TP Group raising £24m for acquisitions

Services and engineering company TP Group announced a conditional fundraising on Monday, comprising a £20m firm placing and an up-to-£3.9m open offer to raise up to £23.9m, in aggregate, by the issue of up to 368,044,411 new ordinary shares at the issue price of 6.5p per new ordinary share.

The AIM-traded firm said the net proceeds would be used primarily to fund acquisitions which the directors believed have the potential to grow the business from its current position to achieve targeted annual revenues in the range of £90m to £100m in 2020, with an EBITDA margin of greater than 10%,. and to fund investment opportunities in the existing business.

Its board said it identified more than 20 potential acquisition opportunities, and had entered discussions with ten.

“All targets are intended to be accretive to earnings in the first full year following acquisition and cash generative,” the board explained.

The directors said they anticipated that the first acquisition would happen during the second half of this year, and that the remainder of the net proceeds identified for acquisitions were expected to be deployed within 12 months following admission.

They added that the fundraising would increase the company's negotiating position with the owners of target businesses, and reduce execution risk.

“The fundraising, in conjunction with existing resources, will allow the group to implement its intended acquisition programme and put it in a better position to generate shareholder value,” the board added.

It remained conditional on the approval of shareholders at the general meeting.

“We are delighted with the strong support from both new and existing shareholders and believe it represents a clear validation of the significant progress TP Group has made over the last two years having successfully acquired businesses alongside converting several sizeable contracts,” said chief executive Phil Cartmell.

“The board firmly believes the defence, aerospace and government sectors offer scope to accelerate our growth and the strengthening of our balance sheet will enable management to work quickly to consolidate what we believe to be highly fragmented markets.

“I look forward to updating the market on our ongoing progress as we continue to pursue a pipeline of potential growth opportunities and remain confident in the medium term prospects for the group.”