British engineer TP Group raising £23.9m war-chest for acquisition spree
British specialist engineering services provider TP Group is embarking on a fundraising to build up a £23.9m war-chest as it eyes acquisition targets in the defence, aerospace and government sectors.
The Aim-listed company, which supplies oxygen generating systems for Royal Navy submarines, unveiled plans to issue 368,044,411 new ordinary shares at a price of 6.5p apiece. Some £20m will be raised through a firm placing and approximately £3.9m by an offer offer.
Most of the money raised will be used to finance an ambitious acquisition programme, while the remaining funds will be used to fund investment opportunities in the existing business.
Directors of the Hampshire-based business has already identified 20 potential acquisition opportunities and entered discussions with ten. It aims to announce its first purchase in the second half of this year.
All takeover targets will be earnings enhancing in the first year following the acquisition and help TP achieve annual revenues in the range of £90m-£100m by 2020.
Chief executive Phil Cartmell said the strong support from shareholders represents “a clear validation of the significant progress TP Group has made over the last two years”, having acquired business and won sizable contracts - including a framework contract with the Ministry of Defence which has a potential value of up to £22.5m.
TP Group won a framework contract with the Ministry of Defence which has a potential value of up to £22.5m earlier this year Credit: Crown/Ray Jones
He added: “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.”
In 2016, TP, which has a market cap of £30.6m, recorded its first profitable year and made a number of management changes, including the appointment of Derren Stroud as chief financial officer.
Since hitting a nadir in November last year, shares have surged by more than 65pc, bolstered by the acquisitions of ALS Technologies and Flexible Software Solutions in February and contract wins.