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TP makes cash work harder

The defence engineer is making deals across the world and affirming its reputation as a reliable source of cash generation
April 2, 2019

TP (TPG) ended 2018 with a record order book that included a five-year deal with French defence specialist Naval Group to work on atmosphere management systems for submarine and surface ships. A tie-up with US-based Micropore, which manages carbon dioxide removal materials, yielded a £1.2m contract with the Ministry of Defence (MoD) just after the year-end, and offers the defence engineer access to micropore markets across the pond. Prior investment in TP’s nascent consulting arm is now yielding positive returns. Revenues nearly doubled over 2018, while the division’s order book trebled.

IC TIP: Buy at 6.25p

Most impressive is TP’s improvement in its cash position, when taking into account the November £3m acquisition of Westek, a provider of computer servers and ancillary equipment for predominantly UK-based military and industrial clients. Management says that “this was achieved through strong working capital performance across the business”.

House broker Cenkos forecasts full-year adjusted pre-tax profits of £2.9m and EPS of 0.3p in 2019, rising to £3.6m and 0.4p in 2020.

TP (TPG)   
ORD PRICE:6.25pMARKET VALUE:£47m
TOUCH:6.2-6.3p12-MONTH HIGH:7.75pLOW: 5.1p
DIVIDEND YIELD:nilPE RATIO:313
NET ASSET VALUE:4.8p*NET CASH:£22.4m
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2014†21.7-3.89-0.87nil
2015†20.4-2.22-0.44nil
201621.2-0.33-0.05nil
2017**27.9-1.03-0.20nil
201839.0-0.010.02nil
% change+40--
Ex-div:na   
Payment:na   
*Includes intangible assets of £18m, or 2.4p a share **Restated for IFRS15 accounting rules †Per share figures adjusted for 2017 1:7 open offer