closing order
book up 32% to £63.8m
(2018: £48.3m)
• Organic growth of £5.5m
• Includes additional £10.0m from Sapienza4
1 2017 values are restated to reflect the impact of IFRS 15; prior years are as originally reported.
2 Refer to the CFO Report section “Adjusted operating profit” for the bridge from operating loss to adjusted operating profit.
3 Westek Technology Ltd. acquired November 2018
4 Sapienza Consulting Holdings B.V. acquired April 2019
5 Polaris Consulting Holdings Ltd. acquired December 2017
Annual Report and Accounts 2019
1
Group revenue (£m)58.239.027.921.220.42015201620172018201920152016201720182019Adjusted operating profit1,2 (£m)5.94.02.11.10.0
At a glance
A resilient and sustainable
business, relied upon
for mission-critical
equipment and systems
Our mission
Our sectors
TP Group provides critical equipment,
technology and services to customers
working towards global safety and
sustainability goals. Currently, TP Group
focuses on three core sectors defence,
space and energy.
Revenue has grown in all three sectors
and the Group has diversified its activity
in order to reduce its reliance on the
defence sector. Some 36% of 2019’s
revenue derived from the space and
energy markets.
64% Defence
(2018: 76%)
21% Space
(2018: 4%)
15% Energy
(2018: 20%)
To design, develop and deliver
advanced technologies, and to provide
world-class services and support
to mission-critical programmes in
high-value sectors.
Working with TP Group
our customers can:
• make better decisions
• deploy safe, reliable and effective systems; and
• benefit from our experience and innovation.
Key statistics
30%
per year growth in revenue
over the last four years
>430
skilled and experienced staff
Operating from facilities in
6
European countries
Delivering to
>30
countries worldwide
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Better
decisions
We are specialists in Artificial
Intelligence (“AI”), Machine Learning
and Spatial Computing. Using the
digital landscape as the environment,
we use advanced tools and technical
know-how to provide business and
military leaders with the insight and
methods to make effective decisions.
Safe, reliable
systems
We deliver complex technology
and systems that are relied
upon for mission performance.
Our solutions are designed and
built to perform in the most
challenging environments
whilst protecting those
depending on them.
Experience and
innovation
With over 75 years of history, TP Group
and its subsidiary companies have
unparalleled experience in providing
equipment for a wide range of
operating conditions. Our continuous
focus on research, development and
innovation gives end-users confidence
in our technologies’ safety, reliability
and performance.
Read more on p4
Read more on p16
Read more on p22
Defence
The foundation of our business for many years has been
complex equipment and systems for defence forces
around the world. These programmes provide long-term,
high-value business, and are a platform for innovation
that is transferable to other addressable systems
and sectors.
Space
The most notable shift in the balance of our work this
year has been the expansion of activities in the space
sector. Our expansion into this increasingly valuable
sector has been achieved through a combination of
organic growth and the acquisition of Sapienza
Consulting Holdings B.V. (“Sapienza”).
Energy
The energy sector is recovering from past pressures on
traditional sources whilst evolving rapidly to meet new
sustainability challenges. TP Group is active in both
traditional and emerging energy markets, benefitting
from increasing business in static equipment for
downstream oil and gas and nuclear power, while also
transferring proven knowledge and equipment into the
burgeoning renewables sector, particularly in the field of
hydrogen production and storage.
Serving a
global market
The Group’s non-UK revenue grew
substantially this year. Our improved
international outreach almost doubled the
organic non-UK sales achieved in 2018.
This was complemented by the
contribution of more than £9m of turnover
from Sapienza. The most significant
growth was seen in Europe and the Middle
East, with other regions holding stable.
We are actively exploring business
opportunities across Europe and North
America, which continue to be areas of
significant potential for the Group.
Geographic Reach (%)
UK
Europe
Asia
Middle East
5
4
Rest of World
1
23
Non-UK revenues (£m)
2019
2018
2017
2016
2015
5.0
4.3
4.6
4.8
67
19.1
02
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03
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Our AI technology is
helping to manage
critical and dangerous
missions to reduce
risks to personnel
and enable greater
confidence in achieving
the intended outcomes
>20,000
viable routes considered in under
a second, every second, to find the
optimal solution
A “big data” approach to critical
systems has allowed us to build
digital models of complex
situations and then apply AI to
help customers manage their way
through them. We have built
autonomous navigation, pattern
recognition and complex
optimisation systems for safer
and swifter management
decisions. We have great
ambitions in this field and plan to
invest further in partnerships and
acquisitions, whilst augmenting
our own capability to develop new
technology solutions that make
the most of this exciting
opportunity.
Case study
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05
Chairman’s statement
Executing strategy with
focus and commitment.
Andrew McCree
Non-executive Chairman
During 2019 we have made significant
progress. Our business is now much
more diversified and balanced, both
geographically and in the markets
we serve.
This gives us a more robust foundation
in uncertain times, and a solid platform
from which to deliver growth.
We have a robust business
to handle uncertain times,
and a solid platform for
future growth.
We outlined the Group’s strategy over the last few years in
last year’s Report. I am pleased to note that under our
excellent leadership team the business has executed this
strategy with focus and commitment.
We continue to drive the Group strategy by focusing on:
• Organic growth: Our business development teams are
winning more new contracts and deepening our existing
relationships with key customers. We continue to invest in
capability to maintain competitive leadership and grow our
core business.
• Technology transfer: Our proven technologies and
equipment can be extended into new uses with careful
investment. This becomes even more valuable when we
combine the separate assets of our expanding Group and
offer them in combination to meet new requirements.
• Acquisitive expansion: We will seek to make acquisitions
where the strategic fit is complementary to our existing
activities and/or will allow us to provide a more extensive
and integrated offering to existing and new customers.
The success of this approach is demonstrated by £19.2m
revenue growth in the year, of which 32% was through organic
expansion of the core business, with the remaining 68% added
through our acquired businesses.
We have expanded our operating footprint in Europe this year
and our goal is to extend this even further to become a truly
global company.
Governance
The Board has continued to drive transparency across the
business with a focus on financial robustness. This is
demonstrated by our adoption of the QCA Corporate
Governance Code to operate effectively within the current
uncertain and evolving business landscape.
We have also given priority to ensuring that the best available
talent is attracted to, retained and developed inside the
business.
People
We are committed to a performance culture, with high levels
of employee engagement across all our locations. Headcount
has grown steadily in all areas of the business, reflecting the
Group’s growth in 2019.
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We take great care to make TP Group a safe and attractive place to
work:
• leadership development has been a priority with both individuals and
the team undertaking several training and development
programmes;
• we invested in almost 1,000 training days in the year;
• we are aiming to have 20 apprentices across the Group next year, up
from five in 2019;
• in 2019, we invested in an employee wellbeing programme and
trained 12 people as specialist responders; and
• put in place suitable working patterns and home-working
arrangements to sustain activity through the COVID-19 outbreak.
We believe our investment in employee welfare, future talent and
career development has created a collaborative and positive working
environment. Our team members now have an average length of
service across the Group of more than five years, with 14 employees
having more than 25 years’ service.
I would like to take this opportunity to thank all our employees for a
very strong performance this year. In particular, the Board wishes to
record its appreciation for the performance of the executive team, led
by the Chief Executive Officer, Phil Cartmell.
Outlook
In the last four years we have made progress technically, commercially
and now geographically. We have also built a very strong executive
leadership and management team to drive us forward. There are great
opportunities ahead of us to apply our technologies and skills in new
and exciting areas.
Our priority in these challenging times is to remain financially prudent
and build a robust financial base. This has been demonstrated through
our responses to COVID-19 where we continue to operate in a safe
manner and at a sustainable level across both the CaPS and T&E
business streams to protect the health and welfare of our staff and the
interests of all our stakeholders. We will continue to focus on building a
successful business which is attractive to customers, employees and
investors. We will also carefully seek acquisitions.
With the solid foundations we have built, and the talent available to us,
I am very confident in the prospects for the Group for the year ahead
and beyond.
TP Group is a compelling
business proposition with:
• experienced and proven
leadership team with a track-
record of consistently delivering
growth – averaging 30% year-on-
year revenue growth since 2015;
• consistent M&A track record with
successful acquisitions completed
each year since the fundraising in
July 2017;
• technical leadership and
differentiation enabling us to
deliver capabilities that are
critical to our customers;
• strong positions in key
programmes with the potential
for long-term, high-value
engagements;
• international demand for the
Group’s capabilities and know-
how, balanced by increasingly
global presence;
• long-term strategic relationships
with blue-chip customers;
• operations in complex, regulated
markets with significant barriers
to entry; and
• a focus on operational
performance, quality, on-time
delivery and cash generation.
06
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07
Market review
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Defence
64% of Group revenue in 2019
TP Group works with defence forces and their prime
contracting partners in addressable markets around the
world. These are principally in the UK, Europe and Asia
where we have developed a strong track record of delivery
and support.
Elevated security tensions have led to:
• increased focus on intelligence, communications and
networking of deployed forces, an area in which TP
Group has extensive experience;
• increased contact with the United States military/
industrial sector to explore opportunities to share
technology and capability;
• innovation to remove humans from harm’s way –
enhanced situational awareness technology and
autonomous vehicles are both part of this trend; and
• greater European co-operation through NATO following
the increased budget commitments made by member
states.
Market analysis indicates that, alongside the continuity of
major programmes in the UK, there will be growing defence
spending in Germany and France. In France, an increase in
resources of €1.7bn is planned in 2020 for modernisation
of major equipment, creation of new roles and innovation,
including delivery of the first Barracuda class attack
submarine.
Space
21% of Group revenue in 2019
Energy
15% of Group revenue in 2019
Space is a growing global market with significant
opportunities for TP Group. The sector is diverse, and
increasingly complex as institutional operators like the
European Space Agency (“ESA”) and NASA are joined by a
number of other private sector players. As the sector
diversifies, we are witnessing:
• headline missions such as NASA’s $35bn Artemis
programme to put astronauts back on the Moon by
2024, leading on to multiple sustainable missions by
2028 and then onwards for human exploration of Mars;
• increasing collaboration between NASA, ESA and other
international agencies to deliver these missions; and
• the falling cost of commercial access to space has led to
a rise in capacity which in turn creates a new demand
for traffic management solutions.
In the energy sector, after several subdued years, there is
evidence of planned long-term investment. TP Group is well
placed with proven solutions, experience and innovation to
support:
• downstream petrochemical processing, particularly
where this can be matched with carbon capture,
utilisation and storage initiatives; and
• emerging initiatives to generate energy from sustainable
sources and then store and distribute this energy safely
and efficiently.
We believe that TP Group is well positioned to provide
programme support services such as system engineering,
cost management and programme assurance. The Group
should also be able to apply our experience of habitation
management systems and the use of artificial intelligence
for a variety of control and management challenges.
08
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09
Market review continued
TP Group’s
innovative responses
We have great experience
in each of our market
sectors, the ability to
transfer skills and
solutions between them,
and have an increasingly
balanced business
as a result
01
Big data, AI and
decision support
Artificial Intelligence, decision support and other “big data”
solutions are invaluable in understanding the world around
us and responding intelligently.
TP Group consultants have been active in this field since
2015 and have seen opportunities arise in:
• autonomous routing of unmanned vehicles – initially
maritime, where the first autonomous vessel will be
delivered to the Ministry of Defence this year. The
approach is now extending to other uses as potential
applications unfold;
• optimising the response to complex and changing
scenarios – multiple upstream gas rigs or offshore wind
turbines; and
• pattern recognition amongst high volume data
transmissions – threat assessment by counter-terror
intelligence teams.
We have invested in capabilities to deliver digitisation
support, a toolset of AI technologies known as North Star
(“North*”), plus training and consultancy to work across
the full range of our market sectors
02 Habitation systems
Building upon decades of experience in submarine
atmosphere management, TP Group is working on adapting
habitation systems for other scenarios. Different
challenges exist in spacecraft or small submersible vessels,
and our experience in delivering crew safety and comfort
has wide-reaching applications beyond our traditional
systems.
03 Hydrogen and
zero-carbon energy
There is a growing market for zero-carbon energy that is
available on demand. This involves generation and storage,
and then the means to use the available energy. We are
investing in a technology transfer campaign to adapt our
proven electrolyser systems to meet this challenge. We
have an impressive track record in designing and producing
gas management systems for safe and reliable long-term
use in difficult environments. We therefore believe that we
have a competitive head-start in this rapidly expanding
market and are working with partners to deliver
consultancy services and to develop innovative or
“first-of-a-kind” solutions.
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05
06
Deployed electronic systems
Military operations are becoming more digital, more
mobile and need better and faster communications
to assure mission success. As well as supporting
end-to-end communications systems for the British
Army, TP Group is working on the Skynet military
communications satellite programme. Another piece
of the jigsaw is the mobile computing power that is
needed to enable deployed personnel to be more
self-sufficient whilst connecting better with remote
command centres. We provide a range of rugged
computer systems and other devices to support
troops and extend their power wherever it is needed.
Software solutions
We work across the software spectrum to support
our customers, from bespoke system development,
through assurance of third-party systems to the
creation of licensed software solutions that are
used by many of our large customers as part of
their everyday activities. The ECLIPSE suite of
project management tools is used by many of the
European aerospace prime contractors and the
North* AI toolset is now available for complex
decision support. The Group is also delivering
software-as-a-service such as an AI-based project
resourcing tool developed by Sapienza that is
gaining momentum in the Netherlands and will
extend to a wider user community this year.
Regional analysis
UK revenues (£m)
Since 2017 we have been building our outreach to
global customers and markets and have now seen
the returns on that effort. 2019 revenue growth
from non-UK customers was almost equally split
between organic growth and business coming
through the Sapienza acquisition.
We continue to pursue global opportunities,
particularly in the United States where defence
spending is greater than the next seven largest
spending countries combined, and NASA spends
approximately three times the European Space
Agency’s budget each year.
39.1
34.0
19.1
2019
2018
2017
2016
2015
23.6
16.6
15.6
Non-UK revenues (£m)
2019
2018
2017
2016
2015
5.0
4.3
4.6
4.8
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A strategy for growth
Technology / capability /
relationships / growth
We are focused on enhancing
our portfolio of advanced
technologies and related services,
improving our ability to serve
high-value and loyal customers,
whilst investing in our capabilities,
competitiveness and culture to
deliver a truly global business.
Strategic priorities
2019 achievements
2020 priorities
Metrics
01
Sustainable competitive
leadership in complex,
mission-critical systems
•
•
Invested in AI systems to
develop the North* suite of
tools
Introduced Westek rugged
servers into the Group’s
product offering
• Added ECLIPSE project
management software to
extend support of complex
project delivery
• Continue to develop AI and
other software technologies
• Develop commercial
hydrogen power solutions
Approximately
£0.6m
invested to support AI
development in the UK
plus additional investment
through Sapienza for
similar purposes in the
Netherlands.
c.61%
of revenue was drawn
from our top six customers
• Develop relationships with
aerospace prime contractors
across Europe
• Build long-term relationships
for consulting and services
02
Drive value from
excellent relationships
with major customers
03
Invest in best-in-class
operating capabilities
and technologies
04
Supplement organic
growth with suitable
acquisitions and
partnerships
05
Expand our geographic
reach in customers and
capabilities
• New contract with GE Baker
Hughes worth £6.4m for
nuclear condensers
• Further £16.9m contract for
defence equipment with a
long-standing major
customer
• Addition of European Space
Agency as a key account
following the acquisition of
Sapienza
• Significant additions to our
UK-based AI development
team
Investment in refresh and
upgrades of all UK
manufacturing facilities
•
• 1,000 days of training
accumulated across the
Group
•
Investment plans developed
for growth initiatives to
support technology and
services delivery
• Support staff in delivering
the Group’s high-
performance culture
£3.4m
investment in equipment
and capability in last
three years
• Acquired Sapienza Consulting
•
Holdings B.V.
Integrated Westek into the
Group and linked them with
central resources such as
business development
• Acquisition potential in a
range of technologies,
services and locations
• Working closely with
partners to develop new
customer solutions
3
acquisitions completed
since the 2017 fundraising
• Sapienza acquisition added
to footprint across Europe
• Opportunity creation and
capture in the United States
• Committed to opening a
business unit in France
• Non-European business
almost doubled, primarily due
to growth in the Middle East
oil and gas sector
• Establish a significant
business in France
c.33%
of staff are now based
outside the UK
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About Sapienza
Founded in 1994, Sapienza is a
leading European provider of
workforce, engineering services
and IT solutions to space and
defence customers.
Based in Noordwijk, near Leiden in the Netherlands,
Sapienza has operations in six European countries
and supports private and governmental clients in
the high-tech, high-reliability, and security-
concerned space and defence sectors. Sapienza’s
teams consist of space-engineers, software
experts, security and IT specialists, administration
professionals and business consultants.
A truly international business, Sapienza has more
than 30 nationalities represented in its workforce,
has worked with the European Space Agency
for 25 years and has supported more than
50 ESA missions.
As well as providing workforce solutions and
engineering services, Sapienza has developed the
ECLIPSE software suite. ECLIPSE is a collaborative
suite of integrated applications that helps space
project and mission teams achieve higher
efficiency, better co-ordination, control, and
compliance with applicable quality standards.
ECLIPSE now has more than 20,000 active
users worldwide.
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Business model
TP Group delivers advanced
technologies, world-class
services and support to
critical programmes in
high-value sectors.
Consulting and technology solutions
are the core of our business and
cover the full life cycle from early
stage problem-solving through
project setup, both technical and
economic, through build, integration,
delivery and onward usage. Some of
the systems we work on can have
service lives greater than 30 years,
and we provide services and
support throughout.
High-value projects and long-term
support arrangements offer a
visible revenue stream that can
be re-invested into the existing
business to sustain market-leading
positions and contribute to
acquisitions that drive step-change
growth and expansion.
Our capabilities
Strategy
Analysis
Software development
System Engineering
Project Management
Design
Manufacturing
Customer support
Organic improvement
Acquisitions
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Customer
value
High-value systems that
are mission-critical for
our customers’ safety
and performance.
Efficient
high-quality delivery
One-off projects
A unique consulting,
software development or
engineering activity, done
once and with a single
deliverable item.
Licenced software
Selling the right to use a
software product, usually
by multiple users, where the
product is developed
and owned by TP Group.
Low-volume systems
A small number of often
highly complex pieces of
equipment, usually under a
single contract.
Ongoing support
A range of activities
contracted over many years
to keep software or
equipment maintained,
updated and operating
successfully.
Partners
Invest
Income
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Case study
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TP Group provides
technical, mission,
project and commercial
support to major space
programmes. We are
proud to be part of
the most extensive
exploration and
discovery activities
ever undertaken.
$35bn
budget for NASA, ESA and others
to collaborate in putting humans
back on the Moon in 2024.
The Group is committed to
building an increased presence in
global space programmes. We are
now key contributors to the UK
Skynet programme, and, with the
acquisition of Sapienza, have a
multinational role in several
European institutional space
missions. Our ambitions go well
beyond our current role and we
are working towards participation
in future NASA, ESA and private
sector programmes.
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Annual Report and Accounts 2019
17
Chief Executive’s statement
I am very pleased
to look back on
another excellent
year of progress
for TP Group.
Phil Cartmell
Chief Executive Officer
2020 initiatives
In 2020 we will focus on:
• managing the business across
multiple geographic lines to
strengthen our position in
each location and provide
clarity and consistency as we
expand further;
• developing our position and
proposition in Europe and
North America to access the
significant market potential
available there;
• investing in our technology to
ensure competitive leadership
in the emerging AI, Machine
Learning and Big Data
opportunities;
• strengthening our offerings,
capabilities and commercial
position in the space sector
worldwide; and
• investigating technology
transfer options where our
existing heritage can be
applied to emerging
challenges, for example our
proven electrolyser solutions
being applied to hydrogen
generation.
All of this will be underpinned by a
relentless focus on securing and assuring
the success of the core business, which
continues to provide the foundation of our
growth ambitions.
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Combining our culture, teamwork and
technology we have ambitious plans
for the future of TP Group.
We have grown the business by almost 50% over its 2018
revenues and converted that into Adjusted Operating
Profit, which is up 48%. This is the fourth consecutive year
of growth and we generated almost three times our Group
revenues of 2015.
We now offer a broader technology and services
proposition and are significantly more diversified
geographically. This was a reflection of the substantial
organic growth in the Group’s core business, as well as
carefully selected acquisitions that have taken us into new
markets. These add value today and prepare us well for
future expansion.
We are, however, mindful of current circumstances in
relation to COVID-19 and the challenges it presents for our
business, the people within it and our plans for the future.
Strategy
We set out our strategy several years ago and have
committed to it fully. We are now seeing consistent growth
and value creation as a result.
Our clear focus is on the strength of our technologies and
services, our access to high-value market sectors and the
expansion of our geographic reach. We have invested in our
core business to provide solid foundations and took an
entrepreneurial approach to acquisitions and partnerships
to make rapid progress where opportunities arise.
Acquisitions and progress against
strategic objectives
During the year, the Group took a big step forward with the
acquisition of Sapienza Consulting Holding B.V. This group
of privately held companies provided us with a substantial
presence in the European space and defence sectors, new
service and software offerings and a mature footprint
across six European countries.
With that acquisition we have significantly increased the
Group’s capabilities and achieved a more balanced business
in terms of geography, market sectors served, and services
offered. As ever, our integration and cross-selling potential
grows over time and we are seeing this with Sapienza’s
excellent project management software suite, ECLIPSE.
This software originated in the space sector and is now
being picked up across TP Group’s other customers in the
defence and energy sectors.
We will not stop there and continue to target advanced technologies
and services that are incremental to our position and that will give
us greater access to higher-value markets.
satellite programme Skynet, and the Army’s end-to-end
communications system LE TacCIS. As a result, the Consulting &
Programme Services business more than doubled its revenues in
2019 and is well placed to continue this growth in the coming years.
Organic growth remains important, and we will continue to develop
the capabilities and assets we have. As the acquired companies join
the Group, we have great potential to link them together and take
them to places that they could not reach alone. This is the power of
our approach and I am pleased to see it delivering as it has in 2019.
Competitive leadership
TP Group succeeds by increasing our clients’ performance through
the intelligent use of technology and information. Across the Group
we are seeing an increasing demand for integrated solutions that
combine software and systems (the technologies) with the actions
of skilled and experienced people (the services) to deliver something
that can be relied upon when it really matters. We see this as a
differentiating requirement for our support that strengthens our
competitive position.
Historically, TP Group has worked on physical systems that must
work well and reliably in difficult or harsh environments. Increasingly
volatile information and communications environments have
created new challenges for our customers, and so our consulting-led
approach becomes more relevant. We bring experience, technical
skills, creativity and flexibility to guide our customers towards a
suitable solution, confident that safety and performance can
be assured.
Technology
We have set out on a development path that will involve internal
investment in software and capabilities, alongside customer-funded
projects, to bring technology solutions to maturity as quickly as
possible to capitalise on market opportunities.
“Big data” environments open many new opportunities for
communications, digital transformation services, modelling and
simulation, and AI. We are already active in data and
communications management for defence clients like the British
Army and the Skynet satellite communications programme. AI and
Machine Learning expertise came with the Polaris acquisition in
2017, and rugged IT for deployed computing came through the 2018
Westek acquisition. Combining these forms the core of future
diverse, integrated and highly valuable solutions, and shows how we
can bring solution components together to form bigger and more
comprehensive offers to our customers.
Of course, it does not have to stop there, and options are available
to extend the proposition to include sensors and data capture,
other software services and systems including simulation and
emulation and onward transmission through 5G and other channels.
This technology horizon means that we stand on the brink of a very
exciting period for the Group.
Consulting and technology support capabilities were demonstrated
this year by the award of contracts under the Skynet satellite
programme where TP Group consultants are helping to guide the
future of military communications.
The growing portfolio of technologies has led us to create a centre
of excellence for technology development that we believe will be a
focal point for innovation across the Group.
Services
Our services businesses have become established as key providers
of consultancy services and methods that accelerate and assure our
customers’ projects. Domain experience and insight, plus leadership
in specialist disciplines such as cost engineering and project
assurance, are important competitive advantages. These are key
factors in winning new business and in extending our relationships
into subsequent phases of major programmes that generate
long-term value for the Group.
We have framework agreements in place with the UK Ministry of
Defence, the European Space Agency and two Naval Design
Partnerships. We use these as pathways to valuable projects, and
through these we have become key contributors to the UK military
Engineering
Our engineering activity is differentiated by our unrelenting focus
on the quality and reliability of the solutions we deliver. This was
demonstrated by the Group’s nuclear condenser work with GE Baker
Hughes. The first contract of £1.6m was awarded in 2016, followed
by a second contract received in 2019 for the balance of the
programme, valued at £6.4m to be delivered by 2023.
Similarly, we started the year with a follow-on order for carbon
dioxide equipment, a key part of the habitable environments we
support all around the world, which was the third in an ongoing
multi-unit programme.
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Annual Report and Accounts 2019
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Chief Executive’s statement continued
Contracts like these are key to securing the business with long-term
and high-value relationships that offer greater confidence in
planning and visibility of future performance.
Geographic expansion
TP Group has always looked for market opportunities beyond our UK
origins. We are key suppliers to maritime programmes in Europe,
Australia and Asia, and support energy markets in the Gulf states
and elsewhere.
We have historically done this through partnerships and agency
agreements, and, as we enter the next phase of our growth plan, it
becomes necessary to have a more direct presence in our target
markets. The acquisition of Sapienza has immediately extended our
European base and we have committed to taking this further in
France to be part of their growing aerospace and defence activities.
We now have a national office in Toulouse, with a local leadership
team operating as a new TP Group subsidiary to capitalise on the
potential in that country.
The Sapienza acquisition also provided us with local presence in
other European countries through which we can offer the wider
capabilities of the Group. Business development discussions have
accelerated in Belgium and Germany and we look forward to building
future business relationships in those locations.
The United States is a key target for the Group, and we have spent a
significant amount of time researching our opportunities and
options. We have incorporated a subsidiary company in the US as a
base from which to operate, and we intend to move this forward in
2020 to access the significant opportunities in the space, security
and energy sectors that have opened up for us. In the defence
sector particularly, there are regulatory matters that must be
navigated, so we are proceeding carefully to ensure we can achieve
the best possible outcome.
Organisation
As we have grown, the Board has looked carefully at the way in
which it operates the business in order to understand strengths,
weaknesses and areas for improvement. As a result, the Group will
be making some improvements to its operational structures and
methods. These range from relatively simple steps that bring sales
and delivery teams closer together to maximise efficiencies and
conversion of opportunities to contracts, to changes in
management reporting lines that will simplify the business and
better prepare us for future growth.
These structural improvements will allow us to employ a more
country-based approach, where local management has
accountability for business performance and a small central team
provides support, consistency of methods, and a hub into which
future acquisitions or partners can be joined without disrupting
the day-to-day operations of the business.
The central team will also be able to plan investment and manage
strategic development projects within a governance framework
that allows us to balance effective business performance with a
true entrepreneurial approach to our growth ambitions.
Investing in people
The Group now employs almost 450 people and we take that
responsibility very seriously. Our recruitment processes have
been streamlined to bring people into the business smoothly and
ensure they are productive quickly. Our culture, benefits and
training programmes have been overhauled to make TP Group an
attractive place to work, and we aim to retain staff through the
promotion of career development and appointments to senior
positions from within the team wherever possible.
Our people are clearly key to our success, and through the
current COVID-19 outbreak we have taken extensive steps to
support their physical and mental health and wellbeing whilst
supporting our customers, maintaining our business activities
and contributing to the overall economy.
Outlook
We have come a long way in the last few years and have been
careful to buy, integrate and manage our businesses in order to
build a solid foundation, and enable ambitious future projects.
We have the culture, the resources and the team to look outward
whilst the core business performs well and without distraction.
The strength of our people, our customers and long-term
contract positions places us very well to manage the
uncertainties arising from the COVID-19 outbreak.
I believe that the next few years will be notably exciting
for TP Group, and I look forward to reporting again on
our progress as we expand the business further.
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TP Group continues to work
to a set of six core values:
These values are a way of life for everyone
at TP Group and guide our behaviours and
responses in all aspects of our business.
01
02
Achieve together
Embrace responsibility
03
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Strive for excellence
Build unity
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Challenge
ourselves
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Have integrity
in all that we do
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Case study
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TP Group is working
to develop modular gas
production equipment
in response to emerging
requirements for oxygen
and/or hydrogen for
local use.
>40 years
experience in delivering critical
life support equipment to global
defence forces.
Recent events have drawn attention
to the availability of oxygen for critical
care, particularly under peak load,
highlighting challenges in logistics,
contingency planning and flexibility in
the supply of medical gases. Emissions
and clean energy campaigns are also
driving demand for hydrogen as an
energy source.
Modular electrolyser systems can use
available water and electricity which, if
renewably generated, means a genuine
low-carbon solution. Using proven
technologies and know-how developed
under a range of submarine life support
programmes, the systems can produce
hydrogen or oxygen on demand to meet
a wide range of end-user requirements.
This approach could provide local
contingency against peak load
emergencies, offer a sustainable energy
source and also contribute to long-term
carbon reduction goals.
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Annual Report and Accounts 2019
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Financial and operational review
We have delivered
strongly against
our KPIs, both
organically and
through acquisitions.
Derren Stroud
Chief Financial Officer
In concluding the Sapienza acquisition, we
have established a pan-European footprint
which has doubled the size of our consulting
business and provided us with routes to
future business across Europe. The
engineering side of the business has also
grown, and with Westek now firmly on
board, we anticipate significant further
growth in this area.
We continue to invest across the business, through
acquisitions, capital assets and operational resources to
deliver on our strategy.
Operating Results
Order book
The Group’s closing order book increased by 32% to
£63.8m (2018: £48.3m). £5.5m (c.11%) was secured
through organic growth and the remaining £10.0m was
from Sapienza.
Group Key Performance Indicators
Order intake
Closing order book
Revenue
Gross profit %
Adjusted operating profit1
Operating loss
Cash
Closing order book by business stream
T&E
CaPS
Group closing order book
Revenue by business stream
T&E
CaPS
Group revenue
Adjusted operating profit1 by business stream
T&E
CaPS
Central unallocated costs
Adjusted Group operating profit
2019
£’m
73.8
63.8
58.2
29%
5.9
(1.7)
6.6
2019
£’m
46.4
17.4
63.8
2019
£’m
33.7
24.5
58.2
2019
£’m
5.7
1.4
(1.2)
5.9
2018
£’m
43.2
48.3
39.0
29%
4.0
0.0
22.4
2018
£’m
42.3
6.0
48.3
2018
£’m
27.7
11.3
39.0
2018
£’m
4.5
0.6
(1.1)
4.0
Change
£’m
30.6
15.5
19.2
–
1.9
(1.7)
(15.9)
Change
£’m
4.1
11.4
15.5
Change
£’m
6.0
13.2
19.2
Change
£’m
1.2
0.8
(0.1)
1.9
Exceptional
performance across
a growing
international
business
1 Refer to the Financial and operational review section
“Adjusted operating profit” for the bridge from
operating loss to adjusted operating profit
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Organic growth was achieved through a balanced approach to
business development across all our sectors. Significant long-term
contracts closed in the year included:
A strong opening order book, coupled with good order capture in
the first half of the year and efficient operational execution, has
delivered another record year of revenue.
• a contract worth approximately £16.9m with a leading UK defence
company, to be completed by late 2021, providing advanced
packaged equipment;
• an order worth £6.4m over four years with Baker Hughes (a GE
company) within the nuclear sector;
• £2.6m of new and follow-on consultancy orders from the Ministry of
Defence;
In line with our strategy we have diversified and developed both
geographically and across our markets.
All market sectors have grown revenue year-on-year:
• £10.5m added in the space sector to £12.1m (2018: £1.6m)
• £7.5m increase in the defence sector to £37.3m (2018: £29.8m)
• £1.2m additional in the energy sector, rising to £8.8m
• €2.2m software license agreement for three years with the
(2018: £7.6m)
European Space Agency; and
• a one-year, £1.4m consulting agreement for the Land Environment
Tactical Communication and Information Systems (“LE TacCIS”)
programme.
2019 was yet another record high in the Group’s closing order book,
reflecting the strong market demand for our technologies and
services, matched by our investments in business development
activities and updated propositions.
Order intake
The 2019 order intake increased by £30.6m (71%) year-on-year to
£73.8m. This includes the £15.0m opening order book value that
was acquired with the Sapienza transaction. An additional £7.2m of
new orders were secured post acquisition by Westek and Sapienza.
Excluding these, organic order intake growth was 20%.
Revenue
Revenue increased by 49% to £58.2m (2018: £39.0m), with growth
delivered across the Group.
The existing business grew by £6.2m (16%), with the balance of
£13.0m coming from a full year’s contribution from Westek, and
from Sapienza since its acquisition.
International expansion was achieved as well as domestic growth:
• Europe up £11.7m to £13.6m
• Rest of World up £2.3m to £5.5m
• UK up £5.2m from prior year to £39.1m
Operating loss
The Group has moved from a break-even position in 2018 to record
an operating loss of £1.7m in 2019. This was driven largely by the
impact of acquisition-related costs that accounting standards
require to be written off to the profit and loss in the period and
masks the strong increase in the underlying profitability of the
business. Acquisition costs expensed during the year include:
• transactional costs of £1.5m (2018: £0.7m) related to
acquisitions; and
• earn-out provision of £1.6m (2018: £0.6m) relating to Westek,
Sapienza and Polaris.
Excluding these acquisition-related costs, the Group would have
made an operating profit of £1.4m (2018: £1.3m).
Annual Report and Accounts 2019
25
Financial and operational review continued
Adjusted operating profit
The directors of the Company believe that adjusted operating profit
is more reflective of the underlying performance of the Group than
equivalent GAAP measures. Adjusted operating profit is defined as
operating loss adjusted to add back depreciation of property, plant
and equipment and right-of-use assets, amortisation of intangible
assets and impairment gains or losses on non-current assets,
changes in fair value of contingent consideration, acquisition
consideration accounted for as employment costs owing to ongoing
service conditions, any other acquisition-related charges, share-
based payment charges, non-controlling interests and non-operating
costs. Non-operating costs are those items believed to be exceptional
in nature by virtue of their size and/or incidence and include
redundancy and restructuring costs. This provides shareholders and
other users of the financial statements with the most representative
year-on-year comparison of underlying operating performance
attributable to shareholders. This measure and the separate
components remain consistent with 2018. Refer below for details of
the reconciliation of adjusted operating profit to operating loss.
Operating loss
Depreciation, amortisation and impairment
Acquisition-related costs
Non-operating costs
Earn-out payments
Share-based payments
Adjusted operating profit including
non-controlling interest
Non-controlling interest
Adjusted operating profit
2019
£’m
(1.7)
3.9
1.5
0.3
1.6
0.2
5.8
0.1
5.9
2018
£’m
(0.0)
2.4
0.6
0.2
0.6
0.2
4.0
0.0
4.0
Adjusted operating profit increased by 48% to £5.9m (2018: £4.0m).
Profit from the existing business grew by 28%, or £1.1m, with the
balance of £0.7m improvement coming from the acquisitions of
Westek and Sapienza.
The adjusted operating profit percentage (as a percentage of
revenue) is 10.1% (2018 10.2%). This reflects:
• the stable gross profit margin percentage of 29% (2018: 29%)
which was derived from volume and efficiency improvements in
our manufacturing facilities, offset by a change in the product
and services mix through the acquisition of Sapienza; and
• further investment in operating expenses, including business
development and marketing, proportionate to the prior year’s
adjusted operating profit percentage.
Cash and bank balances
Year-end Group cash of £6.6m (2018: £22.4m), was lower than the
prior year. The key movements included:
• the cash element of the acquisition of Sapienza of £7.7m;
• the settlement of final earn-out payments of £2.0m combined for
Polaris and Westek;
• £1.5m invested in business systems, infrastructure, equipment
and software development; and
• working capital consumption of £4.8m arising from the timing
of material payments due from two customers at year-end that
were received in early January 2020, and the over-performance
in cash collection that contributed to a £3.4m inflow achieved
in 2018.
Note that working capital balances will vary through timing of
operational delivery and receipts although these factors are
typically short-term in nature.
Acquisitions, investments and disposals
In May 2019, the Group acquired Sapienza Consulting Holdings B.V.
for an initial cash consideration of €10.0m plus €1.5m by way of the
issue of 20,612,865 new ordinary shares and a possible earn-out of
up to €2.0m over the next two years. The deal was concluded on a
debt-free, cash-free, normalised working capital basis. Sapienza is
a provider of highly complex solutions and skills to the European
space and defence markets. With such specialist, technical services
and skills, Sapienza is a highly complementary business for TP Group,
with significant cross-selling opportunities. They have facilities in
six European countries, which immediately expands the Group’s
geographic presence, improving proximity to existing customers
and providing access to a new international community. Once fully
integrated, we believe Sapienza will help further drive the Group’s
participation in future European and global space programmes.
The Group incurred £1.4m of transactional costs for acquisitions
(2018: £0.7m) predominantly relating to the Sapienza transaction
noted above. These were charged to the Statement of
Comprehensive Income in the year.
Final earn-out payments of £2.0m have been made in the year
relating to the acquisitions of Polaris and Westek in prior years.
The Group continues to invest in its facilities, equipment and
technologies (principally the North* Artificial Intelligence toolset
and the ECLIPSE project management software) to build capability
and develop our propositions. Across the Group, £1.5m was
invested in 2019 (2018: £0.9m).
On 1 July 2019, the Group invested c. €0.7m in the AI company Lift
B.V. (“Lift”). Lift is based in Den Haag in the Netherlands and has
developed an AI system to support rapid resourcing of large-scale
technical projects.
Sapienza had initially acquired a c. 33% stake in Lift in May 2017,
as part of their strategy to invest in complementary technology
partners. This follow-on investment takes the Group’s holding in
Lift to 69%.
Lift is highly active in a range of sectors including defence,
aerospace, security, government, medical and commercial, and we
believe that the Group will be able to develop a number of highly
complementary growth opportunities for the Lift technologies in
our wider operations.
Non-operating items and earn-out costs
During the year, the Group incurred one-off non-operating and
earn-out costs of £2.0m (2018: £0.8m). These relate to the business
transformation actions required by the strategic plan, including
employment-related restructuring costs (£0.4m), and earn-out
provisions relating to Polaris, Westek and Sapienza (£1.6m).
Finance costs
Finance costs of £0.3m (2018: £0.1m) were incurred, predominantly
relating to fees in relation to investments in the Manchester facility
and lease interest charges following the adoption of IFRS 16 in 2018.
Taxation
The tax charge for the financial year to 31 December 2019 is less than
£0.1m. Refer to note 8 of the financial statements for further detail.
The Group expects to incur in total cash tax payments of c. £0.2m
net of R&D tax credits for the 2019 financial year (2018: £0.2m).
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Results and dividends
The directors continually evaluate Group performance, and do not
currently recommend the payment of a dividend (2018: £nil).
Brexit
As negotiations progress on the future trading relationships
between the UK and the EU, the Group has looked at the potential
impacts on the business in the event of no deal being agreed and
reversion to World Trade Organisation (“WTO”) rules. We are
monitoring the negotiations and will consider the impact of any
alternative scenarios as they emerge.
Our strategy is to increase our presence outside the UK to enable
contracts to be placed with TP Group companies local to our
customers. This country-based model allows us to act as a global
enterprise to best mitigate any possible impacts of Brexit. Initially,
the acquisition of Sapienza has provided an operating footprint in
Europe to take local contracts in the EU, as well as substantially
increasing our revenues in the global space sector. We are also in the
process of establishing an operational business in France and
seeking to widen our physical footprint of operations further within
and outside of Europe that will help offset the potential impact of
Brexit.
The Group has significant revenue that originates in the UK relating
to the defence market, and therefore ultimately to UK Government
spending. The outcome of trade negotiations may have a knock-on
impact on the Group if it leads to a change in Government decisions
on current and future programmes.
Whilst we believe our exposure to be low, we are actively managing
our supply chain through a number of risk mitigation approaches.
Our main risk is in the supply of raw materials, most notably steel,
from the EU, where we are investigating alternate sources as
back-up. However, in any event, the nature of the goods means
that under WTO rules, we expect them to attract low levels of tariffs
(c. 2%). Furthermore, the nature of our projects means that the
business has excellent visibility of when these goods are required
and can plan receipts accordingly to tie into customer build
programmes.
Coronavirus
The advent of Coronavirus in recent months has placed a number of
challenges before the business.
The Group is approaching this situation on a number of fronts to:
• protect the health and wellbeing of staff and their families;
• sustain the level of business activity on customer projects;
• continue dialogue with customers regarding renewals, extensions
and new business opportunities; and
• manage investment in operating expenses and capital equipment
where necessary.
The business is robust as it participates in several long-term
strategic government and institutional programmes in the UK
and overseas. More than 80% of the year-end order book can be
ultimately traced to programmes from government and
international institutions and major prime contractors. Many of
these organisations have publicly stated their intentions to continue
the pursuit of current programmes and ensure continuity of
payments and integrity of the supply chains through this period,
which is proving to be the case. As such, a large percentage of our
order book and pipeline of opportunities are regarded as secure.
The Group’s profile further protects us through the spread of our
business activities across multiple sectors, and the global nature of
the major industrial businesses we work with that we expect to
continue operating through such events.
The Group maintains a business continuity plan that includes several
relevant features:
• flexible working practices and systems that support the ability to
work from home in many cases;
• employee outreach initiatives to support as far as possible the
health, wellbeing and safety of our staff;
• flexible shift patterns within the manufacturing facilities to
accommodate staggered activities and appropriate distancing
within the facilities; and
• communications processes to facilitate and co-ordinate the
running of the business and the interaction with key stakeholders.
The business is further insulated through:
• a liquid cash balance that is retained predominantly within the UK
operating businesses;
• a banking facility of £7.0 m available to supplement our existing
cash balance; and
• our ability to flex our plans on operating expenses and capital
investment.
As of 20 May 2020 the banking facility has been fully drawn down
to insulate the business against any potential COVID-19 impact.
However, it must be noted that the Group’s current cash flow
forecast indicates that none of these funds will be required to
support the Group’s ongoing operational activities.
Auditor
As part of our continued drive to adopt the highest possible
standards of corporate governance, the directors undertook a
competitive tender process for the 31 December 2019 year-end
audit. The outcome of this process was the appointment of RSM UK
Audit LLP as auditors.
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Financial and operational review continued
Going concern
The directors, having considered various scenarios for the business
over the foreseeable future, including the potential impact of
COVID-19, are satisfied that it is appropriate to prepare the financial
statements for the group on a going concern basis.
In reaching this conclusion the directors have undertaken a
sensitivity analysis to reflect the potential impact of COVID-19, over
a period of at least twelve months from the date of the approval of
these financial statements, on our forecasts. This analysis has been
based upon market conditions and other received intelligence, and
the current operational conditions within the business. Possible
scenarios include:
• execution of the 2020 budget as planned through managed
operating procedures;
• zero revenue growth in 2020 but continued investment in capital
equipment, technologies and operating expenses in line with the
2020 budget; and
• reduced capacity or capability which impairs revenues across the
business by 10% against prior year for a period of six months, and
reduced investment in capital equipment, technologies and
operating expenses.
In the last and most cautious of these scenarios, the Group has
secured revenue cover through its February 2020 order book of
c. 80% of the impaired 2020 revenues and would carry c. £33m of
this order book forward into 2021. This provides considerable
comfort in the Group’s ability to execute this scenario.
All of these scenarios take into account the Group’s existing cash
resources of £6.6m, which along with the bank financing facility of
£7.0m established on 3 March 2020, provides sufficient insulation
against any reasonably plausible downside scenarios and risks.
Brexit has also been considered as part of this review, and whilst the
decision to leave the EU has now been confirmed, the ongoing
negotiations related to a future trade agreement may lead to some
disruption in the short term on some TP Group projects. However,
the Group has limited concern that this could impact on its ability to
deliver against its forecast targets, based on:
• the quality of TP Group’s order book and the programmes it is
involved in (both globally and in the UK);
• the acquired Sapienza business, which provides a European
footprint to offset some of the risk factors;
• the mitigation actions the business is putting in place; and
• the limited impact we expect Brexit to have on the defence
market (both in the UK and in the EU).
Through all of our analysis, the directors have concluded that the
Group is well placed to manage the business as a going concern
through the foreseeable future.
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Consulting & Programme Services (“CaPS”)
Our Consulting & Programme
Services business provides software
and specialist consultants to help
our customers meet their goals.
Domain specialists and advanced
technologies combine to deliver
operational and business
transformations. We use proven
systems engineering and project
management approaches in mission
and safety-critical situations to
assure high-performance and safe
operations.
Revenue Growth (£m)
2019
2018
2017
2016
2.1
11.3
5.8
24.5
Note – 2017 revenues are restated to reflect the
impact of IFRS 15, prior years are as originally
reported, refer to Note 2.1 to the financial
statements for further details.
Business performance
• Revenue more than doubled to £24.5m (2018: £11.3m)
• Adjusted operating profit £1.4m (2018: £0.6m)
• Operating loss £0.5m (2018: £0.5m)
• Closing order book up almost three times to £17.4m
(2018: £6.0m)
2019 was a transformational year for TP Group’s consulting
business. In addition to excellent organic growth in the UK we
completed the acquisition of Sapienza, and progressed as a
combined force to win new business in the space sector and for
traditional defence business outside the UK.
The Sapienza acquisition contributed £9.9m of additional revenue in
the year, the balance of growth being organic from the core
business, adding almost 30% like-for-like.
“Flagship” contracts and relationships
TP Group has become an essential part of the operational landscape
for several large organisations. These include the UK Ministry of
Defence where, across several contracts, we support the end-to-
end communications chain from front-line troops over satellite links
to the command centre. We also work closely with the European
Space Agency on most of their current and near-term planned
missions.
Extending our reach
The team has started work as a trusted partner to NATO on cost
assurance aspects of a range of their mission- and safety-critical
systems. This demonstrates the cross-selling value that the
expanded Group offers following the Sapienza acquisition.
Our Enterprise Technical Alliance continues to flourish, and now has
presence in two Naval Design Partnerships, covering submarines
and ships, and is in discussions to extend this arrangement
even further.
Technology development
The Group has invested significantly in developing software and
technology capabilities across Europe, with development and
diversification of the artificial intelligence software, now known as
North* suite of tools, the ECLIPSE project management suite and
other new applications.
Outlook
The services side of the Group’s business has embarked upon an
ambitious plan to develop on three paths, with opportunities
already in progress for new uses of the AI toolset, further expansion
of our presence in the space sector and taking our programme
assurance and systems engineering services to new customers
outside the UK. The core business is very healthy and with these
growth initiatives before us we are confident in the future success
of the business.
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Financial and operational review continued
Technology & Engineering (“T&E”)
Our Technology & Engineering
business stream designs, builds
and supports complex equipment
in a range of sectors which can
be relied upon for long service life,
in challenging or dangerous
environments.
Revenue Growth (£m)
2019
2018
2017
2016
33.7
27.8
22.1
19.1
Note – 2017 revenues are restated to reflect the
impact of IFRS 15, prior years are as originally
reported, refer to Note 2.1 to the financial
statements for further detail.
Based upon 75 years of engineering heritage and using our unique
combination of knowledge, skills and experience, we produce
high-integrity equipment from our factory facilities in Portsmouth,
Melksham and Manchester.
Business performance
• Revenue up 21% to £33.7m (2018: £27.8m)
• Adjusted operating profit up 27% to £5.7m (2018: £4.5m)
• Operating profit £3.7m (2018: £2.6m)
• Closing order book up 10% to £46.4m (2018: £42.3m)
The Group’s engineering businesses continued to grow organically,
adding £2.8m to revenue from the core activities. A further £3.1m
of revenue in the year came from the acquisition of Westek,
completed just before the 2018 year-end.
Adjusted operating profit grew slightly ahead of revenue and
reflects the benefit of new higher margin product mix arising from
the Westek acquisition.
Westek integration
The Group has worked with the Westek team to harmonise
business processes, capture operational efficiencies and make
the most of the greater business development network across
the Group. This has delivered several contracts including a major
project with a European customer, Roda Computer GmbH,
announced in January 2020.
Investing in capability
The Group invested in a £0.3m refit of both its Portsmouth and
Manchester facilities including new office space, welfare facilities
and lean-management initiatives within the factories.
Further investment was made in Manchester, where fabrication and
welding equipment was upgraded to the latest standards, and new
hydro expansion tooling was installed to speed up assembly
processes and improve consistency and quality. Investment at
Westek’s Melksham facility increased production capacity by
approximately 25%.
Outlook
Our strategy is that the engineering businesses will:
• maximise our core business by continuously improving quality
assurance, efficiency and customer interaction
• deliver work into new markets like carbon capture, hydrogen
storage and refuelling; and
• invest in rugged electronics manufacturing, creating a new larger
factory environment
Through these initiatives the Group sees a very healthy future for
our complex systems capability.
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Our strategic priorities
/01 Sustainable competitive leadership
in complex mission-critical systems
/02 Drive value from excellent relations
with major customers
/03 Invest in best-in-class operating
capabilities
/04 Supplement organic growth
with suitable acquisitions and
partnerships
/05 Expand our geographic reach in
customers and capabilities
KPI trends
Order intake (£m)
Order book2 (£m)
73.8
43.2
44.7
2019
2018
2017
2016
2015
23.8
17.4
2019
2018
2017
2016
2015
48.3
41.7
17.0
14.5
Why we measure it: Visibility of demand for our
technology and services, tracked monthly to
recognise any changes in the business environment.
Why we measure it: A clear indicator of forward
demand for the business. It is the basis of capacity
planning and resource allocation.
Performance: Another strong year, intake ahead of
revenue and boosted by additional order generation
from Sapienza.
Link to strategic priorities:
/01 /02 /05
Performance: Continuing to run at record levels
to provide confidence in future business.
Link to strategic priorities:
/02 /03
Revenue1 (£m)
Adjusted operating profit1,2 (£m)
2019
2018
2017
2016
2015
58.2
39.0
27.9
21.2
20.4
2019
2018
2017
2016
2015
0.0
2.1
1.1
5.9
4.0
Why we measure it: the fundamental indicator of
the scale of the business and the basis upon which
cash is generated.
Performance: Continuing the growth trend with an
increase of 49%.
Link to strategic priorities:
/01 /02 /03 /05
Why we measure it: An indicator of the
performance of core operating activities after
removing transactions that are not reflective of
the routine business operations.
Performance: Up 48% to continue our
year-on-year trend.
Link to strategic priorities:
/01 /02 /03 /05
Cash (£m)
Productivity revenue per head1 (£k)
2019
2018
2017
2016
2015
6.6
9.2
7.0
22.4
21.9
2019
2018
2017
2016
2015
159
181
139
131
120
Why we measure it: Allows us to manage the
operational business effectively and flexibly, with
resources available for investment as required.
Performance: Lower as a result of acquisition
activity and investment to drive future growth.
Link to strategic priorities:
/03 /04
Why we measure it: An indicator of overall
efficiency and productivity. This KPI is based
upon the average of monthly productivity
through the year.
Performance: Reduced slightly as expected,
following an exceptional year in 2018 and through
changing product and service mix.
Link to strategic priorities:
/03
Notes:
1 2017 value is restated to reflect the
impact of IFRS 15, prior years are as
originally reported.
2 Refer to the Financial and operational
review section “Adjusted operating
profit” for the bridge from operating loss
to adjusted operating profit.
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Corporate social responsibility
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Everyone working as part
of the business (whether as
employees, contractors or
advisors) is expected to
embrace our ethos to strive
to engender a way of
working that does not
compromise our integrity
or high standards of
business conduct.
During 2019 we have reviewed
our Code of Conduct and our
approach to corporate
governance (refer to the
Corporate Governance Report for
details of our approach) to ensure
its continued fitness for purpose
within our evolving and growing
business landscape. Together,
these cover a wide range of areas
which enable us effectively to
define the standards of behaviour
and conduct that we expect as a
responsible business.
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Corporate social responsibility continued
Employee engagement
We actively encourage employee engagement throughout our
sites, and our management teams at even the most senior
levels adopt an “open door” policy. Establishing the Reading
office in 2019 enhanced our open engagement culture,
becoming a central hub for multi-team meeting opportunities.
The roll-out of a regular quarterly magazine, “The Circle”, and
greater use of social media accounts has driven better
information sharing, and the adoption of a new HR online portal
(“HRIS”) means that all employees have access to key company
news and information.
We continue to drive our core value programme,
“Team tpgroup”, and during 2020 plan to create an online
“handbook” to capture the “TP Group Way” – covering our
ethos, culture, Group-wide and local ways of working and key
policies and information.
Our core values were created in collaboration with our
employees and encompass all our beliefs at TP Group. They are:
• Achieve together – thrive on knowledge sharing, helping
each other and delivering projects as a team.
• Embrace responsibility – take responsibility for our own
work. Trust our people to deliver their projects and have
ownership in what they do.
• Strive for excellence – constantly strive to achieve the
highest standards in our work.
• Build unity – work cohesively with our colleagues, customers
and partners to build strong and lasting relationships.
• Challenge ourselves – challenge ourselves and our people to
develop and grow. To learn new things and to always seek to
improve what we do.
• Have integrity in all we do – always conduct our business
fairly, with honesty and transparency.
We drive a culture of respect for one another (supported where
legally required by appropriate policies) and make every effort
to ensure that the work environment, whether in an office,
workshop or other location where work is carried out, is open
and comfortable.
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Remote working
As part of the Group’s business continuity planning and
flexible working provision, we have invested in business
technology, processes and equipment to enable staff to
work flexibly in terms of location and timing where this
is possible. This includes enabling access to the Group’s
networks, which remain subject to our cyber security
protocols.
This approach has proved to be an essential part of
the Group’s response to the COVID-19 outbreak.
Remote working was at the heart of this and software
tools were adopted to create a standard route by which
staff can securely access their company desktop wherever
they are. This has been proven on laptops and iPads, in
customer facilities, hotel rooms or back at home. It is a
truly flexible infrastructure from which to deliver customer
projects with minimum disruption.
Community engagement
and volunteering
We are committed to community engagement and
volunteering within our local communities. Our STEM
(initiatives in Science, Technology, Engineering and
Mathematics education) programme where all employees
can engage in extracurricular education for children and
young people continues to be a success, with a number of
our employees actively engaged in this initiative. Our
people understand the importance STEM plays in schools
and wider education. If young people choose to pursue
careers outside of engineering, then the UK will not have
enough resources to meet demand in this critical field.
That is why in 2020 we intend to provide 100 hours of
voluntary community engagement in the STEM areas.
Our people are also involved in raising money for a range
of charities, both individually and as a company, with
events for Cancer Research, Mind (BlueLight Works) and
others taking place over the course of 2019.
During 2019 we registered as a Disability Confident
business and have also signed up to the Armed
Services Covenant.
Diversity and inclusion
We create an environment where individuals are treated
with dignity and respect, in line with our duty to provide
equal opportunities to all.
We respect human rights and do not directly or
indirectly discriminate between persons based on
reasons of race, creed, sex, gender, sexual orientation,
social status, religion, nationality, pregnancy, age or
bodily or mental disability.
We respect the cultures, customs and history of every
country in which we operate or with whom we may come
into contact.
We do not tolerate any forms of bullying and have clear
policies on safeguarding against and reporting this type
of behaviour. For the avoidance of doubt, bullying
involves any offensive, intimidating or insulting
behaviour involving the misuse of power that can make
a person feel vulnerable, upset, humiliated, undermined
or threatened.
If someone’s actions in the work environment are
offensive and hostile, we encourage others to speak up
without fear so that we can remedy the situation quickly
and sensitively. During 2019 we invested in a series of
online training courses, made available to key staff,
and covering key aspects such as harassment, data
protection, security and bribery. It is planned to extend
this during 2020 with more modules and a wider reach
across all staff.
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Corporate social responsibility continued
Training and mentoring
TP Group is committed to ensuring that all employees
can meet their career aspirations, and as such place a
high value on the development and mentoring of its
staff. As well as making sure that all employees are
fully trained in their specific job roles, we also offer a
suite of development opportunities delivered by both
internal and external providers based on an individual’s
career path and learning requirements. To ensure that
we continue to look to the future, we develop both our
current and future leaders with a variety of leadership
development opportunities and, for those who are
early in their careers we are looking at developing
robust graduate and apprenticeship schemes which
will allow us to continue to recruit and retain the best
talent. Several more experienced employees, actively
supported by the Company, have been linked with
mentors to support them through the next stages of
their chosen career.
Anti-bribery and corruption
We have a clear anti-bribery policy supported by a
robust process which is followed across the business
and regular training to put in place all reasonable steps
to ensure full compliance and control in this area. In our
business dealings we never act in a manner which
results in an illegal restraint of trade, such as collusion
in tender or collusion with a view to the fixing of price
levels or levels of production or supply or the division
of markets.
We never conduct unfair trade practices, such as
boycott, resale price maintenance or payment of
unjustified rebates.
We take a zero-tolerance approach to bribery and are
committed to acting professionally, fairly and with
integrity in all our business dealings and relationships
wherever we operate.
We conduct ourselves in an ethical and responsible
manner in the communities in which we work. We do
not:
• render public officials or persons in a similar position,
any economic favour such as money, gift or other
favour in return for performance of their duties;
• pay any agent, advisor or consultant any commission
which we have reason to know will be used for
influencing public officials or persons in a similar
position in an unlawful manner:
• render employees or officers of customers any
economic favour such as money, gift or other favour,
the value of which is greater than a generally
accepted commercial level, nor receive such
economic favour from employees or officers of
customers; or
We do seek to timely disclose any information of TP
Group in accordance with any laws and regulations
protecting the interests of investors including the rules
of any relevant stock exchanges.
No modern slavery
Modern slavery takes various forms, such as slavery,
servitude, forced or compulsory labour and human
trafficking, all of which involve a violation of
fundamental human rights by another in order to
exploit them for personal or commercial gain.
TP Group first published its formal Anti-Slavery
statement during 2019 and a copy of this is accessible
through our website. We continue to review our supply
chain management processes and our internal training
to ensure that we drive the right behaviours in this area
and can make improvements as needed.
Environment
We comply with all laws and regulations
concerning the protection of the environment
wherever TP Group may operate and keep
informed and aware of environmental issues
concerning the Group and its business.
Many of our businesses are accredited to ISO
14001, which is the environmental management
system. The measures in place for the EMS system
and associated external audits, ensure that these
businesses do not damage the environment.
Those that are not yet accredited conduct
environmental assessments to raise awareness
amongst their employees to protect the
environment against damage.
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Reducing water/waste
TP Group is very mindful of consuming less water and
producing less waste. At all of our sites there are
recycling bins appropriately labelled to dispose of items
correctly. Metrics of usage are monitored against
targets set to reduce both waste and water.
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Section 172 statement
The following sets out TP Group’s section 172 statement.
Background
From 1 January 2019, companies meeting certain criteria
are required to include a specific statement in their Annual
Report regarding their understanding of and compliance
with section 172 of the Companies Act, 2006. A director of
a company must act in the way he/she considers, in good
faith, would be most likely to promote the success of the
company for the benefit of its members as a whole, and in
doing so have regard (amongst other matters) to:
• the likely consequences of any decision in the long term;
• the interests of the company’s employees;
• the need to foster the company’s business relationships
with suppliers, customers and others;
• the impact of the company’s operations on the
community and the environment;
• the desirability of the company maintaining a reputation
for high standards of business conduct; and
• the need to act fairly as between members of the
company.
The board of directors are fully aware of their responsibilities
and work actively to review and promote the success of the
Company through robust internal and external reporting
practices. TP Group arranges for the full board of directors to
have regular update training concerning their obligations
under S172, with the next training scheduled for mid-2020.
Additionally, the Company Secretary and external advisors
are available as and when needed to advise on any specific
matters arising related to the duties of the directors under
the Companies Act.
Effective stakeholder engagement
A specific aspect of the new reporting requirements has
regard to the manner in which key stakeholders of the
business are identified and how the Board can ensure that
their interests are taken into account as part of any key
decision-making process.
Engaging with our stakeholders strengthens our
relationships and helps us make better business decisions
and deliver on our commitments. The Board is regularly
updated on feedback from wider stakeholder engagement
to stay abreast of the issues that matter most to them and
our business, and to enable the Board to understand and
consider these issues in any decisions made.
TP Group has identified its main stakeholders as being its:
• shareholders;
• customers and suppliers; and
• employees.
Shareholders
TP Group remains committed to listening to and
communicating openly with its shareholders to ensure that
its strategy, business model and performance are clearly
understood. Understanding what investors and analysts
think about us, and in turn, helping these audiences
understand our business, is a key part of driving our
business forward and we actively seek dialogue with
the market via regular investor roadshows and our
reporting activities.
There are a number of methods for engaging with and
informing shareholders. The Regulatory News Service
(“RNS”) ensures that relevant updates are provided in
near-real-time to the market and we work closely with our
Nominated Advisor (“NOMAD”) and communications
advisor to ensure that the appropriate information is
released in a timely fashion.
We hold regular meetings with key shareholders, usually
coinciding with half-year and end-year updates. Our AGM
is held typically in June each year and is open for all
shareholders to attend. Notice of this is issued in
accordance with our Articles of Association and details
are published each year on the company website.
In addition, the Board are available to meet with or talk
to shareholders for any specific matters arising through
the year.
Customers and suppliers
Across the Group, we many long-standing and highly
successful relationships with large customers and suppliers
worldwide. We seek to have appropriate, risk-balanced
agreements in place with all our customers and suppliers
to create proactive working relationships across the supply
chain.
Effective communication across our supply chain is key and
this is managed both formally (via scheduled meetings,
audit activities, project management reporting etc.) and
informally through day-to-day contact. Many of our
customers are themselves providing equipment and/or
services to end-users and so we aim to be flexible (within
sensible boundaries) and open to the requirements they
may have.
For our larger “key accounts” we appoint Account
Managers who maintain responsibility for all relevant
dealings. Our account and supply chain management
teams are encouraged to build proactive open relationships
across the supply chain in order to understand and respond
to their needs. This stands us in good stead when we
require support from time to time on specific matters – for
example, we are able to have open discussions about
payment profiling when required.
Our consultancy services business often operates as
“Customer Friend” and we are trusted and relied upon to
provide clear, unbiased advice and guidance across a range
of critical programmes in this regard.
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Employees
Alongside our shareholders, suppliers and customers,
we recognise that our employees are one of our most
important stakeholder groups. We have implemented a
series of employee development and management training
programmes across the business and the Board is looking
to roll-out an appropriate form of employee feedback
forum and/or survey. We have additionally invested in
a series of online tools and systems to ensure effective
communication with our employees and, during 2019,
introduced a quarterly newsletter, “The Circle”, for
all employees.
The development of our company Core Values programme,
and regular review of our company Code of Conduct, our
key policies and ways of working ensure that employees
have the tools and information they need to perform
effectively within the business. As we continue to grow,
both organically and via acquisition, we are continually
seeking ways to ensure that the underlying culture within
TPG Group can be maintained and understood, and that all
employees feel valued.
Key decision-making
Decisions around matters such as acquisitions, key hires,
market diversification and risk appetite are taken from time
to time by the Board. A key element of the decision-making
process is how each of the key stakeholder communities
may be impacted.
We ensure that the needs of shareholders are balanced
with those of our customers and suppliers, and those of
our employees, by considering carefully the impact
(positive and negative) that such decisions may have.
We believe that we take a robust but commensurate
approach to risk management and have a range of risk
management policies and ways of working that are
intended to derive the right balance of risk and reward
across the business. By operating within our Core Values
and our Code of Conduct in all decision-making activities
we are able to drive a company ethos which aligns to the
key requirements of S172 and thus deliver benefit to
all stakeholders.
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Principal risks and uncertainties
Risk management
framework
TP Group’s risk management
framework, policies and procedures
are designed to identify, manage
and mitigate risks that may impact
upon the execution of the Group’s
strategy and day-to-day business.
Whilst we cannot eliminate risk or uncertainty, we can
mitigate some and seek to ensure that we are only
exposed to risks that can be managed effectively in
accordance with the Board’s risk appetite.
Effective risk management is essential to safeguarding
TP Group’s ongoing commercial success. We manage
risks through three phases in a structured and
controlled framework.
The key elements of this approach are:
• identify and evaluate
• action plan
• implement
Our strategic priorities
/01 Competitive leadership – to have sustainable
competitive leadership in complex mission-critical
systems and equipment
/02 High-value accounts – to drive value from
excellent relations with major customers
/03 Invest in capability – to invest in best-in-class
operating capabilities and technologies
/04 Acquire or partner – to supplement organic
growth with suitable acquisitions and
partnerships
/05 Geographic expansion – to expand our geographic
footprint in customers and capabilities
Key performance indicators
/01 Orders
/02 Order book
/03 Revenue
/04 Adjusted operating profit
/05 Cash
/06 Revenue/head
Identify and evaluate
The Board has identified the principal risks which could impact the execution
of its strategy, delivery of business objectives or continuity of ongoing
operations. A formal process has been established for the Senior Leadership
Team to identify and manage risks on a continuous basis, reporting to the
Board and supported by Group Finance through regular risk reviews.
Using a centrally maintained risk register, risks are assessed and prioritised
by severity, using a scoring matrix of likelihood and impact for effective
comparison and prioritisation
Action plan
Risk responses and strategies are prepared by the relevant business owners
to ensure risks are appropriately managed or mitigated and where possible,
their likelihood and/or severity is reduced to an acceptable level. The Board
reviews and agrees the risk response plans, monitoring them regularly for
effectiveness and ensuring actions taken are appropriate and sufficient. In
some cases, certain areas of risk are further mitigated by external insurance.
Implement
Local management regularly monitors TP Group’s register of risks and the
mitigation actions that apply to them. Their continuous review is reported to
the Senior Leadership Team where the risk portfolio is consolidated and
reviewed before onward reporting to the Board. This ensures a consistency
of awareness across the business of context in which those risks stand and
the potential consequences of them maturing.
The Board therefore monitors the adequacy of any mitigating controls and
actions and the effectiveness of risk management and internal control
systems that are in place.
Having considered all the elements of the risk management framework
described here, the Board has concluded that it has taken all reasonable
steps to satisfy itself that the risk management framework is effective and
has addressed all material risks up to the date of approval of the Annual
Report and Accounts 2019.
Risk trends
The direction of change during the year is illustrated by the icon in the
‘Risk Trend’ column. Please note that this refers to the overall change in
the risk to the Group following mitigating actions.
Increased risk
No change to risk
Decreased risk
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Global economic conditions
Principal Risk
Management Strategy
The Group is adversely
affected by the
commercial conditions
in its markets.
The Group is diversifying through organic growth and
acquisition (i.e. Sapienza) into adjacent markets to reduce
our exposure to a single market event. We carry out review
and analysis of emerging trends in our key markets
including political and economic aspects. This intelligence
informs strategy and planning decisions at the Group
and business unit levels, for example our response to
COVID-19, refer to the Financial and operational review
for further details.
Risk
Trend
Strategic
Impact
KPIs
Affected
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/06
02
Government policy, regulation and legislation
Principal Risk
Management Strategy
Brexit (future trading
relationship) leads to
adverse trading
conditions.
Revenue generated
from defence and
energy industry
contracts is impacted
by changes in
government policies
and legislation.
From a defence perspective, Brexit is expected to have
limited impact on the Group as a result of our competitive
position in the key global programmes we support. In terms
of our energy business, the possible disruption is in relation
to our supply chain. Alternative sources of supply are being
investigated and/or customer contracts are being negotiated
to mitigate the potential risks related to supply chain impact.
In relation to Sapienza, appropriate work visas will be put in
place to mitigate the labour risk. We will continue to monitor
our position as the exit date draws closer.
Defence contracts are with long-term customers with
whom we have well established and close working
relationships that provide us with good visibility of future
programmes and spend. Defence policy, at least in the UK,
has protected the key programmes we are active on. Whilst
the business is less reliant on the energy sector, we monitor
the policy and programmes horizon, as well as global
events, in order to react early to potential impacts to the
business plan.
Risk
Trend
Strategic
Impact
KPIs
Affected
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/06
/01
/02
/03
/04
/05
/06
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Principal risks and uncertainties continued
02 continued
Government policy, regulation and legislation
Principal Risk
Management Strategy
COVID-19 - the onset
of the pandemic could
have long lasting and
far-reaching effects
across the global
economy and
businesses.
Health, safety,
environmental, privacy
and social regulations
place greater burden
on the business.
The immediate risks faced by the Group due to the outbreak
are possible delays in work on customer sites, delays to
development processes and other customer projects. A
prolonged period of restricted activity could compound and
enhance other principal risks, not least general economic
conditions, delays in client decision making or cost overruns
resulting from delay.
The directors have conducted a series of sensitivity
analyses to a range of scenarios arising from the effects of
COVID-19 on the business, its staff, customers and other
stakeholders. A number of responses and mitigation actions
have been taken by the Group.
This forms part of the group’s Going Concern assessment,
further details of which can be found in the Financial and
operational review.
These risks are managed by the Group’s accreditation under
BS EN ISO 14001 (Environmental Management System) and
OHSAS 18001 (Occupational Health and Safety
Management System). The Group has implemented
measures to comply with GDPR, and monitors pending
regulations closely. The acquisition of Sapienza has
increased the potential because of the volume of personal
data they hold. Regarding widespread health matters, the
Group monitors Government responses to any outbreaks
and their recommendations, and implements appropriate
measures as required.
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Customers, competitors and commercial relationships
Principal Risk
Management Strategy
Competitor capabilities may
change or disruptive
technologies emerge, leading
to loss of advantage or
market position
The Group’s approach is to manage business
development primarily through business sector
teams who are closely aligned to their propositions
and the competitive threats they face. Know-how
has been built up over time, and close relationships
with customers provide insight into trends in the
requirement which create barriers to entry for
competitors.
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Availability of key resources
Risk
Trend
Strategic
Impact
KPIs
Affected
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/06
/01
/02
/03
/04
/05
/06
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Principal Risk
Management Strategy
Risk
Trend
Strategic
Impact
KPIs
Affected
Loss of performance,
reliability and availability of
certain key assets, equipment
and information technology
systems impacts delivery
execution.
Loss of a major customer.
The Group has taken steps to avoid single points of
failure or capacity constraints. The business has
also taken out insurance to mitigate the risk. Some
equipment is subject to structured warranty and
maintenance provisions and as a further mitigation,
selected tasks can be subcontracted out.
Focus on operational excellence to avoid loss of
customer whilst also expanding the Group’s
activities with other key accounts to minimise
reliance on any single account.
Focus on operational excellence to avoid loss of
customers whilst also expanding the Group’s
activities with other key accounts to minimise
reliance on any single account.
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/06
/01
/02
/03
/04
/05
05
Technology and security
Principal Risk
Management Strategy
Cybersecurity threats come
in a number of forms, posing
a risk to sensitive data held
in the normal course of
business, as well as business
interruption risk.
The Group has implemented Cyber Essentials Plus
across its businesses and continuously reviews the
quality of its security shields and protocols to
mitigate the threat. Additional system estates
arising from the Sapienza acquisition have increased
potential risk, which is being assessed to bring in
line with Group standards.
Risk
Trend
Strategic
Impact
KPIs
Affected
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/06
06
Acquisitions
Risk
Trend
Strategic
Impact
KPIs
Affected
Principal Risk
Management Strategy
Risk
Trend
Strategic
Impact
KPIs
Affected
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/06
Issues may arise from an
acquisition that could add
unexpected costs or liabilities
to the Group.
Such risks cannot be eliminated, however they are
mitigated through, amongst other things, due
diligence, vendor warranties and integration plans
developed and executed in a timely fashion. All
acquisitions are directed, approved and monitored by
the Board. Risk is likely to increase as we acquire
business outside of the UK however we will look to
take appropriate advice and guidance.
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/06
Principal Risk
Management Strategy
Risk
Trend
Strategic
Impact
KPIs
Affected
Key employee knowledge
and skills, upon which key
functions or initiatives
depend, may be lost.
The Group seeks to avoid single points of failure or
capacity constraints by attracting and retaining
suitably skilled and experienced staff to support the
business performance. This is achieved through
appropriate and competitive remuneration
packages, a framework for personal and
professional development and working
environments that make TP Group an attractive
place to work.
/01
/02
/03
/04
/05
/01
/02
/03
/04
/05
/06
Phil Cartmell
Chief Executive
Derren Stroud
Chief Financial Officer
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Board of Directors
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Andrew McCree
Non-executive Chairman
Phil Cartmell
Chief Executive Officer
Derren Stroud
Chief Financial Officer
Phil Holland
Non-executive Director
Jeremy Warner-Allen
Non-executive Director
Claire MacPherson
Company Secretary
Andrew McCree was
appointed to the Board in
October 2014 and has over
35 years’ experience in
energy and environmental
technology and consulting
businesses, with an
extensive knowledge of
technologies and markets.
Following his early career
with BP Exploration, he
joined the UK Atomic
Energy Authority
(“UKAEA”) and in 2005
became Chief Executive of
AEA Technology. Since
2011 he has worked for a
US specialist consulting
business. His principal role
has been to advise on a
range of defence, energy
and climate change
matters working with both
government agencies and
private sector clients.
Phil Cartmell was appointed
to the Board in September
2009. He has had a highly
active career in business,
having formerly been Chief
Executive of Vega Group
plc between 2001 and
2008, where he grew the
company into a leading
European aerospace and
defence business. In
February 2008, Vega Group
was acquired by Italian
multi-national,
Finmeccanica, for a
substantial premium. Phil
has served as a Non-
executive Director and
adviser for a number of
companies including
Alterian plc, a leading
provider of Global
Information Management
Solutions, where he was
Non-executive Chairman
until its acquisition by SDL
plc in January 2012, and
Trafficmaster.
Claire MacPherson was
appointed as Company
Secretary in February 2015
and is also the Group Legal
and Compliance Director.
Claire has enjoyed a
successful career in
commercial and legal
management spanning
over 20 years. She has
worked in the global
defence, retail transport
and energy sectors for
companies such as GEC
Marconi, Lockheed Martin
and CSC Computer Sciences
Corporation.
Jeremy joined the Group in
February 2017. He has over
25 years’ experience in
capital markets, most
recently as Executive
Director, Board Member
and Head of the Growth
Companies Team at Cenkos
Securities plc, where he
advised a number of AIM
companies over a period of
11 years. Prior to joining
Cenkos, he was a founding
member of Beeson Gregory
Limited and responsible for
the UK sales desk, a role he
retained when Beeson
Gregory merged with
Evolution Securities in
2002. Jeremy chairs the
Remuneration Committee
and has held this position
since appointment.
Derren Stroud was
appointed to the Board in
March 2016. Derren, a
member of the Chartered
Institute of Management
Accountants has over 20
years of industry
experience, including
senior finance roles at
Retail Decisions, Envox and
Safenet. He has worked
within a range of specialist
innovation and engineering
businesses, with both
public and private equity
backing, serving a global
customer base from
manufacturing and
commercial sites
worldwide.
Phil joined the Group in
February 2017. He is a
chartered accountant and
has over 20 years’
experience in board-level
finance roles, previously
with Atlas Estates Limited,
Laing O’Rourke plc,
Teesland plc and Estates &
General plc. In 2011, Phil
became Finance Director
and Deputy Managing
Director of Primary Health
Properties PLC (‘PHP’), a
leading investor in primary
care real estate, with a
portfolio of over 300
medical centre properties
across the UK and Republic
of Ireland, until leaving that
role on 31 March 2017. Phil
joined Prime plc, a
healthcare real estate
developer as Chief
Investment Officer on 10
April 2017. Phil chairs the
Audit Committee and has
held this position since
appointment. Phil is also a
Non-executive Director of
Stenprop Limited, a real
estate investment trust
listed on the London Stock
Exchange.
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Directors’ report
Directors’ report (continued)
The directors present their report together with the audited financial statements for the year ended
31 December 2019.
Principal activity
TP Group is a technology services business, working to make the world a safer place, employing more
than 400 highly skilled individuals across six European countries. We combine to deliver mission, business
and safety critical services and equipment across three high growth sectors - Defence, Space and Energy.
Our customers trust us to ensure the safety, reliability and performance of complex systems in the most
challenging or arduous situations. With global presence and proven field experience, TP Group is a
leading choice for platform builders, integrators and users of both military and industrial systems.
We operate across two distinct but highly complementary integrated business units:
Technology & Engineering (“T&E”) - the capability to design, manufacture and support mission-
critical systems
Consulting & Programme Services (“CaPS”) - advising clients on strategic problems and
implementing technology-driven solutions
Results and dividends
The directors do not recommend the payment of a dividend (2018: £nil).
The results of the financial year of the Group are detailed in the Strategic Report and the Financial
Statements.
Future developments
The Strategic Report includes details of future developments of the Group.
Research and development
Total R&D expenditure in the year was £0.4m (2018: £0.6m). £nil (2018: £0.6m) was charged to the income
statement and £0.4m (2018: nil) capitalised in the year.
Business relationships
The information on the fostering of business relationships with suppliers, customers and others required
by Schedule 7.11B (1) and (2) is given in the Group’s s.172 report on page 38.
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.
On 3 March 2020, the Group entered into a new £7.0 million revolving loan facility (the "Facility
Agreement") with HSBC UK Bank plc. This facility has a term of three years and carries an option to
increase the headroom to £12.0 million subject to certain conditions. Under the terms of the Facility
Agreement the Group will pay interest at a rate of between 1.75% and 2.25% over LIBOR on the amount
drawn down, depending on the Group's total leveraged position. As of 20 May 2020 the facility had been
fully drawn to insulate the business against any potential covid-19 impacts. However, it must be noted
that the Group’s current cash flow forecast indicates that none of these funds will be required to support
the Group’s ongoing operational activities.
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 29 days (2018: 31 days). The Parent Company’s creditor
payment period was 35 days (2018: 31 days).
Employees
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.
Directors and their Interests
The directors during the year and up to the date of this report were as follows:
Executive
P Cartmell
D Stroud
Non-executive
A McCree
P Holland
J Warner-Allen
Directors’ interests in shares are shown in the Remuneration Report.
Related party transactions
These have been disclosed within note 29 to the financial statements.
Financial instruments
Details of the Group’s financial instruments are set out in note 23 to the Consolidated Financial
statements
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Directors’ report (continued)
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.
As part of their continued drive to adopt the highest possible standards of corporate governance the
directors undertook a competitive audit tender process for the 31 December 2019 year end. Following
completion of this process, the directors appointed RSM UK Audit LLP as auditor at the Company’s AGM
on 6 June 2019.
By order of the board
Claire MacPherson
Company secretary
Cody Technology Park
Old Ively Road
Farnborough
Hampshire
GU14 0LX
20 May 2020
Statement of Directors' responsibilities in respect of the Annual Report and
the Financial Statements
The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial
statements in accordance with applicable law and regulations.
Company Law requires the directors to prepare Group and Parent Company financial statements for each
financial year. The directors are required by the AIM rules of the London Stock Exchange to prepare the
Group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as
adopted by the European Union and have elected under company law to prepare the Parent Company
financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law) including FRS101 ‘Reduced Disclosure Framework’.
The financial statements are required by law and IFRS adopted by the EU to present fairly the financial
position of the Group and the Company and the financial performance of the Group. The relevant part
of the Companies Act 2006 supports the requirement that the financial statements present a true and
fair view with references to their giving a fair presentation.
Under Company Law, the directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Group and the Parent Company and of the
profit or loss for that period. In preparing these financial statements, International Accounting Standard
1 requires that directors:
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select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRSs adopted by the EU;
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Group and the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s and Parent Company’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 Group and 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.
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Corporate governance report
Principles of good corporate governance
Following the decision by the Group to adopt the Quoted Companies Alliance Corporate Governance
Code (the “QCA Code”), we have continued to review our governance procedures to ensure that we are
able institute good governance insofar as it is practical and appropriate for an organisation of the Group’s
size and nature.
The QCA Code sets out 10 key principles that companies should adhere to or have a plan in place to
achieve. At this time the Group is able to demonstrate compliance with nine of the ten principles and is
seeking the most appropriate way to ensure full compliance with the one remaining principle during
2020.
The following table shows, at a summary level, compliance against each principle. Furthermore, where
this Annual Report references any of the principles, the relevant section is noted. Full details of our
compliance can be found on our website: https://www.tpgroup.uk.com/media/1447/corporate-
governance-code-statement-v2-feb-2020.pdf
Principle
1) Establish a strategy and business model
which promotes long term value for
shareholders
2) Seek to understand and meet shareholders’
needs and expectations
3) Take into account wider stakeholders, social
responsibilities, and their implications for
long-term success
4) Embed effective risk management
considering both opportunities and threats
throughout the organisation
5) Maintain the board as a well-functioning
balanced team led by the chair
6) Ensure that between the directors they have
the necessary up to date experience, skills
and capabilities
7) Evaluate board performance based on clear
and relevant objectives seeking continuous
improvement
Compliant
Yes/No
Yes
Yes
Yes
Yes
Yes
Yes
No
8) Promote a corporate culture that is based on
Yes
ethical values and behaviours
9) Maintain governance structures and
processes that are fit for purpose and support
good decision-making by the Board
10) Communicate how the Company is governed
and is performing by maintaining a dialogue
with shareholders
Yes
Yes
Comments
information
Please refer to the Chairman’s
Statement, Investment Case, Market
Review and Business Model sections
of this report
Please refer to the
provided below
Please refer to the Corporate and
Social Responsibility section of this
report
Please
Risk
Management Framework section of
this report
refer
the
to
Refer to the board biographies
section of this report and the further
information provided below
Refer to the board biographies
section of this report and the further
information provided below
The board is investigating the most
appropriate approach to evaluate
performance in accordance with the
requirements of the QCA Code.
Please refer to the Corporate Social
Responsibility and CEO Statement
(Core Values) sections of this report
Please refer to the
information
provided below
Please refer to the
provided below
information
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Corporate governance report (continued)
Application of principles
Effective Board Structure and Role
During the year, the Board consisted of two executive and three independent non-executive directors.
Andrew McCree remained in post as non-executive Chairman throughout the period. The Company is
satisfied that the current composition of the board is appropriately skilled and experienced, and that it
has a suitable balance between independence on the one hand, and knowledge of the Group on the
other, to enable it to discharge its duties and responsibilities effectively.
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.
All directors are encouraged to use their independent judgement and to challenge all matters, whether
strategic or operational. The Chairman engages with the directors outside of the board meetings on a
one-to-one basis as and when required to discuss matters of the business.
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.
The Board met eight times in the year and was provided with relevant information on financial, business
and corporate matters sufficiently prior to meetings to enable it to properly discharge its duties.
Risk Identification and Management
The Board drives effective risk management across the Group and retains ownership of the significant
risks that are faced by the business. 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 all risks and therefore can provide reasonable
but not absolute assurance. The Board considers that the internal controls in place are appropriate for
the size, complexity and risk profile of the Group.
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.
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Corporate governance report (continued)
Audit Committee
The Audit Committee comprises three independent non-executive directors and is chaired by Philip
Holland, who was 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 auditor attending by invitation. The Committee reviews the
independence and objectivity of the auditor each year. The Committee reviews the adequacy of the
Group’s and 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.
During the year under review, the Committee oversaw the tender for and selection of the Company’s
new auditor, RSM LLP. The Committee was involved at all stages of the process, agreeing the long list of
audit firms invited to tender, approving the information provided to those who took part in the process,
meeting with participants to aid preparation of their submissions and interviewing short-listed candidates
as part of the final selection process.
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
The Chief Financial Officer’s Review includes a review of going concern, as well as separate consideration
of the impact of Brexit and the Coronavirus.
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On behalf of the Board
Philip Holland
Chairman, Audit Committee
20 May 2020
Corporate governance report (continued)
Financial controls
The Group has an established framework of internal financial controls, the effectiveness of which are
reviewed by the Audit Committee, the Board and the executive management, including:
well-understood and implemented processes for budgeting and forecasting;
an overall Group strategy, including approving revenue, profit and capital budgets and plans; and for
determining the financial and reporting structure of the Group; and
agreed KPIs and other business measures.
Non-financial controls
The principal elements of the Group’s internal non-financial controls include:
close management of the day-to-day activities of the Group by the executive directors and the senior
management team;
an organisational structure with defined levels of responsibility, which promotes entrepreneurial
decision-making and rapid implementation while minimising risks;
a clearly documented and enforced approval process covering matters such as capital and operational
expenditure, recruitment, tendering, and contract acceptance;
detailed monthly reviews of major contract activities; and
central control over key areas such as material capital expenditure and banking facilities.
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 financial
statements. The Group continues to review its system of internal controls to ensure compliance with best
practice, while also having regard to its size and the resources available.
Effective Shareholder Engagement
The Board has always attached high importance to maintaining good relationships with all shareholders
and this is now further emphasised via principle 2 of the QCA Code. TP Group remains committed to
listening and communicating openly with its shareholders and senior management hold regular meetings
with institutional shareholders to keep them updated on the Group’s performance, strategy,
management and Board membership. The Board is kept informed of the views and concerns of major
shareholders by briefings from the Chief Executive Officer and the Company’s nominated advisor, Cenkos.
Any significant investment reports from analysts are also circulated to the Board. The Non-Executive
Chairman is available to meet with major shareholders if required to discuss issues of importance to
them.
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.
Ethical Behaviour and Social Responsibility
TP Group is committed to promoting a culture based on ethical values and behaviours across its business.
Policies are in place covering key matters such as bribery, protection of intellectual property and sensitive
information, diversity and anti-discrimination and whistleblowing. These are rigorously enforced.
Ongoing training across a range of compliance areas (such as anti-bribery, harassment, GDPR, security)
has been delivered during 2019 via our nominated third-party on-line training provider. The Group first
published its formal anti-slavery statement in 2019 and this is available on the Group’s website.
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Remuneration report
Unaudited Information
Remuneration committee
The Remuneration Committee, as of May 2020, is made up of three independent non-executive directors
and is chaired by Jeremy Warner-Allen. Meetings are 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 12-month notice periods. Non-executive
directors are appointed on three-year contracts, with no notice period.
Directors' emoluments
Basic
salary
or fees
£000
300
-
180
70
36
36
Pension
contributions
£000
Other
benefits
£000
Total
emoluments
2019
£000
Total
emoluments
2018
£000
10
-
18
-
-
-
93
-
49
-
-
-
403
-
247
70
36
36
489
185
285
65
32
35
Executive
P Cartmell
S Kings1
D Stroud
Non-executive
A McCree
P Holland
J Warner-Allen
1 2018 Includes a termination payment of £161,000.
622
28
142
792
1,091
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Remuneration report (continued)
Directors' share options
The interests of the directors, who were in office during the financial year, in options over the Ordinary
Shares at 31 December 2019 and 31 December 2018 were:
As at 31
December
2018
number
Exercised
in year
number
Cancelled
in year
number
Issued
in year
number
As at 31
December
2019
number
Exercise
price (p)
Lapse date
Executive
P Cartmell
22,179,398
D Stroud
9,980,729
Non-
executive
A McCree
250,000
-
-
-
-
-
-
-
-
-
22,179,398
7.00 9 May 2027
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 6.55p at 31 December 2019. In the period 1 January 2019 to
31 December 2019 the closing mid-market high was 7.62p per Ordinary Share and low was 6.00p per
Ordinary Share.
Directors' interests
The directors who were in office during the financial year and to the date of this report, had the following
beneficial interests in the Ordinary Shares of the Parent Company at 31 December 2019, at 31 December
2018 and at the date of this report:
Number held at
Number held at
Number held at
31 December 2019
20 May 2020
31 December 2018
Ordinary Shares of
Ordinary Shares of
Ordinary Shares of
1 pence each
1 pence each
1 pence each
P Cartmell
A McCree
D Stroud
P Holland
J Warner-Allen
3,136,105
333,847
653,847
421,978
1,854,945
3,136,105
333,847
653,847
421,978
1,854,945
3,136,105
333,847
653,847
421,978
1,854,945
On behalf of the Remuneration Committee
Jeremy Warner-Allen
Chairman, Remuneration Committee
20 May 2020
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TP GROUP PLC
Opinion
We have audited the financial statements of TP Group plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 December 2019 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 and related notes to the financial statements,
including a summary of significant accounting policies. The financial reporting framework that has been
applied in the preparation of the group financial statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that
has been applied in the preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards, including Financial Reporting Standard 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
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 2019 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements 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 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 SME 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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
the directors’ use of the going concern basis of accounting in the 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.
Summary of our audit approach
Key audit matters
Group
Revenue recognition
Acquisition accounting
Impairment of goodwill
Parent Company
None
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Materiality
Scope
Group
Overall materiality: £760,000 (2018: £450,000).
Performance materiality: £570,000 (2018: not disclosed)
Parent Company
o Overall materiality: £430,000 (2018: £180,000).
o Performance materiality: £322,500 (2018: not disclosed)
Our audit procedures covered 98.6% of revenue, 98.1% of total assets
and 88.6% of pre tax losses.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the group financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) we identified, including 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 group
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Revenue recognition
audit matter
Key
description
How the matter was
addressed
the
audit
in
The group’s revenue can broadly be divided into Technology &
Engineering (T&E), and Consultancy & Programme Services (CaPS), as
set out in the accounting policy notes on pages 68 and 70 to 73 and in note
2. Contract terms vary between the divisions, and between individual
contracts. There is a risk that these contracts have not been assessed
correctly against the requirements of IFRS 15.
The areas with
misstatement, whether or not due to fraud, include:
the most significant assessed risk of material
whether goods and services (including software) should be recognised
at a point in time (and if so, when) or over time;
judgements exercised in relation to certain contracts which are still open
at the period end and which are recognised over time on the basis of
contractual terms giving the Group an enforceable right to payment
percent completion
For a sample of contracts, we obtained the relevant agreements and
supporting documentation and reviewed and challenged management’s
judgements relating to those contracts. Our work included:
o
o
o
o
o
o
o
o
considering management’s IFRS 15 papers on key contracts
evaluating whether all performance obligations in the contract
had been identified by management
testing management’s determination of the transaction price
through agreement to the underlying contract
comparing the expected margin with that actually achieved to
provide evidence of the accuracy of management’s forecasting.
enquiring of staff outside the finance function as to whether there
was any evidence of contract modifications
checking open contracts for evidence of any post year end
contract losses
challenging management’s interpretation of key contract terms
which impact on the timing of the recognition of revenue
obtaining evidence of the timing of delivery of goods and
services to customers to confirm the point at which revenue
should be recognised
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o
considering the progress to completion on contracts where
specific components are purchased as a major part of the
contract costs.
Key observations
Based on the work performed, we concluded that, following discussions
with management, the recognition of revenue on contracts from customers
is in accordance with the requirements of IFRS 15.
Acquisition accounting
audit matter
Key
description
How the matter was
addressed
the
audit
in
During the year the group acquired the Sapienza Consulting Holdings B.V.
Group for initial consideration of £8.9m cash and £1.3m in shares, as
shown in note 31. As part of this acquisition the group recognised goodwill
and intangible assets of £2.7m and £8.3m respectively (see notes 10 and
11).
The identification and valuation of intangibles involves the exercise of
judgement and application of estimates in a number of areas, as a result
of which there is a risk of a material misstatement.
As a consequence of the acquisition of Sapienza by the group on 30 April
2019 a holding of 33% in Lift BV was brought into the group. This holding
was initially treated as an associate, and the group then acquired an
additional stake in Lift BV on 28 June 2019 to bring the group’s
shareholding to 69%, giving control of Lift BV.
There is a risk that this step acquisition has been accounted for incorrectly.
Our work included:
o
o
o
o
reviewing the sale and purchase agreements to identify and
corroborate key terms, with specific focus on the areas of
possible complexity noted
obtaining management’s workings for the business combinations,
checking the entries against the terms in the agreements, and
agreeing the settlement of consideration to bank records and
share capital records
challenging the assumptions and calculations used in identifying
and then determining the fair value of the intangible assets
acquired, using an auditor’s expert where required
reviewing the estimates of fair value attributed to the existing
holding and the non-controlling interest as part of accounting for
the step acquisition of Lift BV.
Key observations
Based on the work performed, following adjustments to the computation of
the non controlling interest in the Lift BV acquisition, the group has
appropriately accounted for both acquisitions.
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How the matter was
addressed
the
audit
in
covering the discount rate applicable and future growth rates applicable to
the cash generating unit.
Our work included:
o
o
o
o
obtaining management’s impairment reviews for the relevant
cash generating units
checking the integrity of the impairment model
considering the sensitivity analyses performed by management
challenging the key assumptions underlying these calculations,
including revenue growth rates and the discount rate, and
checking independent evidence of the growth rates used.
Key observations
Based on the work performed, we have concluded that management’s
impairment review of goodwill is reasonable.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the
nature, timing and extent of our audit procedures. When evaluating whether the effects of misstatements,
both individually and on the financial statements as a whole, could reasonably influence the economic
decisions of the users we take into account the qualitative nature and the size of the misstatements.
Based on our professional judgement, we determined materiality as follows:
Group
Parent company
Overall materiality
£760,000 (2018: £450,000)
£430,000 (2018: £180,000)
Basis
overall materiality
for determining
Rationale for benchmark
applied
1.3% of revenue
1.2% of total assets
Revenue is considered the key
benchmark as the group continues
to build revenues and moves
towards profitability, and the group
regularly updates the market on
new revenue contracts
The principal activity of the parent
company is to hold investments in
the group’s subsidiaries. The
percentage applied has been
the purpose of
restricted
calculating
appropriate
an
component materiality.
for
Performance materiality £570,000 (2018: not disclosed)
£320,000 (2018: not disclosed)
for determining
Basis
performance materiality
Reporting
misstatements
Audit Committee
to
of
the
75% of overall materiality
75% of overall materiality
Misstatements
in excess of
£21,000 and misstatements below
that threshold that, in our view,
warranted reporting on qualitative
grounds.
Misstatements
in excess of
and misstatements
£21,000
below that threshold that, in our
view, warranted
reporting on
qualitative grounds.
Impairment of goodwill
audit matter
Key
description
The group had £9.2m of goodwill at the period end, as set out in note 10.
Of this, £3.9m arose on the acquisition of Sapienza and Lift in the year, as
shown in note 31.
IAS 36 requires an assessment to be undertaken annually to determine
whether there is any impairment of intangible assets with indefinite lives.
This impairment review involves the exercise of judgements and estimates
An overview of the scope of our audit
The group consists of 16 components, located in the following countries:
o United Kingdom
o Netherlands
o USA
o Germany
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Italy
o
o North Macedonia
The coverage achieved by our audit procedures was:
Number of
components
Revenue
Total assets
Loss before tax
Full scope audit
8
98.6%
98.1%
88.6%
Analytical procedures at group level were performed for the remaining eight components.
None of the audit procedures were undertaken by component auditors.
Other information
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. 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.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
o
o
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.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their
environment obtained in the course of the audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
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: http://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.
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Geoff Wightwick FCA (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
Portland
25 High Street
Crawley
West Sussex
RH10 1BG
o
o
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; or
certain disclosures of directors’ remuneration specified by law are not made; or
o
o we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 49, 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
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Consolidated statement of comprehensive income
For the year ended 31 December 2019
Consolidated and Parent Company statements of financial position
As at 31 December 2019
Group
Parent Company
Note
2
4
2
2
2
2
2
2
7
8
9
9
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating loss
Adjusted operating profit including non-controlling interest
Depreciation, amortisation and impairment
Acquisition-related costs
Non-operating costs
Share based payments
Movement in expected earn-out payments
Operating loss
Net finance cost
Loss before taxation
Taxation (charge) / credit
(Loss)/profit after taxation for the year
Attributable to:
Equity holders of the parent company
Non-controlling interest
Total (loss) / profit for the year
(Loss)/earnings per share (pence per share)
Basic (loss)/earnings per share (pence per share)
Diluted (loss)/earnings per share (pence per share)
(Loss)/profit for the year
Other comprehensive income/(expense): items that may be
subsequently recycled to the income statement:
Foreign exchange losses on translation of foreign operations
Total comprehensive (expense)/income for the year
Attributable to:
Equity holders of the parent company
Non-controlling interest
2019
£'000
58,218
(41,284)
16,934
(18,633)
(1,699)
5,801
(3,858)
(1,527)
(360)
(176)
(1,579)
(1,699)
(264)
(1,963)
(46)
(2,009)
(1,927)
(82)
(2,009)
(0.26)
(0.26)
(2,009)
(4)
(2,013)
(1,931)
(82)
(2,013)
2018
£'000
39,037
(27,806)
11,231
(11,261)
(30)
3,974
(2,377)
(657)
(192)
(165)
(613)
(30)
(80)
(110)
285
175
175
-
175
0.02
0.02
175
-
175
175
-
175
All income relates to continuing activities. The notes on pages 67 to 110 form part of these financial statements.
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investments
Amounts owed by EBT
Current assets
Inventories
Trade and other receivables
Amounts due from contract customers
Taxation recoverable
Cash and bank balances
Total assets
Liabilities
Current liabilities
Trade and other payables
Amounts due to contract customers
Current tax liabilities
Lease liabilities
Non-current liabilities
Trade and other payables
Deferred taxation
Lease Liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium
Own shares held by the EBT
Translation of foreign operations
Share-based payments reserve
Retained earnings
Non-controlling interest
Total equity
Note
10
11
12
13
14
15
16
18
17
19
21
17
22
21
8
22
24
25
8
2019
£'000
9,161
19,466
2,073
5,808
-
-
36,508
2,036
13,031
10,042
-
6,568
31,677
68,185
(11,605)
(10,228)
(180)
(1,022)
(23,035)
(286)
(2,738)
(5,429)
(231)
(8,684)
(31,719)
36,466
7,792
18,529
(561)
(4)
1,142
9,140
428
36,466
2018
£'000
5,289
12,800
1,401
5,423
-
-
24,913
2,727
4,295
5,596
87
22,413
35,118
60,031
(10,614)
(4,837)
-
(739)
(16,190)
-
(1,648)
(5,198)
(499)
(7,345)
(23,535)
36,496
7,586
17,438
(561)
-
1,441
10,592
-
36,496
2019
£'000
-
141
157
363
33,874
105
34,640
-
1,200
-
-
144
1,344
35,984
(7,152)
-
-
(120)
(7,272)
(285)
-
(272)
(20)
(577)
(7,849)
28,135
7,792
18,529
-
-
1,142
672
-
28,135
2018
£'000
-
85
46
94
18,806
95
19,126
-
4,823
-
-
10,505
15,328
34,454
(8,312)
-
-
(38)
(8,350)
-
-
(59)
(10)
(69)
(8,419)
26,035
7,586
17,438
-
-
1,441
(430)
-
26,035
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The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to
present the Parent Company’s income statement. The Parent Company made a profit of £627,000 (2018
loss: £4,778,000) for the year.
The financial statements were approved and authorised for issue by the board of directors and were
signed on its behalf on 20 May 2020. The notes on pages 67 to 110 form part of these financial statements.
Phil Cartmell
Chief Executive
(Company number: 3152034)
Derren Stroud
Chief Financial Officer
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Consolidated statement of changes in equity
For the year ended 31 December 2019
Parent Company statement of changes in equity
For the year ended 31 December 2019
Share
capital
£'000
Share
premium
£'000
Share-
based
payments
reserve
£'000
Retained
earnings
£'000
Total
£'000
Balance at 1 January 2018
7,586
17,438
1,459
4,165
30,648
Total comprehensive loss
Share-based payments charge
Share-based payments reserves
transfer
-
-
-
-
-
-
-
165
(183)
(4,778)
-
183
(4,778)
165
-
Balance at 31 December 2018
7,586
17,438
1,441
(430)
26,035
Total comprehensive profit
Shares issued
Share-based payments charge
(note 26)
Share-based payments reserves
transfer
-
206
-
-
-
1,091
-
-
-
-
176
(475)
627
-
-
475
627
1,297
176
-
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10,592
-
36,496
Balance at 31 December 2019
7,792
18,529
1,142
672
28,135
(1,927)
(82)
(2,009)
The notes on pages 67 to 110 form part of these financial statements.
Own
shares
held
by
EBT
£'000
Share
Share
capital premium
£'000
£'000
Share-
based
reserve
£'000
Translation Retained
earnings
£'000
Reserve
£'000
Non-
controlling
interest
£'000
Total
£'000
7,586
17,438
(561)
1,553
-
10,882
-
36,898
-
-
-
-
-
-
-
-
-
-
-
-
-
-
165
(277)
7,586
17,438
(561)
1,441
-
-
-
-
-
-
206
1,091
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
176
(475)
-
175
(742)
-
277
-
-
-
-
175
(742)
165
-
-
-
-
-
-
-
(4)
-
-
(4)
(4)
(1,927)
(82)
(2,013)
-
-
-
-
-
-
475
-
-
-
1,297
176
-
-
510
510
7,792
18,529
(561)
1,142
(4)
9,140
428
36,466
Balance at 1
January 2018
Profit for the year
and total
comprehensive
income
IFRS 16 cumulative
adjustment
Share-based
payments charge
Share-based
payments reserves
transfer
Balance at
31 December 2018
Loss for the year
Other
comprehensive loss
Total comprehensive
loss
Shares issued
Share-based
payments charge
(note 26)
Share-based
payments reserves
transfer
Non-controlling
interest on
acquisition of Lift BV
Balance at
31 December 2019
The notes on pages 67 to 110 form part of these financial statements.
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Consolidated and Parent Company statement of cash flows
For the year ended 31 December 2019
Notes to the financial statements
Operating activities
(Loss)/profit before taxation
Adjustments for:
Depreciation, amortisation and impairment
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)/decrease in trade and other
receivables
Increase/(decrease) in trade and other payables
(Decrease)/increase in provisions
Dividend received
Taxation paid
Net cash (used in) / generated from
operating activities
Investing activities
Acquisition of subsidiary, net of cash acquired
Acquisition of subsidiary - payment of earn out
Interest received
Purchase of property, plant and equipment
Purchase of computer software
Dividend received
Group
Parent Company
Note
2019
£'000
2018
£'000
2019
£'000
2018
£'000
14
14
(1,963)
(110)
782
(5,114)
3,865
264
176
-
-
691
(7,086)
1,901
(269)
-
(2,421)
(412)
2,377
81
165
-
-
3,141
1,490
(1,277)
62
-
5,929
(211)
198
(11)
176
10
-
-
193
(56)
165
2
4,876
-
(1,324)
(6,100)
1,127
10
(5,000)
2,181
97
-
(4,032)
(3,756)
-
-
(2,833)
5,718
(4,032)
(3,756)
(8,282)
(2,000)
23
(932)
(556)
-
(2,953)
(300)
60
(864)
(79)
-
(9,002)
(2,000)
23
(174)
(97)
5,000
(3,000)
(300)
60
(39)
(35)
-
Net cash used in investing activities
(11,747)
(4,136)
(6,250)
(3,314)
Financing activities
Interest payable
Repayment of lease liabilities
(286)
(981)
(254)
(846)
(11)
(68)
Net cash used in financing activities
(1,267)
(1,100)
(79)
Effects of exchange rates on cash and cash
equivalents
Net (decrease) / increase in cash and cash
equivalents
Cash and cash equivalents at beginning of year
2
-
-
(15,845)
482
(10,361)
(7,112)
22,413
21,931
10,505
Cash and cash equivalents at end of year
6,568
22,413
144
The notes on pages 67 to 110 form part of these financial statements.
(4)
(38)
(42)
-
17,617
10,505
1. Accounting policies
The Company
TP Group is a technology services business, working to make the world a safer place, employing more
than 400 highly skilled individuals across six European countries. We combine to deliver mission, business
and safety critical services and equipment across three high growth sectors - Defence, Space and Energy.
Our customers trust us to ensure the safety, reliability and performance of complex systems in the most
challenging or arduous situations. With global presence and proven field experience, TP Group is a
leading choice for platform builders, integrators and users of both military and industrial systems.
We operate across two distinct but highly complementary integrated business units:
Technology & Engineering (“T&E”) - the capability to design, manufacture and support mission-
critical systems
Consulting & Programme Services (“CaPS”) - advising clients on strategic problems and
implementing technology-driven solutions
TP Group plc (the “Parent Company”) is the Group’s ultimate parent company, which is incorporated
under the Companies Act and domiciled in the United Kingdom. The address of the registered office of
the Parent Company is Cody Technology Park, Old Ively Road, Farnborough, Hampshire, GU14 0LX. The
Parent Company’s shares are listed on the Alternative Investment Market of the London Stock Exchange.
Basis of preparation and statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) and interpretations issued by the IFRS Interpretations Committee applicable
to companies reporting under IFRS. The financial statements comply with IFRS as adopted by the EU.
The Parent Company financial statements have been prepared in accordance with Financial Reporting
Standard (“FRS”) 101 Reduced Disclosure Framework and in accordance with applicable accounting
standards. In preparing the Parent Company financial statements, the directors have taken advantage of
the exemption for disclosures under paragraphs 17 and 18A of IAS 24, and the requirements in IAS 24 to
disclose related party transactions entered into between two or more members of the Group, provided
that the subsidiary is wholly owned.
The preparation of the financial statements requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statements are disclosed below.
The Consolidated Financial Statements are presented in pounds sterling which is the Group’s functional
currency. Figures are presented to the nearest thousand pounds, unless otherwise stated.
The financial statements have been prepared on a historical cost basis, except for, where applicable, the
revaluation of financial assets and liabilities at fair value through profit or loss or financial assets at fair
value through other comprehensive income.
The measurement bases and principal accounting policies of the Group and Parent Company are set out
below. The accounting policies adopted are consistent with those of the previous financial year with
exception of matters noted below.
The Group adopted IFRS 16 early on 1 January 2018 and reflected its impact in the financial statements
for the year ended 31 December 2018.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
1. Accounting policies (continued)
New or amended Accounting Standards and Interpretations adopted
In the current year, the Group has adopted a number of amendments to Accounting Standards and
Interpretations issued by the IASB that are effective for any period that began on or after 1 January 2019.
Their adoption has not had any material impact on the disclosures or on the amounts reported in these
financial statements.
IFRIC Interpretation 23: Uncertainty over Income Tax Treatment;
Amendments to IFRS 9: Prepayment Features with Negative Compensation;
Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
Amendments to IAS 28: Long-term interests in associates and joint ventures
Annual Improvements 2015-2017 Cycle
Certain new accounting standards and interpretations have been published that are not mandatory for
31 December 2019 reporting periods and have not been adopted early by the Group. These standards
are not expected to have a material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
Key areas of judgement and sources of estimation uncertainty
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually
evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and
expenses. Management bases its judgements, estimates and assumptions on historical experience and
on various other factors, including expectations of future events management believes to be reasonable
under the circumstances. The actual outcome may differ from those originally calculated. The
judgements, estimates and assumptions that have a significant risk of causing material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Revenue
The Group values its costs and anticipated profits in excess of billings based on the time and materials
charged into each project and anticipated future costs and revenues. The determination of revenues and
contract assets involves estimates of the volume of work required to complete the project. On a monthly
basis, management reviews the actual volume of work and the estimated anticipated volume of work for
each project to determine whether the amount recognised as contract assets is a true reflection of the
amount that will be earned on the projects. Where the review determines that the value of costs and
anticipated profits in excess of billings exceed the amount that can be earned, adjustments are made to
the contract asset. Changes in the estimate of work required to complete the projects could lead to
reversals of revenues.
Revenue has been recognised over time, rather than at a point in time, following judgement made on
the Group’s enforceable right to payment under certain contracts with the Ministry of Defence, where
there is a right for the customer to terminate without cause and prior to contract completion under
various versions of DEFCON 656. Under this DEFCON there is no explicitly stated right of recovery of
profit, however there is an implication that this is allowed for within the DEFCON wording. The revenue
recognition determination under these contracts has taken this implied wording into account. This
judgement is based on management’s understanding of the commercial reality underlying such
contracts, and experience of similar contracts which do contain explicit rights to recover profit.
1. Accounting policies (continued)
Key areas of judgement and sources of estimation uncertainty (continued)
Impairment of non-current assets
Determining whether intangible assets and goodwill are impaired requires an estimation of the value in
use of the cash-generating units to which intangible assets and goodwill have been allocated. Investment
in subsidiaries is based on the estimation of recoverability based on the value in use calculation of the
cash-generating unit (CGU) invested in.
The value in use calculation requires the entity to estimate the future cash flows expected to arise from
the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual
future cash flows are less than expected, a material impairment loss may arise.
Significant accounting policies
The Group’s significant accounting policies are set out below and have been applied consistently to all
periods presented in these Consolidated Financial Statements.
Basis of consolidation
The Consolidated Financial Statements include the Company’s financial statements and those of its
subsidiary undertakings made up to 31 December 2019. TP Group plc and its subsidiaries together are
referred to in these financial statements as the ‘Group’.
A subsidiary is an entity controlled by the Group. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and is able to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are de-consolidated from the date control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the
impairment of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in
ownership interest, without the loss of control, is accounted for as an equity transaction, where the
difference between the consideration transferred and the book value of the share of the non-controlling
interest acquired is recognised directly in equity attributable to the Parent.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
1. Accounting policies (continued)
Basis of consolidation (continued)
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated Statement of Comprehensive Income, Statement of Financial Position and Statement of
Changes in Equity of the Group. Losses incurred by the Group are attributed to the non-controlling
interest in full, even if that results in a deficit balance.
When the Group loses control over a subsidiary, it derecognises the assets, including goodwill, liabilities
and non-controlling interest in the subsidiary together with any cumulative translation differences
recognised in equity. The Group recognises the fair value of the consideration received and the fair value
of any investment retained together with any gain or loss in profit or loss.
Revenue
The Group’s operations generate revenues through the design and manufacture of high integrity
equipment, provision of services and provision of software.
Revenue is measured based on the consideration to which the Group expects to be entitled in a contract
with a customer, excluding amounts collected on behalf of third parties, sales related taxes and trade
discounts. The Group recognises revenue when it transfers control of a product or service to a customer
as more fully explained below.
Technology and Engineering
Design and manufacturer of high-integrity equipment
The Group designs and manufactures mission-critical systems under long-term contracts with customers.
The promises in these contracts include the design and manufacturer of systems for delivery to the
customer and standard assurance warranties. The promises in these contracts are combined as a single
performance obligation because the customer cannot benefit from the promises on their own, and they
are not separately identifiable in the context of the contract. In some instances, the contract will also
include a promise to install the equipment at the customer site. Where installation is included in the
contract, this is not generally considered a separate performance obligation as the promise is not
separately identifiable in the context of the contract.
Some contracts will include:
a promise to store the equipment or an option to purchase storage services at a future date.
Storage services are provided in the period between acceptance of the equipment by the
customer and shipping. Where storage services are provided, this is considered a separate
performance obligation, and/or
extended service warranties which are a separate performance obligation.
The systems that are designed and manufactured are bespoke for each customer and do not have an
alternative use to the Group. Where the Group has an enforceable right to payment for performance
completed to date, being recovery of costs incurred in satisfying the performance obligation plus a
reasonable profit margin, the performance obligation is satisfied over time, as it meets the requirements
of IFRS 15.35(c). The measurement of progress towards complete satisfaction of the performance
obligation is measured using the input method, based on costs incurred compared to total contract costs.
1. Accounting policies (continued)
Costs are only included in the measurement of progress towards satisfying the performance obligation
where there is a direct relationship between the input and the satisfaction of the performance obligation.
The Group becomes entitled to invoice customers based on achieving a series of performance-related
milestones. Any amount previously recognised as a contract asset is reclassified to trade receivables at
the point at which it is invoiced to the customer. If the milestone payment exceeds the revenue
recognised to date under the cost-to-cost method, then the Group recognises a contract liability for the
difference. There is not considered to be a significant financing component in the design and
manufacture of high-integrity equipment with customers as the period between recognition of revenue
and milestone payment is always less than one year.
For contracts where the Group does not have an enforceable right to payment for performance
completed to date, being recovery of costs incurred in satisfying the performance obligation plus a
reasonable profit margin, revenue is recognised at a point in time. For these contracts, revenue is
recognised at the point of customer delivery (as defined in each specific contract) of the system, as this
is the point at which the customer is in control of the deliverable, has the risks and rewards of ownership
and the Group has a present right for payment for the deliverable.
For storage services, the customer receives and consumes the benefit over the storage period. The
performance obligation is satisfied over time under IFRS 15.35(a). Revenue is recognised on an output
basis, based on daily rate for the period of storage.
For extended warranties, the customer receives and consumes the benefit of the warranty over the
extended warranty period. The performance obligation is satisfied over time under IFRS 15.35(a). An
output method, based on straight line recognition over the period of the warranty, is used to measure
progress towards complete satisfaction of the extended warranty performance obligation.
Payment terms under the contract are typically 30 days.
Parts management
The Group has a parts management contract, whereby the Group manages the parts supply chain for a
customer. This contract contains two performance obligations being asset availability, and supply of
consumables.
In terms of asset availability, the Group’s performance does not create an asset with an alternative use to
the Group and the Group has an enforceable right to payment for performance completed to date, being
recovery of costs incurred in satisfying the performance obligation plus a reasonable profit margin. The
customer also simultaneously receives and consumes the benefits of the asset availability service as the
Group performs. Revenue is recognised over time under IFRS 15.35(a) and (c). The output method, based
on straight-line recognition over the length of the contract, is used to measure progress towards
complete satisfaction of the performance obligation, as this best depicts the Group’s performance in
providing the asset availability service to the customer.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
1. Accounting policies (continued)
The contract price for asset availability includes variable consideration in the form of rebates based on
achievement of KPI’s within the contract. The expected value approach, which is based on the sum of
probability weighted amounts for a range of possible outcomes, has been used to estimate the
transaction price. The variable consideration is trued up at the end of each reporting period to reflect
changes in the period and conditions that exist at the period end.
For the supply of consumables, the customer receives the benefit of the service on delivery (as defined
in the contract) of the consumable. This is the point at which the customer is in control of the deliverable,
has the risks and rewards of ownership and the Group has a present right for payment for the deliverable.
Payment terms under the contract are typically 30 days.
Maintenance of equipment
The Group has contracts for the maintenance and servicing of customer vessels with a 12-month
assurance warranty. These contracts contain a single promise and performance obligation. The assurance
warranty is not a separate performance obligation.
The performance of the Group enhances the vessels, which are controlled by the customer, as the Group
performs. Revenue is recognised over time as the criteria in IFRS 15.35(b) is met. The Group uses an input
method, based on labour hours, costs incurred and materials, to measure complete satisfaction of the
performance obligation. Costs are only included in the measurement of progress towards satisfying the
performance obligation where there is a direct relationship between the input and the satisfaction of the
performance obligation.
Payment terms under these contracts are typically 30 days.
Consulting and Programme Services
Consulting
The Group provides advisory, technical, project management and development services to customers for
specialised business operations and technology-driven solutions.
Performance obligations are identified against each customer contract.
Where the contract is advisory, technical or project management, the customer receives and consumes
the benefits of the service as the Group performs. Revenue is recognised overtime, using an input basis,
based on costs incurred compared to total contract costs. Costs are only included in the measurement
of progress towards satisfying the performance obligation where there is a direct relationship between
the input and the satisfaction of the performance obligation.
Where the contract is time and materials, customer receives and consumes the benefits as the Group
performs. Revenue is recognised over time, using an input method based on time and materials incurred.
Where the contract is for the provision of specified deliverables to the customer, none of the criteria in
IFRS 15.35 are met. Revenue is recognised at a point in time, being the point at which the customer is in
control of the deliverables under the project.
Payment terms under these contracts are typically 30 days.
1. Accounting policies (continued)
Provision of software
The Group sells programme management software, including either basic or extended support, which is
either hosted or non-hosted.
The hosted programme management software contains a single performance obligation, as the customer
cannot benefit from either the software or the support without the hosting infrastructure. The customer
receives and consumes the benefit of the service as the Group performs. Revenue is recognised over time
as it meets the criteria in IFRS 35(a). Revenue is recognised using an output method i.e. straight line over
the life of the contract, as this best depicts the Group’s performance in providing the service to the
customer.
For non-hosted programme management software, there are two performance obligations in the
contract being the provision of software licence and licence keys for the specified modules and then
provision of a basic support service.
The software licence grants the customer a right to use the intellectual property as it exists at the point
in time at which the licence is granted. Revenue from the software licence is recognised at a point in time
on delivery of the software and associated licence keys to access the software.
The basic support service is simultaneously received and consumed by the customer as the Group
performs. Revenue is recognised over time as the criteria in IFRS 15.35(a) has been met. An output
method, i.e. straight line over the contract, is used to measure progress towards complete satisfaction of
the performance obligation.
For non-hosted contracts, there is a single price in the contract which has been allocated to the two
performance obligations based on stand-alone selling prices. The stand-alone selling price for each of
the performance obligation is not directly observable so has been determined using an adjusted market
assessment approach. It has been concluded by the business that support services obligations equate to
20% of the software license fee.
For non-hosted programme management software, enhanced support services may also be provided
which can include onsite services and/or training. Enhanced support services are either provided based
for a fixed number of hours or on demand based on time and materials. Where enhanced support is
purchased based on a fixed number of hours, the customer receives and consumes the benefits as the
Group performs. Revenue is recognised over time using an output method i.e. straight line over twelve
months. Where enhanced support is purchased on demand, revenue is recognised over time based on
an input method i.e. time and materials incurred.
The Group invoices annually for all programme management software contracts (hosted and non-
hosted). There is no significant financing component in these contracts as the period between invoicing
and recognition of revenue is less than one year.
Payment terms under these contracts are typically 30 days.
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.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
1. Accounting policies (continued)
Government grants (continued)
Government grants are recognised in the Income Statement 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.
Interest
Interest receivable/payable is credited/charged to the Income Statement using the effective interest
method. Where borrowing costs are attributable to the acquisition, construction or production of a
qualifying asset, such costs are capitalised as part of the specific asset.
Taxation
The tax charge/credit on the profit or loss for the year comprises current and deferred tax.
Current tax is the expected tax payable for the year, based on the applicable income tax rate for each
jurisdiction and using tax rates enacted or substantively enacted by the end of the reporting period,
and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences
between the carrying amounts of the assets and liabilities for financial reporting purposes and the
amounts used for tax purposes and is calculated using the enacted or substantively enacted rates
that are expected to apply when the asset or liability is settled.
Tax is charged or credited to the Income Statement or Other Comprehensive Income as appropriate,
except when it relates to items credited or charged directly to equity in which case the tax is also dealt
with in equity.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to
be applied when the assets are recovered or liabilities settled, based on those tax rates that are enacted
or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of an asset or liability
in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
When the taxable temporary difference is associated with interest in subsidiaries or associates, and
the timing of the reversal can be controlled and is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be
available against which the assets can be utilised.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting
date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future
taxable profits will be available for the carrying amount to be recovered. Previously unrecognised
deferred tax assets are recognised to the extent that it is probable that there are future taxable profits
available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current
tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they
relate to the same taxable authority on either the same taxable entity or different taxable entities which
intend to settle simultaneously.
1. Accounting policies (continued)
R&D tax credits
Companies within the Group have made claims for R&D tax credits under the large company Research
and Development Expenditure Credit (RDEC) Scheme and under the SME R&D scheme.
The income tax recoverable in respect of R&D cash tax credits is based upon management estimates,
judgements and assumptions considered reasonable at the time but the actual income tax recoverable
may differ from those estimates.
Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which each entity operates (‘the functional currency’).
The consolidated financial statements are presented in British pounds sterling, which is the Group’s
presentation currency.
Transactions denominated in currencies other than the functional currency of the transacting Group
undertaking are translated into the functional currency at the average monthly exchange rate when the
transaction occurs. Monetary assets and liabilities denominated in foreign currencies are translated into
the relevant functional currency at the rate prevailing at the end of the financial year. Exchange
differences arising on foreign exchange transactions and the retranslation of assets and liabilities into
functional currencies at the rate prevailing at the end of the financial year are included in profit before
taxation.
The trading results of Group undertakings are translated into pounds sterling on a monthly basis at the
average monthly exchange rate. The assets and liabilities of overseas undertakings, including goodwill
and fair value adjustments arising on acquisition, are translated at the exchange rates prevailing at the
end of the financial year. Exchange adjustments arising from the retranslation of the opening net assets,
and from the translation of the profits or losses at average rates, are recognised in other comprehensive
income.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s Statement of Financial Position
when the Group or Parent Company becomes a party to the contractual provisions of an instrument.
Classification and measurement
Financial assets primarily include trade receivables, cash and cash equivalents (comprising cash at bank,
money market funds and short-term deposits), short term investments, derivatives (foreign exchange
contracts, commodity contracts, interest rate contracts), and unlisted investments.
Cash and cash equivalents (consisting of balances with banks and other financial institutions, money-
market funds, short-term deposits) and short-term investments are subject to low market risk. Cash
balances and short-term investments are measured at fair value through profit or loss; and
Trade receivables are measured at amortised cost;
Derivatives and unlisted investments are measured at fair value through profit or loss.
Financial liabilities primarily consist of trade payables and borrowings and are measured at amortised
cost.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are either
measured at amortised cost or fair value through other comprehensive income. The measurement of the
loss allowance depends upon the Group's assessment at the end of each financial year as to whether the
financial instrument's credit risk has increased significantly since initial recognition, based on reasonable
and supportable information that is available, without undue cost or effort to obtain.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
1. Accounting policies (continued)
Financial instruments (continued)
For financial assets measured at fair value through other comprehensive income, the loss allowance is
recognised within other comprehensive income. In all other cases, the loss allowance is recognised in
profit or loss.
Foreign currency financial assets
The carrying amount of financial assets that are denominated in a foreign currency is determined in that
foreign currency and translated at the spot rate at the end of each financial year. Where there are any
financial assets measured at amortised cost that are not part of a designated hedging relationship, any
exchange differences are recognised in profit or loss in the ‘gains and losses on foreign exchange’ line
item (note 7).
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity. 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.
On de-recognition of a financial asset measured at amortised cost, the difference between the asset’s
carrying amount and the sum of the consideration received and receivable is recognised in the income
statement.
Business combinations and goodwill
The acquisition method of accounting is used for business combinations.
The consideration transferred is the sum of the acquisition date fair values of the assets transferred,
value of goodwill and any contingent consideration, less the amount of non-controlling interest in the
acquiree. For each business combination, the non-controlling interest in the acquiree is measured at
either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition
costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and
liabilities assumed for appropriate classification and designation in accordance with the contractual
terms, economic conditions, the consolidated entity's operating or accounting policies and other
pertinent conditions in existence at the acquisition date.
Where the business combination is achieved in stages, the consolidated entity re-measures its previously
held equity interest in the acquiree and the difference between the revised fair value and the previous
carrying amount is recognised in profit or loss.
Contingent consideration to be paid by the acquirer is recognised at the acquisition-date at fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is
recognised in profit or loss. Contingent consideration classified as equity is not re-measured and its
subsequent settlement is accounted for within equity.
1. Accounting policies (continued)
Business combinations and goodwill (continued)
The difference between the acquisition date fair value of assets acquired, liabilities assumed and any non-
controlling interest in the acquiree and the fair value of the consideration transferred and the fair value
of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred
and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a
bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the
acquirer on the acquisition date, but only after a reassessment of the identification and measurement of
the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively
adjusts the provisional amounts recognised and recognises additional assets or liabilities during the
measurement period based on new information obtained about the facts and circumstances that existed
at the acquisition date. The measurement period ends on either the earlier of (i) 12 months from the date
of the acquisition, or (ii) when the acquirer receives all the information possible to determine fair value.
Goodwill arising on a business combination is carried at cost as established on the date of acquisition
less accumulated impairment losses, if any.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of profit
or loss on disposal.
Research and development
Expenditure incurred on research and development is distinguished as relating either to a research phase
or to a development phase. All research phase expenditure is charged to the Income Statement.
Development expenditure is recognised as an internally generated intangible asset only if it meets strict
criteria, relating in particular to technical feasibility and generation of future economic benefits.
More specifically, development costs are capitalised from the point at which the following conditions
have been met:
the technical feasibility of completing the programme and the intention and ability (availability of
technical, financial and other resources) to complete the programme asset and use or sell it;
the probability that future economic benefits will flow from the programme asset; and
the ability to measure reliably the expenditure attributable to the programme asset during its
development.
Capitalisation continues until the point at which the asset meets its originally contracted technical
specification. This is defined internally as the point at which the asset is capable of operating in the
manner intended by management.
Subsequent expenditure is capitalised where it enhances the functionality of the asset and demonstrates
an enhanced economic benefit to the Group. All other subsequent expenditure on assets is expensed as
incurred.
Capitalised development costs are amortised on a straight-line basis over the period of their expected
benefit, being their finite life of 5 years.
Software
Software that is not specific to an item of property, plant and equipment is classified as an intangible
asset, recognised at its acquisition cost and amortised on a straight-line basis of between 3 and 5 years.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
1. Accounting policies (continued)
Other intangible assets
These principally include intangible assets arising on acquisition of business. Amortisation of intangible
assets is on a straight line basis over their useful economic lives, determined as follows
Technical know how
Customer relationships
Trade name
Order backlog
10-20 years
10-12 years
10-16 years
2 years
Estimated useful lives and amortisation method are reviewed by management at the end of each
reporting period, with the effect of any change in estimate accounted for on a prospective basis.
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and any provision for
impairment in value. The cost of self-constructed assets includes the cost of materials, direct labour and
an appropriate proportion of overheads and, where appropriate, interest.
Depreciation is provided on a straight-line basis to write off the cost, less the estimated residual value,
of property, plant and equipment over their estimated useful lives. No depreciation is recorded on assets
in the course of construction. Estimated useful lives, residual values and depreciation method are
reviewed at the end of each reporting period, with the effect of any change in estimate accounted for on
a prospective basis.
Computer equipment
Office furniture and fittings
Plant and machinery
33% per annum
20% per annum
10% to 20% per annum
Assets held under leases are reported in the Statement of Financial Position as Right of Use Assets.
Depreciation is provided over their expected useful lives on the same basis as owned assets or, where
shorter, over the term of the relevant lease on a straight-line basis. An impairment loss is recognised
for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment, or more frequently if events or changes in circumstances
indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The
value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-
tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that
do not have independent cash flows are grouped together to form a cash-generating unit.
Leases
The Group has applied IFRS 16 in 2018 using the modified retrospective approach.
1. Accounting policies (continued)
Leases (continued)
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration. To assess whether a contract conveys the right to control
the use of an identified asset, the Group assesses whether:
the contract involves the use of an identified asset either explicitly or implicitly and should
be physically distinct or represent substantially all of the capacity of a physically distinct
asset;
the Group has the right to obtain substantially all of the economic benefits from use of the
asset throughout the period of use; and
the Group has the right to direct the use of the asset. The Group has this right when it has
the decision-making rights that are most relevant to changing how and for what purpose
the asset is used.
This policy is applied to contracts entered into, or changed, on an ongoing basis.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying asset, less any lease
incentive received.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases
of less than 12 months and leases of low value assets. Instead, the Group recognises the lease
payments associated with these leases as an expense on a straight-line basis over the lease term.
Depreciation on right-of-use lease assets is charged on a straight-line basis over the shorter of the
term of the lease and useful economic life, and is recognised in profit or loss.
Interest expense on the lease liability is recognised in profit or loss within finance costs.
Inventories
Inventories and work in progress are valued at the lower of cost and net realisable value. Cost
comprises direct materials and, where applicable, direct labour costs and those direct and indirect
overheads that have been incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling prices less all estimated costs to completion and
costs to be incurred in marketing, selling and distribution.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, investments in money-market funds
and short-term. The Group considers overdrafts (repayable on demand) to be an integral part of its
cash management activities and these are included in cash and cash equivalents for the purposes of
the cash flow statement.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
1. Accounting policies (continued)
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, and it is probable that the Group will be required to settle that obligation and a
reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at the reporting date, taking into account the risks and uncertainties surrounding
the obligation. When a provision is measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash flows (when the effect of the time
value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be
recovered from a third party, a receivable is recognised as an asset if it is virtually certain that
reimbursement will be received and the amount of the receivable can be measured reliably.
Retirement benefit obligations
The Group operates a defined contribution stakeholder pension scheme for employees. Payments to
the defined contribution retirement benefit plans are recognised as an expense when the employees
have rendered service entitling them to contributions.
Share-based payments
The Group provides share-based payment arrangements to certain employees. These are equity-
settled arrangements and are measured at fair value at the date of grant.
Fair value is independently determined using the Black-Scholes option pricing model that takes into
account the exercise price, the term of the option, the impact of dilution, the share price at the grant
date and expected price volatility of the underlying share, the expected dividend yield and the risk
free interest rate for the term of the option, together with non-vesting conditions that determine
whether the Group receives the services that entitle the employees to receive payment.
The cost of equity-settled transactions is recognised as an expense with a corresponding increase in
equity over the vesting period. The cumulative charge to profit or loss is calculated based on the
grant date fair value of the award, the best estimate of the number of awards that are likely to vest
and the expired portion of the vesting period. The amount recognised in profit or loss for the period
is the cumulative amount calculated at each reporting date less amounts already recognised in
previous periods.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification
has not been made. An additional expense is recognised over the remaining vesting period, for any
modification that increases the total fair value of the share-based compensation benefit as at the
date of the modification.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and
any remaining expense is recognised immediately. If a new replacement award is substituted for the
cancelled award, the cancelled and new award is treated as if they were a modification.
1. Accounting policies (continued)
Equity
Equity comprises the following:
‘Share capital’ represents the nominal value of equity shares.
‘Share premium’ represents the excess over nominal value of the fair value of consideration
received for equity shares, net of expenses of the share issue.
‘Own shares held by EBT’ represents Company shares purchased directly by the Group to satisfy
obligations under the employee share plan.
‘Share-based payment reserve’ represents equity-settled share-based employee remuneration
until such share options are exercised or lapse.
‘Translation reserve’ represents the foreign currency differences arising on translating foreign
operations into the presentational currency of the Group.
‘Retained earnings’ represents retained profits.
‘Non-controlling interest’ represents the proportionate share of the identifiable net assets on
acquisition and subsequent share of result following this of any subsidiary where the
shareholding held by the Parent Company is less than 100%.
Employee benefit trust
The assets and liabilities of the Employee Benefit Trust ("EBT") have been included in the Group
accounts.
Any assets held by the Employee Benefit Trust cease to be recognised in the Consolidated Statement
of Financial Position when the assets vest unconditionally in identified beneficiaries.
The costs of purchasing own shares held by the Employee Benefit Trust are shown as a deduction
against consolidated equity. The proceeds from the sale of own shares held increase consolidated
equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the
Consolidated Statement of Comprehensive Income.
The undiscounted amount of short-term benefits attributable to services that have been rendered in
the period are recognised as an expense, unless specifically required or permitted within the scope
of IFRS reporting to be included in the cost of an asset. Any difference between the amount of cost
recognised and cash payments made is treated as a liability or prepayment as appropriate.
2. 3 Segmental information
An operating segment, as defined by IFRS 8 ‘Operating segments’, is a component of the Group that
engages in business activities from which it may earn revenues and incur expenses. The Group is
managed through its two reporting segments, Technology & Engineering (“T&E”) and Consulting &
Programme Services (“CaPS”) which form the operating segments on which the information below is
prepared. The Group determines and presents operating segments based on the information that is
provided internally to the chief operating decision maker, which has been identified as the Board of
Directors of TP Group plc.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
2. Segmental information (continued)
2. Segmental information (continued)
Revenue
T&E
CaPS
Group revenue
Segment operating result
T&E
CaPS
Central unallocated costs
Group loss from operations
Finance cost
Loss before tax
Taxation (charge) / credit
(Loss)/profit after tax
2019
£'000
33,709
24,509
58,218
3,714
(487)
(4,926)
(1,699)
(264)
(1,963)
(46)
(2,009)
2018
£'000
27,766
11,271
39,037
2,571
(484)
(2,117)
(30)
(80)
(110)
285
175
Segment revenue reported above represents revenue generated from external customers.
The accounting policies of the reportable segments are the same as the Group’s accounting policies
described in note 1. Segment profit or loss represents the profit or loss before tax earned by each
segment without allocation of central administration costs and directors’ salaries, other gains and
losses, as well as finance costs.
The following table shows how the Group loss from operations, adjusted operating profit and
reconciling exceptional items for the financial year are split between the Group’s reportable segments
and central unallocated costs.
2019
Segment operating result
Depreciation, amortisation
and impairment
Acquisition-related costs
Non-operating costs
Share based payments
Movement in expected earn-
out payments
Adjusted operating profit /
(loss) including non-
controlling interest
Non-controlling interest
Adjusted operating profit /
(loss)1
T&E
£'000
3,714
1,946
-
66
-
-
5,726
-
5,726
CaPS
£'000
(487)
1,714
-
91
-
-
1,318
82
1,400
Central
unallocated
costs
£'000
Group
£'000
(4,926)
(1,699)
198
1,527
203
176
1,579
(1,243)
-
(1,243)
3,858
1,527
360
176
1,579
5,801
82
5,883
2018
Segment operating result
Depreciation, amortisation
and impairment
Acquisition-related costs
Non-operating costs
Share based payments
Movement in expected earn-
out payments
Adjusted operating profit /
(loss) including non-
controlling interest
Non-controlling interest
Adjusted operating profit/
(loss)1
2,571
1,629
-
734
-
-
4,934
-
4,934
(484)
(2,117)
555
-
104
-
-
175
-
175
193
657
(646)
165
613
(1,135)
-
(1,135)
(30)
2,377
657
192
165
613
3,974
-
3,974
1
Adjusted operating profit / (loss) is defined as operating result adjusted to add back depreciation of property, plant and
equipment and right-of-use assets, amortisation of intangible assets and impairment gains or losses on non-current assets,
changes in fair value of contingent consideration, acquisition consideration accounted for as employment costs owing to
on-going service conditions, any other acquisition-related charges, share based payment charges, non-controlling interest
and non-operating costs. Non-operating costs include £253,000 (2018: £579,000) in respect of termination payments, and
the remainder due to restructuring of the Group. Non-operating costs are those items believed to be exceptional in nature
by virtue of their size and or incidence. The directors of the Company believe this measure is more reflective of the
underlying performance of the Group than equivalent GAAP measures. This is primarily due to the exclusion of non-cash
items, such as share-based payments, impairment, depreciation and amortisation, as well as acquisition and non-operating
costs. This provides shareholders and other users of the financial statements with the most representative year-on-year
comparison of underlying operating performance attributable to shareholders . This measure and the separate components
remain consistent with 2018.
Analysis by geographical destination
The following is an analysis of the Group’s revenue from continuing operations from its products and
services:
United Kingdom
Europe excluding United Kingdom
Asia
Middle East
Rest of the World
Total revenue
2019
£'000
39,094
13,588
2,582
2,521
433
58,218
2018
£'000
33,979
1,868
2,729
-
461
39,037
Revenue from continuing operations from external customers and non-current assets are all generated
from operations in the UK. All segment assets are located in the UK.
Analysis by type of good or service
Revenue
Engineering
Software
Consultancy
Total revenue
2019
£'000
33,709
1,271
23,238
58,218
2018
£'000
27,766
-
11,271
39,037
82
Annual Report and Accounts 2019
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Annual Report and Accounts 2019
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
2. Segmental information (continued)
Analysis by timing of revenue recognition
T&E
CaPS
Total
Over time
Point in time
Total revenue
Analysis by industry
Revenue
Defence
Energy
Space
Total revenue
2019
£'000
28,001
5,708
33,709
2018
£'000
25,456
2,310
27,766
2019
£'000
23,908
601
24,509
2018
£'000
11,271
-
11,271
2019
£'000
51,909
6,309
58.218
2019
£'000
37,305
8,821
12,092
58,218
Information about major customers
Revenue includes sales from customers who contributed 10% or more to the Group’s revenue:
Customer 1
Customer 2
Customer 3
Total revenue
3. Research and development
Group
Expenditure in the year
Capitalised as intangible assets - software
Amortisation of capitalised costs
Net cost recognised in the income statement
4. Operating loss
The Group operating loss for the year is stated after charging the following:
Amortisation of intangible assets (note 11)
Impairment of intangible assets
Depreciation of property, plant and equipment and right-of-use
assets (notes 12 and 13)
Impairment of trade receivables
Share-based payment expense1
2019
£'000
6,921
14,104
8,669
29,694
2019
£'000
444
(444)
39
39
2019
£'000
2,500
-
1,360
36
176
2018
£'000
36,727
2,310
39,037
2018
£'000
29,796
7,595
1,646
39,037
2018
£'000
9,910
9,776
-
19,686
2018
£'000
600
-
-
600
2018
£'000
1,435
-
855
87
165
1 Share-based payment expense arises from transactions accounted for as equity-settled share-
based payment transactions and are non-cash in nature.
5. Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the
Company’s annual financial statements
Fees payable to the Company’s auditor for the audit of the
Company’s subsidiaries
Total fees payable for audit services
Fees payable to the Company’s auditor for other services:
Taxation advisory services
Total fees payable to the Company’s auditor
6. Employee information
Group
Wages, salaries and benefits
Social security costs
Other pension costs
Share-based payments
Group employment costs
Group
Engineering
Business development
Administration
Average number of employees
2019
£'000
44
117
161
-
161
2019
£'000
16,172
2,295
831
176
19,474
2018
£'000
58
99
157
8
165
2018
£'000
10,516
1,230
694
165
12,605
Number
Number
290
10
64
364
144
16
54
214
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 £831,000 (2018: £694,000) represents contributions
payable to these plans by the Group at rates specified in the rules of the plans. As at 31 December
2019, contributions of £102,000 (2018: £62,000) due in respect of the 2019 reporting period remained
outstanding. The amounts were paid subsequent to the end of the reporting period.
Parent
Wages, salaries and benefits
Social security costs
Other pension costs
Share-based payments
Parent Company employment costs
Parent
Business development
Administration
Average number of employees
2019
£'000
2,148
317
187
176
2,828
2018
£'000
1,736
219
140
165
2,260
Number
Number
4
23
27
7
15
22
84
Annual Report and Accounts 2019
84
85
Annual Report and Accounts 2019
85
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
6. Employee information (continued)
Retirement benefits
The Parent Company is covered by the Group’s defined contribution retirement benefit plans for all
qualifying employees. The assets of these plans are held separately from those of the Parent Company
in separately administered funds.
The total expense recognised in profit or loss of £209,000 (2018: £151,000) represents contributions
payable to these plans by the Parent Company at rates specified in the rules of the plans. As at 31
December 2019, contributions of £22,000 (2018: £11,000) due in respect of the 2019 reporting period
remained outstanding. The amounts were paid subsequent to the end of the reporting period.
Disclosure of the remuneration of the Group’s key management personnel, who are considered to be
the directors, as required by IAS 24, is detailed below. Disclosure of the remuneration of the statutory
Directors is further detailed in the Remuneration Report on pages 54 to 55.
Group
Short-term employee benefits 1
Contributions to defined contribution pension schemes
Social Security costs
Other benefits
Share-based payments
Total key management remuneration
1 Includes a termination payment of £161,000 in 2018.
7. 6
Net finance cost
Group
Interest received on bank deposits
Finance income
Interest paid on lease contracts
Bank interest paid
(Loss)/gain on foreign exchange derivative financial assets
Finance expense
Net finance expense
8. 7 Taxation
Group
Current tax charge for the year
Adjustments in respect to prior year
Current tax
Deferred tax arising on amortisation of acquired intangibles
Deferred tax on reversal of timing differences
Adjustments in respect to prior year
Deferred tax
Tax charge / (credit) from continuing operations
86
Annual Report and Accounts 2019
86
2019
£'000
622
28
98
142
155
2018
£'000
721
29
81
341
123
1,069
1,295
2019
£'000
23
23
(246)
(15)
(26)
(287)
(264)
2019
£'000
474
(62)
412
(368)
216
(214)
(366)
46
2018
£'000
60
60
(240)
(13)
113
(140)
(80)
2018
£'000
2
(103)
(101)
(184)
-
-
(184)
(285)
8. Taxation (continued)
The tax charge for the period is lower than (2018: lower than) the standard rate of corporation tax in
the UK of 19% (2018: 19%). The differences are explained as follows:
Tax reconciliation
Group
Loss on ordinary activities before tax
Loss on ordinary activities at the standard rate
of corporation tax in the UK of 19% (2018: 19%)
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 recognized
Prior year deferred tax adjustment IFRS 16
Effect of overseas tax rates
Adjustment in respect of prior years
Tax charge / (credit) for the year
Deferred taxation liabilities
Group
At 1 January
Arising on business combination
Credit to comprehensive income
At 31 December
2019
£'000
(1,963)
(373)
532
(130)
88
(1)
(285)
494
(7)
4
(276)
46
2019
£'000
1,648
1,456
(366)
2,738
2018
£'000
(110)
(21)
179
(500)
73
31
22
151
(115)
-
(105)
(285)
2018
£'000
1,425
407
(184)
1,648
The deferred tax liability brought forward on 1 January 2019 arose in respect of intangible assets
acquired on the acquisition of TPG Maritime Limited and TPG Engineering Limited on 5 April 2012,
ALS Technologies Limited and Flexible Solutions Software Limited on 6 February 2017, Polaris
Consulting (Holdings) Limited on 12 December 2017 and Westek Technology Limited on 2 November
2018.
Amounts arose in the current year on the acquisition of Sapienza Consulting Holdings B.V. on 30 April
2019 and Lift BV on 28 June 2019. In the year to 31 December 2019, the credit to the Consolidated
Statement of Comprehensive Income of £366,000 (2018: £184,000) comprises the release of deferred
tax liability arising on the amortisation of acquired intangibles.
At the reporting date, the Group has approximately £21.8m (2018: £20.5m) of unrelieved tax losses for
offset against future taxable profit. No deferred tax asset has been recognised in respect of these
losses. TPG Design & Technology Limited created £18.1m (2018: £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 be sufficient trade to recover these losses against future taxable
profit.
87
Annual Report and Accounts 2019
87
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
8. Taxation (continued)
The UK main corporation tax rate was due to be reduced to 17% from 1 April 2020, as announced in
the Finance Bill 2016, which was substantively enacted on 12 September 2016. The changes had been
substantively enacted at the balance sheet date and are therefore recognised in these financial
statements in the measurement of the Group’s deferred tax assets and liabilities.
Following the year end, in the Budget of 11 March 2020, the Chancellor announced the reversal of
the previously enacted reduction in the rate of corporation tax. This reversal was subsequently
confirmed by a resolution under the Provisional Collection of Taxes Act 1968, which set the rate at
19%. The impact of this reversal is a net increase in the tax charge, which will be recognised in 2020,
of approximately £320,000.
9. Earnings per share
The calculation of basic earnings per share for the year ended 31 December 2019 is based upon a
loss after tax of £1,927,000 (2018: profit after tax of £175,000) and a weighted average number of
shares of 772,439,898 (2018: 758,565,854). The weighted average number of shares has been reduced
by the weighted average number of shares held by the Employee Benefit Trust.
The issue of additional shares on exercise of employee share options would increase the basic loss
per share and there is therefore no dilutive effect of employee share options.
10. Goodwill
Group
Cost and net book value
At 1 January 2018
Acquired through business combination
At 31 December 2018
Acquired through business combination
At 31 December 2019
£'000
4,386
903
5,289
3,872
9,161
Goodwill arose on the acquisition of TPG Maritime Limited and TPG Engineering Limited on 5 April
2012, of Polaris Consulting (Holdings) Limited on 12 December 2017 and of Westek Technology
Limited on 2 November 2018.
Goodwill arose in the current year on the acquisition of Sapienza Consulting Holdings B.V. and
subsidiary companies on 30 April 2019, and also separately on the increase in its shareholding in Lift
B.V. of Sapienza Consulting Holdings B.V., from 33% to 69% on 30 June 2019.
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
Westek Technology Limited
Sapienza Consulting Holdings B.V and subsidiaries
Lift B.V.
At 31 December
88
Annual Report and Accounts 2019
88
2019
£'000
3,316
602
468
903
2,696
1,176
9,161
2018
£'000
3,316
602
468
903
-
-
5,289
10. Goodwill (continued)
During the year, goodwill was tested for impairment in accordance with IAS 36. The recoverable
amount of the Group’s goodwill was assessed by reference to value-in-use calculations derived from
5 year budgeted cash flows, and extrapolated cash flows thereafter based on estimated terminal
growth rates of 1.5% (2018: 1.5%).
Cash flows are based on 2020 budgets, which have been approved by the Board. In preparing these
budgets, management has used past experience and actual results, combined with expectations of
future performance using knowledge of, inter alia, confirmed order books and known customer
contracts and anticipated costs associated with those contracts.
The key assumptions on which the impairment tests are based on are a pre-tax discount rate of 10.5%
(2018: 11.5%) and a long-term growth rate, after the period of detailed forecasts, of 1.5% (2018: 1.5%)
on forecast cash flows. Differing growth rates have been used for each of the Group’s trading entities,
based on management’s assessment of the future outlook for each individual business, as noted
below.
Management has identified two cash generating units where a reasonably possible change in
assumptions used in arriving at the value in use might cause an impairment:
In the case of Lift BV, which is an early stage start-up technology business, although early stage
customers are generating revenue, there is a risk in the revenue growth assumptions which, if they
do not transpire, could result in impairment. A reduction of 17% in the projected revenues in year
5 of the projections, and the resulting impact on the terminal value, would result in an impairment
of approximately £0.8m.
In the case of TPG Engineering Limited, an increase in the discount rate from 10.5% to 12.5% would
cause an impairment of approximately £0.2m. A 10% reduction in revenues from those forecast
for 2020 and 2021, followed by a reversion to the levels reported in 2019 and no growth thereafter,
combined with an increase in the discount rate from 10.5% to 12.5% would result in an impairment
of approximately £0.3m.
89
Annual Report and Accounts 2019
89
Notes to the financial statements (continued)
Notes to the financial statements (continued)
11. Other intangible assets
11. Other intangible assets (continued)
Technical
know how
Customer
relationships
Trade
name
Order
backlog
Computer
software
£'000
£'000
£'000
£'000
£’000
Internally
developed
software
Total
£'000
12,239
-
4,585
-
171
-
731
1,426
239
12,970
-
6,011
-
410
-
-
-
-
-
-
261
80
-
341
112
- 17,256
80
-
-
2,396
- 19,732
556
444
-
5,727
520
953
-
1,410
8,610
12,970
11,738
930
953
453
1,854 28,898
4,979
810
5,789
856
6,645
7,181
6,325
298
472
770
972
1,742
139
15
154
70
224
5,241
9,996
256
706
-
-
-
318
318
-
635
81
138
219
57
276
122
177
-
-
-
227
227
5,497
1,435
6,932
2,500
9,432
- 12,800
1,627 19,466
Group
Cost
At 1 January 2018
Additions
Acquired through
business combination
At 31 December 2018
Additions
Acquired through
business combination
At 31 December
2019
Accumulated
amortisation
At 1 January 2018
Charge for year
At 31 December 2018
Charge for year
At 31 December 2019
Net Book Value
At 31 December 2018
At 31 December 2019
Technical know-how includes £11,741,000 initial cost which arose on the acquisition of TPG Maritime
Limited (previously known as Atmosphere Control International Limited). This represents the
company’s proprietary expertise and experience of atmosphere management techniques in the
defence environment. At 31 December 2019, this technical know-how had a net book value of
£5,679,000, and a remaining useful life of 14 years.
Intangible assets brought-forward as at 1 January 2018 arose on the acquisition of TPG Maritime Limited
and TPG Engineering Limited on 5 April 2012 and are amortised on a straight-line basis over their useful
life of fifteen years.
Intangible assets brought-forward as at 1 January 2018 also include those arising from the acquisition of
ALS Technologies Limited (now TPG Services Limited) and Flexible Solutions Software Limited on 6
February 2017 and Polaris Consulting (Holdings) Limited on 12 December 2017. These assets are
amortised on a straight-line basis over their useful life of between nine and ten years.
Intangible assets acquired in the year ended 31 December 2018 arose on the acquisition of Westek
Technology Limited on 2 November 2018. These assets are amortised on a straight-line basis over their
useful life of ten years.
Intangible assets acquired in the current year are a result of the acquisition of Sapienza Consulting
Holdings B.V. and subsidiaries on 30 April 2019 and the acquisition of further shares in Lift BV on 28 June
2019. Customer relationships, trade name, internally developed software and order backlog will be
amortised on a straight-line basis over their useful life of between two and ten years.
Computer software represents both internally developed software as well as externally acquired computer
software licences and associated installation costs. Internally developed software is amortised on a
straight-line basis over its useful life of five years. Externally acquired computer software is amortised on
a straight-line basis over its 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.
Parent Company
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for year
At 31 December 2018
Charge for year
At 31 December 2019
Net book value
At 1 January 2018
At 31 December 2018
At 31 December 2019
Computer
software
£'000
261
35
296
97
393
81
130
211
41
252
180
85
141
Total
£'000
261
35
296
97
393
81
130
211
41
252
180
85
141
S
t
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a
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R
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p
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s
90
Annual Report and Accounts 2019
90
91
Annual Report and Accounts 2019
91
Notes to the financial statements (continued)
Notes to the financial statements (continued)
12. Property, plant and equipment
12. Property, plant and equipment (continued)
Parent Company
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for year
At 31 December 2018
Charge for year
At 31 December 2019
Net book value
At 1 January 2018
At 31 December 2018
At 31 December 2019
Computer
equipment
£'000
Office
furniture
and fittings
£'000
60
39
99
54
153
27
26
53
35
88
33
46
65
-
-
-
120
120
-
-
-
28
28
-
-
92
Total
£'000
60
39
99
174
273
27
26
53
63
116
33
46
157
Group
Cost
At 1 January 2018
Additions
Acquired through
business combinations
Transfer to right-of-use assets
Transfers
Disposals
At 31 December 2018
Additions
Acquired through
business combinations
Transfers
Disposals
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for year
Disposals
Transfers
Transfer to right-of-use assets
At 31 December 2018
Charge for year
Disposals
Transfers
At 31 December 2019
Net book value
At 1 January 2018
At 31 December 2018
At 31 December 2019
Computer
equipment
£'000
Office
furniture
and fittings
£'000
Plant and
machinery
and motor
vehicles
£'000
473
219
-
(11)
-
-
681
348
73
28
(83)
1,047
146
132
-
13
-
291
227
(83)
4
439
327
390
608
199
82
16
(5)
-
-
292
279
167
(28)
(26)
684
80
55
-
(25)
-
110
190
(26)
(4)
270
119
182
414
2,437
564
43
16
(1,142)
(237)
1,681
290
-
-
(41)
1,930
757
130
(28)
12
(19)
852
127
(5)
(95)
879
1,680
829
1,051
Total
£'000
3,109
865
59
-
(1,142)
(237)
2,654
917
240
-
(150)
3,661
983
317
(28)
-
(19)
1,253
544
(114)
(95)
1,588
2,126
1,401
2,073
The cost of assets still in use with a net book value of zero is £1,363,000 (2018: £1,133,000).
S
t
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a
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i
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R
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p
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o
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n
a
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a
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i
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t
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m
e
n
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s
92
Annual Report and Accounts 2019
92
93
Annual Report and Accounts 2019
93
Notes to the financial statements (continued)
Notes to the financial statements (continued)
13. Right-of-use assets
13. Right-of-use assets (continued)
Group
Cost
Recognised on adoption of IFRS 16 on 1 January 2018
Finance leases transferred from property plant and
equipment
Additions
Acquired through
business combinations
At 31 December 2018
Transfers
Additions
Acquired through business combinations
Disposals
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for year
At 31 December 2018
Charge for year
Disposals
At 31 December 2019
Net book value
At 1 January 2018
At 31 December 2018
At 31 December 2019
Property, plant,
machinery
and motor
vehicles
£'000
4,506
1,123
119
213
5,961
(95)
515
781
(61)
7,101
-
538
538
816
(61)
1,293
5,629
5,423
5,808
Total
£'000
4,506
1,123
119
213
5,961
(95)
515
781
(61)
7,101
-
538
538
816
(61)
1,293
5,629
5,423
5,808
Parent Company
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for year
At 31 December 2018
Charge for year
At 31 December 2019
Net book value
At 1 January 2018
At 31 December 2018
At 31 December 2019
S
t
r
a
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e
g
i
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R
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p
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G
o
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a
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c
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F
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a
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c
i
a
l
S
t
a
t
e
m
e
n
t
s
Plant and
machinery
£'000
Total
£'000
-
130
130
364
494
-
36
36
95
131
-
94
363
-
130
130
364
494
-
36
36
95
131
-
94
363
Right-of-use assets comprise property leases at Cody Technology Park, Farnborough for a period of
three years and Apex Plaza, Reading for a period of five years.
Investments
14.
The Parent Company’s investments comprise interests in group undertakings, details of which are
listed below.
Parent Company
At 1 January
Investment during year:
Investment in shares in group undertakings
Conversion of subsidiary debt to share capital
Conversion of subsidiary debt provision to impairment
Impairment charge during the year
Lapse of share options
Long term loan to subsidiary
Provision against long term inter-company loan
At 31 December
2019
£'000
18,806
10,150
22,229
(16,050)
(1,230)
(31)
-
-
33,874
2018
£'000
15,435
3,371
-
-
-
-
133
(133)
18,806
The increase in investments in shares in Group undertakings relates to the acquisition of Sapienza
Consulting Holdings B.V. and subsidiaries please refer to note 31.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
Investments (continued)
14.
During 2019 long-term loans made to TPG Design & Technology Limited (“TPG D&T”) and TPG
Engineering Ltd (“TPGE”) were settled following a recapitalisation of both businesses.
The TPG D&T loan was fully impaired at the end of 2018. As the commercial circumstances have not
changed since the end of 2018, the Parent Company has deemed that there should be no change to
the impairment provision held for TPG D&T.
The TPGE loan was partially impaired at the end of 2018. Following a review of the expected
performance of TPGE and timings thereof, the Parent Company has assessed that there is some risk in
the full recoverability of the investment. As such an impairment review was undertaken and an increase
in the provision of £1,230,000 against the investment in TPGE was deemed to be required in the current
year.
The key assumptions on which the impairment tests are based on are a pre-tax discount rate of 10.5%
(2018: 11.5%) and a long-term growth rate, after the period of detailed forecasts, of 1.5% (2018: 1.5%)
on forecast cash flows. Differing growth rates have been used for each of the Group’s trading entities,
based on management’s assessment of the future outlook for each individual business.
14.
Investments (continued)
Name of undertaking
Registered
office note
Country of
incorporation
Description of
shares held
Proportion of
nominal
value
of shares
held by the
Parent
Company
Principal
Activity
TPG Maritime Limited
1
United Kingdom
TPG Design & Technology Limited 1
TPG Engineering Limited
TPG Services Limited
Polaris Consulting (Holdings)
Limited
Polaris Consulting Limited
Westek Holdings Limited
Westek Technology Limited
TPG USA Inc.
US Merger Corp Inc.
Hunt Thermal Technologies
Limited
Atmosphere Control International
Limited
Wellman Defence Limited
Sapienza Consulting Holdings B.V.
Sapienza Consulting B.V.
Sapienza Consulting Limited
Sapienza Consulting Gmbh
Sapienza Consulting S.R.L.
AI Recruiting B.V.
Sapienza Balkans Holdings B.V.
Sapienza Balkans Skopje
Lift B.V.
1
1
1
1
1
1
2
2
1
1
1
3
3
4
5
6
7
7
8
9
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United States of
America
Unites States of
America
United Kingdom
United Kingdom
United Kingdom
Netherlands
Netherlands
United Kingdom
Germany
Italy
Netherlands
Netherlands
North
Macedonia
Netherlands
£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
$0.001 ordinary
shares
$0.001 ordinary
shares
£1.00 ordinary
shares
£1.00 ordinary
shares
£1.00 ordinary
shares
€0.01 ordinary
shares
€100 ordinary shares
€1.00 ordinary
shares
€12,500 ordinary
shares
100% of capital
€100 ordinary shares
€1.00 ordinary
shares
€20,000 ordinary
share
€0.01 ordinary
shares
100%
1
100%
Dormant
100%
100%
100%
100%
2
3
3
3
100%
Dormant
100%
100%
100%
4
5
5
100%
Dormant
100%
Dormant
100%
Dormant
100%
100%
100%
100%
100%
100%
65%
100%
69%
6
6
6
6
6
6
6
6
7
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
14. Investments (continued)
Principal activities:
1. Provision of air purification equipment for submarines including oxygen/hydrogen generation and
purification, air handling and distribution systems.
2. Design and manufacture of heat exchangers and other critical equipment used in large scale industrial
processes.
3. The provision of services including technical project management, systems engineering, design,
software development and assurance.
4. The provision of rugged, high performance computer servers and ancillary equipment for the defence
and commercial sectors.
5. A trading structure to support any activity that arises in the United States of America.
6. A provider of workforce, engineering services and IT solutions to the space and defence sectors.
7. Builds AI systems to support rapid resourcing of large-scale technical projects.
Registered office addresses
1) A2/1064 Cody Technology Park, Farnborough, Hampshire, GU14 0LX, United Kingdom
2) c/o Registered Agent Solutions Inc., 9 E. Loockerman Street, Suite 311, Dover, Kent County,
Delaware 19901, United States of America.
3) Rijnstraat 3, 2223 EG Katwijk, Netherlands.
4) 61 Rodney Street, Liverpool, Merseyside, L1 9ER, United Kingdom.
5) Berliner Allee 65, 64295 Darmstadt, Germany.
6) Roma (RM) Piazza, Sant’Andrea Della Valle, 3 Cap 00186 Studio Commerciale Falato, Italy.
7) Kapteynstraat 1, 2201 BB Noordwijk, Netherlands.
8) Bul. Partizanski Odredi 15a/2-11, 1000 Skopje, North Macedonia.
9) Noordwal 10 III, 2513 EA, The Hague, Netherlands.
15. Amounts owed by Employee Benefit Trust
Parent Company
Amounts owed by EBT
Less: impairment
2019
£'000
600
(495)
105
2018
£'000
600
(505)
95
The loan to the Employee Benefit Trust is interest free and unsecured. Details of the Employee Benefit
Trust are provided in note 27. 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.
16.
Inventories
Group
Raw materials
Work in progress
2019
£'000
457
1,579
2,036
2018
£'000
628
2,099
2,727
The cost of inventories recognised as an expense during the year in respect of continuing operations
was £14,706,000 (2018: £12,544,000). 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.
Long term contracts
17.
The carrying amounts presented in the Consolidated Statement of Financial Position for long term
contracts relate to the following categories of assets and liabilities:
Group
Amounts due from contract customers included in
trade and other receivables: (note 18)
Brought forward at 1 January
Contract asset reclassified as a receivable
Newly accrued
Effect of changes in measurement of progress/estimate of
transaction price/contract modification
Carried forward at 31 December
Amounts due to contract customers included in trade and other
payables (note 21)
Brought forward at 1 January
Revenue recognised in the year and included in opening balance
New cash received, revenue deferred
Effect of changes in measurement of progress/estimate of
transaction price/contract modification
Carried forward at 31 December
2019
£'000
2018
£'000
5,596
(4,391)
8,785
52
4,085
(3,460)
4,971
-
10,042
5,596
4,837
(3,567)
7,972
986
10,228
10,669
(7,808)
3,396
(1,420)
4,837
Unsatisfied long term contracts
Amounts due to contract customers of £10,228,000 above reflects the aggregate amount of revenue
allocated to performance obligations that are unsatisfied or partly unsatisfied at the year end. The full
amount is expected to be recognised as revenue within the 2020 financial year.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
18.
Trade receivables and other assets
Trade receivables
Amounts owed by subsidiary undertakings
Other receivables
Prepayments
Contract assets (see note 17)
Analysed as:
Trade receivables and similar items
Non-financial instruments
Group
Parent Company
2019
£'000
11,205
-
507
1,319
13,031
10,042
23,073
21,754
1,319
23,073
2018
£'000
3,221
-
597
477
4,295
5,596
9,891
9,414
477
9,891
2019
£'000
-
442
557
201
1,200
-
1,200
999
201
1,200
2018
£'000
-
4,200
540
84
4,823
-
4,823
4,739
84
4,823
The carrying value of trade and other receivables is considered a reasonable approximation of fair
value due to their short-term nature.
The Group’s customers are predominantly government agencies and ministries, or blue-chip
companies many of whose underlying customers are also government agencies. Management’s
assessment of the 12 month expected credit losses on trade receivables from these customers is based
on past experience and future expectations of credit losses. The increase in over 90 days debtors
(shown below) is considered low risk. The resulting credit loss is not considered material to the Group,
at less than £40,000, and no further disclosure is considered necessary.
The ageing of past due but not impaired receivables is:
0-30 days
31-60 days
61-90 days
>90 days
Group
Parent Company
2019
£'000
2018
£'000
2019
£'000
2018
£'000
851
802
329
197
846
279
69
181
2,179
1,375
-
-
-
-
-
-
-
-
-
-
The average age of receivables is 26 days (2018: 31 days).
In 2019 a rent deposit of £67,000 (2018: £67,000) due after more than one year is included within
prepayments and other debtors.
Trade receivables and other assets (continued)
18.
Trade receivables disclosed above are classified as assets measured at amortised cost. Credit terms are
negotiated as part of each individual contract. No interest is charged on the receivables from the date
of the invoice. The Group does not hold any collateral or other credit enhancements over any of its
trade receivables nor does it have a legal right of offset against any amounts owed by the Group to
the counterparty.
The amounts due by subsidiary undertakings to the Parent Company do not give rise to any material
expected credit loss.
19. Cash and cash equivalents
The funds were placed on floating interest rate deposit as follows:
Group
Parent Company
2019
£'000
2018
£'000
2019
£'000
2018
£'000
Cash and bank balances
6,568
22,413
144
10,505
Cash and cash equivalents
1 Restricted cash of £247,000 (2018: £460,000) is included in Prepayments and Other Debtors
144
6,8151
22,8731
10,505
20. Borrowings
Group
Secured:
Lease liabilities1
Current
Non-current
Total
2019
£'000
2018
£'000
2019
£'000
2018
£'000
2019
£'000
2018
£'000
1,022
1,022
739
739
5,429
5,429
5,198
5,198
6,451
6,451
5,937
5,937
1
The borrowings are fixed with repayment periods from 5 to 25 years.
The carrying value of all borrowings approximates to the fair value.
Parent
Secured:
Lease liabilities
Current
Non-current
Total
2019
£'000
2018
£'000
2019
£'000
2018
£'000
2019
£'000
2018
£'000
120
120
38
38
272
272
59
59
392
392
97
97
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100
101
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
21. Trade payables and other liabilities
Group
Trade payables
Accruals & deferred income
Other taxation and social security
Contingent consideration
Other creditors
Trade and other payables
Lease liabilities
Contract liabilities
Parent
Trade payables
Amounts owed to subsidiary
undertakings
Accruals & deferred income
Other taxation and social security
Contingent consideration
Other creditors
Trade and other payables
Lease liabilities
Trade and other payables are analysed as:
Financial instruments
Non-financial instruments
Current
Non-current
Total
2019
£'000
6,374
2,519
1,021
585
1,106
2018
£'000
5,883
1,780
1,157
1,453
341
11,605
10,614
1,022
10,228
739
4,837
2019
£'000
2018
£'000
-
-
-
286
-
286
-
-
-
-
-
-
2019
£'000
6,374
2,519
1,021
871
1,106
2018
£'000
5,883
1,780
1,157
1,453
341
11,891
10,614
5,429
5,198
6,451
-
-
10,228
5,937
4,837
22,855
16,190
5,715
5,198
28,570
21,388
Current
Non-current
Total
2019
£'000
257
2018
£'000
450
2019
£'000
-
2018
£'000
-
2019
£'000
257
2018
£'000
450
5,356
4,821
645
286
585
23
7,152
120
7,272
510
1,066
1,453
12
8,312
38
8,350
-
-
-
285
-
285
272
557
-
5,356
4,821
-
-
-
-
-
59
59
645
286
870
23
7,437
392
7,829
510
1,066
1,453
12
8,312
97
8,409
Group
Parent
2019
£’000
2018
£’000
2019
£’000
2018
£’000
27,549 20,231
1,157
28,570 21,388
1,021
7,543
286
7,829
7,343
1,066
8,409
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 29 days (2018: 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.
22. Lease liabilities
The Group uses leases to acquire plant and machinery. Future minimum lease payments for all
equipment and property are as follows:
Property Motor Vehicles
Other Equipment
Total
2019
2018
2019
2018
2019
2018
£'000
£'000
£'000
£'000
£'000
£'000
2019
£'000
2018
£'000
Future minimum payments due:
Not later than one year
After one year but not more than
five years
After 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
After five years
946
672
2,872
2,408
2,934
3,013
14
17
-
14
14
-
290
495
-
273
728
1,250
959
3,384
3,150
-
2,934
3,013
(1,057)
(1,084)
(1)
(3)
(59)
(98)
(1,117)
(1,185)
5,695
5,009
30
25
726
903
6,451
5,937
753
498
2,355
1,898
2,587
5,695
2,613
5,009
13
17
-
30
12
13
-
25
256
470
-
726
229
674
-
903
1,022
739
2,842
2,585
2,587
6,451
2,613
5,937
The average lease term is 5 years. For the year ended 31 December 2019, the average effective
borrowing rate was 4.23% (2018: 4.26%). 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.
The Group's obligations under leases which are secured by the lessors' rights over the leased assets
with initial recognised value of £1,366,000 (2018: £1,366,000), are disclosed within note 13, and have
corresponding year end lease liabilities of £657,000 (2018: £884,000).
Effects of leases on financial performance:
Depreciation charge for the year included in
‘administrative expenses’ for right-of-use assets:
Property, plant, machinery and motor vehicles
Total depreciation charge on leased assets
Interest expense for the year on lease liabilities
recognised in ‘finance costs’
Effect of leases on cash flows:
Total cash outflow for leases in the year
Group
2019
£'000
2018
£'000
Parent
2019
£'000
2018
£'000
816
816
246
538
538
240
95
95
9
981
846
68
36
36
4
38
Both the Group and the Parent Company did not incur any costs within administrative expenses
relating to short-term leases, leases of low value or variable lease payments not already included within
the measurement of the lease liability.
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
23. Financial instruments
Carrying values and fair values of financial instruments
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
Trade receivables and similar items
Cash at bank and in hand
Financial liabilities:
Trade payables and similar items
Lease liabilities
Note
15
18
19
Group
20181
£'000
2019
£'000
Parent
20181
£'000
2019
£'000
-
21,754
6,568
28,322
-
9,414
22,413
31,827
21,098
6,451
27,549
14,294
5,937
20,231
105
999
144
1,248
7,151
393
7,544
95
4,739
10,505
15,339
7,246
97
7,343
1
There has been a re-analysis of the 2018 figures to align with the 2019 figures.
Risk management 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 and its amounts
recoverable on contracts, which, as set out in note 18, at 31 December 2019 were £21,247,000
(2018: £8,817,000). The amounts presented in the balance sheet are net of impairment, estimated by
the Group's management in line with principles set out in IFRS 9. Impairment loss recognised against
trade receivables for the financial period was £36,000 (2018: £62,000).
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.
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.
24. Provisions for liabilities and charges
Group
At 1 January 2019
Released to income statement
Charged to income statement
At 31 December 2019
Warranty
Property
£'000
389
(278)
-
111
£'000
110
-
10
120
Total
£'000
499
(278)
10
231
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.
25. Share capital
Issued and fully paid:
Ordinary shares of 1 pence each
779,178,719
758,565,854
7,792
7,586
2019
Number
2018
Number
2019
£'000
2018
£'000
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 1 pence each.
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 27.
The increase in share capital of 20,612,865 ordinary shares during the year is due to ordinary shares
issued as part of the consideration for the acquisition of Sapienza Consulting Holdings B.V. (note 31).
26. Share-based payments
The Group has two unapproved share option schemes and an Enterprise Management Incentive (EMI)
scheme. Share options have been granted by the Parent Company under the rules of the schemes. The
share options granted by the Employee Benefit Trust have no dilutive effect on the Parent Company's
share capital.
Number of options
At 1 January 2019
Granted during the year
Cancelled during the year
Unapproved
scheme
EMI
scheme
Total
number
number
Number
32,461,133
10,832,328
43,293,461
6,000,000
(1,500,000)
-
(1,500,000)
6,000,000
(3,000,000)
At 31 December 2019
36,961,133
9,332,328
46,293,461
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105
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105
Notes to the financial statements (continued)
Notes to the financial statements (continued)
26. Share-based payments (continued)
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 2019, 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:
2019
Weighted
average
exercise
price
(pence)
2019
Number
of options
2018
Weighted
average
exercise
price
(pence)
2018
Number
of options
At 1 January 2019
Lapsed during the year
Cancelled during the year
Granted during the year
7.57
-
9.84
3.12
43,293,461
-
(3,000,000)
6,000,000
7.52
14.90
7.03
6.44
51,346,666
(26,666)
(10,776,539)
2,750,000
At 31 December 2019
6.85
46,293,461
7.57
43,293,461
26. Share-based payments (continued)
Option
price
per share
pence
Closing
share
price
at grant
pence
Expected
volatility
%
Risk-free
interest
rate
%
Fair value
per share
Pence
21.75
15.00
10.00
10.00
10.00
7.00
7.00
7.00
7.00
6.50
6.42
6.88
6.70
22.00
14.80
9.50
9.75
5.50
7.25
7.25
7.25
7.25
6.50
6.42
6.70
6.70
50.63
37.43
36.28
19.57
42.28
56.89
56.89
56.89
56.89
56.89
56.89
56.89
56.89
1.20
0.80
0.51
0.53
0.76
0.66
0.66
0.66
0.66
0.66
0.66
0.66
0.66
6.31
3.04
1.73
0.99
0.38
3.12
3.14
3.26
3.57
3.57
3.57
3.57
3.57
Date of
Grant
2010
2010
2012
2014
2014
2017
2017
2017
2017
2018
2018
2019
2019
Number
200,000
1,950,000
166,667
666,667
250,000
18,377,216
9,188,608
4,594,303
3,650,000
750,000
1,000,000
4,500,000
1,000,000
46,293,461
Exercisable at 31 December 2019
8.00
21,564,349
9.23
11,657,744
All options expire 10 years after the date of grant.
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No share options were exercised during the year (2018: none). The options outstanding at
31 December 2019 had exercise prices as shown in the following table and a weighted average
remaining contractual life of 7.29 years.
At 31 December 2019 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 2019 was 6.55p and the
range during the year was between 6.00p and 7.62p.
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.
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 £177,000 and £165,000 related to equity-settled share-based
payment transactions in 2019 and 2018 respectively.
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.
27. Employee Benefit Trust
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 2019 the Parent Company had loaned £600,000 (2018: £600,000) to the Corac
Employee Benefit Trust. With this loan the Trustee purchased shares in the Parent Company and, at
31 December 2019, the Corac Employee Benefit Trust held 1,606,769 (2018: 1,606,769) ordinary shares
in TP Group plc with a book cost of £653,352 (2018: £653,352) which had a market value of £105,243
(2018: £94,799). 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 nil (2018: 26,666) shares to employees.
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.
106
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106
107
Annual Report and Accounts 2019
107
Notes to the financial statements (continued)
28. Contingent liabilities
As part of the Group’s long-term contract trading activities, £344,000 of performance and warranty
bonds (2018: £1,331,000) have been issued to customers. Of this amount £247,000 has been cash
backed (2018: £460,000) by the Group’s cash resources and this balance sits within prepayments and
other debtors. The balance is supported by a bonding facility provided by Barclays Bank plc guaranteed
by the UK Export Fund. No liability is expected to arise, and no provision is made in the accounts.
29. Related party transactions
There were no related party transactions with entities outside of the Group during the reporting period.
For the period post acquisition of Sapienza Consulting Holdings B.V., Sapienza Consulting B.V. charged
Lift B.V. £61,000 for the provision of management and support services.
The Parent Company applies the exemptions provided for under FRS 101 not to disclose transactions
with wholly owned subsidiaries during the 2019 financial year.
30. Exchange Rates
The following exchange rates have been used as part of the acquisition and consolidation accounting
contained within these financial statements:
Average Exchange Rate for the year 1
Euro
Closing rate at 31 December 1
Euro
Rate at acquisition at 30 April 2
Euro
2019
1.18
1.17
1.15
1 Average rates are used to translate the income statement and cash flow statement. Closing rates are used to translate the
balance sheet. Only the most significant currencies are shown.
2 Rate at acquisition of Sapienza (see note 31) used to translate book value and fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill.
31. Business combinations
Sapienza Consulting Holdings B.V
On 30 April 2019, the Group through its parent company TP Group plc, acquired 100% of the issued
share capital of Sapienza Consulting Holdings BV (“Sapienza”) on a cash free, debt free, normalised
working capital basis, for a combined initial consideration of €10 million in cash and €1.5 million by
way of the issue of 20,612,865 new ordinary shares of 1 pence each in the Company. In addition, a
maximum of €2.0 million may also be payable in cash on delivery by the vendors of certain transition
activities within two years following completion of the acquisition. This amount will be expensed in the
Group’s income statement over the two years to 30 April 2021, in line with IFRS 3. Sapienza was a
privately-owned group of services and software companies serving the space and defence sectors.
108
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108
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Notes to the financial statements (continued)
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Notes to the financial statements (continued)
31. Business combinations (continued)
31. Business combinations (continued)
31. Business combinations (continued)
31. Business combinations (continued)
On 28 June 2019, the Group via its subsidiary Sapienza Consulting Holdings BV acquired additional
On 28 June 2019, the Group via its subsidiary Sapienza Consulting Holdings BV acquired additional
On 28 June 2019, the Group via its subsidiary Sapienza Consulting Holdings BV acquired additional
On 28 June 2019, the Group via its subsidiary Sapienza Consulting Holdings BV acquired additional
shares in Lift BV (“Lift”), increasing its shareholding from 33% to 69%. The additional 36% was acquired
shares in Lift BV (“Lift”), increasing its shareholding from 33% to 69%. The additional 36% was acquired
shares in Lift BV (“Lift”), increasing its shareholding from 33% to 69%. The additional 36% was acquired
shares in Lift BV (“Lift”), increasing its shareholding from 33% to 69%. The additional 36% was acquired
for an initial consideration of €486,000 in cash, paid from the Group’s existing cash resources, and a
for an initial consideration of €486,000 in cash, paid from the Group’s existing cash resources, and a
for an initial consideration of €486,000 in cash, paid from the Group’s existing cash resources, and a
for an initial consideration of €486,000 in cash, paid from the Group’s existing cash resources, and a
further consideration of €216,667 in cash to be paid over an 18-month period, again from the Group’s
further consideration of €216,667 in cash to be paid over an 18-month period, again from the Group’s
further consideration of €216,667 in cash to be paid over an 18-month period, again from the Group’s
further consideration of €216,667 in cash to be paid over an 18-month period, again from the Group’s
existing cash resources. Lift is a software business that designs AI based conversational technology.
existing cash resources. Lift is a software business that designs AI based conversational technology.
existing cash resources. Lift is a software business that designs AI based conversational technology.
existing cash resources. Lift is a software business that designs AI based conversational technology.
The principal reason for the acquisition of Sapienza and the increased investment in Lift is to support
The principal reason for the acquisition of Sapienza and the increased investment in Lift is to support
The principal reason for the acquisition of Sapienza and the increased investment in Lift is to support
The principal reason for the acquisition of Sapienza and the increased investment in Lift is to support
the Group’s evolution as a diversified engineering and services group. Sapienza and Lift form part of
the Group’s evolution as a diversified engineering and services group. Sapienza and Lift form part of
the Group’s evolution as a diversified engineering and services group. Sapienza and Lift form part of
the Group’s evolution as a diversified engineering and services group. Sapienza and Lift form part of
the CaPS business segment.
the CaPS business segment.
the CaPS business segment.
the CaPS business segment.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and
goodwill are as follows:
goodwill are as follows:
goodwill are as follows:
goodwill are as follows:
Sapienza Consulting
Sapienza Consulting
Sapienza Consulting
Sapienza Consulting
Holdings BV
Holdings BV
Holdings BV
Holdings BV
Book
Book
Book
Book
Value
Value
Value
Value
£'000
£'000
£'000
£'000
Fair Value
Fair Value
Fair Value
Fair Value
£'000
£'000
£'000
£'000
Property, plant & equipment
Property, plant & equipment
Property, plant & equipment
Property, plant & equipment
Right-of-use assets
Right-of-use assets
Right-of-use assets
Right-of-use assets
Investments
Investments
Investments
Investments
Identifiable intangible assets
Identifiable intangible assets
Identifiable intangible assets
Identifiable intangible assets
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Financial assets
Financial assets
Financial assets
Financial assets
Financial liabilities
Financial liabilities
Financial liabilities
Financial liabilities
Deferred taxation
Deferred taxation
Deferred taxation
Deferred taxation
Total identifiable net assets
Total identifiable net assets
Total identifiable net assets
Total identifiable net assets
Non-controlling interest
Non-controlling interest
Non-controlling interest
Non-controlling interest
Goodwill arising on consolidation
Goodwill arising on consolidation
Goodwill arising on consolidation
Goodwill arising on consolidation
Total Consideration
Total Consideration
Total Consideration
Total Consideration
Consisting of:
Consisting of:
Consisting of:
Consisting of:
Consideration in cash
Consideration in cash
Consideration in cash
Consideration in cash
Consideration in shares
Consideration in shares
Consideration in shares
Consideration in shares
Fair value of previously held
Fair value of previously held
Fair value of previously held
Fair value of previously held
interest
interest
interest
interest
167
167
167
167
-
-
-
-
491
491
491
491
-
-
-
-
1,178
1,178
1,178
1,178
5,934
5,934
5,934
5,934
(6,671)
(6,671)
(6,671)
(6,671)
-
-
-
-
1,099
1,099
1,099
1,099
167
167
167
167
781
781
781
781
491
491
491
491
8,327
8,327
8,327
8,327
1,178
1,178
1,178
1,178
5,828
5,828
5,828
5,828
(7,901)
(7,901)
(7,901)
(7,901)
(1,416)
(1,416)
(1,416)
(1,416)
7,455
7,455
7,455
7,455
-
-
-
-
2,696
2,696
2,696
2,696
10,151
10,151
10,151
10,151
8,854
8,854
8,854
8,854
1297
1297
1297
1297
-
-
-
-
Lift BV
Lift BV
Lift BV
Lift BV
Book
Book
Book
Book
Value
Value
Value
Value
£'000
£'000
£'000
£'000
Fair Value
Fair Value
Fair Value
Fair Value
£'000
£'000
£'000
£'000
73
73
73
73
-
-
-
-
-
-
-
-
-
-
-
-
31
31
31
31
77
77
77
77
(59)
(59)
(59)
(59)
-
-
-
-
122
122
122
122
73
73
73
73
-
-
-
-
-
-
-
-
283
283
283
283
31
31
31
31
184
184
184
184
(59)
(59)
(59)
(59)
(40)
(40)
(40)
(40)
472
472
472
472
(510)
(510)
(510)
(510)
1,176
1,176
1,176
1,176
1,138
1,138
1,138
1,138
631
631
631
631
-
-
-
-
507
507
507
507
Following the increase in shareholding in Lift B.V., no change in fair value of the non-controlling
Following the increase in shareholding in Lift B.V., no change in fair value of the non-controlling
Following the increase in shareholding in Lift B.V., no change in fair value of the non-controlling
Following the increase in shareholding in Lift B.V., no change in fair value of the non-controlling
interest has been recognised in view of the short space of time between the two transactions.
interest has been recognised in view of the short space of time between the two transactions.
interest has been recognised in view of the short space of time between the two transactions.
interest has been recognised in view of the short space of time between the two transactions.
The non-controlling interest in Lift B.V. was valued as the percentage of shares not owned by the
The non-controlling interest in Lift B.V. was valued as the percentage of shares not owned by the
The non-controlling interest in Lift B.V. was valued as the percentage of shares not owned by the
The non-controlling interest in Lift B.V. was valued as the percentage of shares not owned by the
Group on 28 June 2019 multiplied by the fair value of the net assets of Lift B.V. on this date, including
Group on 28 June 2019 multiplied by the fair value of the net assets of Lift B.V. on this date, including
Group on 28 June 2019 multiplied by the fair value of the net assets of Lift B.V. on this date, including
Group on 28 June 2019 multiplied by the fair value of the net assets of Lift B.V. on this date, including
intangibles arising on acquisition. The fair values were determined using the income approach to value
intangibles arising on acquisition. The fair values were determined using the income approach to value
intangibles arising on acquisition. The fair values were determined using the income approach to value
intangibles arising on acquisition. The fair values were determined using the income approach to value
of the technology of the company, and the cost approach to value the workforce and all remaining
of the technology of the company, and the cost approach to value the workforce and all remaining
of the technology of the company, and the cost approach to value the workforce and all remaining
of the technology of the company, and the cost approach to value the workforce and all remaining
assets and liabilities of Lift B.V. at acquisition.
assets and liabilities of Lift B.V. at acquisition.
assets and liabilities of Lift B.V. at acquisition.
assets and liabilities of Lift B.V. at acquisition.
The Group has identified intangible assets on the purchase of Sapienza Holdings BV relating to
The Group has identified intangible assets on the purchase of Sapienza Holdings BV relating to
The Group has identified intangible assets on the purchase of Sapienza Holdings BV relating to
The Group has identified intangible assets on the purchase of Sapienza Holdings BV relating to
customer relationships of £5,727,000, internally developed software of £1,127,000, the brand of
customer relationships of £5,727,000, internally developed software of £1,127,000, the brand of
customer relationships of £5,727,000, internally developed software of £1,127,000, the brand of
customer relationships of £5,727,000, internally developed software of £1,127,000, the brand of
£520,000 and order backlog of £953,000.
£520,000 and order backlog of £953,000.
£520,000 and order backlog of £953,000.
£520,000 and order backlog of £953,000.
109
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109
Notes to the financial statements (continued)
31. Business combinations (continued)
Goodwill of £2,696,000 is primarily applicable to the assembled workforce acquired as part of the
transaction to purchase Sapienza Holdings BV. Acquisition costs of £799,000 arose as a result of the
transaction and these were settled in cash from the Group’s existing resources. These have been
recognised as part of administrative expenses in the Consolidated Statement of Comprehensive
Income.
Had the acquisition of Sapienza Holdings BV been effective from 1 January 2019, the consolidated
revenue of the Group for the year would have been approximately £63,000,000 and the operating loss
for the year would have been approximately £1,846,000. The directors consider these values to
represent an approximate measure of performance of the combined Group on an annualised basis
and to provide a reference point for future periods. Since acquisition Sapienza Holdings BV, including
Lift B.V. reports revenue of circa £9,900,000 and operating profit of circa £317,000.
The Group has identified intangible assets on the purchase of Lift B.V. relating to internally developed
software £283,000. Goodwill of £1,176,000 is primarily applicable to the future enhancements made
to the core technology acquired to support future revenue growth, and the highly skilled assembled
workforce.
32. Controlling parties
In the opinion of the directors, there is no single controlling party.
33. Subsequent events
On 3 March 2020, the Group entered into a new £7.0 million revolving loan facility (the "Facility
Agreement") with HSBC UK Bank plc. This facility has a term of three years and carries an option to
increase the headroom to £12.0 million subject to certain conditions. Under the terms of the Facility
Agreement, the Group will pay interest at a rate of between 1.75% and 2.25% over LIBOR on the
amount drawn down, depending on the Group's total leveraged position. As of 20 May 2020 the facility
had been fully drawn to insulate the business against any potential covid-19 impacts. However it must
be noted that the Group’s current cash flow forecast indicates that none of these funds will be required
to support the Group’s ongoing operational activities.
The Financial and Operational Review includes a review of going concern, as well as separate
consideration of the impact of Brexit and the Coronavirus, which has not identified any material impact
on the values of any of the Group’s assets or liabilities.
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Company information
Company Information
Company Number
3152034
Directors
P Cartmell - Chief Executive Officer
A McCree - Non-executive Chairman
D Stroud – Chief Financial Officer
P Holland – Non-executive Director
J Warner-Allen – Non-executive Director
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
RSM UK Audit LLP
Portland, 25 High Street, Crawley, West Sussex, RH10 1BG
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
110
Annual Report and Accounts 2019
110
111
Annual Report and Accounts 2019
111
Notes
112
Annual Report and Accounts 2019
Apex Plaza
Forbury Road
Reading
Berks
RG1 1AX
United Kingdom
tel: +44 (0)1753 285810
email: enquiries@tpgroup.uk.com
www.tpgroup.uk.com
Registered in England & Wales No. 3152034
© Copyright TP Group 2019