TP Group plc
Annual Report and Financial
Statements 2021
Contents
A digital copy of this report can be downloaded from
www.tpgroupglobal.com/investors/results-and-presentations
Financial Statements
26
Independent Auditor’s Report
33
Consolidated Statement of
Comprehensive Income
34
Consolidated and Parent
Company Statements of
Financial Position
35
Consolidated Statement of
Changes in Equity
36
Parent Company Statement of
Changes in Equity
37
Consolidated Statement of
Cash Flows
38
Notes to the Financial
Statements
80
Company Information
Strategic Report
1
Chairman’s Statement
3
Financial and Operational
Review
8
Principal Risks and Uncertainties
10
Section 172 Statement
12
Environment, Social and
Governance
Governance
14
Board of Directors
15
Directors’ Report
17
Statement of Directors’
Responsibilities
18
Corporate Governance Report
22
Audit Committee Report
24
Remuneration Committee
Report
Chairman’s Statement
2021 was a challenging year for TP Group. The financial performance is reported in the Financial
and Operational Review section including an explanation of certain prior year adjustments. A
significant cost reduction programme was initiated in the middle of 2021, substantially reducing
head office overhead costs, resources and office facilities. This streamlining of the organisation
structure placed clearer responsibilities into the business operations. Following the investment
by Science Group plc (“Science Group”) in the second half of the year and the associated Board
changes, the Group’s strategy and operations were reviewed. As a result of the restructuring and
associated disposals, TP Group now comprises two divisions: TPG Services and TPG Maritime, both
operating primarily in the aerospace and defence markets. Segmental reporting is provided in note
4 of these financial statements.
TPG Services
TPG Services has adapted well to the increased
commercial rigour with a good management team
operating as a disciplined, process-driven organisation.
This growing, profitable business continues to
strengthen its position as “Customer Friend”, aligning
with the end user. Reinforcing the strategy as a
solution and product agnostic trusted partner, TPG
Services has recently won a three year contract in
support of the deployment of autonomous systems
across air, land and sea, a key multi-domain integration
programme. The Osprey business, acquired in 2020,
which has an excellent reputation in its markets, is now
being integrated into TPG Services enabling operating
scale benefits and marketing synergies within the
enlarged organisation.
While order intake in the first half of 2022 is slightly
behind expectations, this is expected to recover and
the Board anticipates continued progress in TPG
Services. Revenue through to the end of June 2022
is in-line with management’s expectations and the
Division continues to operate profitably with actions
to improve operating margins being successfully
implemented by the management team.
TPG Maritime
The substantial challenges within TPG Maritime,
resulting from onerous legacy contracts, became
progressively more apparent in the latter part of
2021 and early 2022. In summary, some years ago
the decision was taken to provide products and
services under fixed price contracts. However, the TPG
Maritime submarine air handling systems are complex
and almost invariably require custom development.
This fundamental change in contractual risk profile
was not adequately addressed and the organisation,
processes and resources necessary to operate such a
high risk model were not implemented or have proven
to be ineffective.
The financial consequences of the failure to address
this change in risk profile is now being realised and
substantial provisions have had to be taken. Not
only has TPG Maritime reported an operating loss for
2021 and recorded a prior year adjustment, but the
impact on operating margins will continue for several
years into the future until these onerous contracts
have been completed or renegotiated. The major
inhibitor to the recovery of TPG Maritime relates to a
UK contract which accounted for the majority of the
forecast contract cost increases and onerous contract
provisions set out in the Financial and Operational
Review section. Some of these contracts contain
unlimited parent company guarantees.
Renegotiating these legacy contracts, which are
invariably with far larger counter-parties, has become
the Board’s priority and a corporate imperative.
Strategic Report
1
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Chairman’s Statement
CONTINUED
A new management team has been installed to effect
the necessary changes, including a general manager
seconded from Science Group and the recruitment
of a finance manager, supported by a strengthened
operational management team.
In this challenging situation, with resources across the
organisation focused on the priority to review existing
programmes and renegotiate onerous contracts, TPG
Maritime has had a slower start to 2022. Order intake,
revenue and profit metrics are all below management’s
expectations for the year-to-date and these issues
will continue to impact the financial performance of
the business. Nevertheless, despite the near-term
challenges TPG Maritime remains a leading provider of
critical systems to its core market and has considerable
potential opportunity in the longer term.
Corporate
The TPG Group strategy to focus on its UK-based
Defence and Aerospace operations, was set out in
November 2021 and the Board has been executing on
that strategy. Accordingly, the non-core businesses
of Northstar and Sapienza have now been sold, net
of costs, for c.£2.5m. Furthermore, while Westek is
a modest business, and discussions with a potential
acquirer continue, it was turned around in the
second half of 2021 and has traded profitably in
the current year.
Throughout the past year, cash has been constrained
and remains a major focus. Following the disposals
of Northstar and Sapienza, c.£1.0m of the c.£2.5m
net disposal proceeds have been used to reduce the
Group’s bank facility to £6 million, which remains fully
drawn. In order to reassure the bank, suppliers and
other stakeholders, and provide resilience against
delays in customer payment receipts, a standby facility
of up to £5 million was provided by Science Group
in December 2021. A portion of the Science Group
facility was drawn in March and June 2022 but on
both occasions was subsequently not needed and was
repaid, although current cash flow forecasts indicate
that the facility may be utilised during the second half
of the year. The Group’s bank facility now expires in
September 2023, co-terminus with the Science Group
standby facility. The Board will shortly be commencing
a refinancing exercise including discussions with its
bank to extend or renew the facility. The Board are
not anticipating that the Science Group facility will be
extended beyond September 2023.
In summary, 2022 and 2023 will be a period of
transition for TP Group, particularly dependent on the
resolution of the legacy contracts in TPG Maritime.
In view of the scheduled expiry of the debt facilities
and the factors set out elsewhere in this report, the
Board will need to consider the Group’s financing
and capital structure. However, if the TPG Maritime
legacy contracts and the Group’s capital structure
are resolved, then TP Group should have a better
foundation upon which the Board can then consider
the longer term strategy.
Martyn Ratcliffe
Chairman
2
Strategic Report
Financial and Operational Review
Key Performance Indicators
2021
£’m
2020
(Restated)2
£’m
Revenue1
44.3
38.7
Gross profit %1
16%
22%
Adjusted operating profit1
(1.6)
0.9
Operating loss1
(7.5)
(3.3)
Loss from discontinued operations
(11.1)
(9.2)
Statutory loss
(19.0)
(12.8)
Cash
5.4
7.4
Bank debt
(7.0)
(7.0)
Revenue by business stream1
2021
£’m
2020
(Restated)2
£’m
TPG Maritime
18.5
18.8
TPG Services
25.8
19.9
Total revenue
44.3
38.7
Adjusted operating profit1 by business stream
2021
£’m
2020
(Restated)2
£’m
TPG Maritime
(2.5)
1.2
TPG Services
2.3
1.0
Central unallocated costs
(1.4)
(1.3)
Adjusted Group operating profit
(1.6)
0.9
1 Numbers presented, both 2021 and 2020, are from continuing operations and exclude Sapienza, Westek and Northstar which were classified as
assets held for sale at the balance sheet date
2 The 2020 numbers have been restated for the prior year adjustment – refer below ‘TPG Maritime onerous legacy contracts’ and to note 32 to
these financial statements for further detail
Revenue from continuing operations
Revenue increased to £44.3m (2020: restated
£38.7m).
TPG Maritime revenue reduced by £0.3m to £18.5m
(2020: restated £18.8m). This small reduction in
revenue was primarily due to the material increases
in the forecast cost to complete estimates for the
onerous legacy contracts partially offset by an
increase in lower margin consumable orders. Revenue
is recognised on these onerous contracts as a
percentage of costs incurred against total forecast
costs. The material increases in forecast cost to
complete estimates resulted in significantly less
revenue (£5.3m) being recognised than was forecast
(refer to the ‘TPG Maritime onerous legacy contracts’
section below for further details).
TPG Services revenue increased by £5.9m to £25.8m
(2020: £19.9m). £3.2m relates to the full year effect
of Osprey, acquired in August 2020 and the balance
of £2.7m is 14% organic growth in TPG’s existing
consulting business. This organic growth was primarily
driven by the Group’s established position on long-
term framework contracts and programmes.
Gross profit percentage from
continuing operations
Gross profit percentage reduced to 16% (2020:
restated 22%). This reflects:
•
The deterioration in the TPG Maritime business
margins in 2021 to 1% (2020: restated 22%). A
result of material increases in forecast costs to
complete estimates, late delivery charges being
accounted for and the recognition of onerous
contract provisions for legacy contracts (refer to
‘TPG Maritime legacy onerous contracts’ section
below for further details); and
•
A change in product mix, with a higher volume of
low margin consumable orders received in 2021;
and
•
TPG Services margins have increased to 26%
(2020: 22%), evidence of the strengthening
position the business has on key frameworks
and programs.
3
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Financial and Operational Review
CONTINUED
TPG Maritime onerous legacy contracts
At the year end the Board has undertaken a detailed
review of TPG Maritime’s customer contracts. As
a result of this review, and for a number of legacy
contracts, forecast cost to complete estimates have
materially increased, late delivery charges have
been accounted for and onerous contract provisions
have had to be recognised for the period ended
31 December 2021. The impact of these adjustments
has resulted in £5.3m less revenue and £4.9m less
adjusted operating profit being recognised than
was forecast.
Furthermore, the Board has also revisited the forecast
cost to complete estimates, late delivery charges and
onerous contract provisions for the period ended
31 December 2020 and, for three of these contracts,
adjustments have been made in respect of the prior
period. Management considers this to be a material
error in line with IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors (paragraphs 41-43),
and has corrected the prior period in line with the
requirements of the standard. The impact of the prior
period adjustment is to reduce revenue by £2.2m,
increase cost of sales by £0.6m and reduce adjusted
operating profit by £2.8m.
For further details of the 2020 prior period adjustment
please refer to note 32 of these financial statements.
Adjusted operating profit from
continuing operations
The directors believe that adjusted operating profit
is more reflective of the underlying performance of
the Group than equivalent GAAP measures because
it excludes non-recurring exceptional and acquisition
costs, non-cash items and is therefore a better proxy
for underlying operating cash. Adjusted operating
profit is defined as operating loss adjusted to add back
depreciation of property, plant and equipment and
right-of-use assets, amortisation of intangible assets
and impairment gains or losses on non-current assets,
changes in fair value of contingent consideration,
acquisition consideration accounted for as employment
costs owing to ongoing service conditions, any other
acquisition-related charges, share-based payment
charges and exceptional operating costs. Exceptional
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
2020. Refer below for details of the reconciliation of
adjusted operating profit to operating loss.
2021
£’m
2020
£’m
Operating loss from continuing operations
-7.5
-3.3
Depreciation, amortisation and impairment
3.1
2.3
Acquisition and disposal-related costs
0.0
1.0
Exceptional operating costs
1.9
0.3
Acquisition earn-out payments
0.8
0.5
Share-based payments
0.1
0.1
Adjusted operating (loss)/profit from continuing operations
(1.6)
0.9
The restated adjusted operating profit of £0.9m in 2020 reduced to a loss of £1.6m in 2021. As noted in the
previous section, the adjusted operating (loss)/profit has been impacted by the adjustments made in relation to
the legacy TPG Maritime contracts, both in 2021 and 2020.
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Strategic Report
Operating loss from
continuing operations
The Group’s operating loss from continuing operations
increased to £7.5m (2020: restated £3.3m). The key
movements are as follows:
•
Restated adjusted operating profit of £0.9m in 2020
reduced to a loss of £1.6m in 2021 as noted above;
•
Depreciation, amortisation and impairment charges
increased by £0.8m to £3.1m. The full year effect
of the Osprey acquisition accounted for £0.3m of
this increase, the balance a combination of impaired
development cost of £0.6m partially offset by a
reduction in the underlying depreciation in the
business;
•
Exceptional operating costs increased to £1.9m
(2020: £0.3m). The increase included CEO
departure costs of £0.7m and corporate defence
fees of £0.5m. £0.5m of the £1.9m relates to head
office restructuring costs;
•
Earn-out costs accrued in year relating to the Osprey
acquisition were £0.8m (2020: £0.5m); and
•
Acquisition costs reduced to nil from £1.0m in 2020.
Discontinued operations
At the balance sheet date, the directors have applied
the principles of IFRS 5, and concluded that Sapienza
Consulting Holdings BV & subsidiaries (“Sapienza”),
Westek Technologies Ltd (“Westek”) and the Group’s
autonomous navigation technology (“Northstar”), are
deemed to be assets held for sale and as such they
have been classified as discontinued.
Subsequent to year end:
•
The Group completed the disposal of Northstar
for cash proceeds of £0.6m on 31 March 2022 to
QinetiQ Ltd;
•
On the 12 July 2022, the Group announced the
disposal of Sapienza to Serco Holdings Ltd (a wholly
owned subsidiary of Serco Group plc) for a cash
consideration of c.€3.2m. On completion c.£1m of
the c.£2m net proceeds was used to part repay the
Group's £7m loan facility with HSBC Bank Plc; and
•
Discussions remain on-going with potential
acquirers of Westek.
The loss from discontinued operations is £11.1m
(2020: £9.2m). This includes an impairment charge
of £10.6m for the carrying value of goodwill,
intangible assets and net assets of each of the three
discontinued businesses to the actual or expected
proceeds from the sale. Refer to note 3 of these
financial statements for further detail.
Statutory loss
The statutory loss in the period was £19.0m (2020:
restated £12.8m), including the operating losses
from continuing operations of £7.5m (2020: restated
£3.3m), as noted above, and a loss from discontinued
operations of £11.1m (2020: £9.2m).
Net debt
Year-end Group cash of £5.4m (2020: £7.4m), was lower
than the prior year. The key movements included:
•
Unwinding of the £0.5m deferred 2020 VAT
payment in line with the Government Covid-19
extension;
•
Osprey earn-out payments of £0.9m;
•
£0.3m invested in business systems, infrastructure
and equipment;
•
Paydown of lease liabilities £0.6m; and
•
Loan arrangement fees, interest payments on bank
borrowings and lease liabilities of £0.5m.
The £7m 3-year term loan facility with HSBC Bank,
secured in March 2020, was fully drawn at the balance
sheet date and so the net debt position, excluding
the impact of IFRS 16, of the Group was £1.6m (2020:
net cash position of £0.4m). This facility has been
subsequently reduced to £6.0m following the disposal
of Sapienza on 12 July 2022, with c.£1.0m of the
c.£2.0m net disposal proceeds being used to part repay
the loan. The loan remained fully drawn at the time of
signing the accounts.
In conjunction with Science Group providing a £5m
loan facility in December 2021 (refer below for further
details), the HSBC Bank loan term was extended to
September 2023 and the leverage covenant increased
to 3.75 times adjusted operating profit from 2.0 times
for the 12-month period through to December 2022.
As a consequence, a cash flow covenant for the same
period was introduced, which requires the Company
to have at least £3m of cash headroom at each month
end including any undrawn HSBC Bank or Science Group
Plc loan facility. In addition, the loan interest margin
was increased to 3%, up from a variable loan interest
margin of between 2.25% and 2.75% dependent on the
amount of leverage.
5
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Financial and Operational Review
CONTINUED
With LIBOR ceasing to be used as an interest rate
benchmark at the end of 2021, the Group transitioned
the HSBC Bank loan to use the Sterling Overnight Index
Average (“SONIA”) as an appropriate alternative. The
transition was agreed during the year and was effective
from December 2021.
In December 2021, the Group secured a £5m unsecured
revolving credit facility with Science Group plc that
expires on 30 September 2023. The covenants match
those of the HSBC Bank facility with 10% more
headroom. Interest is chargeable on any drawn amounts
at 12% per annum and any undrawn amounts at 4.8%
per annum, subject to SONIA remaining below 1%. A
3% arrangement fee was charged on the facility which
can be cancelled at any time with no cancellation fees.
The Science Group loan was undrawn at the balance
sheet date and, although drawdowns occurred in March
2022 and June 2022, the balance was nil at the time of
signing the accounts.
Exceptional operating, earn-out and
disposal costs
During the year, the Group incurred one-off
exceptional operating, earn-out and disposal costs of
£2.7m (2020: £1.8m). These relate to:
•
Exceptional operating costs of £1.9m (2020:
£0.3m). This includes £0.7m CEO departure costs;
£0.5m for corporate defence fees and £0.5m of
head office restructuring costs.
•
Earn-out costs of £0.8m (2020: £0.5m) relating
to the acquisition of Osprey in August 2020. The
final earnout payment of £0.2m was made in
February 2022.
Finance costs
Finance costs of £0.5m (2020: £0.3m) were incurred in
the year, predominantly relating to:
•
Interest charges of £0.1m (2020: £0.2m)
associated with the capitalisation of leased assets
under IFRS 16.
•
Finance facility interest charges of £0.2m (2020:
£0.1m), most of which related to the HSBC Bank
£7m loan.
•
Loan arrangement fees of £0.2m (2020: nil), the
majority of which was associated with the Science
Group plc loan agreed in December 2021.
Taxation
There is a tax credit for the financial year to
31 December 2021 of £0.1m (2020 tax charge of nil).
Refer to note 10 of these financial statements for
further details.
The Group expects, in total, to receive a small tax
refund of c. £0.2m for the financial year 2021, being
the R&D tax credits for this period (2020: £0.2m).
Results and dividends
The directors continually evaluate Group performance,
and do not currently recommend the payment of a
dividend (2020: £nil).
Going concern
As part of the going concern assessment, the directors
have considered:
•
Various scenarios for the business for the period
through to 31 December 2023, including delivery
of its base case budget through 2022 and 2023,
and downside sensitivities to this budget, as noted
below.
•
The Group’s sources of committed external
financing and related covenants.
As noted in the Net Debt note above, the Group’s debt
facilities at the time of signing these accounts are:
•
A £6m HSBC Bank loan facility which was fully
drawn at the time of signing these accounts.
•
A £5m loan facility secured from Science Group plc
in December 2021. The loan was undrawn at the
balance sheet date and the balance was nil at the
time of signing the accounts.
Both facilities terminate in September 2023. The Board
will commence a process in the second half of 2022 to
refinance the Group and will consider both debt and
equity options.
In addition to its debt facilities, the Company could
raise additional equity capital through its listing on
the AIM, although is mindful that the ongoing market
environment could impact any fundraising potential.
The Company is currently able to raise up to 10% of its
market capitalisation through an equity placing on a
non pre-emptive basis without the need for shareholder
approval. Accordingly, the directors believe that the
Company would be able to react with reasonable speed
in the event it was required to pursue this course of
action, subject to market conditions.
The directors regularly review operating performance
and cash generation projections for the Group which
are based on delivery of the Group’s order book, a
reasonable expectation of success in ongoing and
future bids for further contracts and an expectation
of additional work from current and new customers. A
base cash budget and cash flow projection has been
prepared for 2022 and 2023, covering at least the
12-month period following the signing of the Group
accounts. The base case budget provides sufficient
liquidity and bank covenant compliance throughout
the period. Performance in Q1 of 2022 is in line
with the base case budget and provides comfort in
the Group’s ability to execute on its projections for
the year.
6
Strategic Report
The business however continues to navigate through
the consequential effects of COVID-19, most notably
the challenges in supply chains and logistics, and the
onerous legacy TPG Maritime contracts. Furthermore,
whilst the Group has no trade or activity in Ukraine or
Russia, it is mindful of the impact that the conflict may
have on global supply chains and the timing of new
business opportunities.
As such, the consequences of the above may further
delay the timely execution of both the Group’s order
book and new order wins which could result in revenue,
margins and resulting cash inflows, that are less and/
or later than modelled, putting pressure on the Group’s
cash and covenant position at times. The directors
have therefore flexed and stress tested the base case
budget to account for various operating scenarios, the
outcomes of which include:
•
A 20% reduction in revenue;
•
A reduction of 6% in the Group’s gross margin
percentage;
•
A deterioration in working capital cash conversion
of £2.3m in 2022 and £7.9m in 2023; and
•
A blend of the above.
These scenarios assume similar and/or greater
levels of disruption to the Group’s business to those
experienced to date since the onset of the COVID-19
pandemic, despite conditions improving and as a result
of the onerous legacy TPG Maritime contracts. All the
scenarios take into account the cash and debt facilities
currently available to the Company.
The directors have reviewed the Group's overall
position and outlook in respect of the matters
identified, including the scenarios noted above, and are
of the opinion that there are reasonable grounds to
believe that the operational and financial projections
are achievable, and that the base case budget provides
insulation to a plausible downside scenario.
Accordingly, the directors have a reasonable
expectation that the Group will have adequate
resources to meet its obligations as and when they
fall due for the foreseeable future and are satisfied
that it is appropriate to prepare the financial
statements for the Group on a going concern basis.
However, considering all of the above factors, the
directors have concluded that if a more extreme but
plausible down-side scenario arises, the Group could
breach one or more of its covenants in the 12 month
period following approval of the financial statements.
In this scenario, the business would be reliant on
either securing a waiver from both HSBC Bank and
Science Group or securing additional funding/debt
headroom. Both HSBC Bank and Science Group have
been supportive of the business through to this point
and, whilst the Board cannot guarantee a waiver will be
forthcoming, would consider it reasonable to conclude
that agreement could be reached with the parties. For
the avoidance of doubt, Martyn Ratcliffe and Peter
Bertram would recuse themselves from discussions
with Science Group in relation to their loan facility.
Furthermore, the Company could also look to raise
additional capital through either or both, a 10% direct
equity placing, as noted above or a wider equity
placing that would require shareholder approval. The
latter option would take more time but enable the
Group to secure more funding than through a 10%
direct equity placing. These events and conditions
therefore indicate that a material uncertainty exists
which may cast significant doubt on the Group’s
and Parent Company’s ability to continue as a going
concern and therefore their ability to realise their
assets and discharge their liabilities in the ordinary
course of business. These financial statements do
not include the adjustments that would be necessary
should the Going Concern basis of preparation no
longer be appropriate.
7
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
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 risk or uncertainty cannot be eliminated, certain risk is mitigated, and the business seeks to ensure that it is
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. Risk is managed
through three phases in a structured and controlled framework as follows:
Identify and evaluate
•
A formal process is in place to identify and manage risks on a continuous basis.
•
This is reported to the Board and supported by Group Finance through regular
risk reviews.
•
Risks are assessed and prioritised by severity, using a centrally maintained
risk register
Action plan in place
•
Risk responses and strategies are prepared and managed by the relevant
business owners.
•
The Board reviews, agrees and monitors the risk response plans.
•
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.
•
The continuous review identifies key issues for reporting to the Board.
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 2021.
Group Risk Register
Risk
Impact
Mitigation/risk hedging
Change since
last reported
The Group is adversely
affected by the
commercial conditions in
its markets.
Delay or loss of customer
contracts, risk to
expansion of business.
The Group is diversifying through organic
growth and partnering into adjacent markets
to reduce our exposure to a single market
event.
No change
Revenue generated
from defence and space
industry contracts are
impacted by changes in
government policies and
legislation.
Possible delay or loss in
customer contracts.
Defence and space 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 and space
policy, in the UK and Europe, has protected the
key programmes on which we are active.
No change
Health safety,
environmental, privacy
and social regulations
place greater burden on
the business.
Additional cost and
oversight added to
business processes,
along with potential
business interruption in
extreme circumstances.
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.
No change
Competitor capabilities
may change, or
disruptive technologies
emerge leading to
loss of advantage or
market position.
Loss of future customer
orders, market share and
capability erosion.
The Group’s approach is to manage business
development primarily through business
sector teams that 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.
No change
Principal Risks and Uncertainties
8
Strategic Report
Risk
Impact
Mitigation/risk hedging
Change since
last reported
Key employee knowledge
and skill, upon which key
functions or initiatives
depend, may be lost.
Ability to deliver growth
strategy.
The Group seeks to attract and retain 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 TPG
an attractive place to work. The tightening
of the labour market has been mitigated
through updated remuneration packages
and conditions, coupled with an improved
recruitment strategy.
No change
Loss of performance,
reliability and availability
of certain key assets and
information technology
systems impacts delivery
execution.
Unable to deliver
customer contracts -
impacts revenue/profit
and cash, however, major
impact is loss of future
orders and reputation.
The Group has taken steps to avoid single
points of failure or capacity constraints. The
business has also taken out insurance to
mitigate best possible the risk.
No change
Loss of a major
customer.
Reduced revenue, profit,
cash and reputation.
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.
Increasing
likelihood of
severity of
impact
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.
Loss or data, damage
to reputation, possible
breach of customer
contracts.
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.
No change
Covid-19.
Staff outages/customer
driven delays/supplier
chain issues results
in delays in customer
projects, impact to
revenues, profits and
cash flow. Ultimately risk
to factory operations
(site closedown) and
service deliveries.
Covid-19 policies and procedures are well-
established across the business including
factory sites operations with minimal
staff, split shifts if required, working from
home, remote customer engagement, etc.
Supply chain challenges mitigated through
diversification in supply chain.
Decreasing
likelihood of
severity of
impact
Poor execution of
material long-term fixed
price contracts.
Reduced revenue,
profit and cash.
Loss of customer.
Subsequent to the change of Board in October
2021, measures taken to ensure new contracts
agreed on commercial terms favourable to the
business and focus on operational excellence
when delivering the contract.
Decreasing
likelihood
of severity
of impact
9
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Background
TP Group has put in place appropriate measures to enable the Board to understand and comply with their collective
and individual responsibilities under Section 172 of the Companies Act 2006.
Each director understands their obligation to act in the way they consider, in good faith, would be most likely to
promote the success of the Company for the benefit of its members as a whole.
We ensure that the needs of shareholders are balanced with those of our customers and suppliers, and those of our
employees, by carefully considering the impact (positive and negative) that such decisions may have.
S172 matters
How the Board responds to the matters
Page reference
Likely consequences of any
decision in the long term
•
Board strategy discussions and oversight
•
Effective risk management
•
Our business model and strategic plan
•
Key decisions made in period
Chairman’s Statement
(Page 1), Principal
Risks & Uncertainties
(Page 8), ESG (Page
12) and Key Decisions
Made in Period (Page
11)
The interests of the
Company’s employees
•
COVID-19 support measures
•
Regular health and safety briefings to the Board
•
Investment in our employees through training and
other initiatives
•
Performance management system
ESG (Page 12)
The need to foster the
Company’s relationships
with customers, suppliers
and others
•
Long and well-established relationships with key
customers leading to repeat business in all sectors of
operation
•
Company engagement policy and business ethics
training
•
Prompt payment of suppliers
•
Updating stakeholders on strategic decisions
through RNS announcements and other Company
communication platforms
ESG (Page 12)
and Corporate
Governance (Page
18)
The impact of the
Company’s operations on
the community and the
environment
•
Development of carbon plans for the business
•
Review and reduction of office requirements
•
ISO14001 accreditation
•
Development of the Group’s consultancy capabilities in
the renewables sector
ESG (Page 12)
The desirability of the
Company maintaining
a reputation for high
standards of business
conduct
•
Code of Conduct
•
Business ethics training
•
Modern Slavery Statement
•
Management of cyber security risks
ESG (Page 12)
The need to act fairly
between members of
the Company
•
Shareholder engagement practices
Corporate Governance
(Page 18), specifically
Principle 5 (Page 19)
Section 172 Statement
10
Strategic Report
Key decisions made in the period
During FY2021, TP Group made several decisions about the strategy, structure and future of the business. Among
these decisions were four key examples relating to:
•
Retention of TPG Maritime
•
New Strategy
•
Disposal of non-core assets
Retention of TPG Maritime
Whilst TP Group received a number of expressions of interest in 2021 to acquire its Maritime business including non-
binding, indicative offers, the Board ultimately decided to withdraw the Maritime business from sale.
New strategy
The Board set its revised strategy on 1st November 2021 to focus on its UK-based Defence and Aerospace
operations, through its two divisions TPG Maritime and TPG Services (including Osprey). These businesses
historically constituted the majority of the Group’s revenue and a greater proportion of the profit contribution.
The Board decided that the focus of the Company’s limited resource and time should be directed at these two
operating units.
Disposal of non-core assets
The Board reviewed the operations of Sapienza, Westek and the Northstar autonomous navigation software,
and concluded that they were non-core. Following this review, it was agreed to pursue a disposal strategy for
these operations.
Board changes
There were a number of Board changes during 2021. Phil Cartmell resigned as CEO on 30 June 2021 and David
Lindsay was appointed as CEO, initially on an interim basis before formally joining the Board on 6 August 2021.
David subsequently resigned as CEO on 31 March 2022 and took up a position as Non-executive Director with
effect from 1 April 2022. Following the investment by Science Group in August 2021, the Board was restructured
in October 2021 with the resignations of Andrew McCree and Jeremy Warner-Allen on 30 September 2021 and
the appointments of Peter Bertram and Martyn Ratcliffe to the Board on 14 October 2021. Phil Holland became
Non-executive Chairman at this time. Phil Holland stepped down from the Board on 29 October 2021 with Martyn
Ratcliffe appointed Chairman on 1 November 2021 following the departure of Phil Holland. Following these changes,
the new Board undertook reviews of the business operations and the Group strategy.
11
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Environment, Social and Governance
Environment
TP Group is committed to understanding and reducing
its impact on the environment while future-proofing
the business. The Group is at an early stage in this
process and other priorities have taken precedence
during the year. Even so, carbon reduction plans
are in place for TPG Services and work is underway
to identify and understand emissions across the
rest of the Group, and to put steps in place to
help mitigate these including new policies around
waste management.
Greener offices
In 2021, the Company reviewed its office requirements
and reduced its office space through the closure of
the Reading office and one of the Farnborough offices.
Sustainability and accessibility were contributing
factors to relocate the Bristol office to the Bristol and
Bath Science Park where the building, and its site, are
environmentally accredited.
The Group has limited scope for renewable energy
generation as premises are leased. In Q2 2022, it is
anticipated to increase the use of UK generated power
from certified renewable sources.
Eliminating carbon from transport
The Company invested in technology, improving online
working and meetings, and training for managers.
TP Group also offer a Cycle to Work Scheme to
encourage employees to use a more sustainable form
of commuting.
ISO 14001
A number of the Company’s businesses are accredited
to ISO 14001, which is the environmental management
system (“EMS”). The measures in place for the EMS
system and associated external audits ensure that
these businesses do not damage the environment.
Social
TP Group’s core values support an environment that is
inclusive and supportive whilst encouraging openness,
trust, inclusivity and innovation.
TP Group’s people offer skills and experience that are
critical to its long-term business success. The Company
is committed to the upskilling and development of
its staff covering personal development, graduate
development programmes, access to apprenticeships
and training (SAFe Training). The Company is a member
of the 5% Club, which is a dynamic movement of
employers committed to learning as part of building
and developing the workforce they need.
Key activities in 2021 included:
•
Development and roll out of the Consultant Toolkit
to support first-time consultants and the required
transition of skills;
•
Workshops to support managers overseeing
remote workers and teams; and
•
Framework development for an early careers
programme to help build well-rounded leaders of
the future.
In 2022, the Company will be progressing a
Performance Management System to enable a more
structured system for quarterly employee reviews and
their ongoing development.
Disability Confident Employer
TP Group is a member of the Government’s Disability
Confident Scheme which encourages employers to
think differently about disabilities and to improve
how they recruit, retain and develop disabled people.
Annually the Company celebrates #PurpleLightUp Day
which highlights the importance of the 386 million
disabled employees around the world.
Equal opportunity
TP Group is proud to provide an inclusive working
environment, supporting employee retention and
progression. The Company conducts regular pay reviews
and audits and has positive action schemes in place to
address under-representation in certain pay grades.
The Company is fully committed to the elimination
of unlawful and unfair discrimination, and will not
discriminate because of disability, gender, sexual
orientation, marriage and civil partnership, pregnancy
and maternity, race (which includes colour, nationality
and ethnic or national origins), religion or belief.
A Gender Survey was sent out in Autumn 2021 across
TPG Services and working groups have been set up
to support equality, diversity and inclusion within
the business.
Health and wellbeing
TP Group is committed to supporting the health and
welfare of all employees in the workplace, including
those with mental health problems.
Over the last two years, COVID-19 has brought new
challenges for people and their families. The Company
provided support to employees over this period and
developed tools on Horizon, the HR portal, as well as
delivering well-received webinars.
Safety at work
The work environment is constantly changing so the
Company regularly reviews how it operates to ensure
it is the safest it can be. At all levels, the Company
manages the risk to help prevent injury and cases
of work-related illnesses. As part of this, a complete
review of safety practices has been undertaken across
the engineering business during Q4 2021/Q1 2022
and, where any potential issues were identified, a plan
to improve/eliminate these is being implemented by
local management.
12
Strategic Report
Building relationships
TP Group builds and develops relationships between
the business, its people and the local communities
in which it operates, focused on partnering with
those organisations or initiatives that have impact
and meaning to the business and its employees.
This includes:
•
The armed forces – supporting active service
personnel, veterans and their families. The
Company is a member of the Armed Forces
Covenant and pledges to be an armed forces
friendly employer;
•
Education and skills – inspiring young people
to consider science, technology, engineering
and mathematics (STEM) subjects and careers
through a UK STEM Programme set up in 2021;
the Company’s apprenticeship scheme; and as a
member of the industry-led 5% Club; and
•
Supporting the local communities - supporting
various initiatives within the areas that the
Company operates including sponsoring youth
activities and community projects.
Governance
TP Group’s success depends on it being trusted by
all its stakeholders. The Company seeks to drive the
right behaviours by forging a culture based on respect
and responsible business practices – a culture that
supports its people in making ethical decisions.
The Company has clear policies and principles that
are embedded in the business through its key
business functions including health and safety,
people management, environment and supply
chain management.
Empowering the right ethical decisions
In order to protect the Company and reduce risks, it
has set out the TP Group Code of Conduct on how it
should conduct business. Compliance with this policy
is compulsory for its employees and supply chain (or
they must have equivalent standards and procedures
in their own businesses). The Company has policies
and training around anti-bribery, and anti-harassment
and bullying. The Company’s training actively
encourages employees to speak out if they need
guidance. It has a whistleblowing policy which means
employees can raise issues or seek guidance in person
and in confidence.
Supply chain due diligence
TP Group expects high standards of commercial
confidentiality from its suppliers, as the protection
of highly sensitive information is important to
the Group and its customers. Before suppliers are
selected, checks are undertaken to make sure they
are appropriate and able to meet the Group’s high
standards for the framework/tasking.
Prompt payment
The Company understands the importance of timely
payments when operating a business and encourage
good practice across the Group. The Group’s standard
payment terms are 30 days.
COVID-19 supply risk
During the COVID-19 pandemic the Company has
worked closely with its supply chain to determine and
help mitigate the impact of COVID-19 on its business.
It maintains an open channel of communication with
its suppliers to make sure that any impacts can be
identified and steps put in place to manage these.
Management of cybersecurity risks
TP Group is committed to improve its infrastructure
security as a continuous programme. The Company
has adopted and achieved the required technical
standards and best practice for appropriate
cybersecurity controls and holds the UK Government
Cyber Essentials and Cyber Essentials Plus
accreditations. The Company complies with the
Ministry of Defence (“MOD”) ‘CyberSecurity Model’
(Moderate level), and all TP Group’s IT Networks are
registered on the UK MOD Defence Accreditation
Registration Tool (DART).
The Company has put measures in place to mitigate
and manage cybersecurity risks within its supply chain
– actively engaging to identify and build resilience
against cybersecurity risks.
In late 2021, TP Group commenced a programme
to create a more secure and compliant electronic
environment, moving from Microsoft E1 to E5 licensing.
This investment reflects the level of classified work it
carries out for the MOD and other major customers,
and the need to apply accurate levels of protection to
safeguard the sensitive data which it handles.
Modern slavery and human rights
TP Group recognises its responsibility for protecting
the human rights of its employees and those they
work with across the world. As part of its commitment
to the highest ethical practice, the Company continues
to review and strengthen its approach to human rights
issues, including modern slavery, across its operations
and supply chain.
The Company statements can be viewed at
www.tpgroupglobal.com/modern-slavery-act.
Approved for and on behalf of the Board.
Derren Stroud
Director
24 August 2022
13
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Peter Bertram was appointed Non-executive
Director of TP Group on 14th October 2021
and has chaired the Audit Committee and the
Remuneration Committee since appointment.
He has been a Non-executive Director of
Science Group plc since 17th June 2020. He was
Chairman of Manolete Partners plc from 2018
until 2021 and has previously held a variety of
other non-executive Board positions including
Low & Bonar plc, Alphameric plc, Anite plc,
Microgen plc, Phoenix IT Group plc and Psion plc.
He was previously CEO of Azlan Group plc. Mr
Bertram is a Chartered Accountant.
Derren Stroud was appointed to the Board in
March 2016. He is a member of the Chartered
Institute of Management Accountants, and 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.
Mr Stroud was additionally appointed to the
role of Company Secretary on 1 May 2022.
David Lindsay was appointed to the Board
on 6 August 2021 as TP Group’s Chief
Executive. He became a Non-executive
Director on 1 April 2022. He has over 35
years’ industry experience gained in senior
UK and international roles including the EDM
Group Ltd, Initial Plc, Collins Stewart Plc,
Bezier Plc and AEA Technology Plc. Mr Lindsay
is a Chartered Accountant and a Qualified
Corporate Treasurer.
Martyn Ratcliffe was appointed to the Board
on 14 October 2021 and became Chairman of
TP Group on 1 November 2021. He has been
the Chairman of Science Group plc, which is
TP Group’s largest shareholder, since 15 April
2010. He was Chairman of Microgen plc from
1998 to 2016 and Chairman of RM plc from
2011 to 2013. He was previously Senior
Vice President of Dell Computer Corporation,
responsible for EMEA.
Peter Bertram
Non-executive Director
Derren Stroud
Chief Financial Officer and
Company Secretary
David Lindsay
Non-executive Director
Martyn Ratcliffe
Chairman
Key
Chair of Audit
Committee
A
Chair of Remuneration
Committee
R
Board of Directors
Governance
A
R
The Board consists of the following directors:
14
Governance
The directors present their Annual Report together with consolidated financial statements and an
Independent Auditors Report for the year ended 31 December 2021.
Principal activities
TP Group is a consulting and engineering business,
working to deliver mission, business and safety critical
services and solutions across high growth sectors
including Defence and Aerospace. As at 31 December
2020, the Group consisted of three business segments
operating across the aerospace, defence and energy
sectors. Following the investment by Science Group in
2021, the strategy was revised resulting in the Group
focusing its activities across two business segments,
TPG Services and TPG Maritime.
Review of the business and
future development
The Chairman’s Statement and Financial and
Operational Review provide a review of the Group’s
business performance during the year, its strategy and
likely future developments.
Events since the reporting date
Events since the reporting date are disclosed in note
33 to the financial statements.
Dividends
The directors do not recommend the payment of a
dividend (2020: £nil).
Research and development
The Group incurs expenditure on research and
development both on behalf of customers and its own
ventures. Research and development expenditure in
the year is noted on page 57.
Going concern
The Group’s financial statements have been prepared
on the going concern basis. Refer to the Going Concern
statement in the Financial and Operational Review and
note 2 to the Financial Statements for further details.
Business relationships
Information on the fostering of business relationships
with suppliers, customers and other stakeholders is
included in the Section 172 statement on page 10.
Capital structure
Details of the issued share capital, together with
details of the movements therein are set out in note
25 to the financial statements. The Company has one
class of ordinary shares, each of which carries no right
to fixed income. Each share carries the right to one
vote at general meetings of the Company.
Environment
The Company is required to disclose its UK energy use
and associated greenhouse gas emissions under the
Streamlined Energy and Carbon Reporting (“SECR”)
Regulations, which came into force on 1 April 2019.
TP Group plc has taken advantage of the exemption
available not to provide the SECR disclosures for its
subsidiary companies, all of which would be exempt
from the requirement to do so in their own right due to
their size.
Financial instruments and
risk management
Disclosures regarding financial instruments are
provided in note 23 to the financial statements.
Directors’ Report
15
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Substantial shareholdings
As at 28 July 2022, the Group had been notified of the
following interests of shareholders in excess of 3%:
Shareholder
No. of shares
%
Science Group plc
217,923,105
27.97%
M&G Investment
Management Limited
146,309,150
18.78%
Canaccord Genuity
Wealth Management
91,180,000
11.70%
Interactive Investor (EO)
52,990,448
6.80%
Hargreaves Lansdown
Asset Management Ltd
49,934,276
6.41%
Killik Asset Management
44,865,910
5.76%
Related party transactions
These have been disclosed within note 29 to the
financial statements.
Directors
Biographies of current directors are set on page 14.
The directors during the year and
up to the date of this report were
as follows:
Executive
D Lindsay (appointed 6 August 2021, resigned
31 March 2022)
D Stroud
P Cartmell (resigned 30 June 2021)
M Ratcliffe (appointed as Non-executive Director on
14 October 2021 and Chairman on 1 November 2021)
Non-executive
P Bertram (appointed 14 October 2021)
D Lindsay (appointed 1 April 2022)
P Holland (resigned 30 October 2021)
A McCree (resigned 1 October 2021)
J Warner-Allen (resigned 1 October 2021)
Directors’ interests in the shares are shown in the
Remuneration Report on page 25.
Directors' insurance
The Group has purchased liability insurance covering
the directors and officers of the Parent Company and
its subsidiaries. This remains in place at the date of this
report.
Directors’ indemnities
The Company entered into a Deed of Indemnity with
each of the directors which indemnifies the director
against all liabilities which the director may suffer
or incur arising out of or in connection his role. Each
director indemnity is capped at two million and fifty
thousand pounds sterling (£2,050,000) and excludes
any liabilities associated with criminal or fraudulent acts.
Auditor
The directors who were in office on the date of
approval of these financial statements have confirmed,
as far as they are aware, that there is no relevant audit
information of which the auditor is unaware. Each of
the directors has confirmed that they have taken steps
they ought to have taken as directors in order to make
themselves aware of any relevant audit information
and to establish that it has been communicated to
the auditor.
The confirmation is given and should be interpreted
in accordance with the provisions of s418 of the
Companies Act 2006.
Approved for and on behalf of the Board.
Derren Stroud
Company Secretary
Cale House
Station Road
Wincanton
BA9 9FE
24 August 2022
Directors’ Report
CONTINUED
16
Governance
The directors are responsible for preparing the Annual Report including 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
UK adopted International Accounting Standards in
Conformity with the requirements of the Companies
Act 2006 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
UK adopted International Accounting Standards in
Conformity with the requirements of the Companies
Act 2006 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 of the Group for that period. In preparing
these financial statements, International Accounting
Standard 1 requires that directors:
•
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 UK adopted International
Accounting Standards in Conformity with the
requirements of the Companies Act 2006; and
•
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 ensuring the
Annual Report and the financial statements are
made available on a website. Financial statements
are published on the Parent Company's website in
accordance with legislation in the United Kingdom
governing the preparation and dissemination of
financial statements, which may vary from legislation
in other jurisdictions. The maintenance and integrity of
the Parent Company's website is the responsibility of
the directors. The directors' responsibility also extends
to the ongoing integrity of the financial statements
contained therein.
Statement of Directors’ Responsibilities
IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS
17
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Principles of good corporate governance
The London Stock Exchange requires all AIM quoted companies to adopt a recognised corporate governance code.
Following the decision by the Group to adopt the
Quoted Companies Alliance Corporate Governance
Code (the “QCA Code”), the Group has continued to
review its governance procedures to ensure that it
is able to institute good governance insofar as it is
practical and appropriate for an organisation of its
size and nature.
The QCA Code sets out 10 key principles that companies
should adhere to or have a plan in place to achieve.
The 10 key principles are summarised below, and
further details can be found at www.tpgroupglobal.com/
wp-content/uploads/2022/07/QCA-Statements-for-
website-2022-.pdf
Principle 1:
Establish a strategy and business model which
promote long-term value for shareholders
The Group strategy and operations were reviewed
following the Board changes in October 2021. The
revised business strategy was communicated to the
market 1 November 2021 and clearly defined that
the business was to focus on its UK based Defence
and Aerospace operations, with non-core assets to
be disposed of. Furthermore, the Group had already
commenced prior to this, a significant cost reduction
programme to substantially reduce head office
overhead costs and office facilities. This streamlining
of the organisation structure placed clearer
responsibilities into the Company operations.
As a result of the restructuring, TP Group comprises
two divisions: TPG Services and TPG Maritime. These
two divisions historically constituted approximately
70% of the Group’s revenue, with the balance coming
from the non-core assets comprising Sapienza,
Northstar, and Westek.
Subsequent to the 1 November 2021, the Board’s
priority has been to resolve the onerous TPG Maritime
contracts and address the short-term cash flow
pressures, so as to establish a solid foundation from
which to grow the business. As noted in the Chairman’s
statement this will take some time to resolve and
only at that point can the Board start to implement a
medium to longer term strategy. Two of the non-core
assets, Sapienza and Northstar, have been disposed of.
Principle 2:
Seek to understand and meet shareholder needs
and expectations
The Board receives updates on the views of
shareholders through briefings and reports from the
Chairman, Chief Financial Officer and the Company’s
brokers. The Company communicates with institutional
investors through briefings with management. In
addition, analysts’ notes and brokers’ briefings
are reviewed to achieve a wide understanding of
investors’ views.
Despite the COVID-19 restrictions in place during the
reporting period, we have been able to hold regular
meetings with key shareholders primarily coinciding
with half-year and end-year updates. Our 2021 AGM
was held with a restricted number of attendees, with
those not able to attend invited to ask questions
via email in line with guidance from the FCA and
our advisors. Our 2022 AGM, held on 28 June 2022,
was open to all shareholders to attend, the voting
results of which can be found on the website at: www.
tpgroupglobal.com/wp-content/uploads/2022/06/
AGM-Results-2022.pdf
Principle 3:
Take into account wider stakeholder and social
responsibilities and their implications for long-
term success
Engaging with our stakeholders strengthens our
relationships and helps us make better business
decisions to deliver on our commitments. The Board is
regularly updated on wider stakeholder engagement
feedback 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.
Please also refer to the Environment, Social and
Governance section of the report on pages 12 to
13 and the Statement of Compliance with the QCA
Corporate Governance Code on the website
(www.tpgroupglobal.com/wp-content/
uploads/2022/07/QCA-Statements-for-website-2022-.
pdf) for further details.
Corporate Governance Report
18
Governance
Principle 4:
Embed effective risk management, considering
both opportunities and threats, throughout the
organisation
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;
•
A more detailed and robust monthly review of
major contract activities following the issues
identified at the end of 2021 in regards to the TPG
Maritime contract review process;
•
Central control over key areas such as material
capital expenditure and banking facilities; 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; and
•
A clearly documented and enforced approval
process covering matters such as capital and
operational expenditure, recruitment, tendering,
commercial terms, and contract acceptance. This
process has been updated and recommunicated in
light of the TPG Maritime legacy contract issues.
The Audit Committee has 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, whilst also having regard to its size and the
resources available.
Principle 5:
Maintaining the Board as a well-functioning,
balanced team led by the Chair
The Board comprises the Chairman, two Non-executive
Directors and an Executive Director, who between
them, as noted in the biographies, provide a broad
range of skills and experience in their respective roles
and joint overall responsibility.
All directors are encouraged to use their independent
judgement and to challenge all matters, whether
strategic or operational. Where any Board member
believes there may be a conflict of interest, specifically
those directors (Martyn Ratcliffe and Peter Bertram)
on the Science Group Board, the director can recuse
themself from a decision, as is recently evidenced:
•
In December 2021 Martyn Ratcliffe and Peter
Bertram recused themselves from all dealings,
negotiations and decisions in relation to the
Science Group plc loan facility.
•
In May 2022 Martyn Ratcliffe and Peter Bertram
recused themselves from the ongoing discussions,
negotiations and final decision to dispose of
Sapienza.
The Board considers, after careful review, that the
Board is sufficiently independent but continues to
evaluate the Board composition. Where necessary, sub-
committees of the main Board have been established
to ensure that this independence can be delivered and
there are no potential conflicts of interest.
The directors are committed to fulfilling their roles. In
addition to Board meetings, established meetings are in
place to support business operations and programmes.
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.
All directors receive regular and timely information on
the Group’s operational and financial performance.
Relevant information is circulated to the directors in
advance of meetings. The business reports monthly
on its headline performance against its agreed
budget, and the Board reviews the monthly update
on performance and any significant variances are
reviewed at each meeting. The Board members service
contracts and letters of appointment are available for
inspection at the Company’s registered office and at
the Annual General Meeting (“AGM”).
Training on matters related to their respective roles
is available if required, to all directors. Directors
are subject to re-election in accordance with the
Company Articles.
19
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
During 2021, nine formal, scheduled Board meetings took place, and all members attended all meetings they were
invited to (see table below). Numerous ad hoc and informal meetings were held.
Board
Audit
Committee
Remuneration
Committee
M Ratcliffe
7/7
n/a
1/1
D Stroud
13/13
2/2
n/a
D Lindsay
9/9
1/1
n/a
P Bertram
7/7
n/a
1/1
P Cartmell
3/3
1/1
n/a
A McCree
6/6
2/2
2/2
P Holland
7/7
2/2
2/2
J Warner-Allen
6/6
2/2
2/2
D Stroud, P Cartmell and D Lindsay attended the Audit Committee meetings by invitation.
Principle 6:
Ensure that between them the directors have
the necessary up-to-date experience, skills
and capabilities
The Board is satisfied that, between the directors,
it has an effective and appropriate balance of skills
and experience, including in the areas of compliance
with the AIM Rules for Companies and other related
legislation, finance, internal controls, risk assessment
and management, innovation, international trading,
business growth, M&A activity and people development.
Subsequent to the Board changes in October, action
has been taken to review and amend amongst other
things, financial processes, employee remuneration,
the commercial approach to future customer
engagement and the financial stability of the
Company. A number of these reviews were in response
to the onerous TPG Maritime contracts, but also
application of appropriate governance by the new
Board. Where required, the Board will take, and has
taken, external advice.
Principle 7:
Evaluate Board performance based on clear
and relevant objectives, seeking continuous
improvement
Given the nature of the Board changes in 2021
and revised strategy including disposal of non-core
assets, the Board will be reviewing its performance
during 2022.
Principle 8:
Promote a culture that is based on ethical values
and behaviours
The Group has in place a Code of Conduct and a set of
Core Values which together aim to promote an ethical
culture across the business.
For further detail, please refer to the Statement of
Compliance with the QCA Corporate Governance
Code on the website (www.tpgroupglobal.com/
wp-content/uploads/2022/07/QCA-Statements-for-
website-2022-.pdf).
Principle 9:
Maintain governance structures and processes that
are fit for purpose and support good decision-
making by the Board
The Board is responsible for the long-term success
of the Company and sets direction for, and reviews
the performance of, the Company. It monitors the
exposure to key business risks and reviews the
strategic direction of the two business streams, their
annual budgets and their performance in relation to
those budgets.
There is a formal schedule of matters reserved for the
Board. It is responsible for matters including:
•
Overall Group strategy;
•
Approval of major investments (whether capital
expenditure or operating expense);
•
Approval of the annual and interim results;
•
Setting of the annual budget;
•
Approval of major contracts;
•
Review of external announcements and reporting;
and
•
M&A activity.
Corporate Governance Report
CONTINUED
20
Governance
The senior management team members each report to
the Board and collectively are responsible for:
•
The day-to-day management of the Group’s
businesses and their overall trading;
•
Operational and financial performance;
•
Management of key risks; and
•
Implementation of the corporate responsibility
programmes.
The Board is supported by the Audit and Remuneration
Committees. Each committee has access to such
resources, information and advice, as it deems
necessary, at the cost of the Company, to enable the
Committee to discharge its duties.
All directors are encouraged to use their independent
judgement and to challenge all matters, whether
strategic or operational. Where any Board member
believes there may be a conflict in interest, specifically
those directors on the Science Group Board, the
director can recuse themselves from decisions,
examples of which are disclosed in principle 5.
Principle 10:
Communicate how the Company is governed and
is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
The Company communicates with shareholders
through the Annual Report, full-year and half-year
announcements, the Annual General Meeting ("AGM"),
regular RNS updates and one-to-one meetings with
large existing or potential new shareholders as well as
more informally via twitter and LinkedIn.
The Board receives updates on the views of
shareholders through briefings and reports from the
Chairman, Chief Financial Officer and the Company’s
brokers. The Company communicates with institutional
investors through briefings with management.
In addition, analysts’ notes and brokers’ briefings
are reviewed to achieve a wide understanding of
investors’ views.
21
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Audit Committee Report
As detailed above, the Parent Company has adopted the Quoted Companies Alliance Corporate
Governance Code (the “QCA Code”) and is committed to achieving high standards of governance as
regards the Audit Committee.
Members of the Audit Committee
The Audit Committee comprises the two Non-executive
Directors and is chaired by Peter Bertram. The
Committee has specific terms of reference that deal
with its authority and duties.
The biographies of the members of the Committee
can be found on page 14 and demonstrate that the
Committee brings together a range of relevant skills
and knowledge that benefit the Parent Company as
required by the provisions of the QCA Code.
During the year, the Committee met two times and
invited the Executive Directors, the auditor and others
to attend the meetings as appropriate, providing
robust and relevant challenge to management and the
external auditor in a balanced and considered manner.
Key responsibilities
Financial reporting
•
Monitor the integrity of the financial
reporting process.
•
Review and scrutiny of the full and half-year
financial statements.
•
Review and challenge of significant matters and
key financial judgements.
Risk management and internal control
•
Oversight of the Group’s system of risk
management and internal control and its
effectiveness, including the process of
identification of risks and opportunities, including
relevant non-financial matters, ensuring risks are
carefully identified, assessed and mitigated.
•
Report any significant reporting and risk issues,
including estimates and judgements made in
connection with the preparation of the Annual
Report and financial statements, to the board.
•
Assessment of the need for an internal
audit function.
External auditor
•
Management of the relationship with the external
auditor, review their performance, independence
and effectiveness.
•
Make recommendations to the Board with regard to
any change of auditor appointment and the setting
of audit fees.
Compliance and assurance
•
Review the going concern basis of preparation of
the financial statements.
•
Consider whether the Annual Report and financial
statements are “fair, balanced and understandable”.
•
Monitor compliance with applicable laws and
regulations.
Business of the Committee
Throughout the year, the Committee operated in
accordance with its terms of reference. In addition,
specific areas of work undertaken in 2021 included
the following:
•
Consideration of the COVID-19 pandemic and
its ongoing impact on the Group’s activities.
Managing the business in the face of this has been
a priority for the Board, Executive Directors and
senior management. Many challenges have been
overcome with revised working practices, such
as remote working, and regular communication
with employees, customers, suppliers and other
stakeholders. The Committee will continue to
monitor the ongoing impact of the pandemic on
the Group’s risks and control environment over the
coming year.
•
A review of revenue recognition across the range
of goods and services supplied by the Group, the
applicable contract structures and profits associated
with such contracts. The Committee discussed the
Group’s revenue recognition policies with executive
management and their application to contracts
across the Group and was satisfied that the policies
were appropriate and had been properly applied to
the Group’s activities in the year.
22
Governance
•
A review of material contracts in TPG Maritime and
the level of provisions, specifically against onerous
and delayed contracts, required to complete each
contract. For further details of the key sources of
estimation, please refer to note 2.1 of the financial
statements, ‘assessment of the percentage
completion of long-term contracts’.
•
Review of any potential impairment to goodwill,
intangibles and investments in subsidiaries. The
Committee discussed the Group’s approach to
impairment reviews and applicable accounting
policies with executive management and was
satisfied that the reviews were appropriate and
accounting policies had been properly applied in
the year.
•
A review of market interest in acquiring Westek,
Sapienza and Northstar (the Group’s autonomous
artificial intelligence technology) prior to the
year-end. The Committee reviewed the level of
interest expressed in these businesses and the
consideration and response to this by the Parent
Company. The Committee concluded it was correct
that each of these businesses should be classified
as an asset ‘held for sale’ at the balance sheet date
and the operations of the business to be reported
as discontinued through the profit and loss.
•
A review of the adoption of the Going Concern basis
of preparation of the Parent Company’s and Group’s
financial statements. A review of management
budgets and forecasts was undertaken. The
Committee reviewed the assumptions adopted
by management and series of possible down-side
operating scenarios. The Committee concluded
that it was appropriate to continue to adopt the
going concern basis of preparation of the financial
statements, albeit a material uncertainly was noted
in relation to a plausible downside scenario where
one or more of the Company’s bank covenants
could be breached and further funding would be
required. Refer to the CFO’s Report or Accounting
Policies for further details of the going concern
assessment.
•
The Group does not have a separate internal audit
function and the Board reviewed the requirement
for establishing one. Due to the size of the
organisation, and close involvement of the senior
management team in day-to-day operations, the
Committee did not feel an internal audit function
was either appropriate or necessary.
Going Concern
The Finance and Operational Review includes a review
of going concern.
On behalf of the Board
Peter Bertram
Chairman, Audit Committee
24 August 2022
23
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Remuneration Committee Report
Remuneration Committee
The Remuneration Committee, as of 24 August 2022, is made up of the two Non-executive Directors and is chaired
by Peter Bertram. Meetings are attended by other members of the Board by invitation.
The Remuneration Committee sets and annually reviews the terms and conditions of employment of the Executive
Directors. The remuneration on 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. The share option scheme expired at the end of 2020 and the Committee is currently
reviewing the implementation of a new scheme in 2022.
The proper application of the remuneration policy is overseen by the Remuneration Committee, who meet at least
twice each year to consider the various matters within their remit. The role of this Committee is set out in the Terms
of Reference. The activities of the Committee include the determination of a framework policy for the remuneration
of the Company’s Executive Directors, including pension rights and any compensation payments.
In determining the policy, the committee will take into account all factors which it deems necessary. The objective of
the policy is to ensure that members of the executive management of the Company are provided with appropriate
incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their
individual contributions to the success of the Company. Accordingly, the Remuneration Committee will regularly
review the ongoing appropriateness and relevance of the remuneration policy, and in determining the remuneration
policy, review and have regard to pay and employment conditions across the Group, especially when determining
annual salary increases.
Service agreements
Executive Directors appointed prior to 2021 have been employed on service contracts with 12-month notice periods
that extends to 24-months in the event of a change of control of the Parent Company. Non-executive Directors are
appointed on three-year letters of appointment, with a three-month notice period.
Directors’ emoluments
Basic salary or
fees
Compensation
for loss of
office
Pension
contributions
Other benefits
Total
emoluments
(2021)
Total
emoluments
(2020)
£'000
£'000
£'000
£'000
£'000
£'000
Executive
P Cartmell *
180
428
5
28
641
428
D Stroud
213
–
22
14
249
256
David Lindsay *
145
169
–
2
316
–
Non-executive
A McCree*
53
35
–
–
88
70
P Holland*
31
–
–
–
31
39
J Warner-Allen*
28
9
–
–
37
39
M Ratcliffe*
–
–
–
–
–
–
P Bertram*
–
–
–
–
–
–
650
641
27
44
1,362
832
1 P Cartmell resigned as Executive Director on 30 June 2021 and was the highest paid director in the period
2 David Lindsay was appointed as Executive Director on 6 August 2021, resigned on 31 March 2022 and was appointed as Non-executive Director
on 1 April 2022.
3 Martyn Ratcliffe was appointed Non-executive Director on 14 October 2021 and Chairman on 1 November 2021. He waived remuneration for
2021.
4 Andrew McCree resigned as Non-executive Chairman on 30 September 2021.
5 Phil Holland resigned as Non-executive Chairman on 29 October 2021.
6 Jeremy Warner-Allen resigned as Non-executive Director on 30 September 2021.
7 Peter Bertram was appointed as Non-executive Director on 14 October 2021 and waived remuneration for 2021.
24
Governance
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 2021 and 31 December 2020 were:
As at
31 December
2020
Exercised
in year
Lapsed
in year
Cancelled in
year
As at
31 December
2021
Exercise
price
Lapse
date
number
number
number
number
number
pence
Executive
P Cartmell
9,505,456
–
(6,336,971)
(3,168,485)
–
7.00
09-May-27
D Stroud
4,277,455
–
(2,851,637)
1,425,818
7.00
09-May-27
Non-executive
A McCree
250,000
–
–
(250,000)
–
10.00
30-Sep-24
The closing mid-market price of an Ordinary Share as quoted on the Daily Official List as published by the London
Stock Exchange was 4.70p at 31 December 2021. In the period 1 January 2021 to 31 December 2021 the closing
mid-market high was 7.30p per Ordinary Share and low was 3.18p per Ordinary Share.
Directors’ interests
The directors who were in office at the end of 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 2021, at 31 December 2020 and
at the date of this report:
Number held at
Number held at
Number held at
31 December 2021
24 August 2022
31 December 2020
Ordinary Shares of
Ordinary Shares of
Ordinary Shares of
1 pence each
1 pence each
1 pence each
D Lindsay
2,600,000
2,600,000
0
D Stroud
653,847
653,847
653,847
M Ratcliffe
0
0
0
P Bertram
0
0
0
Martyn Ratcliffe is the largest shareholder in Science Group plc with 20.73%. Science Group plc is the largest
shareholder in TP Group plc with a shareholding of 27.97%.
On behalf of the Remuneration Committee
Peter Bertram
Chairman, Remuneration Committee
24 August 2022
25
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Financial statements
Independent Auditor’s Report
TO THE MEMBERS OF TP GROUP PLC
Opinion on the financial statements
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 2021 and of the Group’s loss
for the year then ended;
•
the Group financial statements have been properly
prepared in accordance with UK adopted international
accounting standards;
•
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.
We have audited the financial statements of TP Group plc
(the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 December 2021 which comprise the
Consolidated statement of comprehensive income, the
Consolidated and Parent Company statements of financial
position, the Consolidated and Parent Company statements
of changes in equity, the Consolidated statement of cash
flows and 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 UK adopted international accounting
standards. 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).
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 believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent
Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Material uncertainty relating to going
concern
We draw attention to note 2 to the financial statements
which indicate the Directors’ considerations over going
concern, including that a plausible down-side scenario
arising on current forecasts may result in a breach of debt
covenants and that the current debt facilities terminate
in September 2023. As stated in note 2, these events or
conditions, along with other matters as set out in note 2,
indicate that a material uncertainty exists that may cast
significant doubt on the Group and Parent Company’s
ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
We considered the audit of going concern to be a key
audit matter based on our assessment of the risk and the
impact on our audit. Our response to the key audit matter
and our evaluation of the Directors’ assessment of the
Group and Parent Company’s ability to continue to adopt
the going concern basis of accounting included:
•
evaluating the Directors’ method for assessing going
concern, including the relevance and reliability of
underlying data used to make the assessment, and
whether assumptions and changes to assumptions
from prior years are appropriate and where relevant
consistent with each other;
•
reviewing the Directors’ stress-testing of the forecasts
to the extent of reasonably plausible downside
scenarios using our knowledge of the business;
•
assessing the underlying forecast model and the
Directors’ historical forecast accuracy, including an
assessment of Q1 2022 actuals against forecast;
•
challenging the order book and pipeline through
agreement to underlying support and enquiries of
management outside of the finance team and through
our knowledge of business and market conditions;
•
assessing the terms and period of the Group’s bank
and other facility agreements and considered the
ability of the Group to refinance when required;
•
considering the Group’s banking covenants and related
headroom in light of the Directors’ downside forecast
scenarios;
•
reviewing the adequacy of the disclosures in the
financial statements against the requirements of
the accounting standards and consistency of the
disclosures with the forecasts and reverse stress test
assessment prepared by the Directors.
In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate.
26
Financial Statements
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
2021
2020
Coverage
100% (2020: 98%) of Group loss before tax
100% (2020: 99%) of Group revenue
95% (2020: 98%) of Group total assets
Revenue recognition – long term contracts
Impairment of goodwill
Key audit
matters
Presentation of TPG Maritime as a continuing operation, along with
the presentation of other discontinued operations during the year
Going concern
Impairment of goodwill is no longer considered to be a key audit
matter due to impairment recognised in previous accounting periods
and impairment in the year being supported by subsequent disposal
price of assets classified as held for sale.
Presentation of TPG Maritime as a continuing operation, along with
the presentation of other discontinued operations during the year
is no longer considered to be a key audit matter because of the
decisions taken by the group to continue the Maritime business and
the actions taken post year end to dispose of those assets held for
sale giving greater certainty over the classification.
Materiality
Group financial statements as a whole
£530,000 (2020: £700,000) based on 1.2% (2020: 1.2%) of revenue
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system
of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk
of management override of internal controls, including assessing whether there was evidence of bias by the Directors that
may have represented a risk of material misstatement.
The Group operates through a number of legal entities, which form reporting components and are incorporated
predominantly in the UK and the Netherlands. The components that were considered to be significant were TP Group plc,
TPG Maritime Limited, TPG Services Limited, Sapienza Consulting Limited and Sapienza Consulting B.V. With the exception
of Sapienza Consulting B.V., all significant components were subject to full scope audits conducted by the Group audit
team. Sapienza Consulting B.V. was audited by a component auditor under instruction from the Group audit team. Non-
significant components were subject to either specified procedures or desktop review carried out by the Group audit team.
Our involvement with component auditors
For the work performed by component auditors on Sapienza Consulting B.V., we determined the level of involvement
needed in order to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our
opinion on the Group financial statements as a whole. The component auditors are not part of the BDO network of firms.
Our involvement with component auditors included the following:
•
Group audit instructions were issued to the component auditor detailing materiality, significant accounting and auditing
issues, including significant risks identified by the group team, and the reporting required.
•
The Group audit team held meetings with the component auditors to confirm the scope of the work required and the
basis of sampling to be used by the component auditor.
•
Regular meetings were held to enable the Group audit team to provide direction and supervision throughout the
audit process.
•
The component auditor’s work and reporting were reviewed in detail by the Group audit team as their work progressed
and at its conclusion.
•
The Group audit team attended close meetings with the component auditor and component and group management.
27
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Independent Auditor’s Report
TO THE MEMBERS OF TP GROUP PLC CONTINUED
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, 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 financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related
to going concern section of our report, we have determined the matter described below to be the key audit matter to be
communicated in our report.
Key audit matter
How the scope of our audit addressed the key audit matter
Revenue recognition –
long term contracts
The accounting policy
for revenue is disclosed
in note 2.4 of the
consolidated financial
statements.
The judgements and
estimates related to
the assessment of
the percentage of
completion of long-term
contracts are disclosed
in note 2.1.
A prior period
adjustment relating to
revenue recognition on
long term contracts is
disclosed in note 32.
The Group generates
substantial revenue
from the design and
manufacture of high
integrity equipment.
Contracts relating to this
usually extend several
years, are complex, and
contain exposure to terms
that may apply penalties
or otherwise vary
consideration due.
Determining costs
to complete and the
value of any variable
consideration, including
any liquidated damages,
are key judgements and
estimates required in order
to correctly recognise
revenue in line with
IFRS 15 - Revenue from
Contracts with Customers.
The high degree of
estimation uncertainty
surrounding forecast
costs to complete leads
to a range of possible
outcomes. The Directors
are required to estimate
forecast costs to complete
and judgement is required
to determine whether
those estimates are
appropriate.
As part of our audit procedures we:
•
Identified the Group's revenue streams and determined
whether the related revenue recognition policy is in
accordance with IFRS 15.
•
Reviewed management's revenue recognition accounting
papers for a sample of long-term contracts and
agreed these to underlying contract agreements and
corroborating evidence.
•
Agreed a sample of costs incurred to corroborative
support such as purchase orders, subcontractor
agreements, inspection forms, good received notes and
purchase invoices where appropriate to determine if these
were valid project costs on which to base the stage of
completion.
•
Considered costs to complete estimates for
reasonableness through discussion with project
managers, management and the board, and challenged
the assumptions used to forecast future costs. This
included a critical assessment of project costing and
forecasting models against contract deliverables and past
performance and understanding management’s review
process to check that estimates made are appropriate,
•
Reviewed the Directors’ disclosure in note 2.1 of the
estimation uncertainty related to the assessment of the
percentage of completion of long-term contracts. We
verified the accuracy of the sensitivities, in respect of the
costs to complete estimation uncertainty, of the contract
disclosed. We reviewed the Directors assessment of the
ability of Management to accurately estimate the costs to
completion in respect of that contract including agreeing
to corroborating evidence.
28
Financial Statements
Key audit matter
How the scope of our audit addressed the key audit matter
Revenue recognition
– long term contracts
(continued)
The challenges described
above mean the existence
and accuracy of revenue
recognised on long term
contracts has been
identified as a key area of
focus for our audit.
A prior period adjustment
relating to revenue
recognition was identified
by management in the
period. The directors
found that forecast costs
to complete estimates
were understated and
contractual transaction
prices were overstated
resulting in an
overstatement of contract
revenue recognised to-date
at 31 December 2020.
The correction of the prior
period error in respect of
revenue recognition and
the related disclosures
have also been a key area
of focus for our audit.
•
Challenged management’s forecast costs by performing
a review of historical forecasting accuracy on sampled
contracts. Where contracts are onerous, checking
appropriate provisions and disclosures are made.
•
Considered the accounting treatment of any modifications
made on the sample of contracts reviewed.
•
Assessed the treatment of liquidated damages, or similar
contract terms, for the sample of contracts reviewed to
determine whether any required constraint of variable
consideration had been applied.
•
Assessed the recoverability of a sample of contract assets
through a review of the subsequent billing and cash
receipt, as well as contract asset existence by agreeing
their recognition to the terms of the contract and the
satisfaction of performance obligations to the year end.
•
For a sample of contracts, we recalculated the contract
liabilities with reference to revenue recognition and
amounts invoiced and tested that contract liabilities had
been appropriately accounted for.
•
Reviewed the underlying support for the prior period
adjustment, agreeing to supporting documents such as
customer contracts, technical specifications, purchase
orders, supplier invoices, customer and supplier
communications and confirmed the correct application
of IAS 8 - Accounting Policies, Changes in Accounting
Estimates and Errors (“IAS 8”).
•
Reviewed the disclosures relating to revenue, estimation
uncertainty of long-term contracts and the prior period
adjustment, to check that they were in accordance with
the requirements of the applicable accounting standards
and adequately reflected any judgements, uncertainties
and sensitivities applied.
Key observations:
We found that revenue, including the correction of the prior
period adjustment, was recorded appropriately, and that the
treatment of the variable consideration, including liquidated
damages, and the estimates and judgements used in the
forecast costs to complete were appropriate.
We consider the disclosures in the financial statements
appropriately describe the uncertainty attaching to forecast
costs to complete estimates.
We consider the disclosures in the financial statements in
respect of the prior period adjustment to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence
the economic decisions of reasonable users that are taken on the basis of the financial statements.
29
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Independent Auditor’s Report
TO THE MEMBERS OF TP GROUP PLC CONTINUED
Our application of materiality (CONTINUED)
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a
lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Group financial statements
Parent company financial statements
2021
2020
2021
2020
Materiality
£530,000
£700,000
£360,000
£350,000
Basis for determining
materiality
1.2% of revenue
1.2% of revenue
1.2% of total assets
1.2% of total assets
Rationale for the
benchmark applied
Revenue is considered to be the most
appropriate performance measure as the
group is loss making and revenue is a key
performance indicator for the users of the
financial statements.
Total assets are considered to be the most
appropriate measure as the Company is a
holding company that does not trade.
Performance
materiality
£400,000
£490,000
£270,000
£245,000
Basis for
determining
performance
materiality
75% (2020: 70%) of overall materiality
based upon:
•
Locations and components within
the group;
•
Expected level of misstatements;
•
Number of areas subject to estimation; and
•
Aggregation effect of planned testing.
Performance materiality has increased from
the prior period given our increased knowledge
of the group.
75% (2020: 70%) of overall materiality
based upon:
•
Expected value of any required audit
adjustments;
•
Number of areas subject to estimation; and
•
Aggregation effect of planned testing.
Performance materiality has increased from
the prior period given our increased knowledge
of the company.
Component materiality
We set materiality for each component of the Group based on a percentage of between 23% and 79% of Group materiality
dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality
ranged from £123,000 to £420,000. In the audit of each component, we further applied performance materiality levels of
75% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was
appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £15,900
(2020: £21,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the
Annual Report and Financial Statements 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. 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 course of 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 this gives rise to a material
misstatement in the financial statements themselves. 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.
30
Financial Statements
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by
the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report
and Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic report and the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
•
the Strategic report and the Directors’ report have been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the Group and Parent Company and its environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic
Report or the Directors’ Report.
Matters on which
we are required
to report by
exception
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:
•
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
•
we have not obtained all the information and explanations that we considered necessary for the
purpose of our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the Directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud is detailed below:
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance
with laws and regulations, our procedures included the following:
•
Obtaining an understanding of the legal and regulatory framework that the Group operates in, focusing on those laws
and regulations generally recognised to have a direct effect on the financial statements or that had a fundamental
effect on the operations of the Group, namely:
−
UK Companies Act 2006
−
The applicable accounting framework
−
The Official Secrets Act
−
Relevant tax legislation
31
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Independent Auditor’s Report
TO THE MEMBERS OF TP GROUP PLC CONTINUED
Extent to which the audit was capable of detecting liabilities, including fraud (CONTINUED)
•
Enquiring of management and the audit committee, including obtaining and reviewing supporting documentation,
concerning the Group’s policies and procedures relating to
−
Identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance; and
−
Detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or
alleged fraud.
•
Considering our knowledge of the nature of the industry, control environment and business performance including the
design of the Group’s remuneration policies, key drivers for Directors’ remuneration and performance targets.
•
Discussing amongst the engagement team how and where fraud might occur in the financial statements and any
potential indicators of fraud. As part of this discussion, we identified potential for fraud in revenue recognition,
specifically in relation to revenue existence, as well as the potential for management override of controls, specifically in
relation to the posting of journal adjustments and the inappropriate use of estimates.
Our procedures to respond to risks identified include the following:
•
Reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with
relevant laws and regulations.
•
Performing a detailed review of the Group’s year-end adjusting entries.
•
Discussion with those charged with governance, review of minutes from Board meetings and review of other supporting
documentation to identify any instances of non-compliance with laws and regulations and any known, suspected, or
alleged fraud.
•
In addressing the risk for fraud in revenue recognition, testing the appropriateness of the revenue recognition policies
and the application of these policies and performing specific procedures over the existence of revenue, as further
described in the Key audit matters section above.
•
In addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries
and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a
potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the
normal course of business.
We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and
remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements,
recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations
or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-
compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/
auditors responsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Christopher Pooles (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Reading, United Kingdom
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
32
Financial Statements
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2021
Note
2021
£’000
2020
(restated)
£’000
Revenue from continuing operations
5
44,255
38,673
Cost of sales
(37,350)
(30,167)
Gross profit from continuing operations
6,905
8,506
Administrative expenses
(14,405)
(11,794)
Operating loss from continuing operations1
7
(7,500)
(3,288)
Net finance cost
9
(450)
(301)
Loss before taxation from continuing operations
(7,950)
(3,589)
Taxation credit/(charge)
10
59
(9)
Loss after taxation for the year from continuing operations
(7,891)
(3,598)
Loss for the period from discontinued operations (attributable to equity
holders of the Company)
3
(11,138)
(9,163)
Loss for the period
(19,029)
(12,761)
Attributable to:
Equity holders of the Parent Company
(19,029)
(12,761)
Non-controlling interest
–
–
Total loss for the year
(19,029)
(12,761)
Loss for the year
(19,029)
(12,761)
Other comprehensive income/(expense): items that may be subsequently
recycled to the income statement:
Foreign exchange (losses)/gains on translation of foreign operations
(481)
427
Total comprehensive expense for the year
(19,510)
(12,334)
Attributable to:
Equity holders of the Parent Company
(19,510)
(12,334)
Non-controlling interest
–
–
(19,510)
(12,334)
The notes on pages 40 to 79 form part of these financial statements.
Note 32 explains the impact of the restatement.
Earnings per share:
2021
2020
(restated)
Loss per share (pence per share)
Continuing operations:
Basic loss per share (pence per share)
11
(1.01)
(0.46)
Diluted loss per share (pence per share)
11
(1.01)
(0.46)
Discontinued operations:
Basic loss per share (pence per share)
11
(1.43)
(1.18)
Diluted loss per share (pence per share)
11
(1.43)
(1.18)
Total:
Basic loss per share (pence per share)
11
(2.44)
(1.64)
Diluted loss per share (pence per share)
11
(2.44)
(1.64)
The notes on pages 40 to 79 form part of these financial statements.
1 Please refer to segment reporting in note 4 for bridge to adjusted operating profits from continuing operations.
33
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Consolidated and Parent Company Statements
of Financial Position
FOR THE YEAR ENDED 31 DECEMBER 2021
Group
Parent Company
Note
2021
£’000
2020
(restated)
£’000
2021
£’000
2020
£’000
Assets
Non-current assets
Goodwill
12
4,338
8,091
–
–
Other intangible assets
13
7,978
19,633
74
185
Property, plant and equipment
14
591
962
52
116
Right-of-use assets
22
2,485
3,841
58
302
Investments
15
–
–
19,707
33,013
Amounts owed by EBT
27
–
–
–
108
Trade and other receivables
17
–
–
–
3,635
Total non-current assets
15,392
32,527
19,891
37,359
Current assets
Inventories
16
416
1,417
–
–
Trade and other receivables
17
4,512
10,268
556
1,312
Amounts due from contract customers
5
5,599
7,391
–
–
Taxation recoverable
258
239
–
–
Cash and bank balances
18
5,376
7,372
193
1,557
16,161
26,687
749
2,869
Assets held for sale
3
8,170
–
6,792
–
Total current assets
24,331
26,687
7,541
2,869
Total assets
39,723
59,214
27,432
40,228
Liabilities
Current liabilities
Trade and other payables
21
(11,154)
(14,389)
(6,622)
(3,431)
Amounts due to contract customers
5
(5,173)
(5,554)
–
–
Lease liabilities
22
(424)
(609)
(58)
(116)
(16,751)
(20,552)
(6,680)
(3,547)
Liabilities held for sale
3
(6,326)
–
(150)
–
Total current liabilities
(23,077)
(20,552)
(6,830)
(3,547)
Non-current liabilities
Deferred taxation
10
(1,403)
(3,001)
–
–
Lease Liabilities
22
(2,752)
(4,079)
(27)
(207)
Borrowings
19
(7,000)
(7,000)
(7,000)
(7,000)
Provisions
24
(607)
(352)
(20)
(20)
(11,762)
(14,432)
(7,047)
(7,227)
Total liabilities
(34,839)
(34,984)
(13,877)
(10,774)
Net assets
4,884
24,230
13,555
29,454
Equity
Share capital
25
7,792
7,792
7,792
7,792
Share premium
18,529
18,529
18,529
18,529
Own shares held by the EBT
–
(561)
–
–
Translation reserve
(90)
415
(129)
–
Share-based payments reserve
553
685
553
685
Retained earnings
(21,901)
(2,631)
(13,190)
2,448
Total equity due to shareholders
4,883
24,229
13,555
29,454
Non-controlling interest
1
1
–
–
Total equity
4,884
24,230
13,555
29,454
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 loss of £15,934,000 (2020: £1,221,000) for the year.
The financial statements were approved and authorised for issue by the Board of Directors and were signed on its behalf
on 24 August 2022. The notes on pages 40 to 79 form part of these financial statements.
Derren Stroud
Chief Financial Officer
(Company number: 3152034)
34
Financial Statements
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2021
Share
capital
£’000
Share
premium
£’000
Own
shares held
by EBT
£’000
Share-
based
payments
reserve
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interest
£’000
Total
£’000
Balance at 1 January 2020
7,792
18,529
(561)
1,142
(4)
9,140
428
36,466
Loss for the year
–
–
–
–
–
(9,999)
–
(9,999)
Adjustment to prior period
(note 32)
–
–
–
–
–
(2,762)
–
(2,762)
Restated loss for the year
–
–
–
–
–
(12,761)
–
(12,761)
Other comprehensive gain
–
–
–
–
427
–
–
427
Restated total
comprehensive gain/(loss)
–
–
–
–
427
(12,761)
–
(12,334)
Share-based payments
charge (note 26)
–
–
–
98
–
–
–
98
Share-based payments
reserves transfer
–
–
–
(555)
–
555
–
–
Forex movement
–
–
–
–
(8)
8
–
–
Non-controlling interest
transfer on acquisition of
100% ownership of Lift BV
–
–
–
–
–
427
(427)
–
Restated balance at
31 December 2020
7,792
18,529
(561)
685
415
(2,631)
1
24,230
Loss for the year
–
–
–
–
–
(19,029)
–
(19,029)
Other comprehensive loss
–
–
–
–
(481)
–
–
(481)
Total comprehensive loss
–
–
–
–
(481)
(19,029)
–
(19,510)
Share-based payments
charge (note 26)
–
–
–
164
–
–
–
164
Share-based payments
reserves transfer
–
–
–
(296)
–
296
–
–
Forex movement
–
–
–
–
(24)
24
–
–
Release on closure of EBT
–
–
561
–
–
(561)
–
–
Balance at 31 December
2021
7,792
18,529
–
553
(90)
(21,901)
1
4,884
The notes on pages 40 to 79 form part of these financial statements.
35
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Parent Company Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2021
Share
capital
£’000
Share
premium
£’000
Share-based
payments
reserve
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Total
£’000
Balance at 1 January 2020
7,792
18,529
1,142
–
672
28,135
Total comprehensive gain as
previously stated
–
–
–
–
1,221
1,221
Share-based payments
charge
–
–
98
–
–
98
Share-based payments
reserves transfer
–
–
(555)
–
555
–
Restated balance at
31 December 2020
7,792
18,529
685
–
2,448
29,454
Total comprehensive loss
–
–
–
(129)
(15,934)
(16,063)
Share-based payments
charge (note 26)
–
–
164
–
–
164
Share-based payments
reserves transfer
–
–
(296)
–
296
–
Balance at 31 December
2021
7,792
18,529
553
(129)
(13,190)
13,555
The notes on pages 40 to 79 form part of these financial statements.
36
Financial Statements
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2021
Group
Note
2021
£’000
2020
(restated)
£’000
Operating activities
Loss before taxation from continuing operations
(7,950)
(3,589)
Loss before taxation from discontinued operations
(12,459)
(9,496)
Adjustments for:
Depreciation, amortisation and impairment
4,918
5,563
Finance cost
512
416
Share-based payment expense
164
98
Impairment loss on held for sale assets
10,572
2,721
(Loss)/profit on disposal of assets
(129)
596
Decrease in inventories
698
483
Decrease in trade and other receivables
1,802
574
Increase in trade and other payables
1,605
2,685
Increase in provisions
421
171
154
222
Taxation credit
77
189
Net cash generated from operating activities
231
411
Investing activities
Acquisition of subsidiary, net of cash acquired
–
(2,000)
Purchase of property, plant and equipment
(286)
(781)
Purchase of intangible fixed assets
(964)
(1,562)
Disposal of subsidiary, net of cash disposed of
–
(349)
Proceeds on disposal of assets
135
–
Net cash used in investing activities
(1,115)
(4,692)
Financing activities
New borrowings
20
–
7,000
Interest payable
(354)
(313)
Loan arrangement fees
(150)
–
Repayment of lease liabilities
20
(598)
(1,622)
Net cash generated (used in)/generated from financing activities
(1,102)
5,065
Effects of exchange rates on cash and cash equivalents
(10)
20
Net (decrease)/increase in cash and cash equivalents
(1,996)
804
Cash and cash equivalents at beginning of year
7,372
6,568
Cash and cash equivalents at end of year
18
5,376
7,372
The notes on pages 40 to 79 form part of these financial statements.
37
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
1. General information
TP Group plc (the “Group”) together with its subsidiaries, is a consulting and engineering business, working to deliver
mission, business and safety critical services and solutions across high growth sectors including Defence and Aerospace.
The Group is incorporated under the Companies Act and domiciled in the United Kingdom. The address of the registered
office of the Parent Company is Cale House, Station Road, Wincanton, BA9 9FE. The Company’s shares are listed on the
Alternative Investment Market of the London Stock Exchange.
Basis of preparation
The consolidated financial statements are measured and presented in sterling, which is the currency of the primary
economic environment in which the Group operates. They have been prepared under the historical cost convention, except
for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at
fair value through other comprehensive income, or when an impairment is recognised on non-current assets. Figures are
presented to the nearest thousand pounds, unless otherwise stated.
The consolidated financial statements have been prepared in accordance with UK adopted international accounting
standards and interpretations issued by the International Financial Reporting Standards Interpretations Committee
applicable to companies reporting under IFRS. The financial statements comply with International Financial Reporting
Standards as adopted by the UK (“IFRS”).
The Parent Company financial statements have been prepared in accordance with Financial Reporting Standard (“FRS”)
101 Reduced Disclosure Framework and in accordance with applicable accounting standards and the provisions of the
Companies Act 2006.
In preparing the Parent Company financial statements, the directors have taken advantage of the following exemptions
for disclosures:
•
A cash flow statement and related notes as required by IAS 7 Statement of Cash Flows
•
To disclose related party transactions entered into between two or more members of the Group, provided that the
subsidiary is wholly owned, under paragraphs 17 and 18A of IAS 24, and the requirements in IAS 24
New accounting standards and interpretations
New standards and interpretations newly applicable for companies with the financial year ending 31 December 2021 are
set out below, together with any noted impact on the Group.
Standard
Impact in year
•
Amendments to IFRS 4 Insurance Contracts – Extension of the Temporary Exemption from Applying IFRS 9
No material impact
•
Amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement,
IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases – Interest Rate
Benchmark Reform (phase 2)
No material impact
•
Amendments to IFRS 16 Leases – Covid-19-Related Rent Concessions beyond 30 June 2021
No material impact
Standards issued but not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021
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.
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Financial Statements
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all of the years presented, unless otherwise stated.
Going concern
As part of the going concern assessment, the directors have considered:
•
Various scenarios for the business for the period through to 31 December 2023, including delivery of its base case
budget through 2022 and 2023, and downside sensitivities to this budget, as noted below.
•
The Group’s sources of committed external financing and related covenants
As noted in the Net Debt note above, the Group’s debt facilities at the time of signing these accounts are:
•
A £6m HSBC Bank loan facility which was fully drawn at the time of signing these accounts
•
A £5m loan facility secured from Science Group plc in December 2021. The loan was undrawn at the balance sheet date
and the balance was nil at the time of signing these accounts
Both facilities terminate in September 2023. The Board will commence a process in the second half of 2022 to refinance the
Group and will consider both debt and equity options.
In addition to its debt facilities, the Company could raise additional equity capital through its listing on the AIM, although
is mindful that the ongoing market environment could impact any fundraising potential. The Company is currently able to
raise up to 10% of its market capitalisation through an equity placing on a non-pre-emptive basis without the need for
shareholder approval. Accordingly, the directors believe that the Company would be able to react with reasonable speed in
the event it was required to pursue this course of action, subject to market conditions.
The directors regularly review operating performance and cash generation projections for the Group which are based on
delivery of the Group’s order book, a reasonable expectation of success in ongoing and future bids for further contracts and
an expectation of additional work from current and new customers. A base case budget and cash flow projection has been
prepared for 2022 and 2023, covering at least the 12-month period following the signing of the Group accounts. The base
cash budget provides sufficient liquidity and bank covenant compliance throughout the period. Performance in Q1 of 2022 is
in line with the base case budget and provides comfort in the Group’s ability to execute on its projections for the year.
The business however continues to navigate through the consequential effects of COVID-19, most notably the challenges
in supply chains and logistics, and the legacy onerous TPG Maritime contracts. Furthermore, whilst the Group has no trade
or activity in Ukraine or Russia, it is mindful of the impact that the conflict may have on global supply chains and the timing
of new business opportunities.
As such, the consequences of the above may further delay the timely execution of both the Group’s order book and new
order wins which could result in revenue, margins and resulting cash inflows, that are less and/or later than modelled,
putting pressure on the Group’s cash and covenant position at times. The directors have therefore flexed, and stress tested
the base case budget to account for various operating scenarios, the outcomes of which include:
•
A 20% reduction in revenue.
•
A reduction of 6% in the Group’s gross margin percentage.
•
A deterioration in working capital cash conversion of £2.3m in 2022 and £7.9m in 2023; and
•
A blend of the above.
These scenarios assume similar and/or greater levels of disruption to the Group’s business to those experienced to date
since the onset of the COVID-19 pandemic, despite conditions improving and as a result of the legacy onerous TPG
Maritime contracts. All the scenarios take into account the cash and debt facilities currently available to the Company.
The directors have reviewed the Group's overall position and outlook in respect of the matters identified, including the
scenarios noted above, and are of the opinion that there are reasonable grounds to believe that the operational and
financial projections are achievable, and that the base case budget provides insulation to a plausible downside scenario.
Accordingly, the directors have a reasonable expectation that the Group will have adequate resources to meet its
obligations as and when they fall due for the foreseeable future and are satisfied that it is appropriate to prepare the
financial statements for the Group on a going concern basis.
However, considering all of the above factors, the directors have concluded that if a more extreme but plausible down-
side scenario arises the Group could breach one or more of its covenants in the 12-month period following approval of the
financial statements. In this scenario, the business would be reliant on either securing a waiver from both HSBC Bank and
Science Group or securing additional funding/debt headroom.
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Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
2. Summary of significant accounting policies (CONTINUED)
Both HSBC Bank and Science Group have been supportive of the business through to this point and, whilst the board
cannot guarantee a waiver will be forthcoming, would consider it reasonable to conclude that agreement could be reached
with the parties. For the avoidance of doubt, Martyn Ratcliffe and Peter Bertram would recuse themselves from discussions
with Science Group in relation to their loan facility.
Furthermore, the Company could also look to raise additional capital through either or both, a 10% direct equity placing, as
noted above or a wider equity placing that would require shareholder approval. The latter option would take more time but
enable the Group to secure more funding than through a 10% direct equity placing. These events and conditions therefore
indicate that a material uncertainty exists which may cast significant doubt on the Group’s and Parent Company’s ability to
continue as a going concern and therefore their ability to realise their assets and discharge their liabilities in the ordinary
course of business. These financial statements do not include the adjustments that would be necessary should the Going
Concern basis of preparation no longer be appropriate.
2.1 Key accounting judgements 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.
Accounting judgements
Alternative performance measures
The Group uses the alternative (non-Generally Accepted Accounting Practice) performance measure of ‘Adjusted operating
profit/ (loss)’ which is not defined within IFRS. See note 4.
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, acquisition consideration accounted for as employment costs owing to ongoing service conditions, any acquisition-
related charges, share-based payment charges and exceptional operating costs.
The directors believe this measure is more reflective of the underlying performance of the Group than equivalent Generally
Accepted Accounting Practice (“GAAP”) measures because it is excludes non-recurring exceptional and acquisition costs,
non-cash items and is therefore a better proxy for underlying operating cash, providing shareholders and other users of
the financial statements with the most representative year-on-year comparison of underlying operational performance
attributable to shareholders.
This measure and the separate components remain consistent for all periods presented in these financial statements.
Assets held for sale
Management has reviewed the Group’s non-current assets and associated liabilities in line with IFRS 5. In particular
management has assessed the ‘held for sale’ criteria in IFRS 5 with a view to determining whether reclassification of either
Westek Technology Limited, Sapienza Consulting Holdings BV (and its subsidiaries) or NorthStar (the Group’s autonomous
artificial intelligence technology) as a held for sale asset was required at the balance sheet date. Following management’s
assessment, it was determined that all three met the IFRS 5 held for sale criteria.
Discontinued operations
For operations classified as discontinued operations, management has considered the facts and circumstances of
each transaction, with consideration of IFRS 5 as to whether the disposal or ceased activity represents a ‘discontinued
operation’. In particular the IFRS 5 discontinued operation criteria was considered in respect of Westek Technology Limited,
Sapienza Consulting Holdings BV (and its subsidiaries) or NorthStar (the Group’s autonomous artificial intelligence
technology) and whether these cash generating units met the requirements of a separate major business line. Following
the assessment, it was considered that all three met the criteria and have been disclosed as discontinued operations.
The determination of incremental borrowing rates used to measure lease liabilities
The Group holds leases where the interest rate is not implicit in the lease. In these circumstances an incremental borrowing
rate is used. The incremental borrowing rates used by the Group are based on assessment of rates to borrow over similar
terms and with similar security to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset
in a similar economic environment.
40
Financial Statements
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 (see note 12). Investment in subsidiaries is
based on the estimation of recoverability based on the value in use calculation of the cash-generating unit invested in (see
note 15).
The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-
generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less
than expected, a material impairment loss may arise.
Useful economic life of intangible assets
Given the nature of the operations performed by the Group, the useful life of an asset is determined as the period over
which the asset is expected to be available for use by the entity. Estimated useful lives and amortisation method are
reviewed by management at the end of each reporting period, with the effect of any change in estimate accounted for on a
prospective basis.
Assessment of the percentage of completion of long-term contracts
The Group’s revenue recognition policy, which is set out in Note 2.4, requires forecasts to be made of the outcomes of long-
term design and manufacture contracts. This requires estimates of labour hours and rates, and material costs to determine
forecast costs to completion and therefore revenue recognition on each long-term contract. Where actual costs incurred
differ to forecast costs, or where forecast cost estimates change, the assessment of the percentage of completion of long-
term contracts will be affected and therefore revenue and profits or losses recognised impacted.
Estimates are reviewed regularly throughout the contract life and adjustments are made based on the latest
available information.
As at 31 December 2021, the amounts due from contract customers and amounts due to contract customers and contract
provisions amounted to £5,599,000, £5,173,000 and £292,000 respectively as set out in Notes 5 and 24. The Group has
considered the nature of the estimates involved in deriving these balances and concluded that it is possible that outcomes
within the next financial year may be different from the assumptions applied at 31 December 2021, which could require
a material adjustment to revenue and profits or losses recognised and the carrying amounts of the related assets and
liabilities in the next financial year.
The Group has identified one particular contract in the TPG Maritime Limited subsidiary company which is more susceptible
to future changes in forecast costs to complete estimates. In respect of this contract, the Group has recognised revenue
from continuing operations in the year of £1,872,000, together with an amount due to contract customers of £2,912,700.
Since contract inception, the Group has recognised revenue totalling £10,012,000. The project, which commenced in
2019, is not scheduled to complete until 2027 which is beyond the Group’s normal contract length of 1-3 years. Due to the
increased complexity of the project and the extended delivery timeframe, the forecast costs to complete on this contract
give rise to an increased level of estimation uncertainty.
The increased level of estimation uncertainty means that final costs could be materially different from the estimates at the
balance sheet date. Based on the project status as of 31 December 2021, a 10% change in direct labour hours or material
costs to completion from that estimated would give rise to a corresponding £0.3m and £0.2m impact respectively on the
loss of the Group.
As at 31 December 2021 the directors estimate that, based on costs incurred to date as a percentage of forecast total
costs to complete, the project was 64% complete.
Trade receivables provisioning
Recoverability of trade debtors are reviewed by management at the end of the reporting period. Trade debtors are impaired
when specific knowledge of customers suggests it is appropriate to do so.
2.2 Basis of consolidation
The Consolidated Financial Statements include the Company’s financial statements and those of its subsidiary
undertakings made up to 31 December 2021. 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.
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TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
2. Summary of significant accounting policies (CONTINUED)
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the Parent.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated Statement of
Comprehensive Income, Statement of Financial Position and Statement of Changes in Equity of the Group. Losses incurred
by the Group are attributed to the owners of the parent and to the non-controlling interest, even if this results in the non-
controlling interest having a deficit balance.
When the Group loses control over a subsidiary, it de-recognises 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.
2.3 Segment reporting
An operating segment, as defined by IFRS 8 operating segments, is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses. The Group has been managed through its two reporting
segments, Engineering and Consulting. 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.
2.4 Revenue
The Group’s operations generate revenues through the design and manufacture of high integrity equipment, provision of
services and provision of software.
The Group determines the transaction price 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. Where the amount of consideration
is variable (e.g., due to trade discounts, late delivery penalties and other similar items) the Group includes the variable
consideration in the transaction price only to the extent that it is highly probable that a significant reversal in the amount
of cumulative revenue recognised will not occur. The Group recognises revenue when it transfers control of a product or
service to a customer as more fully explained below.
Design and manufacture 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.
−
Over time revenue recognition
Where the Group has an enforceable right to payment for performance completed to date, being recovery of costs incurred
in satisfying the performance obligation plus a reasonable profit margin, the performance obligation is satisfied over time.
The measurement of progress towards complete satisfaction of the performance obligation is measured using the input
method, based on costs incurred compared to total contract costs.
42
Financial Statements
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.
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 contracts where the Group becomes entitled to invoice customers based on achieving a series of performance-
related milestones, at the point a customer is invoiced, any amount previously recognised as amounts due from contract
customers is reclassified to trade receivables. 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.
−
Point in time revenue recognition
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.
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.
For storage services, the customer receives and consumes the benefit over the storage period. The performance obligation
is satisfied over time. Revenue is recognised on an output basis, based on daily rate for the period of storage.
For extended warranties, the customer receives and consumes the benefit of the warranty over the extended warranty
period. The performance obligation is satisfied over time, based on straight line recognition over the period of the
warranty, which is used to measure progress towards complete satisfaction of the extended warranty performance
obligation.
Payment terms under the contract are typically 30 days.
Parts management
The Group has a parts management contract, whereby the Group manages the parts supply chain for a customer. This
contract contains two performance obligations being asset availability, and supply of consumables.
In terms of asset availability, the Group’s performance does not create an asset with an alternative use to the Group and
the Group has an enforceable right to payment for performance completed to date, being recovery of costs incurred in
satisfying the performance obligation plus a reasonable profit margin. The customer also simultaneously receives and
consumes the benefits of the asset availability service as the Group performs. Revenue is recognised as a provision of
assets are provided and control passes to the customer on the sale of the goods. Where it is concluded that the customer
has material rights under the contract for asset availability service then this will be assessed in measuring progress
towards complete satisfaction of the performance obligation that depicts the Group’s performance in providing the asset
availability service to the customer.
The contract price for asset availability includes variable consideration in the form of rebates based on achievement of KPI’s
within the contract. The expected value approach, which is based on the sum of probability weighted amounts for a range
of possible outcomes, has been used to estimate the transaction price. The variable consideration is trued up at the end of
each reporting period to reflect changes in the period and conditions that exist at the period end.
For the supply of consumables, the customer receives the benefit of the service on delivery (as defined in the contract)
of the consumable. This is the point at which the customer is in control of the deliverable, has the risks and rewards of
ownership and the Group has a present right for payment for the deliverable.
Payment terms under the contract are typically 30 days.
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TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
2. Summary of significant accounting policies (CONTINUED)
Maintenance of equipment
The Group has contracts for the maintenance and servicing of customer vessels with a 12-month assurance warranty.
These contracts contain a single promise and performance obligation. The assurance warranty is not a separate
performance obligation.
The performance of the Group enhances the vessels, which are controlled by the customer, as the Group performs.
Revenue is recognised over time. The Group uses an input method, based on labour hours, costs incurred and materials,
to measure complete satisfaction of the performance obligation. Costs are only included in the measurement of progress
towards satisfying the performance obligation where there is a direct relationship between the input and the satisfaction
of the performance obligation.
Payment terms under these contracts are typically 30 days.
Consulting
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 over time, using an input basis, based on costs incurred compared to
total contract costs. Costs are only included in the measurement of progress towards satisfying the performance obligation
where there is a direct relationship between the input and the satisfaction of the performance obligation.
Where the contract is time and materials, customer receives and consumes the benefits as the Group performs. Revenue is
recognised over time, using an input method based on time and materials incurred.
Where the contract is for the provision of specified deliverables to the customer, none of the criteria in IFRS 15.35 are met.
Revenue is recognised at a point in time, being the point at which the customer is in control of the specified deliverables
under the project. Payment terms under these contracts are typically 30 days.
Provision of software
The Group sells programme management software, including either basic or extended support, which is either hosted or
non-hosted.
The hosted programme management software contains a single performance obligation, as the customer cannot benefit
from either the software or the support without the hosting infrastructure. The customer receives and consumes the
benefit of the service as the Group performs. Revenue is recognised over time. Revenue is recognised straight line over the
life of the contract, as this best depicts the Group’s performance in providing the service to the customer.
For non-hosted programme management software, there are two performance obligations in the contract being the
provision of software licence and licence keys for the specified modules and then provision of a basic support service.
The software licence grants the customer a right to use the intellectual property as it exists at the point in time at which
the licence is granted. Revenue from the software licence is recognised at a point in time on delivery of the software and
associated licence keys to access the software.
The basic support service is simultaneously received and consumed by the customer as the Group performs. Revenue is
recognised over time. An output method, i.e. straight line over the contract, is used to measure progress towards complete
satisfaction of the performance obligation.
For non-hosted contracts, there is a single price in the contract, which has been allocated to the two performance
obligations based on standalone selling prices. The standalone selling price for each of the performance obligations is not
directly observable, so has been determined using an adjusted market assessment approach. It has been concluded by the
business that support services obligations equate to 20% of the software license fee.
For non-hosted programme management software, enhanced support services may also be provided, which can include
onsite services and/or training. Enhanced support services are either provided based for a fixed number of hours or
on demand based on time and materials. Where enhanced support is purchased based on a fixed number of hours, the
customer receives and consumes the benefits as the Group performs. Revenue is recognised over time as the hours are
consumed by the customer. Where enhanced support is purchased on demand, revenue is recognised over time based on
an input method i.e. time incurred.
44
Financial Statements
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.
2.5 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.
2.6 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 that intend to settle simultaneously.
R&D tax credits
Companies within the Group have made claims for R&D tax credits under the large company Research and Development
Expenditure Credit (“RDEC”) Scheme and under the SME R&D scheme.
The income tax recoverable in respect of R&D cash tax credits is based upon management estimates, judgements and
assumptions considered reasonable at the time but the actual income tax recoverable may differ from those estimates.
2.7 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.
45
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
2. Summary of significant accounting policies (CONTINUED)
The trading results of Group undertakings are translated into pounds sterling on a monthly basis at the average monthly
exchange rate. The assets and liabilities of overseas undertakings, including goodwill and fair value adjustments arising
on acquisition, are translated at the exchange rates prevailing at the transaction date or date of valuation. Exchange
adjustments arising from the retranslation of the opening net assets, and from the translation of the profits or losses at
average rates, are recognised in other comprehensive income.
2.8 Financial instruments
Financial assets and liabilities are recognised in the Statement of Financial Position when a member of the Group becomes
party to the contractual provisions of the instrument.
Financial assets
Financial assets are classified according to the business model within which the asset is held and the contractual cash-flow
characteristics of the asset.
All financial assets are classified at amortised cost.
Financial assets at amortised cost
The Group’s financial assets at amortised cost comprise trade receivables, loans, other receivables and cash and
cash equivalents.
Financial assets at amortised cost are initially recognised at fair value including any directly attributable costs. They are
subsequently measured at amortised cost using the effective interest method, less any impairment. No interest income is
recognised on financial assets measured at amortised cost, with the exception of cash and cash equivalents, as all financial
assets at amortised cost are short-term receivables and the recognition of interest would be immaterial. Financial assets
are derecognised when the contractual right to the cash flows from the asset expire.
Trade and other receivables
Trade and other receivables are initially recorded at the fair value of the amount receivable and subsequently measured
at amortised cost using the effective interest method, less any provision for impairment. Other receivables also represent
client money required to meet settlement obligations.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, on demand deposits with banks and other short-term highly liquid
investments with original maturities of three months or less.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected
loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables are
considered on an individual basis due to the differing nature of complexity and scope of the contracts the Group enters into
with its customers. Where balances are unpaid, the Group will engage with customers to understand the circumstances,
and where these are considered unlikely to be resolved, will consider the debt to be in default.
The carrying amount of the financial assets is reduced by the use of a provision. When a trade receivable is considered
uncollectable, it is written off against the provision. Subsequent recoveries of amounts previously written off are credited
against the provision. Changes in the carrying amount of the provision are recognised in the Income Statement.
The Group has chosen to take advantage of the practical expedient in IFRS 9 when assessing default rates over its portfolio
of trade receivables and contract assets, to estimate the expected credit loss (“ECL”) based on historical default rates
specific to groups of customers by type of service offering. Each individual trading entity within the Group has a unique
service offering and as such are considered separate to each other.
At each reporting date, factors considered as part of the assessment of the expected credit loss provision for each entity
include historical default rates, current and expected future economic conditions at the time of assessment such as the
ongoing impact of COVID-19 and changes in announced government funding, changes in credit risk, as well as review of
cash receipts received post period end. Changes in the ECL provision are recognised in profit or loss.
Entities within the Group do not have a history of significant credit losses and as such generalised loss rates are not applied
to each entity. To assess potential credit losses, the Group assesses each entity individually and recognises expected credit
losses where specific knowledge of particular customers suggests it is appropriate to do so. Given the low levels of credit
losses, which have been historically incurred, the Group does not define customer default based on debtors reaching a
defined level of ageing. Instead, regular communication with customers and consideration of the various factors mentioned
above will drive the Group’s assessment of whether default is likely, and an expected credit loss should be recognised.
46
Financial Statements
Reviews for specific expected credit losses are assessed at each reporting date and recognised when the Group definition
of default has been met.
The same approach as outlined above is also applied to ad hoc other receivables as they arise.
Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into.
2.9 Business combinations and goodwill
The acquisition method of accounting is used for business combinations.
The consideration transferred for an acquisition is the sum of the acquisition date fair values of the assets transferred,
value of goodwill and any contingent consideration, less the amount of non-controlling interest in the acquiree.
On acquisition, the financial assets acquired, and liabilities assumed have been assessed for appropriate classification and
designation in accordance with the contractual terms, economic conditions, in addition to assessment of the acquiree’s
operating or accounting policies and other pertinent conditions in existence at the acquisition date.
Each business combination, which includes non-controlling interest in the acquiree, is measured at either fair value or at
the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit
or loss.
Where the business combination is achieved in stages, the consolidated entity re-measures its previously held equity
interest in the acquiree and the difference between the revised fair value and the previous carrying amount is recognised in
profit or loss.
Contingent consideration to be paid by the acquirer is recognised at the acquisition-date at fair value. Subsequent changes
in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent
consideration classified as equity is not re-measured and its subsequent settlement is accounted for within equity.
Where additional consideration may be payable in cash on delivery by the vendors of certain transition activities within
specified timeframes following completion of the acquisition, this amount is considered to be a financial instrument and is
expensed in the Group’s Income Statement over the specified timeframe, in line with IFRS 3 (paragraph 58).
The difference between the acquisition date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the
fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and recognises additional assets or liabilities during the measurement period based on new
information obtained about the facts and circumstances that existed at the acquisition date. The measurement period ends
on either the earlier of (i) 12 months from the date of the acquisition; or (ii) when the acquirer receives all the information
possible to determine fair value.
Goodwill arising on a business combination is carried at cost as established on the date of acquisition less accumulated
impairment losses, if any.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of profit or loss on disposal.
47
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
2. Summary of significant accounting policies (CONTINUED)
2.10 Research and development
Expenditure incurred on research and development is distinguished as relating either to a research phase or to a
development phase. All research phase expenditure is charged to the Income Statement. Development expenditure is
recognised as an internally generated intangible asset only if it meets strict criteria, relating in particular to technical
feasibility and generation of future economic benefits.
More specifically, development costs are capitalised from the point at which all of the following conditions have been met:
•
The technical feasibility of completing the programme and the intention and ability (availability of technical, financial
and other resources) to complete the programme asset and use or sell it;
•
The probability that future economic benefits will flow from the programme asset;
•
The availability of adequate technical, financial and other resources to complete the development and to use or sell the
programme asset; and
•
The ability to measure reliably the expenditure attributable to the programme asset during its development.
Capitalisation continues until the point at which the asset meets its originally contracted technical specification. This is
defined internally as the point at which the asset is capable of operating in the manner intended by management.
Subsequent expenditure is capitalised where it enhances the functionality of the asset and demonstrates an enhanced
economic benefit to the Group. All other subsequent expenditure on assets is expensed as incurred.
Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit, being their
finite life of 5-years.
2.11 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 three and five years.
2.12 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 and intellectual property rights
10–20 years
Capitalised development
5 years
Customer relationships
8–12 years
Trade name
10–16 years
Order backlog
2–3 years
Computer software
3 years
Internally developed software
5 years
Estimated useful lives and amortisation methods 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.
2.13 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
33% per annum
Office furniture and fittings
20% per annum
Plant and machinery
10% to 20% per annum
Motor Vehicles
25% per annum
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
48
Financial Statements
2.14 Impairment of non-financial assets
Goodwill has an indefinite useful life and is not subject to amortisation and is tested annually for impairment, or more
frequently if events or changes in circumstances indicate that it might be impaired. Other non-financial assets are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
2.15 Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:
•
The contract involves the use of an identified asset either explicitly or implicitly and should be physically distinct or
represent substantially all of the capacity of a physically distinct asset;
•
The Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the
period of use; and
•
The Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights
that are most relevant to changing how and for what purpose the asset is used.
This policy is applied to contracts entered into, or changed, on an ongoing basis.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
the underlying asset, less any lease incentive received.
The Group was not able to determine the interest rate implicit in the leases, and so has been determined based on research
into external borrowing rates attached to available financing for similar asset purchases.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of less than 12
months and leases of low value assets. Instead, the Group recognises the lease payments associated with these leases as
an expense on a straight-line basis over the lease term.
Where extension options are available, these are accounted for as part of the recognition of a right of use asset and lease
liability if it is reasonably certain that the extension will be taken up at time of assessment, and the extension term is
defined. Otherwise, any extension subsequently taken up is treated as a new lease when it is exercised.
Depreciation on right-of-use lease assets is charged on a straight-line basis over the shorter of the term of the lease and
useful economic life and is recognised in profit or loss.
Interest expense on the lease liability is recognised in profit or loss within finance costs.
2.16 Inventories
Inventories and work in progress are valued at the lower of cost and net realisable value. Cost comprises direct materials
and, where applicable, direct labour costs and those direct overheads that have been incurred in bringing the inventories to
their present location and condition. Net realisable value represents the estimated selling prices less all estimated costs to
completion and costs to be incurred in marketing, selling and distribution.
2.17 Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, investments in money-market funds. 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.
49
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
2. Summary of significant accounting policies (CONTINUED)
2.18 Borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Subsequent
recognition will be net of any cash payments made to settle in part or in full in line with the original agreement with the lender.
Finance charges, including premiums payable on settlement or redemption and direct issues costs are accounted for on an
accruals basis in the Income Statement using the effective interest rate method and are disclosed within accruals to the
extent they are not settled in the period.
2.19 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.
2.20 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.
2.21 Share-based payments
The Group provides share-based payment arrangements to certain employees. These are equity-settled arrangements and
are measured at fair value at the date of grant.
Fair value is determined using the Black-Scholes option pricing model that takes into account the exercise price, the term
of the option, the impact of dilution, the share price at the grant date and expected price volatility of the underlying share,
the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions
that determine whether the Group receives the services that entitle the employees to receive payment.
The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of the modification.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
50
Financial Statements
2.22 Assets held for sale
Assets held for sale are assets previously classified as non-current, which are expected to be sold rather than held for
continuing use. These have principally arisen as part of the Group’s review of its structure and strategy.
Assets held for sale have not been sold at the reporting date but are being actively marketed for sale, with a high
probability of completion within 12 months of their classification as held for sale.
2.23 Discontinued operations
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly
distinguished from the rest of the Group and which:
•
Represents a separate major line of business or geographic area of operations;
•
Is part of a single coordinated plan to dispose of a separate major line of business or geographic area of operations; or
•
Is a subsidiary acquired exclusively with a view to re-sale.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be
classified as held-for-sale.
When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is
re‑presented as if the operation had been discontinued from the start of the comparative year.
2.24 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.
2.25 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%.
51
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
3. Discontinued operations
Following review of the Group’s strategy as noted in the market release dated 1 November 2021, Westek Technology
Limited ("Westek"), Sapienza Consulting Holdings BV, including its subsidiaries ("Sapienza") and the Group’s Northstar
operations have been identified as assets held for sale in line with IFRS 5 Assets Held for Sale and Discontinued Operations.
Westek makes up a significant percentage of the Engineering business segment’s revenue and operating result, and a
material percentage of Group’s operating result and net assets. Furthermore, the business represents the Group’s entire
ruggedised electronics business and, therefore, represents a major line of business.
Sapienza makes up a significant percentage of the Consulting business segment’s revenue, operating result and net assets.
Furthermore, the business represents:
•
The Group’s entire manpower activity in Europe
•
The Group’s entire mainland European legal and people infrastructure
•
The Group’s entire business for the document management software, Eclipse
Northstar is a significant part of the Group’s software operations in terms of revenue and adjusted operating profit/(loss).
The balance of the software operations is the Eclipse software suite of products sold by Sapienza. Eclipse and Northstar
are both being disposed of as part of the revised strategy, closing the Group’s software business in its entirety.
The financial performance and cash flow information for these discontinued operations, including the discontinued
operations of TPG Engineering Limited, disposed of on 29 October 2020, is as follows:
2021
£’000
2020
£’000
Revenue
18,674
22,174
Cost of sales
(15,500)
(17,908)
Gross profit
3,174
4,266
Administrative expenses
(4,998)
(8,946)
Impairment
(10,572)
(4,106)
Operating loss
(12,396)
(8,786)
Net finance cost
(63)
(114)
Loss before taxation
(12,459)
(8,900)
Taxation credit
1,321
333
Loss after taxation for the year from discontinued operations
(11,138)
(8,567)
Loss on disposal of discontinued operations
–
(596)
Loss for the period from discontinued operations (attributable to equity holders of the
company)
(11,138)
(9,163)
Loss per share from discontinued operations (pence per share):
Basic loss per share (pence per share)
(1.43)
(1.18)
Diluted loss per share (pence per share)
(1.43)
(1.18)
Cash flows from / (used in) discontinued operations:
Net cash flows from operating activities
(1,120)
2,248
Net cash flows from investing activities
(546)
(1,035)
Net cash flows from financing activities
(217)
(1,250)
Effects of exchange rates on cash and cash equivalents
(10)
61
Net decrease in cash generated by discontinued operations
(1,893)
24
52
Financial Statements
The following assets and liabilities were classified as held for sale in relation to the discontinued operations as at
31 December 2021:
Group
2021
£’000
Assets classified as held for sale
Other intangible assets
1,482
Property, plant and equipment
137
Right-of-use assets
500
Inventory
303
Trade receivables
4,450
Amounts due from contract customers
1,298
Total assets of disposal group held for sale
8,170
Liabilities directly associated with assets classified as held for sale
Trade creditors
584
Other creditors and accruals
1,123
Amounts due to contract customers
3,506
Taxation
15
Lease liabilities
663
Deferred tax liability
270
Provisions
165
Total liabilities of disposal group held for sale
6,326
Parent
2021
£’000
Assets classified as held for sale
Investments
3,662
Intercompany receivables
3,130
Total assets of disposal group held for sale
6,792
Liabilities directly associated with assets classified as held for sale
Intercompany payables
150
Total liabilities of disposal group held for sale
150
53
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
4. Segmental information
The Group’s segmental reporting shows the performance of each operating businesses separately from the central costs
that remain unallocated. The segments have been renamed at the end of 2021 following the revised strategy announced
1 November 2021, which confirmed the Group would focus on its UK businesses including Maritime, UK Consulting
and Osprey.
•
Engineering, which previously included both the Group’s life support systems business (TPG Maritime Limited) and its
ruggedised electronics business (Westek Technology Limited), has been renamed TPG Maritime. This segment now only
includes TPG Maritime Limited, with Westek Technology Limited (“Westek”) classified as an asset held for sale and being
reported as a discontinued operation.
•
The TPG Services business segment (formerly named Consulting) provides specialist services to enable our clients to
transform their enterprise and evolve their systems and services. This segment now excludes Sapienza Consulting
Holdings BV and its subsidiaries (“Sapienza”) as this is also classified as held-for-sale and reported as discontinued
operations. The renaming to TPG Services more accurately reflects the substance of this business, excluding Sapienza.
Software Digital Solutions business unit is no longer applicable because it has been classified as discontinued.
Financial information is provided to the chief operating decision maker (“CODM”) in line with this structure.
The segmental analysis is reviewed to operating profit. Other resources are shared across the Group.
Continuing Operations:
2021
£’000
2020
(restated)
£’000
Revenue
TPG Maritime
18,459
18,783
TPG Services
25,796
19,890
Group revenue
44,255
38,673
Operating result
TPG Maritime
(4,393)
(165)
TPG Services
1,354
298
Central unallocated costs
(4,461)
(3,421)
Group loss from operations
(7,500)
(3,288)
Finance cost
(450)
(301)
Loss before tax
(7,950)
(3,589)
Taxation credit/(charge)
59
(9)
Loss after tax
(7,891)
(3,598)
Revenue reported above represents revenue generated from external customers.
Continuing Operations:
TPG Maritime
£’000
TPG Services
£’000
Central
unallocated
costs
£’000
Group
£’000
2021
Operating result
(4,393)
1,354
(4,461)
(7,500)
Depreciation, amortisation and impairment
1,840
1,008
281
3,129
Acquisition-related costs
–
–
(40)
(40)
Exceptional operating costs
86
–
1,789
1,875
Gain on disposal of assets
–
(23)
–
(23)
Share-based payments
–
–
164
164
Movement in expected earn-out payments
–
–
830
830
Adjusted operating profit/(loss)
(2,467)
2,339
(1,437)
(1,565)
54
Financial Statements
Continuing Operations (restated):
TPG Maritime
£’000
TPG Services
£’000
Central
unallocated
costs
£’000
Group
£’000
2020
Operating result
(165)
298
(3,421)
(3,288)
Depreciation, amortisation and impairment
1,223
692
346
2,261
Acquisition-related costs
–
–
1,035
1,035
Exceptional operating costs
104
25
209
338
Share based payments
–
–
98
98
Movement in expected earn-out payments
–
–
479
479
Adjusted operating profit / (loss)
1,162
1,015
(1,254)
923
Geographical analysis
Non-current assets by geographical area are as follows:
2021
£’000
2020
(restated)
£’000
United Kingdom
15,392
21,868
Europe excluding United Kingdom
–
10,659
Total non-current assets
15,392
32,527
5. Revenue
The Group’s main revenue streams are disclosed in note 4 above.
For the purposes of the analysis of revenue, geographical markets are defined as the country or area in which the client
is based.
5.1 Primary geographic markets
2021
£’000
2020
(restated)
£’000
United Kingdom
41,326
33,318
Europe
524
2,999
Rest of the World
2,405
2,356
Total revenue
44,255
38,673
5.2 Analysis by industry
Continuing operations
2021
£’000
2020
(restated)
£’000
Revenue
Defence
35,818
34,132
Aerospace
7,540
4,355
Energy
897
186
Total revenue
44,255
38,673
55
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
5. Revenue (CONTINUED)
5.3 Information about major customers
Revenue includes sales from customers who contributed 10% or more to the Group’s revenue:
2021
£’000
2020
(restated)
£’000
Customer 1
19,426
14,493
Customer 2
5,115
3,470
Customer 3
3,565
2,717
Total revenue
28,106
20,680
5.4 Contract balances
Changes in the contract assets and liability balances during the period are as follows:
Group
2021
£’000
2020
(restated)
£’000
Contract assets
Brought forward at 1 January
7,391
10,042
Contract asset reclassified as a receivable
(4,003)
(4,923)
Revenue recognised as contract assets
5,158
7,866
Disposal of subsidiary
–
(4,770)
Classified as held for sale
(2,371)
–
Effect of changes in measurement of progress/estimate of transaction price/contract
modification
(576)
(824)
Carried forward at 31 December
5,599
7,391
Contract liabilities
Brought forward at 1 January
5,554
10,228
Revenue recognised in the year and included in opening balance
(1,355)
(6,059)
New cash received/revenue deferred
1,341
5,073
Disposal of subsidiary
–
(3,890)
Classified as held for sale
(3,393)
–
Effect of changes in measurement of progress/estimate of transaction price/contract
modification
3,026
202
Carried forward at 31 December
5,173
5,554
The nature of the business activities of the Group requires contracts with customers with terms spanning several years
and as such either cash is received in advance or revenue accrued based on milestones being met based on contract terms
in place. More applicable to the Engineering business, adjustments may be made depending on reassessment of project
progress during the year, which may result in the timeframe to achieve particular milestones of a particular project being
moved back or forward in agreement with the customer. The nature of the work required as part of the contract may be
changed after work is commenced and so may impact on the agreed pricing and timing of invoices to be raised, which will
also have an effect.
The nature of the TPG Services business where contracts are generally shorter in nature, and invoices are raised on a
regular basis in line with contractual terms results in high levels of amounts due from customers brought forward being
converted into invoices raised during the first month of the following financial period.
Amounts brought forward at the start of the financial period may be carried forward into the following financial period
depending on the progress achieved during the current reporting period, in line with timeframes agreed with the
customer concerned.
Amounts due to contract customers of £5,173,000 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 2022 financial year.
56
Financial Statements
6. Research and development
Group
2021
£’000
2020
£’000
Expenditure in the year
192
1,014
Capitalised as intangible assets – software
(142)
(1,014)
Impairment of intangible assets
571
–
Amortisation of capitalised costs
51
77
Net cost recognised in the income statement
672
77
7. Operating expenses
7.1 Operating loss
The Group operating loss for continuing operations for the year is stated after charging the following:
2021
£’000
2020
(restated)
£’000
Loss on disposal of subsidiary
–
596
Cost of inventories recognised as an expense in Cost of Sales (note 16)
13,019
8,174
Amortisation of intangible assets (note 13)
1,683
1,406
Impairment of intangible assets
571
–
Depreciation of property, plant and equipment and right-of-use assets (notes 14 and 22)
883
858
Impairment of trade receivables
333
21
Share-based payment expense1
164
98
Net losses on foreign currency translation
(20)
80
1 Share-based payment expense arises from transactions accounted for as equity-settled share-based payment transactions and are non-cash in nature.
7.2 Auditor’s remuneration
2021
£’000
2020
(restated)
£’000
Fees payable to the Company’s auditor for the audit of the Company’s annual
financial statements
179
75
Fees payable to the Company’s auditor for the audit of the Company’s subsidiaries
(2021 includes £242,000 in respect of the prior year audit)
413
155
Total fees payable for audit services
592
230
Fees payable to the Company’s auditor for other services:
Corporation tax compliance services
7
30
Audit related assurance services
4
–
Tax advisory services
25
139
Valuation services
–
126
Due diligence services
–
76
Training services
–
23
Total fees payable to the Company’s auditor
628
624
57
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
8. Employee information
8.1 Employment costs (Group)
2021
£’000
2020
£’000
Wages and salaries
21,138
22,503
Social security costs
2,583
2,567
Other pension costs
2,071
1,278
Employment related contingent consideration
830
479
Share-based payments
164
98
Group employment costs
26,786
26,925
Number
Number
Engineering
334
346
Business development
16
10
Administration
100
105
Average number of employees
450
461
Group employment costs for the year ended 31 December 2021 include wages and salaries of £7,728,000
(2020: £10,933,000), social security costs of £1,111,000 (2020: £1,204,000) and other pension costs of £757,000
(2020: £212,000) relating to discontinued operations.
Retirement benefits
The Group operates 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 £1,563,000 (2020: £1,278,000) represents contributions payable to these
plans by the Group at rates specified in the rules of the plans. As at 31 December 2021, contributions of £101,000 (2020:
£101,000) due in respect of the 2021 reporting period remained outstanding. The amounts were paid subsequent to the
end of the reporting period.
8.2 Employment costs (Parent Company)
2021
£’000
2020
£’000
Wages, salaries and benefits
2,666
2,429
Social security costs
332
336
Other pension costs
257
262
Share-based payments
164
98
Parent Company employment costs
3,419
3,125
Number
Number
Business development
2
3
Administration
24
27
Average number of employees
26
30
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 £257,000 (2020: £262,000) represents contributions payable to these
plans by the Parent Company at rates specified in the rules of the plans. As at 31 December 2021, contributions of £14,000
(2020: £28,000) due in respect of the 2021 reporting period remained outstanding. The amounts were paid subsequent to
the end of the reporting period.
58
Financial Statements
8.3 Key management personnel
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 24 to 25.
2021
£’000
2020
£’000
Wages and salaries
650
728
Pay in lieu of notice
641
–
Contributions to defined contribution pension schemes
27
32
Social Security costs
118
101
Other benefits
44
72
Share-based payments
19
68
Total key management remuneration
1,499
1,001
9. Net finance cost
Group
2021
£’000
2020
(restated)
£’000
Interest recognised on lease contracts
(127)
(147)
Bank interest paid
(163)
(154)
Other interest paid
(10)
–
Loan arrangement fees
(150)
–
Finance expense
(450)
(301)
Net finance expense
(450)
(301)
10. Taxation
10.1 Tax charge
The tax charge/(credit) comprises:
Group
2021
£’000
2020
£’000
Current tax (credit)/charge for the year
(25)
262
Adjustments in respect to prior year
(3)
(321)
Current tax
(28)
(59)
Deferred tax arising on amortisation of acquired intangibles
(31)
(52)
Deferred tax arising on intangibles
–
120
Deferred tax
(31)
68
Tax (credit)/charge from continuing operations
(59)
9
Tax (credit) from discontinued operations
1,321
333
59
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
10. Taxation (CONTINUED)
The tax credit for the period is lower than (2020: lower than) the standard rate of corporation tax in the UK of 19%
(2020: 19%). The differences are explained as follows:
10.2 Tax reconciliation
Group
2021
£’000
2020
£’000
Loss on ordinary activities before tax including discontinued operations
(20,409)
(12,489)
Loss on ordinary activities at the standard rate of corporation tax in
the UK of 19% (2020: 19%)
(3,878)
(2,373)
Effects of:
Expenses not deductible for tax purposes
2,619
1,387
Income not taxable
(37)
(194)
Other timing differences
(1,724)
214
Share-based payments
–
18
Deferred tax arising on intangibles
–
120
Adjustment to deferred tax in respect to change in tax rates
374
366
Deferred tax not recognised
1,123
689
Effect of overseas tax rates
–
(21)
Adjustment in respect of prior years
143
(530)
Tax credit for the year
(1,380)
(324)
10.3 Deferred tax
Group
2021
£’000
2020
£’000
At 1 January
3,001
2,738
Disposal of subsidiary
–
(29)
Arising on business combination
–
321
Credit to comprehensive income
(1,353)
(73)
Classified as held-for-sale
(270)
–
Effect of movements in exchange rates
25
44
At 31 December
1,403
3,001
The deferred tax liability brought forward on 1 January 2021 arose in respect of intangible assets acquired on the acquisition
of TPG Maritime Limited, ALS Technologies Limited and Flexible Solutions Software Limited on 6 February 2017, Polaris
Consulting (Holdings) Limited on 12 December 2017, Westek Technology Limited on 2 November 2018, Sapienza Consulting
Holdings B.V. on 30 April 2019, Lift BV on 28 June 2019 and Osprey Consulting Services Limited on 25 August 2020.
At the reporting date, the Group has approximately £26.7m (2020: £18.6m) of unrelieved tax losses for offset against
future taxable profit. There are no expiry dates on these unrelieved tax losses. No deferred tax asset has been recognised
in respect of these losses. TPG Design & Technology Limited created £17.9m (2020: £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.
The deferred tax balances as at 31 December 2021 are measured at 25% as the increase to the main rate of corporation
tax to 25% from April 2023 announced in the March 2021 Budget was substantively enacted on 24 May 2021.
60
Financial Statements
11. Earnings per share
The calculation of basic earnings per share for the year ended 31 December 2021 is based upon a loss after tax of
£18,630,000 (2020 (restated): loss after tax of £12,761,000) and a weighted average number of shares of 779,178,719
(2020: 779,178,719). Further split between continued and discontinued operations is shown in the table below.
Numerator
Continuing
operations
2021
£’000
Discontinued
operations
2021
£’000
Total
2021
£’000
Continuing
operations
2020
(restated)
£’000
Discontinued
operations
2020
(restated)
£’000
Total
2020
(restated)
£’000
Loss for the year used
in basic EPS
(7,891)
(11,138)
(19,029)
(3,598)
(9,163)
(12,761)
Loss for the year used
in diluted EPS
(7,891)
(11,138)
(19,029)
(3,598)
(9,163)
(12,761)
Denominator
‘000
‘000
‘000
‘000
‘000
‘000
Weighted average number of
shares used in basic EPS
779,179
779,179
779,179
779,179
779,179
779,179
Weighted average number of
shares used in diluted EPS
779,179
779,179
779,179
779,179
779,179
779,179
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.
12. Goodwill
Group
£’000
Cost and net book value
At 1 January 2020
9,161
Acquired through business combination
556
Impairment
(1,778)
Effect of movements in exchange rates
152
At 31 December 2020
8,091
Impairment
(3,567)
Effect of movements in exchange rates
(186)
At 31 December 2021
4,338
Goodwill arose on the acquisition of TPG Maritime Limited on 5 April 2012, of Polaris Consulting (Holdings) Limited
on 12 December 2017, of Westek Technology Limited on 2 November 2018, of Sapienza Consulting Holdings B.V. and
subsidiary companies on 30 April 2019, the increase in its shareholding in Lift B.V. from 33% to 69% on 30 June 2019,
on the acquisition of Osprey Consulting Services Limited on 25 August 2020, and also on consolidation of Osprey’s
subsidiary GCAP Limited, having previously been acquired by Osprey in December 2017.
In accordance with the requirements of IAS 36, Impairment of Assets, goodwill is allocated to the Group’s cash-generating
units, or groups of cash-generating units, which are expected to benefit from the synergies of the business combination
that gave rise to the goodwill as analysed in the table below:
2021
£’000
2020
£’000
TPG Maritime Limited
3,316
3,316
Polaris Consulting (Holdings) Limited
468
468
Westek Technology Limited
–
904
Sapienza Consulting Holdings B.V and subsidiaries
–
2,849
Osprey Consulting Services Limited
554
554
At 31 December
4,338
8,091
In line with IFRS 5, Goodwill on the acquisition of Westek Technology Limited, Lift BV and Sapienza Consulting Holdings B.V
and subsidiaries has been re-classified as "assets held for sale". Immediately before reclassification as held for sale, the
related goodwill was tested for impairment and impairments recognised.
61
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
12. 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 five-year budgeted cash flows, and
extrapolated cash flows thereafter based on estimated terminal growth rates of 1.5% (2020: 1.5%).
Cash flows are based on 2022 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 include a pre-tax discount rate of 10.7% (2020: 10.7%).
Management has assessed TPG Maritime, combined TPG Services and Polaris Consulting (Holdings) and Osprey Consulting
Services Limited as identifiable cash generating units. Prudent revenue growth assumptions of 2% have been used. Cost
increase assumptions, which are running ahead of revenue growth assumptions of 5% in the near term reducing to 3% in
later years have been applied. Impairment tests have been performed with significant headroom noted. Further sensitivities
have been run with profit for all businesses set lower than prior period actuals, which still provides significant headroom.
13. Other intangible assets
Group
Technical
know–
how and
intellectual
property
rights
£’000
Capitalised
development
£’000
Customer
relationships
£’000
Trade
name
£’000
Order
backlog
£’000
Computer
software
£’000
Internally
developed
software
£’000
Total
£’000
Cost
At 1 January 2020
12,970
–
11,738
930
953
453
1,854
28,898
Additions
–
610
–
–
–
119
830
1,559
Acquired through
business combination
–
–
1,133
169
552
–
12
1,866
Disposal
(498)
–
(324)
(171)
–
(5)
–
(998)
Effect of movements in
exchange rates
–
–
214
19
36
–
50
319
At 31 December 2020
12,472
610
12,761
947
1,541
567
2,746
31,644
Additions
–
142
–
–
–
–
822
964
Re-classified as held
for sale
(731)
(130)
(6,979)
(504)
(924)
–
(3,405)
(12,673)
Disposal
–
–
–
–
–
(320)
(20)
(340)
Effect of movements in
exchange rates
–
–
(388)
(35)
(65)
–
(143)
(631)
At 31 December 2021
11,741
622
5,394
408
552
247
–
18,964
Accumulated
amortisation
At 1 January 2020
6,645
–
1,742
224
318
276
227
9,432
Charge for year
856
–
1,221
89
556
84
379
3,185
Impairment
–
–
143
4
–
–
201
348
Disposal
(498)
–
(324)
(171)
–
–
–
(993)
Effect of movements in
exchange rates
–
–
14
1
12
–
12
39
At 31 December 2020
7,003
–
2,796
147
886
360
819
12,011
Charge for year
856
78
1,283
95
349
80
484
3,225
Impairment
421
571
5,045
533
–
–
1,004
7,574
Re-classified as held
for sale
(652)
(27)
(6,979)
(504)
(924)
–
(2,261)
(11,347)
Disposal
–
–
–
–
–
(275)
(275)
Effect of movements in
exchange rates
–
(82)
(9)
(65)
–
(46)
(202)
At 31 December 2021
7,628
622
2,063
262
246
165
–
10,986
Net Book Value
At 31 December 2020
5,469
610
9,965
800
655
207
1,927
19,633
At 31 December 2021
4,113
–
3,331
146
306
82
–
7,978
62
Financial Statements
Technical know-how and intellectual property rights 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
2021, this technical know-how had a net book value of £4,113,000, and a remaining useful life of 12 years.
Intangible assets consisting of customer relationships brought-forward as at 1 January 2021 also include those arising
from the acquisition of ALS Technologies Limited (now TPG Services Limited) and Flexible Solutions Software Limited on
6 February 2017, Polaris Consulting (Holdings) Limited on 12 December 2017, Sapienza Consulting Holdings B.V. and
subsidiaries on 30 April 2019 and Osprey Consulting Services Limited on 25 August 2020. These assets are amortised
on a straight-line basis over their useful life of ten years.
Customer relationships arising on the acquisition of Sapienza Consulting Holdings BV have been re-classified as
held‑for‑sale at the reporting date.
Computer software represents externally acquired computer software licenses and associated installation costs. Prior to
being classified as held-for-sale, internally developed software was 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
Computer
software
£’000
Total
£’000
Cost
At 1 January 2020
393
393
Additions
106
106
At 31 December 2020
499
499
Disposals
(320)
(320)
At 31 December 2021
179
179
Accumulated amortisation
At 1 January 2020
252
252
Charge for year
62
62
At 31 December 2020
314
314
Charge for year
66
66
Elimination on disposal
(275)
(275)
At 31 December 2021
105
105
Net book value
At 1 January 2020
141
141
At 31 December 2020
185
185
At 31 December 2021
74
74
63
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
14. Property, plant and equipment
Group
Computer
equipment
£’000
Office
furniture
and fittings
£’000
Plant and
machinery
and motor
vehicles
£’000
Total
£’000
Cost
At 1 January 2020
1,047
684
1,930
3,661
Additions
200
122
256
578
Acquired through business combinations
–
122
–
122
Disposals
(145)
(166)
(81)
(392)
Disposal of subsidiary
(182)
(37)
(1,720)
(1,939)
Effect of movements in exchange rates
5
5
–
10
At 31 December 2020
925
730
385
2,040
Additions
122
117
47
286
Disposals
(309)
(69)
–
(378)
Classified as held for sale
(162)
(170)
(16)
(348)
Effect of movements in exchange rates
(7)
(6)
–
(13)
At 31 December 2021
569
602
416
1,587
Accumulated depreciation
At 1 January 2020
439
270
879
1,588
Charge for year
320
185
204
709
Acquired through business combinations
–
83
–
83
Disposals
(145)
(165)
(78)
(388)
Disposal of subsidiary
(144)
(42)
(761)
(947)
Impairment
–
34
–
34
Effect of movements in exchange rates
1
(2)
–
(1)
At 31 December 2020
471
363
244
1,078
Charge for year
259
124
41
424
Disposals
(230)
(51)
–
(281)
Classified as held for sale
(120)
(85)
(14)
(219)
Effect of movements in exchange rates
(3)
(3)
–
(6)
At 31 December 2021
377
348
271
996
Net book value
At 1 January 2020
608
414
1,051
2,073
At 31 December 2020
454
367
141
962
At 31 December 2021
192
254
145
591
64
Financial Statements
Parent Company
Computer
equipment
£’000
Office
furniture
and fittings
£’000
Total
£’000
Cost
At 1 January 2020
153
120
273
Additions
41
–
41
At 31 December 2020
194
120
314
Additions
14
–
14
Disposals
(61)
–
(61)
At 31 December 2021
147
120
267
Accumulated depreciation
At 1 January 2020
88
28
116
Charge for year
42
40
82
At 31 December 2020
130
68
198
Charge for year
38
40
78
Elimination on disposal
(61)
–
(61)
At 31 December 2021
107
108
215
Net book value
At 1 January 2020
65
92
157
At 31 December 2020
64
52
116
At 31 December 2021
40
12
52
15. Investments
The Parent Company’s investments comprise interests in Group undertakings, details of which are listed below.
Parent Company
2021
£’000
2020
£’000
At 1 January
33,013
33,874
Investment in shares in Group undertakings
–
2,545
Impairment charge during the year
(9,644)
(3,406)
Classified as held for sale
(3,662)
–
At 31 December
19,707
33,013
For the Parent Company’s investments in TPG Maritime, combined TPG Services and Polaris Consulting (Holdings) and
Osprey Consulting Limited, prudent revenue growth assumptions of 2% have been used. Cost increase assumptions,
which are running ahead of revenue growth assumptions, of 5% in the near term, reducing to 3% in later years have been
applied. A pre-tax discount rate of 10.7% (2020: 10.7%) has been used. Impairment tests have been performed with
significant headroom noted for each of these investments. Further sensitivities have been run with profit for all businesses
set lower than prior period actuals, which still provides significant headroom.
The impairment in year of £9,644k, relates to the Parent Company’s investment in Sapienza Consulting Holdings BV and
Westek Technologies Ltd. Both businesses have been classified as "assets held for sale" and so the carrying value of the
investments have been impaired to the expected sales prices less fees.
65
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
15. 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
2021
2020
TPG Maritime Limited
1
United Kingdom £1.00 ordinary shares
100%
100%
1
TPG Design & Technology
Limited
1
United Kingdom £1.00 ordinary shares
100%
100% Dormant
TPG Services Limited
1
United Kingdom £0.01 ordinary shares
100%
100%
2
Polaris Consulting (Holdings)
Limited
1
United Kingdom £1.00 ordinary shares
100%
100%
2
Polaris Consulting Limited
1
United Kingdom £1.00 ordinary shares
100%
100%
2
Westek Technology Limited
1
United Kingdom £1.00 ordinary shares
100%
100%
3
TPG USA Inc.
2
United States
of America
$0.001 ordinary
shares
100%
100%
4
US Merger Corp Inc.
2
Unites States
of America
$0.001 ordinary
shares
100%
100%
4
Atmosphere Control
International Limited
1
United Kingdom £1.00 ordinary shares
100%
100% Dormant
Sapienza Consulting Holdings
B.V.
3
Netherlands
€0.01 ordinary shares
100%
100%
5
Sapienza Consulting B.V.
3
Netherlands
€100 ordinary shares
100%
100%
5
Sapienza Consulting Limited
4
United Kingdom €1.00 ordinary shares
100%
100%
5
Sapienza Consulting Gmbh
5
Germany
€12,500 ordinary
shares
100%
100%
5
Sapienza Consulting S.R.L.
6
Italy
100% of capital
100%
100%
5
AI Recruiting B.V.
7
Netherlands
€100 ordinary shares
100%
100%
5
Sapienza Balkans Holdings
B.V. 1,2
7
Netherlands
€1.00 ordinary shares
65%
65%
5
Sapienza Balkans Skopje
8
North
Macedonia
€20,000 ordinary
share
100%
100%
5
Lift B.V.
9
Netherlands
€0.01 ordinary shares
100%
100%
6
TP Group Sapienza France
SAS
10
France
€10 ordinary shares
100%
100%
5
Osprey Consulting Services
Limited
11
United Kingdom
£0.001 ordinary
shares
100%
100%
7
GCAP Limited
11
United Kingdom £1 ordinary shares
100%
0%
7
1 On 26 April 2022, the parent of Sapienza Balkans Holdings B.V., AI Recruiting BV, acquired the remaining 35% shareholding from the minority interest
for €15,000.
2 On 12th July 2022 TPG Design and Technology acquired the entire share capital of Sapienza Balkans Holdings B.V. from AI Recruiting BV for €43,000.
Principal activities:
1. Provision of air purification equipment for submarines including oxygen/hydrogen generation and purification, air
handling and distribution systems.
2. The provision of software and services including technical project management, systems engineering, design, software
development, artificial intelligence and assurance.
3. The provision of high-performance computer servers and ancillary equipment for the defence and commercial sectors.
4. Dissolved 25 April 2022.
5. A provider of workforce, engineering services and IT solutions to the space and defence sectors.
6. Ceased operation 31 December 2020.
7. The provision of consultancy services including safety and mission critical air space management, and regulation
services in the defence, space and urban air mobility markets.
66
Financial Statements
Registered office addresses
1. Cale House, Station Road, Wincanton, England, BA9 9FE, 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.
10. 4, Allée des Cormorans, 06150, Cannes, France
11. Suite 10, The Hub, Fowler Avenue, Farnborough Business Park, Farnborough, Hampshire, GU14 7JP, United Kingdom
16. Inventories
Group
2021
£’000
2020
£’000
Raw materials
170
893
Work in progress
246
524
416
1,417
The cost of inventories recognised as an expense during the year in respect of continuing operations was £13,019,000
(2020 restated): £8,174,000). The cost of inventories recognised as an expense during the year in respect of discontinued
operations (note 10) was £1,056,000 (2020 (restated): £4,279,000). This represents the expense recognised by TPG
Engineering Limited up to the date of disposal by the Group in October 2020 and Westek Technology Limited, which is held
for sale at the 31 December 2021. The cost of inventories recognised at the reporting date is not materially different to the
replacement cost.
17. Trade receivables and other assets
Group
Parent Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Current assets:
Trade receivables
3,814
7,995
–
–
Less: provision for impairment
(333)
(21)
–
–
Trade receivables – net
3,481
7,974
–
–
Other receivables
460
194
131
153
Amounts owed by subsidiary undertakings
-
–
220
936
Prepayments
571
2,100
205
223
4,512
10,268
556
1,312
Non-current assets:
Amounts owed by subsidiary undertakings
–
–
–
3,635
–
–
–
3,635
The carrying value of trade and other receivables is considered a reasonable approximation of fair value due to their
short‑term nature.
67
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
17. Trade receivables and other assets (CONTINUED)
The ageing of past due but not impaired receivables is:
Group
Parent Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
0–30 days
459
897
31–60 days
101
87
–
–
61–90 days
485
876
–
–
>90 days
–
39
1,045
1,899
–
–
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.
To assess potential credit losses, the Group has assessed each entity individually and recognised expected credit losses
where specific knowledge of particular customers suggests it is appropriate to do so. Given the low levels of credit losses,
which have been historically incurred, the Group does not define customer default based on debtors reaching a defined
level of ageing.
Instead, regular communication with customers and consideration of the various factors mentioned above will drive the
Group’s assessment of whether default is likely, and an expected credit loss should be recognised.
At each reporting date, factors considered as part of the assessment of the expected credit loss provision for each entity
include historical default rates, current and expected future economic conditions at the time of assessment, changes in
credit risk, as well as review of cash receipts received post period end. Changes in the expected credit loss provision are
recognised in profit or loss.
The movement in the expected credit loss provision is shown in the following table:
Group
2021
£’000
2020
£’000
Opening balance
21
141
New provision recognised, expensed to income statement
333
21
Provision reversed, credited to income statement
(21)
(136)
Provision utilised
–
(5)
Closing Balance
333
21
In 2021, rent deposits of £48,000 (2020: £48,000) due after more than one year are included within other debtors.
Trade receivables disclosed above are classified as assets measured at amortised cost. Credit terms are negotiated as part
of each individual contract. No interest is charged on the receivables from the date of the invoice. The Group does not hold
any collateral or other credit enhancements over any of its trade receivables nor does it have a legal right of offset against
any amounts owed by the Group to the counterparty.
The amounts due by subsidiary undertakings to the Parent Company do not give rise to any material expected credit loss.
18. Cash and cash equivalents
The funds were placed on floating interest rate deposit as follows:
Group
Parent Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Cash and bank balances
5,376
7,372
193
1,557
Cash and cash equivalents
5,376
7,3781
193
1,557
1 Restricted cash of £nil (2020: £6,000) is included in Prepayments and Other Debtors.
68
Financial Statements
19. Borrowings
Current
Non–current
Total
Group
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Secured:
Lease liabilities1
424
609
2,752
4,079
3,176
4,688
Bank Loan
–
–
7,000
7,000
7,000
7,000
424
609
9,752
11,079
10,176
11,688
1 The lease liabilities are fixed with repayment periods from 5 to 25 years. All leases are secured on the asset under lease.
The carrying value of all borrowings approximates to the fair value.
Current
Non–current
Total
Parent
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Secured:
Lease liabilities
58
116
27
207
85
323
Bank Loan
–
–
7,000
7,000
7,000
7,000
58
116
7,027
7,207
7,085
7,323
In March 2020, the Group entered into a £7.0m revolving loan facility (the “Facility Agreement”) with HSBC UK Bank plc.
In December 2021 and in conjunction with the Group securing a £5m loan facility from Science Group Plc (refer below), the
term on this credit facility was extended to September 2023 to be co-terminus with the Science Group loan. Furthermore,
the leverage covenant was increased to 3.75 times EBITDA from 2.0 times for the 12-month period through to December
2022. As a consequence, a cash flow covenant for the same period was introduced, which requires the Group to have at
least £3m of cash headroom at each month end including any undrawn HSBC Bank or Science Group Plc loan facility. In
addition, the margin was increased to 3%, up from a variable margin of between 2.25% and 2.75% dependent on the
amount of leverage. The interest cover covenant remained the same i.e. EBITDA must be at least four times the net finance
charges. The impact of IFRS 16 is excluded for the purposes of calculating leverage and finance charges. The Group has
been compliant with the facility agreement, including the covenants, throughout the financial period.
The Group’s loan facility is secured by way of an all-assets debenture, which contains fixed and floating charges over the
assets of the Group.
On 16 December 2021 the Company entered into a standby credit facility with its major shareholder Science Group plc.
The facility takes the form of a Revolving Credit facility of a sum up to £5 million for a period to 30 September 2023. The
terms of the facility, which reflect the unsecured standby revolving nature of the arrangement, include a set-up fee of 3%,
interest rate on drawn amounts of 1% per month and a rate of 0.4% per month of any undrawn amount, both subject to
the Sterling Overnight Index Average remaining below 1%. The facility can be cancelled or refinanced by TP Group at any
time and without penalty or early termination charges. The full £5m was undrawn at 31 December 2021.
69
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
20. Notes supporting statement of cash flows
Movements in items recognised in financing activities of the cash flow statement
Group
Continuing Operations:
Borrowings
(note 19)1
£’000
Lease liabilities
(note 22)
£’000
Total
£’000
Liability at 1 January 2021
7,000
4,688
11,688
Cash flows
–
(769)
(769)
Non-cash flows:
– Interest recognised
–
171
171
– New lease liabilities
–
206
206
– Early termination adjustment
(421)
(421)
– Classified as held-for-sale
–
(663)
(663)
– Effect of movements in exchange rates
–
(36)
(36)
Liability at 31 December 2021
7,000
3,176
10,176
Liability at 1 January 2020
–
6,451
6,451
Cash flows
7,000
(1,848)
5,152
Non-cash flows:
– Interest recognised
–
227
227
– New lease liabilities
–
280
280
– Disposal of subsidiary
–
(472)
(472)
– Effect of movements in exchange rates
–
50
50
Liability at 31 December 2020
7,000
4,688
11,688
1 Movements on borrowings for both 2020 and 2021 are the same for the Parent Company.
21. Trade payables and other liabilities
Group
2021
£’000
2020
(restated)
£’000
Trade payables
6,007
6,398
Accruals and deferred income
3,009
4,898
Other taxation and social security
1,620
2,105
Contingent consideration
402
466
Other creditors
116
522
11,154
14,389
Parent
2021
£’000
2020
£’000
Trade payables
525
408
Amounts owed to subsidiary undertakings
3,723
691
Accruals and deferred income
1,249
916
Other taxation and social security
708
922
Contingent consideration
402
466
Other creditors
15
28
6,622
3,431
70
Financial Statements
The carrying values of trade and other payables are considered to be a reasonable estimate of their fair values.
Group
Parent
2021
£’000
2020
(restated)
£’000
2021
£’000
2020
£’000
Trade and other payables are analysed as:
Financial instruments
9,534
12,284
5,914
2,509
Non-financial instruments
1,620
2,105
708
922
11,154
14,389
6,622
3,431
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 27 days (2020: 29 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 settled.
22. Leases
22.1 Right-of-use assets:
Group
Property, plant,
machinery
and motor
vehicles
£’000
Total
£’000
Cost
At 1 January 2020
7,101
7,101
Additions
203
203
Acquired through business combinations
189
189
Disposals
(166)
(166)
Disposal of subsidiary
(2,014)
(2,014)
Effect of movements in exchange rates
29
29
At 31 December 2020
5,342
5,342
Additions
215
215
Disposals
(529)
(529)
Classification as held for sale
(997)
(997)
Effect of movements in exchange rates
(17)
(17)
At 31 December 2021
4,014
4,014
Accumulated depreciation
At 1 January 2020
1,293
1,293
Charge for year
898
898
Acquired through business combinations
110
110
Disposals
(159)
(159)
Disposal of subsidiary
(644)
(644)
Effect of movements in exchange rates
3
3
At 31 December 2020
1,501
1,501
Charge for year
668
668
Disposals
(272)
(272)
Classification as held for sale
(385)
(385)
Effect of movements in exchange rates
17
17
At 31 December 2021
1,529
1,529
Net book value
At 1 January 2020
5,808
5,808
At 31 December 2020
3,841
3,841
At 31 December 2021
2,485
2,485
On 28 September 2021, TPG Services Limited entered into a four-year lease for a property in Bristol.
71
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
22. Leases (CONTINUED)
Parent Company
Property,
plant and
machinery
£’000
Total
£’000
Cost
At 1 January 2020
494
494
Additions
59
59
Disposal
(17)
(17)
At 31 December 2020
536
536
Additions
9
9
Disposal
(129)
(129)
Early termination adjustment
(131)
(131)
At 31 December 2021
285
285
Accumulated depreciation
At 1 January 2020
131
131
Charge for year
120
120
Disposal
(17)
(17)
At 31 December 2020
234
234
Charge for year
115
115
Disposal
(122)
(122)
At 31 December 2021
227
227
Net book value
At 1 January 2020
363
363
At 31 December 2020
302
302
At 31 December 2021
58
58
The depreciation charges in the tables above are included within administrative expenses in the Income Statement.
Right-of-use assets brought forward comprise property leases at Cody Technology Park, Farnborough for a period of three
years and Apex Plaza, Reading for a period of five years. The Company exited Cody, Technology Park Farnborough on
termination of the lease in September 2021. The Company has exited Apex Plaza, Reading, exercising the break clause on
the lease which terminated in March 2022.
72
Financial Statements
22.2 Lease liabilities
The Group uses leases to acquire plant, property and machinery. Future minimum lease payments for all equipment and
property are as follows:
Property
Motor Vehicles
Other Equipment
Total
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Future minimum
payments due:
Not later than one year
461
714
9
30
17
22
487
766
After one year but not
more than five years
1,346
2,191
1
21
32
48
1,379
2,260
After five years
1,896
2,519
–
–
–
–
1,896
2,519
Less finance charges
allocated to future periods
(583)
(850)
–
(2)
(3)
(5)
(586)
(857)
Present value of minimum
lease payments
3,120
4,574
10
49
46
65
3,176
4,688
The present value of minimum lease payments is analysed as follows:
Not later than one year
400
561
9
28
15
20
424
609
After one year but not
more than five years
1,028
1,756
1
21
31
45
1,060
1,822
After five years
1,692
2,257
–
–
–
–
1,692
2,257
3,120
4,574
10
49
46
65
3,176
4,688
The average lease term is five years. For the year ended 31 December 2021, the average effective borrowing rate was
4.52% (2020: 4.52%). 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.
Group
Parent
2021
£’000
2020
£’000
2021
£’000
2020
£’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
668
898
115
120
Total depreciation charge on leased assets
668
898
115
120
Interest expense for the year on lease liabilities recognised in
‘finance costs’
171
164
5
13
Effect of leases on cash flows:
Total cash outflow for leases in the year
769
1,848
113
203
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.
Both the Group and the Parent Company did not receive any rent concessions on any of leases active during the 12 months
to 31 December 2021.
Lease payments made in the year contained 100% (2020: 100%) fixed and 0% (2020: 0%) variable proportions.
73
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
23. Financial instruments
23.1 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:
2021
2020 (restated)
Group
Note
Amortised
cost
£’000
Financial
liabilities
£’000
Carrying
value
£’000
Amortised
cost
£’000
Financial
liabilities
£’000
Carrying
value
£’000
Financial assets:
Trade receivables
17
3,481
–
3,481
7,974
–
7,974
Other receivables
17
460
–
460
194
–
194
Cash and cash equivalents
18
5,376
–
5,376
7,372
–
7,372
9,317
–
9,317
15,540
–
15,540
Financial liabilities:
Trade and other payables
21
–
9,534
9,534
–
12,284
12,284
Lease liabilities
22
–
3,176
3,176
–
4,688
4,688
Bank Loan
–
7,000
7,000
–
7,000
7,000
–
19,710
19,710
–
23,972
23,972
The carrying amount of all financial assets and liabilities approximate to their fair value due to their short-term nature.
23.2 Financial risk factors
(a) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Liquidity needs are monitored on a weekly and monthly basis. The Group maintains a level of cash and cash equivalents,
bank and other finance servicing facilities deemed adequate by management to ensure as far as possible, that the Group
will have sufficient liquidity to meet its liabilities when they fall due.
The Group’s financial obligations consist of trade and other payables, lease liabilities and the bank loan, which are set out in
notes 19, 21 and 22.
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of
financial liabilities:
2021
2020
Group
Note
Within
1 year
£’000
Between
1 and 5 years
£’000
Over
5 years
£’000
Within
1 year
£’000
Between
1 and 5 years
£’000
Over
5 years
£’000
Trade and other payables
21
9,534
–
–
12,284
–
–
Amounts due to contract
customers
5
5,173
–
–
5,554
–
–
Lease liabilities
22
487
1,379
1,896
766
2,260
2,519
Loans and borrowings
19
151
7,000
–
151
7,000
–
2021
2020
Parent
Note
Within
1 year
£’000
Between
1 and 5 years
£’000
Over
5 years
£’000
Within
1 year
£’000
Between
1 and 5 years
£’000
Over
5 years
£’000
Trade and other payables
21
5,914
–
–
2,509
–
–
Lease liabilities
22
58
27
–
127
216
–
Loans and borrowings
19
151
7,000
–
151
7,000
–
74
Financial Statements
(b) Credit risk
The Group’s exposure to credit risk is attributable to its trade receivables and its amounts recoverable on contracts.
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 £333,000
(2020: £21,000).
(c) 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.
The Group is exposed to interest rate risk under the terms of the Facility Agreement. The Group will pay interest at a rate of
3% over SONIA on the amount drawn down from December 2021 to September 2023, when the Facility Agreement ends. A
1% rise or fall in the interest rate would not have a material impact on the profit for the financial period (2020: £nil).
The Group is also exposed to interest rate risk under the terms of the Science Group loan. The Group will pay interest at a
rate of 12% per annum fixed unless the SONIA rate gets above 1% per annum, on the amount drawn down and at a rate of
40% of the 12% per annum on any undrawn amount, from December 2021 to September 2023, when the loan agreement
ends. If the SONIA rate increases above 1% per annum, Science Group can pass this increase onto TP Group.
In aggregation, a 1% per annum increase in the SONIA rate on the Facility Agreement and the Science Group loan will incur
an additional £120k interest per annum assuming the Science Group loan was fully drawn so does not have a material
impact on the profit for any financial period.
(d) 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.
Foreign currency monetary assets and liabilities in respect of continuing operations at the reporting date are shown below:
2021
USD
£’000
Euro
£’000
Total
£'000
Financial assets
59
523
582
Financial liabilities
798
–
451
2020
USD
£’000
Euro
£’000
Total
£'000
Financial assets
4
32
36
Financial liabilities
122
48
170
All foreign currency denominated financial assets and liabilities are classified as current.
23.3 Capital management
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.
75
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
24. Provisions for liabilities and charges
Group
Warranty
£’000
Contract
£’000
Onerous
contract
provision
£’000
Legal provision
£’000
Property
£’000
Total
£’000
At 1 January 2021 (restated)
34
150
98
–
70
352
Released to income statement
(15)
(117)
–
–
–
(132)
Charged to income statement
–
28
194
200
12
434
Reclassified as held for sale
(19)
(28)
(47)
At 31 December 2021
–
33
292
200
82
607
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 contract provision relates to potential costs, which are required to be met by the Group as part of contracts, which
have been substantially completed, but could arise in the next couple of years.
Onerous contract provisions have been recognised where forecast costs to complete estimate losses, the majority of which
is expected to be recognised 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 11 years.
25. Share capital
2021
Number
2020
Number
2021
£’000
2020
£’000
Issued and fully paid:
Ordinary shares of 1 pence each
779,178,719
779,178,719
7,792
7,792
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 one 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.
26. Share-based payments
All of the Group’s existing share option schemes had expired by the end of 2020. The remaining granted options remain
live until they are either cancelled or lapse in line with the rules of the scheme. Share options have been granted by the
Parent Company. The share options granted by the Employee Benefit Trust have no dilutive effect on the Parent Company’s
share capital.
Number of options
Unapproved
scheme
number
EMI
scheme
number
Total
Number
At 1 January 2021
17,602,362
6,163,883
23,766,245
Granted during the year
23,375,361
–
23,375,361
Lapsed during the year
(7,760,037)
(1,428,571)
(9,188,608)
Cancelled during the year
(4,418,485)
(750,000)
(5,168,485)
At 31 December 2021
28,799,201
3,985,312
32,784,513
The exercise of options granted during 2014 and those granted to the directors during 2017 are subject to the satisfaction
of the applicable performance conditions. At 31 December 2021, 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.
76
Financial Statements
The movement on the Group’s share option scheme is summarised in the table below:
2021
Weighted
average exercise
price (pence)
2021
Number
of options
2020
Weighted
average exercise
price (pence)
2020
Number
of options
At 1 January
7.06
23,766,245
6.85
46,293,461
Lapsed during the year
7.00
(9,188,608)
7.90
(20,527,216)
Cancelled during the year
7.05
(5,168,485)
6.72
(2,750,000)
Granted during the year
5.80
23,375,361
6.13
750,000
At 31 December
6.17
32,784,513
7.06
23,766,245
Exercisable at 31 December
6.14
30,809,243
7.20
13,973,848
On 30th September 2021, the Company issued a warrant for 23,375,361 shares to Cenkos Securities Plc as consideration
for professional services. The fair value of the warrant has been estimated in line with the cost of similar services provided
to the business.
No share options were exercised during the year (2020: none). The options outstanding at 31 December 2021 had exercise
prices as shown in the following table and a weighted average remaining contractual life of 6.07 years.
At 31 December 2021, options over ordinary one pence 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 2021 was 4.70 pence and the range during the
year was between 3.18 pence and 7.30 pence.
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 £164,000 and £98,000 related to equity-settled share-based payment
transactions in 2021 and 2020 respectively. The expense recognised in respect of the warrant issued has been calculated
in line with the fair value of the services provided, had they been settled in cash.
Date of
grant
Number
Option
price
per share
pence
Closing
share
price
at grant
pence
Expected
Volatility
%
Risk–free
interest
rate
%
Fair value
per share
Pence
2012
166,667
10.00
9.50
36.28
0.51
1.73
2014
666,667
10.00
9.75
19.57
0.53
0.99
2017
1,425,818
7.00
7.25
56.89
0.66
3.26
2017
2,650,000
7.00
7.25
56.89
0.66
3.57
2018
750,000
6.50
6.50
56.89
0.66
3.57
2019
2,000,000
6.88
6.70
56.89
0.66
3.57
2019
1,000,000
6.70
6.70
56.89
0.66
3.57
2020
750,000
6.13
6.13
56.89
0.66
3.57
2021
23,375,361
5.80
5.35
48.30
0.70
3.23
32,784,513
Options granted up to and including 2020 expire ten years after the date of grant. The warrants issued in 2021 expire five
years after the date of grant.
The dividend yield of 0% in all cases reflects the absence of dividends and of a clear dividend policy statement at the
relevant dates of grant.
77
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021 CONTINUED
27. Employee Benefit Trust
The Employee Benefit Trust was terminated on 12 August 2021.
The Trust held 1,606,769 shares £0.01 each in the capital of the Company and had liabilities amounting to £600,000 in
the form of a loan from the Company to the Trust. The Company had impaired the loan in line with the market value of the
shares at 31 December 2020. Net funds received from the sale of the shares were deducted from the loan balance.
28. Contingent liabilities
As part of the Group’s long-term contract trading activities, £366,000 of performance and warranty bonds (2020:
£215,000) have been issued to two customers. Of this amount £nil has been cash backed (2020: £6,000) by the Group’s
cash resources and this balance sat within prepayments and other debtors.
29. Related party transactions
Key management personnel are represented by the Board of Directors, as shown on page 14.
During the year there were no material transactions or balances between the Group and its key management personnel or
members of their close families, other than the remuneration of the individual directors which is provided in the Directors’
Remuneration report on pages 24 to 25.
As noted in the Director Remuneration report Martyn Ratcliffe is the largest shareholder in Science Group plc with 20.73%.
Peter Bertram is a Non-executive Director of Science Group plc.
On 16 December 2021 the Company entered into a standby credit facility with its major shareholder Science Group plc.
Martyn Ratcliffe and Peter Bertram recused themselves from this process due to a conflict of interest. The facility takes
the form of a Revolving Credit facility of a sum up to £5 million for a period to 30 September 2023. The terms of the
facility, which reflect the unsecured standby revolving nature of the arrangement, include a set-up fee of 3%, interest rate
on drawn amounts of 1% per month and a rate of 0.4% per month of any undrawn amount, both subject to the Sterling
Overnight Index Average remaining below 1%. The facility can be cancelled or refinanced by TP Group at any time and
without penalty or early termination charges. The full £5m remains undrawn at 31 December 2021.
An interim management support service agreement was entered into with Science Group plc on 14th February 2022. Costs
for the services provided are £50,000 per quarter.
The Parent Company applies the exemptions provided for under FRS 101 not to disclose transactions with wholly owned
subsidiaries during the 2021 financial year.
Transactions between the Parent Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed.
30. Exchange rates
The following exchange rates have been used as part of the acquisition and consolidation accounting contained within
these financial statements:
2021
2020
Average Exchange Rate for the year1
Euro
1.16
1.13
Closing rate on 31 December1
Euro
1.19
1.11
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.
31. Controlling parties
In the opinion of the directors, there is no single controlling party.
78
Financial Statements
32. Prior period adjustment
Following an intensive review of contracts within the TPG Maritime business, it was found that forecast costs to completion
estimates were understated and contractual transaction prices were overstated as they did not include provision of late
delivery penalties where required under IFRS 15 at 31 December 2020. The above resulted in an overstatement of contract
revenue-to-date at 31 December 2020. Management considers this to be a material error in line with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors (paragraphs 41-43) and have corrected the prior period in line with
the requirements of the standard.
The principal accounting adjustments impacts on:
•
Increase in forecast costs to completion on contracts. Revenue is recognised overtime in line with IFRS 15 Revenue
Recognition using the input cost method. The increase in costs to completion has reduced revenue to be recognised
for the financial year ended 31 December 2020. The reduction in revenue reduces the amounts recoverable from the
customer at the reporting date.
•
Inclusion of late delivery penalties existing within contractual terms. As above, revenue is recognised over time in line with
IFRS 15. The impact of late delivery penalties reduces the amount of revenue to be recognised at the reporting date.
•
The increase in forecast costs to completion and late delivery penalties has resulted in the requirement to recognise
onerous contract provisions. The impact of the onerous contract provisions increases provisions at the reporting date.
No Statement of financial position at 31 December 2019 has been presented in accordance with IAS 1 Presentation of
Financial Statements as there was no material impact on the balance sheet at that date.
The impact on figures originally reported in the financial statements for the year ended 31 December 2020 is shown below.
2020
as originally
stated
£’000
Adjustment
in respect of
discontinued
operations
£’000
Prior period
adjustment
£’000
2020
restated
£’000
Income statement:
Revenue from continuing operations
59,045
(18,172)
(2,200)
38,673
Cost of sales
(43,368)
13,763
(562)
(30,167)
Gross profit from continuing operations
15,677
(4,409)
(2,762)
8,506
Administrative expenses
(20,518)
8,724
–
(11,794)
Operating loss from continuing operations
(4,841)
4,315
(2,762)
(3,288)
Loss before taxation
(5,178)
4,351
(2,762)
(3,589)
Taxation
196
(205)
–
(9)
Loss after tax from continuing operations
(4,982)
4,146
(2,762)
(3,598)
Statement of financial position:
Amounts due from contract customers
9,388
–
(1,997)
7,391
Total current assets
28,684
–
(1,997)
26,687
Total assets
61,211
–
(1,997)
59,214
Trade and other payables
(13,925)
–
(464)
(14,389)
Amounts due to contract customers
(5,351)
(203)
(5,554)
Total current liabilities
(19,885)
–
(667)
(20,552)
Provisions
(254)
–
(98)
(352)
Total non-current liabilities
(14,334)
–
(98)
(14,432)
Total liabilities
(34,219)
–
(765)
(34,984)
Net assets
26,992
–
(2,762)
24,230
Retained earnings
131
(2,762)
(2,631)
33. Subsequent events
On 31 March 2022, the Group sold its Northstar autonomous navigation software to QinetiQ Limited, a subsidiary
of QinetiQ Group PLC, for a cash consideration of c.£0.6m. The disposal resulted in the Northstar software, and its
development team, being transferred to QinetiQ Group PLC effective 1 April 2022.
On 12 July 2022 the Group announced the disposal of the entire issued share capital of Sapienza Consulting Holdings BV to
Serco Holdings Limited (a wholly owned subsidiary of Serco Group plc) for a cash consideration of c.€3.2m. On completion
c.£1m of the c.£2m net proceeds was used to part repay the Group's £7m loan facility with HSBC Bank Plc thereby reducing
it to c.£6.0m.
79
TP Group Annual Report 2021
Strategic Report
Governance
Financial Statements
Company Information
Company Number
3152034
Directors
M Ratcliffe – Chairman
D Stroud – Chief Financial Officer
D Lindsay – Non-executive Director
P Bertram – Non-executive Director
Secretary
D Stroud
Registered Office
Cale House
Station Road
Wincanton
England
BA9 9FE
Nominated Adviser and Broker
Cenkos Securities plc
6-8 Tokenhouse Yard, London EC2R 7AS
Auditor
BDO LLP
Level 12, Thames Tower, Station Road, Reading, RG1 1LX
Solicitor
CMS Cameron McKenna Nabarro Olswang LLP
Cannon Place, 78 Cannon Street, London, EC4N 6AF
Bankers
HSBC UK
26 Broad Street, Reading, Berkshire, RG1 2BU
Registrar
Equiniti
PO Box 4630, Aspect House,
Spencer Road, Lancing,
West Sussex BN99 6QQ
80
Financial Statements
TP Group plc
Cale House
Station Road
Wincanton
England
BA9 9FE
United Kingdom
tel: +44 (0)1753 285800
email: enquiries@tpgroup.uk.com
www.tpgroupglobal.com
Registered in England & Wales No. 3152034
© Copyright TP Group 2021