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TP upscales, but remains in the red

The specialist engineer remains in the red, although the order book points to the transformation under way
September 13, 2017

Investors in TP (TPG) may have been disappointed with a reported operating loss of £272,000 despite a surge in half-year revenue, but the result belies significant operational progress. You can see this in the gross margin, up from 26.5 per cent to 27.2 per cent, while adjusted cash profit increased from £12,000 to £760,000. Chief executive Phil Cartmell expects TP to deliver full-year profit on this measure to be in line with current expectations and then "move onward to sustainable profitability”.

IC TIP: Buy at 6.38p

A sharp hike in administration expenses sent the specialist engineer into the red due to demands from the purchase and subsequent integration of the acquired ALS Technologies and Flexible Software Solutions during the period. TP remains on the lookout for accretive bolt-on purchases, and has the ammunition following a net £20.8m equity raise post period-end. Management confirmed that discussions are ongoing with several targets with a view to closing the first transaction by the end of the year.

Top-line visibility has improved following the award of two substantial contracts with the Ministry of Defence, as has the geographic spread of revenue streams. Order intake has surged, with the backlog more than double the 2016 half-year level at £30.8m.

Cenkos gives adjusted pre-tax profit of £1.2m for the year-end, leading to EPS of 0.1p from a break-even level in 2016.

TP (TPG)   
ORD PRICE:6.38pMARKET VALUE:£48.4m
TOUCH:6.25-6.5p12-MONTH HIGH:8.9pLOW: 4.38p
DIVIDEND YIELD:nilPE RATIO:80
NET ASSET VALUE:2.6p*NET CASH:£6.7m **
Half-year toTurnover   Pre-taxEarnings perDividend
30 Jun (£m) profit (£m)share (p) per share (p)
2016 (restated)9.4-0.8-0.20nil
201713.6-0.3-0.07nil
% change+46---
Ex-div:-   
Payment:-   
*Includes intangible assets of £14.2m, or 1.9p a share. **TP raised £20.8m via an equity issue post period-end.