Half Year Results

RNS Number : 5825X

Tribal Group PLC

18 August 2009

 



Embargoed for release at 7.00am

18 August 2009    

PRESS INFORMATION

Tribal Group plc (″Tribal″ or the ″Group″)

Half year results for the six months ended 30 June 2009 

Highlights

• Revenue increase of 11% to £125.2m (2008: £113.3m)

• Adjusted profit before tax (after restructuring costs of £0.8m) of £8.5m (2008: £9.1m) 

• Substantial growth in committed income to £217m (2008: £139m)

• Continued healthy sales pipeline

• Further development of international activities

• Strong operational cash conversion of 153%

• Net debt reduced to £15.8m

• Restructuring programme largely completed

• Interim dividend of 1.85p, an increase of 9%

Financial summary

	Six months ended	Six months ended
	30 June 2009	30 June 2008
Revenue	£125.2m	£113.3m	+11%
Adjusted profit before tax	£8.5m	£9.1m	-7%
Profit before tax	£8.1m	£9.1m	-11%
Adjusted earnings per share	6.7p	7.4p	-9%
Interim dividend	1.85p	1.7p	+9%
Operating profit to cash conversion	153%	207%

Note: The adjusted profit before tax and adjusted earnings per share exclude intangible asset amortisation of £0.4m (2008: £0.2m) and the financial instrument credit of £nil (2008: credit of £0.2m). 

Commentary

Peter Martin, Tribal's Chief Executive, commented: ″Despite a more challenging trading environment, Tribal has made good progress during the period. We have increased our committed income substantially, largely completed our restructuring programme and our sales pipeline remains healthy. Financial pressures on public sector organisations will increase.  Tribal is well-placed to support clients that will be required to develop and implement plans to reduce costs and enhance productivity and efficiency. We continue to see a good flow of new opportunities to grow our business both in the UK and internationally.″

Presentation

A presentation of these results will be made to analysts and investors at 9.30am today at RBS Hoare Govett Ltd, 250 Bishopsgate, London, EC2M 4AA. A copy of the presentation will be available later this morning on the Tribal Group website www.tribalgroup.co.uk.

For further information please contact:

Tribal Group plc	Tel: [phone]
Peter Martin, Chief Executive Simon Lawton, Group Finance Director
Weber Shandwick	Tel: [phone]
Nick Oborne, Stephanie Badjonat, James White

Notes to Editors:

Tribal provides a range of consultancy, support and delivery services focused on improving the delivery of public services in the UK and internationally.  Our core markets are in education, health, housing and regeneration, central government and local government.  Tribal employs over 2,300 staff and its shares are quoted on the London Stock Exchange (TRB).

Links: Tribal Group plc website: www.tribalgroup.co.uk

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.

  Tribal Group plc

Chief Executive's statement

Introduction

Tribal provides a range of consultancy, support and delivery services focused on improving the delivery of public services in the UK and internationally.  Our core markets are in education, health, housing and regeneration, central government and local government.  

During the first half of the year, the Group has made good progress in a number of areas, including health, education and the development of our international business. In certain UK markets, such as regeneration and the further education capital programme, we have experienced difficult trading conditions and we have also seen increasing pressure on fee rates across some of our consulting-related activities.

We have been pleased by the substantial growth in our committed income levels during the first six months of the year and the continued health of our sales pipeline.  We have secured significant cost savings from our restructuring programme and continued to invest in areas of growth.

Results for the first half were in line with our expectations and reflect the anticipated H1/H2 bias.  Revenue for the period increased by 11% to £125.2m (2008: £113.3m).  Adjusted operating profit (after absorbing restructuring costs of £0.8m) was £9.0m (2008: £9.5m) and our adjusted operating margin was 7.2% (2008: 8.4%).  Adjusted profit before tax was £8.5m (2008: £9.1m) and adjusted earnings per share were 6.7p (2008: 7.4p).  

The Group has continued to focus on working capital management and, during the period, we generated operating cash flow of £13.8m (2008: £19.6m), with adjusted operating profit to cash conversion of 153%.  Net debt at 30 June 2009 was £15.8m against total bank facilities of £46m (of which £40m is committed until June 2012).

The financial position of the Group remains robust and the Board is proposing an interim dividend of 1.85p for the six months ended 30 June 2009, an increase of 9%.  This will be paid on 23 October 2009 to shareholders on the register at 25 September 2009.

We have enjoyed a good level of contract wins during the period and secured extensions and renewals to a number of important contracts. As a result, our committed income levels had risen to £217m at 30 June 2009, an increase of £78m (56%) since the beginning of the year. At 31 July 2009, we had secured 83% of our planned revenue for 2009.

Our sales pipeline of qualified opportunities stood at £258m at 30 June 2009 (£297m at 1 January 2009). Given the substantial increase in committed income during the period, we have been encouraged by the continued health of the Group's pipeline.

During the period, we have completed the reorganisation of our education business allowing us to focus better our resources on key market opportunities. In addition, we have reduced headcount in specific areas of the Group in order to address the softer trading conditions in certain of our UK markets.  The overall programme is now largely completed and is anticipated to generate annualised cost savings in excess of £6m.  The total cost of the restructuring will be £1.1m, of which approximately £0.8m has been expensed in the first half of the year. We have increased headcount in areas that offer significant growth potential, in particular our health business and our international activities.  We have also undertaken planned investment in new business initiatives that is expected to total £0.8m, of which £0.5m was expensed in the first half of the year.  

The UK public sector is set to experience a period of more challenging conditions, particularly following the next general election when a more stringent spending environment will prevail. Health and education will continue to be policy priorities but there will be continuing pressure on all public sector organisations to demonstrate value for money. Change and reform will be necessary, rather than simply desirable, and Tribal is well-placed to support organisations as they seek and implement solutions that will improve the delivery and cost effectiveness of public services. Our strategic response to the changing environment has five principal themes:

• develop new and enhanced service offerings to meet the future needs of our clients

• increase our committed income to improve our revenue visibility 

• expand our international activities to generate new sources of growth

• maintain a rigorous approach to our cost base to ensure competitiveness 

• accelerate collaboration across the Group to maximise the potential of our broad range of activities.

We believe that successful implementation of our strategy will position us well to tackle future challenges, to benefit from market opportunities both in the UK and internationally and to drive the Group's continued success and long-term growth.

Operating review

Segmental operating profit (before amortisation of IFRS 3 intangibles) and operating profit margin figures for the six months ended 30 June 2009 and six months ended 30 June 2008 are stated in accordance with the business segment information in note 4 to the financial information.  

Education 

	Six months ended 30 June 2009 £'000	Six months ended  30 June 2008 £'000
Revenue	51,737	50,527
Operating profit	6,964	7,483
Operating profit margin	13.5%	14.8%

Our education business saw an increase in revenue to £51.7m (2008: £50.5m). Operating profit was £7.0m (2008: £7.5m) and the operating margin was 13.5% (2008: 14.8%).

During the period, we completed the programme to reorganise the business and our individual operations are now much better aligned to the market landscape.  At the same time, we have continued to invest in new products and services and in enhancing our business development capability.  

The period was very successful in terms of winning new, and extending existing, contracts. Across our education business, we signed contracts with a total value of more than £123m, led by our new Ofsted contract. The underlying financial performance of the business was impacted by the phasing of expected software sales and restructuring costs.

The education market continues to provide opportunities for growth and, in addition to our major contract wins, we have extended our presence in the education improvement sector and continued to participate in the Government's core academy, schools improvement and Building Schools for the Future programmes.  In recent months, we have also seen changes in certain funding regimes, the restructuring of government departments and the rescheduling of planned programmes.  We have addressed these developments in three ways: through our strategy of major contract extensions, new product development in priority areas of education and international growth.

We have worked increasingly effectively with other areas of Tribal in order to offer our customers integrated services that provide cost-effective opportunities for change.  Important new contracts won in the period included a £1.5m Learning and Skills Improvement Service programme to improve the health skills of young people in further education, which brought together Tribal's education and health expertise.  

Our education software business has maintained its market share. We successfully developed a number of innovative web-based portals and further developed our GotATeenager website funded by the Department for Children, Schools and Families.  Internationally, we have made significant progress. In June, we were awarded a £4m contract by the University of Sydney for the development and implementation of a new student administration system, which will provide us with an important reference site for growth in the Australasia region. We also won a one-year extension to our successful college benchmarking project in New Zealand.

We have continued to perform well in the Government's priority areas of science, technology, engineering and mathematics (STEM).  We have also invested in promoting Tribal as a leading provider of major outsourced service contracts to our key customers. 

In the schools sector, we have been operating the highly successful Greater Manchester Challenge programme, designed to help schools across the 10 local authorities in the region improve their performance. The success of the programme was recognised by a £1.8m increase in the value of the contract during the period.  We have also developed a new software-based schools improvement product, which we expect to launch fully in the latter part of the year.

We continue to build our business working with large employers to develop the skills of their workforces. Since January 2009, we have won a new contract to deliver a programme for J D Wetherspoon, to add to our existing programmes for McDonald's and Sainsbury's. We have also been appointed as a provider of training to large employers through the Learning and Skills Council's National Employer Service.  

In February 2009, Tribal won a new Ofsted contract worth £75m over six years to inspect schools and other education providers across the South East of England, London and the South West.  This win, which increased Tribal's share of the school inspections business to 40%, will build on the strong performance that we have achieved in delivering our previous Ofsted contracts.

Our contracts to support the rehabilitation of offenders were renewed and extended.  We are now the largest provider of career information and advice services to the Offender Learning and Skills Service, with contracts worth £11m over three years.

Tribal's innovative digital and mobile technologies provide excellent value for money for clients. In the first six months of the year, we have created a mobile learning programme for taxi drivers across England with the sector skills council GoSkills and the TUC and we have been commissioned by the national Cancer Action Trust to create online collaboration portals for doctors, pharmaceutical companies and advice agencies.  We have also been appointed by the US Navy to develop an education and training programme using mobile technology.  

A key element of Tribal's growth strategy is to diversify and expand sources of income by exporting education products to overseas markets.  Our initial focus has been on Australasia and the Middle East, where we have secured work in Abu Dhabi and Oman.  As a result of the growth in international opportunities, we plan to open offices in Sydney and the Gulf region during the second half of the year.

Consulting

	Six months ended 30 June 2009 £'000	Six months ended 30 June 2008 £'000
Revenue	52,006	40,286
Operating profit	4,725	3,558
Operating profit margin	9.1%	8.8%

Our consulting business increased revenue by 29% to £52.0m (2008: £40.3m).  Operating profit increased by 33% to £4.7m (2008: £3.6m) and the operating margin was 9.1% (2008: 8.8%).  These results were supported by contributions from recent acquisitions (in particular, Tribal HELM) and a strong performance from our health business. Our regeneration practice encountered challenging market conditions during the period and action has been taken to reduce the cost base substantially. 

Our health business returned a strong performance in the first half of the year, reflecting growth within our established businesses, particularly commissioning, and the successful integration of two acquisitions. 

Tribal is now one of the largest professional services providers in health in the UK. We have aligned our offering to support the NHS in addressing both its current and longer-term challenges.  Our work ranges from high-level consultancy on future strategies, to improving quality and value on the front line. We are also supporting major private sector clients in developing their NHS strategies. 

We have continued to work with the Department of Health, helping develop its information strategy and supporting the NHS National Programme for IT.  Our commissioning business is now one of the market leaders and has won a number of major contracts with primary care trusts to help them improve quality and productivity. We have developed a new wellness and care management service which works with employers, colleges and the NHS to address the problem of growing health needs.  We have recently been appointed as one of only three providers of advisory services approved by the Department of Health to support its quality and efficiency programmes. 

Despite the economic environment, the market for our services continues to be buoyant and the pipeline of NHS contracts is strong.  While there will be continuing cost pressures within the NHS, we expect the market for expert support in transforming hospitals and health systems to grow.  

Our central government business has continued to develop key accounts with major departments including the Home Office; the Ministry of Justice; the Department for Business, Innovation and Skills; and the Foreign and Commonwealth Office.  We have won several large assignments, each worth over £1 million, at the UK Border Agency, the Rural Payments Agency and the Foreign and Commonwealth Office.

Our central government clients continue to demand value for money and Tribal's competitive position has enabled us to win significant contracts against our principal competitors. Our service offerings in commissioning, procurement, project management, training, business cases and cost reduction have all seen good levels of demand despite pressures on consultancy spend in government departments and increased competition.  We are increasingly working across Tribal with colleagues in health and education to develop integrated and differentiated offerings which combine professional and process skills with specialist domain knowledge. 

Despite the challenges of the economic environment, our housing business has maintained its position as the leading consultancy practice in social housing. We are working closely with the new regulator, the Tenant Services Authority, and continue to provide support and advice to the Department for Communities and Local Government on its review of social housing finance. We are the leading adviser on housing stock transfers and are currently providing wide-ranging advice to seven transferring councils and the organisations which will manage the homes in the future.

Our regeneration business has had a challenging six months, with significant changes in the housing and property development market and reduced demand for planning and urban design. We have restructured the business to align it more closely with Tribal's core markets of education, health and housing, reduced the cost base significantly and developed a focused international strategy. Our significant wins include master planning contracts in Northern Ireland and for one of England's major housing growth areas, Fareham in Hampshire.  Working jointly with the housing business, we have also secured a series of strategic housing policy assignments that are helping to reshape regional and local housing policy across the North of England. 

Tribal has one of the largest dedicated local government consulting practices in the UK and is well positioned to help local authorities achieve their key challenges of increasing efficiency and reducing costs.  During the period, the average size of projects across the practice has increased and there has been considerable growth in the sales pipeline.  We have had a number of good wins, including a fundamental spending review for the States of Guernsey, a multi million pound retendering exercise for Norwich City Council and a major business case for the merging and outsourcing of back office support functions for three districts in East Lincolnshire.  We are exploring the opportunities arising from the Government's Total Place programme, which is mapping public sector spend by region, in order to enable a fundamental redesign of services and generate efficiency savings.  We also see considerable opportunities in social care and are currently developing a more significant presence in this market.

Our financial management consultancy, Tribal HELM, has delivered a good performance in its core international markets. We have secured contracts, together worth over £6m, to improve the management of public finance in the Philippines and Kosovo. In the Philippines, we are working on two projects funded by the Australian government to develop internal controls and improve performance management and in Kosovo we are supporting major financial management reform initiatives.  

Our operations in the UK and Ireland also performed well, and benefited from the current focus on financial governance and cost efficiency.  In May, we were selected for a key consultancy services procurement framework which will enable us to bid for a range of financial and management consultancy work across the Department of Work and Pensions, the Home Office, the Ministry of Defence and the Department for Children, Schools and Families.  Our pipeline of opportunities is strong and we are increasingly working with other parts of Tribal to develop integrated offerings for our international client base. 

As the public sector spending environment becomes tighter, we expect clients across our consultancy business to focus increasingly on solutions that deliver real and demonstrable outcomes on a cost-effective basis. We continue to develop new and innovative service offerings, based on our deep domain expertise, and to explore arrangements for sharing risk and reward with our clients.

Support services

	Six months ended 30 June 2009 £'000	Six months ended  30 June 2008 £'000
Revenue	22,862	23,369
Operating profit	1,009	1,705
Operating profit margin	4.4%	7.3%

Our support services saw a fall in revenue during the period to £22.9m (2008: £23.4m).  Operating profit was £1.0m (2008: £1.7m) and the operating margin was 4.4% (2008: 7.3%).  

The performance of our architectural design business was affected during the period by the suspension of projects in the Learning and Skills Council's Building Colleges for the Future programme.  As a result, we have reduced our cost base very significantly and consolidated a number of regional offices.

Our health and science practices continued to make progress and we enhanced our potential pipeline by winning places on key national procurement frameworks, including Frameworks Scotland, HM Treasury OGC Buying Solutions Framework and the frameworks operated by the Medical Research Council and the Science and Technology Facilities Council. We have already secured major commissions through Frameworks Scotland, including the design for the £120m redevelopment of Dumfries and Galloway Royal Infirmary and the new £150m Royal Sick Children's Hospital in Edinburgh. 

In line with our international expansion strategy, our business in South Africa has secured a commission to design a major new lighthouse facility at Cape Agulhus, the southernmost point of the African continent.  We have also submitted final proposals for a large correctional services PFI bid. In Australia, we have been appointed by a leading consortium to bid for the £400m Royal Adelaide Hospital PPP.

Following a strategic acquisition last year, our communications business started 2009 with a fully integrated PR, advertising and digital offering.  During the period, we have seen softer market conditions and a more competitive environment.  We have also seen a shift in new business opportunities away from large retainer contracts to smaller, project-based work.  Despite these challenges, we have secured a number of good wins for our new, integrated offering, including the Chartered Management Institute and the Royal Pharmaceutical Society of Great Britain.  We continue to see solid organic growth in PR, particularly in the education and skills sector, and also an increase in demand for our bid support services.  We also secured an important strategic advertising contract with the Welsh Assembly Government.  

Our resourcing business recorded an improved performance, as a result of several new accounts secured over the past year and improvements in margins across the business. Market conditions remain challenging, with a continuing reduction in the number of advertised jobs.  However, we are maintaining our market share and sustaining good conversion levels on new bids. We have achieved increased sales of high-value digital and creative products and have increased margins through effective cost management and improved efficiency.  Our contract wins include a successful bid to manage the new online recruitment service for all schools in England for the Department for Children, Schools and Families worth £1.6m over the next three years.

People

Tribal has always recognised that our success is founded on the talent of our 2,300 employees and our extensive network of associates. Our people are our most important asset and we continue to focus and invest in skills development, targeted recruitment campaigns and organisational realignment projects.  As a professional services company, it is critical that we nurture and manage our people in a way that continues to develop our professional, commercial and international expertise in order to protect and enhance Tribal's competitive position.

Managing risks 

Tribal regularly reviews its corporate risk register and the Board considers risk assessment, identification of mitigating actions and internal controls to be fundamental to achieving the Group's strategic objectives.  The principal risks that the Group will be managing during the second half of the year are as follows:

• operational risks, such as competition, bidding processes, availability of skilled staff; 

• changes in government policy and spending; and 

• reputational risk. 

In the current challenging economic climate, and given the outlook for the short and medium term, the most significant risks we are facing relate to uncertainty in government policy, particularly with a general election pending in the UK; pressure on public sector spending (although we believe that the focus on public sector cost effectiveness will provide us with opportunities); and increased competition. 

Our risk management policies are more fully documented in the Group's report and accounts for the year ended 31 December 2008.

Going concern

The Group has considerable financial resources. It maintains sizeable cash balances, a credit facility of £40m, which is not due for renewal until June 2012, and an overdraft facility of £6m which is renewable annually in February. Net debt was £15.8m at 30 June 2009. Although the current economic conditions create some uncertainty in terms of the maintenance of current public spending levels, the Group also has a number of long-term contracts with customers across different geographic areas, significant levels of committed income and a strong pipeline of new opportunities. The Group's forecasts and projections, which allow for reasonably possible changes in trading performance, show that the Group will continue to be cash generative. As a consequence, the directors believe that the Group is well-placed to manage its business risks successfully despite the current uncertain economic outlook.  

After making due enquiries, the Board has formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the directors continue to adopt the going concern basis in preparing the financial statements.  

Prospects

The pressures on public sector spending in the UK will increase and it will become ever more important for organisations in the public sector to deliver savings and efficiency gains at the same time as maintaining and enhancing the quality and timeliness of service delivery.  Whilst our marketplace will face challenges and we can expect competitive pressures to increase, the public sector change agenda will be substantial and will create opportunities for the Group to deliver innovative and cost-effective solutions to its growing customer base.  

During the first half of the year, we substantially raised our committed income levels and our pipeline of new business is healthy.  As a result of our success in securing new contracts, restructuring the business and developing our international activities, the Board is confident that the Group will trade in line with its expectations for the full year.

Peter J Martin

Chief Executive

18 August 2009

  Condensed consolidated income statement

For the six months to 30 June 2009

			Six months		Six months		Year
			ended		ended		ended
			30 June		30 June		31 December
			2009		2008		2008
			£'000		£'000		£'000
	Note
Continuing operations
Turnover			152,846		143,643		294,192
Direct agency costs			(27,629)		(30,347)		(60,202)
Revenue	4		125,217		113,296		233,990
Cost of sales			(77,991)		(67,826)		(140,320)
Gross profit			47,226		45,470		93,670
Administrative expenses before amortisation of IFRS 3 intangibles			(38,206)		(35,972)		(73,847)
Operating profit before amortisation of IFRS 3 intangibles	4		9,020		9,498		19,823
Amortisation of IFRS 3 intangibles			(476)		(171)		(556)
Total administrative expenses			(38,682)		(36,143)		(74,403)
Operating profit			8,544		9,327		19,267
Investment revenues	5		227		446		586
Other gains and losses	6		37		202		(66)
Finance costs	7		(746)		(914)		(1,835)
Profit before tax			8,062		9,061		17,952
Tax	8		(1,932)		(2,471)		(4,810)
Profit after tax from continuing operations			6,130		6,590		13,142
Discontinued operations
Profit from discontinued operations			-		392		1,211
Profit for the period			6,130		6,982		14,353
Attributable to:-
Equity holders of the parent			5,669		6,664		13,443
Minority interest			461		318		910
			6,130		6,982		14,353

Condensed consolidated income statement (continued)

For the six months to 30 June 2009

			Six months		Six months		Year
			ended		ended		ended
			30 June		30 June		31 December
			2009		2008		2008
	Note
Earnings per share
From continuing operations
Basic	9		6.3p		7.4p		14.1p
Diluted	9		6.3p		7.4p		14.1p
Adjusted basic before amortisation of IFRS 3 intangibles and financial instrument (credit)/charge	9		6.7p		7.4p		14.7p
Adjusted diluted before amortisation of IFRS 3 intangibles and financial instrument (credit)/charge	9		6.7p		7.4p		14.7p
From continuing and discontinued operations
Basic	9		6.3p		7.8p		15.5p
Diluted	9		6.3p		7.8p		15.5p
Adjusted basic before amortisation of IFRS 3 intangibles, profit from discontinued operations and financial instrument (credit)/charge	9		6.7p		7.4p		14.7p
Adjusted diluted before amortisation of IFRS 3 intangibles, profit from discontinued operations and financial instrument (credit)/charge	9		6.7p		7.4p		14.7p

Condensed consolidated statement of comprehensive income

For the six months to 30 June 2009

		Six months		Six months		Year
		ended		ended		ended
		30 June 2009		30 June 2008		31 December  2008
		£'000		£'000		£'000
Profit for the period		6,130		6,982		14,353
Cash flow hedges		215		264		(1,109)
Actuarial loss on defined benefit pension schemes		(891)		-		(408)
Tax relating to components of other comprehensive income		189		(74)		423
Total comprehensive income for the period		5,643		7,172		13,259

Condensed consolidated statement of changes in equity

For the six months to 30 June 2009 

		Share		Share		Other		Retained				Minority		Total
		capital		premium		reserves		earnings		Total		interest		equity
		£'000		£'000		£'000		£'000		£'000		£'000		£'000
Balance at 1 January 2009		4,394		78,749		64,486		45,945		193,574		1,829		195,403
Total comprehensive income for the period		-		-		(487)		5,669		5,182		461		5,643
Issue of share capital		144		2,342		-		-		2,486		-		2,486
Dividends		-		-		-		(2,384)		(2,384)		-		(2,384)
Credit to equity for share-based payments		-		-		687		-		687		-		687
New minorities		-		-		-		-		-		6		6
Purchase of minorities		-		-		-		-		-		(240)		(240)
Balance at 30 June 2009		4,538		81,091		64,686		49,230		199,545		2,056		201,601

For the six months to 30 June 2008

		Share		Share		Other		Retained				Minority		Total
		capital		premium		reserves		earnings		Total		interest		equity
		£'000		£'000		£'000		£'000		£'000		£'000		£'000
Balance at 1 January 2008		4,239		74,750		64,582		36,606		180,177		1,065		181,242
Total comprehensive income for the period		-		-		190		6,664		6,854		318		7,172
Issue of share capital		125		3,243		-		-		3,368		-		3,368
Dividends		-		-		-		(2,477)		(2,477)		(196)		(2,673)
Credit to equity for share-based payments		-		-		305		17		322		-		322
New minorities		-		-		-		-		-		760		760
Purchase of minorities		-		-		-		-		-		(225)		(225)
Balance at 30 June 2008		4,364		77,993		65,077		40,810		188,244		1,722		189,966

For the year ended 31 December 2008 

		Share		Share		Other		Retained				Minority		Total
		capital		premium		reserves		earnings		Total		interest		equity
		£'000		£'000		£'000		£'000		£'000		£'000		£'000
Balance at 1 January 2008		4,239		74,750		64,582		36,606		180,177		1,065		181,242
Total comprehensive income for the period		-		-		(799)		13,148		12,349		910		13,259
Issue of share capital		155		3,999		-		-		4,154		-		4,154
Dividends		-		-		-		(3,957)		(3,957)		(439)		(4,396)
Credit to equity for share-based payments		-		-		703		148		851		-		851
New minorities		-		-		-		-		-		884		884
Purchase of minorities		-		-		-		-		-		(591)		(591)
Balance at 31 December 2008		4,394		78,749		64,486		45,945		193,574		1,829		195,403

Condensed consolidated balance sheet

At 30 June 2009

			30 June		30 June		31 December
			2009		2008		2008
			£'000		£'000		£'000
	Note
Non-current assets
Goodwill	11		215,474		202,869		209,765
Other intangible assets	12		9,208		6,990		7,740
Property, plant and equipment			8,733		8,423		9,103
Investments			38		187		7
Deferred tax assets			2,506		1,617		2,149
Derivative financial instruments			-		644		-
			235,959		220,730		228,764
Current assets
Inventories			841		1,496		801
Trade and other receivables	13		68,183		65,585		66,190
Amounts recoverable on contracts			-		-		6
Cash and cash equivalents	18		16,294		22,222		13,892
			85,318		89,303		80,889
Total assets			321,277		310,033		309,653
Current liabilities
Trade and other payables	14		(75,266)		(80,674)		(68,456)
Tax liabilities			(6,421)		(6,203)		(7,234)
Obligations under finance leases			-		(3)		-
Bank loans and loan notes			(388)		(662)		(662)
Provisions	15		(635)		(560)		(655)
Derivative financial instruments			(110)		-		(188)
			(82,820)		(88,102)		(77,195)
Net current assets			2,498		1,201		3,694
Non-current liabilities
Bank loans			(31,735)		(28,896)		(32,894)
Pension liabilities	16		(2,271)		(1,052)		(1,425)
Deferred tax liabilities			(2,215)		(2,017)		(1,927)
Derivative financial instruments			(635)		-		(809)
			(36,856)		(31,965)		(37,055)
Total liabilities			(119,676)		(120,067)		(114,250)
Net assets			201,601		189,966		195,403
Equity
Share capital			4,538		4,364		4,394
Share premium account			81,091		77,993		78,749
Other reserves			64,686		65,077		64,486
Retained earnings			49,230		40,810		45,945
Equity attributable to equity holders of the parent			199,545		188,244		193,574
Minority interest			2,056		1,722		1,829
Total equity			201,601		189,966		195,403

Condensed consolidated cash flow statement

For the six months to 30 June 2009

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
	Note
Net cash from operating activities	17	12,704		21,038		22,303
Investing activities
Interest received		227		446		586
Proceeds on disposal to minorities		18		-		-
Disposal of subsidiary		-		-		225
Proceeds on disposal of property, plant and equipment		4		26		53
(Purchase)/disposal of trading investments		(31)		-		320
Purchases of property, plant and equipment		(1,098)		(1,203)		(3,632)
Expenditure on product development		(1,427)		(824)		(1,851)
Acquisitions and deferred consideration		(6,599)		(20,158)		(24,855)
Cash and cash equivalents acquired		746		2,167		-
Net cash outflow from investing activities		(8,160)		(19,546)		(29,154)
Financing activities
Interest paid		(664)		(819)		(1,514)
Equity dividend paid		-		(966)		(3,957)
Dividends to minorities		-		(197)		(439)
Issue of shares		-		-		(9)
Repayment of borrowings		(3,728)		(5,214)		-
Repayment of obligations under finance leases		-		-		(3)
New bank loans		2,250		11,752		10,491
Movements in collateralised cash		-		192		192
Net cash (used in)/from financing activities		(2,142)		4,748		4,761
Net increase/(decrease) in cash and cash equivalents		2,402		6,240		(2,090)
Cash and cash equivalents at beginning of period		13,892		15,982		15,982
Cash and cash equivalents at end of period	18	16,294		22,222		13,892

  Notes to the condensed consolidated financial information for the six months to 30 June 2009

1    General information

The condensed consolidated financial information for the six months ended 30 June 2009 was approved by the Board of Directors on 18 August 2009.

The information for the year ended 31 December 2008 does not comprise statutory accounts as defined in Section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.

2    Accounting policies

The condensed consolidated financial information for the six months ended 30 June 2009 has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) and in accordance with IAS 34 'Interim Financial Reporting'.

The same accounting policies, presentation and methods of computation are followed in the condensed consolidated financial information as applied in the Group's latest annual audited financial statements except for the adoption of IFRS 8 'Operating Segments' and IAS 1 (revised) 'Presentation of financial statements'.  IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance.  In contrast, the predecessor standard (IAS 14 'Segment Reporting') required the Group to identify two sets of segments (business and geographical), using a risk and rewards approach, with the Group's system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. However, the Group believes that in this case the two methodologies result in the same segmented disclosures.  

IAS 1 (revised) has resulted in a condensed consolidated statement of changes in equity being presented as a primary statement.  

3    Going concern

After making enquiries and on the basis of the information set out in the chief executive's statement, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half year results.  

4    Segmental analysis

The Group is currently organised into three business segments - Consulting, Education and Support services.

Principal activities are as follows:

Consulting     -     one of the largest consulting businesses operating in the public sector providing a broad range of management consultancy advisory and delivery services.

Education     -    one of the largest providers of education services to the public sector including software, managed services, school inspection services, consultancy, e-learning, benchmarking, publishing and training.

Support services    -    support services businesses largely operate in the public sector providing a range of PR advertising and communications, resourcing and architectural design services. 

From 1 January 2009, the Group transferred a business unit between its business segments to realign with its revised reporting structure.  

Accordingly, the business segment information for the year ended 31 December 2008 and the six months ended 30 June 2008 has been restated to reflect the transfers. As a result, there has been an adjustment to inter-segment sales.  

4    Segmental analysis (continued)

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Revenue
Consulting		52,006		40,286		90,475
Education		51,737		50,527		96,408
Support services		22,862		23,369		49,010
Inter segment		(1,388)		(886)		(1,903)
Continuing operations		125,217		113,296		233,990
Operating profit before amortisation of IFRS 3 intangibles
Consulting		4,725		3,558		8,725
Education		6,964		7,483		14,303
Support services		1,009		1,705		4,386
Unallocated corporate expenses		(3,678)		(3,248)		(7,591)
Operating profit before amortisation of IFRS 3 intangibles		9,020		9,498		19,823
Amortisation of IFRS 3 intangibles		(476)		(171)		(556)
Operating profit		8,544		9,327		19,267

5    Investment revenues

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Interest on bank deposits		30		302		373
Other investment receivable		197		144		213
		227		446		586

6    Other gains and losses

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Change in the fair values of derivatives		247		296		109
Hedge ineffectiveness in the cash flow hedge		(210)		(94)		(175)
		37		202		(66)

7    Finance costs

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Finance charges
Interest on bank overdrafts and loans		707		846		1,717
Interest on loan notes		4		18		29
Net finance cost of retirement benefit obligations		-		1		17
Total borrowing costs		711		865		1,763
Financial instruments
Discounting charge for deferred consideration		35		49		72
		35		49		72
		746		914		1,835

8    Tax

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Continuing operations
Current tax
UK corporation tax		2,599		3,144		5,975
Adjustments in respect of prior periods		(426)		(500)		(632)
		2,173		2,644		5,343
Deferred tax
Current year		(241)		(173)		(533)
Tax charge		1,932		2,471		4,810

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.  

9    Earnings per share 

Earnings per share and diluted earnings per share are calculated by reference to a weighted average number of ordinary shares calculated as follows:

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		thousands		thousands		thousands
Basic weighted average number of shares in issue		90,113		84,927		86,358
Employee share options		56		61		101
Weighted average number of diluted shares outstanding		90,169		84,988		86,459

The adjusted basic and adjusted 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.  

Earnings and adjusted earnings (basic and diluted)

From continuing operations

Six months ended

Six months ended

Year ended

30 June 2009

30 June 2008

31 December 2008

Earnings

Earnings

Earnings

Earnings

per share

Earnings

per share

Earnings

per share

£'000

pence

£'000

pence

£'000

pence

Profit after tax

6,130

6,590

13,142

Minority interest

(461)

(318)

(910)

Profit for period

5,669

6.3p

6,272

7.4p

12,232

14.1p

Amortisation of IFRS 3 intangibles (net of tax)

343

0.4p

123

0.1p

400

0.5p

Financial instrument (credit)/charge (net of tax)

(1)

-

(145)

(0.1p)

99

0.1p

Adjusted earnings

6,011

6.7p

6,250

7.4p

12,731

14.7p

From continuing and discontinued operations

Six months ended

Six months ended

Year ended

30 June 2009

30 June 2008

31 December 2008

Earnings

Earnings

Earnings

Earnings

per share

Earnings

per share

Earnings

per share

£'000

pence

£'000

pence

£'000

pence

Profit for period

5,669

6.3p

6,664

7.8p

13,443

15.5p

Amortisation of IFRS 3 intangibles (net of tax)

343

0.4p

123

0.1p

400

0.5p

Profit from discontinued operations

-

-

(392)

(0.4p)

(1,211)

(1.4p)

Financial instrument (credit)/charge (net of tax)

(1)

-

(145)

(0.1p)

99

0.1p

Adjusted earnings

6,011

6.7p

6,250

7.4p

12,731

14.7p

10    Dividends

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the nine months ended 31 December 2007 of 1.15 pence per share		-		966		966
Final dividend for the nine months ended 31 December 2007 of 1.8 pence per share		-		1,511		1,511
Interim dividend for the year ended 31 December 2008 of 1.7 pence per share		-		-		1,480
Final dividend for the year ended 31 December 2008 of 2.65 pence per share		2,384		-		-
		2,384		2,477		3,957

The Board has declared an interim dividend of 1.85 pence per share (2008: 1.7 pence per share), which will absorb £1.7m (2008: £1.5m).

The interim dividend was approved by the Board on 18 August 2009 and has not been included as a liability as at 30 June 2009. The dividend is payable on 23 October 2009 to ordinary shareholders who are on the register on 25 September 2009. The shares will be quoted ex-dividend on 23 September 2009.  

11    Goodwill

		£'000
Cost
At 31 December 2008		260,896
Additions		6,007
Revision to prior periods		(298)
At 30 June 2009		266,605
Accumulated impairment losses
At 31 December 2008 and 30 June 2009		51,131
Net book value
At 30 June 2009		215,474
At 31 December 2008		209,765

Additions to goodwill during the period relates primarily to the acquisition of Newchurch.

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.  

We have seen softer market conditions in our communications business (as described in the chief executive's statement). As a result we have reassessed this business for impairment. This assessment indicates that based on our current forecasts no impairment to the £19.2m of carrying value is required.  However, the headroom is such that if the economic environment surrounding this sector continues to decline throughout 2009 and management's forecast profit outturn is down by over 20% or 7% in 2010, there may be a requirement to impair goodwill.  Management will conduct regular reviews to monitor this.

12    Other intangible assets

	Business		Development		Business		Total
	combinations		costs		systems
	£'000		£'000		£'000		£'000
Cost
At 31 December 2008	5,855		5,528		2,205		13,588
Additions	1,292		929		483		2,704
Disposals	-		(57)		-		(57)
At 30 June 2009	7,147		6,400		2,688		16,235
Amortisation
At 31 December 2008	1,754		3,495		599		5,848
Charge for the period	476		619		139		1,234
Disposals	-		(55)		-		(55)
At 30 June 2009	2,230		4,059		738		7,027
Carrying amount
At 30 June 2009	4,917		2,341		1,950		9,208
At 31 December 2008	4,101		2,033		1,606		7,740

Additions to business combinations during the period relates to the acquisition of Newchurch.

13    Trade and other receivables

		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Trade receivables		48,004		42,363		49,728
Other receivables		1,207		788		954
Prepayments and accrued income		18,972		22,434		15,508
		68,183		65,585		66,190

14    Trade and other payables

		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Trade payables		13,157		20,031		19,832
Other taxation and social security		6,580		7,734		6,183
Other payables		9,487		12,087		3,947
Accruals and deferred income		46,042		40,675		37,368
Deferred cash consideration		-		147		1,126
		75,266		80,674		68,456

15    Provisions

As at 30 June 2009, there were provisions of £635,000 (30 June 2008: £560,000; 31 December 2008: £655,000). Provisions represent an estimate of the cost of settling potential litigation claims. These claims are expected to be resolved within one year and are therefore shown within current liabilities.  However, it is possible that these claims may take longer to resolve, or the Group may not be promptly notified that the claim has been dropped. The claim may be settled at amounts higher or lower than that provided depending on the outcome of commercial or legal arguments. The provision made is management's best estimate of the Group's liability based on past experience, commercial judgement and legal advice. There is no expected reimbursement for any economic outflow that may be required.  Further details are contained in note 20.

16    Defined benefit schemes

One of the Group's subsidiary undertakings, Tribal Technology Limited, participates in the TfL Pension Fund. Another subsidiary, SDP Regeneration Services 2 Limited, participates in the LPFA Pension Fund. Both are defined benefit arrangements.

Due to the fluctuations in the financial markets since 31 December 2008 an assessment of the net effect on the liability has been made and is reflected in these interim financial statements.  

17    Note to the cash flow statement

Reconciliation of operating profit to operating cash flows

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Operating profit from continuing operations		8,544		9,327		19,267
Depreciation of property, plant and equipment		1,523		1,482		3,149
Amortisation of other intangible assets		1,234		953		1,944
Net pension charge		(45)		(42)		(212)
Loss/(gain) on disposal of property, plant and equipment		17		(26)		96
Gain on sale of investments		(12)		-		(304)
Share-based payments		687		322		851
Operating cash flows before movements in working capital		11,948		12,016		24,791
Decrease in amounts recoverable on contracts		6		63		57
(Increase)/decrease in inventories		(40)		(441)		426
(Increase)/decrease in receivables		(1,320)		22		684
Increase/(decrease) in payables		5,116		11,771		(387)
(Decrease)/increase in provisions		(20)		(17)		78
Net cash from operating activities before tax		15,690		23,414		25,649
Tax paid		(2,986)		(2,376)		(3,346)
Net cash from operating activities		12,704		21,038		22,303

Net cash from operating activities before tax can be analysed as follows:
		£'000		£'000		£'000
Continuing operations (excluding restricted cash)		13,830		19,637		26,936
Increase/(decrease) in restricted cash		1,860		3,777		(1,287)
		15,690		23,414		25,649

18    Analysis of net debt

		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2009		2008		2008
		£'000		£'000		£'000
Non restricted cash		12,479		15,203		11,937
Restricted cash		3,815		7,019		1,955
Gross cash		16,294		22,222		13,892
Short term loans		(388)		(662)		(662)
Syndicated bank facility (net of bank arrangement fees)		(31,735)		(28,896)		(32,894)
Finance leases		-		(3)		-
Gross debt		(32,123)		(29,561)		(33,556)
Net debt		(15,829)		(7,339)		(19,664)

Restricted funds represent funds restricted in use by the relevant commercial terms of certain trading contracts.

19    Acquisitions

On 27 January 2009, the Group acquired 100% of the issued share capital of Newchurch Limited, a leading health consulting business in the UK, for a total consideration of up to £10.1m (including cash acquired of £0.7m).  

The total consideration is made up as follows:

-    initial consideration of £2.675m in cash and £2.0m by way of 2,418,073 new Tribal shares. The number of Tribal shares issued was determined by the average mid-market price for the 14 days preceding 16 January 2009, being the last practicable date before the offer became unconditional.  

-    further consideration of £2.5m in cash and £0.5m by way of 471,237 new Tribal shares was paid on 16 March 2009 upon confirmation of Newchurch's profits for the year ended 31 December 2008.  

-    deferred consideration of up to £2.5m is payable by way of cash or Tribal loan notes in line with the realisation of deferred tax assets over time.

The transaction will be accounted for in accordance with IFRS 3 'Business Combinations'.  

Net assets acquired were:

		Book value		Fair value adjustments		Fair value
		£'000		£'000		£'000
Intangible assets		-		1,292		1,292
Property, plant and equipment		59		-		59
Debtors		682		(20)		662
Cash		746		-		746
Creditors		(484)		-		(484)
Deferred tax		-		(362)		(362)
Book/fair value of net assets		1,003		910		1,913
Net assets acquired						1,913
Goodwill						6,000
Total consideration						7,913
Satisfied by:
Shares						2,500
Cash						5,077
Purchase consideration						7,577
Directly attributable costs						336
Total consideration						7,913

The total consideration of £7.9m does not include up to £2.5m deferred consideration as payment is contingent on the recoverability of a deferred tax asset. The provisional fair value adjustments represent changes to bring the accounting policies in line with those of the Group. 

Intangible assets were recognised primarily in respect of customer contracts and relationships.  Goodwill arising on acquisition is attributable to the underlying profitability of the company, expected profitability arising from new business, anticipated future operating synergies arising from assimilation into the Group and the value attributed to the skilled workforce which does not meet the criteria for recognition as a separate intangible asset.

20    Contingent liabilities

The Group has received notification of a number of potential litigation claims. In all cases, the claims are being investigated by our lawyers and are being robustly contested as to the liability and quantum. The principal claim is for breach of contract relating to the design of a new college.  

A provision of £635,000 (30 June 2008: £560,000) has been made for defending these claims, where appropriate (see note 15).  

Responsibility statement

We confirm that to the best of our knowledge:

(a)    the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

(b)    the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the accounting period); and

(c)    the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). 

By order of the Board

Peter J Martin                        Simon M Lawton

Chief Executive                        Group Finance Director

18 August 2009

Independent review report to Tribal Group plc

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009, which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement and related notes 1 to 20.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'  issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditors

Bristol, United Kingdom

18 August 2009

 

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