Proposed Sale of Government and Health Businesses

RNS Number : 6351E

Tribal Group PLC

11 April 2011

TRIBAL GROUP PLC

The Board of Tribal is pleased to announce that it has entered into a conditional agreement with The Capita Group Plc to sell its Government and Health Businesses for a total consideration of up to £15.87 million, of which £13.37 million is payable in cash on Completion with further cash consideration of up to £2.5 million payable on the satisfaction of certain conditions.

The sale is conditional upon the approval of Tribal Shareholders.

Tribal has been in an offer period under the City Code on Takeovers and Mergers (the "City Code") since 17 December 2010. The Company remains in an offer period and, accordingly, the Board confirms that the Disposal is being undertaken in accordance with note 1 to rule 21.1 of the City Code.

HIGHLIGHTS

· Proposed sale of Tribal's Government and Health Businesses for an initial cash consideration of £13.37 million, payable on Completion, and up to a further £2.5 million payable in cash on the satisfaction of certain conditions.

· Government Business: Tribal supplies a range of strategic and operational advisory services to government clients in the UK, working principally across the home and foreign affairs, local government and social housing markets. Tribal also provides consultancy services in developing countries on behalf of government funded donor organisations.

· Health Business: Tribal provides a range of services to the UK healthcare industry, from strategic advice to the provision of managed services to NHS and private healthcare clients.

· In the audited consolidated accounts for Tribal in the year ended 31 December 2010, the Health Business and the Government Business had combined gross assets of £71.7 million and combined operating losses of £2.7 million, before goodwill impairment and exceptionals of £55.8 million, on turnover of £70.8 million.

· Following completion of the proposed sale, Tribal will be focused on the education and training markets in the UK and internationally, providing a range of technology, inspection and other professional support services. At 28 February 2011, the Education Business had total committed income of £187 million, 66% of 2011 planned revenue already secured and a sales pipeline of £161 million.

· The estimated net cash proceeds on Completion of £12.5 million (after fees and tax) will significantly reduce Tribal's current level of indebtedness and will provide a strong platform for developing and investing in the Education Business.

· Following completion, a programme of cost reduction will be implemented to reduce overheads, both centrally and within the Education Business. The Tribal Board expects the overall impact of the Disposal will be broadly neutral for earnings in the current year.

· The Board unanimously recommends the Disposal and the Directors (and certain of their connected persons) have irrevocably undertaken to vote in favour of the Disposal Resolution in respect of their own and their connected persons' beneficial holdings, which amount in aggregate to 587,206 Ordinary Shares and represent approximately 0.63 per cent. of Tribal's issued share capital as at 8 April 2011 (the latest practicable date prior to publication of this announcement).

A circular giving details of the transaction and seeking their approval will be dispatched to shareholders shortly.

John Ormerod, Chairman, commented:

"The Board believes that opportunities exist to grow the revenues of the Government and Health Businesses but that both require significant investment over a period of time in order to enable them to generate acceptable levels of profitability. In these circumstances, the Directors have decided that it would be appropriate for Tribal to consider a sale of the Government and Health Businesses in order to create a group focused on the education and training markets and with significantly reduced levels of financial leverage. The board is very grateful for the loyalty and commitment shown by the employees of the Health and Government businesses and we wish them well for the future.

"Our Education Business continued to grow revenues in 2010 and has maintained consistently good levels of profitability. It will benefit from the Group's significantly reduced levels of debt following the sale, providing additional capacity to invest in product development and new business initiatives. The business offers good growth prospects, entering 2011 with high levels of committed income and a strong sales pipeline, particularly in its international markets. We are excited about the opportunities for this business."

Enquiries:

Tribal Group plc	Tel:	+44 (0) 20 7323 7100
John Ormerod, Chairman
Peter Martin, Chief Executive
Stephen Breach, Group Finance Director

Investec	Tel:	+44 (0) 20 7597 4000
Rowena Murray
Tom Noonan

Weber Shandwick	Tel:	+44 (0) 20 7067 0700
Nick Oborne
Stephanie Badjonat

Investec, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Tribal Group plc and no one else in connection with the Disposal and this announcement and will not be responsible to anyone other than Tribal Group plc for providing the protections afforded to clients of Investec nor for providing advice in connection with the Disposal or this announcement or any matter referred to herein.

Proposed Sale of the Government and Health Businesses

1. Introduction

The Board of Tribal today announces that the Company has entered into conditional agreements to sell its Government and Health Businesses to certain subsidiaries of The Capita Group Plc, for a total consideration of up to £15.87 million (the "Disposal"). Of the total consideration payable, £13.37 million is payable in cash on Completion (which, if the Disposal Resolution is passed, is expected to occur on the day of the General Meeting). Further cash consideration of up to £2.5 million is payable in certain circumstances as explained in paragraph 5 below.

The Disposal is of sufficient size relative to that of the Group to constitute a Class 1 transaction under the Listing Rules and is therefore conditional upon the approval of Shareholders.

A General Meeting of the Company is to be held at 9.30 a.m. on 28 April 2011 at the offices of Osborne Clarke, One London Wall, London EC2Y 5EB. A notice of the General Meeting setting out the Disposal Resolution to be considered at the General Meeting and an explanatory Circular will be sent to Shareholders shortly.

2. Background to and reasons for the Disposal

The markets in which the Government and Health Businesses operate have been very challenging over the last year as a result of reduced spending on consultancy work, particularly in central government, and delayed procurement decisions across the public sector. On 16 August 2010, and subsequently on 5 October 2010, Tribal announced that the trading environment had become increasingly difficult, particularly in the UK advisory businesses of the Government and Health Businesses. On 5 October 2010, Tribal announced that the adjusted profit before tax for the Group for the year ended 31 December 2010 would be below previous expectations. On 30 March 2011, the Group published its audited results for the year ended 31 December 2010. An extract of that announcement is reproduced in paragraph 8 below.

During the course of 2010, Tribal has significantly rationalised the Government and Health Businesses' cost bases. Over the past three months, some stability has returned to the markets for the Government and Health Businesses and the Tribal Board is confident that the actions taken to reduce costs will lead to an improving trading performance for the two businesses in 2011. Whilst opportunities exist to grow the advisory revenues of the Government and Health Businesses and to expand through the development of service delivery and technology propositions, it is the opinion of the Tribal Board that, in order to generate acceptable levels of profitability, the two businesses will require significant investment over a sustained period of time.

The Education Business has continued to grow its revenues during 2010 and has maintained consistently good levels of profitability. The business entered 2011 with high levels of committed income and a strong sales pipeline, particularly internationally.

The Tribal Board believes that the Education Business offers attractive growth opportunities but that, given the current size and capital structure of the Group, the level of investment that can be made to realise these opportunities will be constrained.

In these circumstances, the Directors have decided that it would be appropriate for Tribal to consider a sale of the Government and Health Businesses in order to create a group focused on the education and training markets and with significantly reduced levels of financial leverage.

In the opinion of the Directors, the terms of the transaction proposed by Capita properly reflect the value of the Government and Health Businesses. In addition, two of the TCL Subsidiaries being sold participate in certain defined benefit pensions schemes. The primary funding obligations in respect of these schemes will therefore pass out of the Group on Completion.

The Tribal Board therefore believes that the Disposal is in the best interests of Shareholders.

3. Information on the Government and Health Businesses

Government Business

Tribal supplies a range of strategic and operational advisory services to government clients in the UK, working principally across the home and foreign affairs, local government and social housing markets. Tribal also provides consultancy and programme delivery services in developing countries on behalf of major government-funded donor organisations and national governments and agencies.

The principal markets addressed by Tribal comprise:

Home and Foreign Affairs: Tribal provides advisory services to the home affairs market, working with the Home Office and the UK Borders Agency, police forces, national policing agencies and a range of partners involved in the criminal justice system. In foreign affairs, Tribal has long-standing relationships with key government departments, principally the Foreign & Commonwealth Office, supporting strategic and operational initiatives both domestically and internationally.

Local Government: Tribal has a large team of specialist local government consultants with wide ranging expertise that supports commissioners and deliverers of local public services. The services provided include cost reduction and efficiency programmes, procurement and commissioning advice and the provision of business intelligence tools.

Social Housing: Tribal provides consultancy services to the social housing sector, delivering advice, support and solutions to local authorities, arms-length management organisations (ALMOs), housing associations and government departments. Tribal provides its clients with operational and strategic advice on improving business performance and implementing major transformation.

Donor Aid: Tribal works with major donor organisations supporting international development programmes. Tribal provides advice on public financial management reform in developing and post conflict nations and also supports national governments and agencies with advice on ICT and professional development issues.

Health Business

Tribal provides a range of professional services to the UK healthcare industry, from strategic advice to the provision of managed services to NHS and private healthcare clients. The division operates across two principal areas: Advisory (performance improvement and informatics) and Services (commissioning, informatics outsourcing and clinical support services).

Advisory: The Advisory business provides strategic support to NHS and private sector organisations, including working with healthcare providers to improve service quality and clinical productivity and with healthcare commissioners to plan and develop patient services.

Services: The Services business provides both healthcare commissioners and healthcare providers with a range of technical services and solutions, with a particular focus on clinical informatics, resource utilisation and clinical coding. Tribal provides commissioning support services to Primary Care Trusts, with several of its larger programmes being delivered under multi-year contracts.

During the three financial years ended 31 December 2010, the Government and Health Businesses recorded the following results:

	Year ended	Year ended	Year ended
	31 December	31 December	31 December

£m	2008	2009	2010
Revenue	82.0	94.1	70.8
	------	------	------
Gross profit	20.1	21.5	12.1
Other administrative expenses	(12.7)	(15.6)	(14.8)
Operating profit after other administrative expenses but before exceptional administrative expenses,amortisation and goodwill impairment	7.4	5.9	(2.7)
Exceptional administrative expenses	-	-	(4.2)
Amortisation of IFRS 3 intangibles	(0.2)	(0.7)	(0.7)
Goodwill impairment	-	(30.7)	(51.6)
Total administrative expenses	(12.9)	(47.0)	(71.3)
	------	------	------
Operating profit/(loss)	7.2	(25.5)	(59.2)

	------	------	------

As at 31 December 2010, the Government and Health Businesses had gross assets of £71.7 million and net assets of £6.8 million. The loss before tax for the year ended 31 December 2010 was £60.1 million.

4. Financial effects of the Disposal and use of proceeds

The gross cash proceeds due at Completion will be £13.37 million; or £12.47 million net of tax and transaction costs of approximately £800,000 and cash of approximately £100,000 included in the Disposal. The net proceeds will be applied in reducing the Group's overall indebtedness. As a result of the Initial Sale, the Continuing Group will have a substantially reduced interest charge for the year ending 31 December 2011. A further programme of cost savings will be implemented over the coming months in order to align overheads with the size of the Continuing Group. Accordingly, the overall impact of the Disposal is expected to be broadly neutral for earnings in the current year.

Following Completion, the Group's borrowing facilities will be reduced to £35 million, of which £30 million will be committed until February 2015.

The disposal will reduce the Group's net assets by £17.1 million to £52.6 million (based on the audited balance sheet of the Group, and the unaudited statement of net assets of the Government and Health Businesses, both as at 31 December 2010). This includes a writedown of goodwill, the carrying value of which was assessed on a value in use basis as at 31 December 2010 at £22.5 million. The value of the gross assets the subject of the Disposal is £71.7 million, which is the sum of the gross assets of the Government and Health Businesses as extracted from the Government and Health Businesses' statement of net assets as at 31 December 2010.

It is intended that the further cash consideration of up to £2.5 million, payable in the circumstances described below, will also be applied in reducing the Group's overall indebtedness.

5. Principal terms of the Disposal

The Sellers and the Buyers entered into the Disposal Agreement on 8 April 2011. Pursuant to the Disposal Agreement, Tribal and Tribal Consulting have respectively conditionally agreed to sell to the Buyers the entire issued share capital of Tribal HELM and the business and assets (including the entire issued share capital of the TCL Subsidiaries) of Tribal Consulting. In addition Tribal and CBSL have granted to each other respectively the TCL Call Option and the TCL Put Option in relation to the intended transfer of the entire issued share capital of Tribal Consulting following Completion as described below. The obligations of Tribal Consulting under the Disposal Agreement have been guaranteed by Tribal.

The Disposal is conditional upon the passing of the Disposal Resolution at the General Meeting. If the Disposal Resolution is not passed by 13 May 2011 then the Disposal Agreement shall terminate (unless such period is extended by mutual agreement of the parties).

The consideration payable for the Initial Sale is £13.37 million, which shall be satisfied in cash on Completion. In addition, CBSL has agreed to assume the TCL Liabilities and the obligations of Tribal Consulting under the TCL Contracts and to indemnify Tribal Consulting accordingly.

Additionally, further deferred cash consideration of up to £2.5 million is payable under the Disposal Agreement in certain circumstances, as explained below.

Of the deferred consideration, £1.5 million is payable under the Disposal Agreement on completion of the TCL Share Sale following any exercise of the TCL Put Option or the TCL Call Option, or in certain other circumstances where the Buyers have satisfactorily assumed all identified material contracts of Tribal Consulting. Pending its payment, such amount will be held in a retention account (the "Retention Account") and may be used by CBSL in settling any agreed or finally determined claims under the Disposal Agreement, the TCL Put and Call Agreement and certain other ancillary agreements, provided that such claims are agreed or finally determined prior to the date at which the funds in the Retention Account are otherwise due to be released to Tribal Group.

In addition, £0.5 million is payable in circumstances where a specific key contract is novated to CBSL and certain assurances are obtained in respect of a limited number of further material contracts. This element of deferred consideration is not subject to any retention arrangements.

A further £0.5 million is to be held in a retention account pending clarification by HMRC of certain tax matters relating to the status of a number of consultants and associates engaged by Tribal Consulting and Tribal HELM. The retention amount, if not fully called upon to meet relevant liabilities, will be released to Tribal following the earlier to occur of the date of an adjudication by HMRC which enables the relevant liabilities to be reasonably determined, and the expiry of 24 months from the date of Completion.

The TCL Put Option granted to Tribal by CBSL, which requires CBSL to complete the TCL Share Sale, is conditional, amongst other matters, on there being no material breach of certain restrictions in the TCL Put Option, and no material breach of certain warranties given in respect of Tribal Consulting and its subsidiaries during the period from the date of the TCL Put and Call Option Agreement to the TCL Share Sale Completion. The TCL Put Option is also conditional upon: (i) certain changes taking place in the tax law, and on certain tax exemptions being available to Tribal (as explained below); or (ii) HMRC confirming that the Initial Sale is effective in eliminating the Degrouping Charge (as defined below) by virtue of value transferring from Tribal Consulting on the Initial Sale.

Following 6 April 2012, CBSL may elect to pay the deferred consideration of £1.5 million in lieu of completing the TCL Share Sale pursuant to the TCL Put Option and may elect to terminate certain subcontracting arrangements entered into between Tribal Consulting and CBSL in such circumstances.

The TCL Call Option granted to CBSL by Tribal, which requires Tribal to complete the TCL Share Sale, is exercisable: (i) conditionally upon certain changes taking place to tax law, and on certain tax exemptions being available to Tribal (as explained below); or (ii) irrespective of whether such conditions have been satisfied, at any time after 6 April 2012 at which point the tax exposure to the Tribal Group will have materially reduced (as explained below).

Certain historic intra-group transactions could result in a material degrouping charge (the "Degrouping Charge") if the shares in Tribal Consulting were to be sold by Tribal at the time of the Initial Sale. The Directors have been advised that HMRC has included draft legislation in the Finance (No.3) Bill 2010-11 (the "Finance Bill 2011") which will amend the legislation giving rise to the Degrouping Charge. The proposed amendments are such that, if the changes are enacted as currently set out in the Finance Bill 2011, a disposal of the shares in Tribal Consulting would be able to be made without the majority of the adverse tax consequences described above being incurred (provided that the substantial shareholdings exemption from corporation tax ("SSE") applies on the sale, in relation to which a clearance application has been made to HMRC). The changes are due to come into force on Royal Assent of the Finance Bill 2011 which is currently expected in or around July 2011. If the relevant provisions of the Finance Act 2011 are enacted without adverse amendment, the Directors intend to exercise the TCL Put Option (subject to such option being exercisable in accordance with its terms and to the availability of SSE in respect of the TCL Share Sale at such time) as soon as practicable following the required legislation coming into effect. If the proposed legislation is not enacted as currently set out in the Finance Bill 2011 in the form currently anticipated, the extent of the Degrouping Charge will in any event be reduced over time following the expiry of the six year statutory limitation period applicable to each relevant intra-group transaction referred to above, the majority of which took place on or before March 2006. In addition, the business and assets sale of Tribal Consulting pursuant to the Initial Sale may prevent the Degrouping Charge arising as value will have passed out of Tribal Consulting at that time. As indicated above, the TCL Call Option is exercisable at any time after 6 April 2012, which follows the expiry of certain of the limitation periods referred to above. Whilst the possibility of a Degrouping Charge affecting the Tribal Group exists if the TCL Call Option is exercised at such time, the Directors believe that the possibility of a material Degrouping Charge is diminished by the passing of value from Tribal Consulting on the Initial Sale. In addition, other mitigation strategies could be adopted by the Tribal Group to further manage the exposure.

The purpose of the TCL Put and Call Option Agreement is to enable CBSL to obtain ownership of the legal title to the TCL Contracts in addition to beneficial ownership which will pass under the other transaction documents on Completion.

The TCL Call Option is not capable of completion after the final release date for the Retention Account. If neither option is exercised by that date, and the other conditions to the release of the Retention Account are not fulfilled by that time, the balance of the Retention Account at that time will be released to the Buyers.

The Sellers have agreed to procure that, between the date of the Disposal Agreement and Completion, the Government and Healthcare Businesses will be conducted in the ordinary course and that the Transferring Government and Health Companies will not, other than in the ordinary course of business or with the consent of the Buyers, undertake certain restricted actions. In addition, Tribal and Tribal Consulting have agreed to certain restrictions on the activities of Tribal Consulting prior to any exercise of the Consulting Put Option.

If at any time on or before Completion: (a) the Sellers have breached certain warranties as to capacity and title; (b) the Sellers are in breach of the pre-Completion obligations referred to above to such a degree which, in the Buyers' reasonable opinion (acting in good faith), has a material adverse effect on the business, operations, assets, liabilities or financial position of the Government and Health Businesses taken as a whole; or (c) the Buyers become aware of any fact or circumstance arising from 8 April 2011 which in the Buyer's reasonable opinion (acting in good faith) has a material adverse effect on the business, operations, assets, liabilities or financial or trading position of the Government and Health Businesses taken as a whole, then the Buyers may terminate the Disposal Agreement provided that the Disposal Agreement will terminate automatically if the Condition is not satisfied by 13 May 2011 (unless such period is extended by mutual agreement of the parties).Materiality for these purposes means an adverse effect which does or will result in a diminution of £1,000,000 or more in either the net assets or the profit of the Health Business or the Government Business or a combination of them (as the case may be).

The Sellers have given certain warranties and indemnities to the Buyers which are customary for a transaction of this nature, and certain additional indemnities in respect of identified potential liabilities.

The Sellers (in the case of Tribal for itself and on behalf of the Tribal Group including certain limited categories of subsequent holding companies) and the Buyers have agreed to enter into restrictive covenants that are customary for a transaction of this nature, subject to certain limitations, for a period of two years from Completion.

Tribal, Tribal Consulting and CBSL have also entered into sub-contracting arrangements in relation to certain contracts of Tribal Consulting pending any assignment or novation of such contracts to CBSL, or the acquisition by CBSL of Tribal Consulting pursuant to the terms of the TCL Put and Call Option Agreement.

6. Information on the Continuing Group

On Completion, the Continuing Group will be comprised solely of the trading activities of Tribal's Education Business. The Education Business provides a range of services to the education, skills and training sectors in the UK and in certain international markets. These services support government policy initiatives aimed at improving standards, increasing quality and delivering better outcomes for learners. Private sector employers also use Tribal's education services to improve the skills of their workforces through web-based learning services. Tribal supplies its student management software for a large number of colleges and universities in the UK and overseas and has developed an innovative suite of software for school improvement operations.

Tribal has expanded its overseas activities significantly and now has operations in a number of markets, including the USA, Middle East, Australia and New Zealand for a range of education software, school improvement and school inspections services and professional development activities.

The Continuing Group will be a significantly less leveraged, more focused business with, in the opinion of the Board, good growth opportunities, particularly internationally. The Education Business is the most profitable of the three existing businesses of the Group, with revenue of £106.6 million and operating profit of £14.6 million for the year ended 31 December 2010.

The Tribal Board believes that on Completion the Continuing Group will benefit from the following characteristics:

· Focus: The Continuing Group will be focused on providing a range of services to the education and training markets in the UK and internationally.

· Revenue resilience: Less than 10 per cent. of the Continuing Group's revenue is derived from short-term advisory work. Approximately 60 per cent. of revenue is sourced from service delivery and programme management activities and close to one third from software and technology solutions.

· Growth prospects: At 28 February 2011, the qualified sales pipeline of the Continuing Group totalled £161 million.

· Good margins: The Education Business has reported consistently good margins. Following Completion, a programme of cost reduction will be implemented to reduce overheads, both centrally and within the Education Business.

· Committed income: At 28 February 2011, the Education Business had total committed income of £187 million and had actual and secured income for the year ending 31 December 2011 equal to approximately 66 per cent. of planned revenue.

· Reduced debt: Following Completion, the Continuing Group will have significantly reduced levels of debt which will provide additional capacity to invest in the Education Business, particularly in the areas of product development and new business initiatives.

As announced on 30 March 2011, Peter Martin will be standing down as Chief Executive on 30 April 2011. On 23 February 2011, Tribal announced that Keith Evans, previously Tribal's Commercial Director, had been appointed Chief Operating Officer and had joined the board of Tribal. In his new role as Chief Operating Officer, Keith Evans has assumed responsibility for the day to day operations of the Group and for the Continuing Group following Completion.

7. Information on the Capita Group

The Capita Group Plc is a leading provider of business process outsourcing and professional support services. It delivers consultancy, back office administration and front office customer contact services to private and public sector organisations, including central and local government and the health, life and pensions and insurance industries, across the UK and Ireland. The Capita Group Plc is a FTSE 100 company, quoted on the London Stock Exchange, with a market capitalisation of approximately £4.5 billion as at 6pm on 8 April 2011.

8. Current trading and prospects

On 30 March 2011, the Group published its audited financial results for the year ended 31 December 2010. An extract from that statement is reproduced below. This statement remains the Board's opinion of current trading as at the date of this announcement.

"The Group encountered challenging market conditions during 2010 with reduced levels of government spending in the UK, particularly on advisory work in our Health and Government businesses, coupled with delays in procurement decisions. As a result, our Health and Government businesses performed significantly below our expectations, particularly in the second half of the year.

Despite the challenges, the Group continued to make progress in a number of key areas. The level of committed income increased and our international business, particularly in Education, made encouraging progress. We also undertook a restructuring of our technology activities in order to create a more integrated and coherent approach to product development and customer support.

During the course of 2010, we implemented an extensive programme of actions to reduce our cost base significantly, dispose of non-core activities and create a more integrated and coherent operating structure. Our staff numbers at the start of 2011 were 1,937 against 2,246 twelve months earlier and, in our continuing businesses, we expect to achieve overall annualised savings of £28.0 million.

In the year ended 31 December 2010, the Group's revenue from continuing operations was £175.4 million (2009: £193.7 million). Adjusted operating profit was £7.4 million (2009: £14.9 million) and adjusted operating margin was 4.2 per cent. (2009: 7.7 per cent.). Adjusted profit before tax was £5.9 million (2009: £13.8 million) and adjusted diluted earnings per share were 5.0p (2009: 10.7p). The adjusted numbers set out above exclude exceptional costs of £10.4 million associated with our restructuring programme and a goodwill impairment charge against our Health and Government businesses of £51.6 million. The statutory loss before tax was £57.8 million.

During 2010, the Group generated operating cash flows from continuing operations of £20.1 million (2009: £20.3 million) and, at 31 December 2010, net debt was £18.5 million (2009: £27.8 million). A significant part of the reduction in net debt was generated through favourable working capital terms from third parties which will have reversed by the end of the first quarter of 2011. The Group has operated in full compliance with its banking covenants during 2010 and, in order to provide additional flexibility and headroom during 2011, the Group has recently agreed with its lenders a revised set of banking covenants. The Group's borrowing facilities total £45 million, of which £40 million are committed until February 2015.

Over the next few years, public sector organisations in the UK will be adapting to an environment of spending constraints. The need for reform will continue, creating opportunities for organisations that are able to support changes in the way public services are commissioned and delivered. Tribal is well placed to participate in this reform process through a combination of its domain expertise, technology capability and track record of service delivery.

During the past year, the Group has implemented a substantial change programme to address both the short-term trading challenges facing the business and the longer-term market opportunities. The key elements in this programme included:

· the disposal of non-core assets;

· a significant reduction in the Group's cost base;

· the establishment of a single integrated software development and customer support capability; and

· the securing of revised bank facilities that are committed until 2015.

Strategically, we remain focused on growing our service delivery and technology activities, both in the UK and overseas. We have maintained strong levels of committed income and our sales pipeline, particularly internationally, remains healthy. At 1 March 2011, we had secured 62 per cent. of our planned revenue for the year (2010: 65 per cent.), with a further 10 per cent. of 2011 revenue at preferred bidder stage, and our sales pipeline totalled £260 million. The Group has traded in line with expectations during the first two months of the year. As a result of the actions we have taken across the Group, the Board is confident that the Group now has a sound footing from which to make progress during 2011."

9. General meeting and Irrevocable Undertakings

Copies of the Circular and Notice of General Meeting will be posted to Shareholders and will be available on the Company's website at www.tribalgroup.com/investors as soon as practicable following posting.

The Board unanimously recommends that Shareholders vote in favour of the Disposal Resolution
to be proposed at the General Meeting, as the Directors (and certain of their connected persons) who are interested in Ordinary Shares have irrevocably undertaken to do in respect of their own and their connected persons' beneficial holdings, which amount in aggregate to 587,206 Ordinary Shares and represent approximately 0.63 per cent. of Tribal Group's issued share capital as at 8 April 2011 (the latest practicable date prior to publication of this document).

Shareholders should read the whole of the circular to be sent to them and not just rely on the summarised information set out in this announcement.

DEFINITIONS

The following definitions apply throughout this document, unless the context otherwise requires:

Board or Directors	The current board of directors of Tribal
business day	Any day, other than a Saturday, Sunday or public or bank holiday, on which banks are generally open for business in the City of London
Buyers	CBSL and CHL, and Buyer shall mean either of them
Capita	The Capita Group Plc, a company incorporated in England and Wales with registered number 02081330 whose registered office is at 71 Victoria Street, London SW1H 0XA
CBSL	Capita Business Services Ltd, a company incorporated in England and Wales with registered number 02299747 whose registered office is at 71 Victoria Street, London SW1H 0XA
CHL	Capita Holdings Limited, a company incorporated in England and Wales with the registered number 06027254 whose registered office is at 17 Rochester Row, London SW1P 1QT
Company or Tribal	Tribal Group plc, a company incorporated in England and Wales with registered number 4128850 whose registered office is at 87-91 Newman Street, London W1T 3EY
Completion	The completion of the Initial Sale in accordance with the terms of the Disposal Agreement
Condition	The passing of the Disposal Resolution
Consulting Subsidiaries	Royal Borough of Kensington Assured Homes Limited, Tribal Treasury Services Limited, Tribal HCH Limited, SDP Regeneration Services 2 Limited, Tribal Property and Planning Limited, RSe Consulting Limited, Westhill Consulting Limited and CCSD Services Limited
Disposal	The Initial Sale and the TCL Share Sale
Disposal Agreement	The agreement in respect of the disposal dated 8 April 2011 between (1) Tribal (2) Tribal Consulting and (3) CBSL and (4) CHL
Disposal Resolution	The ordinary resolution to approve the Disposal to be proposed at the General Meeting and set out in the Notice of General Meeting
Education Business	The education business of the Tribal Group, carried on by Tribal Education as at the date of this document
FSA	The United Kingdom Financial Services Authority
FSMA	The Financial Services and Markets Act 2000, as amended from time to time
General Meeting	The general meeting of the Company convened by the Notice of General Meeting or any reconvened meeting following any adjournment thereof, to consider and, if thought fit, to approve the Disposal Resolution
Government Business	The government business of the Tribal Group carried on by Tribal HELM and Tribal Consulting as at the date of this document
Government and Health Businesses	The Government Business and the Health Business
Government and Health Companies	Tribal Consulting and the Transferring Government and Health Companies
Group or Tribal Group	Tribal and its subsidiaries, including Tribal HELM and Tribal Consulting
Health Business	The health business of the Tribal Group carried on by Tribal Consulting as at the date of this announcement
HMRC	HM Revenue & Customs
Initial Sale	The proposed sale of the entire issued share capital of Tribal HELM and the business and assets (including the Consulting Subsidiaries) of Tribal Consulting
Investec	Investec Bank plc, a company incorporated in England and Wales with registered number 489604 whose registered office is at 2 Gresham Street, London EC2V 7QP
Listing Rules	the rules and regulations made by the FSA under Part VI of FSMA, as amended from time to time
Long Stop Date	13 May 2011
NHS	National Health Service
Ordinary Shares or Tribal Shares	Ordinary shares of five pence each in the capital of the Company
Retention Account	The retention account referred to in paragraph 5 of this announcement
Sellers	Tribal and Tribal Consulting
Shareholders	Holders of Ordinary Shares
TCL Call Option	The conditional call option granted by Tribal to CBSL in respect of the entire issued share capital of Tribal Consulting
TCL Contracts	Certain of the contracts entered into by Tribal Consulting in relation to the Health Business.
TCL Liabilities	Certain of the liabilities of Tribal Consulting incurred in relation to the Health Business
TCL Put and Call Option Agreement	The agreement in respect of the TCL Call Option and the TCL Put Option dated 8 April 2011 between (1) Tribal and (2) CBSL
TCL Put Option	The conditional put option granted by CBSL to Tribal in respect of the entire issued share capital of Tribal Consulting
TCL Share Sale	The sale of the entire issued share capital of Tribal Consulting in accordance with the terms of the TCL Put and Call Option Agreement
TCL Share Sale Completion	The completion of the TCL Share Sale in accordance with the terms of the TCL Put and Call Option Agreement
TCL Subsidiaries	Tribal HCH Limited, SDP Regeneration Services 2 Limited and CCSD Services Limited
Transferring Government and Health Companies	Tribal HELM and the Consulting Subsidiaries and, following completion of the TCL Share Sale, Tribal Consulting
Tribal Consulting	Tribal Consulting Limited, a company incorporated in England and Wales with registered number 4268468 whose registered office is at 87-91 Newman Street, London, W1T 3EY
Tribal Education	Tribal Education Limited, a company incorporated in England and Wales with registered number 4163300 whose registered office is at 87-91 Newman Street, London, W1T 3EY
Tribal Group	The Tribal Group as constituted from time to time following the Initial Sale and the TCL Share Sale, as the case may be
Tribal HELM	Tribal HELM Corporation Limited, a company incorporated in Northern Ireland with registered number NI025165 whose registered office is at Helm House, Demesne Court, 88 Main Street, Moira, County Armagh, Northern Ireland BT67 0LH
UK or United Kingdom	The United Kingdom of Great Britain and Northern Ireland