Tp Share Discussion Threads

[catch007] 19/11/2018 17:32

Thanks Bullster & Cerrito

Not sure that 'cash to burn' is correct as there has been a very prudent approach taken to date on purchases. The interims indicated advanced talks with three possible acquisitions I have never seen twenty targets quoted anywhere prior to this article. Generally a positive piece

[bullster] 19/11/2018 17:14

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Thanks Cerrito, I just had to go find it.



Market minnows: TP Group's slowly but surely acquisitions approach looks to be working

MARK SHAPLAND

Growing through acquisitions can be the fastest way to lose minnow status. This has been the strategy adopted by TP Group, and slowly but surely it looks to be working.

TP Group started out making compressors for the oil and gas industry, but then in 2014 it moved into the defence sector where it believed it could make more money. The company’s major activity now is providing air purification equipment for Royal Navy submarines.
To gain a foothold in the defence industry the company made a series of bolt-on acquisitions, including Shaw Sheet Metal, a company that laser cuts metal, in 2015.
However, chief executive Phil Cartmell is an ambitious type who wants annual revenues to hit £100 million by 2020. Last year its revenue was £29.5 million. So to hit the punchy revenue target the company raised £20.8 million in July last year to boost its war chest for potential acquisition targets.

Since then it has bought consultancy firm Polaris Consulting and computer server supplier Westek Technology for £3.5 million each.

Cartmell says the company still has plenty of cash to burn, adding that it is in discussions to close one more deal this year. The company has said on top of that there are another 20 potential acquisition targets. Cartmell added that all acquisitions and takeover targets are earnings enhancing in the first year.

Aside from acquisitions, the company has also been boosted by a string of contract wins, including a £12.5 million win from the Ministry of Defence in May. The contract will see the group produce combined oxygen generating systems.

On the back of new contract, the group has invested £1.5 million on upgrading is Dukinfield plant with state-of-the-art engineering capabilities. However, the biggest and most exciting growth area is the expansion in its consulting arm. Last year, the division increased revenues by 73% year on year to £5.1 million, while its order book grew by 151% to £7.8 million. The performance benefited from its acquisition of Polaris, which has army contracts.

Analyst Zane Bezuidenhout, who has a Buy rating on the stock, says: “Earnings have been propelled by the group’s recent acquisitions it is making. The diversification into new markets leaves TP Group significantly undervalued in our opinion.”

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Zane Bezuidenhout is an analyst at Cenkos Securities Plc (Broker)

Cenkos is our adviser and broker.

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[cerrito] 19/11/2018 16:37

TPG feature of today's London Evening Standard Market Minnows Section.
Someone reading the column knowing nothing about TPG may well be put off by their description of Cartmell's acquisition plans but otherwise generally supportive.

[catch007] 13/11/2018 17:13

Had another read of the 2018 interim results power point presentation on the TPG website. For those with a serious interest in the company its a compelling read with some real information gems such as profit margin increasing from 1% to 6% (a good indicator when benchmarked against the order book of 56m) US contract opportunities that may be closed in 2019 and big ticket potential new customers like Lockheed, Nato & General Dynamics. Add to this what we know of the frameworks & partnerships that have been announced it is likely that we will see some large orders coming through in the coming months. Either I am in a state of total delusion on prospects or it TPG is a compelling value play ….. I hope its the latter lol.

[catch007] 13/11/2018 15:59

I remain puzzled on what it will take to move the share price needle north after a period of constant business improvement, strong order book and business trading, industry awards, a rising EBITDA forecast moving to profitability, no debt and now announcing a high quality earnings enhancing acquisition that is already profitable. Like many here I see this company doing all the right things yet not reflected in the SP, bought a few more today as the value will be recognized at some point by the market, anything under 6.5p seems a reasonable punt to me given the positive news flow . GLA

[pavey ark] 12/11/2018 20:16

Lessons were learned from the mad Corac days and TPG will not spend on research without this sort of arrangement.
Submarine manufactures are paying them to do research (AIP) and now Polaris is being funded to produce a system that has many diverse applications and not just military.

Polaris has obviously benefitted from the TPG contacts and this is certainly a factor in TPG's acquisition decisions.

Edit : Thales UK is worth a look

[pavey ark] 12/11/2018 18:50

Not just a trophy for the cabinet.
It looks like the £900k award last month was from the MoD but more to come from "industry partners"
From last month's announcement "This work will also strengthen our relationship with Thales as a key industrial partner as we work together to deliver the first mission system, and then collaborate on exploitation."

Edit: good find GB

[grinley boy] 12/11/2018 16:41

Another award!

[larry laffer] 06/11/2018 11:07

Still got my first ruggedised computer

A Kontron 286 PC

286 being the CPU, I decided to keep 3 spare CPU's just in case. Although the first one fitted is still working ok in its present application as a file server.

It will probably see me out, and may keep going until TPG hits 10p

[pavey ark] 05/11/2018 21:14

TDday, yes, those were my thought first thing this morning but the latest Westek accounts (Dec'17) look ok with £850k net current assets and I assume the last £500k payment is an earn out clause.
They obviously didn't have to buy Westek and the company announcement before and after this purchase certainly emphasised the cross selling aspect of the deal.

All in all not a high risk purchase and one which has the potential do well both in terms of improved markets for Westek products and new customers for TPG products and services.

The value of Westek to TPG is much greater than it would be to someone coming along and buying it as a stand alone purchase.

With TPG T&E operating at a 27% profit margin and central cost covered then any additional orders via the Westek customer base make the whole deal very profitable but I suspect that the acquisition team have synergies in mind that would make the deal a good one even without this additional benefit.

[tday] 05/11/2018 18:04

Purchase price is about 17x pre tax profits; not cheap by any means but hopefully synergies, cross selling etc will make the deal more attractive.

[napoleon 14th] 05/11/2018 10:32

So, TPG have got themselves a mini Radstone Technology for not very much money/risk...
I was very long Radstone in the '00s before they were bid for at quite a premium.
Their product was rugged computers for missile control.

IMO acquisition know how is a big forte at TPG and they seem capable of buying technology which has a transformational effect on their positioning in the market.
I would like to see a corresponding transformational effect to their ebitda & eps.

[pavey ark] 05/11/2018 09:37

From the recent results:" At present, we are in discussions with prospects involved in the supply of ruggedised military systems, project software systems and space mission support services."
I got this wrong because I assumed they had re-opened their negotiations with a "rugged computer" company that fell through last year.
Last year's purchase was to be in the region of £12m/£14m but the company didn't want to play and then they had a bad set of results so TPG didn't want to play.
This much more modest purchase is within the T&E unit and I assume the other two are connected with the CaPS unit.

We may yet see additional activity this year and I certainly like this incremental approach.

PS: Westek looks like a good geographical fit which although not that important it does help.

[bullster] 05/11/2018 09:28

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Yes, one would be forgiven for saying "something is due".

lol.




RE:

Pavey Ark 3 Nov '18 - 18:22 - 3346 of 3349

Bullster, looking for a bit of expansion of the above.

Are you saying that Killik and HL made sizeable purchases in October ?

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[pavey ark] 05/11/2018 08:45

Well not the big acquisition that some were hoping for but that may still come as this addition could be paid for from next years free cash flow alone.
The word "rugged" jumps out but it is certainly not the company that they have referred to in the past so I don't know if that deal is dead or this is in addition to it.
A quick look on the TPG site shows that Westek should fit in well and there is the double bonus of selling Westek products into TPG's customer base and vice versa.

Nice, easy addition that presents very little risk to TPG holders but should add an easy 10% to t/o in 2019. If the rather robust organic growth and order book are added in we are set for a very healthy increase whilst still retaining a substantial cash balance which must be good in these rather uncertain times.

[luzley] 05/11/2018 07:20

Nice little addition. Westech Tech looks a neat fit into TPG that gives more presence and traction.

[luzley] 05/11/2018 07:18

Excellent add-on announced this morning. Acquisition strategy on track and building.

[pavey ark] 03/11/2018 18:22

Bullster, looking for a bit of expansion of the above.

Are you saying that Killik and HL made sizeable purchases in October ?

[bullster] 02/11/2018 13:30

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OCTOBER BUYING SPIKE






Recent trading activity:





Buy 7.66m Killik & Co, 19/09/17 - 17/10/18 new total 46.25m
Buy 6.46m Hargreaves Lansdown, 09/01/15 - 10/10/18 new total 22.62m




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[pavey ark] 02/11/2018 12:20

Excellent posts today but perhaps I would say that as they as they are both totally in sync with my way of thinking.

By the way of some totally unsubstantiated guesswork on my part I "THINK" that there is a chance that one of their major acquisition targets is considering an acquisition of its own and TPG may be in the mix to buy a part of one business while another business is bought.

It could be something like a house buying chain.

Just some random musings but like the posters today I am confident that the management will do the right thing if and when the time comes.

Just because we are not getting weekly news announcements doesn't mean that things aren't moving apace on all aspects and divisions of the company.

[napoleon 14th] 02/11/2018 09:54

Plenty of potential but no instant results.
The slower TPG are in spending their cash, the more likely the deals are to be good - last one immediately kicked in with research grant close to what the acquisition cost.
I'll wait.

[luzley] 02/11/2018 06:54

TPG have a resilient, successful business and is growing both substantially and organically. Acquisitions made have been excellent value, appropriate and seamlessly integrated. Given the current swings within the general market, the amount of cash in the war-chest may be extremely useful as the cost of future possible acquisitions follows the market. Despite the frequently voiced frustaration, I think the prudence of the BoD may well prove to have been an excellent and prescient stance. Good solid company able to weather whatever Brexit and the future may hold.

[steve3sandal] 31/10/2018 22:47

Hopefully and wisely but probably not. Not obvious there they could acquire in that size hence the slow bolt on secondary complimentary contractors. One of the safer places to hide in October will do for me.

[timojelly] 31/10/2018 11:22

Will we ever spend that 20mill?