TIDMTPG

RNS Number : 6329L

TP Group PLC

14 September 2021

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

14 September 2021

TP Group plc

("TP Group" or the "Company" or the "Group")

Unaudited interim results for the six months ended 30 June 2021

TP Group (AIM: TPG) today announces its unaudited interim results for the six months ended 30 June 2021.

TP Group overall delivered a much improved performance in a difficult market and is well positioned to deliver good growth that will increase shareholder value. UK Consulting grew revenues and margins. Our recent acquisition of Osprey Consulting Ltd ("Osprey") delivered an excellent performance despite COVID-19 ("C-19") shutting down a large part of the aviation market. TPG Maritime's profits increased. Central costs were historically too high and have since been reduced by GBP1m per annum, the benefit of which will fall straight to the bottom line. Looking forward we are confident of good growth within the UK Consulting market and across Europe.

H1 Performance Summary

   --     Revenue up 23% to GBP33.8m (H1 2020: GBP27.5m) 
   --     Adjusted operating profit(1) up 23% to GBP1.7m (H1 2020: GBP1.4m) 

-- Operating loss increased to GBP1.9m (H1 2020: GBP1.7m loss) due to the GBP0.5m termination cost of the former CEO

-- Closing order book GBP60.9m (31 December 2020: GBP69.3m) - provides strong H2 2021 revenue visibility with more than 90% of full year market forecast revenues covered

-- Net debt of GBP3.5m (31 December 2020 net cash: GBP0.4m) - cash performance is tracking in line with expectations and is well within banking covenants

David Lindsay, Chief Executive Officer of TP Group, commented:

"TP Group will significantly increase shareholder value by focussing on Aerospace & Defence clients that place great trust in our excellent people, expert technical knowledge and secure processes & systems.

"TP Group has successfully grown its UK Consulting business despite the C-19 pandemic and aims to replicate this success across Europe using Sapienza as an important stepping stone.

"I have already streamlined our management structure and reduced our central costs by GBP1m per annum that will directly benefit the bottom line in 2022. We will also improve profitability by increasing knowledge transfer, resource sharing and use of common systems across our businesses.

"I am very optimistic about TP Group's future because we have great people and operate in good markets where important clients value our services highly."

(1.) (Adjusted operating profit is defined as operating result adjusted to add back depreciation of property, plant and equipment and right-of-use assets, amortisation of intangible assets and impairment gains or losses on non-current assets, changes in fair value of contingent consideration, acquisition consideration accounted for as employment costs owing to on-going service conditions, any other acquisition-related and disposal-related charges, share based payment charges, and non-operating costs. Non-operating costs are those items believed to be exceptional in nature by virtue of their size and or incidence. The directors of the Company believe this measure is more reflective of the underlying performance of the Group than equivalent GAAP measures. This is primarily due to the exclusion of non-cash items, such as share-based payments, impairment, depreciation and amortisation, as well as acquisition and non-operating costs. This provides shareholders and other users of the financial statements with the most representative year-on-year comparison of underlying operating performance attributable to shareholders. This measure and the separate components remain consistent with 2020.)

For further information, please contact:

 
  TP Group plc                              Tel: 01753 285 810 
  David Lindsay, Chief Executive Officer 
  Derren Stroud, Chief Financial Officer 
  www.tpgroupglobal.com 
 
  Cenkos Securities plc                     Tel: 020 7397 8980 
  Stephen Keys / Mark Connelly / Callum 
   Davidson 
  www.cenkos.com 
 
  SEC Newgate UK                            Tel: 020 3757 6882 
  Elisabeth Cowell/ Bob Huxford/ Richard 
   Bicknell 
  www.secnewgate.co.uk 
 

Business Review

Introduction

TP Group overall delivered a much improved result with revenue and adjusted operating profit both up by 23% despite the difficult market that was severely impacted by the C-19 pandemic.

Consulting:

-- The Osprey acquisition in August 2020 has strengthened Consulting, adding both specialist safety assurance capability and aviation market access. Osprey's performance improved thanks to its entry into the space, drone and digital technology markets and despite the devastating impact of C-19 on the civil aviation sector.

   --    Our established UK Consulting business saw strong organic growth in its core defence markets. 

-- In Europe, Sapienza also delivered good organic growth in consultancy from existing customers, with both revenues and profits up.

Engineering:

-- TPG Maritime's profits increased despite delays in new contract awards and cost overruns in European contracts that are now addressed, and we are confident that the business has a good future.

-- Westek disappointed due to product design difficulties and delayed order intake. We are currently reviewing how best to realise value from this business.

Northstar/Optimiser, our artificial intelligence software suite continues to offer the potential of profitable growth but has not, to date, generated significant revenues. We are currently reviewing the costs and potential benefits of this activity and how they can best be monetised.

Central costs were too high and action has already been taken to address this by the Company's new CEO, who joined post period end.

Financial summary

Group revenue increased 23% to GBP33.8m (H1 2020: GBP27.5m):

-- Consulting increased revenues by GBP4.6m (31%) to GBP19.7m. Excluding the contribution from Osprey of GBP2.5m, revenue grew organically by GBP2.1m (14%);

   --      Revenues in Software and Digital Solutions decreased by GBP0.2m to GBP0.5m; and 

-- Engineering grew organically overall by GBP1.8m (16%) to GBP13.6m, with growth in TPG Maritime of GBP2.3m being partially offset by a reduction in Westek revenues of GBP0.5m.

The Group's gross profit margin remained consistent at 24% year on year:

-- The Consulting margin increased to 24% from 21%, principally arising from Osprey which has taken the Group into higher margin markets and activities;

   --      Margins in Digital Solutions remained broadly constant year on year; and 

-- Margins in Engineering reduced to 24% from 29% as a result of execution and delivery issues in key overseas projects as noted above. These costs are not expected to repeat in 2022 and margins are expected to improve as a result.

Operating expenses increased from GBP8.4m to GBP10.0m in the period. The key drivers include:

   --      The acquisition of Osprey which added GBP0.6m; 

-- Investment of GBP0.2m into the European consulting business to drive future business performance;

   --      Investment of GBP0.2m to support development of UK Software and Hydrogen activities; 

-- An increase in depreciation and amortisation charges of GBP0.2m following the acquisition of Osprey; and

-- Non-operating restructuring costs of GBP0.5m (H1 2020: GBP0.3m) due to the departure of the previous CEO.

The Group's H1 2021 GBP1.9m (H1 2020: GBP1.7m loss) operating loss includes the GBP0.5m termination cost for the former CEO.

Adjusted operating profit rose by 23% to GBP1.7m (H1 2020: GBP1.4m). The GBP0.3m improvement in adjusted operating profit was driven by a GBP1.4m increase in gross profit partially offset by an increase in operating expenses of GBP1.1m.

 
                                        H1 2021      H1 2020 
                                         GBPm         GBPm 
 
 Operating loss                          (1.9)        (1.7) 
 Depreciation, amortisation and 
  impairment                              2.3          2.0 
 Acquisition and disposal-related 
  costs                                   0.1          0.2 
 Non-operating costs                      0.5          0.3 
 Earn-out payments                        0.6          0.5 
 Share-based payments                            -     0.1 
 Adjusted operating profit                1.7          1.4 
----------------------------------  --------------  -------- 
 

Earn-out payments relate to the acquisition of Osprey.

The Group's net debt position as at 30 June 2021 was GBP3.5m (31 December 2020 net cash of GBP0.4m). Cash performance is tracking in line with market expectations, providing sufficient liquidity and bank covenant compliance.

Group order intake of GBP25.5m was GBP7.9m lower than that secured in the same period last year (H1 2020: GBP33.4m). Included in the 2020 figures, however, was the renewal of the 2 1/2 year European Space Agency ('ESA') agreement which contributed c. EUR18.0m (c. GBP16.0m) to H1 2020 order intake. Excluding this, order intake across both the Consulting and Engineering business streams was up on the prior period.

The closing order book reduced by GBP8.4m to GBP60.9m from the 2020 year-end position of GBP69.3m because of the timing of multi-year contracts won in prior years, including ESA as noted above. The current order book provides 95% coverage of market revenue expectations for the 2021 financial year.

Post period-end

David Lindsay was appointed as the Company's permanent CEO on 26 July 2021.

Following his in-depth review of the business, David has identified a number of measures which will immediately improve the business and provide an initial upgrade in the market forecasts for 2022 to GBP6.1m adjusted Operating Profit. He sees a number of opportunities to further improve performance.

The Company was the subject of a speculative takeover approach by Science Group in August, which the Board regarded as opportunistic and seeking to capitalise on the short-term impact suffered by TP Group as a result, primarily, of the C-19 pandemic. No formal offer was made by Science Group, and they withdrew interest in making an offer for the Company on 3 September 2021.

During the past several weeks, Science Group has acquired more than 27% of the shares of the Company and, despite the possible offer for the Company being withdrawn, has requested that the business call a General Meeting proposing that two of the current Non-Executive Directors, Andrew McCree and Jeremy Warner-Allen, are replaced by two of Science Group's directors Martyn Ratcliffe (Executive Chairman and CEO of Science Group) and Peter Bertram (non-executive Director of Science Group). The General Meeting has been convened for 1 October 2021. The Board is vehemently challenging the resolutions proposed by Science Group and further details can be found in the circular posted to shareholders on 6 September 2021 and which is available on the Company's website.

Market outlook

Our UK Consulting business is well established in the defence market, and we expect to see growth in its recurring revenues through the frameworks agreements already in place.

Osprey will grow as airports and the aviation market generally returns to normal operations as the C-19 impact subsides. Osprey will also benefit from its entry into adjacent markets such as spaceports.

Sapienza will continue to benefit from recurring revenues from ESA. Sapienza will also serve as a stepping stone as we explore transferring skills and services across Europe to target the aerospace and defence markets. Sapienza's offices in France, Germany, Italy, Netherlands and North Macedonia offer potential in-country bases.

TPG Maritime is expected to perform well in FY22 with an established submarine order book and potential opportunities within the hydrogen market.

David Lindsay

14 September 2021

Condensed consolidated statement of comprehensive income

 
                                             Six months      Six months      Year ended 
                                                  ended           ended 
                                                30 June         30 June     31 December 
                                                   2021       2020(1,2)         2020(1) 
                                            (unaudited)     (unaudited)       (audited) 
                                                GBP'000         GBP'000         GBP'000 
  Revenue from continuing 
   operations                                    33,772          27,520          59,045 
  Cost of sales                                (25,702)        (20,897)        (43,368) 
---------------------------------------  --------------  --------------  -------------- 
  Gross profit from continuing 
   operations                                     8,070           6,623          15,677 
  Administrative expenses                       (9,976)         (8,362)        (20,518) 
---------------------------------------  --------------  --------------  -------------- 
  Operating loss from continuing 
   operations                                   (1,906)         (1,739)         (4,841) 
---------------------------------------  --------------  --------------  -------------- 
  Net finance costs                               (145)            (84)           (337) 
---------------------------------------  --------------  --------------  -------------- 
  Loss before taxation from 
   continuing operations                        (2,051)         (1,823)         (5,178) 
  Taxation credit                                   243             249             196 
---------------------------------------  --------------  --------------  -------------- 
  Loss for the period from 
   continuing operations                        (1,808)         (1,574)         (4,982) 
  Loss for the period from 
   discontinued operations 
   (attributable to equity 
   holders of the company)                            -         (2,833)         (5,017) 
---------------------------------------  --------------  --------------  -------------- 
  Loss for the period                           (1,808)         (4,407)         (9,999) 
---------------------------------------  --------------  --------------  -------------- 
  Attributable to: 
  Equity holders of the parent 
   company                                      (1,808)         (4,386)         (9,999) 
  Non-controlling interest                            -            (21)               - 
---------------------------------------  --------------  --------------  -------------- 
  Total loss for the period                     (1,808)         (4,407)         (9,999) 
---------------------------------------  --------------  --------------  -------------- 
  Other comprehensive income/(expense) 
   for the period: 
  Loss for the period                           (1,808)         (4,407)         (9,999) 
  Foreign exchange gains / 
   (losses) on translation 
   of foreign operations                             65            (40)             427 
---------------------------------------  --------------  --------------  -------------- 
  Total comprehensive expense 
   for the period                               (1,743)         (4,447)         (9,572) 
=======================================  ==============  ==============  ============== 
 
  Attributable to: 
  Equity holders of the parent 
   company                                      (1,743)         (4,426)         (9,572) 
  Non-controlling interest                            -            (21)               - 
---------------------------------------  --------------  --------------  -------------- 
                                                (1,743)         (4,447)         (9,572) 
=======================================  ==============  ==============  ============== 
 
  Earnings per share: 
  Loss per share (pence per 
   share) 
  Continuing operations: 
  Basic and diluted loss per 
   share (pence per share)                       (0.23)          (0.21)          (0.64) 
---------------------------------------  --------------  --------------  -------------- 
  Discontinued operations: 
  Basic and diluted loss per 
   share (pence per share)                            -          (0.36)          (0.64) 
  Total: 
  Basic and diluted loss per 
   share (pence per share)                       (0.23)          (0.57)          (1.28) 
=======================================  ==============  ==============  ============== 
 

(1) The comparative condensed statements of comprehensive income have been presented to reflect continuing operations and exclude the results of TPG Engineering Limited which was disposed of on 29 October 2020. The comparative results for TPG Engineering Limited are presented above as 'Loss for the period from discontinued operations'.

(2) A reclassification between Cost of Sales and Administrative expenses of GBP172,000 has been made for the six months to 30 June 2020 to reflect gross profit on a consistent basis.

Condensed consolidated statement of financial position

 
                                             30 June         30 June    31 December 
                                             2021(1)         2020(1)           2020 
                                         (unaudited)     (unaudited)      (audited) 
                                             GBP'000         GBP'000        GBP'000 
------------------------------------  --------------  --------------  ------------- 
  Assets 
  Non-current assets 
  Goodwill                                     8,091           8,560          8,091 
  Other intangible assets                     18,521          18,209         19,633 
  Property, plant and equipment                  920           1,056            962 
  Right-of-use assets                          3,471           4,064          3,841 
                                              31,003          31,889         32,527 
------------------------------------  --------------  --------------  ------------- 
  Current assets 
  Inventories                                  1,820           1,515          1,417 
  Trade and other receivables                 10,469           7,090         10,268 
  Amounts due from contract 
   customers                                  12,378           5,962          9,388 
  Taxation recoverable                           143               -            239 
  Cash and bank balances                       3,480          13,802          7,372 
------------------------------------  --------------  --------------  ------------- 
                                              28,290          28,369         28,684 
  Assets held for sale(1)                          -           6,673              - 
------------------------------------  --------------  --------------  ------------- 
                                              28,290          35,042         28,684 
------------------------------------  --------------  --------------  ------------- 
  Total assets                                59,293          66,931         61,211 
------------------------------------  --------------  --------------  ------------- 
 
    Liabilities 
  Current liabilities 
  Trade and other payables                  (14,434)         (9,911)       (13,925) 
  Amounts due to contract customers          (5,310)         (3,017)        (5,351) 
  Current tax liabilities                          -           (108)              - 
  Lease liabilities                            (619)           (957)          (609) 
------------------------------------  --------------  --------------  ------------- 
                                            (20,363)        (13,993)       (19,885) 
  Liabilities held for sale(1)                     -         (6,673)              - 
------------------------------------  --------------  --------------  ------------- 
                                            (20,363)        (20,666)       (19,885) 
------------------------------------  --------------  --------------  ------------- 
  Non-current liabilities 
  Trade and other payables                         -           (512)              - 
  Deferred taxation                          (2,766)         (2,514)        (3,001) 
  Lease liabilities                          (3,657)         (3,922)        (4,079) 
  Borrowings                                 (7,000)         (7,000)        (7,000) 
  Provisions                                   (223)           (183)          (254) 
------------------------------------  --------------  --------------  ------------- 
                                            (13,646)        (14,131)       (14,334) 
------------------------------------  --------------  --------------  ------------- 
  Total liabilities                         (34,009)        (34,797)       (34,219) 
------------------------------------  --------------  --------------  ------------- 
  Net assets                                  25,284          32,134         26,992 
====================================  ==============  ==============  ============= 
 
  Equity 
  Share capital                                7,792           7,792          7,792 
  Share premium                               18,529          18,529         18,529 
  Own shares held by EBT                       (561)           (561)          (561) 
  Translation of foreign operations              475            (44)            415 
  Share-based payments reserve                   720           1,257            685 
  Retained earnings                          (1,672)           4,754            131 
------------------------------------  --------------  --------------  ------------- 
  Total equity due to shareholders            25,283          31,727         26,991 
  Non-controlling interest                         1             407              1 
------------------------------------  --------------  --------------  ------------- 
  Total equity                                25,284          32,134         26,992 
====================================  ==============  ==============  ============= 
 

(1) The comparative Statement of Financial Position shows current assets and liabilities held for sale due to the planned disposal of TPG Engineering which was ultimately completed on 29 October 2020.

Condensed consolidated statement of changes in equity

 
                                        Own 
                                        shares    Share-based 
                      Share     Share   held         payments  Translation   Retained  Non-controlling 
                    capital   premium   by EBT        reserve      reserve   earnings         interest     Total 
                    GBP'000   GBP'000   GBP'000       GBP'000      GBP'000    GBP'000          GBP'000   GBP'000 
 Balance at 1 
  January 
  2021                7,792    18,529     (561)           685          415        131                1    26,992 
 Loss for the 
  period                  -         -         -             -            -    (1,808)                -   (1,808) 
 Other 
  comprehensive 
  profit                  -         -         -             -           65          -                -        65 
-----------------  --------  --------  --------  ------------  -----------  ---------  ---------------  -------- 
 Total 
  comprehensive 
  loss                    -         -         -             -           65    (1,808)                -   (1,743) 
 Share-based 
  payments 
  charge                  -         -         -            35            -          -                -        35 
 Forex movement           -         -         -             -          (5)          5                -         - 
-----------------  --------  --------  --------  ------------  -----------  ---------  ---------------  -------- 
 Balance at 30 
  June 
  2021                7,792    18,529     (561)           720          475    (1,672)                1    25,284 
=================  ========  ========  ========  ============  ===========  =========  ===============  ======== 
 
 Balance at 1 
  January 
  2020                7,792    18,529     (561)         1,142          (4)      9,140              428    36,466 
-----------------  --------  --------  --------  ------------  -----------  ---------  ---------------  -------- 
 Loss for the 
  period                  -         -         -             -            -    (4,386)             (21)   (4,407) 
 Other 
  comprehensive 
  loss                    -         -         -             -         (40)          -                -      (40) 
-----------------  --------  --------  --------  ------------  -----------  ---------  ---------------  -------- 
 Total 
  comprehensive 
  loss                    -         -         -             -         (40)    (4,386)             (21)   (4,447) 
 Share-based 
  payments 
  charge                  -         -         -           115            -          -                -       115 
 Balance at 30 
  June 
  2020                7,792    18,529     (561)         1,257         (44)      4,754              407    32,134 
=================  ========  ========  ========  ============  ===========  =========  ===============  ======== 
 
 Balance at 1 
  January 
  2020                7,792    18,529     (561)         1,142          (4)      9,140              428    36,466 
-----------------  --------  --------  --------  ------------  -----------  ---------  ---------------  -------- 
 Loss for the 
  year                    -         -         -             -            -    (9,999)                -   (9,999) 
 Other 
  comprehensive 
  loss                    -         -         -             -          427          -                -       427 
-----------------  --------  --------  --------  ------------  -----------  ---------  ---------------  -------- 
 Total 
  comprehensive 
  loss                    -         -         -             -          427    (9,999)                -   (9,572) 
 Share-based 
  payments 
  charge                  -         -         -            98            -          -                -        98 
 Share-based 
  payments 
  reserves 
  transfer                -         -         -         (555)            -        555                -         - 
 Forex movement           -         -         -             -          (8)          8                -         - 
 Non-controlling 
  interest 
  transfer on 
  acquisition 
  of 100% 
  ownership 
  of Lift BV              -         -         -             -            -        427            (427)         - 
-----------------  --------  --------  --------  ------------  -----------  ---------  ---------------  -------- 
 Balance at 31 
  December 
  2020                7,792    18,529     (561)           685          415        131                1    26,992 
=================  ========  ========  ========  ============  ===========  =========  ===============  ======== 
 
 

Condensed consolidated statement of cash flows

 
                                              Six months      Six months      Year ended 
                                                   ended           ended 
                                                 30 June         30 June     31 December 
                                                    2021            2020            2020 
                                             (unaudited)     (unaudited)       (audited) 
                                                 GBP'000         GBP'000         GBP'000 
----------------------------------------  --------------  --------------  -------------- 
  Operating activities 
  Loss before income tax from 
   continuing operations                         (2,051)         (1,823)         (5,178) 
  Loss before income tax from 
   discontinued operations                             -         (2,933)         (5,144) 
----------------------------------------  --------------  --------------  -------------- 
  Total loss before taxation                     (2,051)         (4,756)        (10,322) 
  Adjustments for: 
  Depreciation, amortisation 
   and impairment                                  2,260           2,296           5,563 
  Finance cost                                       145             112             416 
  Share-based payment expense                         35             115              98 
  Impairment loss on available-for-sale 
   assets                                              -           2,044           2,721 
  Loss on disposal of subsidiary                       -               -             596 
  (Increase) / decrease in 
   inventories                                     (404)           2,067             483 
  (Increase) / decrease in 
   trade and other receivables                   (3,190)           3,786         (1,423) 
  Increase / (decrease) in 
   trade and other payables                          581         (3,148)           2,017 
  (Decrease) / increase in 
   provisions                                       (31)               -              73 
----------------------------------------  --------------  --------------  -------------- 
                                                 (2,655)           2,516             222 
  Income tax received / (paid)                       103            (15)             189 
----------------------------------------  --------------  --------------  -------------- 
  Net cash (used in) / generated 
   from operating activities                     (2,552)           2,501             411 
----------------------------------------  --------------  --------------  -------------- 
  Investing activities 
  Purchase of property, plant 
   and equipment                                   (143)           (498)           (781) 
  Purchase of intangible fixed 
   assets                                          (529)           (319)         (1,562) 
  Acquisition of subsidiary, 
   net of cash acquired                                -               -         (2,000) 
  Acquisition of subsidiary 
   - payment of earn-out                            (35)           (877)               - 
  Disposal of subsidiary, net 
   of cash disposed of                                 -               -           (349) 
----------------------------------------  --------------  --------------  -------------- 
  Net cash used in investing 
   activities                                      (707)         (1,694)         (4,692) 
----------------------------------------  --------------  --------------  -------------- 
  Financing activities 
  New borrowings                                       -           7,000           7,000 
  Interest payable                                 (146)           (107)           (313) 
  Repayment of lease liabilities                   (493)           (465)         (1,622) 
----------------------------------------  --------------  --------------  -------------- 
  Net cash (used in) / generated 
   from financing activities                       (639)           6,428           5,065 
----------------------------------------  --------------  --------------  -------------- 
  Effect of exchange rates 
   on cash and cash equivalents                        6             (1)              20 
----------------------------------------  --------------  --------------  -------------- 
  Net (decrease) / increase 
   in cash and cash equivalents                  (3,892)           7,234             804 
  Cash and cash equivalents 
   at the beginning of the period                  7,372           6,568           6,568 
----------------------------------------  --------------  --------------  -------------- 
  Cash and cash equivalents 
   at the end of the period                        3,480          13,802           7,372 
----------------------------------------  --------------  --------------  -------------- 
  Net increase in cash and 
   cash equivalents for discontinued 
   operations                                          -              41               - 
========================================  ==============  ==============  ============== 
 

Notes to the condensed set of unaudited interim financial statements

1. General information

TP Group is a consulting, software and technologies business, working to make the world a safer place, employing more than 400 highly skilled individuals across six European countries. We combine to deliver mission, business and safety critical services and solutions across three high growth sectors - Defence, Space and Energy.

Our customers trust us to ensure the safety, reliability and performance of complex systems in the most challenging or arduous situations. With global presence and proven field experience, TP Group is a leading choice for platform builders, integrators and users of both military and industrial systems.

The Group currently reports as three complementary value streams:

-- Atmosphere Management Systems ('Engineering') - life support systems and specialist electronics in critical workspaces,

-- Consulting - specialist services to enable our clients to transform their enterprise and evolve their systems and services, and

-- Software and Digital Solutions - solving complex problems in dynamic and changing environments with AI and software tools.

This structure allows us to be clearer in the nature of our offerings to support customers through the full lifecycle of their projects or programmes. Our consultants can support initial planning, justification and project management whilst specialist teams can deliver software or equipment as required.

TP Group plc (the 'Company') is the Group's ultimate parent company, is incorporated under the Companies Act and domiciled in the United Kingdom. The address of the registered office of the Company is Cody Technology Park, Old Ively Road, Farnborough, Hampshire, GU14 0LX. The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange.

2. Basis of preparation

The financial information for the six months ended 30 June 2021 presented in these unaudited condensed consolidated interim financial statements (the 'interim report') has been prepared under the historical cost convention using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the European Union and is presented in pounds sterling, which is the currency of the primary economic environment in which the Group operates. All amounts have been rounded to the nearest thousand, unless otherwise stated.

While the financial figures included in the interim report have been computed in accordance with IFRS applicable to interim periods, the report does not contain sufficient information to constitute interim financial statements as defined by International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted by the European Union (the 'EU').

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2020, prepared under IFRS as adopted by the EU, have been delivered to the Registrar of Companies. The auditor's report on the 2020 financial statements was unqualified, did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006 but did draw attention to a material uncertainty related to going concern. The audit opinion was not modified in respect of this matter.

These unaudited condensed consolidated interim financial statements were approved for issue by the Board of Directors on 13 September 2021.

Going concern

The Directors have reviewed the Group's cash position, trading outlook and projections for a period of 12 months from the date of approving these unaudited interim consolidated financial statements. The Group has positive cash resources and has met, and is projecting to continue to meet, all its banking covenants. The Group is performing in line with market expectations and management projects that there is no requirement for further funding from its facility provider to support working capital.

Accordingly, the Directors are of the opinion that there are reasonable grounds to believe that operational and financial projections are achievable and have a reasonable expectation that the Group will have adequate resources to meet its obligations as and when they fall due for the foreseeable future. The Directors are satisfied that it is appropriate to prepare these unaudited interim consolidated financial statements for the Group on a going concern basis.

The Directors made specific statements in the Company's 2020 Annual Report concerning going concern. The Company's auditor drew attention to the Directors disclosure of a material uncertainty related to going concern and issued an unqualified audit opinion on the 2020 consolidated Group financial statements.

Accounting policies

The accounting policies adopted by the Group in these unaudited consolidated interim financial statements are consistent with those applied by the Group in its audited consolidated financial statements for the year ended 31 December 2020.

The following Standards and Interpretations are effective. Application of these standards has no material impact on the results of the Group:

   --        Amendments to the following standards: 

o IFRS 16: Covid-19 Related Rent Concessions (Amendment), effective 1 June 2020

o IFRS 9, IAS 39. IFRS 4, IFRS 7 and IFRS 16: Interest Rate Benchmark Reform (Amendment) - Phase 2, effective 1 January 2021

   --        Amendments to References to the Conceptual Framework in IFRS Standards 

Notes to the condensed set of unaudited interim financial statements (continued)

3. Segmental reporting

The following is an analysis of the Group's revenue and results from the continuing operations by reportable segment.

 
                                                                     Software         Central 
                                                                      Digital     unallocated 
                                        Engineering  Consulting     Solutions        costs(2)      Group 
 
                                            GBP'000     GBP'000       GBP'000         GBP'000    GBP'000 
Six months ended 30 June 2021 
  Revenue(1)                                 13,612      19,678           482               -     33,772 
--------------------------------------  -----------  ----------  ------------  --------------  --------- 
  Operating profit / (loss)                     618         104         (404)         (2,224)    (1,906) 
  Depreciation, amortisation 
   and impairment                               813       1,237            75             135      2,260 
  Acquisition and disposal 
   related costs                                  -           -             -             140        140 
  Non-operating costs                             -           -             -             531        531 
  Share based payments                            -           -             -              35         35 
  Movement in expected earn-out 
   payments                                       -           -             -             631        631 
--------------------------------------  -----------  ----------  ------------  --------------  --------- 
  Adjusted operating profit 
   / (loss) including non-controlling 
   interest                                   1,431       1,341         (329)           (752)      1,691 
  Non-controlling interest                        -           -             -               -          - 
--------------------------------------  -----------  ----------  ------------  --------------  --------- 
  Adjusted operating profit 
   / (loss)(3)                                1,431       1,341         (329)           (752)      1,691 
======================================  ===========  ==========  ============  ==============  ========= 
 
Six months ended 30 June 2020(4) 
  Revenue                                    11,777      15,059           684               -     27,520 
--------------------------------------  -----------  ----------  ------------  --------------  --------- 
  Operating profit / (loss)                     733       (402)         (312)         (1,758)    (1,739) 
  Depreciation, amortisation 
   and impairment                               753       1,098            52             134      2,037 
  Acquisition and disposal 
   related costs                                  -           -             -             150        150 
  Non-operating costs                            17         118             -             136        271 
  Share based payments                            -           -             -             115        115 
  Movement in expected earn-out 
   payments                                       -           -             -             525        525 
--------------------------------------  -----------  ----------  ------------  --------------  --------- 
  Adjusted operating profit 
   / (loss) including non-controlling 
   interest                                   1,503         814         (260)           (698)      1,359 
  Non-controlling interest                        -          21             -               -         21 
--------------------------------------  -----------  ----------  ------------  --------------  --------- 
  Adjusted operating profit 
   / (loss)(3)                                1,503         835         (260)           (698)      1,380 
======================================  ===========  ==========  ============  ==============  ========= 
 
 
Year ended 31 December 2020(2) 
  Revenue                               24,021   33,100  1,924        -   59,045 
--------------------------------------  ------  -------  -----  -------  ------- 
  Operating profit / (loss)              1,761  (3,135)      2  (3,469)  (4,841) 
  Depreciation, amortisation 
   and impairment                        1,553    3,692     75      396    5,716 
  Acquisition and disposal 
   related costs                             -        -      -    1,035    1,035 
  Non-operating costs                      104      792      -      209    1,105 
  Share based payments                       -        -      -       98       98 
  Movement in expected earn-out 
   payments                                  -        -      -      479      479 
  Lift BV discontinued business              -      132      -        -      132 
--------------------------------------  ------  -------  -----  -------  ------- 
  Adjusted operating profit 
   / (loss) including non-controlling 
   interest                              3,418    1,481     77  (1,252)    3,724 
  Non-controlling interest                   -        -      -        -        - 
--------------------------------------  ------  -------  -----  -------  ------- 
  Adjusted operating profit 
   / (loss)(4)                           3,418    1,481     77  (1,252)    3,724 
======================================  ======  =======  =====  =======  ======= 
 

Notes to the condensed set of unaudited interim financial statements (continued)

3. Segmental reporting (continued)

(1) Revenue generated in the Digital Solutions segment to 30 June 2021 is lower than reported for the period to 30 June 2020 due to the discontinuation of the Lift BV business previously disclosed here.

(2) Central unallocated costs are specific costs associated with the Group's AIM listing and other Group operational costs that are not charged out to the operating companies.

(3) Adjusted operating profit is defined as operating result adjusted to add back depreciation of property, plant and equipment and right-of-use assets, amortisation of intangible assets and impairment gains or losses on non-current assets, changes in fair value of contingent consideration, acquisition consideration accounted for as employment costs owing to on-going service conditions, any other acquisition-related and disposal-related charges, share based payment charges, and non-operating costs. Non-operating costs are those items believed to be exceptional in nature by virtue of their size and or incidence. The directors of the Company believe this measure is more reflective of the underlying performance of the Group than equivalent GAAP measures. This is primarily due to the exclusion of non-cash items, such as share-based payments, impairment, depreciation and amortisation, as well as acquisition and non-operating costs. This provides shareholders and other users of the financial statements with the most representative year-on-year comparison of underlying operating performance attributable to shareholders. This measure and the separate components remain consistent with 2020.

(4) The comparative segment for the six months to 30 June 2020 has been restated to present the segments in line with the financial statements to 31 December 2020.

4. Loss per share

The calculation of the basic loss per share is based on the loss after tax for the period divided by the weighted average number of shares in issue during the period as follows:

 
                                 Six months       Six months      Year ended 
                                      ended            ended 
                               30 June 2021     30 June 2020     31 December 
                                                                        2020 
                                (unaudited)      (unaudited)       (audited) 
                                  Number of        Number of       Number of 
                                     shares           shares          shares 
 
  Weighted average shares 
   in issue                     779,178,719      779,178,719     779,178,719 
==========================  ===============  ===============  ============== 
 

The weighted average number of shares in issue has been reduced by deducting the weighted average number of shares held by the Employee Benefit Trust of 1,606,769 shares (six months ended 30 June 2020 and year ended 31 December 2020: 1,606,769 shares).

The issue of additional shares on exercise of employee share options would decrease the basic loss per share and there is therefore no dilutive effect of employee share options.

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END

IR ZZGMLRFKGMZM

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September 14, 2021 02:00 ET (06:00 GMT)

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