TIDMTRB
RNS Number : 2237T
Tribal Group PLC
19 March 2019
19 March 2019
Tribal Group plc
("Tribal" or the "Group")
Preliminary Results year ended 31 December 2018
Tribal (AIM: TRB), a leading provider of software and services
to the international education management market, today announces
its preliminary results for the year ended 31 December 2018.
Financial highlights
-- Adjusted operating profit for the year up 27% to GBP10.8m*
(2017: GBP8.5m*) on revenue of GBP80.1m (2017: GBP84.9m)
-- Statutory operating profit up 24% to GBP4.6m (2017: GBP3.7m);
statutory earnings per share (diluted) 2.0p (2017: 1.3p)
-- Annual recurring revenue increased by 5% to GBP38.5m (2017:
GBP36.5m**) representing 45% of revenue
-- Adjusted Operating Margin improvement of 4.4pp** to 13.5%, pre-IFRS 15 margin 15%
-- Strong operational cash inflow during the year of GBP14.2m
(2017: GBP11.1m); year end net cash of GBP20.0m (2017:
GBP14.1m)
-- Progressive annual dividend payment with the Board
recommending a 10% increase to 1.1p per share (2017: 1.0p)
* Adjusted operating profit is in respect of continuing
operations and is stated excluding "Other Items" charges of GBP6.2m
(2017: GBP4.8m). Other Items include Share-based Payments, Deferred
Contingent Consideration, Amortisation of IFRS3 Intangibles,
Defined Benefit Pension Scheme gains, and Restructuring and
associated costs
** Adjusted for Ofsted contract, IFRS15 and constant
currency
Operational highlights
-- Four new name Universities won in the UK Higher Education
sector and a number of larger Further Education Colleges
-- QAS won significant new contracts as well as renewals and
extensions to existing contracts across the UK, USA and Middle
East
-- In Australia and New Zealand, Higher Education sector
continues to perform well supporting existing customers; Schools
and FE/VET sector has been more challenging and a restructuring
plan is in place to improve future performance
-- Continued investment in next generation, cloud-based student
information system "Tribal Edge", and ongoing investment in current
Student Management Systems products
-- Dispute with software platform provider on royalty payments;
unsubstantiated pre-claim of GBP15m-GBP30m which we will strongly
defend
-- Mark Pickett named Chief Executive Officer and Paul Simpson
named Acting Chief Financial Officer on 18(th) March 2019
Mark Pickett, Chief Executive, commented:
"I am pleased with the improved profit performance for the year
and the addition of significant new customers in Higher Education
and Further Education following competitive tenders. Margin has
improved and we continue to challenge costs across the business.
The Group continues to deliver against its strategic goals of
improving profitability, supporting customers in their move to the
Cloud and delivering the next - generation information system to
new and existing customers. We have started 2019 well with
significant wins in the Further Education and Work-based learning
sectors and look forward to continued momentum across the year and
into the future."
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No.596/2014.
Ends
For further information please contact:
Tribal Group plc
Tel: 0117 313 6371
Richard Last, Executive Chairman
Mark Pickett, Chief Executive Officer
Paul Simpson, Acting Chief Financial Officer
Investec Bank plc
Tel: 020 7597 5970
Sara Hale
Andrew Pinder
William Godfrey
Neil Coleman
N+1 Singer Capital Markets Limited
Tel: 0207 496 3000
Shaun Dobson
Tulchan Communications LLP
Tel: 0207 353 4200
James Macey White
David Ison
About Tribal Group plc
Tribal Group plc is a pioneering world-leader of education
software and services. Its portfolio includes Student Information
Systems; a broad range of education services covering quality
assurance, peer review, benchmarking and improvement; and student
surveys that provide the leading global benchmarks for student
experience. Working with Higher Education, Further and Tertiary
Education, schools, Government and State bodies, training providers
and employers, in over 55 countries; Tribal Group's mission is to
empower the world of education with products and services that
underpin student success.
Chairman's statement
As Tribal enters its 20(th) year of trading following its
foundation in 1999, I am pleased to report another positive
performance continuing the upward trend since the operational and
structural changes put in place during 2015 and 2016.
The Group achieved significant growth in full year adjusted
operating profit which increased by 27% to GBP10.8m (2017:
GBP8.5m), and the adjusted operating margin which increased to
13.5% from 10.1% in 2017. Adjusted earning per share (diluted)
increased to 4.3p (2017: 3.2p). Statutory profits, which are stated
after charging share-based payments, amortisation of IFRS3
intangibles and restructuring costs, increased to GBP4.1m (2017:
GBP2.6m).
Revenue decreased to GBP80.1m (2017: GBP84.9m), which reflects
the expiry of the Ofsted Early Years contract in March 2017 that
contributed GBP2.4m, and the move to the new revenue accounting
standard IFRS 15 which reduced comparable current year revenue by
GBP1.5m.
Annually recurring revenues, covering Support & Maintenance
fees and Cloud services, grew by over 5% to GBP38.5m (2017:
GBP36.5m) and now represent 45% of total revenue, and 64% of
software related revenue giving considerable stability to the
business.
We continue to see strong cash flows, operating cash flow was
GBP14.2m (2017: GBP11.1m). The Group ended the year debt free, with
the balance sheet in a strong position, debt free, and with closing
cash 42% higher at GBP20.0m (2017: GBP14.1m).
Dividend
Reflecting the Group's strong performance the Board is pleased
to propose a 10% increase in the annual dividend to 1.1p per share
continuing the progressive dividend policy announced with the
return to dividend payments in 2017.
2018 Business Performance
Tribal continues to be an international leader in the provision
of student information systems to universities and colleges in the
UK, Australia, New Zealand, Malaysia and Canada as well as
elsewhere in the world. Tribal systems are used by 50% of the
Russell group of universities in the UK.
The Group secured new contract wins in 2018 in the Higher
Education sector to install our SITS student management systems at
the University of Portsmouth, Canterbury Christ Church University,
St Mary's University Twickenham and Ravensbourne University London.
These will be delivered during 2019 and 2020.
In Further Education we had a significant contract award with
Colleges Northern Ireland to install our ebs student management
system in all six further education colleges. In addition we
concluded the rollout of Campus to all British Council sites across
47 countries.
In Australia we entered the second year of our four year
agreement to provide our Callista software to a group of 11
universities and successfully completed the key releases of ebs to
2200 schools in New South Wales; we now support 4000 schools across
the country however, as previously reported, 800 of the dioceses
schools using our School (Human)Edge system will migrate to their
own student management system over the next two years.
The wider APAC market proved challenging in 2018 with no
significant new customer wins and limited pipeline opportunities as
institutions have deferred upgrading or replacing existing systems.
At the end of 2018 the Group took the decision to restructure the
Australian business, including ceasing development of additional
SchoolEdge modules, with anticipated annualised savings of
approximately GBP2m.
Throughout the year, and particularly in the second half, we
have focused significant effort on improving operational efficiency
across all aspects of our business. This will bring benefits to
Tribal in 2019 and beyond.
Quality Assurance Solutions (QAS) continued to perform well
winning over 80% of tender submissions with significant new
contracts secured in the UK to provide quality assurance and
training, as well as contract extensions in both the UK and the USA
and ongoing inspections work in the Middle East. From 2019 the
i-graduate surveys business will be brought under QAS management
and will operate as one combined business, Education Services, this
will improve the efficiency of the i-graduate business both from a
sales and costs perspective.
Product Development (Tribal Edge)
We continue to invest in our cloud enabled student information
platform, Tribal Edge, with the first modules being completed will
in 2020 with further development continuing into 2021 and beyond.
The product is a complementary evolution to our existing student
management systems which we will continue to support into the
future. We already have a number of Edge ready modules that are
available on our existing platforms, including Student Engage our
social collaboration app for students and teachers.
Board and employees
It was with great shock and sadness that we received the news of
Ian Bowles's death on 28 August 2018. Ian was widely respected
throughout the Group and the wider industry, and was instrumental
in leading the turn around of Tribal since he joined the business
as Chief Executive Officer in March 2016. We extend our most
heartfelt condolences and sympathy to Ian's family; he is much
missed.
We announced on 18 March 2019 the appointment of Mark Pickett as
Chief Executive Officer. Mark had been performing the role of
Acting Chief Executive Officer, in addition to his Chief Financial
Officer duties, since 5 October 2018. I should like to thank Mark
for taking on this significant extra responsibility and for the
continuing excellent contribution he has made to the success of the
business. Paul Simpson, our Global Financial Controller, has taken
on the role of Acting Chief Financial Officer.
Our employees are the bedrock upon which the success of our
business is founded. Despite the challenges Tribal has faced they
have shown great loyalty, determination and hard work for which I
thank them sincerely. I look forward to their continued commitment
and to working with them in the future.
Dispute
As previously reported on 25th January 2019 we received a letter
of claim from lawyers acting for a provider of a software platform
on which certain of the Group's software products are based. The
letter claims that Tribal Education Limited, a subsidiary of Tribal
Group plc, has failed to account properly for royalties under the
terms of a Value Added Reseller Agreement dated 1 April 2000 and
has breached the terms of that agreement. We are aware that other
companies have had similar claims made against them by the same
platform provider. Whilst no specific amount is claimed, the letter
of claim estimates the losses at between GBP15 million and GBP30
million. These claims date back over a period of more than 18 years
during which the Group has regularly made royalty payments and the
Directors do not consider the claims to be justified. The Directors
wish to continue to work with the platform provider but we intend
to defend these claims vigorously.
Brexit
Tribal awaits the conclusion of the UK's exit from the European
Union (Brexit). Whilst we have no evidence of any short term impact
of Brexit, areas concerning reduced funding for research projects,
a fall in student numbers as a result of increasing tuition fees
and present overseas student immigration policies (which will be
exacerbated by a disorderly Brexit) will undoubtedly put pressure
on universities' finances which may result in curtailment or delays
in new investment. We continue to monitor developments closely and
will take all necessary action to respond to any forthcoming
developments in our market place.
Outlook and current trading
We have started 2019 strongly winning a large contract in the
Work-based learning sector providing our Maytas system to the CITB
(Construction Industry Training Board). We have a good pipeline of
new opportunities in the UK in Higher Education, Further Education
and Work-based learning and expect to secure new customers for our
student information systems across the year. Our focus in the Asia
Pacific region is on improved operational efficiencies whilst we
introduce new products and services.
In Education Services we expect further growth in inspections
and training (QAS) with a number of new contracts in the pipeline,
including expansions and renewals, and we also expect to see
improved performance in our student surveys business (i-graduate)
as the products are refreshed.
Revenues for the coming year are expected to be similar to 2018,
however we are focused on delivering improved operating margins as
we continue to target cost savings and further efficiencies. We
enter 2019 with an increased sales order backlog at GBP121.6m
(2017: GBP120.4m) of which GBP59.9m is expected to be recognised in
2019.
We look forward to our 20(th) year with optimism and will
continue to build sustainable shareholder value for the future.
Richard Last
Executive Chairman
Business & Financial Review
Introduction
The Group continues to build on the strong foundations put down
in 2016 and 2017. There is further, significant improvement in
profitability as a result of continued efficiencies and
productivity.
Revenues fell to GBP80.1m (2017: GBP84.9m reported); this,
however, includes the combined impacts of the accounting change to
IFRS 15 "Revenue from Contracts with Customers", adverse currency
fluctuations, and the inclusion of the Ofsted contract which
successfully concluded in March 2017. These are described in more
detail below. Excluding these items to focus on the core business,
revenue remained consistent with last year, driven by the strong
performance in Quality Assurance Solutions (QAS).
Annually recurring revenues increased to GBP38.5m (2017:
GBP37.5m reported), driven by increasing demand for Cloud
services.
The adjusted operating profit increased by 27% to GBP10.8m
(2017: GBP8.5m reported) and the statutory operating profit by 24%
to GBP4.6m (2017: GBP3.7m). The adoption of IFRS 15 which spreads
the recognition of license revenue for large deals across the
period of implementation, materially impacts the profit for the
year. For 2018, the profit would have been higher by GBP1.4m if the
previous accounting standard had been applied.
The adjusted operating profit for the core business, after
adjusting 2017 for the accounting change to IFRS 15, adverse
currency fluctuations, and the Ofsted contract, increased by 48% to
GBP10.8m (2017: GBP7.3m adjusted). On the same basis, adjusted
operating margin increased to 13.5% from 9.1%, with consistent or
increased margin in all segments (before central overheads).
We continued the downward pressure on cost which, together with
the material cost efficiencies of 2016 and 2017 benefitting 2018,
reduced Central Overheads to GBP10.7m (2017: GBP14.6m reported),
just over 13% of revenue.
Management continues to look to deliver cost efficiencies and
improve margin without impacting the Group's ability to serve our
customers or drive the business forward. In 2019, we anticipate
that there will be further opportunities to restructure parts of
the business to improve profitability.
2018 in summary
In the UK, within our chosen markets and sectors, overall
activity levels for the replacement of student information systems
have remained stable, and we have continued the strong win rates in
Higher Education and Further Education. In the year, we won four
new university customers for full SITS (Strategic Information
Technology System) implementations, at the University of
Portsmouth, Canterbury Christ Church University, St Mary's
University Twickenham and Ravensbourne University London, as well
as in Further Education, winning Colleges Northern Ireland, where
we are implementing ebs in all six further education colleges.
These wins confirm that our international customer base and
continued market-leading position provide a strong platform around
which to build long-term shareholder value.
Our Callista business, which provides student information
systems to 25% of Australian universities, performed well, and is
in the second year of a four year contract extension (approximately
GBP16.8m) with the 11 universities for the ongoing development of
the Callista product with gradual migration into the cloud-ready
Tribal Edge platform. We have also had a successful year with our
existing SITS contracts in Asia Pacific, where we completed work in
the University of Massey and the University of Waikato, in New
Zealand, as well as continued implementation of SITS at the
University of Malaya in Malaysia. We have, though, seen a downturn
in opportunities to tender for new student information systems in
Asia Pacific; fewer universities appear to be going out to tender,
currently, combined with a smaller market, of which Tribal already
serves around 40% of the Australia and New Zealand universities
market.
Outside of Higher Education, 2018 has been a challenging year in
Australia. We have a number of large contracts where we have
developed bespoke software, including the British Council and the
Department of Education (DoE) schools contract. These contracts
have now reached a level of maturity and steady state, where there
is less requirement for development services. As previously
reported, we also have a contract with New South Wales TAFE
(Technical and Further Education) campuses which is expected to end
in 2019, and with two schools dioceses (New South Wales and
Victoria) in which about 800 of the 1800 schools running the
SchoolEdge platform will migrate away to a new product over the
next 2-3 years. Management have taken remedial action at the end of
2018 to restructure the Asia Pacific business, including ceasing
the development of further SchoolEdge modules, and will continue to
monitor the progress of these contracts.
Quality Assurance Solutions (QAS) continues to confirm its
position as a market-leading international school inspections
business. During the year, the Ministry of Education (MoE) in Dubai
awarded us the contract for the review of private schools, which
was successfully completed, as well as ongoing work for public
school inspections in Abu Dhabi. In the US, we were granted an
extension to the work evaluating schools and districts of New York
State. In the UK, we were granted an extension of the contract with
the National Centre for Excellence in the Teaching of Mathematics,
as well as being granted the contract with the UK Department for
Education (DfE) to provide quality assurance of the new
gold-standard National Professional Qualifications (NPQ). The
contract will ensure qualifications are independently verified,
nationally consistent, and of the highest quality across the
country.
The Group continues to drive efficiencies and remove costs where
appropriate. In the first half of the year the original cost
savings programme initiated in 2016 was completed. At the end of
the year the Group announced the restructure of the management of
its i-graduate business in the UK and the SchoolEdge development
team in Asia Pacific with annualised savings of over GBP2m.
2019 outlook
Looking forward to 2019, we continue to see a good pipeline of
opportunities in the UK, in Higher Education, where we have a
number of tenders in progress, as well as in Further Education, and
in Work-based Learning, where, in January 2019, we closed a major
win in partnership with Sopra Steria to implement our Maytas
product at the CITB (Construction Industry Training Board).
In Asia Pacific, the Higher Education business remains strong,
although there are still few new customer opportunities available
to tender. The outlook for Further Education and Vocational
Learning business remains as noted above.
QAS continues to have a pipeline of opportunities, in the UK,
USA and Middle East. Progress continues well in existing projects,
although the customer has extended the timelines of the existing
ADEK contract in Abu Dhabi, which may impact the revenue in the
first half of 2019.
The i-graduate business will move under the QAS management,
creating a single line of business known as Education Services.
With further investment in a refresh of the survey products, we
expect to see growth back into the i-graduate business.
Product & services strategy
At the core of Tribal's business is a portfolio of functionally
rich student information systems. These are being expanded with the
development of a next generation, cloud-based solution - Tribal
Edge - a solution that enables institutions to significantly
enhance the student experience they offer. The Group's new product
investment will focus on delivering Tribal Edge, though we will
continue the development of the existing products (SITS, ebs,
Callista and Maytas) to ensure ongoing relevance and
competitiveness.
Following the successful launch of Tribal Edge in 2017, we have
completed beta trials in both Further and Higher Education
institutions for the first new modules and functionality. These
modules are available to connect to both SITS (HE) and ebs (FE),
providing enhanced functionality to our installed base of
customers.
The module structure for Tribal Edge was also simplified to
three offerings:
-- Engage - a mobile app giving students anytime, anywhere
availability to see their day at a glance and enabling them to
access all information they need at their fingertips, all
personalised to their timetable and their lifestyle. This also
includes social collaboration functionality where students and
staff can communicate with each other within a social network that
is both managed and safeguarded. This enables staff and students to
safely connect, communicate and collaborate with each other.
-- Student Support - ensures students are supported through the
complete education lifecycle. Institution support staff have a
single view of all student performance issues and identify
opportunities to deliver critical support to reduce drop-outs and
maximise student successes, while students have easy access to
support wherever they are.
-- Student Insight - a learning analytics solution that monitors
and tracks student engagement, analysing student data from multiple
sources, and flagging students at potential risk, thus enabling the
targeting of students that need support. This timely intervention
improves outcomes and reduces dropouts.
We have also continued to invest in our market-leading employers
and training providers solution, Maytas. While there was
significant uncertainty in the UK market in 2018, we are now seeing
growth around Apprenticeships at all levels, including Degree
Apprenticeships. Maytas fully supports the management of
apprenticeship programmes, including the critical area of funding,
and we are now seeing new business sales in this area.
SchoolEdge has continued in development through 2018 with new
functionality added to the existing set. In 2019 we will reduce the
development effort on this product as we look to maximise the
return of what has already been delivered to market. Sales and
marketing efforts around the Australian schools market will focus
on migrating customers to SchoolEdge from their existing legacy
systems.
In 2018, we combined the data analysis and management teams of
the Quality Assurance Solutions (QAS) and i-graduate areas of the
business. Combining these datasets and cross-training the teams
will allow us to offer new insights and value to our customers in
2019. It will also support greater cross-selling opportunities.
Business structure
The Group provides software and non-software related services to
educational customers, both public and private. These services are
managed across three lines of business (segments) as follows:
Student Information Systems (SIS) focusses on the following
market sectors: Higher Education, Further Education, Colleges and
Employers (referred to in Australia as VET), and Schools, and
across three main markets, UK, Australia and New Zealand. Product/
Offerings are split between License & Development Services,
Support & Maintenance, Implementation, and Cloud
Operations.
Quality Assurance Solutions (QAS) covers inspection and review
services which support the assessment of educational delivery, and
performance benchmarking.
i-graduate and Other covers student surveys and data analytics.
This segment also covers various non-core businesses including K2
Asset Management, Software Solutions and Information Matters. These
are businesses that operate profitably and continue to be
supported, although there is limited investment in future
development of the solutions and little proactive sales and
marketing activity.
From 2019 the Group will be combining QAS and i-graduate into
one line of business called Education Services. Other non-core
business will be reported as part of Education Services.
Reporting basis
In order to give a true reflection of year-on-year performance,
the Group is presenting its results in the Business & Financial
Review on an adjusted basis, as detailed below:
a) Foreign Exchange: almost half of Tribal's income in the year
was generated outside the UK, and is therefore subject to foreign
exchange movement. During 2018, the strengthening of sterling,
particularly against the Australian Dollar, has impacted revenue.
In the Business & Financial Review, the results for 2017 have
been adjusted to reflect the foreign exchange rates prevailing
during 2018 to provide a "constant currency" comparative.
b) IFRS 15: the Group's 2018 revenue was accounted for under
IFRS 15 "Revenue from Contracts with Customers", as discussed
below. In accordance with the Modified Retrospective transitional
reporting approach, the statutory results for 2017 have not been
restated to reflect this change; however, in the Business &
Financial Review, the 2017 results have been updated to provide an
IFRS 15 comparative.
c) Ofsted: As previously reported, the Group's core Ofsted Early
Years inspections contract came to a conclusion in March 2017.
Given the nature of the Ofsted contracts, and consistent with prior
years reporting, this income has been removed from the 2017 results
in the Business & Financial Review to provide an "excluding
Ofsted" comparative.
Note this presentation disclosed as "adjusted" is an alternative
performance measure and not a statutory reporting measure prepared
in line with International Financial Reporting Standards (IFRS) and
disclosed as "reported" in in the Business & Financial
Review.
IFRS 15 "Revenue from Contracts with Customers"
The Group adopted IFRS 15 "Revenue from Contracts with
Customers" with effect from 1 January 2018. The major impact is
that software license revenue is now recognised over the duration
of the project implementation period on a percentage complete
basis.
For the larger deals, mainly Higher Education, which typically
have implementation periods of two years or more, this has the
effect of spreading the recognition of License revenue over an
extended period, rather than the immediate, upfront recognition
under the previous basis.
For the smaller deals, mainly Further Education and Work-based
Learning where there is a shorter implementation period of
generally less than 50 days, there will be little if any
impact.
There are no changes to the timing of the recognition of revenue
for Implementation services, Support & Maintenance fees or
Cloud services, nor is there any impact in QAS or i-graduate.
As part of the transitional reporting requirements, the
statutory results for 2017 have not been restated; however the
opening balance sheet was restated with a reduction of GBP1.5m to
equity reserves, GBP0.2m to accrued income and GBP1.5m to deferred
income, and an increase of GBP0.2m to prepayments.
Results
Post
IFRS15
Pre IFRS15
excluding excluding
Adjusted(2) Ofsted Ofsted Reported
GBP'm 2018 2017 Growth 2017 2017 2017
Revenue 80.1 81.0 (1.1)% 82.9 82.5 84.9
------- ------------ -------- ----------- ----------- ---------
Student Information
Systems 57.0 58.8 (3.1)% 60.4 60.0 60.0
------- ------------ -------- ----------- ----------- ---------
Quality Assurance
Solutions 16.7 15.2 9.8% 15.4 15.4 17.8
------- ------------ -------- ----------- ----------- ---------
i-graduate & Other 6.4 7.0 (8.4)% 7.1 7.1 7.1
------- ------------ -------- ----------- ----------- ---------
Adjusted Operating
Profit (before Central
Overheads) 21.5 21.4 0.2% 22.4 22.0 23.1
------- ------------ -------- ----------- ----------- ---------
Student Information
Systems 16.5 17.4 (5.4)% 18.0 17.6 17.6
------- ------------ -------- ----------- ----------- ---------
Quality Assurance
Solutions 3.7 3.0 23.7% 3.3 3.3 4.4
------- ------------ -------- ----------- ----------- ---------
i-graduate & Other 1.3 1.0 26.5% 1.1 1.1 1.1
------- ------------ -------- ----------- ----------- ---------
Adjusted Operating
Margin (before Central
Overheads) 26.8% 26.5% 0.3pp 27.0% 26.6% 27.2%
------- ------------ -------- ----------- ----------- ---------
Student Information
Systems 28.9% 29.7% (0.8)pp 29.9% 29.3% 29.3%
------- ------------ -------- ----------- ----------- ---------
Quality Assurance
Solutions 22.2% 19.7% 2.5pp 21.1% 21.1% 24.8%
------- ------------ -------- ----------- ----------- ---------
i-graduate & Other 19.8% 14.4% 5.4pp 15.0% 15.0% 15.0%
------- ------------ -------- ----------- ----------- ---------
Central Overheads (10.7) (14.1) (24.2)% (14.6) (14.6) (14.6)
------- ------------ -------- ----------- ----------- ---------
Adjusted Operating
Profit(1) 10.8 7.3 46.9% 7.8 7.4 8.5
------- ------------ -------- ----------- ----------- ---------
Adjusted Operating
Margin 13.5% 9.1% 4.4pp 9.4% 8.9% 10.1%
------- ------------ -------- ----------- ----------- ---------
Statutory profit
after tax 4.1 n/a n/a n/a n/a 2.6
------- ------------ -------- ----------- ----------- ---------
1. Adjusted Operating Profit is in respect of continuing
operations and excludes charges reported in "Other items" of
GBP6.2mm (2017: GBP4.8m)
2. 2017 results adjusted for constant currency, post IFRS15 and excluding Ofsted:
a. "Constant currency" - the Group has applied 2018 foreign
exchange rates to 2017 results to present a constant currency
basis, when applied to 2017 results there is a reduction in Revenue
of GBP1.9m, a reduction to Adjusted Operating Profit (before
Central Overheads) of GBP1.0m and Adjusted Operating Profit of
GBP0.5m
b. "Post IFRS15" - IFRS 15 "Revenue from Contract with
Customers" became effective on 1 January 2018, when applied to 2017
results there is an increase to Revenue of GBP0.4m and an increase
to Adjusted Operating Profit of GBP0.4m
c. "Excluding Ofsted" - the contract with Ofsted ended in March
2017, when excluded from 2017 results there is a reduction in
Revenue of GBP2.4m and a reduction in Adjusted Operating Profit of
GBP1.1m in 2017
Revenue
Revenue in the year was 1.1% lower than last year at GBP80.1m on
an adjusted basis (2017: GBP81.0m adjusted for the negative impact
of foreign exchange of GBP1.9m, the impact of IFRS 15 which would
have increased revenue by GBP0.4m and excluding Ofsted revenue in
2017 of GBP2.4m; GBP84.9m as reported).
The Group has chosen to present its results in this Business
& Financial Review on an adjusted basis to give a true
reflection of year-on-year performance and account for the adverse
impact of foreign exchange movements, the adoption of IFRS15
"Revenue from Contract with Customers" and the conclusion of the
contract with Ofsted.
During the year there has been a worsening in the average UK
exchange rates with the Group's key overseas countries, notably
Australia. If the average exchange rates had been applicable to
2017 results there would have been a reduction in revenue of
GBP1.9m.
Adjusted Operating Profit (EBITA)
The Adjusted Operating Profit was GBP10.8m (2017: GBP7.3m
adjusted for the negative impact of foreign exchange of GBP0.5m,
the impact of IFRS 15 which would have increased Adjusted Operating
Profit by GBP0.4m and excluding Ofsted operating profit in 2017 of
GBP1.1m; GBP8.5m reported).
The Adjusted Operating Margin increased significantly to 13.5%
(2017: 9.1% adjusted; 10.1% reported).
The 2018 results benefitted from the cost reduction programme
initiated in 2016, particularly in Central Overheads which fell by
GBP3.4m to GBP10.7m (2017: GBP14.1m adjusted; GBP14.6m reported).
The full year effect of the 2017 cost reductions equated to an
additional GBP1.0m of in year savings. Further savings were
achieved throughout the year as the Group continued to manage its
cost base.
The Adjusted Operating Profit in the year benefitted from a
number of one-off items in relation to bad debt provision releases
of GBP0.9m, property related provisions releases of GBP0.5m and
potential onerous contracts provision of GBP0.2m. There were
however costs incurred in relation to revenue contingency
adjustments on underperforming contracts of GBP0.2m and one off
costs incurred of GBP0.5m in relation to the exit of the Group's
data centre.
Product and Services performance
Post
IFRS15 Pre IFRS15
excluding excluding
Adjusted Ofsted Ofsted Reported
GBP'm 2018 2017 Growth 2017 2017 2017
Software & Related
Services 60.6 61.8 (2.0)% 64.1 63.7 63.7
----- --------- -------- ----------- ----------- ---------
License & Development
Fees 7.5 10.3 (27.7)% 10.4 10.0 10.0
----- --------- -------- ----------- ----------- ---------
Support & Maintenance
Fees 32.9 32.5 1.1% 33.5 33.5 33.5
----- --------- -------- ----------- ----------- ---------
Implementation Services 13.9 14.2 (2.3)% 14.8 14.8 14.8
----- --------- -------- ----------- ----------- ---------
Cloud Services 5.6 4.0 42.6% 4.0 4.0 4.0
----- --------- -------- ----------- ----------- ---------
Other Services 0.7 0.8 (10.1)% 1.4 1.4 1.4
----- --------- -------- ----------- ----------- ---------
Non-Software Services 19.5 19.2 1.2% 18.8 18.8 21.2
----- --------- -------- ----------- ----------- ---------
QAS - School Inspections
& Related Services 16.4 15.2 7.6% 14.8 14.8 17.1
----- --------- -------- ----------- ----------- ---------
i-graduate - Surveys
& Data Analytics 2.6 3.0 (13.6)% 3.0 3.0 3.0
----- --------- -------- ----------- ----------- ---------
Other - Information
Management Services 0.5 1.0 (50.4)% 1.0 1.0 1.1
----- --------- -------- ----------- ----------- ---------
Total Revenue 80.1 81.0 (1.2)% 82.9 82.5 84.9
----- --------- -------- ----------- ----------- ---------
Annually Recurring
Revenue 38.5 36.5 5.6% 37.5 37.5 37.5
----- --------- -------- ----------- ----------- ---------
Software & Related Services
Software & Related Services covers sales across our core
Student Information Systems business together with software sales
in i-graduate, reported under Other. In addition QAS has
successfully developed and sold a software license as part of the
Ofsted migration. The revenue from Software & Related Services
decreased by (2.0)% to GBP60.6m (2017: GBP61.8m adjusted; GBP63.7m
reported).
License & Development Fees relate to the sale of new
software licenses as well as customer paid enhancements
(development fees) to previous sales. Tribal's core Student
Information Systems products include:
- SITS (Student Information Technology System) used by around
50% of universities in the UK, including 50% of the Russell Group
universities, as well as universities in Australia, New Zealand,
Malaysia, Canada, Southern Ireland, Hungary and Malta
- Callista, a bespoke student management system implemented in 11 Australian universities
- ebs (education business system) used by colleges and training
institutes in the UK (including Northern Ireland)
- Maytas, for training providers and apprenticeship providers
- Student Engage, a social collaboration mobile technology application sold across all markets
- School Edge and ebs Schools used by around 4000 schools in Australia
In addition, non-SMS software sales includes K2 (asset
management software) and Software Solutions (bespoke software
development). These are businesses that operate profitably and
continue to be supported, although there is limited investment in
future development of the solutions and little proactive sales and
marketing activity.
Revenue from License & Development fees fell 27.7% to
GBP7.5m (2017: GBP10.3m adjusted; GBP10.0m reported). There were a
number of large license wins in the year in the UK markets for both
Higher Education and Further Education; however the markets in APAC
region have been more challenging with some contracts moving to a
steady-state supporting the implemented solution with limited
account growth opportunity, and a limited pipeline with no
significant new customers added in the year. In addition, the QAS
Technology contract for the Ofsted transition concluded in the
year. The impact of these are discussed in more detail in the
Segmental Performance review.
Implementation services deliver the technical implementation of
our software products at customer sites, typically working
alongside customer teams. Implementation projects vary in length,
and range from a small number of days, to more than two years for
more complex projects. Revenues are typically based on day rate
fees, although we sometimes operate under fixed fee contracts for
defined implementation scopes. Revenue was consistent with last
year at GBP13.9m (2017: GBP14.2m adjusted; GBP14.8m reported)
reflecting an ongoing level of implementation work, with new
customer wins replacing implementations completed in the year,
supplemented by steady level of enhancement work across many
customers.
Support & Maintenance fees in the period were GBP32.9m
(2017: GBP32.5m adjusted; GBP33.5m reported), an increase of 1.1%.
This reflects the strong retention rates in our customer base and
their ongoing commitment to Tribal solutions.
Cloud services cover the provision of managed IT services and
hosting services to customers to manage their Tribal products
either on premise, in a private cloud, or in a public cloud. We are
seeing increasing demand in this area particularly from our Higher
Education customers as they consider migrating their systems into
the cloud. Revenue has grown by 42.6% to GBP5.6m (2017: GBP4.0m
adjusted; GBP4.0m reported).
Other software & related services include revenue from the
conferences that Tribal provides to customers in the Higher
Education and Further Education sectors, and research and
development tax credits (RDEC) received in the UK in relation to
product development work undertaken.
Annually Recurring Revenue, comprising Support & Maintenance
Fees and Cloud Services, increased by 5.6% to GBP38.5m (2017:
GBP36.5m adjusted: GBP37.5m reported), representing 63.6% of
Software & Related revenue and 45.2% of total Group
revenue.
Non-software related services
Non-software related sales relate to the Quality Assurance
Solutions and i-graduate lines of business only.
School inspections & related services covers all products
and services offered by the QAS line of business. The business
operates globally with sales in the UK, North America, the Middle
East, Australia and New Zealand. Inspection services are provided
to government and non-government bodies in the UK, US and Middle
East, these tend to be multi-year contracts with fixed and variable
pricing elements. Related complementary services include training
for prospective quality assurance inspectors, training and software
tools for school leaders to prepare for inspections, online
professional development tools for teachers to enhance their
professional development, and other similar offerings.
Surveys & data analytics covers all products and services
offered by the i-graduate line of business, this includes a range
of services for managers of universities, colleges and schools to
assess and enhance the quality of education they provide and
improve their operational performance. These services are provided
globally, the largest product being the International Student
Barometer which is performed annually for each of the Northern and
Southern hemispheres.
Information management services is a complementary consultancy
service providing advice on information and records management
including General Data Protection Regulation (GDPR) compliance
which came into force in May 2018.
Segmental performance
Student Information Systems (SIS)
Adjusted Reported
GBP'm 2018 2017 Growth 2017
Revenue 57.0 58.8 (3.1)% 60.0
------ --------- -------- ---------
License & Development
Fees 6.5 9.1 (28.8)% 8.7
------ --------- -------- ---------
Support & Maintenance
Fees 31.7 31.1 1.9% 32.1
------ --------- -------- ---------
Implementation Services 13.6 13.7 (0.7)% 14.2
------ --------- -------- ---------
Cloud Services 4.5 3.5 26.2% 3.6
------ --------- -------- ---------
Other Services 0.7 1.4 (51.8)% 1.4
------ --------- -------- ---------
Adjusted Operating
Profit 16.5 17.4 (5.4)% 17.6
------ --------- -------- ---------
Adjusted Operating
Margin 28.9% 29.7% (0.8)pp 29.3%
------ --------- -------- ---------
Student Information Systems revenue decreased by 3.1% to
GBP57.0m (2017: GBP58.8m adjusted; GBP60.0m reported). Operating
profit decreased by 5.4% to GBP16.5m (2017: GBP17.4m adjusted;
GBP17.6m reported) and operating margin decreased to 28.9% (2017:
29.7% adjusted; 29.3% reported).
The adoption of IFRS 15 "Revenue from Contracts with Customers"
in the year resulted in software license revenue being recognised
over the duration of the project implementation period on a
percentage completion basis, the greatest impact being on sales to
the Higher Education market, which typically have implementation
periods of two years or more.
The impact to 2018 statutory results of IFRS 15 to is two-fold.
Firstly, revenue from license sales in previous years where the
related implementation work was still ongoing in 2018 has been
rephased such that GBP0.9m of previously recognised revenue is
reported in 2018 results. Secondly, revenue from new licenses sold
in the year with implementation periods that run into future years
is no longer recognised up front and is now spread across the
implementation periods, such that of the GBP4.0m of new licenses
sales in the year only GBP1.6m was recognised in 2018 results. The
net impact to 2018 results is a reduction in revenue of
GBP1.5m.
Overall activity for the replacement or enhancement of student
management systems in the UK and the wider European region has
remained strong and we continue to see a positive pipeline of new
opportunities. Since 2016 Tribal has displaced over 20 competitive
student information systems and replaced four home grown solutions
in universities.
In the Higher Education market Tribal won four major new
customers in the year, replacing competitor systems to implement
SITS. These were at the University of Portsmouth and Canterbury
Christ Church University (CCCU) in the early part of the year, and
at St Mary's University Twickenham and Ravensbourne University
London towards the end of the year.
Demand for implementation services has remained high, and
implementation work commenced at the University of Portsmouth and
CCCU, with significant ongoing implementations at the University of
Bristol, the University of Sheffield, the University of Hull, the
University of the Arts London, Glasgow Caledonian University,
King's College London, the University of Warwick and the University
of Wales Trinity St. David.
In Asia Pacific, we have continued to see strong performance
from our existing contracts in Higher Education. Our Callista
business entered the second year of a four year renewal, and
continues to perform well with annualised support and delivery
revenues in excess of AUD14m. There was also increased demand for
technical developments outside the scope of the core renewal.
Within the SITS product market, we saw implementation work
commence in Malaysia at the University of Malaya and the
implementations at Universiti Teknologi Petronas (UTP) and Institut
Teknologi Petroleum Petronas (INSTEP) were successfully concluded.
Key clients in the New Zealand market including Massey University
added additional consultancy and implementation revenues to the
business showing strength in this market. We have, though, seen a
significant slowdown in the opportunities available to tender, and
no new university customers were gained in 2018. This situation
continues into 2019.
There was increased demand for Cloud services across all student
management products, up 26%, with a growing trend for systems and
applications to be managed in the Cloud (either a Private Cloud in
a data centre or the Public Cloud), rather than managed On Premise
by an in-house IT team. All of the four new universities won in
2018 elected to have provision of their SITS software from the
Cloud.
With continued very high Support & Maintenance renewal rates
and the strong performance in student information systems in the
UK, the Annually Recurring Revenue in SIS, which relates to Support
& Maintenance and Cloud services, has increased nearly 5% to
GBP36.2m (2017: GBP34.6m adjusted; GBP35.7m reported) and
represents almost 64% of SIS revenue.
In the Further Education market Tribal continued to compete
successfully in the UK with a succession of wins with colleges and
councils (providing adult education facilities), and a major win at
Colleges Northern Ireland (CNI) to implement ebs in all six Further
Education colleges, with implementation expected to last 18 months,
a significant increase in scope compared to previous deals in this
sector.
Following the introduction of the UK Apprenticeship Levy in 2017
the Work-based Learning market has been challenging, however we
started to see increased interest in our work-based learning
product, Maytas, through the second half of the year as employers
increased their understanding of the levy process and sought to
access their contributions. This culminated in a major win in
January 2019 with Sopra Steria to implement our Maytas work-based
learning product at the CITB (Construction Industry Training
Board).
In the Further Education / Vocational Learning sectors in Asia
Pacific, we have seen a slowdown in revenue, which is expected to
continue into 2019. We completed the first deployment of a
cloud-based ebs platform in region to English Language Partners in
New Zealand (ELPNZ) and enhancement works were delivered to several
key clients including TAS TAFE and several NZ FE clients.
Successful deployment of the Campus solution to South Australian
Department of Education, and Auckland Institute of Studies (AIS)
was also completed during 2018, bringing major deployments of that
product to conclusion.
However, a number of key contracts managed from Australia have
reached a level of maturity where the customer investment has
reduced to a steady state of support and maintenance of the current
product with limited investment in building further functionality
at this point. This includes the British Council where we
successfully concluded the global rollout of a customised version
of the Campus product across 47 countries and all British Council
sites in April 2018, with further delivery of customised reporting
services throughout the year.
As noted in 2017, the 138 TAFEs (Technical & Further
Education) in New South Wales, Australia continued to utilise our
support and enhancement services throughout 2018, which will
continue into 2019 until they complete their migration to a new
student management system, expected in the second half of the year,
when revenues from this account will cease.
In the Schools sector, we successfully concluded the key
releases of software for our ebs student management system across
2200 schools in the Student Administration and Learning Management
(SALM) programme in New South Wales, Australia. The contract will
now continue at a lower revenue level, as the ebs implementation is
reaching a level of completeness, and the Department of Education
has confirmed it will not be implementing the Tribal Timetabling
solution.
Our other schools product, SchoolEdge, is used by over 1800
schools in Australia. There was a 90% retention rate across these
schools, including a large number of the 800 dioceses schools
previously earmarked for movement onto their own student management
system platform. The migration is expected to take place over the
next two years to the end of 2020. We will continue to receive
revenue from school's prior to their migration and a one off
following migration and will work with the Dioceses to ensure
smooth migration.
At the end of 2018, the Group decided to complete development of
the existing core modules, and cease the development of further
modules. The focus will then be on driving revenue in the existing
customer base through upgrades to the newly released modules. As a
result of this decision, there is a charge of GBP1.4m, which
includes an impairment charge of GBP1.0m against capitalised
development costs relating to the work done on further modules
which may now not be completed, and a restructuring charge of
GBP0.4m relating to the reduction in headcount in SchoolEdge
product development, which was announced in December, and took
effect at the end of January 2019.
Quality Assurance Solutions (QAS)
Reported(1)
Adjusted
GBP'm 2018 2017 Growth 2017
Revenue 16.7 15.2 10.2% 17.8
------ --------- -------- ------------
School Inspections
& Related Services 16.4 14.5 12.8% 17.1
------ --------- -------- ------------
Technology Services
(License & Development
Fees) 0.3 0.7 (48.1)% 0.7
------ --------- -------- ------------
Adjusted Operating
Profit 3.7 3.0 23.7% 4.4
------ --------- -------- ------------
Adjusted Operating
Margin 22.2% 19.7% 2.5pp 24.8%
------ --------- -------- ------------
1. Includes the Ofsted "Early Years" contract which ended in
March 2017 representing Revenue of GBP2.4m and Adjusted Operating
Profit of GBP1.1m
Quality Assurance Solutions revenue increased by 10.2% to
GBP16.7m (2017: GBP15.2m adjusted; GBP17.8m reported). Operating
profit increased by 23.7% to GBP3.7m (2017: GBP3.0m adjusted;
GBP4.4m reported) and operating margin increased to 22.2% (2017:
19.7% adjusted; 24.8% reported).
As previously noted, the core Ofsted "Early Years" successfully
concluded in March 2017 following the decision by Ofsted to take
the work back in-house. To allow clear year on year comparability
the 2017 results in this review have been adjusted to exclude
Ofsted income resulting in a decrease in 2017 Reported Revenue of
GBP2.4m and a decrease to Adjusted Operating Profit of GBP1.1m. The
adjusted results are shown on a constant currency basis however
there is no impact from IFRS 15 "Revenue from Contracts with
Customers".
The QAS revenue grew by 10.2%, excluding the Ofsted Early Years
revenue (2018: GBPnil; 2017: GBP2.4m). This contract had
successfully concluded at the end of March 2017, following a
decision by Ofsted to take school inspections back in house.
The strong performance in QAS was supporting by the high win
rate of over 80% on bids. During the year, we successfully rebid an
extension of the NCETM contract (National Centre for the Excellence
in the Teaching of Mathematics), and, in partnership with MEI
(Mathematics in Education and Industry), won the contract to
deliver the Advanced Maths Support Programme (AMSP), a national
programme designed to increase the maths education levels of our
population and better prepare young people for apprenticeships,
work, and higher education.
QAS were also chosen by the Department for Education (DfE) to
provide quality assurance of the new gold-standard National
Professional Qualifications (NPQ). The contract will ensure
qualifications are independently verified, nationally consistent,
and of the highest quality across the country. The contract has
been agreed for an initial three-year period, worth up to GBP2
million per year.
In the USA, we won an extension to the New York State Education
Department contract (NYSED), and in the Middle East, successfully
concluded tranches of the Dubai Ministry of Education private
schools inspection contract, and the schools inspection contract in
Abu Dhabi with ADEK (The Department of Education and
Knowledge).
QAS also developed a software application as a platform to
manage the Ofsted inspections following the decision to take the
work back in-house; this is shown in the table as Technology
Services (License & Development Fees). This activity continued
until August 2018, when Ofsted completed the implementation of its
own application.
The adjusted operating margin was 22.2% (2017: 19.7%), remaining
consistent within the low 20s percent margin expectations from the
QAS business.
i-graduate and Other
Adjusted Reported
GBP'm 2018 2017 Growth 2017
Revenue 6.4 7.0 (8.4)% 7.1
------ --------- -------- ---------
i-graduate - Surveys
& Data Analytics 2.6 3.0 (13.6)% 3.1
------ --------- -------- ---------
Information Management
Services 0.5 1.0 (50.4)% 1.0
------ --------- -------- ---------
Assets management
and software solutions
(Software Related
Services) 3.3 3.0 11.4% 3.0
------ --------- -------- ---------
Adjusted Operating
Profit 1.3 1.0 26.4% 1.1
------ --------- -------- ---------
Adjusted Operating
Margin 19.8% 14.4% 5.4pp 15.0%
------ --------- -------- ---------
i-graduate and Other revenue fell by 8.4% to GBP6.4m (2017:
GBP7.0m adjusted; GBP7.1m reported). Operating profit increased by
26.4% to GBP1.3m (2017: GBP1.0m adjusted; GBP1.1m reported) and
operating margin increased to 19.8% (2017: 14.4% adjusted; 15.0%
reported).
The 2017 results are shown on a constant currency basis to allow
clear year on year comparability and there is no impact from IFRS
15 "Revenue from Contracts with Customers".
The revenue for i-graduate Surveys & Data Analytics fell by
13.6% to GBP2.6m (2017: GBP3.0 adjusted; GBP3.1m reported). The key
offering in this business is the International Student Barometer
operated across the Northern and Southern hemispheres; the window
for accepting applications for the Northern hemisphere barometer
which operates across the 2018/2019 academic year was extended
compared to the previous year and this resulted in lower income
recognition in 2018, although the total income is expected to be
comparable to the previous year and will be recognised as the
barometer concludes in 2019.
The i-graduate business also ran the annual Destination for
Leavers from Higher Education (DLHE) survey on behalf of HESA
(Higher Education Standards Agency). In early 2018 the contract was
not renewed as HESA adopted a different approach to managing the
survey.
The management of i-graduate was restructured at the end of
2018, and integrated into the QAS management. From 2019, the
combined QAS and i-graduate student surveys become a single line of
business (segment) called Education Services.
As expected, the revenue in our information management services
business, Information Matters, fell to GBP0.5m (2017: GBP1.0m
adjusted; GBP1.0m reported). The business's largest customers in
the oil & gas and consumer goods sectors have ceased their
requirements or taken the work in house. We continue to offer
information and records management consultancy and seen a good
demand for advice on General Data Protection Regulation (GDPR)
compliance which came into force in May 2018.
The revenue from other non-core business, Asset Management (K2)
and Software Solutions, increased by 11.4% to GBP3.3m (2017:
GBP3.0m adjusted; GBP3.0 reported). These businesses operate
profitably and continue to be supported, although there is limited
investment in future development of the solutions and little
proactive sales and marketing activity.
Product Development
Reported
GBP'm 2018 2017 Change
Product Development 11.2 10.9 3.3%
----- --------- --------
Of which capitalised 4.1 2.1 96.1%
----- --------- --------
- Tribal Edge 3.7 1.1 229.0%
----- --------- --------
- SchoolEdge 0.4 1.0 (53.9)%
----- --------- --------
Net adjusted operating
profit charge (1) 7.1 8.8 (19.1)%
----- --------- --------
- SITS 2.3 1.9 19.7%
----- --------- --------
- ebs 1.8 1.9 (6.6)%
----- --------- --------
- Maytas 0.4 0.6 (32.1)%
----- --------- --------
- SchoolEdge 1.0 1.2 (10.2)%
----- --------- --------
- Other 1.6 3.2 (50.4)%
----- --------- --------
Including amortisation
of 1.4 1.4 (1.7)%
----- --------- --------
1. Excludes impairment charge of GBP1.0m (2017: GBPnil).
Non-client funded Product Development spend was GBP11.2m, of
which GBP4.1m was capitalised (2017: GBP10.9m spent, GBP2.1m
capitalised). The net income statement charge after removing
capitalised spend decreased by 19.1% to GBP7.1m (2017:
GBP8.8m).
The Group continued to invest in the Tribal Edge platform, the
next generation, cloud-based platform for student information
systems in the Higher Education and Further Education &
Colleges sectors. Capitalised Product Development spend increased
to GBP3.7m (2017: GBP1.1m) as the Tribal Edge development team
matures to full capacity through recruitment or reskilling from
other roles.
The investment in SchoolEdge, the Group's student information
system for schools, was GBP0.5m of capitalised Product Development
spend (2017: GBP1.0m) and completed the development of the core set
of SchoolEdge modules. At the end of the year management decided to
cease product development work on additional modules until the
value of the core modules was demonstrated through a successful
program of upgrading existing customers to the completed modules.
Accordingly, an impairment charge of GBP1.0m was incurred for work
already undertaken on the additional modules, and a further charge
of GBP0.4m was taken for restructuring of the SchoolEdge
development team.
The Group continued to undertake client funded product
development work in relation to the Callista student management
system on behalf of a group of 11 universities in Australia.
Geographic revenue
Post
IFRS15 Pre IFRS15
excluding excluding
Adjusted Ofsted Ofsted Reported
GBP'm 2018 2017 Growth 2017 2017 2017
Revenue 80.1 81.0 (1.2)% 82.9 82.5 84.9
----- --------- -------- ----------- ----------- ---------
UK 42.6 36.2 17.5% 36.3 36.8 39.2
----- --------- -------- ----------- ----------- ---------
Asia Pacific 27.8 32.9 (15.6)% 34.6 33.7 33.7
----- --------- -------- ----------- ----------- ---------
Rest of world(1) 9.7 11.9 (18.2)% 12.0 12.0 12.0
----- --------- -------- ----------- ----------- ---------
1. Including USA, Canada and Middle East
Tribal's key geographic markets are the UK (53% of total
revenue), Asia Pacific including Australia, New Zealand and
Malaysia (35%); and, North America and the rest of the world
including Middle East (12%).
UK revenues increased 17.5% due to significant new customers in
both Higher Education and Further Education together with new
contract wins for QAS.
Asia Pacific revenues reduced by 15.6%, primarily due to larger
implementations coming to an end in the year, a limited pipeline
for new implementations as well as reduced sales in the schools
market.
Revenue for the Rest of the world reduced by 18.2%, due to the
conclusion of larger QAS contracts in the Middle East and the
timing of ongoing work which was delayed into 2019.
Key Performance Indicators (KPIs)
Adjusted Reported
2018 2017 Growth 2017
Revenue GBP80.1m GBP81.0m (1.1)% GBP84.9m
---------- ---------- --------- ----------
Adjusted Operating GBP10.8m GBP7.3m 46.9% GBP8.5m
Profit
---------- ---------- --------- ----------
Adjusted Operating
Margin 13.5% 9.1% 4.4pp 10.1%
---------- ---------- --------- ----------
Annually Recurring GBP38.5m GBP36.5m 5.6% GBP37.5m
Revenue (ARR)
---------- ---------- --------- ----------
Sales Order Backlog GBP121.6m GBP120.1m 1.2% GBP120.4m
---------- ---------- --------- ----------
Operating Cash Conversion 132% 152% (20.0)pp 130%
---------- ---------- --------- ----------
Free Cash Flow GBP8.8m GBP8.0m 10.0% GBP8.0m
---------- ---------- --------- ----------
Staff Retention 89.0% 87.0% 9.0pp 87.0%
---------- ---------- --------- ----------
Revenue / Average GBP91.7k GBP97.8k (6.2)% GBP104k
FTE
---------- ---------- --------- ----------
Sales Order Backlog
The sales order backlog relates to the total value of orders
which have been signed on or before, but not delivered by, 31
December 2018. This is reported on an IFRS 15 basis, including the
restatement of 2017, and represents the best estimate of business
expected to be delivered and recognised in future periods, and
includes 2 years of Support & Maintenance revenue. At 31
December 2018 this increased to GBP121.6 (2017: GBP120.1m adjusted;
GBP120.4m reported).
Annually Recurring Revenue (ARR)
The Annually Recurring Revenue (ARR) includes Support &
Maintenance fees paid on all software and, from December 2017, our
Cloud hosting services, as detailed in the 2017 Annual Report and
Accounts. The 2017 ARR is restated to include Cloud hosting
services. Overall the Annually Recurring Revenue total increased by
5.6% to GBP38.5m (2017: GBP36.5m adjusted; GBP37.5m reported).
Operating cash conversion
Operating cash conversion is calculated as net cash from
operating activities before tax as a proportion of adjusted
operating profit. In 2018, operating cash conversation was 132%
(2017: 130% reported).
Free cash flow
Free cash flow is included as a key indicator of the cash that
is generated by the Group and available for further investment or
distribution. It is calculated as net cash from operating
activities less capital expenditure and less capitalised
development costs (excluding acquired intellectual property). In
2018, free cash flow was GBP8.8m (2017: GBP8.0m reported).
Headcount and staff retention
2018 2017 Change
Headcount 900 850 5.9%
----- ----- --------
UK 581 542 7.2%
----- ----- --------
Asia Pacific 302 287 5.2%
----- ----- --------
Rest of world(1) 17 21 (19.0)%
----- ----- --------
Full Time Equivalent
(FTE) 873 820 6.5%
----- ----- --------
1. Including USA, Canada and Middle East
Our overall workforce has increased by 5.9% to a total headcount
of 900, up from 850 at 31 December 2017. This follows a 22%
headcount reduction in the previous year to a headcount of 850 from
1,089 the previous year.
The total Full Time Equivalent (FTE) headcount has increased by
53 FTEs to 873 (2017: 820 FTEs). Nearly half of the UK increase is
due to increased delivery headcount to support additional work in
QAS and in Higher Education. There was also a net increase of
nearly 30 heads, as the Group continues its investment in the
Tribal Edge platform.
The Revenue per Average FTE metric is impacted by the adoption
of IFRS 15, and is GBP91.7k for 2018 (2017: GBP97.8k adjusted;
GBP104.0k reported). On an operational headcount basis (excluding
Product Development), the revenue per FTE for 2018 is GBP100.0k
(2017: GBP109.0k)
We note, though, that despite the extent of change within the
Group, our staff retention has improved to 89% (2017: 87%).
One off movements
There were a number of one-off impacts to the 2018 profit,
although the overall impact was not material.
Trade receivables were significantly reduced in the year
following a very strong collections performance including older
debts which had been previously provided for, this resulted in a
one off provision release of GBP0.9m.
The Group continued to rationalise its office estate in the year
by reducing space or exiting certain offices, the dilapidations and
onerous lease exposure was lower than expected giving a benefit of
GBP0.5m.
A charge of GBP0.2m was taken as contingency against revenue on
ongoing contracts to account for delays in contract performance and
timing of delivery; the assessment of debtor recoverability on
these contracts is referenced to the revenue contingency.
The Group exited its current data centre in the year and,
working in partnership with Rackspace, migrated existing customers
into either a Rackspace data centre or into a Public Cloud
provider. During the migration there was a duplication of costs of
GBP0.5m.
Items excluded from adjusted profit figures
Certain items not directly related to the trading business or
regarded as exceptional in nature are removed from the adjusted
profit figure and disclosed as "Other Items" on the Income
Statement to provide greater understanding of the Group's
underlying performance. The main adjustments are as follows:
Share based payments
In 2018, share based payment charges (including employer related
taxes) totalled GBP2.3m (2017: GBP1.7m), and are excluded from the
Adjusted operating profit.
The charges in the current year relate to the matching shares
granted as part of the rights issue and share subscriptions in 2016
(GBP0.6m) and the Long Term Incentive Plan options (LTIPs) which
were granted to the executive and senior management teams in 2016,
2017 and 2018 (GBP1.7m).
Amortisation of IFRS 3 intangibles
The amortisation charge in relation to IFRS 3 intangible assets
of GBP1.8m (2017: GBP2.0m) arose from separately identifiable
assets recognised as part of previous acquisitions. The assets
principally relate to software and customer relationships and are
amortised over their expected life which was determined in the year
the acquisition took place.
Restructuring and associated costs
These costs relate to the restructuring of the Group's
operations and the charge for the year is GBP1.0m (2017: GBP1.0m).
The original programme initiated in 2016 completed in the early
part of the year with a further GBP0.3m of cost. At the end of the
year the Group announced the restructure of the management of its
i-graduate business in the UK and the SchoolEdge development team
in Asia Pacific, a provision for costs to be incurred in 2019 of
GBP0.7m was set up.
Net cash and cashflow
GBPm 2018 2017 Growth
Net cash from operating activities 14.2 11.1 3.1
------ ------ -------
Net cash outflow from investing
activities (6.2) (5.5) (0.7)
------ ------ -------
Net cash outflow from financing
activities (1.9) (0.1) (1.8)
------ ------ -------
Net increase in cash & cash
equivalents 6.1 5.5 0.6
------ ------ -------
Cash & cash equivalents at
beginning of the year 14.1 8.8 5.3
------ ------ -------
Cash & cash equivalents at
end of period 20.2 14.3 5.9
------ ------ -------
Less: Effect of foreign exchange
rate changes (0.2) (0.2) -
------ ------ -------
Net cash & cash equivalents
at end of period 20.0 14.1 5.9
------ ------ -------
Net cash at 31 December 2018 was GBP20.0m (2017: GBP14.1m).
Operating cash inflow for the period was GBP14.2m (2017:
GBP11.1m). The working capital movement increased to GBP3.1m (2017:
GBP0.2m), as a result of strong cash management including a
significant reduction in trade debtors.
Cash outflow from investing activities was GBP6.2m (2017:
GBP5.5m). The Group rationalised its office space during the year,
exiting certain locations and reducing foot space elsewhere; this
has however resulted in an increase to capital expenditure,
primarily due to fit out costs, as well as ongoing spend on
equipment costs (2018: GBP1.2m; 2017: GBP0.8m). Spend on product
development increased to GBP4.2m (2017: GBP3.6m including GBP1.25m
on acquired intellectual property). The Group made a payments of
GBP0.8m for deferred consideration (2017: GBP1.2m), of which
GBP0.5m was the final payment in respect of the acquisition of Sky
Software Pty (Campus) and GBP0.3m the second payment in relation to
intellectual property acquired in 2017.
Cash outflow from financing activities increased to GBP1.9m
(2017: GBP0.1m) as the Group resumed the payment of dividends in
the year with GBP1.8m returned to shareholders.
There was an adverse impact of foreign exchange movement of
GBP0.2m (2017: GBP0.2m).
Finance costs and funding arrangements
Net finance costs reduced to GBP0.1m in the year (2017: GBP0.2m)
as the Group reduced the size of its revolving credit facility
prior to the conclusion of the loan agreement in June 2018.
In November 2018 the Group agreed a UK overdraft of GBP2.0m to
assist with the management of working capital.
Shareholders returns and dividends
The Board has proposed a full year dividend of 1.1p per share
(2017: 1.0p per share), pending approval at the AGM on 24 April
2019, reaffirming its intention to continue a progressive dividend
policy, with a single dividend payment each year following annual
results. The anticipated payment date is 29 May 2019, with an
associated record date of 3 May 2019 and ex-dividend date of 2 May
2019.
Going concern
Tribal had net cash of GBP20.0m at the end of 2018 including an
undrawn UK overdraft of GBP2.0m.
The Group's software products benefit from a significant
installed customer base, whilst its other activities are typically
delivered under the framework of long-term contracts. Collectively,
the Group has a range of customers across different geographic
areas, good levels of committed income and a pipeline of new
opportunities. While the Group has a net current liability
position, this has improved since 2017 and the Group's forecasts
and projections, which allow for reasonable possible changes in
trading performance, show that the Group will be cash generative
across the forecast period.
The Directors have a reasonable expectation that the Group has
sufficient financial resources to continue in operational existence
for the foreseeable future. Accordingly, the Directors continue to
adopt the going concern basis in preparing the financial
statements.
Taxation
The corporation tax on continuing operations was GBP1.9m (2017:
GBP1.8m) and the adjusted effective tax rate was 21% (2017: 21%).
This includes the impact of higher rates of taxation arising in
overseas jurisdictions.
As the Group continues to operate in international jurisdictions
with a higher rate of corporation tax, it is anticipated that the
tax charges on profits in the near- to medium-term future is likely
to be higher than the standard rate of UK corporation tax.
Share options and share capital
On 26 March 2018, 3,975,000 share options were granted to senior
management, excluding Ian Bowles and Mark Pickett. On 22 May 2018,
590,452 nil-cost share options were granted to Ian Bowles and Mark
Pickett as part of their ongoing remuneration.
As at 31 December 2018, there were 196,051,181 shares issued
(2017: 196,051,181).
Related parties
Transactions with related parties during the period are set out
in note 32 of the full financial statements.
Earnings per share (EPS)
Adjusted diluted earnings per share from continuing operations
before other costs and intangible asset impairment charges and
amortisation, which reflects the Group's underlying trading
performance, increased by 34% to 4.3p (2017: 3.2p).
Statutory earnings per share (diluted) increased by 54% to 2.0p
(2017: 1.3p).
Pension obligations
The Group has two defined benefit pension schemes for former
employees as a consequence of historic contract awards. The largest
scheme relates to the Ofsted Early Years inspection contract we
entered during the year ended December 2010. This contract expired
in March 2017, and those individuals working directly on the
contract were transferred to Ofsted, under the Transfer of
Undertakings (Protection of Employment) act (TUPE). Under the terms
of the contract, a number of individuals elected to transfer their
pension plan from Tribal to Ofsted. This process was concluded in
2018 and resulted in a transfer of GBP3.6m of assets and GBP4.0m of
liabilities.
Across the remaining pensions schemes, the combined deficit
calculated under IAS19 at the end of the year totalled GBP1.0m
(2017: deficit of GBP1.7m), with gross assets of GBP6.8m and gross
liabilities of GBP7.8m (2017: GBP11.0m and GBP12.7m respectively).
Total actuarial gains recognised in the consolidated statement of
comprehensive income are GBP0.4m (2017: GBP0.1m).
Risks
Financial risks
The main financial risks the Group faces relate to the continued
sales of our software, where a trading downturn puts a strain on
the operating cash flow, credit risk arising from contractual
delays or scope changes, fluctuations in interest rates, and
foreign exchange risk.
Operating cash flow risk
The Group benefits from significant annually recurring revenue
which is received through out the year. A 12 month rolling cash
flow forecast is updated on a monthly basis to help identify any
risk in future operating cash flows.
Credit risk
The credit risk arising from contractual delays or scope changes
is reviewed monthly by the PLC Board. The Group seeks to reduce the
risk of bad debts arising from non-payment by our customers. This
risk is closely monitored by the Credit & Collections team,
which form part of Group Finance. Tribal incurred no material bad
debts during 2018.
Interest rate risk
At the end of 2018, Tribal had no bank loan indebtedness.
However, the Group is exposed to interest rate risk because
entities in the Group borrow funds at floating interest rates.
Hedging activities are evaluated regularly to align with interest
rate views and defined risk appetite, and forward rate agreements
and interest swaps may be used, where appropriate, to achieve the
desired mix of fixed and floating rate debt. There are no open
derivative financial instruments at the year end.
Foreign exchange risk
Tribal's reporting currency is Sterling. A number of its
subsidiaries have different functional currencies, so increases and
decreases in the value of Sterling versus the currency used by the
Group's international operations will affect its reported results,
and the value of assets and liabilities on the consolidated balance
sheet. Tribal's principal currency exchange exposure is to the
Australian dollar although as at 31 December 2018, the Group was
also exposed to movements in the rates between Sterling and the US
dollar, United Arab Emirates Dirhams, South African Rand, and New
Zealand dollar.
The Group Finance team oversees management of foreign exchange
risk, and policies and procedures approved by the Board.
Effect of the decision of the UK to exit the European Union
(Brexit)
We do not expect the decision of the UK to exit the European
Union (Brexit) to have an adverse impact in the short-term demand
for student information systems, and the longer term potential
impact remains to be seen and is dependent upon the final exit
terms agreed. The Group has seen fluctuations in exchange rates
during the Brexit process and any strengthening in the value of
Sterling would have an adverse impact on earnings. There are a
small number of contracts with customers based in the European
Union; however, the loss of these contracts would not have a
material impact on the Group. The Group also employs a number of
European Union nationals but they do not form a significant part of
the workforce.
Mark Pickett
Chief Executive Officer
Consolidated Income Statement
For the year ended 31 December 2018
Year ended Year ended
Other items 31 December Other items 31 December
(see note 2018 (see note 2017
Adjusted 5) Total Adjusted 5) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Continuing operations
Revenue 3 80,062 - 80,062 84,918 - 84,918
Cost of sales (40,837) - (40,837) (42,401) - (42,401)
----------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Gross profit 39,225 - 39,225 42,517 - 42,517
Total administrative
expenses (28,430) (6,212) (34,642) (33,975) (4,815) (38,790)
----------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Operating profit 4 10,795 (6,212) 4,583 8,542 (4,815) 3,727
Investment income 6 46 - 46 20 - 20
Finance income/(costs) 7 (54) 274 220 (179) (128) (307)
----------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Profit before tax 10,787 (5,938) 4,849 8,383 (4,943) 3,440
Tax (charge)/credit 8 (1,873) 1,171 (702) (1,757) 936 (821)
----------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Profit attributable
to the owners of
the parent 8,914 (4,767) 4,147 6,626 (4,007) 2,619
----------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Earnings per share
----------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Basic 10 4.6p (2.5)p 2.1p 3.4p (2.1)p 1.3p
----------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Diluted 10 4.3p (2.3)p 2.0p 3.2p (1.9)p 1.3p
----------------------- ---- -------- ----------- ------------ -------- ----------- ------------
All activities are from continuing operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018
Year ended Year ended
31 December 31 December
2018 2017
GBP'000 GBP'000
----------------------------------------------------- ------------ ------------
Profit for the year 4,147 2,619
Other comprehensive (expense)/income:
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement of defined benefit pension
schemes 430 55
Deferred tax on measurement of defined benefit
pension schemes (73) (9)
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of foreign
operations (792) (436)
------------------------------------------------------ ------------ ------------
Other comprehensive expense for the year
net of tax (435) (390)
Total comprehensive income for the year attributable
to equity holders of the parent 3,712 2,229
------------------------------------------------------ ------------ ------------
Consolidated Balance Sheet
As at 31 December 2018
2018 2017
Note GBP'000 GBP'000
-------------------------------------------- ---- -------- --------
Non-current assets
Goodwill 11 20,517 21,113
Other intangible assets 12 12,718 13,863
Property, plant and equipment 1,762 1,577
Deferred tax assets 3,776 4,004
Contract assets 77 150
-------------------------------------------- ---- -------- --------
38,850 40,707
-------------------------------------------- ---- -------- --------
Current assets
Trade and other receivables 13 12,840 13,625
Contract assets 3,750 4,851
Current tax assets 73 106
Deferred tax assets 228 271
Cash and cash equivalents 19,974 14,082
-------------------------------------------- ---- -------- --------
36,865 32,935
-------------------------------------------- ---- -------- --------
Total assets 75,715 73,642
-------------------------------------------- ---- -------- --------
Current liabilities
Trade and other payables 14 (6,755) (6,888)
Accruals (7,941) (8,593)
Contract liabilities (20,872) (17,934)
Current tax liabilities (1,097) (2,573)
Provisions (879) (1,250)
-------------------------------------------- ---- -------- --------
(37,544) (37,238)
-------------------------------------------- ---- -------- --------
Net current liabilities (679) (4,303)
Non-current liabilities
Other payables 14 (62) (551)
Deferred tax liabilities (713) (1,276)
Contract liabilities (707) (113)
Retirement benefit obligations (1,002) (1,718)
Provisions (213) (194)
-------------------------------------------- ---- -------- --------
(2,697) (3,852)
-------------------------------------------- ---- -------- --------
Total liabilities (40,241) (41,090)
-------------------------------------------- ---- -------- --------
Net assets 35,474 32,552
-------------------------------------------- ---- -------- --------
Equity
Share capital 9,803 9,803
Share premium 15,539 15,539
Other reserves 25,020 22,783
Accumulated losses (14,888) (15,573)
-------------------------------------------- ---- -------- --------
Total equity attributable to equity holders
of the parent 35,474 32,552
-------------------------------------------- ---- -------- --------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2018
Share Share Other Accumulated Total
capital premium reserves losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- --------- ----------- --------
At 1 January 2017 9,769 14,989 20,879 (18,147) 27,490
Profit for the year - - - 2,619 2,619
Other comprehensive expense
for the year - - - (390) (390)
Issue of equity share capital 34 550 - - 584
Charge to equity for share-based
payments - - 1,393 - 1,393
Tax credit on charge to equity
for share-based payments - - - 345 345
Transfer from other payables
for share-based payments - - 511 - 511
------------------------------------ -------- -------- --------- ----------- --------
Contributions by and distributions
to owners 34 550 1,904 345 2,833
------------------------------------ -------- -------- --------- ----------- --------
Balance at 31 December 2017
as previously reported 9,803 15,539 22,783 (15,573) 32,552
Effect of IFRS 15 - - - (1,511) (1,511)
Tax effect of IFRS 15 - - - 265 265
------------------------------------ -------- -------- --------- ----------- --------
Total Effect of IFRS 15 - - - (1,246) (1,246)
------------------------------------ -------- -------- --------- ----------- --------
Balance as at 31 December 2017
restated 9,803 15,539 22,783 (16,819) 31,306
Profit for the year - - - 4,147 4,147
Other comprehensive expense
for the year - - - (435) (435)
Equity dividend paid - - - (1,952) (1,952)
Charge to equity for share-based
payments - - 2,265 - 2,265
Foreign exchange difference
on share-based payments - - (28) - (28)
Tax credit on charge to equity
for share-based payments - - - 171 171
------------------------------------ -------- -------- --------- ----------- --------
Contributions by and distributions
to owners - - 2,237 (1,781) 456
------------------------------------ -------- -------- --------- ----------- --------
At 31 December 2018 9,803 15,539 25,020 (14,888) 35,474
------------------------------------ -------- -------- --------- ----------- --------
Consolidated Cash Flow Statement
For the year ended 31 December 2018
Year ended Year ended
31 December 31 December
2018 2017
Note GBP'000 GBP'000
--------------------------------------------------- ---- ------------ ------------
Net cash from operating activities 15 14,241 11,117
--------------------------------------------------- ---- ------------ ------------
Investing activities
Interest received 46 20
Purchases of property, plant and equipment (1,203) (803)
Expenditure on intangible assets (4,217) (3,559)
Payment of deferred consideration for acquisitions (826) (1,157)
--------------------------------------------------- ---- ------------ ------------
Net cash outflow from investing activities (6,200) (5,499)
--------------------------------------------------- ---- ------------ ------------
Financing activities
Interest paid (1) (101)
Equity dividend paid (1,952) -
Repayment of borrowings and loan arrangement
fees - (25)
--------------------------------------------------- ---- ------------ ------------
Net cash used in financing activities (1,953) (126)
--------------------------------------------------- ---- ------------ ------------
Net increase in cash and cash equivalents 6,088 5,492
Cash and cash equivalents at beginning of
year 14,082 8,833
Effect of foreign exchange rate changes (196) (243)
--------------------------------------------------- ---- ------------ ------------
Cash and cash equivalents at end of year 19,974 14,082
--------------------------------------------------- ---- ------------ ------------
Notes to the Financial Statements
1. General information
The basis of preparation of this preliminary announcement is set
out below.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2018
or 2017,but is derived from those accounts. Statutory accounts for
2017 have been delivered to the Registrar of Companies and those
for 2018 will be delivered following the Company's annual general
meeting. The auditor BDO LLP has reported on the statutory
financial statements for the year ended 31 December 2018 and the
audit report was unqualified.
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, except for financial instruments.
Copies of this announcement can be obtained from the Company's
registered office at King's Orchard, 1 Queen Street, Bristol BS2
0HQ.
The full financial statements which comply with IFRSs will be
posted to shareholders on or around 29 March 2019 and are available
to members of the public at the registered office of the Company
from that date, and are now available on the Company's website:
www.tribalgroup.com.
2. Effect of new accounting standards
The Group adopted IFRS15 "Revenue from contracts with customers"
with effect from 1 January 2018 using the modified retrospective
method. License revenue is now recognised over the duration of the
project Implementation period on a percentage completion basis.
This has the effect of spreading the recognition of License revenue
of the period of implementation, rather than immediate, upfront
recognition as was policy under IAS 18. There are no changes to the
timing of the recognition of Implementation or Support &
Maintenance revenue.
The opening balance sheet at 1 January 2018 was restated for
this change with a reduction of GBP1.3m to equity reserves and
GBP0.2m to contract assets and increases of GBP1.5m to contract
liabilities, GBP0.2m to deferred tax assets and GBP0.2m to
prepayments.
The impact to revenue of the adoption of IFRS 15 in 2018 is a
decrease of GBP1.5m; under the accounting policy before the
adoption of IFRS 15, the revenue would have been GBP81.6m (2017:
GBP82.3m excluding Ofsted) and adjusted operating profit GBP12.3m
(2017: GBP7.4m excluding Ofsted).
The Group also adopted IFRS9 "Financial Instruments" with effect
from 1 January 2018. Expected credit losses on trade receivables
have been calculated using the simplified approach. Individual
comparatives have not been restated. The loss allowances for
financial assets are based on assumptions about risk of defaults
and expected loss rates. The Group uses judgement in making these
assumptions and selecting the inputs to the impairment calculation
based on the Group's past history, existing market conditions as
well as forward looking estimates at the end of each reporting
period. The Group has applied the IFRS 9 simplified approach in
measuring expected credit losses which uses a lifetime expected
loss allowance for all trade receivables and contract assets. The
restatement of trade receivables at 1 January 2018 on transition to
IFRS 9 after applying the expected credit loss model was immaterial
and therefore not recorded at that date.
The effects of adopting IFRS 15 and IFRS 9 for the year ending
31 December 2018 are as follows:
31 Dec 31 Dec 31 Dec
31 Dec 2018 2018 2018 As
2018 As Effect Effect would have
reported of IFRS15 of IFRS9 been reported
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- ---------- --------- --------------
Income Statement
Revenue 80,062 1,452 - 81,514
Cost of Sales (40,837) (90) - (40,927)
---------------------------- --------- ---------- --------- --------------
Gross Profit 39,225 1,362 - 40,587
Administrative Expenses (34,262) - (144) (34,406)
---------------------------- --------- ---------- --------- --------------
Operating Profit 4,963 1,362 (144) 6,181
---------------------------- --------- ---------- --------- --------------
Balance Sheet
Trade and other receivables 12,840 (90) (144) 12,606
Contract assets 3,827 941 - 4,768
Contract liabilities (21,579) 511 - (21,068)
3. Revenue for contracts with customers
The Group has split revenue into various categories which is
intended to enable users to understand the relationship with
revenue segment information provided in note 4.
North America
and rest
of the
UK Australia Other APAC world Total
31 December 2018 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ ------- --------- ---------- ------------- -------
Licence and development fees 5,977 110 424 (21) 6,490
Implementation Services 6,534 4,107 2,436 479 13,556
Support & Maintenance 13,613 16,179 1,314 624 31,730
Cloud Services 3,639 715 25 87 4,466
Other services 450 229 1 - 680
Schools inspections & other related
services (QAS) 7,715 - 877 8,114 16,706
i-graduate survey & data analytics 4,626 894 452 462 6,434
------------------------------------ ------- --------- ---------- ------------- -------
42,554 22,234 5,529 9,745 80,062
------------------------------------ ------- --------- ---------- ------------- -------
North America
and rest
of the
UK Australia Other APAC world Total
31 December 2017 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ ------- --------- ---------- ------------- -------
Licence and development fees 4,693 83 926 67 5,769
Implementation Services 5,651 8,790 2,722 663 17,826
Support & Maintenance 13,104 16,418 1,377 565 31,464
Cloud Services 2,867 642 6 60 3,575
Other services 135 1 245 6 387
Schools inspections & other related
services (QAS) 7,028 - 834 9,929 17,791
i-graduate survey & data analytics 5,774 637 1,032 663 8,106
------------------------------------ ------- --------- ---------- ------------- -------
39,252 26,571 7,142 11,953 84,918
------------------------------------ ------- --------- ---------- ------------- -------
Net contract assets/(liabilities)
Contract Contract
Asset/(Liability) Asset/(Liability)
2018 2017
GBP000 GBP000
------------------------------------------------------ ------------------ ------------------
Opening contract balance pre IFRS 15 (13,046) (16,396)
IFRS 15 adjustment (1,704) -
------------------------------------------------------ ------------------ ------------------
Opening contract balance post IFRS 15 (14,750) (16,396)
Of which released to income statement 14,416 16,255
New billings and cash in excess of revenue recognised (17,418) (12,906)
------------------------------------------------------ ------------------ ------------------
Closing contract balance (17,752) (13,046)
------------------------------------------------------ ------------------ ------------------
Balances arise on contract assets and liabilities arise when
cumulative payments received from customers at the balance sheet
date do not necessarily equal the amount of revenue recognised on
contracts.
Licence revenue is now recognised over the duration of the
project implementation period on a percentage completion basis
based on timesheet data of actual days delivered versus number of
expected days for the project. This has resulted in a cumulative
catch-up adjustment of GBP1.7m being recognised in the current
period, but which related to performance of the previous period and
current periods.
Contract assets inherently have some contractual risk associated
with them related to the specific and ongoing risks in each
individual contract with a customer. The impairment of contract
assets/(liabilities) reflects provisions recognised against
contract assets in relation to these risks.
The amount of incremental costs to obtain a contract which
extends over a period of more than 12 months have been recognised
as an asset in prepayments totalling GBP0.2m and will be released
in line with the total contract revenue. No amount has been
impaired at 31 December 2018 or 2017.
Remaining performance obligations
Licence revenue is recognised over the duration of the project
implementation period on a percentage completion basis. Where there
is a short implementation, as with most Further Education and
Work-based Learning sales, there is no change to the recognition of
revenue. For larger deals, which may typically have an
implementation period of two years or more, this has the effect of
spreading the recognition of License revenue over an extended
period, rather than immediate upfront recognition. There are no
changes to the timing of recognition of Implementation, Support
& Maintenance revenue, nor is there any impact on i-graduate or
QAS.
The amount of revenue that will be recognised in future periods
on these contracts when those remaining performance obligations
will be satisfied is analysed as follows:
At 31 December 2018
2019 2020 2021 Thereafter Total
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ------- ------- ------- ---------- -------
Licence and development fees 3,887 1,658 482 26 6,053
Implementation Services 6,955 2,465 170 55 9,645
Support & Maintenance 32,448 29,201 17,558 1,007 80,214
Cloud Services 5,278 4,071 2,199 497 12,045
Other services 166 157 158 - 481
Schools inspections & other
related services (QAS) 10,540 1,613 311 - 12,464
i-graduate survey & data analytics 622 15 14 - 651
----------------------------------- ------- ------- ------- ---------- -------
59,897 39,180 20,892 1,585 121,554
----------------------------------- ------- ------- ------- ---------- -------
The Group has taken advantage of the relief in IFRS 15 to
reflect the aggregate effect of all modifications that occur before
1 January 2018.
The transaction price of contracted goods and services is shown
separately in the contract with customers. The contracted prices of
each component of a product sale are expected to provide a robust
and appropriate starting point in seeking to allocate the total
transaction price to the identified performance obligations. The
time value of money is not expected to be significant as contracts
where cash is disconnected from revenue by greater than one year
are likely to be rare.
An analysis of the Group's revenue is as follows:
2018 2017
GBP'000 GBP'000
Continuing operations
Sales of services 80,062 84,918
---------------------- -------- --------
Total revenue 80,062 84,918
---------------------- -------- --------
Sales of services are defined as education related systems or
solutions and consultancy services. Further details of the nature
of the services provided are disclosed in note 4.
Sales of goods are not material and are therefore not shown
separately. Included in sales of services is GBP0.8m (2017:
GBP0.4m) related to software licence revenues recognised as a
result of a periodic review of our licence entitlement resulting
from changes in our customers' enrolled student numbers.
There is no revenue in respect of discontinued operations.
4. Business segments
Information reported to the Group's Chief Executive for the
purposes of resource allocation and assessment of segment
performance is focused on the nature of each type of activity. The
Group's reportable segments and principal activities under
IFRS 8 are detailed below:
-- Student Information Systems ("SIS") represents the delivery
of software and subsequent maintenance and support services and the
activities through which we deploy and configure our software for
our customers;
-- Quality Assurance Solutions ("QAS"), representing inspection
and review services which support the assessment of educational
delivery; and
-- i-graduate, represents a portfolio of performance improvement
tools and services, including analytics, software solutions,
facilities and asset management.
In accordance with IFRS 8 'Operating Segments', information on
segment assets is not shown, as this is not provided to the chief
operating decision-maker. Inter-segment sales are charged at
prevailing market prices.
Adjusted Segment
Revenue Operating Profit
-------------------------- --------------------------
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ------------ ------------
Student Information Systems 56,922 60,026 16,506 17,613
Quality Assurance Solutions 16,706 17,791 3,701 4,408
i-graduate 6,434 7,101 1,274 1,064
----------------------------------- ------------ ------------ ------------ ------------
Total 80,062 84,918 21,481 23,085
----------------------------------- ------------ ------------ ------------ ------------
Unallocated corporate expenses (10,686) (14,543)
----------------------------------- ------------ ------------ ------------ ------------
Adjusted operating profit 10,795 8,542
Amortisation of IFRS 3 intangibles (1,787) (2,034)
Other items (4,045) (2,781)
----------------------------------- ------------ ------------ ------------ ------------
Operating profit 4,963 3,727
Investment income 46 20
Finance costs (160) (307)
----------------------------------- ------------ ------------ ------------ ------------
Profit before tax 4,849 3,440
Tax charge (702) (821)
----------------------------------- ------------ ------------ ------------ ------------
Profit after tax 4,147 2,619
----------------------------------- ------------ ------------ ------------ ------------
The accounting policies of the reportable segments are the same
as the Group's accounting policies. Segment profit represents the
profit earned by each segment, without allocation of central
administration costs, including Directors' salaries, finance costs
and income tax expense. This is the measure reported to the Group's
Chief Executive for the purpose of resource allocation and
assessment of segment performance.
Within QAS revenues of approximately 5% (2017: 4%) have arisen
from the Segments largest customer; within SIS revenues of
approximately 6% (2017: 8%) have arisen from the Segments largest
customer.
Geographical information
Revenue from external customers, based on location of the
customer, are shown below:
2018 2017
GBP'000 GBP'000
------------------------------------ -------- --------
UK 42,554 39,252
Australia 22,234 26,571
Other Asia Pacific 5,529 7,142
North America and rest of the world 9,745 11,953
------------------------------------ -------- --------
80,062 84,918
------------------------------------ -------- --------
Non-current assets (excluding deferred tax)
2018 2017
GBP'000 GBP'000
------------------------------------ -------- --------
UK 17,884 15,923
Australia 16,940 20,660
Other Asia Pacific 248 115
North America and rest of the world 2 6
------------------------------------ -------- --------
35,074 36,704
------------------------------------ -------- --------
5. Other items
2018 2017
GBP'000 GBP'000
------------------------------------------------- -------- --------
Acquisition related costs (62) (29)
------------------------------------------------- -------- --------
Share based payments (including employer related
taxes) (2,329) (1,732)
------------------------------------------------- -------- --------
- Impairment of development costs (983) -
- Legacy Defined benefit schemes (73) -
- Property related 7 -
- Restructuring and associated costs (985) (1,020)
------------------------------------------------- -------- --------
Other exceptional items (2,034) (1,020)
------------------------------------------------- -------- --------
Amortisation of IFRS 3 intangibles (1,787) (2,034)
------------------------------------------------- -------- --------
Total administrative expenses (6,212) (4,815)
------------------------------------------------- -------- --------
Other financing costs (106) (128)
Other financing income 380 -
------------------------------------------------- -------- --------
Total other items before tax (5,938) (4,943)
Tax on other items 1,171 936
------------------------------------------------- -------- --------
Total other items after tax (4,767) (4,007)
------------------------------------------------- -------- --------
IAS 1, paragraph 97 requires separate disclosure of such items
that are considered material by nature or value, that they require
separate disclosure in the financial statements. As such, 'other
items' are not part of the Group's underlying trading activities
and include the following:
Acquisition costs: Amounts relating to corporate activity in the
period total GBP62,000, During the previous period, a final payment
was made in respect of deferred consideration payable on
acquisition of Callista, which resulted in a true up of the amounts
provided (2017: GBP29,000).
Other exceptional items: Amounts principally reflect the costs
arising in respect of the restructuring of the Group's operations
and the impairment of SchoolEdge development costs. The
restructuring program will be executed in the first half of 2019
and associated costs have been provided for. Amounts relate mainly
to provision for redundancy costs. (2018: GBP985,000: 2017:
GBP1,020,000). In addition Management concluded that there was an
impairment in Development costs as at 31 December 2018, being the
whole of modules 3, being software sold in schools in Australia
only (2018: GBP983,000: 2017: GBPnil).
Share based payments: The numbers above include the movement in
associated employers taxes accrual (2018: GBP17,000: 2017:
GBP339,000) and the cash paid on dividends on share options that
have met performance conditions (2018: GBP47,000: 2017: GBPnil).
When the Company declares a cash dividend, some option holders are
entitled to a "dividend equivalent". This is a payment in cash
and/or additional shares with a value determined by reference to
the dividends that would have been paid on the vested shares in
respect of dividend record dates occurring during the period
between the grant of the Award and the date on which it becomes
exercisable.
Amortisation of IFRS3 intangibles: Amortisation arising on the
fair value of intangible assets acquired is separately disclosed as
other items. (2018: GBP1,787,000: 2017: GBP2,034,000).
Financing charges: Consistent with the treatment of movements in
deferred consideration, the unwind of the discount on deferred
consideration is separately presented as other financing costs in
the income statement (2018: GBP106,000: 2017: GBP128,000).
Financing income: Amounts relating to settlement gains on
defined benefit schemes (2018: GBP380,000: 2017: GBPnil).
Taxation: The tax credit arising on the above items is presented
on a consistent basis with the underlying cost or credit to which
it relates and therefore is also presented separately on the face
of the income statement.
6. Investment income
2018 2017
GBP'000 GBP'000
-------------------------- -------- --------
Other interest receivable 46 20
-------------------------- -------- --------
46 20
-------------------------- -------- --------
7. Finance(income)/costs
2018 2017
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Interest on bank overdrafts and loans 1 51
Amortisation and write off of loan arrangement fees 12 36
Net interest payable on retirement benefit obligations 41 42
Other interest payable - 50
------------------------------------------------------- -------- --------
Adjusted Finance costs 54 179
------------------------------------------------------- -------- --------
Unwinding of discounts 106 128
------------------------------------------------------- -------- --------
Other finance costs 106 128
------------------------------------------------------- -------- --------
Total finance costs 160 307
Settlement gain on defined benefit schemes (380) -
------------------------------------------------------- -------- --------
Total finance (income)/costs (220) 307
------------------------------------------------------- -------- --------
8. Tax
2018 2017
GBP'000 GBP'000
------------------------------------------ -------- --------
Current tax
UK corporation tax 114 100
Overseas tax 702 1,529
Adjustments in respect of prior years (179) (165)
------------------------------------------ -------- --------
637 1,464
------------------------------------------ -------- --------
Deferred tax
Current year 79 (641)
Adjustments in respect of prior years (14) (2)
------------------------------------------ -------- --------
65 (643)
------------------------------------------ -------- --------
Tax charge on profits 702 821
------------------------------------------ -------- --------
The continuing tax charge can be reconciled to the profit from
continuing operations per the income statement as follows:
2018 2017
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Profit before tax on continuing operations 4,849 3,440
----------------------------------------------------- -------- --------
Tax charge at standard UK rate of 19% (2017: 19.25%) 921 662
Effects of:
Overseas tax rates (56) 180
Expenses not deductible for tax purposes 156 64
Adjustments in respect of prior years (193) (167)
Additional deduction for R&D expenditure 18 (7)
Movement in transfer pricing tax provision (64) -
Utilisation of unrecognised tax losses 9 (125)
Effect of changes in tax rates (89) 214
----------------------------------------------------- -------- --------
Tax expense for the year 702 821
----------------------------------------------------- -------- --------
In addition to the amount charged to the income statement a
current tax credit of GBPnil (2017: GBPnil) and a deferred tax
credit of GBP171,000 (2017: credit of GBP345,000) has been
recognised directly in equity during the year in relation to share
schemes. A deferred tax charge of GBP73,000 (2017: charge of
GBP9,000) has been recognised in the Consolidated Statement of
Comprehensive Income in relation to Defined Benefit pension
schemes.
The Group continues to hold an appropriate corporation tax
provision in relation to the Group relief claimed from Care UK for
the year ended 31 March 2007, together with other appropriate Group
provisions.
The income tax expense for the year is based on the UK statutory
rate of corporation tax for the period of 19% (2017: 19.25%). Tax
for other jurisdictions is calculated at the prevailing rates
prevailing in the respective jurisdictions.
A further reduction in the UK corporation tax rate from 19% to
17% (effective from 1 April 2020) was substantively enacted on 6
September 2016. This will reduce the Group's future tax charge
accordingly. The deferred tax balances at 31 December 2018 have
been calculated based on these rates.
9. Dividends
2018 2017
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Amounts recognised as distributions to equity holders
in the period:
Final dividend for the year ended for the year ended
31 December 2017 of 1.0 pence (year ended 31 December
2017: nil pence) per share 1,952 -
Proposed final dividend for the year ended 31 December
2018 of 1.1 pence
(year ended 31 December 2017: 1.0 pence) per share 2,147 1,961
------------------------------------------------------- -------- --------
10. 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:
2018 2017
thousands thousands
-------------------------------------------------- ---------- ----------
Weighted average number of shares outstanding:
Basic weighted average number of shares in issue 195,224 195,011
Weighted average number of employee share options 10,546 10,729
-------------------------------------------------- ---------- ----------
Weighted average number of shares outstanding for
dilution calculations 205,770 205,740
-------------------------------------------------- ---------- ----------
Diluted earnings per share only reflects the dilutive effect of
share options for which vesting criteria have been met.
The maximum number of potentially dilutive shares, based on
options that have been granted but have not yet met vesting
criteria, is 7,021,974 (2017: 10,084,612). In addition there are a
further 3,405,996 (2017: 3,405,996) potentially dilutive matching
share options that have been granted but have not yet met vesting
criteria as at 31 December 2018.
The adjusted basic and diluted earnings per share figures shown
on the consolidated income statement on page [58] 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:
2018 2017
GBP'000 GBP'000
----------------------------- -------- --------
Net Profit 4,147 2,619
----------------------------- -------- --------
Earnings per share
Basic 2.1p 1.3p
Diluted 2.0p 1.3p
----------------------------- -------- --------
Adjusted net profit 8,914 6,626
----------------------------- -------- --------
Adjusted earnings per share
Basic 4.6p 3.4p
Diluted 4.3p 3.2p
----------------------------- -------- --------
Profit for the
year Earnings per share
----------------------------------- ------------------ --------------------
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- --------- ---------
Profit for the year attributable
to equity shareholders 4,147 2,619 2.1p 1.3p
----------------------------------- -------- -------- --------- ---------
Add back:
Amortisation of IFRS intangibles
(net of tax) 1,271 1,444
Share based payments 2,237 1,393
Unwinding of discounts 106 128
Other items (net of tax) 1,153 1,013
Movement in deferred contingent
consideration - 29
----------------------------------- -------- -------- --------- ---------
Total adjusting items (net of tax) 4,767 4,007 2.5p 2.1p
----------------------------------- -------- -------- --------- ---------
Adjusted earnings 8,914 6,626 4.6p 3.4p
----------------------------------- -------- -------- --------- ---------
11. Goodwill
2018 2017
GBP'000 GBP'000
------------------------------ -------- --------
Cost
At beginning of year 102,344 102,547
Disposals - (10)
Exchange differences (596) (193)
------------------------------ -------- --------
At end of year 101,748 102,344
------------------------------ -------- --------
Accumulated impairment losses
At beginning of year 81,231 81,231
------------------------------ -------- --------
At end of year 81,231 81,231
------------------------------ -------- --------
Net book value
At end of year 20,517 21,113
------------------------------ -------- --------
At beginning of year 21,113 21,316
------------------------------ -------- --------
Goodwill acquired in a business 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:
2018 2017
GBP'000 GBP'000
---------------------------- -------- --------
Student Information Systems 16,983 17,579
i-graduate 3,534 3,534
---------------------------- -------- --------
20,517 21,113
---------------------------- -------- --------
Goodwill is reviewed at least annually for impairment by
comparing the recoverable amount of each cash generating unit (CGU)
with the goodwill, intangible assets and property, plant and
equipment allocated to that CGU.
The recoverable amount of a CGU is determined based on value in
use calculations. These calculations use risk adjusted cash flow
projections based on the financial budget approved by management
for the period to 31 December 2019. The budget was prepared based
on past experience, strategic plans and management's expectation
for the markets in which they operate including adjustments for
known contract ends, contract related inflationary increases and
planned cost savings. The budget was extrapolated over an
eight-year period inline with previous calculations and to give
greater clarity on future cashflows. The growth assumption is 2%
per annum for SIS and QAS and 4% per annum for i-graduate. Cash
flows beyond the budget and extrapolation period were calculated
into perpetuity using the same growth rates. These growth rates are
in line with the expected average UK economy long-term growth
rate.
The cash flows projections are discounted at a pre-tax discount
rate of 10.4% (2017: 11.27%). The single discount rate, which is
consistently applied for all CGUs, is determined with reference to
internal measures and available industry information and reflects
specific risks relevant to the Group.
Impairment testing inherently involves a number of judgemental
areas, including the preparation of cash flow forecasts for periods
that are beyond the normal requirements of management reporting;
the assessment of the discount rate appropriate to the Group and
the estimation of the future revenue and expenditure of each CGU.
Accordingly, management undertook stress testing to understand the
key sensitivities and concluded as follows:
SIS is the largest segment and has significant impairment
headroom as such no reasonable sensitivities would cause an
impairment.
i-graduate is the smallest segment and the impairment headroom
is the most sensitive however there is reasonable headroom. The
discount rate for 2018 would need to increase to 14.6% for an
impairment to occur or the growth rate reduce to 0.6% per annum.
For example, if the growth rate decreased to 0.6% and the discount
rate was 14.6% it would result in an impairment of approximately
GBP873,000. From 1 January 2019 the i-graduate business is now
combined with QAS under one new CGU "Education Services" and lead
by the current Managing Director of QAS. Significant synergies are
anticipated. Additionally, the annually recurring nature of the
surveys and data analytics i-graduate undertakes give further
comfort. The Directors will however continue to closely monitor the
position given the sensitivity of the segment.
Further to the impairment review, the Directors concluded that
no impairment has arisen during the year.
12. Other intangible assets
Customer Acquired
contracts Intellectual Development Business Software
Software & relationships Property costs systems licences Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
Cost
At 1 January 2017 7,876 7,142 - 24,479 6,470 1,404 47,371
Additions - - 1,873 2,135 97 77 4,182
Disposals - - - - (191) (12) (203)
Exchange differences (109) (46) - (79) (2) - (236)
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2017
and 1 January
2018 7,767 7,096 1,873 26,535 6,374 1,469 51,114
Additions - - - 4,145 46 26 4,217
Disposals - - - - - (7) (7)
Exchange differences (353) (151) - (173) (5) (2) (684)
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2018 7,414 6,945 1,873 30,507 6,415 1,486 54,640
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
Amortisation
At 1 January 2017 4,039 4,458 - 18,860 4,575 1,225 33,157
Charge for the
year 1,529 505 187 1,445 642 134 4,442
Disposals - - - - (191) (12) (203)
Exchange differences (93) (27) - (24) (1) - (145)
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2017
and 1 January
2018 5,475 4,936 187 20,281 5,025 1,347 37,251
Charge for the
year 1,358 429 374 1,383 487 85 4,116
Impairment - - - 983 - - 983
Disposals - - - - - (7) (7)
Exchange differences (270) (78) - (70) (3) - (421)
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2018 6,563 5,287 561 22,577 5,509 1,425 41,922
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
Carrying amount
At 31 December
2018 851 1,658 1,312 7,930 906 61 12,718
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2017 2,292 2,160 1,686 6,254 1,349 122 13,863
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
Software and customer contracts and relationships have arisen
from acquisitions and are amortised over their estimated useful
lives, which are 3-6 years and 3-12 years respectively. The
amortisation period for development costs incurred on the Group's
product development is 3 to 7 years, based on the expected
life-cycle of the product. Amortisation and impairment of
development costs, the amortisation for software, customer
contracts and relationships, business systems and software licences
are all included within administrative expenses.
Included within Business Systems are finance systems with a
carrying value of GBP0.9m (2017: GBP1.3m). Each system is being
amortised over a period of three to five years and have an average
of three years left.
The Group is required to test annually if there are any
indicators of impairment. The recoverable amount is determined
based on value in use calculations of identified CGU's. The use of
this method requires the estimation of future cashflows and the
determination of a discount rate in order to calculate the present
value of the cashflows.
The impairment testing allocates all assets relating to specific
CGUs, including goodwill, other intangibles, property, plant and
equipment and net current assets/liabilities.
Towards the end of 2018 management identified some challenges in
the APAC school's business. To mitigate some of the challenge it
was decided to reduce investment in the sector and halt future
software development where it is not supported by committed sales.
The decision to stop work on modules 3 was only taken at the end of
the year and in line with the Group's policy, work undertaken
throughout the year has been capitalised as the view at the time
was that the capitalised value was supportable. Management
concluded that as at 31 December 2018 there was an impairment in
Development Costs, being the whole of modules 3 (prior year and
current year capitalisation) in SchoolEdge totalling GBP1m, being
the software sold into schools in Australia only. This asset
belongs to the SIS segment and has been booked through "other
items, administrative expenses" (see note 5) in the financial
statements and is consistent with the treatment of other
"non-trading" adjustments.
On 5 June 2017, the Group acquired Intellectual property from
Wambiz Limited. The initial cash consideration was GBP1,250,000.
Further consideration of GBP289,000 was paid in 2018 and GBP485,000
is payable in 2019. An intangible asset of GBP1,873,000 has been
recorded under Acquired intellectual property, discounted for
deferred payments which have been recorded as a deferred
consideration liability in Trade and other payables. This asset is
being amortised over a period of 5 years.
13. Trade and other receivables
2018 2017
GBP'000 GBP'000
Amounts receivable for the sale of services 9,452 12,202
Less: loss allowance (137) (1,713)
-------------------------------------------- -------- --------
9,315 10,489
Other receivables 375 516
Prepayments 3,150 2,620
-------------------------------------------- -------- --------
12,840 13,625
-------------------------------------------- -------- --------
14. Trade and other payables
2018 2017
GBP'000 GBP'000
----------------------------------- -------- --------
Current
Trade payables 1,461 429
Other taxation and social security 3,028 2,596
Other payables 1,793 3,038
Deferred consideration 473 825
----------------------------------- -------- --------
6,755 6,888
----------------------------------- -------- --------
Non-current
Other payables 62 153
Deferred consideration - 398
----------------------------------- -------- --------
62 551
----------------------------------- -------- --------
Total 6,817 7,439
----------------------------------- -------- --------
The average credit period taken for trade purchases is 30 days
(2017: 5 days). For most suppliers, no interest is charged on the
trade payables for the first 30 days from the date of invoice.
Thereafter, in some cases, interest may be charged on the
outstanding balances due to certain suppliers at various interest
rates. The Group has financial risk management policies in place to
ensure that all payables are paid within a reasonable timeframe.
The Directors consider that the carrying amount of trade and other
payables approximates their fair value.
Other payables are split as follows:
2018 2017
GBP'000 GBP'000
---------------------------- -------- --------
Goods received not invoiced 997 1,650
Funds restricted in use - 39
Other creditors 1,108 1,349
---------------------------- -------- --------
2,105 3,038
---------------------------- -------- --------
15. Notes to the cash flow statement
2018 2017
GBP'000 GBP'000
------------------------------------------------- -------- --------
Operating profit from continuing operations 4,963 3,727
Depreciation of property, plant and equipment 995 1,190
Amortisation and impairment of other intangible
assets 5,099 4,442
Share based payments 2,265 1,393
Research and development tax credit (325) (159)
Net pension (credit)/charge (326) 6
Movement in deferred consideration - 29
Other non-cash items 55 222
------------------------------------------------- -------- --------
Operating cash flows before movements in working
capital 12,726 10,850
Decrease in inventories - 83
Decrease in receivables 2,034 1,044
Increase/(decrease) in payables 1,086 (930)
------------------------------------------------- -------- --------
Net cash from operating activities before tax 15,846 11,047
Tax (paid)/received (1,605) 70
------------------------------------------------- -------- --------
Net cash from operating activities 14,241 11,117
------------------------------------------------- -------- --------
Net cash from operating activities before tax can be analysed as
follows:
2018 2017
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Continuing operations (excluding restricted cash) 15,885 11,220
Decrease in restricted cash (39) (173)
-------------------------------------------------- -------- --------
15,846 11,047
-------------------------------------------------- -------- --------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAFDPFEENEAF
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March 19, 2019 03:01 ET (07:01 GMT)
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