Preliminary Results
Tribal Group PLC
22 June 2004
Embargoed for release at 7.00am 22 June 2004
22 June 2004 PRESS INFORMATION
Tribal Group plc
Preliminary results for the year ended 31 March 2004
Highlights:
Profit before tax* up 30 per cent to £20.1m
Adjusted diluted earnings per share* up 10 per cent to 20.5p
Underlying organic revenue growth of 18 per cent
Operating profit* to cash conversion rate of 135 per cent
Loss on ordinary activities after tax £0.9m
Committed income for 2005 over 47 per cent of budgeted turnover
Final dividend of 2.0 pence per share, making 3.0 pence per share for the year
(2003: nil)
Note: *The operating profit, profit before tax and adjusted diluted earnings per
share are stated before goodwill amortisation and impairment of £10.7m (2003:
£6.3m), employee benefit trust costs of £1.0m (2003: £0.6m) and exceptional
items of £3.0m (2003: £0.7m), (see page 7 and page 12).
Strone Macpherson, Chairman of Tribal Group plc, said:
'Tribal continues to make strong progress. During the period, we have further
strengthened our central and divisional management; accelerated our integration
programme; increased capacity; completed a number of successful acquisitions and
made new appointments to the main board.
The Group has consolidated its position as a leading provider of consultancy
services and professional support services in its key markets of education,
local government and health and social care. We have also extended its presence
in the housing, regeneration and central government markets.
During the period, we made a number of acquisitions to supplement our strong
organic growth. Most significantly, in July 2003, we purchased HACAS, the
housing and regeneration consultancy. These transactions have together
strengthened our position in existing markets and established a presence in new
growth areas. The Group continues to be well placed to take advantage of the
many opportunities arising in the markets it serves.
Since being appointed preferred bidder to set up and manage a regional chain of
NHS treatment centres, we have made good progress with contractual negotiations.
However, contract completion has been delayed and a small number of significant
issues remain outstanding.
Overall, our markets remain buoyant and, in certain areas, are very strong. Our
property businesses, which experienced some weakness last year, have made an
excellent start to the year. The schools sector remains a difficult market for
our training businesses.
The Board expects this to be another successful year for the Group and looks to
the future with confidence.'
Financial highlights:
Year ended 31 March
2004 2003
Turnover £185.7m £105.7m up 76 %
Gross revenue £152.2m £98.4m up 55 %
Operating profit* £23.2m £16.7m up 39 %
Operating margins on gross revenue* 15.2% 17.0%
Profit before tax* £20.1m £15.4m up 30 %
Profit on ordinary activities before £5.3m £7.9m down 33 %
taxation
(Loss)/profit on ordinary activities
after taxation (£0.9m) £3.1m
Adjusted diluted earnings per share* 20.5p 18.6p up 10 %
Operating cash flow £31.3m £20.4m up 53 %
Operating profit to cash conversion* 135% 122%
Note: *The operating profit, profit before tax and adjusted diluted earnings per
share are stated before goodwill amortisation and impairment of £10.7m (2003:
£6.3m), employee benefit trust costs of £1.0m (2003: £0.6m) and exceptional
items of £3.0m (2003: £0.7m), (see page 7 and page 12).
For further information contact:
Tribal Group plc 01285 886020
Henry Pitman, Chief Executive
Simon Lawton, Group Finance Director
The Maitland Consultancy
Colin Browne 0207 379 5151
Chief Executive's statement
Overview
I am pleased to report on the results of Tribal Group plc for the year ended 31
March 2004. During this period, the Group has further consolidated its position
as a leading professional support services and consultancy business,
predominantly operating in the UK public sector. The Group's position in its
core markets of education, local government and health and social care has been
further strengthened and the Group's presence in the housing, regeneration and
central government markets has been enhanced.
We continue to operate in expanding markets and to benefit from increasing
government expenditure, particularly in education and health, which together now
account for 60 per cent of public sector jobs. We now work with over 2,500
public sector organisations in areas that account for over £200bn of government
spending. There are expanding opportunities for the private sector to play a
major role in reforming and delivering public services. The main business driver
continues to be an increasing acceptance of the private sector as a provider of
consultancy and support services to the public sector. During the year, 96 per
cent (2003: 97 per cent) of our revenues were from the public sector and we
expect to retain this focus for the immediate future.
Organic growth within our business remains strong with underlying organic
revenue growth of 18 per cent. Over the year, we have increased headcount across
the whole business by 19 per cent, excluding acquisitions. We have continued to
broaden and strengthen our management and resources by hiring a number of high
quality, senior managers from major support services and consultancy
competitors. This growth has been augmented by a number of targeted
acquisitions, including our first public acquisition of HACAS, the housing and
regeneration consultancy.
Mercury Health, which has been established as the Group's healthcare delivery
business is preferred bidder on a five year Independent Sector Treatment Centre
(ISTC) contract with the NHS.
During the year, we established a divisional management structure for the
business; we have now appointed divisional CEOs to lead each of our three
largest divisions: consulting, resourcing and technology. This divisional
structure has enabled us to accelerate our integration plans and we are starting
to see benefits from cost efficiencies, brand leverage, transfer of best
practice, enhanced recruitment and staff development initiatives, as well as
from the shared services provided from the Group's eight hub offices.
Strategy
Our strategy continues to be focused on developing an integrated consultancy and
support service group working predominantly with the UK public sector. We
continue to grow the business by extending our range of skills and services and
building capacity through organic growth, and strategic and bolt-on
acquisitions. In parallel, we are creating a healthcare delivery business to
take advantage of the opportunities arising in the NHS market.
Results
In the year ended 31 March 2004, the Group has produced another set of strong
results. Turnover was £185.7m (2003: £105.7m) and operating profit* was £23.2m
(2003: £16.7m). Operating margins* were 15.2 per cent (2003: 17.0 per cent), a
good performance given the level of growth during the year. Profit before
taxation* was £20.1m (2003: £15.4m) and adjusted diluted earnings per share*
were 20.5p (2003: 18.6p) and loss after tax was £0.9m (2003: profit £3.1m).
During the period, the Group generated operating cash flow of £31.3m (2003:
£20.4m), representing an operating profit to cash conversion rate of 135 per
cent (2003: 122 per cent). Net debt at the year end was £37.9m, representing
gearing of 23.9 per cent. Interest cover was 7.5 times. Our gross return on
capital employed was 15.0 per cent (2003: 20.0 per cent).
* The operating profit, operating margins, profit before tax and adjusted
diluted earnings per share are stated before goodwill amortisation and
impairment of £10.7m (2003: £6.3m), employee benefit trust costs of £1.0m (2003:
£0.6m) and exceptional items of £3.0 (2003: £0.7m) see page 7 (profit and loss
account) and page 12 (notes).
Dividend
The Group paid a maiden dividend of 1.0 pence per share following the
announcement of the interim results last November. The Board is pleased to
announce that it is recommending a final dividend of 2.0 pence per share, making
a total of 3.0 pence per share for the year. The dividend will be paid on 15
October 2004 to shareholders on the register on 24 September 2004.
Review of operations
The Group has two existing business streams, consultancy and support services.
In addition, in early 2003, Mercury Health was established as the Group's health
delivery business.
During the year, our consultancy and support services operations both won a
series of important new contracts and continued to generate strong organic
growth that was supplemented by a number of significant acquisitions.
Tribal Consulting is one of the largest consultancy businesses operating in the
public sector, with over 500 fully consultants and over 1,000 associates. The
business has recurring, high margin revenues; technically sophisticated staff;
and high quality, long-term customer relationships which often lead to
outsourcing opportunities. The consultancy business operates through four
business units: education; local government and housing; health and social care;
and central government.
Our Support Services businesses deliver an extensive range of 'white collar'
services that support the core operations of an organisation. They are managed
through five divisions:
* Tribal Technology - products, systems development, managed services and
document management
* Tribal Resourcing - staff resourcing and recruitment advertising
* Tribal Training - training delivery, e-learning and publishing
* Tribal Property - project management, architectural and property services
* Tribal Communications - communications and PR services
Each of these divisional businesses are either already, or are expected to
become, leaders in their respective markets and substantial in their own right.
These businesses provide the Group with long-term committed revenue; skills and
services which can be supplied to customers as a packaged solution; and the
reference sites which assist the Group to bid successfully for further
contracts.
Mercury Health was established in response to the ISTC initiative. This £2bn NHS
programme was developed to seek private sector capacity to establish and run new
treatment centres to carry out 250,000 elective surgery and diagnostic
procedures. Mercury Health brought together the Group's considerable expertise
in healthcare planning, equipping, recruitment, property and healthcare
management, augmented by a strategic partnership with Health Inventures, a
leading US treatment centre service provider.
In September 2003, we announced that Mercury Health had been appointed as
preferred bidder on a £300m treatment centre contract (the 'Spine Chain').
Following extensive negotiations, during which material changes were made by the
NHS to the proposed number of guaranteed procedures and casemix, it became clear
that it was not going to be possible to agree a pricing and contractual
structure which would have provided the Group with an acceptable level of
return.
In February 2004, we announced that the NHS had confirmed our appointment as
preferred bidder on a separate five year ISTC contract. The contract involves
setting up and operating a regional network of five treatment centres (the
'South East Chain') in support of the NHS. These centres will be located in
Wycombe, Haywards Heath, Portsmouth, Havant and Medway and are scheduled to open
between Spring 2005 and Spring 2006. The contract will guarantee a minimum
caseload over a five year period and is expected to generate revenues from the
NHS of approximately £190m.
Although significant progress has been made since February and commercial and
contract negotiations are now at an advanced stage, a small number of
significant issues still remain outstanding. In the light of this, the Board has
reviewed the current position on the ISTC negotiations with the Department of
Health and has concluded that it would be prudent to make full provision for all
costs incurred to date. The Group has expensed £3.0m in the year ended 31 March
2004, which are disclosed as exceptional items. Further bid and implementation
costs of £2.3m have been incurred since 31 March 2004 and the Board expect that
these will be shown as exceptional items in the 31 March 2005 accounts.
We and the Department of Health are working hard to resolve the remaining issues
and move towards the signing of an agreed contract. The Group is minimising f
urther expenditure until the outstanding issues are resolved.
New contracts
During the year, we won a number of important contracts and, increasingly, these
involve more than one part of the Group.
In April 2003, our schools inspection contract with Ofsted (now valued at £6m)
was renewed and extended. We are contracted to inspect 580 schools, an increase
of 52 over the previous year, and now have some 14 per cent of the inspections
market. In May, we announced that, through a consortium led by RM plc, we had
been awarded a £4.2m contract to provide e-learning services to the South
Yorkshire e-learning partnership. In July, we won a £4.4m basic skills contract
with the Adult Basic Skills Agency.
In August, we were awarded a three year contract as the NHS Franchise Partner at
Good Hope Hospital, the first time the private sector has been brought in to
manage a failing hospital trust. This type of turnaround contract is an area
where the Group has developed significant expertise. Over the last two years, we
have been contracted to provide strategic management in education at Swindon
LEA; to assist in the restructuring of social services in Cardiff; and to manage
the library service in Haringey. In September 2003 the Ofsted inspection report
on the work of Swindon LEA was published. The report showed a dramatic
turnaround in the effectiveness of the Council's work in the year since Tribal
was awarded the contract to be the Council's strategic partner. The degree and
rate of improvement has not been bettered anywhere and was recently described as
'a leap in standards of which most councils can only dream.'
In January 2004, we were awarded a very high profile DfES contract for the
provision of school improvement services to schools facing challenging
circumstances. The total number of schools now involved is 53. In February 2004,
we were awarded a £2m healthcare architectural contract to design a new mental
health facility as part of the Birmingham New Hospital PFI scheme.
During the year, we won 11 new recruitment advertising contracts with a combined
estimated value of £5m per annum. Since the start of this year, we have won a
further nine such contracts worth £4m per annum.
In April 2004, we renewed our contract with Fujitsu to maintain and support the
learning environment at the heart of Ufi learndirect. This contract is valued at
£1.2m. In the spring and early summer, we won two contracts to project manage
City Academies at Leicester and Hackney. These prestigious projects will
position the Group well for the Government's 'Building Schools for the Future'
initiative.
Today, we are announcing the award of contracts to run three Ufi learndirect
hubs in Somerset, Dorset and Devon & Cornwall. The two year contracts,
commencing on 1st August 2004, are expected to be worth up to £9.6m. As a hub
operator, we are responsible for managing the delivery of online courses and
information through a network of learning centres and achieving learning
performance targets in the hub areas.
Acquisitions
During the year, we made a number of acquisitions, including HACAS, our first
listed company acquisition and our largest to date, which was acquired in July
2003 for a total consideration of £45.5m.
HACAS is the leading consultancy business in the social housing sector, working
with 120 Local Authorities and over 500 Registered Social Landlords, as well as
a number of central government departments and agencies. This acquisition has
substantially strengthened our consultancy division, and has provided us with
market leadership in the housing sector. The business has been successfully
integrated with our local government consultancy. Since acquisition, the
business has expanded its operations in Scotland, where a very able team of
consultants has joined us from a competitor. The business continues to operate
in buoyant markets and has performed in line with our expectations.
The other major acquisition during the year was Geronimo, one of the UK's
leading public sector PR and corporate social responsibility agencies.
Geronimo's clients include several central government departments and agencies,
such as the DfES, DVLA and the DWP, charities and the community relations
departments of large corporations. Approximately 70 per cent of sales are from
the education sector. This acquisition, which now forms part of Tribal
Communications, has won a significant amount of new business since joining the
Group, and has performed ahead of expectations.
The acquisitions made in the year cost an aggregate initial consideration of
£71.1m (including cash balances acquired of £7.1m), paid for by a combination of
cash and shares. Deferred consideration of up to £15.4m is payable in respect of
these acquisitions, principally in shares, based on increases in operating
profits. At the year end, our estimated aggregate earn-out liability in respect
of the period to 31 March 2008 was £22.8m. Although these liabilities are
primarily to be satisfied in shares, the Group always retains sufficient
headroom in its banking facilities to finance the next two years' earn-outs in
cash.
While the main focus of the business is to achieve high levels of organic growth
and the pace of acquisitions has slowed, we continue to identify successful
companies with strong track records and excellent growth potential and with
skills and services that can add to our overall proposition. We expect to make a
limited number of further bolt-on acquisitions. Since the year end, we have
completed the acquisition of Aldcliffe Computer Systems for an initial
consideration of £2.7m, satisfied in cash and shares, with deferred
consideration of up to £1.8m to be satisfied primarily in shares.
Board changes
I would like to record the Board's gratitude to David Telling who retired as
Chairman on 26 September 2003 due to continuing ill health. Very sadly, he died
on 31 October 2003. He made a major contribution to the early evolution of the
Group and was immensely valuable to the executive team in the early stages of
the Group's development.
Dominic Collins acted as Interim Chairman until the appointment of Strone
Macpherson on 11 March 2004. Since the start of the new financial year, we have
announced the appointment of three independent directors, each bringing
significant board and operational experience from both FTSE 100 and 250
companies. Strone Macpherson, Sheila Forbes, David Thompson and Tim Stevenson
come up for re-election at the forthcoming AGM.
Miles Hunt, one of the founder directors, will be retiring at the AGM after five
years on the Board. Miles has made a major contribution to the Board and had a
significant impact on the development of the Group. We would like to record our
thanks to him.
Outlook
Tribal Group is firmly established as a major supplier of high value added
consultancy and professional support services to the public sector. The Group is
operating in expanding public sector markets, and has the right business model,
as well as the skills, services, management and customer relationships to build
barriers to entry and grow market share.
Overall, our markets remain buoyant and in certain areas are very strong. Our
property businesses, which experienced some weakness last year, have made an
excellent start to the year. The schools sector remains a difficult market for
our training businesses.
The necessary investment to develop the Group's infrastructure, in further
strengthening central and divisional management, and in accelerating the
integration programme, is now well underway. As indicated in our previous
statements, this expenditure and our continuing investment in capacity building
is likely to hold back progress somewhat in the short term, but we believe it
will further strengthen our foundations for the future. The Board expects this
to be another successful year for the Group and looks to the future with
confidence.
Henry Pitman
Chief Executive
Consolidated profit and loss account
For the year ended 31 March 2004
2004 2003
Note Before Goodwill Total Before Goodwill Total
goodwill,EBT EBT and goodwill, EBT EBT and
and exceptional and exceptional
exceptional items exceptional items
items items
£000 £000 £000 £000 £000 £000
Turnover (gross earnings)
Continuing
operations 163,385 - 163,385 105,659 - 105,659
Acquisitions 22,359 - 22,359 - - -
------- -------- ------ ------- ------- ------
185,744 - 185,744 105,659 - 105,659
Direct agency costs (33,523) - (33,523) (7,295) - (7,295)
------- -------- ------ ------- ------- ------
Gross revenue 152,221 - 152,221 98,364 - 98,364
Cost of sales (65,870) - (65,870) (42,249) - (42,249)
------- -------- ------ ------- ------- ------
Gross profit 86,351 - 86,351 56,115 - 56,115
------- -------- ------ ------- ------- ------
Net administrative expenses (63,198) - (63,198) (39,430) - (39,430)
Goodwill amortisation
and impairment - (10,690) (10,690) - (6,288) (6,288)
Contribution to EBT - (912) (912) - (505) (505)
Amortisation of shares held
by EBT - (113) (113) - (75) (75)
Exceptional items 2 - (3,040) (3,040) - (702) (702)
------- -------- ------ ------- ------- ------
Total administrative
expenses (63,198) (14,755) (77,953) (39,430) (7,570) (47,000)
____________ ____________ _________ ___________ ___________ _________
23,153 (14,755) 8,398 16,685 (7,570) 9,115
------- -------- ------ ------- ------- ------
Operating profit
Continuing operations 17,816 (12,373) 5,443 16,685 (7,570) 9,115
Acquisitions 5,337 (2,382) 2,955 - - -
------- -------- ------ ------- ------- ------
23,153 (14,755) 8,398 16,685 (7,570) 9,115
Net interest payable (3,076) - (3,076) (1,260) - (1,260)
------- -------- ------ ------- ------- ------
Profit on ordinary activities
before taxation 20,077 (14,755) 5,322 15,425 (7,570) 7,855
Taxation 4 (6,176) - (6,176) (4,911) 174 (4,737)
------- -------- ------ ------- ------- ------
(Loss)/profit on ordinary
activities after taxation 13,901 (14,755) (854) 10,514 (7,396) 3,118
Minority interest (equity) (108) - (108) - - -
------- -------- ------ ------- ------- ------
(Loss)/profit)for the
financial year 13,793 (14,755) (962) 10,514 (7,396) 3,118
Dividends (2,090) - (2,090) - - -
------- -------- ------ ------- ------- ------
Retained (loss)/profit
for the year 11,703 (14,755) (3,052) 10,514 (7,396) 3,118
------- -------- ------ ------- ------- ------
(Loss)/earnings per share
Basic 3 22.0p (23.5)p (1.5)p 21.4p (15.0)p 6.4p
Diluted 3 20.5p (21.9)p (1.4)p 18.6p (13.1)p 5.5p
The results for the year disclosed in the profit and loss account are on a
historical cost basis. There are no other recognised gains or losses in the
current or prior year, and accordingly, no separate statement of total
recognised gains and losses has been presented.
Consolidated balance sheet
At 31 March 2004
31 March 31 March
Note 2004 2003
£000 £000
Fixed assets
Intangible assets - goodwill 5 200,798 142,315
- development expenditure 557 308
Tangible assets 6,356 3,549
Investments 190 86
--------- -------
207,901 146,258
Current assets
Stock - work in progress 2,058 1,618
Debtors 6 45,245 33,856
Cash at bank and in hand 10 41,740 29,671
--------- -------
89,043 65,145
Creditors: amounts falling due within one year 7 (67,784) (60,737)
--------- -------
Net current assets 21,259 4,408
--------- -------
Total assets less current liabilities 229,160 150,666
Creditors: amounts falling due after more than 8 (72,015) (36,225)
one year
--------- -------
Net assets 157,145 114,441
--------- -------
Capital and reserves
Called up share capital 3,448 2,624
Share premium account 112,992 59,216
Capital reserve 9,545 9,545
Profit and loss account 2,861 5,913
Shares to be issued 27,172 36,367
--------- -------
Equity shareholders' funds 156,018 113,665
Equity minority interest 1,127 776
--------- -------
Total capital employed 157,145 114,441
--------- -------
Reconciliation of movements in consolidated shareholders' funds
At 31 March 2004
31 March 31 March
2004 2003
£000 £000
(Loss)/profit for the year (962) 3,118
Dividends (2,090) -
New share capital subscribed 54,600 19,983
Shares to be issued (10,355) 5,261
Credit in relation to share related awards 912 505
Share related awards acquired 248 -
------- -------
Net addition to shareholders' funds 42,353 28,867
Opening shareholders' funds 113,665 84,798
------- -------
Closing shareholders' funds 156,018 113,665
------- -------
Consolidated cash flow statement
For the year ended 31 March 2004
Year ended Year ended
31 March 31 March
Note 2004 2003
£000 £000
Net cash inflow from operating activities 9 31,293 20,411
Returns on investments and servicing of finance
Interest paid (4,957) (3,173)
Interest element of finance lease rental payments (14) (30)
Interest received 1,347 1,343
------- -------
Net cash outflow from returns on investments and
servicing of finance (3,624) (1,860)
Taxation
Corporation tax paid (7,772) (3,722)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (3,399) (2,150)
Payments to acquire intangible fixed assets (502) (329)
Payments to acquire investments (10) (5)
Sale of tangible fixed assets 865 168
Sale of investments 718 -
------- -------
Net cash outflow for capital expenditure and
financial investment (2,328) (2,316)
Acquisitions
Purchase of subsidiary undertakings (55,813) (30,681)
Net increase in cash from acquisition of 7,350 2,613
subsidiary undertakings
------- -------
Net cash outflow from acquisitions (48,463) (28,068)
Equity dividend paid (688) -
------- -------
Cash outflow before financing (31,582) (15,555)
Financing
Issue of ordinary share capital less issue costs 20,123 (21)
Repayment of borrowings (11,617) (26,479)
New secured loans less issue costs 35,243 36,180
Capital element of finance lease rental payments (98) (238)
------- -------
Net cash inflow from financing 43,651 9,442
------- -------
Increase/(decrease) in cash in the year 12,069 (6,113)
------- -------
Consolidated cash flow statement (continued)
For the year ended 31 March 2004
Year ended Year ended
31 March 31 March
2004 2003
£000 £000
Reconciliation of net cash flow to movement in net
debt
Increase/(decrease) in cash in the year 12,069 (6,113)
Cash outflow from movements in debt (27,615) (12,828)
------- -------
Change in net debt resulting from cash flows (15,546) (18,941)
Finance leases acquired with subsidiaries (1) (75)
Debt acquired with subsidiaries (267) -
New finance leases - (39)
------- -------
Movement in net debt in the year (15,814) (19,055)
Net debt at the start of the year (22,083) (3,028)
------- -------
Net debt at the end of the year (37,897) (22,083)
------- -------
Notes
1 Preliminary Announcement
A duly appointed and authorised committee of the Board of directors approved the
preliminary announcement on 21 June 2004.
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 March 2004 or 2003, but is derived
from those accounts.
The financial information is prepared on the basis of the accounting policies as
stated in the previous year's financial statements.
Statutory accounts for 2003 have been delivered to the Registrar of Companies
and those for 2004 will be delivered following the company's Annual General
Meeting. The auditors have reported on those accounts; their reports were
unqualified and did not contain statements under s237 (2) or (3) of the
Companies Act 1985.
2 Exceptional Items
The exceptional items of £3,040,000 relate to bid costs incurred on two NHS
Independent Sector Treatment Centre contracts. Further details are disclosed in
note 12.
3 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:
2004 2003
thousands thousands
Weighted average number of shares outstanding:
Basic weighted average number of shares in issue 62,622 49,030
Employee share options 1,926 1,563
Shares to be issued in respect of deferred consideration 2,695 5,892
-------- --------
Weighted average number of shares outstanding
for dilution calculations 67,243 56,485
-------- --------
The adjusted basic and adjusted diluted earnings per share figure shown on the
profit and loss account on page7 is included as the directors believe that it
provides a better understanding of the underlying trading performance of the
Group. Therefore, an adjusted earnings per share and adjusted diluted earnings
per share is also presented:
2004 2003
Earnings (Loss)/ Earnings Earnings
earnings per share
£000 per share £000 pence
pence
Basic and adjusted basic
earnings per share
(Loss)/earnings and basic
earnings per share (962) (1.5)p 3,118 6.4p
Adjustments:
Goodwill amortisation
and impairment 10,690 17.1p 6,288 12.8p
EBT costs net of tax 1,025 1.6p 406 0.8p
Exceptional items 3,040 4.8p 702 1.4p
-------- -------- -------- --------
Adjusted earnings and adjusted
basic earnings per share 13,793 22.0p 10,514 21.4p
-------- -------- -------- --------
Notes (continued)
3 Earnings per share (continued)
2004 2003
Earnings (Loss)/ Earnings Earnings
earnings
£000 per £000 per
share share
pence pence
Diluted and adjusted diluted
earnings per share
(Loss)/earnings and diluted
earnings per share (962) (1.4)p 3,118 5.5p
Adjustments:
Goodwill amortisation
and impairment 10,690 15.9p 6,288 11.1p
EBT costs net of tax 1,025 1.5p 406 0.7p
Exceptional items 3,040 4.5p 702 1.3p
-------- -------- -------- --------
Adjusted earnings and adjusted
diluted earnings per share 13,793 20.5p 10,514 18.6p
-------- -------- -------- --------
4 Taxation
The effective rate of tax on operating profit before goodwill amortisation, EBT
costs and exceptional items was 30.8% (2003: 31.8%). The current year charge
also prudently assumes no tax relief on the ISTC bid costs.
5 Intangible fixed assets: Goodwill
£000
Net book value at 31 March 2003 142,315
Goodwill arising on acquisitions 69,173
Amortisation charge (10,126)
Impairment (564)
-------
Net book value at 31 March 2004 200,798
-------
The total amortisation charge for the year was £10.7m. Included in this total
charge was an impairment write down of £0.6m relating to a review of the
carrying value of investments. This impairment relates to one company.
6 Debtors
31 March 31 March
2004 2003
£000 £000
Trade debtors 38,972 28,478
Other debtors 878 373
Prepayments and accrued income 4,629 4,090
Amounts recoverable on contracts 388 487
Deferred tax 378 428
------- -------
45,245 33,856
------- -------
Debtor days outstanding improved from 49 days to 45 days.
Notes (continued)
7 Creditors: amounts falling due within one year
31 March 31 March
2004 2003
£000 £000
Trade creditors 23,209 13,887
Corporation tax 4,510 4,393
Other taxation and social security 8,500 5,404
Other creditors 1,176 508
Accruals and deferred income 18,950 14,335
Deferred consideration 1,827 6,681
Dividends 1,400 -
Other loans 8,168 15,431
Obligations under finance leases and hire 44 98
purchase contracts
------- -------
67,784 60,737
------- -------
8 Creditors: amounts falling due after more than one year
31 March 31 March
2004 2003
£000 £000
Bank loans and overdrafts 71,423 36,180
Obligations under finance leases and hire 2 45
purchase contracts
Deferred consideration 590 -
------- -------
72,015 36,225
------- -------
9 Note to the cash flow statement
Reconciliation of operating profit to operating cash flows
Year ended Year ended
31 March 31 March
2004 2003
£000 £000
Operating profit 8,398 9,115
Depreciation 2,134 1,513
Goodwill amortisation and impairment 10,690 6,288
Amortisation of development expenditure 255 265
Provision for impairment of investments - 35
Profit on sale of investments (203) -
Profit on disposal of fixed assets (25) (1)
Contribution to employee share awards 912 505
Amortisation of employee benefit trust 113 75
Increase in debtors (3,717) (6,137)
Increase in creditors 12,317 8,957
Decrease/(increase) in stocks 419 (204)
------- -------
Net cash inflow from operating activities 31,293 20,411
------- -------
Notes (continued)
10 Cash management
31 March 31 March
2004 2003
£000 £000
Cash at bank 34,273 14,174
Cash collateralised 7,467 15,497
------- -------
41,740 29,671
Loan notes - cash backed (7,467) (14,692)
Other loan notes (701) (739)
Bank loans (71,423) (36,180)
Finance leases (46) (143)
------- -------
(79,637) (51,754)
------- -------
Net debt (37,897) (22,083)
------- -------
11 Acquisitions
Since 31 March 2003, Tribal Group plc has acquired the following principal
subsidiary undertakings:
Date Subsidiary acquired
April 2003 Foundation Software Solutions Limited
July 2003 HACAS Group PLC
July 2003 Kinetic Technologies Limited
August 2003 Geronimo Public Relations Limited
12 Post Balance Sheet Event
The Group consistently applies UITF 34 'Pre-Contract Costs' and only capitalises
bid costs from the point at which it becomes virtually certain that costs will
be recovered. Costs of £1.8m were expensed in full following the withdrawal from
negotiations on the Spine regional chain. In February 2004, the Group was
appointed preferred bidder on the South-East regional chain. Although
significant progress has been made and contract negotiations are at an advanced
stage, a number of significant issues still remain outstanding. In the light of
this, the Board has concluded post year end, that it is no longer virtually
certain that contract closure will be reached and has decided that it would be
prudent to make a further exceptional write-off of £1.2m, making a total of
£3.0m as disclosed in Note 2.
Further bid and implementation costs of £2.3m have been incurred since 31 March
2004 and the Board expect that these will be shown as exceptional items in the
31 March 2005 accounts.
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