Interim Results
Tribal Group PLC
23 November 2004
23 November 2004 PRESS INFORMATION
Tribal Group plc
Interim results for the six months ended 30 September 2004
Tribal Group today announces its interim results for the six months ended 30
September 2004.
Financial highlights:
Unaudited Unaudited
six months six months
ended ended
30 September 30 September Percentage
2004 2003 change
Turnover £107.7m £78.7m 36.8%
Gross revenue £81.8m £64.4m 27.0%
Operating profit* £8.9m £8.2m 8.5%
Profit before tax * £6.9m £7.0m (1.4)%
(Loss)/profit on ordinary
activities before taxation £(4.4)m £2.0m
Adjusted diluted earnings per share * 6.5p 7.8p (16.7%)
Loss for period £(6.5)m £(0.1)m
Operating cash flow £0.2m £7.2m
* Operating profit, profit before tax and diluted earnings per share are stated
before goodwill amortisation and impairment of £8.8m (2003: £4.6m), employee
benefit trust costs of £0.5m (2003: £0.3m) and exceptional items of £2.0m (2003:
nil) (see page 15 of the interim statement).
• Trading impacted by organisational change
• Good progress being made towards an integrated divisional structure
• Underlying organic revenue growth of 11 per cent
• Secured income for 2005 over 79 per cent of forecast turnover
• Key £190m NHS contract is making good progress towards contract signature
• Interim dividend of 1p per share payable on 14 January 2005
Strone Macpherson, Chairman of Tribal Group plc, commented:
'This has been, and remains, a demanding period for Tribal Group with
significant organisational restructuring and investment. As we foreshadowed at
the time of the preliminary results and in our AGM statement, the actions we
have taken along with a number of management changes have impacted profitability
but are necessary to deliver a strong platform for the future.
Over this first half year we have seen a decline in our operating margin from
12.8 per cent to 10.9 per cent. This has been due principally to softness in
Tribal Asset Management and the teacher training businesses which have now been
addressed, and the changes made to our organisation which have necessitated
additional costs.
We have, however, made good progress with the integration of businesses into our
divisional management structure and there is increasing evidence of improved
joint working across the Group.
Overall, we continue to be well placed to exploit our strong position in our key
markets of education; local government, housing and regeneration; health and
social care; and central government.
Our subsidiary Mercury Health is making good progress towards financial close on
a pivotal NHS contract to design, set up and manage a regional network of five
diagnostic and treatment centres across the south east of England. This contract
was, at preferred bidder, valued at £190m over a five year period and represents
a major and challenging opportunity in the development of the Group. We are
hopeful that this contract will lead to further opportunities in the UK
healthcare delivery market.
The Group will continue to focus its efforts on contract signature and then the
development of Mercury and the completion of the organisational restructuring.
While we expect that profitability will improve in the second half, positively
helped by the seasonal weighting to trading and improved margins, adjusted
profit before tax (excluding Mercury Health) for the full year will, however, be
below market consensus but not less than £17.5m.'
For further information contact:
Henry Pitman, Chief Executive, Tribal Group plc Tel. 01285 886020
Simon Lawton, Group Finance Director, Tribal Group plc Tel: 01285 886020
Neil Bennett/Colin Browne, Maitland Tel: 020 7379 5151
Tribal Group plc
Unaudited interim results for the six months ended 30 September 2004.
Chief Executive's statement
We hereby report on the interim results of Tribal Group plc for the six months
ended 30 September 2004. Trading has been broadly in line with market
expectations, with profit impacted as anticipated by the seasonality of our
business and the very significant changes we have made to our organisational
structures and management arrangements. These changes, as well as the continuing
investment in our infrastructure, are necessary to create a robust structure for
future growth.
Results For the six months ended 30 September 2004, the Group's turnover
increased by 37 per cent to £107.7m (2003: £78.7m). Underlying organic revenue
growth was 11 per cent. Excluding amortisation and impairment of goodwill,
exceptional items and the costs associated with employee benefit trusts,
operating profit* was £8.9m (2003: £8.2m); operating margins* were 10.9 per cent
(2003: 12.8 per cent); profit before taxation* was £6.9m (2003: £7.0m); and
adjusted diluted earnings per share was 6.5p (2003: 7.8p). The Group reports a
loss before tax of £4.4m (2003: £2.0m profit).
During the period, the amortisation of goodwill rose from £4.6m to £8.8m.
Included in this charge was an impairment write down of £3.2m relating to a
review of the carrying value of certain investments.
* Operating profit, profit before tax and diluted earnings per share are stated
before goodwill amortisation and impairment of £8.8m (2003: £4.6m), employee
benefit trust costs of £0.5m (2003: £0.3m) and exceptional items of £2.0m (2003:
nil) (see page 15 of the interim statement).
In these results we are showing an analysis of trading by division for the first
time.
Dividend An interim dividend of 1p per share (2003: 1p) will be paid on 14
January 2005 to shareholders on the register on 17 December 2004.
NHS contract - Mercury Health Following our announcement on 18 February 2004
that we had been selected as Preferred Bidder on an Independent Sector Treatment
Centre (ISTC) contract, we have made good progress with the contract
negotiations and are approaching financial close on a five year NHS contract to
design, set up and manage a regional network of five treatment centres.
Guaranteed revenues over the duration of the contract were, at preferred bidder,
valued at £190m. This is a major opportunity for the Group that we have worked
hard to secure. We are hopeful that it will lead to further opportunities in
this area.
The delays in the ISTC contract meant that Mercury Health has incurred higher
bid costs than planned. Cumulative bid and implementation costs to date have
been £5.0m. As previously announced, £3.0m was written off as an exceptional
item in the year ended 31 March 2004 and £2.0m has been written off as an
exceptional item in the six months ended 30 September 2004.
In September the Board received sufficient comfort that the costs would be
recovered to allow it to commence capitalising bid costs in accordance with UITF
34 'Pre-Contract costs'.
We will however have to absorb Mercury Health operating costs in this year's
full year figures of approximately £0.5m.
Integration and investment The main focus over this period has continued to be
the integration of businesses into the Group's divisional structure and the
strengthening of management. We have also continued to invest in our support
infrastructure and selectively in building capacity in our businesses.
The integration process has accelerated over the period and we expect that by 1
April 2005 all our businesses will be operating through fully integrated
divisions. This divisionalisation process has highlighted a number of issues
relating to the ending of earn-out and succession planning arrangements. As a
consequence, we have decided to accelerate this organisational change process
and have strengthened senior operational and finance management in several
business areas. These actions have caused some disruption to trading in certain
parts of the business, and have added cost into the business. The benefits will,
in most cases, not be seen until next financial year.
We have also continued to invest in developing our support structure, in
particular building capacity in our central Group management team, and extending
our network of regional hub offices. These actions are necessary to provide the
capacity to continue our growth.
The investment in our bid team has continued, bringing into the Group new
managers and individuals who have good experience of managing complex public
sector bids. We expect to see a contribution from this investment in the second
half of next financial year.
We have continued to back a limited number of start-ups and investments in areas
where we consider there are good growth prospects over the next few years. In
particular, we have recently set up a new business focusing on opportunities in
the regeneration market; an interim management business in local government and
housing; and a consultancy offering in the chronic disease management market. We
expect these start-ups to begin making a contribution to profitability in 2006.
Furthermore, we have been investing in positioning ourselves to participate in
some of the major new Government initiatives, such as Building Schools for the
Future; the opportunities arising from the Children's Bill; and the City Academy
Programme. The cost of these investments will be approximately £200,000 in this
financial year.
We have also started the development of our divisional shared service network,
bringing together finance, HR and IT support functions. Over the next 12 months
we expect to see significant cost benefits of more than £500,000 from this
rationalisation.
Divisional trading
Consulting
6 months ended 6 months ended 12 months ended
30 September 2004 30 September 2003 31 March 2004
£000 £000 £000
Gross revenue 26,761 16,756 43,723
EBITA** 2,507 2,606 7,065
EBITA margin** 9.4% 15.6% 16.2%
** Before goodwill and employee benefit trust costs
The Group's consulting division has consolidated its position as the largest
consultancy delivering services into the public sector.
Consultancy showed revenue growth of 60 per cent due in part to HACAS
contributing for the full six months in 2004, compared with under three months
in 2003. The underlying organic sales growth was 27 per cent.
Operating profit** was down by 4 per cent and operating margins** were
significantly lower compared to the prior period.
The margin dilution is principally due to increased competition which has
reduced win rates and higher associate costs. Utilisation rates in healthcare
have fallen from 73 per cent to 66 per cent which accounts for 2.65 per cent of
the divisional margin dilution. The associate costs were £1m higher that budget
due to skill shortages and this accounts for the remaining 3.6 per cent of the
divisional margin dilution.
Overall, the consultancy markets remain buoyant, average fee rates remain firm
and the divisional utilisation is at over 70 per cent. We have made good
progress in the housing and local government markets with utilisation levels
close to 80 per cent. Areas of underperformance have been addressed and we
expect margins across the division to improve in the seasonally stronger second
half.
We are seeing good growth opportunities in central government, where we are
gaining market share from major consultancies, and in regeneration and economic
development where across the Group we have a very strong offering. These are new
areas of development for the Group which have been loss making in the first half
but should start to make a contribution to profitability in the second half.
We continue to strengthen our position across our markets and to build barriers
to entry by adding capacity, enhancing our product range, and by extending our
service offering.
Education
6 months ended 6 months ended 12 months ended
30 September 2004 30 September 2003 31 March 2004
£000 £000 £000
Gross revenue 16,071 13,528 36,475
EBITA** 1,764 1,919 6,634
EBITA margin** 11.0% 14.2% 18.2%
** Before goodwill and employee benefit trust costs
We have now decided to separate our education activities from our consultancy
division. The creation of an education division will provide a focus for our
offering in this area.
Overall growth in revenue of 19 per cent reflected underlying organic growth of
10 per cent. The two teacher training businesses suffered from a continuing
decline in delegate day numbers - down from 9,339 to 7,980 resulting in a 32 per
cent fall in revenue.
The operating margin** for our education consultancy, e-learning and distance
learning businesses was higher compared to 2003, with the overall lower
performance reflecting the lower contribution from our teacher training
businesses which we anticipate will improve following rationalisation and cost
reductions. We expect to see the full benefits of this restructuring during
2006. Without the impact of the training businesses the divisional operating
margin** would have been 17.1 per cent.
We are seeing very positive opportunities in the education market, where Tribal
is now established as a major operator and one of the few companies able to
offer a comprehensive range of services across both the schools and post-16
market.
We have now been selected as project managers for five City Academies. This
experience should position us well for future waves as well as for the Building
Schools for the Future initiative. Our e-learning and distance learning
operations continue to grow well in buoyant markets.
Technology
6 months ended 6 months ended 12 months ended
30 September 2004 30 September 2003 31 March 2004
£000 £000 £000
Gross revenue 15,365 15,012 30,486
EBITA** 1,836 2,617 4,308
EBITA margin** 11.9% 17.4% 14.1%
** Before goodwill and employee benefit trust costs
Overall growth in revenue of 2 per cent reflected a fall in organic growth of 6
per cent. Much of this fall is down to our asset management software business
which experienced ongoing trading difficulties, as previously announced, and
where revenues were lower by 19 per cent.
The operating margins** in the education software businesses were broadly
comparable to 2003. The asset management business continued to be loss making
and accounts for 3 per cent of the divisional margin dilution. Without the asset
management business, the divisional operating margin** would have been 16.1 per
cent. The restructuring of the asset management business should result in
annualised cost savings of £500,000. We expect it to return to profit in the
second half of the year. The remaining 2 per cent dilution arises from a mix
change and the up-front costs associated with the mobilisation of the Ufi hub
contract which started trading in August 2004.
The period did not yet benefit from our off-shoring partner arrangements for
software programming in India. We expect to see the benefits in the second half
and beyond, and this will be extended to include SITS.
Our education software businesses have grown market share, with an increasing
order book, and have been greatly strengthened by the acquisitions of Aldcliffe,
which has traded in line with expectations, and more recently SITS, which have
extended our reach into the work-based training and higher education markets
respectively.
Resourcing
6 months ended 6 months ended 12 months ended
30 September 2004 30 September 2003 31 March 2004
£000 £000 £000
Gross revenue 11,183 10,507 20,910
EBITA** 2,460 2,853 5,406
EBITA margin** 22.0% 27.2% 25.9%
** Before goodwill and employee benefit trust costs
Overall growth in revenue was 6 per cent. Recruitment advertising has performed
well with margins sustained. The slow down in NHS demand has been compensated by
a buoyant local government market. Overall market conditions for recruitment
advertising are challenging with strong competition, however, there are good
prospects for growth.
Margins in the executive search business have been disappointing, impacted by
increased competition, some pressure on fee rates and succession management
issues, which have now been resolved. Financial controls have been strengthened
in this area with a new finance director appointed, and the cost base adjusted.
The healthcare supply business continues to grow market share with margins
improving.
Communications
6 months ended 6 months ended 12 months ended
30 September 2004 30 September 2003 31 March 2004
£000 £000 £000
Gross revenue 4,662 2,309 6,926
EBITA** 1,094 566 1,741
EBITA margin** 23.5% 24.5% 25.1%
** Before goodwill and employee benefit trust costs
Our communication division is performing well, with growth in revenue of 102 per
cent. Geronimo and Tribal MPC contributed for the full six months in 2004,
compared with just one and three months respectively in the prior period.
We continue to build our capacity and geographic coverage.
Property
6 months ended 6 months ended 12 months ended
30 September 2004 30 September 2003 31 March 2004
£000 £000 £000
Gross revenue 10,040 8,086 18,443
EBITA** 1,226 670 2,819
EBITA margin** 12.2% 8.3% 15.3%
** Before goodwill and employee benefit trust costs
Property showed revenue growth of 24 per cent, all of which is organic. The
property businesses are participating in, and benefiting from, increasing and
large scale capital programmes in healthcare and education.
The operating profit** showed an improvement of 83 per cent and a margin
improvement. This is partly due to buoyant demand for our services, but also due
to improved financial resources and controls which were implemented at the start
of this financial year. Our capacity and technical capability have been enhanced
by the recent acquisition of Derek Hicks and Thew, which has strengthened our
position in the north west and in the schools market.
Cash and net debt Cash inflow from operating activities for the six months to 30
September 2004 was £0.2m (2003: £7.2m) representing an operating profit to cash
conversion of 2 per cent (2003: 88 per cent). The fall is mainly due to the
unwinding of a very strong performance for the year to 31 March 2004, which is
unlikely to be repeated (conversion: 135 per cent). In particular tighter
control of creditors at March which have unwound, and the payment of £2m of
exceptional costs which were higher than the comparative period.
Cash management is a strong focus across the Group and debtor days outstanding
improved to 46 days at 30 September 2004 (2003: 60 days). Creditor days reduced
to 44 days (2003: 56 days) due in part to the unwinding of year end creditors in
the period.
Cash conversion of 102 per cent was achieved over the 12 months ended 30
September 2004, as demonstrated in the table below:
12 months ended
30 September 2004
£000
Operating cash flow 24,228
Net interest (4,111)
Tax paid (7,533)
Net capital expenditure (3,382)
Free cash flow 9,202
Dividends (688)
Acquisitions (7,568)
Financing (1,768)
Net cash outflow (822)
EBITA for year to 30 September 2004 23,829
Operating cash flow conversion 102%
However, we do not expect the cash conversion ratio for the full year to
31 March 2005 to be at previous high levels because of the one-off benefit of
£2m, arising from improving the working capital post acquisition of HACAS in the
second half of last year, and the high level of creditors at 31 March 2004. We
expect the cash conversion ratio to return to normal levels in the next
financial year.
Net debt at 30 September 2004 was £48.0m, representing gearing of 32 per cent,
and interest cover was 4.3 times.
Growth The Group has taken the decision to reduce the pace of acquisitions since
we have now secured substantial positions in each of our target growth markets.
Moving forward, the focus will be on delivering organic growth and margin
improvement from existing businesses, the vast majority of which are operating
in rapidly expanding markets. We may, however, make a small number of further
acquisitions where they add strength to our divisions.
During the period to 22 November 2004 we acquired three companies: Aldcliffe
Computer Systems Limited, Strategic Information Technology Services Group
Limited and Derek Hicks & Thew Limited. These acquisitions cost an aggregate
initial consideration of £16.0m (including payment of £4.9m, on a £ for £ basis,
for cash acquired with the businesses), paid for by a combination of cash and
shares. Deferred consideration of up to £6.3m is payable in respect of these
acquisitions, principally in shares, based on increases in operating profit.
The 2004 earn-out obligations will be settled shortly leaving an estimated
earn-out liability of £19.5m, of which approximately £16.6m is expected to be
satisfied by the issue of shares through to November 2008. Although these
liabilities are primarily to be satisfied by the issue of new shares, the
Group's policy is to retain sufficient headroom in its banking facilities to
finance at its option the next two years earn-outs in cash (currently estimated
to be approximately £15.6m).
We have continued to build our bidding and business development capability and
will increasingly bid for longer term public sector contracts that increase the
levels of our contracted revenue.
Management and board The Group's executive board has now been strengthened by
the appointment of CEOs in five out of our seven divisions; Richard Collins as
Company Secretary, Adam Hoyle as Group Business Development Director and by
Julia Marsan, who joins us as Group HR Director. We have made a number of new
senior manager appointments over the period in particular in the finance area,
where three new divisional finance directors have joined us.
People We are a business that relies on the quality and commitment of our people
and progress in this challenging year is thanks to the hard work and
professional integrity of our staff.
We have exceptional individuals amongst our middle and senior management teams,
many of whom are nationally leading figures in their specialist areas. Overall
staff numbers across the Group have remained static during the year at 1,800.
Within this number we have increased capacity in many areas and reduced numbers
in others.
In November of this year, we are running our second Tribal Management
Development Programme, in association with Henley Management College. Twenty six
of our senior managers will be participating.
Prospects As expected, we have had a relatively slow start to the year, with
profitability impacted both by the actions we have taken to integrate businesses
into our divisional structure and the seasonality of our business. While we
expect that margins and profitability in the second half will increase, we now
expect adjusted profit before tax for the full financial year to be below
current market consensus but not less than £17.5m, reflecting our continued
investment in infrastructure and in building capacity and the disruption caused
by the pace of organisational change in the business.
The board is, however, confident that the good progress we have made and
continue to make in the current year, in developing our organisational structure
and management team, should provide a strong platform for future growth.
Henry J Pitman
Chief Executive
Consolidated profit and loss account
For the six months to 30 September 2004
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2004 2003 2004
Note £000 £000 £000
Turnover
Continuing operations 106,134 78,680 185,744
Acquisitions 1,584 - -
---------- --------- ---------
107,718 78,680 185,744
Direct agency costs (25,902) (14,273) (33,523)
Gross revenue 81,816 64,407 152,221
Cost of sales (45,625) (34,136) (81,134)
Gross profit 36,191 30,271 71,087
Net administrative expenses
before amortisation of goodwill,
employee benefit trust costs
and exceptional items (27,266) (22,022) (47,934)
Operating profit before
amortisation of goodwill,
employee benefit trust costs
and exceptional items 8,925 8,249 23,153
Goodwill amortisation and
impairment 6 (8,829) (4,640) (10,690)
Employee benefit trust costs (500) (324) (1,025)
Exceptional items 2 (1,991) - (3,040)
Operating (loss)/profit
Continuing operations (2,615) 3,285 8,398
Acquisitions 220 - -
---------- --------- ---------
(2,395) 3,285 8,398
Net interest payable (2,050) (1,244) (3,076)
---------- --------- ---------
(Loss)/profit on ordinary activities
before taxation (4,445) 2,041 5,322
Taxation - current tax at 30% 3 (2,062) (2,108) (6,176)
---------- --------- ---------
Loss on ordinary activities
after taxation (6,507) (67) (854)
Minority interest - (53) (108)
---------- --------- ---------
Loss attributable to ordinary
shareholders (6,507) (120) (962)
Dividends 4 (750) (680) (2,090)
Retained loss for the period (7,257) (800) (3,052)
(Loss)/earnings per share
Basic 5 (9.39)p (0.21)p (1.5)p
Diluted 5 (9.39)p (0.21)p (1.5)p
Adjusted basic before
amortisation of
goodwill, employee benefit
trust costs and
exceptional items 5 6.94p 8.48p 22.0p
Adjusted diluted before
amortisation of goodwill,
employee benefit trust costs
and exceptional items 5 6.49p 7.80p 20.5p
The results for the period disclosed in the profit and loss account are on a
historical cost basis. There are no other recognised gains and losses in the
current or prior periods and, accordingly, no separate statement of total
recognised gains and losses has been presented.
Consolidated balance sheet
At 30 September 2004
Unaudited Unaudited Audited
30 September 30 September 31 March
Note 2004 2003 2004
£000 £000 £000
Fixed assets
Intangible assets - Goodwill 6 192,771 208,259 200,798
- Development expenditure 623 235 557
Tangible assets 7,829 5,584 6,356
Investments 190 690 190
------------ -------- --------
201,413 214,768 207,901
------------ -------- --------
Current assets
Stock - work in progress 4,616 2,942 2,058
Debtors 41,023 38,527 45,245
Cash at bank and in hand 27,493 28,315 41,740
------------ -------- --------
73,132 69,784 89,043
Creditors: amounts falling due
within one year (53,376) (54,943) (67,784)
------------ -------- --------
Net current assets 19,756 14,841 21,259
------------ -------- --------
Total assets less current
liabilities 221,169 229,609 229,160
Creditors: amounts falling due
after more than one year (71,861) (67,251) (72,015)
------------ -------- --------
Net assets 149,308 162,358 157,145
------------ -------- --------
Capital and reserves
Called up share capital 3,468 3,305 3,448
Share premium account 113,737 102,753 112,992
Capital reserve 9,545 9,545 9,545
Profit and loss account (4,396) 5,113 2,861
Shares to be issued 25,605 40,723 27,172
------------ -------- --------
Equity shareholders' funds 147,959 161,439 156,018
Equity minority interests 1,349 919 1,127
------------ -------- --------
Total capital employed 149,308 162,358 157,145
------------ -------- --------
Reconciliation of movements in consolidated shareholders' funds
At 30 September 2004
Unaudited Unaudited Audited
30 September 30 September 31 March
2004 2003 2004
£000 £000 £000
Loss for the period (6,507) (120) (962)
Dividends (750) (680) (2,090)
New share capital subscribed 765 44,218 54,600
Shares to be issued (2,067) 4,070 (10,355)
Credit in relation to share related awards 500 286 912
Share related awards acquired - - 248
----------- -------- ---------
Net (reduction)/addition to
shareholders' funds (8,059) 47,774 42,353
Opening shareholders' funds 156,018 113,665 113,665
----------- -------- ---------
Closing shareholders' funds 147,959 161,439 156,018
----------- -------- ---------
Consolidated cash flow statement
For the six months to 30 September 2004
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
Note 2004 2003 2004
£000 £000 £000
Net cash inflow from
operating activities 7 175 7,240 31,293
---------- --------- ---------
Returns on investments and
servicing of finance
Interest paid (2,581) (1,902) (4,957)
Interest element of
finance lease rental payments (2) (7) (14)
Interest received 688 501 1,347
Net cash outflow from
returns on investments and
servicing of finance (1,895) (1,408) (3,624)
Taxation
Corporation tax paid (3,104) (3,343) (7,772)
Capital expenditure and
financial investment
Payments to acquire
tangible fixed assets (5,306) (1,722) (3,399)
Payments to acquire (261) (11) (502)
intangible fixed assets
Payments to acquire investments - - (10)
Sale of tangible fixed assets 2,840 60 865
Sale of investments - - 718
---------- --------- ---------
Net cash outflow for
capital expenditure
and financial
investment (2,727) (1,673) (2,328)
Acquisitions
Purchase of subsidiary
undertakings (3,198) (50,352) (55,813)
---------- --------- ---------
Net increase in cash from
acquisition of
subsidiary undertakings 660 6,919 7,350
---------- --------- ---------
Net cash outflow from
acquisitions (2,538) (43,433) (48,463)
Equity dividends paid - - (688)
---------- --------- ---------
Cash outflow before financing (10,089) (42,617) (31,582)
Financing
Issue of ordinary share
capital less issue costs 83 20,079 20,123
Repayment of borrowings (4,232) (9,809) (11,617)
New secured loans less issue costs - 31,058 35,243
Capital element of finance (9) (67) (98)
lease rental payments
---------- --------- ---------
Net cash (outflow)/inflow
from financing (4,158) 41,261 43,651
---------- --------- ---------
(Decrease)/increase in
cash in the period (14,247) (1,356) 12,069
---------- --------- ---------
Consolidated cash flow statement (continued)
For the six months to 30 September 2004
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
Note 2004 2003 2004
£000 £000 £000
Reconciliation of net cash flow to
movement in net debt
(Decrease)/increase in cash in
the period (14,247) (1,356) 12,069
Cash inflow/(outflow) from
movements in debt 4,242 (25,276) (27,615)
----------- --------- --------
Change in net debt resulting
from cash flows (10,005) (26,632) (15,546)
Finance leases acquired with
subsidiaries (32) - (1)
Debt acquired with
subsidiaries - - (267)
New finance leases (18) - -
----------- --------- --------
Movement in net debt in the
period (10,055) (26,632) (15,814)
----------- --------- --------
Net debt at the start of the
period
(37,897) (22,083) (22,083)
----------- --------- --------
Net debt at the end of the
period 8 (47,952) (48,715) (37,897)
----------- --------- --------
Notes
1 Accounting policies
The unaudited interim accounts were approved by the Board of Directors on 22
November 2004. The auditors have carried out an interim review and their report
is set out on page 19.
The unaudited interim accounts do not comprise statutory accounts within the
meaning of section 240 of the Companies Act 1985. The information for the year
ended 31 March 2004 is an extract from the statutory accounts to that date which
have been delivered to the Registrar of Companies. Those accounts included an
audit report which was unqualified and which did not contain a statement under
Section 237 (2) or (3) of the Companies Act 1985.
Turnover represents the amounts (excluding value added tax) derived from the
provision of goods and services to third party customers and includes the gross
amounts billed in respect of commission based income. The particular policies
applied are:
• Consultancy - on performance of the contracted services;
• Courses and training - over the provision of the related services;
• Product sales - on despatch of the related goods; and
• Commission based income - on provision of the service to which the
commission relates.
Direct agency costs comprise media payments and production costs in respect of
commission based income. Gross revenue comprises commission and fees earned in
respect of turnover.
Cost of sales includes the direct expenditure incurred in performing the goods
and services described above including the cost of third party associates and
the salary cost of employed fee earners. Administrative expenses include the
salary cost of non fee earners. The comparative results for cost of sales and
administrative expenses have been shown on a consistent basis and this has
resulted in a net reclassification of £8.5m (30 September 2003: £6.4m, 31 March
2004: £15.3m) from administrative expenses to cost of sales. There is no impact
on operating profit or net assets in any period. In all other respects the
unaudited interim accounts have been prepared on a basis consistent with the
accounting policies adopted in the Annual Report and Accounts for the year ended
31 March 2004.
2 Exceptional Items
The exceptional items of £1,991,000 (30 September 2003: nil, 31 March 2004:
£3,040,000) are in relation to further bid and implementation costs incurred on
the NHS Independent Sector Treatment Centre Contract. In September the Board
received sufficient assurance to believe that the contract would reach financial
close and has capitalised subsequent bid costs in accordance with UITF 34.
3 Taxation
The taxation charge is calculated by applying the forecast full year effective
tax rate on operating profits adjusted for goodwill amortisation, employee
benefit trust costs and exceptional items to the interim profit, similarly
adjusted.
4 Dividends
The interim dividend of 1.0p per share, which will absorb £750,000, will be paid
on 14 January 2005 to ordinary shareholders on the register on 17 December 2004.
The shares will be quoted ex-dividend on 15 December 2004.
Notes (continued)
5 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:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 1 March
2004 2003 2004
thousands thousands thousands
Basic weighted average number of shares in issue 69,293 57,139 62,622
Employee share options 1,128 2,121 1,926
Shares to be issued in respect of deferred
consideration 3,748 2,871 2,695
------- ------- -------
74,169 62,131 67,243
------- ------- -------
30 September 30 September 31 March 2004
2004 2003
Earnings (Loss)/ Earnings (Loss)/ Earnings (Loss)/
£000 earnings £000 earnings £000 earnings
per share per share per share
pence pence pence
Basic and
adjusted
basic
earnings per
share:- (6,507) (9.39)p (120) (0.21)p (962) (1.5)p
Loss and
basic loss
per share
Adjustments:
Goodwill
amortisation
and impairment 8,829 12.74p 4,640 8.12p 10,690 17.1p
EBT costs
net of tax 500 0.72p 324 0.57p 1,025 1.6p
Exceptional
items 1,991 2.87p - - 3,040 4.8p
------ ------ ------ ------ ------ --------
Adjusted
earnings and
adjusted
basic
earnings per
share 4,813 6.94p 4,844 8.48p 13,793 22.0p
------ ------ ------ ------ ------ --------
Diluted and
adjusted diluted
earnings per
share:- (6,507) (9.39)p (120) (0.21)p (962) (1.5)p
Loss and
diluted
earnings per
share
Adjustments:
FRS 14
adjustment* - 0.63p - 0.02p - 0.1p
Goodwill
amortisation
and impairment 8,829 11.90p 4,640 7.47p 10,690 15.9p
EBT costs
net of tax 500 0.67p 324 0.52p 1,025 1.5p
Exceptional
items 1,991 2.68p - - 3,040 4.5p
------ ------ ------ ------ ------ --------
Adjusted
earnings and
adjusted
diluted
earnings per
share 4,813 6.49p 4,844 7.80p 13,793 20.5p
------ ------ ------ ------ ------ --------
The adjusted basic and adjusted diluted earnings per share figure shown on the
profit and loss account is included as the directors believe that it provides a
better understanding of the underlying trading performance of the Group.
* FRS 14 requires presentation of diluted earnings per share when a company
could be called upon to issue shares that would decrease net profit or increase
net loss per share. For a loss making company, net loss per share would only be
increased by the exercise of out-of-money options. Hence, no adjustment is made
to diluted earnings per share in the six months ended 30 September 2004, the six
months ended 30 September 2003, or the year ended 31 March 2004.
Notes (continued)
6 Intangible assets: Goodwill
£000
Net book value at 31 March 2004 200,798
Goodwill arising on acquisitions 4,444
Fair value adjustments relating to prior year acquisitions (3,642)
Amortisation (5,629)
Impairment (3,200)
--------
Net book value at 30 September 2004 192,771
--------
7 Note to the cash flow statement
Reconciliation of operating profit to operating cash flows
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2004 2003 2004
£000 £000 £000
Operating (loss)/ profit (2,395) 3,285 8,398
Depreciation 1,332 957 2,134
Goodwill amortisation and
impairment 8,829 4,640 10,690
Amortisation of development
expenditure 195 85 255
Profit on sale of investments - - (203)
Profit on disposal of fixed assets (63) (6) (25)
Contribution to employee share awards 500 286 912
Amortisation of employee benefit trust - 38 113
Decrease/(increase) in debtors 4,661 1,293 (3,717)
(Decrease)/increase in creditors (10,366) (2,872) 12,317
(Increase)/decrease in stocks (2,518) (466) 419
--------- --------- -------
Net cash inflow from operating
activities 175 7,240 31,293
--------- --------- -------
8 Cash management
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2004 2003 2004
£000 £000 £000
Cash at bank 24,058 19,316 34,273
Cash collateralised deposits 3,435 8,999 7,467
--------- --------- -------
27,493 28,315 41,740
Loan notes - cash backed (3,435) (8,999) (7,467)
Other loan notes (501) (717) (701)
Bank loans (71,423) (67,238) (71,423)
Finance leases (86) (76) (46)
--------- --------- -------
Net debt (47,952) (48,715) (37,897)
--------- --------- -------
Notes (continued)
9 Acquisitions
Since 31 March 2004 Tribal Group plc has acquired 100% of the following
principal subsidiary undertakings:
Date Subsidiary acquired
April 2004 Aldcliffe Computer Systems Limited
October 2004 Strategic Information Technology Services Group Limited
November 2004 Derek Hicks & Thew Limited
Independent review report to Tribal Group plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2004 which comprises the consolidated profit
and loss account, the consolidated balance sheet, the consolidated cash flow
statement and related notes 1 to 9, together with the reconciliation of
movements in consolidated shareholders' funds and the reconciliation of net cash
flow to movement in net debt. We have read the other information contained in
the interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as test of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2004.
Deloitte & Touche LLP
Chartered Accountants
Bristol
22 November 2004
Notes: A review does not provide absolute assurance on the maintenance and
integrity of the website, including controls used to achieve this, and in
particular on whether any changes may have occurred to the financial information
since first published. These matters are the responsibilities of the directors
but no control procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination of
financial information differs from legislation in other jurisdictions.
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