Final Results
Tribal Group plc
13 March 2013
Preliminary results for the year ended 31 December 2012
Tribal, a leading provider of technology products and services to the education, learning and training markets in the UK and internationally, is pleased to announce its preliminary results for the year ended 31 December 2012.
Summary
· Significant progress in first year of three-year strategic plan
· Strong profit growth: 27% increase in adjusted pre-tax profit to £12.8m (2011: £10.1m)
· Good cash generation: cash conversion3 improved from 69% to 87%
· Net debt reduced to £9.9m (2011: £16.0m)
· Business simplified and focused
· Strong UK market positions retained
· Strong progress in chosen international markets
· Good potential for further progress
Financial summary
|
Year Ended 31 December |
2012 |
2011 |
Change |
|
|
|
|
|
|
Adjusted results: Adjusted revenue1 |
£113.4m |
£105.8m |
7% |
|
Adjusted operating profit2 |
£13.9m |
£12.0m |
16% |
|
Adjusted operating profit margin |
12.3% |
11.3% |
9% |
|
Adjusted profit before tax2 |
£12.8m |
£10.1m |
27% |
|
Adjusted diluted earnings per share2 |
10.9p |
8.4p |
30% |
|
Statutory results: Revenue |
£115.4m |
£108.2m |
7% |
|
Operating profit |
£11.5m |
£5.7m |
102% |
|
Profit/(loss) for the year |
£9.7m |
£(22.4)m |
- |
|
|
|
|
|
|
Dividend per share |
1.25p |
1.00p |
25% |
|
Net debt |
£9.9m |
£16.0m |
(38)% |
Notes:
1. Adjusted revenue excludes revenue from closed businesses of £2.0m (2011: £2.5m).
2. The adjusted operating profit, adjusted profit before tax and adjusted diluted earnings per share are in respect of continuing operations, excluding trading losses of closed businesses of £0.8m (2011: £0.7m), intangible asset amortisation of £0.02m (2011: £0.2m), exceptional costs of £1.6m (2011: £5.3m), in the case of adjusted profit before tax and adjusted earnings per share financial instruments charges of £0.5m (2011: £0.1m) and, in the case of adjusted earnings per share the related tax credit of £0.6m (2011: £1.8m).
3. Cash conversion is calculated as operating cash flow from underlying operations before exceptional cash flows and after capital expenditure, divided by adjusted operating profit.
John Ormerod, Chairman, commented:
"Tribal is trading well, and we have a number of growth initiatives underway which offer good potential. Our systems and solutions remain strong in their UK markets, and we are seeing increasing momentum for our offerings in international markets, both those in which we currently operate and selected potential new markets. As a result, we continue to make good progress towards our strategic target of doubling earnings per share over the three-year period ending 31 December 2014.
"Our current trading is in line with our expectations for 2013. As a consequence of seasonality in our business, and our continued programme of investment, we anticipate our profits in 2013 will be weighted towards the second half of the year, and Tribal has good potential to make further progress over the medium-term."
Further information
A presentation of these results will be made to analysts and investors at 9.30am today at the offices of Weber Shandwick, 2 Waterhouse Square, 140 Holborn, London EC1N 2AE. A copy of the presentation will be made available later this morning on the Tribal Group website: www.tribalgroup.com.
|
Tribal Group plc Keith Evans, Chief Executive Steve Breach, Group Finance Director
|
Tel: 020 3402 3540 |
|
Weber Shandwick Financial Nick Oborne Stephanie Badjonat Robert Cook
|
Tel: 020 7067 0700 |
|
Canaccord Genuity Limited Simon Bridges Cameron Duncan
|
Tel: 020 7523 8000 |
Links: Tribal Group plc website: www.tribalgroup.com.
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.
CHAIRMAN'S STATEMENT
"We have made good progress during the first year of our three year strategic plan. Tribal is a focused and simplified business, concentrated on its core UK and international markets. We are well placed to maintain our strong market positions, and to take advantage of new opportunities that are becoming increasingly visible to us.
We are seeing the benefits of our focus through enhanced operational and financial performance. Our adjusted operating profits grew by 16% to £13.9m, and good cash flow supported an increased level of investment in our products and people, while also reducing our net debt to below £10m.
By increasing our investment in software development, we have sustained the market leading positions of our major systems and solutions in the UK and strengthened our international reputation. We are now well established as a leading provider to the education markets in Australia and New Zealand, we are operating successfully in the Middle East, and we are evaluating attractive opportunities in other international markets including North America. Our acquisition of i-graduate, completed in January 2013, brings new skills and a presence in European and Asian markets.
We are continuing to invest in our people and expertise in the UK and internationally. Enhancing our service delivery capabilities, to ensure we can confidently follow through new business wins with high quality execution, is a priority. We now operate a global sales structure, and our main software development and support teams, based in the UK and Australia, are complemented by software development partners based in Brazil and China.
Tribal has become an increasingly international business whilst retaining its clarity of purpose. Our task now is to sustain our momentum as we move forward with our plans during 2013."
CHIEF EXECUTIVE'S REPORT
The year ended 31 December 2012 was the first of our three-year strategic plan. We set an ambitious target of more than doubling earnings per share over the three years ending 31 December 2014.
The year was a period of investment during which we strengthened the foundations on which our plans are based, delivered strong financial performance, and advanced confidently towards our goals. We have made a good start, although we will need to sustain our strong progress notwithstanding the challenges of managing a business in an uncertain economic environment.
Delivering our three-year strategic plan
Our strategy places emphasis on organic growth initiatives. At the heart of our strategy, we have two key goals:
1. Retain our market leading positions in the UK:
• Creating new modules and services for our existing customer base;
• Developing new systems for the children's services and schools markets; and
• Creating scalable software based tools to support education providers.
2. Internationalise our systems and solutions to English speaking markets:
• Continue to grow in Australasia;
• Undertake selected projects in the Middle East; and
• Explore North American markets.
Our investment in 2012 has focused on enhancing our software based systems and tools, and growing our resources in our existing and new countries of operation.
Competitive advantage through technology
Tribal's investment in new software development is based on careful analysis of our customers' requirements, keeping our software fresh and relevant. We have increased the level of investment substantially, rising from £3.6m in 2011 to £6.2m in 2012.
Our development programmes continue to benefit from the close relationship between our solutions activities, which give us insight into our customers' needs and the challenges they face in delivering education today, and the technology skills of our software developers.
During the last year, our software development investment has targeted both our major education management systems and software tools within our evidence-based education improvement solutions. We expect to continue to invest strongly in new software development during 2013, as technology becomes a core component of all our major systems and solutions.
Strengthening the foundations for growth
Our growth into international markets has been underpinned by enhancement of our capabilities outside the UK. A simple organisational structure, with clear lines of accountability is key, with increasing operational resilience to support our wider geographic coverage.
We have aligned our sales and marketing activities regionally as we enter new high-growth-potential markets outside the UK. To ensure effective follow-through on new business wins, we have also put in place a robust global software development and operating model.
Tribal's software development teams have been internationalised - in addition to our core teams in the UK and Australia, development partners are now also based in Brazil and China, and our teams provide customer support around the clock.
Acquisition of i-graduate
We are focused on an organic growth strategy, but carefully chosen acquisitions, such as that of i-graduate in January 2013, can accelerate our strategy plans.
i-graduate works with over 1,200 education institutions in 24 countries, analysing feedback from more than 1.3 million students of over 190 nationalities. Thus i-graduate provides access for our existing products to a significant new customer base, both in the UK and internationally.
Strategically, we wish to provide our customers with evidence-based systems and solutions that support the improvement of educational outcomes. Technology supported benchmarking and analytics, which are at the heart of i-graduate's business, are a cornerstone of this evidence base.
Remaining flexible
We completed a major restructuring of the business in 2011, but as 2012 progressed we identified residual areas of activity which offered limited future value to the Group's wider activities, specifically the reselling and implementation of Microsoft Dynamics software, and the direct delivery of apprenticeship training programmes. We therefore withdrew from these activities during the year.
Our markets
In the UK and internationally, education and training markets are facing conflicting challenges. The economic environment is creating financial pressures for both recipients and providers of education and training. Nevertheless, education and training remains a priority for individuals, organisations and governments around the world.
Within this conflicted environment, key themes have emerged:
• The student as a customer - an ever greater proportion of students are expected to fund their own studies. As a result students are becoming more demanding of education providers, who must proactively respond to ensure they attract and retain students.
• Education as a borderless market - students are showing increasing willingness to travel far from their home countries to find the best education they can afford. Institutions must compete at an international level to attract and retain students.
• Raising educational standards - measurement and evaluation of educational delivery, based on objective evidence, and the translation of that analytical evidence into improvement programmes, is required to support the drive for better education outcomes.
• Delivering efficiency and auditability - with finite resources, providers of education wish to improve cost effectiveness, and demonstrate good value for money in the education they deliver.
Our systems and solutions are focused on our customers' needs, and they respond to these important market drivers both in the UK and in our international markets.
Higher Education
Tribal's services to the Higher Education market are presently focused on student management systems and analytics services. We are the UK market leader in university student management systems, and we are successfully growing our international Higher Education presence.
During 2012 we secured four new universities as SITSTM student management system customers. In the UK, we concluded a contract with the University of Staffordshire (with a total initial value of £2.2m), and the University of Kent purchased key modules of the SITSTM system. In Asia Pacific, the Royal Melbourne Institute of Technology purchased our system under a A$1.4m contract, and the University of Canterbury, Christchurch entered into a NZ$5.5m contract.
Our other recent SITSTM customer projects are progressing well. The major change programme at Sydney University continues, and our systems are now in use at Trinity College, Dublin and University of Oxford.
Tribal has also extended the capabilities of the SITSTM system through integrating specialist third party modules within the core application. In 2012, we launched the Azorus "student capture" system, which provides CRM-type functionality to assist universities in their student recruitment programmes. The universities of Bedfordshire and Gloucestershire are amongst our first customers to adopt the Azorus system. We have also launched the Ideate grant management system, which assists universities' to use research resources efficiently. We are currently implementing Ideate for the University of Warwick, to form part of our wider SITSTM deployment across its campus.
In our analytics business, we are working with an increasing number of universities across the UK to help them better understand their financial and operational metrics, to ensure they are well prepared to manage their costs within their available resources, and also to protect the quality of what they do. Looking forward, we will integrate i-graduate with our existing analytics and benchmarking activities to maximise the combined benefits across our business.
Going into 2013, we have a good pipeline of prospective new customers for the SITSTM system both in the UK and internationally, including new opportunities in South Africa and North America. We are also beginning to explore opportunities outside English-speaking markets through our Brazilian development partners and through the extensive customer relationships within the i-graduate business.
Vocational learning
Tribal delivers a broad spectrum of systems and solutions across the Further Education and work-based learning markets. We offer our UK market leading ebs4TM and MaytasTM student management systems, together with analytics, review and evaluation, and adult learning solutions targeted at improving education and training delivery. Our activities are strong both in the UK and internationally.
In the UK we extended our market leadership in Further Education college student management systems, securing eight new colleges during 2012, and in New Zealand our ebs4TM student management system is now operational in four Institutes of Technology and Polytechnics (ITPs).
Internationally, we are pleased with our progress on the Student Administration and Learning Management (SALM) programme in New South Wales. Amongst other elements, this project will deploy our student management systems across all 136 Technical and Further Education college (TAFE) campuses in New South Wales.
This major programme, with a potential contract value significantly in excess of A$40m, forms part of the Learning Management and Business Reform programme under which the New South Wales Department for Education and Communities is upgrading business systems across all state-run education institutions. Our enhancements to our existing ebs4TM and SynergyTM systems, which tailor these systems for the SALM programme, are well advanced for deployment to users during 2013.
Looking beyond the SALM programme, we are now seeing early stage opportunities for other large scale student management system programmes based on our credentials, and we will be seeking to take advantage of cross-selling opportunities offered by i-graduate's customer base in Further Education.
Our Further Education based analytics work continues to develop well. We have recently extended our contract under which we provide operational and financial benchmarking solutions to all ITPs in New Zealand, and we have secured our first operational benchmarking contract in Australia for the Central Institute of Technology, Western Australia. Our evaluation and analytics activities also cover more than half of all colleges in the UK, and we work on behalf of Ofsted, the UK Government's Office of Standards in Education, Children's Services and Skills.
In adult training, we have refreshed and re-launched our leading MaytasTM system, and our customer base is progressively moving to the new Maytas5 platform. Our virtual learning and assessment systems are now deployed in the US and five further partner nations on behalf the Mobile Learning Environment ('MoLE') programme run by the US Department of Defense. We are working further with the US Department of Defense to provide mobile learning software to support training and development across its distributed workforce. Alongside our existing FE college learning programmes, we have launched GoLearnTM, a web-based resource for functional skills training, and we have extended our pilot project with KFC to manage its apprenticeship training programme on our MyAppTM software platform.
Schools
Our work with schools is making good progress across a number of fronts. In the UK, we are the leading provider of schools-based solutions to Ofsted. We are also a major provider of management systems to Children's Services departments in local authorities in the UK, and are building increasing momentum with our systems and solutions in international markets.
Our quality review and evaluation contracts with Ofsted continue to progress well, and our expertise and software tools used in these programmes are providing good development opportunities for other markets. During the year, we launched a self-evaluation software tool for schools (Framework+TM) which allows school leaders to benefit from our evaluation expertise on a continual basis, as an embedded part of their school management processes.
Our review and evaluation resources are also deployed internationally. In the Middle East, we have extended our contract with the Abu Dhabi Education Council and we will be providing review and evaluation support to state and private schools in Abu Dhabi over the coming three years. In the US, our USD6m project with the Metropolitan District of Nashville to assist in turning around under-performing schools is progressing well, and we have now secured a contract to expand our activities into New York State. The analytics solution provided by i-graduate to over 400 schools in the US will form part of our wider offering to this market.
We have an increasingly powerful suite of systems applicable to the schools and Children's Services markets, covering student management systems for use in schools, asset management systems to manage school estates, and management information systems for Children's Services departments in local government.
We are making good progress with our schools-based student management system as part of the SALM project, and we expect our system to go live in over 200 schools during 2013. Thereafter, it is anticipated that our system will be rolled out to the remaining c2,000 state schools in New South Wales. As a result of our progress on this project, encouraging early stage opportunities are becoming visible in other markets.
Our k2TM asset management system is proving successful in the schools market. k2TM is now operating across all state schools in England, and in 2012 we built on this success with a NZ$3.9m contract to deploy this system across all state schools in New Zealand.
In the UK, our SynergyTM system is used by over half of Children's Services departments in local authorities across the UK, and during 2012 the Wakefield, Dorset and Bury local authorities joined our customer group. We have also made good progress with our new Children's Social Care Record system, which provides social care professionals with a "single view" of a child in line with the recommendations of the Munro Report. Through this system, important information from otherwise disaggregated records across local government can be integrated, helping to improve care for vulnerable children. This system has continued to be developed in collaboration with our initial customers during 2012, and is now successfully operating in Stockport and Barnsley councils.
Government and other
We also deploy our systems and solutions on behalf of government departments in the UK and internationally.
In the UK, while government procurements of new services remain subdued, we continue to make good progress with our £5m professional development contract for mathematics teaching in England. Under this contract with the UK Department of Education, which was extended in March 2012 for a further three years, we manage the National Centre for Excellence in the Teaching of Mathematics (NCETM), which provides professional development resources to teachers throughout England. Our NCETM portal helps schools and colleges to learn from their own best practice, through collaboration among staff via the portal, and by sharing good practice locally, regionally and nationally.
In a similar way, Tribal's software and expertise underpins the online Learning4Health programme, an NHS initiative to bring together clinical staff's professional development in a coordinated manner across over 3,000 healthcare facilities in the South West of England, and we are now commencing work on a new £1.7m project for the National Institute for Health Research ('NIHR') to produce a new records management system to automate the collection of data and manage more effectively the NIHR clinical research network portfolio.
Internationally, our adult learning solutions are deployed in EU funded projects in Turkey, where we are supporting the professional development of Special Educational Needs teachers, and in Croatia where we are working with the Croatian employment service to improve standards of employment agencies and adult education providers.
Our focus for 2013
During 2013 we intend to accelerate our development, building on the advances we made during 2012. This progress will be underpinned by continued discipline in our core activities: delivering on our major systems projects such as SALM, converting our good pipeline into contract wins, and increasing efficiency in our software development functions.
In our UK markets, we are focused on sustaining our leading positions through new customer wins and continued enhancement to our systems and solutions. Linking third parties' specialist modules to our major systems through carefully chosen licensing deals will complement investment in our own software.
Internationally, we have taken significant steps forward, and we now wish to maximise the competitive advantages of our large education management systems. We will be exploring entry into additional new markets, and the use of third party system implementation partners in these new markets to give us rapid scale and flexible local capabilities.
These actions form the core of our organic growth strategy, alongside which we will consider bolt-on acquisitions which complement our positions in our main systems and solutions markets.
Outlook
Tribal is trading well, and we have a number of growth initiatives underway which offer good potential. Our systems and solutions remain strong in their UK markets, and we are seeing increasing momentum for our offerings in international markets, both those in which we currently operate as well as selected potential new markets. As a result, we continue to make good progress towards our strategic target of doubling earnings per share over the three year period ending 31 December 2014.
Our current trading is in line with our expectations for 2013. As a consequence of seasonality in our business, and our continued programme of investment, we anticipate our profits in 2013 will be weighted towards the second half of the year, and Tribal has good potential to make further progress over the medium term.
Keith Evans
Chief Executive
13 March 2013
Divisional Performance: Systems
Our Systems business has made significant progress this year, securing new customers for our major student management systems, advancing well on the major SALM programme, and investing in significant enhancements to our products. We have also established an international software development team to support our growth into 2013.
|
Year ended 31 December |
2012 £'000 |
2011 £'000 |
|
Adjusted revenue |
|
|
|
Licence |
10,563 |
7,817 |
|
Implementation |
19,567 |
15,716 |
|
Maintenance |
16,782 |
14,547 |
|
Other |
8,632 |
7,091 |
|
|
55,544 |
45,171 |
|
Of which: |
|
|
|
UK |
67% |
82% |
|
International |
33% |
18% |
|
|
100% |
100% |
|
|
|
|
|
Adjusted segment operating profit |
12,072 |
10,104 |
|
Adjusted operating profit margin |
22% |
22% |
|
|
|
|
|
Systems product development investment |
£5.3m |
£3.0m |
|
|
|
|
Our Systems business grew revenue by 23% to £55.5m (2011: £45.2m). Divisional adjusted operating profit was £12.1m (2011: £10.1m), and the adjusted operating margin was 22% (2011: 22%).
We experienced generally good trading conditions in the UK across the sectors in which our Systems business operates, and our activities in Asia Pacific continued to grow on the back of strong interest in our product set. Our international revenues in 2012 in our Systems business were £18.3m, of which £8.5m related to the SALM programme. As a whole, our Systems business generated 33% of its revenues from international customers, compared with 18% in 2011.
Our licence revenues grew strongly in the year. While our progress on the SALM programme in New South Wales represents an important part of this licence revenue growth, sales of our student management systems to new university and college customers in the UK and internationally have also driven good licence revenues.
Implementation revenues grew strongly as we continued the deployment of our systems for major customers such as the University of Sydney, University of Oxford and Trinity College Dublin. Our work for the New South Wales Department of Education on the SALM programme gathered momentum during the second half of 2012, enhancing our implementation revenues, and this programme is anticipated to continue to draw strongly on our teams during 2013.
Maintenance revenues grew well, following the successful implementation of a number of new customer systems during the year. The SALM programme did not contribute materially to our maintenance income during 2012, as the programme is in its initial design and development phase, prior to roll-out to users during 2013.
Our adjusted operating margin progression is positive, reflecting our focus on increasing operational efficiency, while supporting the establishment of new business infrastructure to support our increasing activities in Asia Pacific; in the short term, this enhanced infrastructure has increased costs, holding back our overall divisional margin growth. Elsewhere in the Systems business, we have maintained good control over our costs throughout 2012, sustaining the benefits of our cost reduction programme completed in 2011.
Strong revenue growth and effective cost control has supported acceleration of investment in new software product development. We have invested across our range of systems, increasing investment from £3.0m in 2011 to £5.3m in 2012. We expect to continue to invest in our software products at this level in 2013.
Divisional Performance: Solutions
In a relatively quiet UK market, our Solutions business has re-focused our offering and increased the technological underpinning of the services we provide. Our revenues are increasingly of a higher quality, and we are building our international capabilities for growth.
|
Year ended 31 December |
2012 £'000 |
2011 £'000 |
|
Adjusted revenue |
|
|
|
Benchmarking and analytics |
2,727 |
4,514 |
|
Review and evaluation services |
29,816 |
33,120 |
|
Professional development and training support |
19,754 |
20,431 |
|
Learning and assessment |
7,045 |
5,108 |
|
|
59,342 |
63,173 |
|
Of which: |
|
|
|
UK |
90% |
93% |
|
International |
10% |
7% |
|
|
100% |
100% |
|
|
|
|
|
Adjusted segment operating profit |
5,282 |
5,363 |
|
Adjusted operating profit margin |
9% |
8% |
|
|
|
|
|
Solutions product development investment |
£0.9m |
£0.6m |
|
|
|
|
Our Solutions business' revenue reduced by 6% to £59.3m (2011: £63.2m). Divisional adjusted operating profit was £5.3m (2011: £5.4m), and the adjusted operating margin increased to 9% (2011: 8%).
As we identified at the start of the year, the UK market in which the Solutions business predominantly operates has remained relatively quiet, and comparatively it continues to present fewer growth opportunities than we see in our Systems business.
Strategically, growth in the Solutions business requires that we re-focus the business on services which are founded upon software-based tools capturing the rich intellectual property in our business, and which do so in a scalable and repeatable form that can be deployed into international markets. Consistent with this approach, our international revenues in our Solutions business grew from 7% to 10% of divisional revenues.
The key profit growth opportunities in our Solutions business are in analytics and benchmarking solutions across higher, further and school education and in evidence-based school improvement solutions internationally.
Our benchmarking and analytics business has been underpinned in recent years by a long-term contract operated for the Department of Education in the UK. The scale of this contract reduced in 2012, partially offset by contract extensions for benchmarking work across all colleges in New Zealand. Our recent acquisition of i-graduate will, we believe, accelerate our progress in analytics and benchmarking.
Tribal's review and evaluation activities are weighted towards our two inspections contracts with Ofsted. The profile of these long-term contracts means that revenues are likely to reduce over the contracts' lives, as we experienced from 2011 to 2012, although they are nevertheless expected to remain substantial throughout that time. We have extended our international work in school improvement services, where we are increasingly using our proprietary software tools to complement our people's on-site work, enhancing margin potential.
During 2012, we focused our professional development and training support services towards higher-quality revenues, and exited low-margin programmes. Our propositions in training support are now supported by our applied technology capabilities and we are well positioned to make progress in this area during 2013.
Our learning and assessment solutions have emphasised our work supporting Further Education colleges in providing distance learning enabled by our applied technologies. Strong appetite for these capabilities produced good revenue growth, and the increased use of our software tools is enhancing margins.
Our margin progress is positive, rising from 8% to 9%, although further work is required. As we increasingly embed technology into our solutions, the opportunity for further margin improvement will increase.
Key performance indicators
Key Performance Indicator
|
Objective |
2011 |
2012 |
Outlook |
|
Adjusted operating margin |
Maintain and enhance our operating margin |
11.3% |
12.3% |
We have made good initial progress in 2012, raising our overall operating margin to 12.3%. We continue to focus on driving margin improvement through good revenue growth and effective cost control. |
|
Adjusted earnings per share |
Long-term sustainable growth in EPS |
8.4p |
10.9p |
We remain focused on our target to double adjusted earnings per share over the three-year period ending 31 December 2014. |
|
Internationalisation |
Increasing the proportion of overall revenue generated from international markets |
12% |
21% |
We have seen strong revenue growth in Asia Pacific during 2012, and expect that to continue in 2013. We are seeing good opportunities in other international markets, and remain focused on pursuit of carefully selected international customers. |
|
Cash conversion |
Generate strong cash flow from our continuing operations (measured before exceptional costs but after capital expenditure) |
69% |
87% |
We have generated excellent operating cash flow during 2012, significantly reducing our debt. While some project cash flows may be lumpy during 2013, we expect to continue to generate good cash flow to reduce debt and create further investment capacity. |
|
Product development investment |
Sustained investment in development of existing and new technology products in the Systems business, stated as a percentage of adjusted Systems division revenue |
6.7% |
9.6% |
We have significantly increased the levels of capitalised product development investment during the past two years. We expect to maintain the levels of investment seen in 2012 for the foreseeable future. |
|
Order book |
Increasing order book supporting enhanced revenue visibility. |
£178m |
£168m |
Whilst the Ofsted review and evaluation contracts are a material contributor to our order book, and we are presently engaged in delivery of those contracts, our overall order book remains strong. We recognise only two years of maintenance income from our installed base of systems customers within our order book, although we expect most of these customers to remain with us for many years. |
|
Staff retention |
Optimise retention of skilled staff. |
76.0% |
84.7% |
As we proceed with our strategy plan, and demonstrate the strength of Tribal's position in its markets, staff feedback indicates that our people are increasingly confident in their future within Tribal. |
|
Impact on the environment |
Minimise our carbon emissions (measured as average kilogrammes of CO2 emitted per member of staff as a result of air, rail and car travel by staff). |
1,214kg / person |
1,373kg / person |
Our increasing internationalisation will continue to require our people to travel extensively, but we are working to use technology to minimise the need for travel where practicable. |
Financial Review
Introduction
We have maintained a firm grip on our cost base, while expanding the scale of our operations into new markets. At the same time, our focus on working capital management is supporting strong cash flow, reducing our borrowings and allowing increased investment in new software and solutions.
Continuing operations
|
|
2012 £'000 |
2011 £'000 |
Change |
|
|
Adjusted revenue |
113,417 |
105,759 |
7% |
|
|
Adjusted operating profit from divisions before central costs |
17,354 |
15,467 |
12% |
|
|
Central costs |
(3,472) |
(3,473) |
- |
|
|
Adjusted operating profit |
13,882 |
11,994 |
16% |
|
|
Adjusted net finance costs |
(1,043) |
(1,860) |
(44)% |
|
|
Adjusted profit before tax |
12,839 |
10,134 |
27% |
|
|
Adjusted effective tax rate |
20.5% |
22.2% |
|
|
|
Adjusted diluted earnings per share |
10.9p |
8.4p |
|
In the year ended 31 December 2012, the Group's adjusted revenue from continuing operations was £113.4m (2011: £105.8m). Adjusted operating profit was £13.9m (2011: £12.0m) and adjusted operating margin was 12.3% (2011 11.3%). Adjusted profit before tax was £12.8m (2011: £10.1m) and adjusted diluted earnings per share were 10.9p (2011: 8.4p). The statutory profit for our continuing business after tax was £8.0m (2011: £3.3m).
Adjusted revenue
Adjusted revenue from continuing operations increased by 7% to £113.4m, driven by organic growth in the Systems business of 23%. This growth primarily resulted from strong performance in international markets, but was offset by a reduction in the Solutions business of 6% as we withdrew from unattractive activities, and as a result of the profile of revenues on the Ofsted inspection contracts (divisional growth rates are stated gross of intra-divisional trading).
Adjusted operating profit
Adjusted operating profit for the year ended 31 December 2012 grew from £12.0m to £13.9m, and adjusted operating margins grew from 11.3% to 12.3%. Our profit margin growth was driven by the increasing scale of technology-based activities in our Systems business, continued attention to operational cost management across the Group, and focus on overhead reduction.
Our central costs remained within our target range of less than 4% of revenue, and were 3.1% of revenue (2011: 3.3%). Adjusted EBITDA (being operating profit before depreciation and amortisation) in the year ended 31 December 2012 was £16.9m (2011: £15.4m).
Exceptional operating costs and closed businesses
|
|
2012 £'000 |
2011 £'000 |
|
|
|
|
|
- Trading losses from closed businesses |
(844) |
(682) |
|
- Redundancy costs and other closure costs |
(1,286) |
- |
|
Operating loss from closed businesses |
(2,130) |
(682) |
|
|
|
|
|
Other exceptional costs: |
|
|
|
- Redundancy costs |
- |
(3,327) |
|
- Property-related costs |
- |
(1,773) |
|
- Other restructuring costs |
- |
(913) |
|
- Acquisition-related expenses |
(209) |
- |
|
- Adjustments to deferred consideration |
(50) |
664 |
|
- Amortisation of IFRS3 intangibles |
(24) |
(218) |
|
|
(2,413) |
(6,249) |
The adjusted profit figures set out above exclude the results of closed businesses and exceptional costs of £2.4m. These costs are primarily associated with the closure of our Microsoft Dynamics reselling / implementation activities, and closure of our direct delivery of apprenticeship-related training business. Each of these businesses was considered not to be core to our strategic direction.
Discontinued activities
|
|
2012 £'000 |
2011 £'000 |
|
Profit/(loss) attributable to Resourcing |
666 |
(2,528) |
|
Profit/(loss) attributable to Health and Government |
1 |
(2,764) |
|
Profit/(loss) attributable to Kindred |
185 |
(780) |
|
Loss attributable to Nightingale Associates |
(50) |
- |
|
Operating profit/(loss) attributable to discontinued operations |
802 |
(6,072) |
|
|
|
|
|
Profit/(loss) on disposal of Resourcing |
541 |
(2,661) |
|
Profit/(loss) on disposal of Health and Government |
45 |
(18,390) |
|
Loss on disposal of Kindred |
- |
(3) |
|
(Loss)/profit on disposal of Nightingale Associates |
(179) |
1,087 |
|
Profit/(loss) on disposal of discontinued operations |
407 |
(19,967) |
|
Attributable tax credit |
556 |
275 |
|
Net loss attributable to discontinued operations |
1,765 |
(25,764) |
Our major disposal programme was completed in 2011. Since completion of the disposals, certain deferred consideration payments have become receivable, and we have pursued the recovery of trade debtor amounts which, under the terms of certain disposals, remained with Tribal. We have also undertaken a programme to mitigate any residual property lease obligations which remained with Tribal. In these respects, we have been successful in recovering significant portions of the receivable amounts, and in subletting the majority of the residual property. This has resulted in profits arising in connection with discontinued activities.
Group finance costs
|
|
2012 £'000 |
2011 £'000 |
|
Investment income |
(162) |
(50) |
|
Finance costs |
1,205 |
1,910 |
|
Net finance costs |
1,043 |
1,860 |
|
Financial instruments |
453 |
145 |
|
|
1,496 |
2,005 |
Net finance costs have fallen consistent with a reduction in Tribal's overall debt levels. During the year, the Group has maintained an interest rate cap arrangement, intended to reduce the risk of interest rate increases. However, the Group has benefited from currently low interest rates and the cap arrangement has not been activated.
In addition to interest costs on our bank borrowings, finance costs also include charges arising from bank guarantees issued as part of the SALM contract.
The financial instruments charge in the year, which is treated as an exceptional cost, arises from the unwinding of the hedging reserve relating to the interest rate swap which was closed out in July 2011. The reserve will unwind over the original life of the swap to September 2013.
Tax
The effective tax rate on our adjusted continuing business of 21% (2011: 22%) is lower than the standard rate due to prior year adjustments. The corporation tax charge on continuing operations was £2.0m (2011: £0.4m). While the Group is growing its activities in international jurisdictions, it is currently anticipated that the tax charge on profits in the near term is likely to be broadly in line with the standard UK corporation tax rate.
Earnings per share
The adjusted diluted earnings per share from continuing operations before exceptional costs, the results of closed businesses and intangible asset amortisation, which reflects the underlying trading performance of the Group, grew from 8.4p to 10.9p.
Basic earnings per share was 10.4p (2011: loss per share of 23.9p).
Shareholder returns and dividends
The statutory profit for the year was £9.7m, compared to a statutory loss in the prior year of £22.4m following the completion of our restructuring programme.
The Group's financial performance, and balance sheet strength, has significantly improved over the last 18 months. Our focus is now on growing the business, sustaining strong investment in our software products, entering selected new markets and, where appropriate, considering bolt-on acquisitions.
The Directors have previously pursued a progressive dividend policy, reflecting the cash generative nature of the continuing business, but seeking to reduce debt levels over the medium term and to retain capital to allow the Group to implement its strategic plan. This progressive dividend policy remains appropriate. The Directors consider that it is in the Group's best interest, for the medium term, generally to retain cash generated from operations for reinvestment in pursuit of the above opportunities.
On this basis, and taking into account the good financial performance of the Group in 2012, the Board has proposed a final dividend of 0.85p per share which, together with the interim dividend of 0.40p per share, gives a total dividend of 1.25p per share (2011: 1.00p). The dividend is covered 8.7 times by adjusted earnings per share, and the final dividend will be paid on 2 July 2013 to shareholders on the register on 14 June 2013.
Net debt and cash flow
Net debt
|
|
2012 £'000 |
2011 £'000 |
|
Cash at bank and in hand |
8,424 |
6,524 |
|
Syndicated bank facility (net of bank arrangement fees) |
(18,274) |
(22,503) |
|
Net debt |
(9,850) |
(15,979) |
|
Gearing |
18% |
35% |
Group net debt decreased from £16.0m at 31 December 2011 to £9.9m at 31 December 2012.
Pension obligations
As a consequence of certain contract awards, primarily the Ofsted Early Years inspection contract which was entered into during the year ended 31 December 2010, a number of employees participate in defined benefit pension schemes. The combined deficits calculated under IAS 19 at the end of the year totalled £0.4m (with gross assets of £5.4m and gross liabilities of £5.8m), compared to £0.5m last year.
Cash flow and cash management
|
|
2012 £'000 |
2011 £'000 |
|
Continuing operations |
|
|
|
Net cash from operating activities before tax and before exceptional cashflows |
20,423 |
12,867 |
|
Capital expenditure (net) |
(2,178) |
(836) |
|
Capital expenditure on product development and business systems |
(6,188) |
(3,764) |
|
Operating cash flow from continuing operations after capital expenditure before exceptional cashflows |
12,057 |
8,267 |
|
Exceptional cashflows |
(1,664) |
(4,786) |
|
Operating cash flow from underlying operations after capital expenditure |
10,393 |
3,481 |
|
|
|
|
|
Operating cash flows from closed businesses |
(791) |
(667) |
|
|
|
|
|
Discontinued operations |
|
|
|
Net cash from operating activities before tax |
(1,213) |
(8,540) |
|
Capital expenditure (net) |
- |
160 |
|
Capital expenditure on product development and business systems |
- |
(40) |
|
Operating cash flow from discontinued operations after capital expenditure |
(1,213) |
(8,420) |
|
|
|
|
|
Net interest |
(633) |
(1,557) |
|
Tax |
(1,692) |
718 |
|
Free cash flow |
6,064 |
(6,445) |
|
Acquisitions and deferred consideration |
(50) |
(70) |
|
Disposal of discontinued operations |
1,542 |
12,378 |
|
Dividends paid |
(933) |
(980) |
|
Financing |
(4,695) |
(10,958) |
|
Settlement of interest rate swap instrument |
- |
(2,086) |
|
Effect of foreign exchange rate changes |
(31) |
26 |
|
Increase/(decrease) in cash and cash equivalents in year |
1,897 |
(8,135) |
During 2012, the Group's continuing activities generated strong operating cash flows after capital expenditure, but before exceptional cash costs, of £12.1m (2011: £8.3m), with cash conversion of 87% (2011: 69%).
Capital expenditure
Our increased cash generation is stated after allowing for significantly increased investment in new software development expenditure and other capital expenditure as the infrastructure of the Group was refreshed and extended in international markets. Capital expenditure across the Group totalled £8.4m (2011: £4.6m). We have increased capitalised expenditure on software product development to £6.2m (2011: £3.6m). At the same time, research and development costs charged directly against profits also increased by £0.5m over the prior year to £1.3m. Our actions in this respect include improved methodologies for measuring and recording the time spent by our software development teams on new development work and pursuing increased benefits from higher productivity working practices. This has allowed us to capture and record as capital investment in 2013 some costs which we might not have been able to capture in prior years. Our areas of increased expenditure particularly relate to enhancements to our existing products to address international customer requirements, and new product development for both domestic and international markets.
Cash flows arising from discontinued operations
During the course of 2012, cash flows arose from our discontinued activities in relation to:
- operating cash flows; and
- deferred consideration payments becoming receivable.
Operating cash flows relate primarily to recovery of receivable amounts due to Tribal from the operations of the discontinued businesses, and property lease payments which Tribal remained committed to in relation to businesses which it had disposed of. As previously noted, we have been successful in recovering much of these receivables, and in subletting the majority of these properties during 2012, and these property-related cash costs are expected now to diminish significantly.
During 2012, we received all of the remaining deferred consideration which was potentially receivable in relation to our disposal of the Health and Government businesses to Capita. We also received close to the maximum potential receipts for the contingent consideration in relation to the disposal of Nightingale Associates, and we continue to receive instalments in relation to the sale of the Resourcing business.
Order book
The total forward order book of the Group as at 31 December 2012 was lower by 4% at £168m (2011: £178m). Our order book relates to business we will deliver over the next five years, but includes only two years of software maintenance income. Based on the period of time over which our student management systems are typically installed in customer sites, it is probable that maintenance income streams will continue well beyond a two-year timeframe; maintenance income for the year ended 31 December 2012 was £16.8m.
Financial risks and treasury management
The main financial risks faced by the Group relate to the availability of funds to meet business needs, credit risk arising from customer defaults, fluctuations in interest rates and foreign exchange risk. These risks are managed as described below.
Funding adequacy
The Group finances its operations by a combination of cash reserves from equity capital, retained profits and bank borrowings. Our senior debt banking facility is committed until February 2015, subject to compliance with covenants. Under the terms of the facility, £30m is available under a revolving credit facility. In addition, the Group currently has a combined committed bonding and working capital facility of £10m, of which up to £5m may be used as an overdraft and which is renewable in March 2013, and a further £9m committed guarantee facility renewable in May 2013.
Treasury management is led by the Group finance team and operates within policies and procedures reviewed and approved by the Board.
Credit risk
The Group seeks to reduce the risk of bad debts arising from non-payment from our customers. This risk is closely monitored by the Group finance team, of which the credit control function forms part. We incurred no material bad debts during 2012 due to our strong relationships with our customers.
Interest rate risk
Forward rate agreements and interest rate swaps are used where appropriate to achieve the desired mix of fixed and floating rate debt. An interest rate cap has been implemented which ensures that the Group's first £20m of borrowings will incur interest costs at a maximum of 2% plus the relevant margin until 1 February 2015.
Foreign exchange risk
A proportion of Tribal's business is transacted overseas, and the financial performance of the Group is therefore exposed to movements in foreign currency exchange rates.
Management of foreign exchange risk is overseen by the Group finance team, and policies and procedures are in place that have been approved by the Board. Where appropriate, forward foreign exchange contracts and options are taken out in order to reduce potential financial exposure to an acceptable level. As the Group continues its international expansion, these policies and procedures are regularly reviewed to ensure that they are appropriate to the Group's operations.
Responsibility statement of the directors on the annual report
The annual report contains the following statements regarding responsibility for the financial statements and business review included in the annual report:
"The directors confirm that, to the best of their knowledge:
§ the Company and Group financial statements in this annual report, proposed in accordance with the relevant Financial Reporting Framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and of the Group taken as a whole; and
§ the business review contained in this annual report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face."
By order of the Board
|
Keith Evans Chief Executive 13 March 2013 |
Steve Breach Group Finance Director 13 March 2013 |
Consolidated income statement
For the year ended 31 December 2012
|
|
Note |
Underlying £'000 |
Closed Businesses And exceptional costs £'000 |
Year ended 31 December 2012 Total £'000 |
Underlying £'000 |
Closed Businesses And exceptional costs £'000 |
Year ended 31 December 2011 Total £'000 |
|
Continuing operations |
|
|
|
|
|
|
|
|
Revenue |
|
113,417 |
1,978 |
115,395 |
105,759 |
2,472 |
108,231 |
|
Cost of sales |
|
(69,253) |
(2,440) |
(71,693) |
(63,816) |
(2,700) |
(66,516) |
|
Gross profit |
|
44,164 |
(462) |
43,702 |
41,943 |
(228) |
41,715 |
|
Other administrative expenses |
|
(30,282) |
(1,927) |
(32,209) |
(29,949) |
(5,803) |
(35,752) |
|
Amortisation of IFRS 3 intangibles |
|
- |
(24) |
(24) |
- |
(218) |
(218) |
|
Total administrative expenses |
|
(30,282) |
(1,951) |
(32,233) |
(29,949) |
(6,021) |
(35,970) |
|
Operating profit |
|
13,882 |
(2,413) |
11,469 |
11,994 |
(6,249) |
5,745 |
|
Investment income |
4 |
162 |
- |
162 |
50 |
- |
50 |
|
Other gains and losses |
5 |
- |
(453) |
(453) |
- |
(145) |
(145) |
|
Finance costs |
6 |
(1,205) |
- |
(1,205) |
(1,910) |
- |
(1,910) |
|
Profit before tax |
3 |
12,839 |
(2,866) |
9,973 |
10,134 |
(6,394) |
3,740 |
|
Tax |
|
(2,633) |
619 |
(2,014) |
(2,246) |
1,831 |
(415) |
|
Profit for the year from continuing operations |
|
10,206 |
(2,247) |
7,959 |
7,888 |
(4,563) |
3,325 |
|
Discontinued operations |
|
|
|
|
|
|
|
|
Profit/(loss) from discontinued operations |
8 |
925 |
840 |
1,765 |
(1,113) |
(24,651) |
(25,764) |
|
Profit/(loss) for the year |
|
11,131 |
(1,407) |
9,724 |
6,775 |
(29,214) |
(22,439) |
|
Attributable to: |
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
|
|
9,724 |
|
|
(22,439) |
|
Earnings per share |
|
|
|
|
|
|
|
|
From continuing operations |
|
|
|
|
|
|
|
|
Basic |
9 |
10.9p |
(2.4)p |
8.5p |
8.4p |
(4.9)p |
3.5p |
|
Diluted |
9 |
10.9p |
(2.4)p |
8.5p |
8.4p |
(4.9)p |
3.5p |
|
From continuing and discontinued operations |
|
|
|
|
|
|
|
|
Basic |
9 |
11.9p |
(1.5)p |
10.4p |
7.2p |
(31.1)p |
(23.9)p |
|
Diluted |
9 |
11.9p |
(1.5)p |
10.4p |
7.2p |
(31.1)p |
(23.9)p |
As explained in note 3, the results of closed businesses have been excluded from the underlying result. Prior year comparatives have been restated accordingly.
Consolidated statement of comprehensive income
For the year ended 31 December 2012
|
|
|
Year ended 31 December 2012 £'000 |
Year ended 31 December 2011 £'000 |
|
Profit/(loss) for the year |
|
9,724 |
(22,439) |
|
Actuarial gain/(loss) on defined benefit plans |
|
290 |
(175) |
|
Transfer from cash flow hedge reserve |
|
453 |
234 |
|
Deferred tax |
|
141 |
(121) |
|
Exchange differences on translation of foreign operations |
|
16 |
4 |
|
Total comprehensive income for the year attributable to equity holders of the parent |
|
10,624 |
(22,497) |
Consolidated balance sheet
At 31 December 2012
|
|
Note |
2012 £'000 |
2011 £'000 |
2010 £'000 |
|
Non-current assets |
|
|
|
|
|
Goodwill |
10 |
72,616 |
72,616 |
95,116 |
|
Other intangible assets |
11 |
10,195 |
5,655 |
7,801 |
|
Property, plant and equipment |
|
3,146 |
2,576 |
6,188 |
|
Investments |
|
1 |
1 |
1 |
|
Deferred tax assets |
|
2,033 |
1,661 |
3,256 |
|
|
|
87,991 |
82,509 |
112,362 |
|
Current assets |
|
|
|
|
|
Inventories |
|
1,931 |
333 |
610 |
|
Trade and other receivables |
12 |
28,225 |
23,323 |
34,885 |
|
Cash and cash equivalents |
|
8,424 |
6,524 |
14,659 |
|
Assets held for sale |
|
- |
- |
4,319 |
|
|
|
38,580 |
30,180 |
54,473 |
|
Total assets |
|
126,571 |
112,689 |
166,835 |
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
13 |
(7,642) |
(8,781) |
(16,915) |
|
Accruals and deferred income |
|
(39,814) |
(28,271) |
(33,856) |
|
Tax liabilities |
|
(2,797) |
(2,671) |
(2,227) |
|
Provisions |
|
(1,159) |
(2,419) |
(525) |
|
Liabilities held for sale |
|
- |
- |
(5,382) |
|
|
|
(51,412) |
(42,142) |
(58,905) |
|
Net current liabilities |
|
(12,832) |
(11,962) |
(4,432) |
|
Non-current liabilities |
|
|
|
|
|
Bank loans |
|
(18,274) |
(22,503) |
(33,157) |
|
Retirement benefit obligations |
|
(419) |
(540) |
(1,159) |
|
Deferred tax liabilities |
|
- |
(178) |
(1,024) |
|
Derivative financial instruments |
|
- |
- |
(2,173) |
|
Provisions |
|
(523) |
(1,439) |
- |
|
Other payables |
|
- |
- |
(662) |
|
|
|
(19,216) |
(24,660) |
(38,175) |
|
Total liabilities |
|
(70,628) |
(66,802) |
(97,080) |
|
Net assets |
|
55,943 |
45,887 |
69,755 |
|
Equity |
|
|
|
|
|
Share capital |
|
4,685 |
4,685 |
4,685 |
|
Other reserves |
|
26,913 |
26,245 |
26,246 |
|
Retained earnings |
|
24,345 |
14,957 |
38,824 |
|
Total equity attributable to equity holders of the parent |
|
55,943 |
45,887 |
69,755 |
Consolidated statement of changes in equity
For the year ended 31 December 2012
|
|
|
Share capital £'000 |
Other reserves £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
Balance at 1 January 2012 |
|
4,685 |
26,245 |
14,957 |
45,887 |
|
Total comprehensive income for the year |
|
- |
302 |
10,322 |
10,264 |
|
Dividends |
|
- |
- |
(934) |
(934) |
|
Credit to equity for share-based payments |
|
- |
366 |
- |
366 |
|
Balance at 31 December 2012 |
|
4,685 |
26,913 |
24,345 |
55,943 |
For the year ended 31 December 2011
|
|
|
Share capital £'000 |
Other reserves £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
Balance at 1 January 2011 |
|
4,685 |
26,246 |
38,824 |
69,755 |
|
Total comprehensive income for the year |
|
- |
169 |
(22,666) |
(22,497) |
|
Dividends |
|
- |
- |
(980) |
(980) |
|
Charge to equity for share-based payments |
|
- |
(170) |
(221) |
(391) |
|
Balance at 31 December 2011 |
|
4,685 |
26,245 |
14,957 |
45,887 |
For the year ended 31 December 2010
|
|
Share capital £'000 |
Share premium £'000 |
Other reserves £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
Balance at 1 January 2010 |
4,685 |
78,723 |
31,597 |
21,512 |
136,517 |
|
Total comprehensive income for the year |
- |
- |
(445) |
(61,343) |
(61,788) |
|
Capital reduction |
- |
(78,723) |
- |
78,723 |
- |
|
Dividends |
- |
- |
- |
(4,284) |
(4,284) |
|
Charge to equity for share-based payments |
- |
- |
(580) |
(110) |
(690) |
|
Transfer |
- |
- |
(4,326) |
4,326 |
- |
|
Balance at 31 December 2010 |
4,685 |
- |
26,246 |
38,824 |
69,755 |
Consolidated cash flow statement
For the year ended 31 December 2012
|
|
Note |
Year ended 31 December 2012 £'000 |
Year ended 31 December 2011 £'000 |
|
Net cash from/(used in) operating activities |
14 |
15,063 |
(408) |
|
Investing activities |
|
|
|
|
Interest received |
|
117 |
49 |
|
Proceeds on disposal of discontinued operations |
|
1,542 |
12,786 |
|
Proceeds on disposal of property, plant and equipment |
|
- |
160 |
|
Purchases of property, plant and equipment |
|
(2,178) |
(836) |
|
Expenditure on product development and business systems |
|
(6,188) |
(3,804) |
|
Acquisitions and deferred consideration |
|
(50) |
(70) |
|
Cash and cash equivalents disposed |
|
- |
(408) |
|
Net cash (outflow)/inflow from investing activities |
|
(6,757) |
7,877 |
|
Financing activities |
|
|
|
|
Interest paid |
|
(750) |
(1,606) |
|
Equity dividend paid |
|
(934) |
(980) |
|
Repayment of borrowings |
|
(4,695) |
(11,500) |
|
Settlement of interest rate swap |
|
- |
(2,086) |
|
New bank loans |
|
- |
542 |
|
Net cash used in financing activities |
|
(6,379) |
(15,630) |
|
Net increase/(decrease) in cash and cash equivalents |
|
1,927 |
(8,161) |
|
Cash and cash equivalents at beginning of year |
|
6,524 |
14,659 |
|
Effect of foreign exchange rate changes |
|
(27) |
26 |
|
Cash and cash equivalents at end of year |
|
8,424 |
6,524 |
Notes to the financial statements
1. General Information
The basis of preparation of this preliminary announcement is set out below.
The financial information in this announcement, which was approved by the Board of Directors on 13 March 2013, does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 31 December 2011, but is derived from these accounts.
Statutory accounts for the year ended 31 December 2011 have been delivered to the Registrar of Companies and those for the year ended 31 December 2012 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under S498 (2) or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement has been completed in accordance with International Financial Reporting Standards (IFRSs), this announcement itself does not contain sufficient information to comply with IFRSs.
The financial information has been prepared on the historical cost basis, modified to include the revaluation of certain properties and financial instruments.
Copies of the announcement can be obtained from the Company's registered office at 1-4 Portland Square, Bristol BS2 8RR.
It is intended that the full financial statements which comply with IFRSs will be posted to shareholders on or around 11 April 2013 and will be available to members of the public at the registered office of the Company from that date and available on the Company's website: www.tribalgroup.com.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.
2. Business segments
The Group is organised into two business segments: Solutions and Systems. These segments were previously referred to as "Services" and "Technology" respectively.
In accordance with IFRS 8 'Operating Segments' information on segment assets is not shown as this is not provided to the ChiefOperating decision-maker.
The principal activities of the Group are now as follows:
|
Systems |
- |
a range of proprietary software products to support the business needs of education, learning and training providers |
|
Solutions |
- |
a range of services to support the improvement of education, learning and training delivery by our customers |
Year ended 31 December 2012
|
|
Systems £'000 |
Solutions £'000 |
Eliminations £'000 |
Consolidated £'000 |
|
Adjusted revenue |
|
|
|
|
|
External sales |
54,083 |
59,334 |
- |
113,417 |
|
Inter-segment sales |
1,461 |
8 |
(1,469) |
- |
|
Total adjusted revenue |
55,544 |
59,342 |
(1,469) |
113,417 |
|
Adjusted segment operating profit |
12,072 |
5,282 |
- |
17,354 |
|
Unallocated corporate expenses |
|
|
|
(3,472) |
|
Adjusted operating profit |
|
|
|
13,882 |
|
Amortisation of IFRS 3 intangibles |
|
|
|
(24) |
|
Exceptional costs |
|
|
|
(1,545) |
|
Closed businesses |
|
|
|
(844) |
|
Operating profit |
|
|
|
11,469 |
|
Investment income |
|
|
|
162 |
|
Other gains and losses |
|
|
|
(453) |
|
Finance costs |
|
|
|
(1,205) |
|
Profit before tax |
|
|
|
9,973 |
|
Tax |
|
|
|
(2,014) |
|
Profit for the year from discontinued operations |
|
|
|
1,765 |
|
Profit after tax and discontinued operations |
|
|
|
9,724 |
Inter-segment sales are charged at prevailing market prices.
Of the total losses from closed businesses of £844,000, £483,000 arose in relation to the Systems division and £361,000 in relation to the Solutions division.
Year ended 31 December 2011
|
|
|
Systems £'000 |
Solutions £'000 |
Eliminations £'000 |
Consolidated £'000 |
|
Revenue |
|
|
|
|
|
|
External sales |
|
42,690 |
63,069 |
- |
105,759 |
|
Inter-segment sales |
|
2,481 |
104 |
(2,585) |
- |
|
Total revenue |
|
45,171 |
63,173 |
(2,585) |
105,759 |
|
Segment operating profit |
|
10,104 |
5,363 |
- |
15,467 |
|
Unallocated corporate expenses |
|
|
|
|
(3,473) |
|
Adjusted operating profit |
|
|
|
|
11,994 |
|
Amortisation of IFRS 3 intangibles |
|
|
|
|
(218) |
|
Exceptional costs |
|
|
|
|
(5,349) |
|
Closed businesses |
|
|
|
|
(682) |
|
Operating profit |
|
|
|
|
5,745 |
|
Investment income |
|
|
|
|
50 |
|
Other gains and losses |
|
|
|
|
(145) |
|
Finance costs |
|
|
|
|
(1,910) |
|
Profit before tax |
|
|
|
|
3,740 |
|
Tax |
|
|
|
|
(415) |
|
Loss for the year from discontinued operations |
|
|
|
|
(25,764) |
|
Loss after tax and discontinued operations |
|
|
|
|
(22,439) |
Geographical information
Revenue from external customers
|
|
2012 £'000 |
2011 £'000 |
|
|
UK |
89,212 |
93,328 |
|
|
Asia Pacific |
16,449 |
7,084 |
|
|
North America and rest of the world |
7,756 |
5,347 |
|
|
Total adjusted revenue |
113,417 |
105,759 |
|
|
UK revenue for closed businesses |
1,978 |
2,472 |
|
|
|
115,395 |
108,231 |
3. Exceptional costs and closed businesses
|
|
2012 £'000 |
2011 £'000 |
|
Closed businesses:
- Turnover |
1,978 |
2,472 |
|
- Cost of sales |
(2,440) |
(2,700) |
|
- Administrative expenses |
(382) |
(454) |
|
Trading loss from closed businesses |
(844) |
(682) |
|
- Redundancy costs - closed businesses |
(279) |
- |
|
- Other restructuring costs - closed businesses |
(1,007) |
- |
|
Operating loss from closed businesses |
(2,130) |
(682) |
|
Other exceptional costs: |
|
|
|
- Redundancy |
- |
(3,327) |
|
- Property related |
- |
(1,773) |
|
- Other restructuring costs
- Acquisition costs |
-
(209) |
(913)
- |
|
- Movements in deferred consideration |
(50) |
664 |
|
- Amortisation of IFRS3 intangibles |
(24) |
(218) |
|
- Hedge ineffectiveness |
(453) |
(145) |
|
|
(2,866) |
(6,394) |
Exceptional costs have arisen throughout the year, which are not part of the Group's normal trading activities. Redundancy and other costs have been incurred in relation to the closure of the Direct Delivery and Microsoft Practice businesses. In order to show more clearly the underlying results of the ongoing Group, the trading results of these closed businesses have also been excluded from the underlying result. Also included within exceptional items are adjustments to deferred consideration in respect of historical acquisitions and direct costs arising on acquisition activity in progress at the year end.
4. Investment income
|
|
2012 £'000 |
2011 £'000 |
|
Interest on bank deposits |
42 |
42 |
|
Net interest receivable on retirement benefit obligations |
45 |
1 |
|
Other interest receivable |
75 |
7 |
|
|
162 |
50 |
5. Other gains and losses
|
|
2012 £'000 |
2011 £'000 |
|
Unwinding of hedge ineffectiveness in the cash flow hedges |
453 |
84 |
|
Charge on settlement of interest rate swap |
- |
61 |
|
|
453 |
145 |
6. Finance costs
|
|
2012 £'000 |
2011 £'000 |
|
Finance charges |
|
|
|
Interest on bank overdrafts and loans |
1,014 |
1,910 |
|
Other interest payable |
191 |
- |
|
|
1,205 |
1,910 |
7. Dividends
|
|
2012 |
2011 |
|
|
£'000 |
£'000 |
|
Amounts recognised as distributions to equity holders in the period: |
|
|
|
Final dividend for the year ended 31 December 2011 of 0.60 pence (year ended 31 December 2010: 0.65 pence) per share |
560 |
606 |
|
Interim dividend for the year ended 31 December 2012 of 0.40 pence (year ended 31 December 2011: 0.40 pence) per share |
374 |
373 |
|
|
934 |
979 |
|
Proposed final dividend for the year ended 31 December 2012 of 0.85p pence (year ended 31 December 2011: 0.60 pence) per share |
796 |
562 |
The interim dividend for 2012 was approved by the Board on 13 August 2012 and was paid on 19 October 2012 to ordinary shareholders who were on the register on 21 September 2012.
The Board is recommending a final dividend of 0.85p per share. This dividend will be paid on 2 July 2013 to shareholders on the register at 14 June 2013.
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has therefore not been included as a liability in these financial statements.
8. Discontinued operations
Discontinued operations include the Health & Government, Resourcing and Communications businesses which were disposed of during 2010 and 2011. The Resourcing and Communications sales were trade assets deals and so there continue to be small transactions, for example as leases associated with those businesses wind down. The results of the discontinued operations which have been included in the consolidated income statement were as follows:
|
|
2012 £'000 |
2011 £'000 |
|
Turnover |
- |
27,591 |
|
Direct agency costs |
- |
(4,275) |
|
Revenue |
- |
23,316 |
|
Operating profit/(loss) before amortisation of IFRS 3 intangibles and exceptional costs |
369 |
(1,329) |
|
Exceptional restructuring costs |
433 |
(4,506) |
|
Amortisation of IFRS 3 intangibles |
- |
(237) |
|
Operating profit/(loss) |
802 |
(6,072) |
|
Attributable tax credit |
556 |
275 |
|
Profit/(loss) on disposal of discontinued operations |
407 |
(19,967) |
|
Net profit/(loss) attributable to discontinued operations |
1,765 |
(25,764) |
|
Operating cash flows for discontinued operations |
(1,213) |
(8,540) |
|
Investing cash flows for discontinued operations |
1,542 |
12,498 |
|
Financing cash flows for discontinued operations |
- |
(11,500) |
|
Total cash flows for discontinued operations |
329 |
(7,542) |
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:
|
|
2012 thousands |
2011 thousands |
|
Weighted average number of shares outstanding: Basic weighted average number of shares in issue |
93,696 |
93,696 |
|
Employee share options |
- |
- |
|
Weighted average number of shares outstanding for dilution calculations |
93,696 |
93,696 |
Diluted earnings per share only reflects the dilutive effect of share options for which the performance criteria have been met. Current share incentive schemes vest based on cumulative EPS for a three-year period with the earliest vesting based on the Group's results for the three years to 31 December 2013.
The adjusted basic and adjusted diluted earnings per share figures shown on the consolidated income statement are included as the directors believe that they provide a better understanding of the underlying trading performance of the Group. A reconciliation of how these figures are calculated is set out below:
|
|
2012 £'000 |
2011 £'000 |
|
Earnings |
|
|
|
From continuing operations |
|
|
|
Net profit from continuing operations attributable to equity holders of the parent |
7,959 |
3,325 |
|
Earnings per share |
|
|
|
Basic |
8.5p |
3.5p |
|
Diluted |
8.5p |
3.5p |
|
From continuing and discontinued operations |
|
|
|
Net profit/(loss) from continuing and discontinued operations attributable to equity holders of the parent |
9,724 |
(22,439) |
|
Earnings per share |
|
|
|
Basic |
10.4p |
(23.9)p |
|
Diluted |
10.4p |
(23.9)p |
|
|
2012 £'000 |
2011 £'000 |
|
From discontinued operations |
|
|
|
Net profit/(loss) from continuing and discontinued operations attributable to equity holders of the parent |
1,765 |
(25,764) |
|
Earnings per share |
|
|
|
Basic |
1.9p |
(27.5)p |
|
Diluted |
1.9p |
(27.5)p |
|
Adjusted earnings |
|
|
|
From continuing operations |
|
|
|
Net profit from continuing operations attributable to equity holders of the parent |
7,959 |
3,325 |
|
Amortisation of IFRS 3 intangibles (net of tax) |
18 |
160 |
|
Closed businesses (net of tax) |
610 |
502 |
|
Exceptional costs (net of tax) |
1,166 |
3,756 |
|
Financial instruments charge (net of tax) |
453 |
145 |
|
Adjusted earnings |
10,206 |
7,888 |
|
Adjusted earnings per share |
|
|
|
Basic |
10.9p |
8.4p |
|
Diluted |
10.9p |
8.4p |
|
From continuing and discontinued operations |
|
|
|
Net profit/(loss) from continuing and discontinued operations attributable to equity holders of the parent |
9,724 |
(22,439) |
|
Amortisation of IFRS 3 intangibles (net of tax) |
18 |
338 |
|
Closed businesses (net of tax) |
610 |
502 |
|
Exceptional costs (net of tax) |
733 |
8,262 |
|
(Profit)/loss on disposal of discontinued operations and associated tax adjustments |
(407) |
19,967 |
|
Financial instruments charge (net of tax) |
453 |
145 |
|
Adjusted earnings |
11,131 |
6,775 |
|
Adjusted earnings per share |
|
|
|
Basic |
11.9p |
7.2p |
|
Diluted |
11.9p |
7.2p |
|
From discontinued operations |
|
|
|
Net profit/(loss) from discontinued operations attributable to equity holders of the parent |
1,765 |
(25,764) |
|
Amortisation of IFRS 3 intangibles (net of tax) |
- |
178 |
|
Exceptional costs (net of tax) |
(433) |
4,506 |
|
(Profit)/loss on disposal of discontinued operations and associated tax adjustments |
(407) |
19,967 |
|
Adjusted earnings |
925 |
(1,113) |
|
Adjusted earnings per share |
|
|
|
Basic |
1.0p |
(1.2)p |
|
Diluted |
1.0p |
(1.2)p |
10. Goodwill
|
|
2012 £'000 |
2011 £'000 |
2010 £'000 |
|
Cost |
|
|
|
|
At beginning of year |
102,196 |
259,605 |
269,888 |
|
Additions |
- |
- |
926 |
|
Disposals |
- |
(157,409) |
(11,209) |
|
At end of year |
102,196 |
102,196 |
259,605 |
|
Accumulated impairment losses |
|
|
|
|
At beginning of year |
29,580 |
164,489 |
111,838 |
|
Impairment charge - discontinued |
- |
- |
56,360 |
|
Disposals |
- |
(134,909) |
(3,709) |
|
At end of year |
29,580 |
29,580 |
164,489 |
|
Net book value |
|
|
|
|
At end of year |
72,616 |
72,616 |
95,116 |
|
At beginning of year |
72,616 |
95,116 |
158,050 |
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from the business combination. The carrying amount of goodwill has been allocated as follows, with the change during 2012 made to reflect an internal reorganisation:
|
|
2012 £'000 |
2011 £'000 |
2010 £'000 |
|
Health |
- |
- |
9,351 |
|
Government |
- |
- |
13,149 |
|
|
|
|
|
|
Systems |
37,520 |
42,430 |
42,430 |
|
Solutions |
35,096 |
30,186 |
30,186 |
|
|
72,616 |
72,616 |
95,116 |
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the Systems and Solutions CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, short to medium-term trading performance, longer-term growth rates and expected changes to selling prices, sales volumes and direct costs during the period. The assumptions made reflect a cautious view of the short-term in the current economic climate. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on internal two-year budgets in the short-term and general market rates thereafter. Changes in selling prices, sales volumes and direct costs are based on past practices and expectations of future changes in the market.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next two years and has extrapolated cash flows in perpetuity based on an estimated growth rate of 2%. This rate does not exceed the average long-term growth rate for the relevant markets and reflects the ongoing caution in the market. The rate used to discount the forecast cash flows is 11% and is chosen to reflect the directors' assessment of the relative degree of risk associated with the CGUs.
The goodwill has not been impaired. The Group has conducted a sensitivity analysis on the impairment test for each CGU's carrying value. For the Systems division, a reduction in the operating profit in each of the forecast years by 46% would result in the carrying value of goodwill being reduced to its recoverable amount. The equivalent figure for the Solutions division is 41%.
11. Other intangible assets
|
|
Customer relationships, contract pipeline and brands £'000 |
Development costs £'000 |
Business systems £'000 |
Total £'000 |
|
Cost |
|
|
|
|
|
At 1 January 2011 |
6,918 |
8,668 |
4,331 |
19,917 |
|
Additions |
- |
3,598 |
206 |
3,804 |
|
Disposals |
(4,472) |
(1,581) |
(188) |
(6,241) |
|
At 1 January 2012 |
2,446 |
10,685 |
4,349 |
17,480 |
|
Additions |
- |
6,188 |
- |
6,188 |
|
At 31 December 2012 |
2,446 |
16,873 |
4,349 |
23,668 |
|
Amortisation |
|
|
|
|
|
At 1 January 2011 |
3,754 |
5,743 |
2,619 |
12,116 |
|
Amortisation and impairment charge for the year - continuing |
218 |
1,354 |
344 |
1,916 |
|
- discontinued |
237 |
- |
- |
237 |
|
Disposals |
(1,846) |
(452) |
(146) |
(2,444) |
|
At 1 January 2012 |
2,363 |
6,645 |
2,817 |
11,825 |
|
Charge for the year |
24 |
1,268 |
356 |
1,648 |
|
At 31 December 2012 |
2,387 |
7,913 |
3,173 |
13,473 |
|
Carrying amount |
|
|
|
|
|
At 31 December 2012 |
59 |
8,960 |
1,176 |
10,195 |
|
At 31 December 2011 |
83 |
4,040 |
1,532 |
5,655 |
|
At 31 December 2010 |
3,164 |
2,925 |
1,712 |
7,801 |
12. Trade and other receivables
|
|
2012 £'000 |
2011 £'000 |
2010 £'000 |
|
Amount receivable |
16,823 |
12,024 |
17,714 |
|
Allowance for doubtful debts |
(287) |
(1,178) |
(860) |
|
|
16,536 |
10,846 |
16,854 |
|
Amounts recoverable on contracts |
812 |
228 |
- |
|
Other receivables |
903 |
3,605 |
3,608 |
|
Prepayments and accrued income |
9,974 |
8,644 |
14,423 |
|
|
28,225 |
23,323 |
34,885 |
13. Trade and other payables
|
|
2012 £'000 |
2011 £'000 |
2010 £'000 |
|
Trade payables |
3,284 |
4,241 |
4,864 |
|
Other taxation and social security |
3,349 |
2,587 |
9,813 |
|
Other payables |
1,009 |
1,953 |
2,166 |
|
Deferred cash consideration |
- |
- |
72 |
|
|
7,642 |
8,781 |
16,915 |
14. Notes to the cash flow statement
|
|
2012 £'000 |
2011 £'000 |
|
Operating profit from continuing operations |
13,599 |
6,397 |
|
Operating loss from closed businesses |
(2,130) |
(652) |
|
|
11,469 |
5,745 |
|
Operating profit/(loss) from discontinued operations |
802 |
(6,072) |
|
Depreciation and impairment of property, plant and equipment |
1,625 |
3,310 |
|
Amortisation of other intangible assets |
1,648 |
2,153 |
|
Net pension charge |
15 |
102 |
|
Loss on disposal of property, plant and equipment |
- |
1,590 |
|
Share-based payments |
366 |
(223) |
|
Movements in deferred consideration |
50 |
(664) |
|
Operating cash flows before movements in working capital |
15,975 |
5,941 |
|
(Increase)/decrease in inventories |
(1,400) |
359 |
|
Increase in receivables |
(6,049) |
(4,310) |
|
Increase/(decrease) in payables |
8,229 |
(3,116) |
|
Net cash from/(used in) operating activities before tax |
16,755 |
(1,126) |
|
Tax (paid)/received |
(1,692) |
718 |
|
Net cash from/(used in) operating activities |
15,063 |
(408) |
Net cash from/(used in) operating activities before tax can be analysed as follows:
|
|
2012 £'000 |
2011 £'000 |
|
Continuing operations (excluding restricted cash) |
17,083 |
8,110 |
|
Decrease in restricted cash |
885 |
(696) |
|
|
17,968 |
7,414 |
|
Discontinued operations |
(1,213) |
(8,540) |
|
|
16,755 |
(1,126) |
Principal risks
The principal risks that the Group manages are described below. Financial risks are covered in the Financial Review and principally relate to funding, credit risk, interest rate risk and foreign exchange risk.
Risk categories |
Examples of events and trends which may lead to manifestation of the risk |
Potential impact |
Strategic objective impacted |
Mitigating factors |
Change in risk since 2011 |
|
Geographic distribution |
• Management capacity or capability shortcomings, or control failure, in new markets as scale of operations grows rapidly • Resource stretch as international growth draws on key expertise in existing markets |
• Reputational damage • Constraint on growth potential • Adverse effect on current and future financial performance and our reputation |
• Revenue growth rates • Growth in revenues from international sources • Sustainable earnings growth |
• Trusted UK management initially put into senior roles in new international operations • Limit geographical spread through careful selection of new markets and new developments |
• Increased - as success in international markets is growing |
|
Resource allocation |
• Poor operational delivery on key contracts • Investment in new software development does not produce a marketable software product • Poor selection of options when transaction timelines do not allow clear direct comparative choices • Insufficient knowledge of local market conditions during international expansion |
• Failure to meet contractual obligations and consequential financial penalties and potential loss of contracts • Reputational damage • Insufficient return on investments • Adverse impact on current and future financial performance |
• Revenue growth rates • Growth in revenues from international sources • Growth in proportion of revenues underpinned by technology • Sustainable earnings growth |
• Careful due diligence / investment appraisal before proceeding with new ventures • Strong programme of rolling review on major projects • Close attention from senior executive team, including frequent in-country presence on international programmes • Investment in additional capacity and skills |
• Increased - as success in international markets is growing |
|
Innovation and technology |
• Failure to complete new development projects in a disciplined fashion • Incorrect assessment of market developments • Obsolescence of technology platforms within key systems • Rapid change in mobile learning technology |
• Loss of long-standing customers and erosion of customer base • Constraint on growth potential • Adverse impact on current and future financial performance |
• Growth in the proportion of revenues underpinned by technology • Sustainable earnings growth |
• Careful due diligence and design / evaluation of new propositions • Investment programme to identify new attractive technologies which can be brought into our existing product set • Increased resource with skilled individuals focusing on this area • Close monitoring of technological development, and maintenance of Tribal labs innovation centre |
• Reduced - as we have expanded our software development capabilities, and enhanced our development methodologies |
|
Intellectual property |
• Loss of control of key intellectual property when outsourcing development work to developing economies with poor IP protection laws • Capturing human IP in software-based tools which may be copied / infringed |
• Constraint on growth potential • New or unforeseen competitive threat |
• Revenue growth rates • Sustainable earnings growth |
• Careful due diligence and robust Contractual frameworks for outsourcing partners • Establishment of robust legal protection where available |
• Unchanged - our development work is now operating on a greater international platform, but we have established relationships with high-quality partners |
|
Customer demands |
• Political or economic change driving rapid policy development • SALM contract cancellation • Ofsted terminates schools inspections regime |
• New business wins falling short of expectations • Adverse effect on future financial performance |
• Revenue growth rates • Growth in revenues from international sources • Growth in proportion of revenues underpinned by technology • Sustainable earnings growth |
• Market intelligence and close senior management relationships into key customers • Increasingly innovative culture amongst senior management • Market positioning giving us strong customer insight |
• Unchanged - economic circumstances remain challenging and can create instability in policymaking by governments and those organisations which rely on government funding |
|
Competitive positioning |
• Aggressive competitor reaction to our international expansion • Inappropriate pricing strategy in new markets |
• Constraint on growth potential • Weakening of long-term customer relationships • Adverse effect on future financial performance |
• Revenue growth rates • Sustainable earnings growth |
• Close monitoring of market and competitor behaviour |
• Unchanged - we have not experienced a material change in the competitive environment in which we operate |
|
Reputation |
• Adverse public profile in the event of failure on SALM • Ofsted inspection related media / political lobby attention • Data protection risks |
• Perceived value and integrity of our systems and solutions is undermined, weakening confidence of potential customers |
• Growth in revenues from international sources • Growth in proportion of revenues underpinned by technology • Sustainable earnings growth |
• Focus on effective delivery and maintenance of strong customer relationships |
• Unchanged - good progress is being made on our key contracts |
|
People |
• Insufficient sales and business development capability • Student management systems implementation resource cannot be expanded sufficiently rapidly to support international expansion • Sustaining expatriate teams whilst growing local management capacity |
• Inability to develop and execute business plans • Poor morale, and poor key staff retention • Competitive disadvantage • Weaker control of international operations |
• Revenue growth rates • Growth in revenues from international sources • Sustainable earnings growth |
• Continued investment in sales and business development skills and resources • Investment in growth of implementation capacity, and development of innovative implementation models |
• Unchanged - while we have made considerable steps forward in enhancing our capacity, our growth internationally means that these pressures remain |
|
Governance and controls |
• Lack of clarity in strategic direction • Failure to keep a tight grip on international growth • Inappropriate balance of control vs freedom to operate • Shortcomings in management information systems' ability to accommodate international growth |
• Adverse impact on current financial performance |
• Sustainable earnings growth • Net debt reduction |
• Board strengthened with broader skills and experience • Development and enhancement of management information systems • Effective risk management and internal audit processes |
• Unchanged - while our international growth has accelerated, we have invested in enhanced local infrastructure and management capacity |
This information is provided by RNS
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