TP Group making 'difficult decisions' over legacy maritime contracts

Engineering and consulting company TP Group said in an update on Friday that at the end of 2021 its net debt totalled £1.6m, with £5.4m of cash, £7m of bank debt, and the Science Group loan undrawn.

The AIM-traded firm said its year-end cash balance benefitted from £1m of deferred payments, most of which were now paid, while the Science Group standby facility had to-date not been required.

In its update on 16 December, the board said exceptional costs would increase and the business would likely incur additional one-off costs in the 2021 financial year in relation to contract liabilities in maritime, and impairment of goodwill and intangibles.

On Friday, it said exceptional costs had increased to £3m from the previously-reported £2.1m due to further headcount restructuring, and fees associated with the HSBC and Science Group loans.

In recent weeks, the board said it had been working with management to review legacy contracts in the maritime business, adding that it had become apparent that project governance had been “inadequate”.

“As a result, provisions related to onerous maritime contracts are now anticipated of approximately £4.5m,” the directors said in their statement.

“At the present time, it is unclear whether this will all be a charge in 2021 or may relate to prior periods.”

TP Group said that, in relation to its strategy, the corporate processes around its non-core operations were continuing with interested parties.

“However, the anticipated valuations are lower than the current book values which are primarily based on the acquisition cost.

“As a result, an impairment of goodwill and intangibles is anticipated.

“While this non-cash charge is still under review, and subject to audit, the board currently anticipates a write-down of intangible assets of around £11m in 2021.”

With regard to 2022 planning, TP said it was now “well advanced”, with the board saying the “difficult decisions” over legacy maritime contracts should provide a more robust platform for the future.

“We expect our consultancy business to continue to perform in line with management expectations as it did in 2021.

“Subject to resolution of the issues within maritime, the board anticipates an improvement in performance through growth and margin enhancement programmes in the services businesses and the reduction in the central costs undertaken in 2021.”

At 1343 GMT, shares in TP Group were down 5.07% at 3.18p.