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RNS Number:8004M
Tribal Group PLC
26 June 2003
26 June 2003 PRESS INFORMATION
Tribal Group plc
Preliminary results for the year ended 31 March 2003
Strong results; recommended offer for Hacas Group plc and #20.5m fundraising
Highlights:
- Strong growth during the period, with profit before tax* up 90 per cent
to #15.4m
- Adjusted diluted earnings per share up 31 per cent to 18.6p
- Underlying organic sales growth of 19 per cent
- Operating profit* to cash conversion rate of 122 per cent
- Committed income for 2004 over 54 per cent of budgeted turnover
- Recommended offer for Hacas Group plc
- #20.5m fundraising conditional on the offer for Hacas being declared
unconditional in all respects
- Important contract wins
- Good start to the current year's trading
David Telling, Chairman of Tribal Group plc, commented:
"I am delighted to be able to announce another set of strong results today.
Tribal has continued to make excellent progress, further consolidating its
position as a leading professional support services and consultancy business,
predominantly delivering services to the UK public sector. The Group has
developed a significant position in its key markets of education, local
government and health and social care, delivering a broad and increasing range
of value added services.
The recommended offer for Hacas is a major step in the development of our public
sector consultancy business and will provide us with market leadership in the
social housing sector. We have also announced today a #20.5m equity fundraising
through a conditional placing of new stock which will strengthen our balance
sheet and, along with our new #103m bank facilities, gives us considerable
financial flexibility to continue our growth.
We have, during the period, made a number of excellent acquisitions, continued
to deliver significant organic growth and won several important contracts. The
Group is very well placed to take advantage of the rapidly increasing
opportunities in our buoyant markets. We expect this to be another successful
year and believe that our future growth will remain strong."
Financial highlights:
Year ended 31 March
2003 2002
Turnover #105.7m #45.7m up 131%
Gross revenue #98.4m #45.7m up 115%
Operating profit* #16.7m #8.4m up 99%
Operating margins on gross revenue* 17.0% 18.3%
Profit before tax* #15.4m #8.1m up 90%
Profit on ordinary activities before taxation #7.9m #4.7m up 68%
Adjusted diluted earnings per share* 18.6p 14.2p up 31%
Operating cash flow #20.4m #9.5m up 115%
Operating profit to cash conversion* 122% 114%
Note: *Profits and earnings per share are stated before goodwill amortisation,
employee benefit trust costs and in respect of 2003, exceptional costs
associated with the move to the Official List
For further information contact:
Henry Pitman, Chief Executive, Tribal Group plc Tel 01285 886020
Tribal Group plc
Preliminary results for the year ended 31 March 2003, recommended offer for
Hacas and announcement of a #20.5m fundraising.
Chairman's and Chief Executive's joint statement
We are pleased to report on the results of Tribal Group plc for the year ended
31 March 2003. During this period, the Group has further consolidated its
position as a leading professional support services and consultancy business,
predominantly operating in the UK public sector. We have extended our market
position in education and local government, established a significant presence
in the health and social care market and entered the central government market.
Results In the year ended 31 March 2003, the Group has produced another set of
excellent results. Turnover was #105.7m (2002: #45.7m) and excluding
amortisation of goodwill, exceptional items and the costs associated with
employee benefit trusts, operating profit was #16.7m (2002: #8.4m). Operating
margins were 17.0 per cent (2002: 18.3 per cent), a strong performance given the
level of growth during the year. Profit before taxation was #15.4m (2002:
#8.1m) and adjusted diluted earnings per share was 18.6p (2002: 14.2p). During
the period, the Group generated operating cash flow of #20.4m (2002: #9.5m),
representing an operating profit to cash conversion rate of 122 per cent. Net
debt at the year end was #22.1m, representing gearing of 19 per cent, and
interest cover was 7.2 times. Our gross return on capital employed was 21.2 per
cent (2002: 21.8 per cent).
Dividend In line with our previous policy, the board is not recommending the
payment of a dividend for the year ended 31 March 2003. However, the board has
agreed to recommend to shareholders that the payment of dividends should
commence in respect of the current year.
Recommended offer for Hacas Group plc We today announced a recommended offer
for Hacas Group plc valued at #45.1m. Irrevocable undertakings to accept the
offer have been received from the directors and other shareholders of Hacas
representing 67.0 per cent of the issued share capital.
Hacas is the leading consultancy business in the social housing sector, working
with 120 Local Authorities and over 500 Registered Social Landlords, as well as
a number of central government departments and agencies. The company has grown
operating profits by 45 per cent compound since it joined AIM in 1998. The
acquisition will considerably strengthen our consultancy capability and is a
major step in creating one of the leading consultancy practices in the public
sector.
In addition to its housing activities, Hacas has a strong HR business which,
together with Tribal's existing operations, will position the enlarged group as
the second largest search and selection business in the public sector. Hacas'
subsidiary, SDP, is a market leader in the regeneration sector and will
substantially enhance Tribal's capacity in this area. Hacas' treasury business
opens up a new market opportunity for Tribal.
We are confident that we can help Hacas to accelerate its growth through
extending its customer base, providing access to large scale outsourcing
contracts, developing joint working initiatives with other Tribal companies and
by making selective bolt-on acquisitions.
Fundraising and banking We today announced the completion of a #20.5m
fundraising through a placing of 6,507,937 shares at 315.0p per share
conditional on the offer for Hacas being declared unconditional in all respects.
The funds will be used to part finance the cash element of the offer for
Hacas.
As previously announced, new bank facilities of #103m were signed on 29 May
2003. The combination of the monies raised in the placing, along with the new
bank facilities, will strengthen our balance sheet and provide the Group with
the flexibility to invest in the development of our businesses and support our
acquisition programme.
Activities Tribal comprises both management consultancy and support services
operations. Our consultancy businesses have recurring, high margin revenues;
technically sophisticated staff; and high quality, long-term customer
relationships which often lead to outsourcing opportunities. Our support
services companies deliver an extensive range of 'white collar' services that
support the core operations of an organisation. These companies provide the
Group with long-term committed revenue; skills and services which can be
supplied to customers as a packaged solution; and the reference sites which
assist the Group to bid successfully for further contracts. Over time, we expect
to become more involved in the direct delivery of services within our markets.
Our services are now grouped into six areas:
* management consultancy - an extensive range of sector specific
services
* IT and information management - products, systems development, managed
services and document management
* HR services - resourcing and recruitment advertising
* training - training delivery and publishing
* property services - project management, architectural and surveying/
asset management services
* communications and PR services
It is our intention to build each of these business streams so that they become
market leaders and substantial businesses in their own right. We have already
achieved these aims in a number of areas.
Markets We continue to operate in buoyant markets and to benefit from increasing
government expenditure, particularly in education and health. We are now
operating in sectors that account for over #120bn of government spending.
There is an increasing acceptance across government that the private sector has
a role to play in reforming and delivering public services. We believe that this
change in approach towards the private sector is the main driver in our markets.
In the year ended 31 March 2003, 97 per cent (2002: 93 per cent) of our revenues
were from the public sector and we expect to retain this focus in the immediate
future.
We now have a strong presence in education and health and social care; a growing
presence in local government, housing and regeneration (which will be
substantially enhanced by the acquisition of Hacas); and have entered the
central government sector. Over time, we expect to increase our presence in the
private sector as we transfer and apply the skills that we have developed in the
public sector.
Competition Many of our businesses are delivering services that were
previously carried out within the public sector and the Group's major competitor
remains the in-house team. We are constantly looking to add value to our
customers by providing innovative products and services and by spreading best
practice from our extensive customer experience. We compete with both
management consultancies and business services companies across our markets.
Growth There are now four strands to our growth strategy. First, we have
increased capacity in our businesses and enhanced their organic growth
potential. This is supported by our focus on delivering the benefits of
cross-selling and capitalising on our national coverage. Secondly, we are now
successfully using the skills and customer reference sites across the Group to
secure major contracts that open up new business streams and increase the level
of our long-term committed income. Thirdly, we have continued to make strategic
acquisitions that add value for shareholders and strengthen the Group's position
in existing markets or extend our services into new, complementary skill or
market areas. Finally, we are developing start-up businesses that fill gaps in
our service offering and enable us to recruit high quality and ambitious
individuals and teams.
Organic growth Over the year, on a like for like basis, the businesses within
the Group have increased headcount by 18 per cent and demonstrated underlying
organic revenue growth of 19 per cent. Without exception, all businesses have
broadened and strengthened their management teams since acquisition, with an
increasing number of high quality senior managers joining us from competitors.
We have within the Group an extensive range of services which are, in most
cases, applied to one market sector only. We are now placing increased emphasis
on applying those skills to other parts of the public sector. We are seeing an
acceleration of cross-selling across the Group, with many examples of companies
winning business in conjunction with other Tribal businesses. In 2003, we
formalised our approach to cross-selling by establishing four core industry
groups (education; health and social care; local government and housing; and
central government). The industry groups are responsible for developing sector
strategy, and co-ordinating the presentation of a well structured offering to
our customers. Cross selling initiatives have been supported by continuing
improvements to the Group's website, intranet and marketing materials and the
establishment of four regional offices.
Contract wins During the year, a number of important contracts have been won
and, increasingly, these are involving more than one part of the Group. In May
2002, we were awarded a three year contract to provide strategic management
services to Swindon Local Education Authority; in November 2002, we were awarded
a contract to provide strategic management to the social care department in
Cardiff Council; we also announced a #8m architectural contract to design the
#300m new Walsgrave hospital in Coventry; in December 2002, we were confirmed as
one of eight UK and international companies approved to bid for the management
of failing NHS hospitals as part of the NHS Franchising initiative; and, in
April 2003, our schools inspection contract with Ofsted (now valued at #6m) was
renewed and extended. We continue to win a number of recruitment advertising
contracts. Since April 2002, we have won over 23 contracts in local government
and health with an estimated annual value of #12.5m. Last month, we announced
that, through a consortium led by RM plc, we had been awarded a #4.2m contract
to provide e-learning services to the South Yorkshire e-learning partnership.
In addition to these contract wins, the Group has also been selected as a
framework provider by a number of Government departments and agencies. We are
currently short-listed on several contracts, including the NHS diagnostic and
treatment centre initiative.
Acquisitions The acquisitions we have made have exceeded our expectations and
the incentivisation of management through equity participation has proved very
successful in creating a stable yet dynamic culture. Of the 103 subsidiary
company directors who have joined the Group through acquisitions over the last
three years, 101 remain with us. During the year, we have attracted more high
quality companies into the Group, thereby extending our cross-selling potential
and our capability to bid for larger scale contracts.
The acquisitions made in the year cost an aggregate initial consideration of
#33.6m, paid for by a combination of cash and shares. Deferred consideration of
up to #30.2m is payable in respect of these acquisitions, principally in shares,
based on increases in operating profits. At the year end, our total estimated
earn-out liability in respect of the period to 31 March 2007 was #42.1m.
Although these liabilities are primarily to be satisfied in shares, the Group
always retains sufficient headroom in its banking facilities to finance the next
two years earn-outs in cash.
We continue to identify high margin, cash generative companies with strong track
records and excellent growth potential, all of which have skills and services
that can add to our overall proposition. Since the year end, we have completed
four acquisitions for an initial consideration of #5.8m, satisfied in cash and
shares, with deferred consideration of up to #5.8m to be satisfied primarily in
shares.
We believe that the consolidation of the education market is nearing completion.
The health and social care and local government markets still offer
opportunities and, in central government, there remains considerable potential
for further consolidation. As Tribal grows and our reputation and track record
increases, we believe that more successful companies will recognise that they
will be able to accelerate their growth as part of the Group.
Move to the Official List In July 2002, we successfully moved from AIM to the
Official List and, in September we became a constituent of the FT All Share
Index. The board believes the profile of a main market company, together with
our increasing financial strength, will provide a strong platform for bidding
for larger government contracts and will help us to attract high calibre
managers to the Group. We are already seeing the benefits of moving to the Main
Market.
Management and board We are delighted that Dominic Collins has agreed to join
our board from 1 July 2003 as non-executive Deputy Chairman. Dominic is a main
board director of Jardine Lloyd Thompson Plc, the world's fifth largest
insurance broker, and Executive Chairman of its largest subsidiary, JLT Risk
Solutions Ltd. JLT is one of the most successful FTSE companies in terms of
delivering shareholder value over the past five years. We are confident that
Dominic will be a great asset to Tribal.
On 1 September 2003, the Group's executive management group will be extended to
include managing directors from certain of the Group's subsidiaries. This group
will be responsible for the strategic and operational management of Tribal,
assessing investment priorities and managing the Group's risk profile.
People We are a business that relies on the quality and commitment of our
people and our success is thanks to the hard work and professional integrity of
our 1,400 staff. We have created an environment in which individuals at all
levels are given a high degree of autonomy within a supportive Group framework.
We have established a clear set of values which encourage entrepreneurialism,
profit focus and a dynamic culture within a strong ethos of customer service,
integrity and social awareness.
We have exceptional individuals amongst our middle and senior management teams,
many of whom are nationally leading figures in their specialist areas. A key
ingredient of our strategy is to incentivise these individuals through an equity
interest in the Group.
In September of this year, we will be launching the Tribal Management
Development Programme, in association with a leading business school. We expect
up to twenty of our senior managers to participate annually.
Our Save As You Earn scheme is offered to employees annually. Currently half of
our employees have chosen to participate in this scheme, a high proportion for
schemes of this kind.
We would like to put on record the thanks of the board to our employees at all
levels. Their efforts have ensured that Tribal is one of the most dynamic and
successful young companies in the UK today.
Prospects Tribal Group is firmly established as a major supplier of
professional support services and consultancy to the public sector. The Group
has the right business model, as well as the skills, services, management and
customer relationships required to take advantage of the rapidly increasing
opportunities in our expanding markets. We have had a good start to the year's
trading and committed income already exceeds 54 per cent of budgeted turnover.
We are currently short-listed for several new important contracts and have a
pipeline of high quality acquisition prospects.
Our intention is to maintain the momentum we have achieved throughout the coming
year for the benefit of all employees and shareholders. The board expects this
to be another successful year and believes that future growth will remain
strong.
David M Telling Henry J Pitman
Chairman Chief Executive
26 June 2003
Consolidated profit and loss account
For the year ended 31 March 2003
Year ended Year ended
31 March 31 March
2003 2002
Note #000 #000
Turnover (gross earnings)
Continuing operations 75,484 45,651
Acquisitions 30,175 -
105,659 45,651
Direct agency costs (7,295) -
Gross revenue 98,364 45,651
Cost of sales (42,249) (19,975)
Gross profit 56,115 25,676
Operating profit before amortisation of goodwill, employee
benefit trust costs and exceptional items 16,685 8,360
Amortisation of goodwill (6,288) (2,903)
Amortisation of shares held by employee benefit trust (75) (75)
Contribution to employee benefit trust (505) (419)
Exceptional items 2 (702) -
Net operation expenses (47,000) (20,713)
Operating profit
Continuing operations 6,730 4,963
Acquisitions 2,385 -
9,115 4,963
Net interest payable (1,260) (283)
Profit on ordinary activities before taxation 7,855 4,680
Taxation (4,737) (1,851)
Profit for the financial year 3,118 2,829
Earnings per share
Basic 3 6.4p 7.6p
Diluted 3 5.5p 6.6p
Adjusted basic before amortisation of goodwill, employee 3 21.4p 16.3p
benefit trust costs and exceptional items
Adjusted diluted before amortisation of goodwill, employee 3 18.6p 14.2p
benefit trust costs and exceptional items
The results for the period disclosed in the profit and loss account are on a
historical cost basis. There are no other recognised gains or losses in the
current or prior year and accordingly, no separate statement of total recognised
gains and losses has been presented.
Consolidated balance sheet
At 31 March 2003
31 March 31 March
2003 2002
Note #000 #000
Fixed assets
Intangible assets - goodwill 4 142,315 92,697
- development expenditure 308 244
Tangible assets 3,549 2,261
Investments 86 71
146,258 95,273
Current assets
Stock - work in progress 1,618 1,030
Debtors 33,856 18,063
Cast at bank and in hand 6 29,671 35,784
65,145 54,877
Creditors: amounts falling due within one year (60,737) (55,964)
Net current assets/(liabilities) 4,408 (1,087)
Total assets less current liabilities 150,666 94,186
Creditors: amounts falling due after more than one year (36,225) (9,388)
Net assets 114,441 84,798
Capital and reserves
Called up share capital 2,624 2,261
Share premium account 59,216 39,596
Shares to be issued 36,367 30,601
Capital reserve 9,545 9,545
Profit and loss account 5,913 2,795
Equity minority interest 776 -
Equity shareholders' funds 114,441 84,798
Reconciliation of movements in consolidated shareholders' funds
At 31 March 2003
31 March 31 March
2003 2002
#000 #000
Profit for the year 3,118 2,829
New share capital subscribed 19,983 30,402
Shares to be issued 5,261 13,083
Credit in relation to share related awards 505 419
Minority interests 776 -
Net addition to shareholders' funds 29,643 46,733
Opening shareholders' funds 84,798 38,065
Closing shareholders' funds 114,441 84,798
Consolidated cash flow statement
For the year ended 31 March 2003
Year ended Year ended
31 March 31 March
2003 2002
Note #000 #000
Net cash inflow from operating activities 5 20,411 9,502
Returns on investments and servicing of finance
Interest paid (3,173) (863)
Interest element of finance lease rental payments (30) (3)
Interest received 1,343 975
Net cash (outflow)/inflow from returns on investments and
servicing of finance
(1,860) 109
Taxation
Corporation tax paid (3,722) (1,994)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (2,150) (1,088)
Payments to acquire intangible fixed
(329)
assets (60)
Payments to acquire investments (5) -
Sale of tangible fixed assets 168 115
Net cash outflow for capital expenditure and financial
investment
(2,316) (1,033)
Acquisitions
Purchase of subsidiary undertakings (30,681) (6,935)
Net increase in cash from acquisition of subsidiary
undertakings 2,613
3,599
Net cash outflow from acquisitions (28,068) (3,336)
Cash (outflow)/inflow before financing (15,555) 3,248
Financing
Issue of ordinary share capital less issue costs 20,881
(21)
Repayment of borrowings (26,479) (951)
New secured loans less issue costs 36,180 -
Capital element of finance lease rental payments (238) (42)
Net cash inflow from financing 9,442 19,888
(Decrease)/increase in cash in the year (6,113) 23,136
Consolidated cash flow statement (continued)
For the year ended 31 March 2003
Year ended Year ended
31 March 31 March
2003 2002
#000 #000
Reconciliation of net cash flow to movement in net debt
(Decrease) / increase in cash in the year (6,113) 23,136
Cash outflow from movements in debt (12,828) (27,173)
Change in net debt resulting from cash flows (18,941) (4,037)
Finance leases acquired with subsidiaries (75) (235)
New finance leases (39) (38)
Movement in net debt in the year (19,055) (4,310)
Net (debt)/funds at the start of the year (3,028) 1,282
Net debt at the end of the year (22,083) (3,028)
Notes
1 Preliminary Announcement
A duly appointed and authorised committee of the board of directors approved the
preliminary announcement on 25 June 2003.
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 March 2003 or 2002, but is derived
from those accounts.
The financial information is prepared on the basis of the accounting policies as
stated in the previous year's financial statements.
Statutory accounts for 2002 have been delivered to the Registrar of Companies
and those for 2003 will be delivered following the company's Annual General
Meeting. The auditors have reported on those accounts; their reports were
unqualified and did not contain statements under s237 (2) or (3) of the
Companies Act 1985.
2 Exceptional Items
The exceptional items of #702,000 relate to the costs of moving from the
Alternative Investment Market to the official list on the London Stock Exchange
in July 2002.
3 Earnings per share
Year ended Year ended
31 March 31 March
2003 2002
Basic
Earnings for year (#000) 3,118 2,829
Weighted average number of shares outstanding
(thousands) 49,030 37,342
Basic earnings per share (pence) 6.4p 7.6p
Diluted
Earnings for year (#000) 3,118 2,829
Weighted average number of shares in issue including dilutive
shares:
Basic weighted average number (thousands) 49,030 37,342
Employee share options (thousands) 1,563 1,416
Shares to be issued in respect of deferred
consideration (thousands)
5,892 4,156
Adjusted number of shares outstanding (thousands) 56,485 42,914
Diluted earnings per share (pence) 5.5p 6.6p
Notes (continued)
3 Earnings per share (continued)
Year ended Year ended
31 March 31 March
2003 2002
Adjusted basic before goodwill amortisation, EBT
costs and exceptional items
Earnings for year (#000) 3,118 2,829
Goodwill amortisation (#000) 6,288 2,903
EBT costs net of tax (#000) 406 346
Exceptional items (#000) 702 -
Adjusted earnings before goodwill
amortisation, 10,514 6,078
EBT costs and exceptional items
(#000)
Weighted average number of shares in issue
(thousands) 49,030 37,342
Adjusted basic earnings per share (pence) 21.4p 16.3p
Adjusted diluted before goodwill amortisation, EBT
costs and exceptional items
Adjusted earnings before goodwill
amortisation, 10,514 6,078
EBT costs and exceptional items
(#000)
Weighted average number of shares in issue
including dilutive shares (thousands) 56,485 42,914
Adjusted diluted earnings per share (pence) 18.6p 14.2p
The two additional adjusted earnings per share figures shown on the profit and
loss account are included as the directors believe that it provides a better
understanding of the underlying trading performance of the Group.
4 Intangible assets: Goodwill
#000
Net book value at 31 March 2002 92,697
Goodwill arising on acquisitions 55,906
Amortisation charge (6,288)
Net book value at 31 March 2003 142,315
Notes (continued)
5 Note to the cash flow statement
Reconciliation of operating profit to operating cash flows
Year ended Year ended
31 March 31 March
2003 2002
#000 #000
Operating profit 9,115 4,963
Depreciation 1,513 563
Amortisation of goodwill 6,288 2,903
Amortisation of development expenditure 265 109
Provision for impairment of investments 35 -
Profit on disposal of fixed assets (1) (32)
Contribution to employee share awards 505 419
Amortisation of employee benefit trust 75 75
Increase in debtors (6,137) (4,789)
Increase in creditors 8,957 5,494
Increase in stocks (204) (203)
Net cash inflow from operating activities 20,411 9,502
6 Cash Management
Year ended Year ended
31 March 31 March
2003 2002
#000 #000
Cash at bank 14,174 11,326
Cash collateralised 15,497 24,458
29,671 35,784
Loan notes - cash backed (14,692) (22,659)
Loan notes - bank guarantees - (15,218)
Other loan notes (739) (668)
Bank loans (36,180) -
Finance leases (143) (267)
(51,754) (38,812)
Net debt (22,083) (3,028)
7 Acquisitions
Since 31 March 2002 Tribal Group plc has acquired the following principal
Subsidiary undertakings:
Date Subsidiary
acquired
May 2002 Nightingale Architects Limited
May 2002 Malcolm Judd and Partners Limited
August 2002 Yale Data Management Consultants Limited
September 2002 Atlas Media Group Limited
December 2002 Action Medical Limited
December 2002 Kingsway Advertising Limited
This information is provided by RNS
The company news service from the London Stock Exchange
END
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