Earnings Release • Mar 14, 2014
Earnings Release
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RNS Number : 2841C
Tribal Group PLC
14 March 2014
Tribal Group plc
14 March 2014
Preliminary results for the year ended 31 December 2013
Tribal, a leading provider of technology-enabled solutions to international education, learning and training management markets, is pleased to announce its preliminary results for the year ended 31 December 2013.
SUSTAINING MOMENTUM
· Good financial performance
- 11% increase in adjusted revenue1 to £125.5m
- 14% increase in adjusted pre-tax profit2 to £14.6m
- healthy cash generation: cash conversion3 77% (2012: 87%)
- net debt reduced to £4.6m (2012: £9.9m)
- bank facilities renewed and extended to 2018
· Dividend increased by 28% to 1.60p per share
· Strong UK market positions retained
· Growing momentum in chosen international markets
- major programmes in Australia and New Zealand progressing well
- new market entry into Canada
- selective bolt on acquisition programme progressing
- international delivery capacity developing well
· Exciting potential for further progress across the Group
Keith Evans, Chief Executive, commented:
"We are pleased with the Group's performance in 2013. Tribal delivered a good financial performance and continued to build strong foundations for sustainable growth across our domestic and, in particular, international markets."
Financial summary
| Year ended 31 December | 2013 | 2012 | Change |
| Adjusted results: Adjusted revenue1 |
£125.5m | £113.4m | 11% |
| Adjusted operating profit2 | £15.8m | £13.9m | 14% |
| Adjusted operating profit margin | 12.6% | 12.3% | |
| Adjusted profit before tax2 | £14.6m | £12.8m | 14% |
| Adjusted diluted earnings per share2 | 12.5p | 10.9p | 15% |
| Statutory results: | |||
| Revenue | £125.5m | £115.4m | 9% |
| Operating profit | £15.5m | £11.5m | 35% |
| Profit for the year | £11.6m | £9.7m | 20% |
| Dividend per share | 1.60p | 1.25p | 28% |
| Net debt | £4.6m | £9.9m | (54)% |
2. Adjusted operating profit and adjusted EPS are in respect of continuing operations, excluding trading losses of closed businesses in 2012 of £0.8m, intangible asset amortisation of £0.2m (2012: £0.02m), net exceptional costs of £0.03m (2012: £1.6m) and in the case of adjusted EPS unwinding of hedge accounting reserve of £0.5m (2012: £0.5m), unwind of discount on deferred contingent consideration of £0.4m (2012: £nil) and the related tax credit of £0.2m (2012: £0.6m).
Further information
A presentation of these results will be made to analysts and investors at 9.30am today at the offices of Weber Shandwick, 2 Waterhouse Square, 140 Holborn, London, EC1N 2AE. A copy of the presentation will be made available later this morning on the Tribal Group website: www.tribalgroup.com.
Tribal Group plc Tel: 020 3402 3540
Keith Evans, Chief Executive
Steve Breach, Group Finance Director
Weber Shandwick Financial Tel: 020 7067 0000
Nick Oborne
Stephanie Badjonat
Canaccord Genuity Limited
Simon Bridges Tel: 020 7523 8000
Cameron Duncan
Links: Tribal Group plc website: www.tribalgroup.com.
FORWARD LOOKING STATEMENTS:
This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "anticipates", "believes", "estimates", "expects", "intends", "may", "plans", "projects", "should" or "will", or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include, but are not limited to, statements regarding Tribal's intentions, beliefs or current expectations concerning, amongst other things, results of operations, prospects, growth, strategies and its expectations.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of Tribal and the development of the markets and the industry in which it operates or is likely to operate may differ materially from those described in, or suggested by, the forward-looking statements contained in this announcement. In addition, even if the results of operations and the development of the markets and the industry in which Tribal operates, are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, those risks in the Principle Risks and Uncertainties section of the Tribal Annual Report & Accounts, as well as general economic and business conditions, industry trends, competition, changes in regulation, currency fluctuations or advancements in research and development.
Forward-looking statements speak only as of the date of this announcement and may, and often do, differ materially from actual results. Any forward-looking statements in this announcement reflect Tribal's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to Tribal's operations, results of operations and growth strategy.
Tribal does not undertake any obligation to update the forward-looking statements to reflect actual results or any change in events, conditions or assumptions or other factors unless otherwise required by applicable law or regulation.
CHIEF EXECUTIVE'S REPORT
Sustaining momentum
Our goal, as we embarked on our current strategic plan, was to transform Tribal into an international business that creates and delivers world-class solutions for the education management market.
We are making excellent progress towards our objectives. Tribal's capabilities in our chosen international markets are growing in stature, and we will continue to invest in the foundations for sustainable long term success in our existing and new growth markets.
Our solutions, and our people, have been tested against the best that our international competitors can offer. In Australia, in the United States and in Canada, our successes demonstrate that our combination of software and intellectual property, developed and credentialed in the UK education market, represents a powerful combination for education management around the world.
Driving through our strategic plan
Through our existing product and service-based solutions, new software product development, and carefully selected acquisitions, we have continued to strengthen our leadership positions in the markets and regions in which we operate. We are growing through new customer wins, and are pleased with increasing momentum in cross-selling our systems and solutions to our existing customers.
Management systems
Our student management systems continue to hold strong leadership positions in the UK. We are continuing to expand in Australia and New Zealand, with the wider Asia Pacific region now also presenting emerging opportunities. In North America, we have secured the platform on which to expand our market presence through a substantial contract win in Canada.
Performance improvement solutions
Our performance improvement solutions have maintained their market leading positions in the UK and Asia Pacific, and are strengthening their position in the US. Our solutions are also finding new sustainable market entry points in new regions, such as the Middle East.
Quality assurance solutions
Tribal continues to dominate the UK market, working in partnership with Ofsted, the Office of Standards in Education, Children's Services and Skills. We have now established a significant presence in the Middle East, and have secured a strong entry position in the US.
Investing in line with our strategy
We are focussed on developing functionality within our student management systems which supports the new requirements of an education management market that continues to expand, globalise and become more data driven.
We have also significantly increased the technology content of our evidence-based performance improvement and quality assurance solutions, enhancing our methodologies and toolsets which provide scalability, resilience and secure our intellectual property.
Financially, we continue to focus on margin improvement, whilst maintaining an appropriate balance between profit growth and business investment.
We are well placed to invest. Tribal is cash generative, and we benefit from an increasingly strong balance sheet. We have also refreshed and extended our bank facilities, and now have committed financial support until 2018.
Whilst our growth is principally organic, we maintain an interest in bolt-on acquisitions for our systems and solutions which can add functionality or give us increased regional penetration. Our recently announced acquisition of Sky Software, an Australian- based provider of cloud-based student management systems to the vocational and higher education markets, extends our product portfolio and brings new customer relationships in our target markets.
Higher education
We have continued to grow our customer base in the UK and Ireland, with Bournemouth University joining our user group, and being appointed preferred supplier for Imperial College, London. Our major implementation at University of Oxford is proceeding well, and our systems have gone live during the year at Staffordshire University and Trinity College, Dublin.
In Asia Pacific, we have continued to build our customer base. The University of Otaga has also now extended its use of our systems with its purchase of our asset management system to manage its estate and facilities. Our significant implementation programmes at University of Sydney and University of Canterbury, Christchurch are going well, and during the year our systems went live at Royal Melbourne Institute of Technology and University of Otago.
In North America, we have secured a major market entry contract through the University of British Columbia (UBC) in Vancouver, one of Canada's leading universities. UBC will provide us with a strong basis from which to develop our Higher Education business in Canada and the US.
Building on our existing presence in the US student benchmarking market, we are now working with the University of California, Berkeley on joint development and delivery of a suite of performance analytics solutions, and separately we have formed a collaboration with the American Association of College Registrars and Admissions Officers to help develop our solutions for the North American region, and to support our implementation activities.
On the back of these initiatives, we have developed a growing pipeline of opportunities across the North American region.
Vocational learning
Whilst we have seen generally quieter market conditions in the vocational learning market in the UK, customer activity levels in our student management systems have been good.
We will be placing increased emphasis on enhancements to our college-based systems in 2014, having focussed development resources on the SALM programme during 2013, but we have continued to increase our customer base with new student management system customers at Luton College, Rhondda Cynon Taff Council, Devon County Council and Neath Port Talbot College.
Tribal's work-based learning student management system upgrade was launched at the end of 2012, and over 85% of our UK customers have migrated to the new version.
Our performance improvement and quality assurance solutions have retained their market leading positions. The trend towards employer funding for workforce skills development has presented new opportunities for our student management systems and related services, and we are currently active with pilot apprenticeship programmes in Tesco, Pizza Hut and KFC.
In Asia Pacific, the major New South Wales Student Administration and Learning Management (SALM) programme continues to make good progress, with our college student management system due to go-live during 2014. Our installed base in New Zealand and the SALM programme are providing strong credentials to support growth elsewhere and our performance analytics solutions are established and growing across the region, with new customers in Western Australia, Queensland and Canberra.
Our recently established North America team is now beginning to explore the potential for our systems and solutions across the community college market, and in the Middle East we are optimistic that we will be able to develop our business further following our significant contract in Saudi Arabia with the Saudi Skills Standards Agency to deploy our quality assurance solutions on a wider basis.
Schools / K-12
Our student management system customer base across our core education authority products in the UK has continued to develop well. We have also developed new modules for children's safety and welfare, and have begun to take early market entry positions in the schools student management system market. Our quality assurance solutions have retained their high standard of delivery through our key relationship with Ofsted, and provide very strong credentials for taking these solutions to wider markets.
In Asia Pacific, the SALM programme is making strong progress, with our schools- based student management systems having gone live in a staged manner in August and November 2013. As our system rolls out over the New South Wales schools base, we will establish a leading position in the schools market in Australia which will create a number of new development opportunities. During 2014, we will be exploring the increased deployment of our performance improvement and quality assurance across the Asia Pacific region.
Following our quality assurance work in Nashville, Tennessee, we secured a significant contract to deploy our solutions across New York State, one of the largest education authorities in the US. This work complements our schools-focused quality assurance work in Massachusetts through our operations in Boston.
In the Middle East, we have now secured a contract presence for our quality assurance solutions in Bahrain, the United Arab Emirates and Saudi Arabia, and have become established as one of the major providers in the region. We have therefore now established a regional team, who will support the development of all of our systems and solutions in the Middle East.
Focus for 2014
Tribal is increasingly well-positioned to take advantage of good market growth opportunities around the world. Our technologies and intellectual property have demonstrated an ability to compete on the world stage, and our strong UK customer base, combined with our growing international customer groups, provide us with an exceptional insight into trends in education management. Our task is to build further on these strengths, and our key objectives for 2014 are therefore three-fold:
1. We will seek to sustain the momentum in our international growth markets, growing within the markets where we have established ourselves, and also reaching into new markets. We are principally focussed on English-speaking markets, but remain alert to opportunities elsewhere which may enable access to significant new markets.
2. Alongside this focus on extending our customer relationships, we will continue to build local infrastructure to underpin our growth into these markets in the long term. Our investment will concentrate on senior management capacity, sales and business development capabilities, and implementation and support capacity in our key regional markets.
3. Our international focus is important, but we are committed to supporting, developing and growing our UK markets. We will be placing renewed emphasis on developing innovative and valuable systems functionality and solutions for our UK customers.
Outlook
Our expectations for 2014 are unchanged. As a consequence of seasonality in our business, and our continued programme of international development and investment, we anticipate our profits in 2014 will once again be weighted towards the second half of the year, and Tribal has good potential to make further progress over the medium term.
Divisional Performance: Systems
Our Systems business has made significant progress again this year, securing further customers for our major student management systems in new international markets, advancing well on the major SALM programme with key go-live milestones having been successfully met, and continuing to invest in significant enhancements to our management systems.
| Year ended 31 December | 2013 £'000 |
2012 £'000 |
| Adjusted revenue | ||
| Licence and development fees | 19,471 | 16,035 |
| Implementation | 22,367 | 18,316 |
| Maintenance | 18,802 | 16,782 |
| Other | 3,566 | 4,411 |
| 64,206 | 55,544 | |
| Of which: | ||
| UK | 58% | 67% |
| International | 42% | 33% |
| 100% | 100% | |
| Adjusted segment operating profit | 14,826 | 12,072 |
| Adjusted operating profit margin | 23% | 22% |
| Systems product development investment | £6.0m | £6.4m |
Our Systems business grew revenue by 16% to £64.2m (2012: £55.5m). Divisional adjusted operating profit was £14.8m (2012: £12.1m), and the adjusted operating margin was 23% (2012: 22%).
We again experienced generally good trading conditions in the UK across the sectors in which our Systems business operates, and our activities in Asia Pacific continued to perform well. Our international revenues in 2013 in our Systems business were £26.8m, of which £18.7m related to the SALM programme. As a whole, our Systems business generated 42% of its revenues from international customers, compared with 33% in 2012.
Our licence revenues grew strongly in the year. We are now well advanced through the core development phase of the SALM programme in New South Wales, and this work represents an important part of this licence revenue growth. Our student management systems continued to see good momentum with new university and college customers in the UK and internationally, although we experienced some delays in closure of new contracts which we now expect to complete during 2014.
Implementation revenues grew strongly as we continued to support the SALM programme implementation in New South Wales. Our work on this aspect of the programme began in H2 2012, and is continuing into 2014. Our teams were also engaged in the deployment of our systems for major customers such as University of British Columbia, University of Oxford, Otago University and Staffordshire University, and we enter 2014 with a strong pipeline of new projects on which these teams will be engaged.
Maintenance revenues grew well as our customer base expanded. The SALM programme did not contribute materially to our maintenance income during 2013, but our support activity for the SALM system commenced towards the end of 2013, and this stream of activity will move forward through 2014 and beyond.
Our adjusted operating margin improved from 22% to 23%. We continue to seek operational efficiency improvements to enhance our margins further, but we remain committed to growing our implementation capacity in our international markets which in the short term will offset margin gains from our operating efficiency programme.
Strong revenue growth has supported our continued investment programme in new software product development. We have invested across our range of systems, with capitalised investment of £6.4m in 2012 maintained at £6.0m in 2013. Our intention is sustain the momentum in our software investment programme for the medium term.
Divisional Performance: Solutions
Our Solutions business continues to re-focus towards increased technological underpinning of the services we provide, and higher quality revenues. We have successfully integrated i-graduate, which has out-performed in its first year within Tribal.
| Year ended 31 December | 2013 £'000 |
2012 £'000 |
| Adjusted revenue | ||
| Performance improvement solutions: | ||
| - Benchmarking and analytics | 6,508 | 2,727 |
| - Professional development and training support | 17,323 | 19,754 |
| - Other | 6,467 | 7,045 |
| 30,298 | 29,526 | |
| Quality assurance services | 31,272 | 29,816 |
| 61,570 | 59,342 | |
| Of which: | ||
| UK | 90% | 90% |
| International | 10% | 10% |
| 100% | 100% | |
| Adjusted segment operating profit | 6,066 | 5,282 |
| Adjusted operating profit margin | 10% | 9% |
| Solutions product development investment | £0.9m | £0.9m |
Our Solutions business' revenue increased by 4% to £61.6m (2012: £59.3m) including the benefit of the i-graduate acquisition in January 2013. Excluding i-graduate, our Solutions business' revenue decreased by 1%. Divisional adjusted operating profit was £6.1m (2012: £5.3m), an increase of 15%, and the adjusted operating margin increased to 10% (2012: 9%).
The UK market in which the Solutions business predominantly operates has remained relatively quiet, and comparatively it continues to present fewer growth opportunities than we see in our Systems business. Growth opportunities in the Solutions business are targeted on internationalising our activities, and increasing focus on analytics and software-based performance improvement solutions and quality assurance solutions.
Performance improvement solutions
At the beginning of the year, we completed our acquisition of i-graduate, our student experience benchmarking business. i-graduate now forms part of our analytics proposition combined with our financial and operational analytics solutions, which has grown strongly in the year. i-graduate has performed ahead of our expectations, and has secured a number of important new customers and programmes such as University of California, Berkeley and the National Student Engagement Survey for Ireland.
Our professional development and training support work continues to evolve toward increasingly software-based activities. Our apprenticeship management programmes for large employers developing well, with a number of pilots progressing in parallel.
We are also seeing our e-learning "GoLearn" system gaining momentum in colleges and work-based learning, and we have recently signed a contract to deploy the GoLearn system as the platform for the Welsh Essential Skills and Assessment Tool, to be rolled out across educational institutions in Wales.
Consistent with our strategic direction, we are placing less emphasis on those areas of our work where technology is less able to be deployed effectively. Our specialist learning solutions work, for Further Education colleges in the UK, has had a quiet year, with uncertain funding levels from the Skills and Funding Agency for new learners holding back colleges' appetite to extend programmes on which work. In our careers advice programmes for the offender management service, changes in prison operating environments have constrained our activity levels.
Quality assurance solutions
Our quality assurance solutions are now actively deployed on a number of significant programmes in North America and the Middle East, complementing our significant contracts with Ofsted in the UK.
In the US, we are working with the New York State Education Department, National Charter Schools Institute, and throughout Massachusetts during the year, whilst our work in the Middle East has expanded beyond that with the Abu Dhabi Education Council and we are now active in Saudi Arabia and Bahrain on similar programmes targeted at uplifting the quality of education outcomes.
Financial Review
Introduction
Tribal has continued to grow its revenue and operating profits. We have delivered strong increases in our international activities, and our operating cash generation remains healthy. Our debt levels have continued to fall, and our capacity to invest for the long term is growing.
Continuing operations
| 2013 £'000 |
2012 £'000 |
Change | ||
| Adjusted revenue | 125,485 | 113,417 | 11% | |
| Adjusted operating profit from divisions before central costs | 20,892 | 17,354 | 20% | |
| Central costs | (5,133) | (3,472) | 48% | |
| Adjusted operating profit | 15,759 | 13,882 | 14% | |
| Adjusted net finance costs | (1,198) | (1,043) | 15% | |
| Adjusted profit before tax | 14,561 | 12,839 | 13% | |
| Adjusted effective tax rate | 19.8% | 20.5% | ||
| Adjusted diluted earnings per share | 12.5p | 10.9p | 15% |
In the year ended 31 December 2013, the Group's adjusted revenue from continuing operations was £125.5m (2012: £113.4m). Adjusted operating profit was £15.8m (2012: £13.9m) and adjusted operating margin was 12.6% (2012: 12.3%). Adjusted profit before tax was £14.6m (2012: £12.8m) and adjusted diluted earnings per share were 12.5p (2012: 10.9p). The statutory profit for our continuing business after tax was £10.8m (2012: £8.0m).
The Group's statutory revenue from continuing operations was £125.5m (2012: £115.4m). Statutory operating profit was £15.5m (2012: £11.5m) and statutory operating margin was 12.4% (2012: 9.9%). Statutory profit before tax was £13.5m (2012: £10.0m) and statutory diluted earnings per share from continuing operations were 11.5p (2012: 8.5p). The statutory profit for our continuing business after tax was £10.8m (2012: £8.0m).
Adjusted revenue
Adjusted revenue from continuing operations increased by 11% to £125.5m, underpinned by organic growth in the Systems business of 16%, primarily resulting from strong performance in international markets. Our Solutions business grew by 4%, with the acquisition of i-graduate contributing to the development of our performance improvement activities.
Adjusted operating profit
Our adjusted operating profit has increased by 14% year-on-year to £15.8m. Our divisional profit margins have improved incrementally in each of our Systems and Solutions divisions; we anticipate that margins will continue to improve albeit reflecting our international expansion programme, with a focus on increasing strength in our regional management structures and sales and business development capabilities in the near term.
Our central costs were £5.1m (2012: £3.5m), or 4.1% of revenue (2012: 3.1% of revenue), slightly above our target range of less than 4% of revenue, as a result of this development programme. Nevertheless, the Group's overall operating margin increased to 12.6%.
Items excluded from adjusted profit figures
| 2013 £'000 |
2012 £'000 |
|
| - Trading losses from closed businesses | - | (844) |
| - Redundancy costs and other closure costs | (93) | (1,286) |
| Operating loss from closed businesses | (93) | (2,130) |
| Other costs excluded from adjusted profit: | ||
| - Property-related credit | 117 | - |
| - Acquisition-related expenses | (54) | (259) |
| - Amortisation of IFRS3 intangibles | (231) | (24) |
| (261) | (2,413) | |
| - Interest rate hedge instrument | (453) | (453) |
| - Adjustments to deferred consideration | (350) | - |
| (1,064) | (2,866) |
The adjusted profit figures exclude the results of closed businesses (where closure took place in 2012) and other costs (including amortisation of IFRS 3 intangibles and adjustments to deferred consideration of £0.6m).
The adjustment to deferred consideration represents the unwinding of the discount applied to the deferred contingent consideration on the acquisition of i-graduate, reflecting the fact that these payments are expected to be made over a number of years.
The amortisation charge in relation to IFRS3 intangible assets arose from separately identifiable assets recognised as part of the i-graduate acquisition, principally in relation to the order book and customer relationships at completion.
The financial instruments charge in the year, which is treated as an exceptional cost, arises from the unwinding of the hedging reserve relating to the interest rate swap which was closed out in July 2011. The reserve has unwound over the original life of the swap to December 2013.
Discontinued activities
| 2013 £'000 |
2012 £'000 |
|
| Profit attributable to Resourcing | 165 | 666 |
| Profit attributable to Health and Government | 242 | 1 |
| Profit attributable to Kindred | 318 | 185 |
| Loss attributable to Nightingale Associates | - | (50) |
| Operating profit attributable to discontinued operations | 725 | 802 |
| Profit on disposal of Resourcing | 248 | 541 |
| Profit on disposal of Health and Government | - | 45 |
| Loss on disposal of Nightingale Associates | (131) | (179) |
| Profit on disposal of discontinued operations | 117 | 407 |
| Attributable tax (charge) / credit | (54) | 556 |
| Net profit attributable to discontinued operations | 788 | 1,765 |
Our major disposal programme was completed in 2011. Since completion of the disposals, certain deferred consideration payments have continued to be receivable. We have also undertaken a programme to mitigate any residual property lease obligations which remained with Tribal.
In these respects, we have continued to be successful in recovering significant portions of the receivable amounts, in subletting and disposing of the residual property and in securing deferred contingent consideration in excess of our previous expectations. This has resulted in profits arising in connection with discontinued activities.
Group finance costs
| 2013 £'000 |
2012 £'000 |
|
| Investment income | (37) | (162) |
| Finance costs | 1,585 | 1,205 |
| Net finance costs | 1,548 | 1,043 |
Net finance costs have increased due to higher other interest charges, including in particular the unwinding of the discount on the iGraduate deferred contingent consideration. Underlying interest on our revolving credit facility has fallen in line with the reduction in year end net debt, although our cash and debt balances fluctuate within each quarter due to some of our larger customer operating under quarterly invoicing schedules.
In addition to interest costs on our bank borrowings, finance costs also include charges arising from bank guarantees issued as part of the SALM contract.
Tax
The effective tax rate on our adjusted continuing business of 20% (2012: 21%) is lower than the standard rate due in particular to the beneficial effect of prior year adjustments. The corporation tax charge on continuing operations was £2.7m (2012: £2.0m). As the Group is now growing its activities in international jurisdictions, it is anticipated that the tax charge on profits in the near to medium term future is likely to be modestly higher than the standard UK corporation tax rate.
Earnings per share
The adjusted diluted earnings per share from continuing operations before exceptional costs, the results of closed businesses and intangible asset amortisation, which reflects the underlying trading performance of the Group, grew from 10.9p to 12.5p.
Basic earnings per share from continuing and discontinued operations was 12.3p (2012: 10.4p).
Shareholder returns and dividends
The statutory profit for the year was £11.6m (2012: £9.7m).
The Group's financial performance, and balance sheet strength, has significantly improved over the last three years. Our focus continues to be on growing the business, sustaining strong investment in our software products, entering selected new markets and, where appropriate, considering bolt-on acquisitions.
The Directors have previously pursued a progressive dividend policy, reflecting the cash generative nature of the continuing business, but seeking to reduce debt levels over the medium term and to retain capital to allow the Group to implement its strategic plan. This progressive dividend policy remains appropriate.
The Directors consider that it is in the Group's best interest, for the foreseeable future, generally to retain cash generated from operations for reinvestment in pursuit of the above opportunities.
On this basis, and taking into account the good financial performance of the Group in 2013, the Board has proposed a final dividend of 1.10p per share which, together with the interim dividend of 0.50p per share, gives a total dividend of 1.60p per share (2012: 1.25p). The final dividend is covered 7.8 times by adjusted earnings per share, and the final dividend will be paid on 11 July 2014 to shareholders on the register on 13 June 2014.
Cash flow and net debt
Net debt
| 2013 £'000 |
2012 £'000 |
|
| Cash at bank and in hand | 7,555 | 8,424 |
| Syndicated bank facility (net of bank arrangement fees) |
(12,114) | (18,274) |
| Net debt | (4,559) | (9,850) |
| Net debt / Adjusted EBITDA | 0.23 | 0.59 |
Group net debt decreased from £9.9m at 31 December 2012 to £4.6m at 31 December 2013. As at 31 December 2013, cash at bank and in hand included advance cash receipts in relation to customer programmes of £4.8m (2012: £0.8m).
Cash flow and cash management
| 2013 £'000 |
2012 £'000 |
|
| Continuing operations | ||
| Net cash from operating activities before tax and before exceptional cashflows | 20,743 | 20,423 |
| Capital expenditure (net) | (1,552) | (2,178) |
| Capital expenditure on product development and business systems | (6,994) | (6,188) |
| Operating cash flow from continuing operations after capital expenditure before exceptional cashflows | 12,197 | 12,057 |
| Exceptional cashflows | (375) | (1,664) |
| Operating cash flow from underlying operations after capital expenditure | 11,822 | 10,393 |
| Operating cash flows from closed businesses | - | (791) |
| Operating cash flow from discontinued operations after capital expenditure | 446 | (1,213) |
| Net interest | (633) | (633) |
| Tax | (2,168) | (1,692) |
| Free cash flow | 9,467 | 6,064 |
| Acquisitions and deferred consideration | (2,521) | (50) |
| Disposal of discontinued operations | 638 | 1,542 |
| Dividends paid | (1,260) | (934) |
| Financing | (6,647) | (4,695) |
| Effect of foreign exchange rate changes | (546) | (27) |
| (Decrease) / increase in cash and cash equivalents in year | (869) | 1,900 |
Cash flow and cash management
During 2013, the Group's underlying activities generated strong operating cash flows after capital expenditure, but before exceptional cash costs, of £12.2m (2012: £12.1m), with cash conversion of 77% (2012: 87%).
Capital expenditure
Capital expenditure across the Group totalled £8.5m (2012: £8.4m). During 2012, we significantly increased our investment in software development. We have sustained this higher level of investment during 2013, and undertaken other capital expenditure as the infrastructure of the Group was further refreshed and extended in international markets.
We have maintained capitalised expenditure on software product development at £6.9m (2012: £7.3m). At the same time, research and development costs charged directly against profits were £1.7m (2012: £1.3m). Our areas of investment expenditure particularly relate to enhancements to our existing education management systems to address international customer requirements, and new development for both domestic and international markets.
Cash flows arising from discontinued activities
A net inflow of cash of £0.4m was generated in the year from through actions associated with the discontinued activities related to our disposal programme which was completed in 2011. These actions comprised successful property disposals and subletting arrangements, and the collection of deferred consideration receipts in relation to the disposal of Tribal Resourcing.
Renewal of bank facilities
During January 2014, we agreed a new facility with our existing banks (Lloyds Banking Group and HSBC), and additionally with Clydesdale Bank (part of National Australia Bank).
Our senior debt banking facility is now committed until June 2018, subject to compliance with covenants. Under the terms of the facility, £40m is available under a revolving credit facility, with a further £10m available on a non-committed basis under an accordian arrangement.
Order book
The total forward order book of the Group as at 31 December 2013 was lower by 24% at £127m (2012: £168m). Our order book relates to business we will deliver over the next five years, but includes only two years of software maintenance income. The year-on-year movement primarily reflects the maturity of our Ofsted inspection contracts. Technology is becoming increasingly pervasive throughout our work; this focus is increasingly reflected in the shape of our order book, which continues to provide good underpinning to our revenue expectations for 2014 and beyond.
Pension obligations
As a consequence of certain contract awards a number of employees participate in defined benefit pension schemes, the largest of which relates to the Ofsted Early Years inspection contract which was entered into during the year ended 31 December 2010. Across these pension schemes, the combined surplus calculated under IAS 19 at the end of the year totalled £0.8m (with gross assets of £6.9m and gross liabilities of £6.1m), compared to a deficit of £0.4m last year.
Acquisition of Sky Software
On 6 March 2014 the Group acquired the entire issued share capital of Sky Software Pty Limited, a company incorporated in Australia that provides cloud-based student management systems to the vocational and higher education markets in Australia, the Asia Pacific region and elsewhere in the world. Initial consideration is AUD4m, with up to a further AUD17m payable in deferred contingent consideration, dependent on the future earnings growth of the business over the period to December 2017.
14 March 2014
Responsibility statement of the directors on the annual report
The annual report contains the following statements regarding responsibility for the financial statements and business review included in the annual report:
"The directors confirm that, to the best of their knowledge:
· the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;
· the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
· the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company's performance, business model and strategy."
By order of the Board
Keith Evans Steve Breach
Chief Executive Group Finance Director
14 March 2014 14 March 2014
Consolidated income statement
For the year ended 31 December 2013
| Note | Underlying £'000 |
Closed businesses and exceptional costs £'000 |
Year ended 31 December 2013 Total £'000 |
Underlying £'000 |
Closed businesses and exceptional costs £'000 |
Year ended 31 December 2012 Total £'000 |
|
| Continuing operations | |||||||
| Revenue | 125,485 | - | 125,485 | 113,417 | 1,978 | 115,395 | |
| Cost of sales | (75,466) | - | (75,466) | (69,253) | (2,440) | (71,693) | |
| Gross profit | 50,019 | - | 50,019 | 44,164 | (462) | 43,702 | |
| Other administrative expenses | (34,260) | (30) | (34,290) | (30,282) | (1,927) | (32,209) | |
| Amortisation of IFRS 3 intangibles | - | (231) | (231) | - | (24) | (24) | |
| Total administrative expenses | (34,260) | (261) | (34,521) | (30,282) | (1,951) | (32,233) | |
| Operating profit | 15,759 | (261) | 15,498 | 13,882 | (2,413) | 11,469 | |
| Investment income | 4 | 37 | - | 37 | 162 | - | 162 |
| Other gains and losses | 5 | - | (453) | (453) | - | (453) | (453) |
| Finance costs | 6 | (1,235) | (350) | (1,585) | (1,205) | - | (1,205) |
| Profit before tax | 3 | 14,561 | (1,064) | 13,497 | 12,839 | (2,866) | 9,973 |
| Tax | (2,889) | 169 | (2,720) | (2,633) | 619 | (2,014) | |
| Profit for the year from continuing operations | 11,672 | (895) | 10,777 | 10,206 | (2,247) | 7,959 | |
| Discontinued operations | |||||||
| Profit from discontinued operations | 8 | - | 788 | 788 | 925 | 840 | 1,765 |
| Profit for the year | 11,672 | (107) | 11,565 | 11,131 | (1,407) | 9,724 | |
| Attributable to: | |||||||
| Equity holders of the parent | 11,565 | 9,724 | |||||
| Earnings per share | |||||||
| From continuing operations | |||||||
| Basic and diluted | 9 | 12.5p | (1.0)p | 11.5p | 10.9p | (2.4)p | 8.5p |
| From continuing and discontinued operations | |||||||
| Basic and diluted | 9 | 12.5p | (0.2)p | 12.3p | 11.9p | (1.5)p | 10.4p |
Consolidated statement of comprehensive income
for the year ended 31 December 2013
| Year ended 31 December 2013 £'000 |
Year ended 31 December 2012 £'000 |
||
| Profit for the year | 11,565 | 9,724 | |
| Items that will not be reclassified subsequently to profit or loss: | |||
| Re-measurement of net defined benefit asset | 1,412 | 290 | |
| Items that may be reclassified subsequently to profit or loss: | |||
| Transfer from cash flow hedge reserve | 453 | 453 | |
| Deferred tax | (82) | 141 | |
| Exchange differences on translation of foreign operations | (581) | 16 | |
| Total comprehensive income for the year attributable to equity holders of the parent | 12,767 | 10,624 |
Consolidated balance sheet at 31 December 2013
| Note | 2013 £'000 |
2012 £'000 |
2011 £'000 |
|
| Non-current assets | ||||
| Goodwill | 10 | 78,652 | 72,616 | 72,616 |
| Other intangible assets | 11 | 16,732 | 10,195 | 5,655 |
| Property, plant and equipment | 3,085 | 3,146 | 2,576 | |
| Investments | 1 | 1 | 1 | |
| Retirement benefit surplus | 778 | - | - | |
| Deferred tax assets | 2,209 | 2,033 | 1,661 | |
| 101,457 | 87,991 | 82,509 | ||
| Current assets | ||||
| Inventories | 714 | 1,931 | 333 | |
| Trade and other receivables | 12 | 28,915 | 28,225 | 23,323 |
| Cash and cash equivalents | 7,555 | 8,424 | 6,524 | |
| 37,184 | 38,580 | 30,180 | ||
| Total assets | 138,641 | 126,571 | 112,689 | |
| Current liabilities | ||||
| Trade and other payables | 14 | (12,438) | (7,642) | (8,781) |
| Accruals | (12,871) | (11,298) | (10,387) | |
| Deferred income | (24,575) | (28,516) | (17,884) | |
| Tax liabilities | (3,197) | (2,797) | (2,671) | |
| Provisions | (3,296) | (1,159) | (2,419) | |
| (56,377) | (51,412) | (42,142) | ||
| Net current liabilities | (19,193) | (12,832) | (11,962) | |
| Non-current liabilities | ||||
| Bank loans | (12,114) | (18,274) | (22,503) | |
| Retirement benefit obligations | - | (419) | (540) | |
| Deferred tax liabilities | (389) | - | (178) | |
| Provisions | (1,531) | (523) | (1,439) | |
| (14,034) | (19,216) | (24,660) | ||
| Total liabilities | (70,411) | (70,628) | (66,802) | |
| Net assets | 68,230 | 55,943 | 45,887 | |
| Equity | ||||
| Share capital | 4,685 | 4,685 | 4,685 | |
| Other reserves | 28,042 | 26,913 | 26,245 | |
| Retained earnings | 35,503 | 24,345 | 14,957 | |
| Total equity attributable to equity holders of the parent | 68,230 | 55,943 | 45,887 |
Consolidated statement of changes in equity
For the year ended 31 December 2013
| Share capital £'000 |
Other reserves £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
| Balance at 1 January 2013 | 4,685 | 26,913 | 24,345 | 55,943 |
| Total comprehensive income for the year | - | 349 | 12,418 | 12,767 |
| Dividends | - | - | (1,260) | (1,260) |
| Credit to equity for share-based payments | - | 780 | - | 780 |
| Balance at 31 December 2013 | 4,685 | 28,042 | 35,503 | 68,230 |
For the year ended 31 December 2012
| Share capital £'000 |
Other reserves £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
| Balance at 1 January 2012 | 4,685 | 26,245 | 14,957 | 45,887 |
| Total comprehensive income for the year | - | 302 | 10,322 | 10,624 |
| Dividends | - | - | (934) | (934) |
| Credit to equity for share-based payments | - | 366 | - | 366 |
| Balance at 31 December 2012 | 4,685 | 26,913 | 24,345 | 55,943 |
For the year ended 31 December 2011
| Share capital £'000 |
Other reserves £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
| Balance at 1 January 2011 | 4,685 | 26,246 | 38,824 | 69,755 |
| Total comprehensive income for the year | - | 169 | (22,666) | (22,497) |
| Dividends | - | - | (980) | (980) |
| Charge to equity for share-based payments | - | (170) | (221) | (391) |
| Balance at 31 December 2011 | 4,685 | 26,245 | 14,957 | 45,887 |
Consolidated cash flow statement
for the year ended 31 December 2013
| Note | Year ended 31 December 2013 £'000 |
Year ended 31 December 2012 £'000 |
|
| Net cash from operating activities | 15 | 18,646 | 15,063 |
| Investing activities | |||
| Interest received | 37 | 117 | |
| Proceeds on disposal of discontinued operations | 638 | 1,542 | |
| Purchases of property, plant and equipment | (1,552) | (2,178) | |
| Expenditure on product development and business systems | (6,994) | (6,188) | |
| Acquisitions and deferred consideration | (2,521) | (50) | |
| Net cash outflow from investing activities | (10,392) | (6,757) | |
| Financing activities | |||
| Interest paid | (670) | (750) | |
| Equity dividend paid | (1,260) | (934) | |
| Repayment of borrowings and loan arrangement fees | (6,647) | (4,695) | |
| Net cash used in financing activities | (8,577) | (6,379) | |
| Net (decrease)/increase in cash and cash equivalents | (323) | 1,927 | |
| Cash and cash equivalents at beginning of year | 8,424 | 6,524 | |
| Effect of foreign exchange rate changes | (546) | (27) | |
| Cash and cash equivalents at end of year | 7,555 | 8,424 |
Notes to the financial statements
1. General Information
The basis of preparation of this preliminary announcement is set out below.
The financial information in this announcement, which was approved by the Board of Directors on 14 March 2014, does not constitute the Company's statutory accounts for the years ended 31 December 2013 or 31 December 2012, but is derived from these accounts.
Statutory accounts for the year ended 31 December 2012 have been delivered to the Registrar of Companies and those for the year ended 31 December 2013 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under S498 (2) or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement has been completed in accordance with International Financial Reporting Standards (IFRSs), this announcement itself does not contain sufficient information to comply with IFRSs.
The financial information has been prepared on the historical cost basis, except for financial instruments.
Copies of the announcement can be obtained from the Company's registered office at 1-4 Portland Square, Bristol BS2 8RR.
It is intended that the full financial statements which comply with IFRSs will be posted to shareholders on or around 11 April 2014 and will be available to members of the public at the registered office of the Company from that date and available on the Company's website: www.tribalgroup.com.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.
2. Business segments
The Group is organised into two business segments: Solutions and Systems.
In accordance with IFRS 8 'Operating Segments' information on segment assets is not shown as this is not provided to the Chief Operating decision-maker. Inter-segment sales are charged at prevailing market prices.
The principal activities of the Group are as follows:
Systems - a range of proprietary software products and related services to support the business needs of education, learning and training providers
Solutions - a range of services to support the improvement of education, learning and training delivery by our customers
Year ended 31 December 2013
| Systems £'000 |
Solutions £'000 |
Eliminations £'000 |
Consolidated £'000 |
|
| Revenue | ||||
| External sales | 63,954 | 61,531 | - | 125,485 |
| Inter-segment sales | 252 | 39 | (291) | - |
| Total adjusted revenue | 64,206 | 61,570 | (291) | 125,485 |
| Adjusted segment operating profit | 14,826 | 6,066 | - | 20,892 |
| Unallocated corporate expenses | (5,133) | |||
| Adjusted operating profit | 15,759 | |||
| Amortisation of IFRS 3 intangibles | (231) | |||
| Exceptional costs | (30) | |||
| Operating profit | 15,498 | |||
| Investment income | 37 | |||
| Other gains and losses | (453) | |||
| Finance costs | (1,585) | |||
| Profit before tax | 13,497 | |||
| Tax | (2,720) | |||
| Profit for the year from discontinued operations | 788 | |||
| Profit after tax and discontinued operations | 11,565 |
Inter-segment sales are charged at prevailing market prices.
Revenues of approximately 21% (2012: 22%) have arisen within our Solutions division from the Group's largest customer and revenues of approximately 15% (2012: 7%) have arisen within our Systems division from the Group's second largest customer.
Year ended 31 December 2012
| Systems £'000 |
Solutions £'000 |
Eliminations £'000 |
Consolidated £'000 |
|
| Adjusted revenue | ||||
| External sales | 54,083 | 59,334 | - | 113,417 |
| Inter-segment sales | 1,461 | 8 | (1,469) | - |
| Total adjusted revenue | 55,544 | 59,342 | (1,469) | 113,417 |
| Adjusted segment operating profit | 12,072 | 5,282 | - | 17,354 |
| Unallocated corporate expenses | (3,472) | |||
| Adjusted operating profit | 13,882 | |||
| Amortisation of IFRS 3 intangibles | (24) | |||
| Exceptional costs | (1,545) | |||
| Closed businesses | (844) | |||
| Operating profit | 11,469 | |||
| Investment income | 162 | |||
| Other gains and losses | (453) | |||
| Finance costs | (1,205) | |||
| Profit before tax | 9,973 | |||
| Tax | (2,014) | |||
| Profit for the year from discontinued operations | 1,765 | |||
| Profit after tax and discontinued operations | 9,724 |
Of the total losses from closed businesses of £844,000, £483,000 arose in relation to the Systems division and £361,000 in relation to the Solutions division.
Geographical information
Revenue from external customers
| 2013 £'000 |
2012 £'000 |
|
| UK | 92,709 | 89,212 |
| Asia Pacific | 25,584 | 16,449 |
| North America and rest of the world | 7,192 | 7,756 |
| Total adjusted revenue | 125,485 | 113,417 |
| UK revenue from closed businesses | - | 1,978 |
| 125,485 | 115,395 |
Non-current assets
| 2013 £'000 |
2012 £'000 |
|
| Asia Pacific | 41 | 55 |
| North America and rest of the world | 36 | 71 |
| 77 | 126 |
The Group's revenues from its major products and services were as follows:
Continuing operations
| 2013 £'000 |
2012 £'000 |
|
| Licence and development fees | 19,471 | 16,035 |
| Implementation | 22,367 | 18,316 |
| Maintenance | 18,802 | 16,782 |
| Other Systems division revenue | 3,566 | 4,411 |
| Performance improvement solutions | 30,298 | 29,526 |
| Quality improvement solutions | 31,272 | 29,816 |
| Eliminations | (291) | (1,469) |
| 125,485 | 113,417 |
3. Exceptional costs and closed businesses
| 2013 £'000 |
2012 £'000 |
|
| Closed businesses: | ||
| - Turnover | - | 1,978 |
| - Cost of sales | - | (2,440) |
| - Administrative expenses | - | (382) |
| Trading loss from closed businesses | - | (844) |
| - Redundancy costs - closed businesses | - | (279) |
| - Other restructuring costs - closed businesses | (93) | (1,007) |
| Operating loss from closed businesses | (93) | (2,130) |
| Other exceptional costs: | ||
| - Acquisition costs | (54) | (209) |
| - Property related | 117 | - |
| - Movements in deferred consideration | (350) | (50) |
| - Amortisation of IFRS3 intangibles | (231) | (24) |
| - Unwinding of hedge accounting reserve | (453) | (453) |
| (1,064) | (2,866) |
Exceptional costs have arisen throughout the year, which are not part of the Group's normal trading activities. This includes additional costs in relation to the closure of the Direct Delivery business during 2012, direct costs arising on acquisition activity, credits where leases were exited or sub-let on terms that were more favourable than expected, adjustments to deferred consideration in respect of acquisitions, amortisation of IFRS3 intangibles and the unwinding of the hedge accounting reserve.
4. Investment income
| 2013 £'000 |
2012 £'000 |
|
| Interest on bank deposits | 21 | 42 |
| Net interest receivable on retirement benefit obligations | - | 45 |
| Other interest receivable | 16 | 75 |
| 37 | 162 |
5. Other gains and losses
| 2013 £'000 |
2012 £'000 |
|
| Unwinding of hedge accounting reserve | 453 | 453 |
No other gains or losses have been recognised in respect of loans and receivables, other than impairment losses reversed in respect of trade receivables.
6. Finance costs
| 2013 £'000 |
2012 £'000 |
|
| Interest on bank overdrafts and loans | 979 | 1,014 |
| Unwinding of discount on deferred contingent consideration | 350 | - |
| Other interest payable | 256 | 191 |
| 1,585 | 1,205 |
7. Dividends
| 2013 £'000 |
2012 £'000 |
|
| Amounts recognised as distributions to equity holders in the period: | ||
| Final dividend for the year ended 31 December 2012 of 0.85 pence (year ended 31 December 2011: 0.60 pence) per share |
794 | 560 |
| Interim dividend for the year ended 31 December 2013 of 0.50 pence (year ended 31 December 2012: 0.40 pence) per share |
466 | 374 |
| 1,260 | 934 | |
| Proposed final dividend for the year ended 31 December 2013 of 1.10 pence (year ended 31 December 2012: 0.85 pence) per share |
1,031 | 796 |
The interim dividend for 2013 was approved by the Board on 12 August 2013 and was paid on 18 October 2013 to ordinary shareholders who were on the register on 20 September 2013.
The Board is recommending a final dividend of 1.10p per share. This dividend will be paid on 11 July 2014 to shareholders on the register at 13 June 2014.
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has therefore not been included as a liability in these financial statements.
8. Discontinued operations
Discontinued operations include the Health & Government, Resourcing and Communications businesses which were disposed of during 2010 and 2011. The Resourcing and Communications sales were trade and asset deals and so there continue to be transactions, for example as leases associated with those businesses wind down. The results of the discontinued operations which have been included in the consolidated income statement were as follows:
| 2013 £'000 |
2012 £'000 |
|
| Operating profit before amortisation of IFRS 3 intangibles and exceptional costs | 13 | 369 |
| Exceptional costs | 712 | 433 |
| Operating profit | 725 | 802 |
| Attributable tax (charge)/credit | (54) | 556 |
| Profit on disposal of discontinued operations | 117 | 407 |
| Net profit attributable to discontinued operations | 788 | 1,765 |
| Operating cash flows for discontinued operations | 446 | (1,213) |
| Investing cash flows for discontinued operations | 638 | 1,542 |
| Total cash flows for discontinued operations | 1,084 | 329 |
9. Earnings per share
Earnings per share and diluted earnings per share are calculated by reference to a weighted average number of ordinary shares calculated as follows:
| 2013 thousands |
2012 thousands |
|
| Weighted average number of shares outstanding: | ||
| Basic weighted average number of shares in issue | 93,696 | 93,696 |
| Employee share options | - | - |
| Weighted average number of shares outstanding for dilution calculations | 93,696 | 93,696 |
Diluted earnings per share only reflects the dilutive effect of share options for which performance criteria have been met. Current share incentive schemes vest based on cumulative EPS for a 3 year period with the earliest vesting based on the Group's results for the 3 years to 31 December 2013. 49% of the 3,016,300 share options that were issued in 2011 meet the performance criteria and are included as dilutive options this year. However, as the vesting criteria were only met at the end of 2013, the weighted average number of these shares measured across the whole year for dilution calculations is nil.
The maximum number of potentially dilutive shares excluding the 2011 grant, based on options that have been granted but have not yet met vesting criteria is 3,521,109 (2012: 5,719,281).
The adjusted basic and adjusted diluted earnings per share figures shown on the consolidated income statement are included as the directors believe that they provide a better understanding of the underlying trading performance of the Group. A reconciliation of how these figures are calculated is set out below:
| 2013 £'000 |
2012 £'000 |
|
| Earnings | ||
| From continuing operations | ||
| Net profit from continuing operations attributable to equity holders of the parent | 10,777 | 7,959 |
| Earnings per share | ||
| Basic and diluted | 11.5p | 8.5p |
| From continuing and discontinued operations | ||
| Net profit from continuing and discontinued operations attributable to equity holders of the parent | 11,565 | 9,724 |
| Earnings per share | ||
| Basic and diluted | 12.3p | 10.4p |
| 2013 £'000 |
2012 £'000 |
|
| From discontinued operations | ||
| Net profit from continuing and discontinued operations attributable to equity holders of the parent | 788 | 1,765 |
| Earnings per share | ||
| Basic and diluted | 0.8p | 1.9p |
| 2013 £'000 |
2012 £'000 |
|
| Adjusted earnings | ||
| From continuing operations | ||
| Net profit from continuing operations attributable to equity holders of the parent | 10,777 | 7,959 |
| Amortisation of IFRS 3 intangibles (net of tax) | 177 | 18 |
| Unwinding of discount on deferred contingent consideration | 350 | - |
| Closed businesses (net of tax) | - | 610 |
| Exceptional costs (net of tax) | 20 | 1,166 |
| Financial instruments charge (net of tax) | 348 | 453 |
| Adjusted earnings | 11,672 | 10,206 |
| Adjusted earnings per share | ||
| Basic and diluted | 12.5p | 10.9p |
| From continuing and discontinued operations | ||
| Net profit from continuing and discontinued operations attributable to equity holders of the parent | 11,565 | 9,724 |
| Amortisation of IFRS 3 intangibles (net of tax) | 177 | 18 |
| Unwinding of discount on deferred contingent consideration | 350 | - |
| Closed businesses (net of tax) | (13) | 610 |
| Exceptional costs (net of tax) | (638) | 733 |
| Profit on disposal of discontinued operations and associated tax adjustments | (117) | (407) |
| Financial instruments charge (net of tax) | 348 | 453 |
| Adjusted earnings | 11,672 | 11,131 |
| Adjusted earnings per share | ||
| Basic and diluted | 12.5p | 11.9p |
| From discontinued operations | ||
| Net profit from discontinued operations attributable to equity holders of the parent | 788 | 1,765 |
| Closed businesses | (13) | - |
| Exceptional costs (net of tax) | (658) | (433) |
| Profit on disposal of discontinued operations and associated tax adjustments | (117) | (407) |
| Adjusted earnings | - | 925 |
| Adjusted earnings per share | ||
| Basic and diluted | - | 1.0p |
10. Goodwill
| 2013 £'000 |
2012 £'000 |
2011 £'000 |
|
| Cost | |||
| At beginning of year | 102,196 | 102,196 | 259,605 |
| Additions | 6,036 | - | - |
| Disposals | - | - | (157,409) |
| At end of year | 108,232 | 102,196 | 102,196 |
| Accumulated impairment losses | |||
| At beginning of year | 29,580 | 29,580 | 164,489 |
| Disposals | - | - | (134,909) |
| At end of year | 29,580 | 29,580 | 29,580 |
| Net book value | |||
| At end of year | 78,652 | 72,616 | 72,616 |
| At beginning of year | 72,616 | 72,616 | 95,116 |
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from the business combination. The carrying amount of goodwill has been allocated as follows, with the change during 2012 made to reflect an internal reorganisation:
| 2013 £'000 |
2012 £'000 |
2011 £'000 |
|
| Systems | 42,113 | 37,520 | 42,430 |
| Solutions (comprising two CGUs) | 36,539 | 35,096 | 30,186 |
| 78,652 | 72,616 | 72,616 |
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the Systems and Solutions CGU groups are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, short to medium-term trading performance, longer-term growth rates and expected changes to selling prices, sales volumes and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. Changes in selling prices, sales volumes and direct costs are based on past practices and expectations of future changes in the market.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by the Board for the next two years and has extrapolated cash flows in perpetuity based on an estimated growth rate of 2%. This rate does not exceed the average long-term growth rate for the relevant markets and reflects the ongoing caution in the market. All Tribal's CGUs operate in the same industry sectors and markets around the world. Therefore discount rates for each of the CGUs are considered to be 14% (2012: 11%) which represents a reasonable rate for the market participants in this sector.
The goodwill has not been impaired. The Group has conducted a sensitivity analysis on the impairment test for each CGU group's carrying value. For the Systems division, a reduction in the operating profit in each of the forecast years by 52% would result in the carrying value of goodwill being reduced to its recoverable amount. The equivalent figure for the Solutions group of CGUs is 31%. In forming our opinion on goodwill impairment in respect of the Solutions group of CGUs we have assumed that the Ofsted contracts, which expire in August 2015, will be renewed on broadly similar terms or that we generate other equivalent revenues to mitigate the impact of losing these contracts.
During the year to 31 December 2013 goodwill of £6.0m has been created from the acquisition of International Graduate Insight Group Limited. This consideration in excess of the identifiable separable net assets represents collective knowledge and experience of the staff in place at the time of the acquisition and market synergies specific to Tribal around the potential to collaborate with other business units within Tribal to improve the quality and scope, as well as market penetration, of existing offerings.
11. Other intangible assets
| Customer relationships and contract pipeline £'000 |
Development costs £'000 |
Business systems £'000 |
Total £'000 |
|
| Cost | ||||
| At 1 January 2012 | 2,446 | 10,685 | 4,349 | 17,480 |
| Additions | - | 6,188 | - | 6,188 |
| At 1 January 2013 | 2,446 | 16,873 | 4,349 | 23,668 |
| Transfer from inventories | - | 1,098 | - | 1,098 |
| Additions | 1,339 | 6,903 | 91 | 8,333 |
| At 31 December 2013 | 3,785 | 24,874 | 4,440 | 33,099 |
| Amortisation | ||||
| At 1 January 2012 | 2,363 | 6,645 | 2,817 | 11,825 |
| Charge for the year | 24 | 1,268 | 356 | 1,648 |
| At 1 January 2013 | 2,387 | 7,913 | 3,173 | 13,473 |
| Charge for the year | 231 | 2,057 | 356 | 2,644 |
| Impairment loss | - | 250 | - | 250 |
| At 31 December 2013 | 2,618 | 10,220 | 3,529 | 16,367 |
| Carrying amount | ||||
| At 31 December 2013 | 1,167 | 14,654 | 911 | 16,732 |
| At 31 December 2012 | 59 | 8,960 | 1,176 | 10,195 |
| At 31 December 2011 | 83 | 4,040 | 1,532 | 5,655 |
Customer relationships and contract pipeline have arisen from acquisitions, and are amortised over their estimated useful lives, which on average is five years. As at 31 December 2013 the total net book value is made up of £1.2m relating to customer relationships (2012: £0.1m, 2011: £0.1m) and £0.1m relating to contract pipeline (2012: £nil, 2011: £nil).
The amortisation period for development costs incurred on the Group's software development and product development is three to five years based on the expected life-cycle of the product.
The Group's corporate business systems software is amortised over an average of five years from the date it first comes into use.
The amortisation for development costs is included within Cost of sales. The amortisation for Customer relationships, contract pipeline and business systems is included within administrative expenses.
During the year, £1.1m of software development cost previously included in inventories in connection with the SALM programme have been reclassified to other intangible assets because the related functionality forms part of our core product development strategy and meets the relevant requirements under IAS 38 'Intangible Assets'.
12. Trade and other receivables
| 2013 £'000 |
2012 £'000 |
2011 £'000 |
|
| Amounts receivable | 18,492 | 16,823 | 12,024 |
| Allowance for doubtful debts | (216) | (287) | (1,178) |
| 18,276 | 16,536 | 10,846 | |
| Amounts recoverable on contracts | 270 | 812 | 228 |
| Other receivables | 283 | 903 | 3,605 |
| Prepayments | 2,705 | 2,353 | 2,556 |
| Accrued income | 7,381 | 7,321 | 6,088 |
| 28,915 | 28,225 | 23,323 |
13. Long term contracts
At the end of 2013, trade and other receivables included amounts due from contract customers of £6,576,000 (2012: £5,461,000, 2011: £806,000) and trade and other payables included amounts due from contract customers of £3,082,000 (2012: £4,890,000, 2011: £480,000).
| 2013 £'000 |
2012 £'000 |
2011 £'000 |
|
| Contract costs incurred plus recognised profits less recognised losses to date | 10,622 | 5,779 | 2,372 |
| Less: progress billings | (9,256) | (10,782) | (2,496) |
| 1,366 | (5,003) | (124) |
At 31 December 2013, retentions held by customers for contract work amounted to £194,000 (2012: 714,000, 2011: £650,000).
There are no amounts included in trade and other receivables arising from long term contracts are due for settlement after more than 12 months.
14. Trade and other payables
| 2013 £'000 |
2012 £'000 |
2011 £'000 |
|
| Trade payables | 3,000 | 3,284 | 4,241 |
| Other taxation and social security | 4,558 | 3,349 | 2,587 |
| Other payables | 4,880 | 1,009 | 1,953 |
| 12,438 | 7,642 | 8,781 |
15. Notes to the cash flow statement
| 2013 £'000 |
2012 £'000 |
|
| Operating profit from continuing operations | 15,591 | 13,599 |
| Operating loss from closed businesses | (93) | (2,130) |
| 15,498 | 11,469 | |
| Operating profit from discontinued operations | 725 | 802 |
| Depreciation and impairment of property, plant and equipment | 1,707 | 1,625 |
| Amortisation of other intangible assets | 2,894 | 1,648 |
| Net pension (credit)/charge | (156) | 15 |
| Research & development tax credit | (322) | - |
| Share-based payments | 780 | 366 |
| Movement in deferred consideration | - | 50 |
| Operating cash flows before movements in working capital | 21,126 | 15,975 |
| Decrease/(increase) in inventories | 190 | (1,400) |
| Increase in receivables | (1,326) | (6,049) |
| Increase in payables | 824 | 8,229 |
| Net cash from operating activities before tax | 20,814 | 16,755 |
| Tax paid | (2,168) | (1,692) |
| Net cash from operating activities | 18,646 | 15,063 |
Net cash from operating activities before tax can be analysed as follows:
| 2013 £'000 |
2012 £'000 |
|
| Continuing operations (excluding restricted cash) | 16,413 | 17,083 |
| Increase in restricted cash | 3,955 | 885 |
| 20,368 | 17,968 | |
| Discontinued operations | 446 | (1,213) |
| 20,814 | 16,755 |
Analysis of changes in net debt:
| 2013 £'000 |
2012 £'000 |
|
| Opening net debt | (9,850) | (15,979) |
| Net (decrease)/increase in cash and cash equivalents | (323) | 1,927 |
| Effect of foreign exchange rate changes | (546) | (27) |
| Decrease in bank loans | 6,160 | 4,229 |
| Closing net debt | (4,559) | (9,850) |
This information is provided by RNS
The company news service from the London Stock Exchange
END
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