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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Tribal Group Plc | LSE:TRB | London | Ordinary Share | GB0030181522 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 52.75 | 52.00 | 53.50 | 52.00 | 52.00 | 52.00 | 76,441 | 16:35:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Business Consulting Svcs,nec | 83.59M | -510k | -0.0024 | -216.67 | 110.36M |
From Apr 2019 to Apr 2024
TIDMTRB
RNS Number : 9498X
Tribal Group PLC
16 August 2018
16 August 2018
Tribal Group plc
Half year results for the six months ended 30 June 2018 (unaudited)
Hot Features
Premium
Change Change
2018 2017 GBPm %
Revenue GBP42.0m GBP44.2m GBP(2.2)m (4.9)%
--------- --------- ---------- -------
Adjusted operating profit (1,2) GBP6.3m GBP5.0m GBP1.3m 27%
--------- --------- ---------- -------
Statutory profit after tax GBP2.9m GBP1.6m GBP1.3m 83%
--------- --------- ---------- -------
Operating cash flow GBP0.5m GBP0.8m GBP(0.3)m (28)%
--------- --------- ---------- -------
Net cash GBP9.2m GBP5.5m GBP3.7m 67%
--------- --------- ---------- -------
Earnings per Share (diluted) 1.4p 0.8p 0.6p 76%
--------- --------- ---------- -------
Operational Highlights
-- Positive first half performance; full year expectations remain unchanged
-- Full year expectation includes anticipated negative impact to adjusted operating profit of 7%-8% due to
IFRS 15 revenue recognition
-- 90% of full year revenue expectation is either already recognised or committed for the second half
-- Annually Recurring Revenue represents 45% of total revenue
-- Significant Student Management System contract wins, including contracts closed at University of Portsmouth, Canterbury Christ Church University, and Colleges Northern Ireland
-- Strong performance in QAS, with further contract wins in UK and Middle East
Financial Highlights
-- Revenue growth on a constant currency basis(3) of 3.2% and adjusted operating margin up 6.0pp to 15% (H1 2017: 9.0% excluding Ofsted Early Years(4) )
-- Adjusted operating profit on a constant currency basis increased 72% to GBP6.3m (H1 2017: GBP3.6m excluding Ofsted Early Years(4) ) including a GBP1.7m reduction in central overheads costs
-- Statutory profit increased 83% to GBP2.9m (H1 2017: GBP1.6m) -- Earnings per share increased 76% to 1.4p (H1 2017: 0.8p)
-- Investment of GBP5.2m in product development, of which GBP1.8m was capitalised relating to Tribal Edge and SchoolEdge (H1 2017: GBP4.7m investment; GBP0.8m capitalised)
Ian Bowles, CEO commented:
"The H1 2018 results clearly demonstrate our continued execution of the Board and Management teams' strategy. The first phase of the turnaround started in 2016 is now complete; however, we will continue to focus on driving operational efficiencies with a view to continuing to lower our cost base. Our revitalised sales and marketing efforts have continued to gain market share in our core markets displacing over 20 competitive student management systems and replacing four home grown solutions in universities.
Our commitment to invest in our product strategy has been well received by our customers; as a group we look forward to the future with confidence."
1 Adjusted Operating Profit and Adjusted Operating Margin is in respect of continuing operations,
excluding intangible asset amortisation of GBP0.9m (H1 2017: GBP1.0m), restructuring costs
of GBP0.1m (H1 2017: GBP0.7m), and share based payments GBP1.1m (H1 2017: GBP0.7m)
2 Adjusted Operating Profit is considered a Key Performance Indicator of the Group. We consider
this to represent the underlying performance of the business and provides greater clarity
to users of the accounts
3 Constant currency calculation is based on 2018 exchange rates applied to 2017 results
4 Revenue growth, adjusted operating profit and adjusted operating margin are after adjusting
for the Ofsted Early Years contract which concluded in March 2017 (H1 2018: GBPnil; H1 2017:
Revenue GBP2.4m, Operating Profit GBP0.9m)
---------------------------------------------------------------------------------------------------------------
Further Information
A presentation of these results will be made to analysts and investors at 11.00am today at the offices of N+1 Singer, 1 Bartholomew Lane London EC2N 2AX. A copy of the presentation will be available on the Tribal Group website: www.tribalgroup.com.
Tribal Group plc Tel: 0117 311 5293 Ian Bowles, Chief Executive Mark Pickett, Chief Financial Officer Investec Bank plc Tel: 020 7597 5970 Sara Hale Andrew Pinder N+1 Singer Capital Markets Limited Tel: 020 7496 3000 Shaun Dobson
This Statement has been prepared for and is addressed only to our shareholders as a whole and should not be relied on by any other party or for any other purpose. Tribal, its directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom this Statement is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. This Statement may contain forward-looking statements. Any forward-looking statement has been made by the directors in good faith based on the information available to them up to the time of approval of this Statement and should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information. To the extent that this Statement contains any statement dealing with any time after the date of its preparation, such statement is merely predictive and speculative as it relates to events and circumstances which are yet to occur and therefore the facts stated and views expressed may change. Tribal undertakes no obligation to update these forward-looking statements.
Chief Executive's Statement
Introduction
I am pleased to report that the first half of the year has continued to see steady progress in line with the Board's expectations.
Revenue has increased by 0.5% to GBP42.0m (H1 2017 revenue: GBP41.8m after adjusting for the Ofsted Early Years contract which concluded in March 2017(1) ), and the adjusted operating profit has increased by 55% to GBP6.3m (H1 2017: GBP4.0m(1) ), adjusted operating margin is 15.0% (H1 2017: 9.7%(1) ). Consistent with prior reporting, revenue, adjusted operating profit and adjusted operating margin for 2017 exclude Ofsted income which drew to a close with the successful conclusion of the Ofsted Early Years contract in March 2017.
Almost 40% of Tribal's income was generated outside the UK, and is therefore subject to foreign exchange movement. In this reporting period, the strengthening of sterling, particularly against the Australian Dollar, has impacted revenue by GBP1.1m and adjusted operating profit by GBP0.4m when 2018 rates are applied to 2017 results after adjusting for the Ofsted Early Years contract ("constant currency"). Adjusted for this impact, the constant currency revenue(1) increased 3.2% and adjusted operating profit was up by 72%.
Strategy & Market Position
Tribal is a pioneering world-leader of education software and services. Our portfolio of functionally rich Student Information Systems (SIS)(2) remain at the core of our business and are complemented by a range of education services covering quality assurance and benchmarking.
Tribal's existing software solutions continue to be well received within the market. Tribal Edge, our next generation, student information services platform has seen significant progress in the last six months, with positive ongoing beta trials and a strong pipeline of early adopters looking to deploy one or more of the new Tribal Edge modules. A full update and demonstration was given at our "Empower" conference held in June at Birmingham's ICC, which was attended by more than 400 delegates; Tribal Edge has been well received by our customers from both Higher and Further Education.
At the conference we also announced the creation of a new Tribal Edge "Exchange" that would allow selected partners to simply and easily offer their solutions to Tribal Edge customers, while ensuring that the third-party applications are integrated through our standard APIs and use the same web and mobile interfaces. A number of partners demonstrated their solutions within the Edge platform. In time, Edge Exchange will offer additional value to our customers and provide incremental revenue streams to Tribal. Edge Exchange will also allow customers to share their own developments with other institutions, again with the potential of revenue sharing.
The Tribal Edge development team continues to grow with people moving across from existing projects as they complete. We have also been hiring new developers and architects to add additional skills and capability. The growth of the Tribal Edge team will continue through 2018. The Tribal Edge roadmap shows the increased utilisation of resources with significant developments coming through over the next 18 months.
In total the Group invested GBP5.2m in product development in the half year, of which GBP1.8m was capitalised, and related to the development of Tribal Edge and SchoolEdge.
Student Management Systems
Since 2016 Tribal student management systems have displaced competitors at 28 institutions. In the first half of the year, the Group won major new contracts in the Higher Education sector for the full student management system at the University of Portsmouth, and at Canterbury Christ Church University (CCCU). In the Further Education sector, we secured a major win to implement our ebs product across all the Further Education Colleges in Northern Ireland. These wins reaffirm Tribal as an international market leader in student information systems.
The Student Management Systems business has performed well and overall activity levels in our markets for the replacement or enhancement of student information systems remain stable and we continue to see a steady flow of new opportunities in all sectors.
Maytas, our employer and training provider solution, is achieving a good share of new sales, despite the uncertainty and challenges in this sector.
Quality Assurance Solutions
Our Quality Assurance Services (QAS) business continues to have success providing inspection services in the Middle-East, specifically the UAE. We were chosen by the Department for Education (DfE) in the UK to provide quality assurance of the new gold-standard National Professional Qualifications (NPQ). The contract has been agreed for an initial three-year period, worth up to GBP2 million per year. Under the contract, Tribal will monitor and assess the performance of providers against the NPQ Quality Framework, which sets out the standards of provision that providers must meet to retain their accreditation. In addition, a GBP2.5m contract was won to provide services to Mathematics in Education and Industry as part of the National Advanced Mathematics Support Programme.
The Quality Assurance Solutions business performed well in the first half of the year, though when compared to the previous year, was adversely impacted by the successful conclusion of the Ofsted Early Years contract in March 2017 (H1 2017: Ofsted revenue GBP2.4m, profit GBP0.9m).
Other QAS contracts continue well, including the Abu Dhabi Department of Education and Knowledge, worth GBP8.4m over 2 years, where we are the sole supplier of school reviews in Abu Dhabi; our Benchmarking contracts in the UK and New Zealand; and the extension to our US$2m contract with the New York State Education Department for school and district improvement. We have also secured a further GBP1.2m expansion of activities in the DfE contract for National Centre for Excellence in the Teaching of Mathematics.
QAS continues to have opportunities to grow and develop its business both in the UK and, more widely, to build on our existing contracts in New Zealand, the Middle East and the USA.
i-graduate
The i-graduate division provides a range of services for managers of universities, colleges and schools to assess and enhance the quality of the education they provide, leading to improved operational performance. The services provided by this division include student experience analytics and the international student barometer survey. This division's activities have increasingly focussed on those skills and tools that closely relate to our student management systems. Increasingly, we will further integrate these services with our software offerings.
In the first half of 2018, i-graduate performance was slightly behind management expectations although ahead of 2017 position. The business has focussed on refreshing the International Student Barometer offering to help drive additional sales later in the year.
Outlook and Current Trading
Overall market conditions and demand for student information systems are expected to remain stable in 2018. The timing of deal closures and the achievement of implementation milestones remains hard to predict, but given Tribal's high win-rate, we are well positioned to continue to benefit from the demand for new student information systems and upgrades. The revenues from Student Management Systems are expected to remain stable in the second half of the year, with margins consistent with the first half of the year.
Our revenue recognition in the Student Management Systems business has been impacted by the adoption of IFRS 15 (Revenues from Contracts with Customers) on 1 January 2018 with software license revenue now recognised over the implementation period on a percentage complete basis rather than on initial installation. This has resulted in GBP0.1m more revenue and GBP0.1m more profit being recognised in H1 under IFRS 15 than would have been the case before its adoption. For the full year, though, it is anticipated that the revenue could be in the range of 1% lower than before IFRS 15 was adopted, due to the timing of software license recognition. This directly impacts adjusted operating profit and could therefore result in a reduction in the region of 7%-8%. This impact is factored into our outlook for the year and our view is that we will meet consensus for the full year despite the significant adverse impact of IFRS 15.
QAS is expected to continue its positive performance in the second half of the year, including further work to be undertaken on the contracts with the Ministry of Education in Dubai and the UK DfE.
i-graduate revenues and profit are skewed to the fourth quarter of the year, in line with the start of the academic year; 2017 was a challenging year for the i-graduate business, and we expect improvement in 2018.
Overall, we have made good progress in the half-year and continue to execute our strategy focussing on operational efficiencies to deliver continued value for all our stakeholders. Our outlook for the year remains unchanged.
1 Revenue growth, adjusted operating profit and adjusted operating margin is after adjusting for the Ofsted Early Years contract which expired in March 2017 (H1 2018: GBPnil; H1 2017: Revenue GBP2.4m, Operating Profit GBP0.9m). 2 Student Information System (SIS) is the general industry term for education management solutions that encompasses Management Information Systems (MIS), Customer (or Student) Relationship Management (CRM), business insight and data analytics products. Student Management System (SMS) is more specifically the administration aspect of Student Information Systems. We refer to our heritage products as SMS, our new offerings (aligned with their wider applicability) as SIS, and the general industry as student information. -------------------------------------------------------------------------
Financial Performance
In the six months ended 30 June 2018 the Group's revenue was down 4.9% to GBP42.0m (H1 2017: GBP44.2m). Revenue, excluding the Ofsted Early Years contract which successfully concluded in March 2017 with revenue of GBP2.4m, was up 0.5% driven by a strong performance in the QAS business.
Adjusted Operating Profit has increased to GBP6.3m (H1 2017: GBP5.0m), a margin of 15.0% (H1 2017: 11.2%). The profit impact of Ofsted was GBP0.9m in 2017; excluding this impact, operating profit improved by GBP2.2m, an increase of 55%.
Overall, the revenue and the adjusted operating profit have benefited by GBP0.1m as a result of the adoption of IFRS 15. To improve understanding of the underlying performance of the business, these numbers are adjusted for certain items, including share based payments, as detailed in the section "Items excluded from adjusted profit figures".
Statutory profit after tax was GBP2.9m (H1 2017: GBP1.6m) and diluted earnings per share were 1.4p (H1 2017: 0.8p).
At the end of the period, the Group had net cash of GBP9.2m (FY 2017: GBP14.1m; H1 2017: GBP5.5m).
Almost 40% of Tribal's income is generated outside the UK, and is therefore subject to foreign exchange movement. Overall, there was an adverse impact due to foreign exchange fluctuations of GBP1.1m in revenue and GBP0.4m in profit, due particularly to the Group's exposure to the Australian dollar, which was on average 6% stronger against GBP sterling in H1 2018 compared with H1 2017.
The revenue and operating profit by segment below shows the reported results for H1 2018 and H1 2017, and the H1 2017 results restated to "constant currency" using H1 2018 rates to exclude foreign currency impact.
The growth percentages shown are on the H1 2017 constant currency numbers.
Results (excluding Ofsted) 2017 Growth
GBPm Constant Constant
6 months to 30 June 2018 2017 (1) Currency Currency
Revenue 42.0 41.8 40.7 3%
------ --------- ---------- ----------
Student Management Systems 29.1 28.9 28.1 4%
------ --------- ---------- ----------
Quality Assurance Solutions 9.6 8.7 8.5 12%
------ --------- ---------- ----------
i-graduate (& Other) 3.3 4.2 4.1 (20)%
------ --------- ---------- ----------
Adjusted Operating Profit
(before Central Overheads)
(2) 12.4 11.9 11.4 8%
------ --------- ---------- ----------
Student Management Systems 9.3 9.1 8.7 6%
------ --------- ---------- ----------
Quality Assurance Solutions 2.3 2.6 2.5 (8)%
------ --------- ---------- ----------
i-graduate (& Other) 0.8 0.2 0.2 344%
------ --------- ---------- ----------
Central Overheads (6.1) (7.9) (7.8) 22%
------ --------- ---------- ----------
Adjusted Operating Profit 6.3 4.0 3.6 72%
------ --------- ---------- ----------
1 Revenue and Adjusted Operating Profit exclude Ofsted related income which ceased in 2017 (H1 2017: Revenue GBP2.4m, Operating Profit GBP0.9m) 2 Adjusted Operating Profit is in respect of continuing operations, excluding intangible asset amortisation of GBP0.9m (H1 2017: GBP1.0m), restructuring costs of GBP0.1m (H1 2017: GBP0.7m), and share based payments GBP1.1m (H1 2017: GBP0.7m)
Student Management Systems
The Student Management Systems (SMS) segment was modified in the 2017 Annual Report and Accounts to include only SMS products and services sold into Higher and Further Education, Schools and Work-based Learning organisations. All other products not relating i-graduate or QAS are included in "Other".
On a constant currency basis, Student Management Systems revenue increased 4%, to GBP29.1m. The table below shows the split between the separate products and services.
Student Management Systems 2017 Growth
GBPm Constant Constant
6 months to 30 June 2018 2017 Currency Currency
Revenue 29.1 28.9 28.1 4%
----- ----- ---------- ----------
License & Development fees 4.8 4.3 4.2 15%
----- ----- ---------- ----------
Implementation Services 6.5 7.0 6.9 (6)%
----- ----- ---------- ----------
Support & Maintenance fees 15.6 15.8 15.2 3%
----- ----- ---------- ----------
Cloud Services 2.2 1.8 1.8 21%
----- ----- ---------- ----------
License sales increased by GBP0.6m, reflecting the timing of revenue recognition under IFRS 15, and the commencement of the large contracts which were won in the first half of the year, at Canterbury Christ Church University, University of Portsmouth, and Colleges Northern Ireland.
Implementation is 6% down in real terms, reflecting that the large contract wins in H1 2018 ramped up a little less quickly than expected. Callista continued to perform well with good margins and revenue slightly above expectations due to additional accelerated development work.
Support & Maintenance revenue increased 3%, taking into account the effect of foreign exchange. This is in line with the contractual annual inflationary uplift applied, and to the further license sales achieved.
Cloud revenue has increased by 21% as more contract wins include Cloud solutions.
i-graduate (& Other)
i-graduate revenue was slightly down at GBP1.2m (H1 2017: GBP1.3m); it is a seasonal business, and revenue and operating profit are skewed to the beginning of the academic year.
Other includes K2 (Asset Management software), Software Solutions (bespoke software development) and Information Matters (Information & Records Management consultancy). These are businesses that operate profitably and continue to be supported, although there is limited investment in future development of the solutions and little proactive sales and marketing activity. Accordingly, revenue continues to fall, although profitability remains strong.
Quality Assurance Solutions
In QAS, excluding the successful conclusion of the Ofsted Early Years contract in March 2017, which increased 2017 revenues by GBP2.4m, QAS revenues increased by 12%, due to the success of the Middle East school inspection contracts in Abu Dhabi, Dubai and Northern Emirates, as well as further work in the US and the UK.
QAS achieved a segment profit of GBP2.3m (H1 2017: GBP2.5m excluding the Ofsted Early Years contract, which successfully concluded at the end of March 2017 and was taken back in-house by Ofsted). Overall, the operating margin of QAS was 24%, down from 30% in H1 2017, reflecting a more sustainable level following the end of certain higher margin contracts.
__________________________________________________________________________________
On a constant currency basis, adjusted operating profit before central overheads increased 8% to GBP12.4m (H1 2017: GBP11.4m excluding the Ofsted contract which concluded in 2017).
The cost reductions achieved in 2017 continue to benefit 2018; in particularly, the central overheads reduced by GBP1.7m on 2017. The cost reduction program has now concluded, although we continue to drive further operational efficiencies, and expect further cost savings to be delivered into 2019 to improve margin without impacting the Group's ability to serve our customers or drive our business forward.
__________________________________________________________________________________
Key Performance Indicators (KPIs)
The Group monitors its performance using the KPIs in the table below; 2017 excludes the Ofsted contract which successfully concluded in March 2017. The KPIs are impacted by the effects of foreign exchange movements in the period, as noted above.
KPIs Growth
(excluding Ofsted) 2017 Constant
Constant
6 months to 30 June 2018 2017 (2) Variance Currency Currency
Revenue(2) GBP42.0m GBP41.8m 0.5% GBP40.7m 3.0%
---------- ---------- ---------- ----------- -----------
Adjusted operating profit(1,2) GBP6.3m GBP4.0m 55% GBP3.6m 72%
---------- ---------- ---------- ----------- -----------
Adjusted Operating Margin(1,2) 15.0% 9.7% 5.3pp 9.0% 6.0pp
---------- ---------- ---------- ----------- -----------
Annually Recurring Revenue
(6 months)(3) GBP18.9m GBP19.0m (0.8)% GBP18.5m 2.2%
---------- ---------- ---------- ----------- -----------
Backlog(4,6) GBP122.5m GBP122.1m GBP0.4m GBP120.7m GBP1.8m
---------- ---------- ---------- ----------- -----------
Cash Conversion(5) (11)% (41)% 30pp
---------- ---------- ----------
Staff Retention 96% 93% 3pp
---------- ---------- ----------
Revenue / Average FTE GBP96.6k GBP96.5k GBP0.1k
(GBP'000s: annualised)
---------- ---------- ----------
1 Adjusted Operating Profit and Adjusted Operating Margin is in respect of continuing operations which excludes "Other Items" charges of GBP2.1m ( H1 2017: charge of GBP2.4m).
2 Revenue, Adjusted Operating Profit and Adjusted Operating Margin exclude Ofsted related income which ceased in 2017 (H1 2017: Revenue GBP2.4m, Operating Profit GBP0.9m).
3 Annually Recurring Revenue is calculated assuming maintenance revenue is received equally throughout the year.
4 Sales order backlog relates to the total value of orders which have been signed on or before, but not delivered by, 30 June 2018, based on the Total Contract Value, even though customers may be permitted, under certain circumstances, to reduce their commitment at a future date.
5 Cash Conversion is calculated as net cash from operating activities before tax from continuing operations, less expenditure on intangible assets and property, plant and equipment, as a proportion of adjusted operating profit.
6 Comparative figure for 2017 is as at 31 December 2017 and restated for IFRS 15 as it is a forward looking figure (FY17 reported: GBP122.2m).
The Annually Recurring Revenue (ARR) includes Support & Maintenance fees paid on all software and, from December 2017, our Cloud hosting services, as detailed in the 2017 Annual Report and Accounts. The H1 2017 ARR is restated to include Cloud hosting services. Overall the Annually Recurring Revenue total reduced by 0.8%; excluding the impact of foreign currency movement, the ARR grew by 2.2% as a result of the increasing license sales and the contractual inflationary uplift applied annually.
The adjusted operating margin excluding Ofsted has increased 5.3 percentage points to 15.0%; excluding the impact of foreign currency movement it has increased by 6.0 percentage points, as the impact of the cost reduction programme continues to benefit the operating margin, which increased by 55% to GBP6.3m (H1 2017: GBP4.0m).
The total Full Time Equivalent (FTE) headcount has increased by 26 FTEs to 869 (H1 2017: 843 FTEs), due mostly to the increased investment in the Tribal Edge development, the move of some headcount to Manila to drive an efficient 24/7 software support service, and additional headcount requirements of the QAS contract at NCETM. However, the Revenue per Average FTE metric has been maintained at GBP96.7k (H1 2017: GBP96.5k).
We note, though, that despite the extent of change within the Group, our staff retention has improved to 96% (H1 2017: 93%).
As is normal in the first half of the year, cash conversion is negative at (11)% (H1 2017: (41)%). This reflects the Group's working capital profile, and the additional cash requirements in the first half of the year; most Support & Maintenance contracts are invoiced and collected towards the end of the calendar year, and some large contract milestones, particularly in QAS, are concluded at the end of the half-year. Cash conversion is expected to recover in the second half of the year, consistent with 2017.
The sales order backlog relates to the total value of orders which have been signed on or before, but not delivered by, 30 June 2018. This is reported on an IFRS 15 basis, including the restatement of 2017, and represents the best estimate of business expected to be delivered and recognised in future periods, and includes 2 years of Support & Maintenance revenue. At 30 June 2018 this increased to GBP122.5m (FY 2017: restated for IFRS 15 GBP122.1m; excluding the impact of foreign currency movement GBP120.7m).
Impact of IFRS 15 (Revenue from Contracts with Customers)
The Group adopted IFRS 15 "Revenue from Contracts with Customers" with effect from 1 January 2018 using the modified retrospective method. License revenue is now recognised over the duration of the project implementation period on a percentage completion basis. Where there is a short implementation, as with most Further Education and Work-based Learning sales, there will be little if any impact. For the larger deals, which may typically have implementation periods of two years or more, this has the effect of spreading the recognition of License revenue over an extended period, rather than immediate, upfront recognition. There are no changes to the timing of the recognition of Implementation or Support & Maintenance revenue, nor is there any impact in i-graduate or QAS.
The opening balance sheet was restated for this change with a reduction of GBP1.7m to equity reserves, GBP0.2m to accrued income and GBP1.5m to deferred income.
The impact to revenue of the adoption of IFRS 15 in H1 2018 is an increase of GBP0.1m; under the accounting policy before the adoption of IFRS 15, the revenue would have been GBP41.9m (H1 2017: GBP41.7m excluding Ofsted) and adjusted operating profit GBP6.2m (H1 2017: GBP4.0m excluding Ofsted).
One-off movements
There were a number of one-off impacts to the 2018 profit, although the overall impact was not material.
One-off impacts
GBPm Net P&L
6 months to 30 June 2018 2017 Impact
Bad Debt release 1.0 0.2 0.8
------ ------ --------
Revenue contingency taken (0.4) - (0.4)
------ ------ --------
Other provisions movement 0.3 (0.1) 0.4
------ ------ --------
Costs of Data Centre exit (0.5) - (0.5)
------ ------ --------
Total impact 0.4 0.1 0.3
------ ------ --------
In H1 2018, the strong collections performance resulted in the release of bad debt provisions; however there was a charge of GBP0.4m taken as contingency against revenue on ongoing contracts to account for delays in contract performance and timing of delivery; the assessment of debtor recoverability on these contracts is referenced to the revenue contingency.
Tribal is in the process of exiting its current data centre and, working in partnership with Rackspace, migrating existing customers into either a Rackspace data centre or into a Public Cloud provider. As we move out of the existing data centre, there is duplication of costs, which were GBP0.5m in H1 2018. This project will continue through the second half of the year and we would expect a similar or slightly higher additional cost.
Items excluded from adjusted profit figures
Certain items not directly related to the trading business or regarded as exceptional in nature have been removed from the adjusted profit figure and disclosed as "Other Items" on the Income Statement to provide greater understanding of the Group's underlying performance. The main adjustments are as follows:
-- Share based payments
In 2018, share based payment charges (including employer related taxes) totalled GBP1.1m (H1 2017: GBP0.7m), and are excluded from the Adjusted operating profit.
The charges in the current year relate to the matching shares granted as part of the rights issue and share subscriptions in 2016 (GBP0.3m) and the Long Term Incentive Plan options (LTIPs) which were granted to the executive and senior management teams in 2016, 2017 and 2018 (GBP0.8m).
-- Amortisation of IFRS 3 Intangibles
The amortisation charge in relation to IFRS 3 intangible assets of GBP0.9m (H1 2017: GBP1.0m) arose from separately identifiable assets recognised as part of previous acquisitions. The assets principally relate to software and customer relationships and are amortised over their expected life which was determined in the year the acquisition took place.
-- Restructuring and associated costs
These costs relate to the restructuring of the Group's operations which was completed early in 2018, and includes a charge for redundancy costs of GBP0.1m (H1 2017: GBP0.7m).
Product Development Costs
The Group spent GBP5.2m on product development, of which GBP1.8m was capitalised; GBP1.5m (H1 2017: GBP0.4m) related to Tribal Edge, reflecting the Group's commitment to development of the Tribal Edge platform, which is the next generation, cloud-based platform for Student Information Systems in the Higher Education and Further Education & Colleges sectors.
The Group also capitalised GBP0.3m of development cost relating to SchoolEdge, our Student Management System for schools.
Product Development Costs
GBPm
6 months to 30 June 2018 2017
Product Development Cost 5.2 4.7
----- -----
Capitalised Development Cost 1.8 1.0
----- -----
Tribal Edge platform 1.5 0.4
----- -----
SchoolEdge 0.3 0.6
----- -----
Amortisation 0.7 0.8
----- -----
Net Cash and Cash flow
Net cash at 30 June 2018 was GBP9.2m (H1 2017: GBP5.5m).
Cash flow
GBPm
6 months to 30 June 2018 2017
Net cash from operating activities 0.5 0.8
------ ------
Net cash outflow from investing activities (3.2) (4.0)
------ ------
Net cash outflow from financing activities (2.0) (0.1)
------ ------
Net decrease in cash & cash equivalents (4.7) (3.3)
------ ------
Cash & cash equivalents at beginning
of the year 14.1 8.8
------ ------
Cash & cash equivalents at end of
period 9.4 5.5
------ ------
Less: Effect of foreign exchange (0.2) -
rate changes
------ ------
Net cash & cash equivalents at end
of period 9.2 5.5
------ ------
Operating cash inflow for the period was GBP0.5m (H1 2017: GBP0.8m); the Group had a working capital movement of GBP(6.3)m (H1 2017: GBP(5.9)m), which, consistent with prior years, is significantly higher in the first half of the year. This is due to a number a factors, including a high proportion of annual Support & Maintenance contracts being renewed in the earlier part of the academic year, increasing the deferred income balance at year end, and in part to the work on key QAS schools contracts performed in the first half of the year being unable to be invoiced until completion of the work in June, towards the end of the school year.
There was an adverse impact of foreign exchange movement of GBP0.2m (H1 2017: GBPnil).
Capital expenditure totalled GBP2.4m (H1 2017: GBP2.9m) including GBP1.8m (H1 2017: GBP1.0m) on internal software development and GBP0.6m on office premises and other equipment.
The Group made a total net payment of GBP0.8m for deferred consideration (H1 2017: GBP1.2m), of which GBP0.4m was in respect of the acquisition of Sky Software (Campus) and GBP0.4m for deferred consideration in relation to the acquisition of intellectual property from Wambiz.
Share Options and Share Capital
On 26 March 2018, 3,975,000 share options were granted to senior management, excluding Ian Bowles and Mark Pickett. On 22 May 2018, 590,452 nil-cost share options were granted to Ian Bowles and Mark Pickett as part of their ongoing remuneration.
As at 30 June 2018, there were 196,051,181 shares issued (FY 2017: 196,051,181).
Earnings per share
Diluted earnings per share increased by 76% to 1.4p (H1 2017: 0.8p).
Adjusted diluted earnings per share from continuing operations before other costs, the results of businesses disposed of, and intangible asset impairment charges and amortisation, which reflects the Group's underlying trading performance, increased by 23% to 2.2p (H1 2017: 1.7p).
Dividends
Following the reinstatement of a dividend of 1p per share, paid by the Company in May 2018, the Board reaffirms its intention to continue a progressive dividend policy, with a single dividend payment each year following annual results.
Related parties
Transactions with related parties during the period are set out in note 19.
Condensed consolidated income statement
For the six months to 30 June 2018
Six months Six months
ended ended
Other 30 June Other 30 June
(note 2018 (note 2017
Adjusted 6) Total Adjusted 6) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Continuing operations
Revenue 4 41,989 - 41,989 44,151 - 44,151
Cost of sales (20,828) - (20,828) (25,423) - (25,423)
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Gross profit 21,161 - 21,161 18,728 - 18,728
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Total administrative expenses (14,879) (2,064) (16,943) (13,775) (2,501) (16,276)
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Operating profit/(loss) 4 6,282 (2,064) 4,218 4,953 (2,501) 2,452
Investment income 18 - 18 11 - 11
Finance costs 7 (13) (60) (73) (80) (54) (134)
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Profit/(loss) before tax 6,287 (2,124) 4,163 4,884 (2,555) 2,329
Tax (charge)/credit 8 (1,748) 441 (1,307) (1,337) 570 (767)
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Profit/(loss) for the
period 4,539 (1,683) 2,856 3,547 (1,985) 1,562
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Earnings per share
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Basic 9 1.5p 0.8p
Diluted 9 1.4p 0.8p
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
All activities are from continuing operations.
Condensed consolidated income statement
For the year to 31 December 2017
Other Year ended
(note 31 December
Adjusted 6) 2017
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- --------- --------- -------------
Continuing operations
Revenue 4 84,918 - 84,918
Cost of sales (42,401) - (42,401)
---------------------------------- ----- --------- --------- -------------
Gross profit 42,517 - 42,517
Total administrative expenses (33,975) (4,815) (38,790)
---------------------------------- ----- --------- --------- -------------
Operating profit/(loss) 4 8,542 (4,815) 3,727
Investment income 20 - 20
Finance costs 7 (179) (128) (307)
---------------------------------- ----- --------- --------- -------------
Profit/(loss) before tax 8,383 (4,943) 3,440
Tax (charge)/credit 8 (1,757) 936 (821)
---------------------------------- ----- --------- --------- -------------
Profit/(loss) for the year 6,626 (4,007) 2,619
---------------------------------- ----- --------- --------- -------------
Earnings per share
------------------------------- ----- --------- --------- -------------
Basic 9 1.3p
Diluted 9 1.3p
---------------------------------- ----- --------- --------- -------------
Condensed consolidated statement of comprehensive income and expense
For the six months to 30 June 2018
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ----------- ----------- -------------
Profit for the period 2,856 1,562 2,619
Other comprehensive (expense)/income
Items that will not be reclassified subsequently
to profit or loss:
Re-measurement of defined benefit pension schemes - - 55
Deferred tax on measurement of defined benefit
pension schemes - - (9)
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translation of foreign
operations (513) 103 (436)
---------------------------------------------------------- ----------- ----------- -------------
Other comprehensive (expense)/income for the period
net of tax (513) 103 (390)
---------------------------------------------------------- ----------- ----------- -------------
Total comprehensive income for the period attributable
to equity holders of the parent 2,343 1,665 2,229
---------------------------------------------------------- ----------- ----------- -------------
Condensed consolidated balance sheet
As at 30 June 2018
30 June 30 June 31 December
2018 2017 2017
Note GBP'000 GBP'000 GBP'000
--------------------------------------- ------ --------- --------- ------------
Non-current assets
Goodwill 10 20,728 21,421 21,113
Other intangible assets 11 13,417 15,154 13,863
Property, plant and equipment 1,737 1,896 1,577
Deferred tax assets 4,579 4,072 4,275
Accrued income 44 200 150
----------------------------------------- ------ --------- --------- ------------
40,505 42,743 40,978
--------------------------------------- ------ --------- --------- ------------
Current assets
Inventories - 6 -
Trade and other receivables 12 15,110 18,723 13,625
Accrued income 6,363 5,059 4,851
Current tax assets 86 179 106
Cash and cash equivalents (excluding
bank overdrafts) 17 9,214 8,368 14,082
----------------------------------------- ------ --------- --------- ------------
30,773 32,335 32,664
--------------------------------------- ------ --------- --------- ------------
Total assets 71,278 75,078 73,642
----------------------------------------- ------ --------- --------- ------------
Current liabilities
Trade and other payables 13 (7,531) (6,333) (6,888)
Deferred income (17,222) (18,306) (17,934)
Accruals (7,194) (8,035) (8,593)
Current tax liabilities (2,888) (2,228) (2,573)
Borrowings 17 - (2,856) -
Provisions 14 (256) (1,091) (1,250)
----------------------------------------- ------ --------- --------- ------------
(35,091) (38,849) (37,238)
--------------------------------------- ------ --------- --------- ------------
Net current liabilities (4,318) (6,514) (4,574)
----------------------------------------- ------ --------- --------- ------------
Non-current liabilities
Deferred income (709) (812) (113)
Retirement benefit obligation (1,718) (1,725) (1,718)
Other payables 13 (160) (874) (551)
Deferred tax liabilities (1,013) (1,596) (1,276)
Provisions 14 (349) (230) (194)
----------------------------------------- ------ --------- --------- ------------
(3,949) (5,237) (3,852)
--------------------------------------- ------ --------- --------- ------------
Total liabilities (39,040) (44,086) (41,090)
----------------------------------------- ------ --------- --------- ------------
Net assets 32,238 30,992 32,552
----------------------------------------- ------ --------- --------- ------------
Equity
Share capital 15 9,803 9,803 9,803
Share premium 15,539 15,539 15,539
Other reserves 23,661 21,942 22,783
Accumulated losses (16,765) (16,292) (15,573)
----------------------------------------- ------ --------- --------- ------------
Total equity attributable to equity
holders of the parent 32,238 30,992 32,552
----------------------------------------- ------ --------- --------- ------------
Condensed consolidated cash flow statement
For the six months to 30 June 2018
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
Note GBP'000 GBP'000 GBP'000
---------------------------------------------- ----- ----------- ----------- -------------
Net cash from operations 16 549 765 11,117
------------------------------------------------- ----- ----------- ----------- -------------
Investing activities
Interest received 17 11 20
Purchases of property, plant and equipment (676) (491) (803)
Expenditure on intangible assets (1,769) (2,382) (3,559)
Payment of deferred consideration for
acquisitions (826) (1,157) (1,157)
Net cash outflow from investing activities (3,254) (4,019) (5,499)
------------------------------------------------- ----- ----------- ----------- -------------
Financing activities
Interest paid (1) (35) (101)
Equity dividend paid (1,952) - -
Repayment of borrowings and loan arrangement
fees - (5) (25)
------------------------------------------------- ----- ----------- ----------- -------------
Net cash used in financing activities (1,953) (40) (126)
------------------------------------------------- ----- ----------- ----------- -------------
Net (decrease)/increase in cash and
cash equivalents (4,658) (3,294) 5,492
------------------------------------------------- ----- ----------- ----------- -------------
Net cash and cash equivalents at beginning
of period 14,082 8,833 8,833
Effect of foreign exchange rate changes (210) (27) (243)
------------------------------------------------- ----- ----------- ----------- -------------
Net cash and cash equivalents at end
of period 17 9,214 5,512 14,082
------------------------------------------------- ----- ----------- ----------- -------------
Condensed consolidated statement of changes in equity
For the six months to 30 June 2018
Share Share Other Accumulated Total
Capital Premium reserves losses Equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----- --------- --------- ---------- ------------ -----------
Balance at 1 January 2017 9,769 14,989 20,879 (18,147) 27,490
Profit for the period - - - 1,562 1,562
Other comprehensive profit for
the period - - - 103 103
Issue of share capital 34 550 - - 584
Charge to equity for share-based
payments - - 538 - 538
Tax credit on charge to equity
for share-based payments - - - 190 190
Transfer from other payables
to equity for share-based payments - - 525 - 525
Balance at 30 June 2017 9,803 15,539 21,942 (16,292) 30,992
Profit for the period - - - 1,057 1,057
Other comprehensive loss for
the period - - - (493) (493)
Charge to equity for share-based
payments - - 855 - 855
Tax credit on charge to equity
for share-based payments - - - 155 155
Transfer from other payables
to equity for share-based payments - - (14) - (14)
--------------------------------------- ----- --------- --------- ---------- ------------ -----------
Balance at 31 December 2017 as
previously reported 9,803 15,539 22,783 (15,573) 32,552
Effect of IFRS 15 5 - - - (1,704) (1,704)
--------------------------------------- ----- --------- --------- ---------- ------------ -----------
Balance at 31 December 2017 restated 9,803 15,539 22,783 (17,277) 30,848
Profit for the period - - - 2,856 2,856
Other comprehensive loss for
the period - - - (513) (513)
Equity dividend paid - - - (1,952) (1,952)
Charge to equity for share-based
payments - - 878 - 878
Tax credit on charge to equity
for share-based payments - - - 121 121
--------------------------------------- ----- --------- --------- ---------- ------------ ---------
Balance at 30 June 2018 9,803 15,539 23,661 (16,765) 32,238
--------------------------------------- ----- --------- --------- ---------- ------------ ---------
Notes to the condensed consolidated financial information
For the six months to 30 June 2018
1. General information
The condensed consolidated financial information for the six months ended 30 June 2018 was approved by the Board of Directors on 16 August 2018. This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2017 were approved by the Board of Directors on 22 March 2018. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor reported on those accounts: its report was unqualified, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
2. Accounting policies
The condensed consolidated set of financial statements included in this half-yearly financial report has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority.
The condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2017 which have been prepared in accordance with IFRSs as adopted by the European Union.
In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were as stated within the consolidated financial statements for the year ended 31 December 2017.
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2017 with the exception IFRS 15 "Revenue from Contracts with Customers" and IFRS 9 "Financial Instruments". This is outlined in Note 1 to the consolidated financial statements for the year ended 2017. The introduction of IFRS 15 has resulted in an update to the recognition for revenue on perpetual software license in Student Management Systems revenue stream as follows:
-- Revenue on perpetual software licenses is recognised on the commencement of software implementation and related consultancy. Revenue will be recognised over the duration of the project implementation period on a percentage complete basis.
All other revenue streams detailed in the policy are not affected by IFRS 15.
IFRS 9 has also been applied in the period. Expected credit losses on trade receivables have been calculated using the simplified approach. See note 5 for the effects of these revised policies.
3. Going concern
The Directors, having considered the cash-flow forecast, and while noting the Group has net current liabilities, have performed a risk assessment of likely downside scenarios and associated mitigating actions, and have a reasonable expectation that adequate financial resources will continue to be available for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the financial statements.
4. Segmental analysis
Information reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance is focused on the nature of each type of activity. The Group's reportable segments and principal activities under IFRS 8 are detailed below:
-- Student Management Systems ("SMS") represents the delivery of software and subsequent maintenance and support services and the activities through which we deploy and configure our software for our customers;
-- i-graduate represents a portfolio of performance improvement tools and services, including analytics, software solutions, facilities and asset management; and
-- Quality Assurance Solutions (QAS), representing inspection and review services which support the assessment of educational delivery.
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.
Total Revenue Adjusted segment operating
profit
--------------------------- ------------------------------------------- -------------------------------------------
Restated* Restated*
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
30 June 30 June 31 December 30 June 30 June 31 December
2018 2017 2017 2018 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP000
--------------------------- ------------- ------------ -------------- ------------- ------------ --------------
SMS 29,147 28,932 60,026 9,247 9,066 17,613
i-graduate 3,328 4,178 7,101 826 186 1,064
QAS 9,514 11,041 17,791 2,328 3,519 4,408
--------------------------- ------------- ------------ -------------- ------------- ------------ --------------
Total 41,989 44,151 84,918 12,401 12,771 23,085
--------------------------- ------------- ------------ -------------- ------------- ------------ --------------
Unallocated corporate
expenses (6,119) (7,818) (14,543)
--------------------------- ------------- ------------ -------------- ------------- ------------ --------------
Adjusted operating profit 6,282 4,953 8,542
--------------------------- ------------- ------------ -------------- ------------- ------------ --------------
Amortisation of IFRS 3 intangibles
(see note 6) (909) (1,028) (2,034)
Other items (see note
6) (1,155) (1,473) (2,781)
--------------------------- ------------- ------------ -------------- ------------- ------------ --------------
Operating profit 4,218 2,452 3,727
--------------------------- ------------- ------------ -------------- ------------- ------------ --------------
*The 2017 June comparatives have been restated to be on a consistent basis with the December 2017 financial statements so that our reporting segments are now in line. They are not adjusted for IFRS 15.
The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit represents the profit earned by each segment, without the allocation of central administration costs, including Directors' salaries, finance costs and income tax expense. This is the measure reported to the Group's Chief Executive for the purpose of resource allocation and assessment of segment performance.
In the annual financial statements for 31 December 2017 the cost allocation between cost of sales and administrative expenses was revised to disclose only product development costs directly attributable to revenue in cost of sales. All capitalised product development continue to be amortised to cost of sales.
Within QAS revenues of approximately 6% (31 December 2017: 4%) have arisen from the segment's largest customer; within SMS revenues of approximately 7% (31 December 2017: 8%) have arisen from the segment's largest customer.
Geographical information:
Revenue from external customers, based on location of the customer, are shown below:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ----------- -------------
UK 20,470 20,915 39,252
Asia Pacific 15,073 16,179 33,713
North America and rest of world 6,446 7,057 11,953
Total 41,989 44,151 84,918
--------------------------------- ----------- ----------- -------------
5. Effect of new accounting standards
The Group adopted IFRS 15 "Revenue from contracts with customers" with effect from 1 January 2018 using the modified retrospective method. License revenue is now recognised over the duration of the project Implementation period on a percentage completion basis. This has the effect of spreading the recognition of License revenue of the period of implementation, rather than immediate, upfront recognition. There are no changes to the timing of the recognition of Implementation or Support & Maintenance revenue.
The Group also adopted IFRS 9 "Financial Instruments" with effect from 1 January 2018. Expected credit losses on trade receivables have been calculated using the simplified approach and are insignificant, therefore the individual comparatives have not been restated.
In accordance with the transitional provisions of IFRS 9 and IFRS 15 the Group has not restated prior year comparatives. The cumulative effect of the above changes that would have been made to the consolidated Income Statement and Balance sheet for the periods ending 30 June 2017 and 31 December 2017 are as follows:
31 Dececember
30 June 2017
30 June 2017 31 December Effect
2017 Effect of 30 June 2017 of IFRS 31 December
As reported IFRS 15 2017 As reported 15 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------- ----------- ---------- ------------- -------------- --------------
Income Statement
Revenue 44,151 178 44,329 84,918 438 85,356
Balance Sheet
Assets
Trade and other
receivables 18,723 - 18,723 13,625
Accrued income 5,259 32 5,291 5,001 (200) 4,801
Liabilities
Deferred Income (19,118) (1,997) (21,115) (18,047) (1,504) (19,551)
Equity
Accumulated losses (16,292) (1,965) (18,257) (15,573) (1,704) (17,277)
Earnings per
share
Basic 0.8p 0.1p 0.9p 1.3p 0.3p 1.6p
Diluted 0.8p 0.1p 0.9p 1.3p 0.2p 1.5p
Adjusted Earnings
per share
Basic 1.8p 0.1p 1.9p 3.4p 0.2p 3.6p
Diluted 1.7p 0.1p 1.8p 3.2p 0.2p 3.4p
6. Other items
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----------- ----------- -------------
Share based payments (including employer
related taxes) (1,096) (726) (1,732)
Restructuring and associated costs (59) (718) (1,020)
Acquisition related costs - movement in
deferred contingent consideration - (29) (29)
--------------------------------------------------- ----------- ----------- -------------
Other administrative costs (1,155) (1,473) (2,781)
Amortisation of IFRS 3 intangibles (909) (1,028) (2,034)
--------------------------------------------------- ----------- ----------- -------------
Total administrative costs (2,064) (2,501) (4,815)
--------------------------------------------------- ----------- ----------- -------------
Unwinding of discount on deferred consideration (60) (54) (128)
Other financing items (60) (54) (128)
--------------------------------------------------- ----------- ----------- -------------
Total other items before tax (2,124) (2,555) (4,943)
--------------------------------------------------- ----------- ----------- -------------
Tax on other items 441 570 936
--------------------------------------------------- ----------- ----------- -------------
Total other items (1,683) (1,985) (4,007)
--------------------------------------------------- ----------- ----------- -------------
IAS 1, paragraph 97, requires separate disclosure of such items that are considered material by nature or value in the financial statements. As such, 'other items' are not part of the Group's underlying trading activities and include the following for the six months ended 30 June 2018:
Other exceptional items: amounts principally reflect the costs arising in respect of the restructuring of the Group's operations. The restructuring program was run throughout 2017 and is nearing completion and the final costs now provided for. Amounts relate mainly to provision for redundancy costs. (30 June 2018: GBP59,000; 30 June 2017: GBP718,000; 31 December 2017: GBP1,020,000).
Share based payments: The numbers include the movement in associated employers taxes accrual (30 June 2018: GBP155,000; 30 June 2017: GBP188,000; 31 December 2017: GBP339,000) and the dividend paid on share options that have met performance conditions (30 June 2018: GBP46,000; 30 June 2017: GBPnil; 31 December 2017: GBPnil).
Amortisation of IFRS 3 intangibles: amortisation arising on the fair value of intangible assets acquired is separately disclosed as other items (30 June 2018: GBP909,000; 30 June 2017 GBP1,028,000; 31 December 2017: GBP2,034,000).
Financing charges: consistent with the treatment of movements in deferred consideration, the unwind of the discount on deferred consideration is separately presented as other financing costs in the income statement (30 June 2018: GBP60,000; 30 June 2017 GBP54,000; 31 December 2017: GBP128,000).
Taxation: the tax credit arising on the above items is presented on a consistent basis with the underlying cost or credit to which it relates and therefore is also presented separately on the face of the income statement.
7. Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- ----------- -------------
Interest on bank overdrafts and loans - 54 51
Amortisation and write off of loan
arrangement fees - 15 36
Net interest payable on retirement
benefit obligations - - 42
Other interest payable 13 11 50
--------------------------------------- ----------- ----------- -------------
Adjusted Finance costs 13 80 179
--------------------------------------- ----------- ----------- -------------
Unwinding of discounts 60 54 128
--------------------------------------- ----------- ----------- -------------
Other finance costs 60 54 128
--------------------------------------- ----------- ----------- -------------
Total finance costs 73 134 307
--------------------------------------- ----------- ----------- -------------
8. Tax
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
------------------------ ----------- ----------- -------------
Current tax
UK corporation tax - - 100
Overseas tax 1,752 1,066 1,529
Adjustments in respect
of prior periods - - (165)
----------------------------- ----------- ----------- -------------
1,752 1,066 1,464
------------------------ ----------- ----------- -------------
Deferred tax
Current period (445) (299) (641)
Adjustments in respect
of prior periods - - (2)
----------------------------- ----------- ----------- -------------
(445) (299) (643)
------------------------ ----------- ----------- -------------
Tax charge on losses 1,307 767 821
----------------------------- ----------- ----------- -------------
In addition to the amount charged to the income statement, a deferred tax credit of GBP121,000 (30 June 2017: credit of GBP190,000; 31 December 2017: credit of GBP345,000) has been recognised directly in equity in relation to share schemes. A deferred tax credit of GBPnil (30 June 2017: credit of GBPnil; 31 December 2017: charge of GBP9,000) has been recognised in the Consolidated Statement of Comprehensive Income in relation to Defined Benefit pension schemes.
The Group continues to hold an appropriate corporation tax provision in relation to the Group relief claimed from Care UK for the year ended 31 March 2007, together with other appropriate Group provisions.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
9. Earnings per share
Earnings per share and diluted earnings per share are calculated by reference to a weighted average of ordinary shares calculated as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
thousands thousands thousands
------------------------------------------------- ----------- ----------- -------------
Basic weighted average number of shares
in issue 195,223 194,802 195,011
Weighted average number of Employee share
options 15,446 8,031 10,729
------------------------------------------------- ----------- ----------- -------------
Weighted average number of shares outstanding
for dilution calculations 210,669 202,833 205,740
------------------------------------------------- ----------- ----------- -------------
Diluted earnings per share only reflects the dilutive effect of share options for which performance criteria have been met.
The maximum number of potentially dilutive shares, based on options that have been granted but have not yet met vesting criteria is 14,475,064 (31 December 2017: 10,084,612). In addition there are a further 3,405,996 (31 December 2017: 3,405,996) potentially dilutive matching share options that have been granted but have not met vesting criteria as at 30 June 2018.
The adjusted basic and diluted earnings per share figures shown on the condensed 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.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------------------------- ----------- ----------- -------------
Net profit 2,856 1,562 2,619
----------------------------- ----------- ----------- -------------
Earnings per share
Basic 1.5p 0.8p 1.3p
Diluted 1.4p 0.8p 1.3p
----------------------------- ----------- ----------- -------------
Adjusted earnings per share
Basic 2.3p 1.8p 3.4p
Diluted 2.2p 1.7p 3.2p
----------------------------- ----------- ----------- -------------
Profit for the period Earnings per share
--------------------------- ---------------------------------------- ----------------------------------------
Six months Six months Six months Six months
ended ended Year ended ended ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2018 2017 2017 2018 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----------- ----------- -------------- ----------- ----------- --------------
Profit for the period
attributable to equity
share holders 2,856 1,562 2,619 1.5p 0.8p 1.3p
--------------------------- ----------- ----------- -------------- ----------- ----------- --------------
Add back:
Amortisation of IFRS
3 intangibles (net
of tax) 647 730 1,444
Share based payments 800 538 1,393
Unwinding of discounts 60 54 128
Other items (net
of tax) 176 634 1,013
Movement in deferred
contingent consideration - 29 29
--------------------------- ----------- ----------- -------------- ----------- ----------- --------------
Total adjusted items
(net of tax) 1,683 1,985 4,007 0.8p 1.0p 2.1p
--------------------------- ----------- ----------- -------------- ----------- ----------- --------------
Adjusted earnings 4,539 3,547 6,626 2.3p 1.8p 3.4p
--------------------------- ----------- ----------- -------------- ----------- ----------- --------------
10. Goodwill
GBP'000
-------------------------------- --------
Cost
At 1 January 2018 102,344
Exchange differences (385)
-------------------------------- --------
At 30 June 2018 101,959
-------------------------------- --------
Accumulated impairment losses
At 1 January 2018 81,231
At 30 June 2018 81,231
-------------------------------- --------
Net book value
At 30 June 2018 20,728
-------------------------------- --------
At 31 December 2017 21,113
-------------------------------- --------
The Group tests annually for impairment, or more frequently if there are indicators that goodwill could be impaired. At the half year, a review has been undertaken to ascertain if any indicators have arisen of potential impairments. Based on the review performed, no impairment indicators that would require an impairment review have been noted.
11. Other intangible assets
Customer
contracts Acquired
and intellectual Development Business Software
Software relationships property costs systems licenses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
Cost
At 1 January 2018 7,767 7,096 1,873 26,535 6,374 1,469 51,114
Additions - - 1,752 16 1 1,769
Exchange differences (226) (96) - (114) (3) (1) (440)
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
At 30 June 2018 7,541 7,000 1,873 28,173 6,387 1,469 52,443
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
Amortisation
At 1 January 2018 5,475 4,936 187 20,281 5,025 1,347 37,251
Charge for the
period 689 220 188 650 226 52 2,025
Exchange differences (160) (47) - (40) (3) - (250)
At 30 June 2018 6,004 5,109 375 20,891 5,248 1,399 39,026
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
Carrying amount
At 30 June 2018 1,537 1,891 1,498 7,282 1,139 70 13,417
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
At 31 December
2017 2,292 2,160 1,686 6,254 1,349 122 13,863
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
Software and customer contract and relationships have arisen from acquisitions, and are amortised over their estimated useful lives, which are 3-6 years and 3-12 years respectively. The amortisation period for development costs incurred on the Group's product development is 3 to 7 years, based on the expected life-cycle of the product. Amortisation of development costs is included within cost of sales; the amortisation for software, customer contracts and relationships and business systems is included within administrative expenses. Intellectual property was acquired from WAMBIZ Limited in 2017 and is recorded as Acquired intellectual property, discounted for deferred consideration payments which are included as a deferred consideration liability in Trade and other payables. This asset is being amortised over a period of 5 years.
12. Trade and other receivables
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------------------- --------- --------- ------------
Amounts receivable for the sale of services 11,966 16,273 12,202
Loss allowance (671) (1,104) (1,713)
--------------------------------------------- --------- --------- ------------
11,295 15,169 10,489
Other receivables 677 734 516
Prepayments 3,138 2,820 2,620
--------------------------------------------- --------- --------- ------------
Total 15,110 18,723 13,625
--------------------------------------------- --------- --------- ------------
13. Trade and other payables
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- ------------
Current
Trade payables 1,178 1,288 429
Other taxation and social security 2,592 2,474 2,596
Other payables 3,334 2,033 3,038
Deferred consideration 427 538 825
------------------------------------ --------- --------- ------------
7,531 6,333 6,888
------------------------------------ --------- --------- ------------
Non-current
------------------------------------ --------- --------- ------------
Other payables 160 251 153
Deferred consideration - 623 398
------------------------------------ --------- --------- ------------
160 874 551
------------------------------------ --------- --------- ------------
Total 7,691 7,207 7,439
------------------------------------ --------- --------- ------------
14. Provisions
Property Onerous Legal
related contracts claims Restructuring Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- --------- ---------------- ----------
At 1 January 2018 926 170 342 6 1,444
Release in provision (145) (114) - - (259)
Utilisation of provision (218) - - (6) (224)
Transfer to accruals - - (342) - (342)
Exchange rate movement (13) (1) - - (14)
----------------------------- --------- ----------- --------- ---------------- ----------
At 30 June 2018 550 55 - - 605
----------------------------- --------- ----------- --------- ---------------- ----------
The provisions are split as
follows:
----------------------------- --------- ----------- --------- ---------------- ----------
Property Onerous Legal
related contracts claims Restructuring Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- --------- ---------------- ----------
Within one year 201 55 - - 256
More than one year 349 - - - 349
Total 550 55 - - 605
----------------------------- --------- ----------- --------- ---------------- ----------
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle the obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
Property related provision relates to the dilapidation costs arising from exiting leasehold properties where the costs are not all expected to be incurred during the next year.
Onerous contracts provision relates to a specific contract and represents the unavoidable costs of meeting the obligations under the contract that exceed the economic benefits expected to be received under it.
15. Share capital
Six months Six months Six months Six months Year
ended ended ended ended ended Year ended
30 June 30 June 30 June 30 June 31 December 31 December
2018 2018 2017 2017 2017 2017
number GBP'000 number GBP'000 number GBP'000
------------------------ -------------- ----------- -------------- ----------- -------------- --------------
Allotted, called
up and fully paid
At beginning of
the period 196,051,181 9,803 195,380,299 9,769 195,380,299 9,769
Issued during the
period - - 670,882 34 670,882 34
At end of the period 196,051,181 9,803 196,051,181 9,803 196,051,181 9,803
------------------------ -------------- ----------- -------------- ----------- -------------- --------------
16. Notes to the cash flow statement
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ----------- -------------
Operating profit from continuing
operations 4,218 2,452 3,727
Depreciation of property, plant and
equipment 496 605 1,190
Amortisation and impairment of other
intangible assets 2,025 2,094 4,442
Share based payments 895 538 1,393
Movement in deferred consideration - 29 29
Other non-cash items 386 932 69
Operating cash flows before movements
in working capital 8,020 6,650 10,850
Decrease in inventories - 77 83
(Increase)/Decrease in receivables (2,942) (4,382) 1,044
Decrease in payables (3,333) (1,504) (930)
------------------------------------------ ----------- ----------- -------------
Net cash from operating activities
before tax 1,745 841 11,047
Tax (paid)/received (1,196) (76) 70
------------------------------------------ ----------- ----------- -------------
Net cash from operating activities 549 765 11,117
------------------------------------------ ----------- ----------- -------------
Net cash from operating activities
before tax can be analysed as follows:
Continuing operations (excluding
restricted cash) 1,784 990 11,220
Decrease in restricted cash (39) (149) (173)
------------------------------------------ ----------- ----------- -------------
Net cash from operating activities
before tax 1,745 841 11,047
------------------------------------------ ----------- ----------- -------------
17. Analysis of net cash
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- ------------
Cash and cash equivalents 9,214 8,368 14,082
Overdrafts - (2,856) -
--------------------------- --------- --------- ------------
Net cash 9,214 5,512 14,082
--------------------------- --------- --------- ------------
Analysis of changes in net cash:
---------------------------------------------------------------------
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------- --------- --------- ------------
Opening net cash 14,082 8,833 8,833
Net (decrease)/increase in cash
and cash equivalents (4,658) (3,294) 5,492
Effect of foreign exchange rate
changes (210) (27) (243)
--------------------------------- --------- --------- ------------
Closing net cash 9,214 5,512 14,082
--------------------------------- --------- --------- ------------
As at 30 June 2018, cash and cash equivalents included restricted advance cash receipts in relation to customer programmes of GBPnil (30 June 2017: GBP0.1m, 31 December 2017: GBP0.1m).
18. Contingent liabilities
From time to time the Group is subject to potential litigation claims. On the basis of legal advice, claims are being robustly contested as to both liability and quantum. A provision of GBPnil (30 June 2017: GBP0.4m, 31 December 2017: GBP0.4m) has been made for defending these claims, where appropriate.
At any time, the Group is overseeing a portfolio of customer implementation projects. Such projects may be complex, multi-phase projects giving rise to significant operational risks which the Group must manage. Such risks may, in certain instances, lead to potential negotiations or disputes with customers which may give rise to consequential financial or commercial obligations or liabilities arising.
The Company and its subsidiaries have provided performance guarantees issued by their banks on their behalf, in the ordinary course of business totalling GBP1.5m (30 June 2017: GBP5.0m, 31 December 2017: GBP1.5m). These are not expected to result in any material financial loss.
19. Related party disclosures
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
On 26 March 2018, Tribal Group plc ("the Company") granted company share options over a total of 3,975,000 ordinary shares (representing approximately 2.0% of the Company's issued shares) to members of the senior management team under the Company share option plan. All of the Options are exercisable at 79.6p per Ordinary Share. The Options may not be exercised before 25 March 2021.
On 22 May 2018, Tribal Group plc ("the Company") granted nil-cost options over a total of 590,452 ordinary shares (representing approximately 0.30% of the Company's issued shares) were granted to Ian Bowles and Mark Pickett under the terms of its 2010 Long Term Incentive. This award has been granted subject to performance conditions based on the Group's Adjusted Operating Profit over a performance period ending 31 December 2018. This award will, ordinarily, vest on the third anniversary of the grant.
The remuneration of the key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'. The members of the Group Board and the Group's Executive Board are considered to be the key management personnel of the Group.
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
------------------------------ --------- --------- ------------
Short-term employee benefits 1,166 1,324 3,824
Termination benefits - 165 -
Share-based payments 895 538 1,277
------------------------------ --------- --------- ------------
Total 2,061 2,027 5,101
------------------------------ --------- --------- ------------
20. Seasonality
The overall performance for the second half of the year will be lower than for the first half as a result of phasing of QAS school inspections. In addition, i-graduate revenues and profit are skewed to the fourth quarter of the calendar year, in line with the start of the academic year.
Responsibility statement
The Directors' confirm that these condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Services Authority and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- An indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- Material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report
The Directors of Tribal Group plc are listed in the Tribal Group plc Report and accounts for the 12 month period ended 31 December 2017. A list of current Directors is maintained on the Tribal Group plc website: www.tribalgroup.com.
The Directors are responsible for the maintenance and the integrity of the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
By order of the Board
Ian Bowles Mark Pickett Chief Executive Chief Financial Officer 16 August 2018
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR FKPDNOBKDCFD
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August 16, 2018 02:00 ET (06:00 GMT)
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