Punt on a minnow



The cut in the dividend tax free allowance and the onshoring of EAT has me trying to rebalance some of my speculative portfolio where I hold things like DX. and CNCT hoping for a recovery sooner or later, and not having to worry about dividend income in the meantime. Plus500 also in that folio, oops.

Today I took a first punt at 6.2p on TP Group, a tiny engineering company which has been acquiring even smaller businesses and has announced a regular stream of new contracts with global customers for things like CO2 scrubbers used on submarines. It is involved in clever future technologies too like autonomous vessel navigation.

Up until now it has not been net-profitable but that may be about to change, while reporting impressive growth. One of those UK companies hiring clever young people which is why we have record employment levels. Results next week should be welcomed and its outlook even better, so I am expecting a surge. It is also reaching the scale where it will become attractive to a bigger player like Qinetiq.

The sp has drifted down in recent weeks despite all the good news, it is usually low volume but that has picked up today, it has been getting a few mentions.


Good, good and more good

2018 revenues up 40% to £39M, half the gain from organic growth and half from acquisitions. Now profitable, just. Solid pipeline “and its closing order book rose 16% to £48.3m” so the year ahead looks full already, followed by the early 2019 sales announcements.

Best of all the cash pot still had £20M+ in it, representing over 42% of market value at the current 6.20p share price. Are they still looking for an acquisition or two, or just carefully managing balance sheet?

Worth at least 7.5p on a conservative backward valuation, or 9.25p on the basis of known momentum and the prospect of a profitable 2019. Not a well covered stock so it might take a month or two to get there, or some decent coverage in the tipster columns, but all the fundamentals are right.


Following yesterday’s excellent TP Group results announcements, today we hear that the acquired Polaris Consulting team led by Carl Dalton has won a c. £1.4M contract extension to support UK MoD’s battlefield communications programme. Evidence that the promising outlook is being turned into real sales.

No reaction from the sp stuck at 6.2p, volumes are still trivial but activity is creeping up.


And another win announced today, the space systems part of Polaris Consulting acquired last year by TP Group has won an immediate 6-9 month contract worth £1.4-£1.7M to help MoD to procure a satellite system. Well done again Carl Dalton and David Bangert of Polaris, hard work paying off.

Increased trading activity this morning but the sp still stuck around 6.2p.


This really is material news, a very big new order…

"TP Group (AIM: TPG), the specialist services and engineering group, is pleased to announce that it has been awarded a contract worth approximately £16.9 million by a leading UK Defence company to provide advanced packaged equipment. The contract pricing remains subject to final verification by the MoD as part of their standard audit cycle.

Under this contract, TP Group will build a primary set of equipment to qualify and verify the system design, and then produce the first operational set. This work will start immediately at TP Group facilities across the UK and is expected to be completed in late 2021."

Not too sure what advanced packaged equipment means, could be for rugged computer systems from the Westek UK subsidiary.


Today TPG announced the acquisition of Sapienza Consulting, who provide project support services and software (Eclipse) across Europe to the space and defence industries. Synergy with TPG’s involvement in supporting UK MoDs acquisition of military satcoms.

Bought for E10M cash which is about £8.6M of TPG’s £20M-odd cash pile, plus an issue of 20.6 million shares so about 2.7% at about 6.3p, and a trailing E2M payment on hitting post-acquisition targets.

Sapienza had 2018 pre-tax earnings of c. E0.7M on revenues of E18.9M.

So this fits the description for TPGs major acquisition of 2019, which they hope will be immediately earnings-accretive eg slightly profitable current year and thereafter a major contribution. Together with other announcements, adding Sapienza takes TPG revenue expectations for 2019 well on the way to £70M.

A futher 1 or 2 smaller acquisitions are rumoured.

At last the share price has responded this morning kicking up to 6.8p.


Just a post-script on Sapienza and then I will stop boring you with news of this winner.

Sapienza is all about a suite of project management software tools and services called Eclipse, which is the almost standard project management control environment for ESA projects. Sapienza has maybe 130-150 staff mostly I think in Holland involved in developing and supporting hosted versions of the software as a service. Its first major client 10 years ago was OHB Systems, an ESA focused prime contractor which has up to 2,000 end users.

So, the good and relevant news is that OHB extended its master license of Eclipse for another 5 years from Mar 2019. The sort of contract renewal which provides certainty and visibility of a good slice of its revenues from the core customer. A springboard to secure long term renewals with other major space clients. And why not other complex project environments where TPG operates?


For some reason not the subject of an RNS announcement Sapienza the new business acquired by TPGroup just won a 2 year framework contract to provide ICT support services to Eurojust in the Hague. The value of the contract award was not anounced but the competitve tendering guide estimated it to be E2.64M+VAT. The award includes an option to double up with an extra two years.

This is the consultancy arm of Sapienza rather then the Eclipse software suite arm, in a new market to add to space and defence clients eg it has been providing support services to NATO offices in Belgium and Holland.

I would have thought this was material news, but perhaps TPG is already at such a scale that it no longer triggers an RNS. Or winning new multi-million contracts is now routine. Or the financial pr team are on holiday.

Whichever it is good news.

The bad news is that the sp is stuck at 7p.


Talked up in the weekend press was it Midas, strong tip as a long term buy or bid target, trading volumes up as a result but sp stuck under 7p. The expectation forecast of revenue growth to £55M sounds light to me if all the news and acquisition contributes to the top line this year.

The only negative points out that further acquisition will need investment, but I think there is still around £10M of net cash available and forecast is for healthy positive earnings this year too.

The span of group activity is indeed now so diverse that I expect one or two areas of promising technology will indeed attract buyers over the coming 18-24 months by when this will be a £70-100M turnover £5-10M earnings business.


The interim results today … growth by leaps and bounds, hinting at full year profitability of a few million and still a £9M cash pile to invest … are just as good as expected. An astonishing claim that they have a bidding pipeline of £700M is just jaw dropping amazing … what it needs now is an announcement of a major contract win at DSEI to shift the sp.

My outlook is one I am happy to stick to. A highly profitable £100M turnover company within two years and a 40p share price.


No further mega win announcements. Just a call off of the air scrubber contract and an appointment as part of PA Consulting’s team holding the hand of MoD while procuring Skynet 4.

The latter is a curious strategy … reliable but limited fees as part of the procurement project office, rather than partnering with a bidder for the real prize of the £6B supply contract. You can’t be on both sides of the fence, so have TPG ruled themselves out of a bigger opportunity. Well maybe, but the project office role could extend to be quite an earner over a number of years. Sapienza may still be preferred software suite for all parties.

TPG also becoming involved in MoD’s projects for the development of autonomous surface naval systems including unmanned replenishment at sea. I suspect concept work on autonomous strategic sub surface is happening in the background too, hush hush.

UK govt also announced today it is embarking on a technology development programme for a new satellite navigation system … I think this is our own precision GPS solution removing any dependency on European or US systems. Right up TPG’s street so surely another opportunity in the pipeline.

All good.

The share price refuses to take off, as though fluttering demand is being met by a large holder steadily offloading. On the one hand how frustrating, on the other hand the case for TPG remains compelling at this price.

So I doubled up this week, trimming some LLOY which has frothed since Friday.


TPG has enjoyed progress back to 7p but the sp has still not really taken off. Not much hard news to report but marketing activity has been strong.

One interesting new angle is the proposal to use its PEM electrolysis technology to generate hydrogen from seawater powered by green energy eg wind turbine or solar when there is surplus capacity. I think the underlying process is similar to how CO2 scrubbers work. Not aware whether TP Group has yet deployed engineered solutions which are generating hydrogen fuel, unless there are bespoke installations.

For examples of applications how about a carbon-neutral plant producing zero-carbon fuel which can be stored, piped or transported, for isolated military stations, arctic research vessels, eco-friendly tourist resorts …

I can imagine this being locally attractive, eg generating hydrogen as a replacement gas (liquified?) fuel for onsite operations in remote places. But how do you safely generate, store and ship hydrogen in strategically useful quantities from offshore windfarms to make it available for use in homes, cars, factories as a replacement for natural gas or LPG?

Ah! Maybe you don’t. Maybe the surplus electricity at times of low demand is delivered onshore or cross-country over existing cable connections. So the hydrogen generator plant can be co-located at places where there is an abundance of (sea)water and where there are existing connections to a gas storage facility and to the transmission network. For example where there are existing terminals for LNG shipping, refineries etc.

Or co-locate the hydrogen generation plant where there is a business case to replace the natural gas used by heavy industry. Beyond nationwide demand for domestic heating who and where are the major industrial consumers of natural gas like makers of glass, metals … other than power stations turning it back into electricity I mean, what would be the point of that! The point would be that accumulated hydrogen from surplus wind power could be a greener capacity option alongside / instead of other methods of responding to short-notice peak grid demand eg replacing natural gas at standby power stations.

Being early-to-market with a scalable solution to replace natural gas with hydrogen sounds like an exciting prospect in the race to zero-carbon, especially if it is a simple replacement making use of all the existing insfrastructure.

Could hydrogen at last become a viable alternative fuel for vehicles?

Would hydrogen piped to my kitchen hob instead of natural gas be viable?

A zero-carbon solution for air transport? Does hydrogen (liquified ?) have the energy density, which batteries do not have anywhere near, to replace avcat jet fuel … or would the need to develop new engine technology be a barrier.

Like I said this is interesting but early speculation. A lot would depend on cost engineering to make this a viable prospect in competition with big oil, it is possible that this idea has appeal in many applications.

Perhaps a smart minded scientist or procurement officer in MoD or some such benificent technology development agency might like to step in and commission a demonstrator programme?


Progress in TPGroup share price continues, up to 7.6p and plenty of volume so hopefully it will keep going to … 10p maybe? At the rate they are announcing new business this will be a £100M turnover company in 2020

Latest news is a £1M uk submarine oxygen generator following hard on the heels of a £1M CO2 scrubber for a Korean ? sub. This is a market TPG is right on top of …

And an unspecified contract win supplying support … that means people … to the human factors engineering design team (1960s buzz words) supplying UK MoD Morpheus programme with new common IT/comms interface. This will be the Polaris consultancy group which has a large associate staff of ex-military types, they can supply the Morpheus programme with pseudo end users so that real soldiers can get on with their day jobs. The number of roles Morpheus requires is extensive so I suspect this could accumulate to multi-millions over the multi-years.


Zoom through the 8p mark and still enjoying strong demand.


The awaited update on trading for FY 2019 ahead of final results 31 March.

“The Board is pleased to announce another year of substantial growth in both revenue, and adjusted operating profit, with a significant strengthening of the Group’s order book. The Group therefore reports that trading for the year ended 31 December 2019 has delivered revenue and adjusted operating profit in line with market expectations*. This strong performance has been driven by both organic growth and acquired business activities.”

Unfortunately the * says see our website for what the market expects, but not obvious. I think they defer to analyst comment by inhouse broker Cenkos who issued a BUY today with

A positive trading update from TP Group confirms that the group traded in line with market forecasts for FY19E, with significant year-on-year growth in revenue and Adj EBITDA, and an order book at an all-time high. The acquisition of Sapienza has provided the group with significantly enhanced space capabilities, as well as an expanded geographic presence. Trading on an ex-cash FY20E Adj P/E of c10.5x, we see considerable value in the shares.

Well of course you do, that is your job. Where is the real data or analysis why is this not more transparent? I think their FY19 expectation was about £70M revenues and about £4M profit with about £10M cash. And I think they are making an FY20 forecast of about £5M profit which sounds very conservative considering the momentum.

So the real takeaways …

TPG are sat on a strategic pile of cash, think the Sapienza integration a done-and-dusted success, and are looking globally for the next tie up or acquisition. (No doubt Cartmell a long way down the road on the next one, I wonder which region … Americas or Far East or Australasia?)

Out performance depends on exploiting new areas such as AI and clean energy and whether the different business units can grow opportunities by exploiting each others capabilities ( V difficult to get isolated business units organised on product lines to cross-sell)

Oh, and the real news was the announcement of a German £1.7M order for rugged equipment from Westek, which is as Cartmell says tremendous


The market not impressed with TPG only delivering really good performance, has the broker been too conservative in its outlook or has this got to deliver good results not just good promise. Pressure growing on Cartmell to come up with another immediately positive acquisition. The sp back to 7p.