TIDMTRB
RNS Number : 5556J
Tribal Group PLC
20 August 2019
20 August 2019
Tribal Group plc
Half year results for the six months ended 30 June 2019
(unaudited)
Change
2019 2018 Change %
Revenue GBP40.4m GBP42.0m GBP(1.6)m (4)%
========== ========= ========== =======
Adjusted operating profit GBP6.3m GBP6.3m - -
(1,2)
========== ========= ========== =======
Adjusted EBITDA GBP8.3m GBP7.9m GBP0.4m 5%
========== ========= ========== =======
Statutory profit after tax GBP3.6m GBP2.9m GBP0.7m 24%
========== ========= ========== =======
Operating cash flow GBP(2.7)m GBP0.5m GBP(3.2)m (640)%
========== ========= ========== =======
Net cash GBP6.0m GBP9.2m GBP(3.2)m (35)%
========== ========= ========== =======
Earnings per Share (diluted) 1.7p 1.4p 0.3p 21%
========== ========= ========== =======
Financial Highlights
-- Full year earnings expected to be in line with the Board's expectations
-- Adjusted operating profit performance in line with 2018 H1
-- Annual recurring revenue increased 5% to GBP19.9m
representing 49% of total revenue (2018 H1: GBP18.9m, 45% of total
revenue)
-- Adjusted operating margin up 50bps to 15.5% (2018 H1: 15.0%)
-- Net cash of GBP6m following the GBP6m acquisition of Crimson Consultants
-- Committed income increased to GBP123.5m (2018 FY: GBP121.6m)
- 89% of full year revenue expectation already recognised or
committed
-- Adjusted earnings per share increased 14% to 2.5p (2018 H1: 2.2p)
Operational Highlights
-- Continued progress against long-term strategy of developing
and delivering our next generation student information services
platform, Tribal Edge
-- Good Student Information Systems performance in EMEA
-- Signed new 3-year GBP9m Education Services contract with NCETM in the UK
-- Completed acquisition of Crimson Consultants for GBP6m with
GBP4m contingent consideration - integration progressing well
-- Continued investment into new and existing product development
-- Investment in Tribal Edge at full headcount with first module expected January 2020
-- Mark Pickett appointed Chief Executive Officer and Paul
Simpson appointed Acting Chief Financial Officer
-- Appointment of Mike Cope, former Chief Information Officer of
University College London, as Chief Technology Officer
Mark Pickett, CEO of Tribal Group, commented:
"Tribal continued to make good progress against its strategic
objectives in the first six months of the year. First half
performance overall was encouraging - recurring revenue and
operating margin were both up. We completed the acquisition of
Crimson Consultants, boosting our next generation cloud solution
Tribal Edge's functionality and accelerating its speed to market as
well as bringing new customers and relationships into the Group.
Our outlook for the full year remains unchanged subject to
successfully winning the Middle East inspections work in H2, we
continue to work on a number of new revenue opportunities, and we
remain very excited about the longer-term growth opportunities
available to us through the transition to Tribal Edge."
1 Adjusted Operating Profit and Adjusted Operating Margin is in respect of continuing operations,
excluding intangible asset amortisation of GBP0.6m (2018 H1: GBP0.9m), restructuring costs
of GBP0.3m (2018 H1: GBP0.1m), and share based payments GBP0.5m (2018 H1: GBP1.1m)
2 Adjusted Operating Profit is considered a Key Performance Indicator of the Group. We consider
this to represent the underlying performance of the business and provides greater clarity
to users of the accounts
---------------------------------------------------------------------------------------------------------
Further Information
A presentation of these results will be made to analysts at
9.30am today at the offices of Tulchan Communications LLP, 85 Fleet
Street, London EC4Y 1AE. Please contact tribal@tulchangroup.com to
register to attend. A copy of the presentation will be available on
the Tribal Group website: www.tribalgroup.com.
Tribal Group plc Tel: 0117 311 5293
Mark Pickett, Chief Executive
Officer
Paul Simpson, Acting Chief Financial
Officer
Investec Bank plc Tel: 020 7597 5970
Sara Hale
Andrew Pinder
Will Godfrey
Neil Coleman
N+1 Singer Capital Markets Limited Tel: 020 7496 3000
Shaun Dobson Tel: 020 7353 4200
Tulchan Communications LLP
James Macey White
David Ison
This Statement has been prepared for and is addressed only to
our shareholders as a whole and should not be relied on by any
other party or for any other purpose. Tribal, its directors,
employees, agents or advisers do not accept or assume
responsibility to any other person to whom this Statement is shown
or into whose hands it may come and any such responsibility or
liability is expressly disclaimed. This Statement may contain
forward-looking statements. Any forward-looking statement has been
made by the directors in good faith based on the information
available to them up to the time of approval of this Statement and
should be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying such
forward-looking information. To the extent that this Statement
contains any statement dealing with any time after the date of its
preparation, such statement is merely predictive and speculative as
it relates to events and circumstances which are yet to occur and
therefore the facts stated and views expressed may change. Tribal
undertakes no obligation to update these forward-looking
statements.
Chief Executive's Review
Introduction
Tribal continued to make good progress against its strategy in
the first half of the year, reporting good profitability on
slightly reduced revenue, in line with the Board's
expectations.
Revenue decreased by 4% to GBP40.4m (2018 H1: GBP42.0m),
adjusted operating profit remained consistent at GBP6.3m (2018 H1:
GBP6.3m), adjusted operating margin increased by 50 basis points to
15.5% (2018 H1: 15.0%) and statutory profit increased 27% to
GBP3.6m.
Almost 40% of Tribal's income is generated outside the UK, and
is therefore subject to foreign exchange movement. Using a constant
currency basis, applying 2019 exchange rates to 2018 results, the
constant currency revenue(1) decreased by 3%, adjusted operating
profit increased by 2% and adjusted operating margin increased by
70 basis points.
Strategy & Market Position
Our strategy is to focus on international education sectors
Higher Education, Further Education and Vocational institutions,
Schools, Government and State bodies, Training Providers, and
Employers - and to underpin student success through the provision
of expertise, software and services.
The strategic direction of the business was set after a detailed
review early in 2016 and our strategic priorities remain
unchanged:
- Deliver Tribal Edge
- Increase Annual Recurring Revenue
- Grow market share in established and new territories
- Drive improved margin
There is a structural shift taking place in the industry, with a
move away from costly and inefficient on-premise solutions and
demand increasing for flexible, cloud-based student information
platforms built on an open ecosystem. We continue to work closely
with those institutions to ensure Tribal Edge, our next generation
cloud platform, meets that demand, and firmly believe that it has
the potential to transform the Group's long-term growth
prospects.
Tribal Edge
Tribal Edge has seen significant progress in the last six months
and the developments were well received at our annual "Empower"
conference, attended by more than 500 delegates.
The first Edge module, for the collection and submission of
Student Information in Australia, will go live at the end of 2019,
followed by the first Applicant Management module in early 2020,
and further modules at regular intervals thereafter. We have
ongoing beta trials and a strong pipeline of early adopters looking
to deploy the new Tribal Edge modules.
We also introduced Tribal Edge "Exchange" which allows partners
and existing customers to simply and easily offer their solutions
to other Tribal Edge customers. In time, Edge Exchange will offer
additional value to our customers and provide incremental revenue
streams to Tribal.
Student Information Systems
This segment includes all software-related products and services
sold into Higher Education, Further Education, Schools and
Work-based and Vocational Learning organisations.
On a constant currency basis, Student Information Systems
revenue remained consistent with the previous year at GBP28.7m
(2018 H1: GBP28.8m).
The Student Information Systems business has performed well.
Overall activity levels in our markets for the replacement or
enhancement of student information systems remain stable and we
continue to see a steady flow of new opportunities in all
sectors.
In the first half of the year, the Group won two new Further
Education college contracts, including a significant win at Capital
City Colleges Group, one of the largest college groups in the UK.
This follows our win in 2018 with Colleges Northern Ireland,
consolidating ebs as the leading Further Education student
management system in the UK. We also signed a large contract with
Sopra Steria to implement our Maytas product to manage the
apprenticeship program for the Construction industry Training
Board.
A strong account management performance in SITS, with additional
modules and components being sold into the existing SITS customer
base, continued to drive license sales and Support &
Maintenance. However, no new SITS customer sales were made
following the five new customers won in the previous 12 months.
This was largely as a result of a fall in the number of
universities coming to market.
In APAC, our existing business continues to operate well, with
additional work obtained from TAFE New South Wales in support of
its migration to OneTAFE, a single TAFE entity. Two new ebs
customer were won, and in SchoolEdge, we signed a AUS$1.3m contract
to support the migration to a new provider, as previously
announced.
Education Services
This segment includes non-software services including Quality
Assurance Solutions (QAS) inspections, training and benchmarking
and i-graduate surveys which are now managed as one business with
shared resource; the segment also includes other non-core software
services.
Overall revenue in Education Services decreased by 9% on a
constant currency basis to GBP11.7m (2018 H1: GBP12.9m).
Our Quality Assurance Solutions (QAS) business continues to be
successful in winning new contracts for the provision of school and
teacher training inspection services through. Revenue was down in
the first half of the year, though, as the Abu Dhabi Ministry for
Education curtailed the existing schools inspection contract (ADEK)
early, to redefine its requirements for future inspections; this
resulted in GBP1m less revenue in H1 2019 than H1 2018. A
subsequent tender has been submitted and if the contract decision
is positive and timely, Education Services will make up the revenue
and operating profit in H2. We also won work in a new emirate,
Sharjah, which commenced at the beginning of H2.
In the UK, we secured a new, GBP9m 3-year contract with the DfE
for the National Centre for the Excellence in the Teaching of
Mathematics (NCETM), and in New Zealand, we secured a one-year
extension of the Tertiary Education Council (TEC) benchmarking
contract for all. In the US, we secured a new customer with a
contract to review the teacher training in the State of Louisiana
(US$1.6m).
Management Changes
In March 2019, Mark Pickett was appointed as Chief Executive
Officer, having previously been Acting Chief Executive Officer and
Chief Financial Officer. At the same time, Paul Simpson was
appointed Acting Chief Financial Officer. Paul had previously been
the Global Financial Controller of Tribal.
We have appointed a Chief Technology Officer, Mike Cope, who
joins from University College London where he was CIO, and an
existing SITS customer. His experience will be invaluable as we
drive adoption of the Tribal Edge modules.
Acquisition
In May 2019, Tribal acquired Crimson Consultants ('Crimson'),
the UK's market-leading provider of customer relationship
management ('CRM') based solutions to the education market.
Crimson's technology provides valuable, additional functionality to
Tribal Edge. It will accelerate its speed to market and reduces
Tribal's requirement to develop this functionality. Additionally,
Crimson brings with it a broad existing customer base and strong
relationships with Higher Education universities and Further
Education colleges, both existing Tribal customers and competitors,
presenting compelling new cross-selling opportunities. The initial
consideration was GBP6m with a further GBP4m contingent
consideration based on meeting an annual recurring revenue target.
The acquisition was financed through existing cash resources and
the integration continues to progress well.
Legal Matters
On 25 January 2019, we notified the stock exchange that the
Group had received a letter of claim from lawyers acting for a
provider of a software platform on which a number of the Company's
material products are based. The letter claims that Tribal
Education Limited 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. Whilst no
specific amount is claimed, the letter of claim estimated the
losses at between GBP15m and GBP30m, which we dispute. These claims
date back over a period of more than 18 years during which time the
Group has regularly made royalty payments and the Board does not
consider the claims to be justified. The Board is vigorously
defending the claim and is actively working with the provider to
reach a resolution at the earliest opportunity.
On 12 August 2019, the company announced that it had been made
aware of the unauthorised disclosure and likely access of personal
information of approximately 9,300 individuals, held by Tribal
Campus, an Australian subsidiary of the Group, in its capacity as a
provider of a student information system to MEGT, an educational
organisation in Australia. Upon discovery of the unauthorised
disclosure, immediate steps were taken by Tribal to secure the data
and external forensic cyber security experts were appointed to
investigate the circumstances and scope of the incident. While
those investigations are ongoing, the individuals that may have
been affected have been contacted and advised on the steps they
should take. The Group continues to work closely with the regulator
in Australia.
Tribal confirms that this is an isolated incident relating to
the migration of data for a single Tribal Campus customer in
Australia involving a non-production system. No other customers,
products or regions have been affected. Whilst there can be no
certainty as to the financial impact, based on current estimates,
costs to Tribal are not expected to be material.
Outlook and Current Trading
Despite fewer institutions coming to market for traditional full
student information systems both in the UK and Australia/New
Zealand, there is growing demand for moving existing systems into
the public cloud, providing an opportunity to drive incremental
revenue from ebs, Maytas and SITS through the provision of Cloud
services.
At the same time, demand for our Tribal Dynamics products,
through the acquisition of Crimson Consultants, is strong, with
universities increasingly looking to invest in CRM for their
Marketing and Recruitment requirements.
Management therefore remains confident that full year earnings
will be in line with the Board's expectations.
Looking beyond the full year, the outlook will be affected if
large new licence opportunities in Higher Education remain
depressed. The team continues to work on a number of bids, but the
longer-term nature of the sales cycles may have a slight impact on
the expected revenues and operating profit in 2020.
While growth may be slower in the short to medium-term, we
continue to make good progress in delivering Tribal Edge in
response to the structural shift we are seeing in our industry. It
is potentially transformational technology in a market ripe for
change, and we remain very excited about the compelling longer-term
growth opportunities it will create.
Financial Performance
In the six months ended 30 June 2019 the Group's revenue was
down 3.8% to GBP40.4m (2018 H1: GBP42.0m).
Adjusted operating profit was in line at GBP6.3m (2018 H1:
GBP6.3m) and operating profit margin increased to 15.5% (2018:
15.0%). To improve understanding of the underlying performance of
the business, these numbers are adjusted for certain items,
including share based payments, as detailed in the section "Items
excluded from adjusted profit figures".
Statutory profit after tax was GBP3.6m (2018 H1: GBP2.9m) and
diluted earnings per share were 1.7p (2018 H1: 1.4p).
At the end of the period, the Group had net cash of GBP6.0m,
excluding the acquisition of Crimson Consultants this would have
increased to GBP12.0m (2018 FY: GBP20.0m; 2018 H1: GBP9.2m).
Results
GBPm
6
months 2018 Growth
to Constant Constant
30
June 2019 2018 Currency Currency
==========
Revenue 40.4 42.0 41.7 (3.2)%
====== ====== ========== ==========
Student Information Systems 28.7 29.1 28.8 -
====== ====== ========== ==========
Education Services 11.7 12.8 12.9 (9.2)%
====== ====== ========== ==========
Adjusted Operating Profit
(before Central Overheads)
(1) 11.8 12.4 12.2 (2.9)%
====== ====== ========== ==========
Student Information Systems 9.2 9.2 9.0 1.8%
====== ====== ========== ==========
Education Services 2.6 3.2 3.2 (16.5)%
====== ====== ========== ==========
Central Overheads (5.6) (6.1) (6.0) 7.3%
====== ====== ========== ==========
Adjusted Operating Profit 6.3 6.3 6.2 1.4%
====== ====== ========== ==========
Adjusted Operating Margin 15.5% 15.0% 14.8% 70bps
====== ====== ========== ==========
(1) Adjusted Operating Profit and Adjusted Operating Margin is
in respect of continuing operations, excluding intangible asset
amortisation of GBP0.6m (2018 H1: GBP0.9m), restructuring costs of
GBP0.3m (2018 H1: GBP0.1m), and share based payments GBP0.5m (H1
2018: GBP1.1m)
Over 40% of Tribal's income is generated outside the UK, and is
therefore subject to foreign exchange movement. Overall, there was
an adverse impact due to foreign exchange fluctuations of GBP0.3m
in revenue and GBP0.2m in operating profit, due particularly to the
Group's exposure to the Australian dollar, which was on average 6%
stronger against GBP sterling in 2019 compared with 2018.
The revenue and operating profit by segment in the table shows
the reported results for 2019 H1 and 2018 H1, and the 2018 H1
results restated to "constant currency" using 2019 rates to exclude
foreign currency impact. The growth percentages shown are on the
2018 constant currency numbers.
Overall revenue decreased by 3.1% on a constant currency basis
to GBP40.4m (2018 H1: GBP41.7m). This was mainly due to Education
Services where Middle East contracts were lower, compared to a
strong first half in 2018.
Adjusted operating profit before central overheads decreased by
3.3% to GBP11.8m (2018 H1: GBP12.2m).
Central overheads, representing costs in HR, IT, Finance,
Marketing and Management that can't be directly attributed to lines
of business, reduced to GBP5.6m (2018 H1: GBP6.0m). We continue to
drive operational efficiencies and cost savings operating on a
centralised basis globally, helping to improve margin without
impacting the Group's ability to serve our customers or grow, for
example absorbing the acquisition of Crimson Consultants.
Adjusted operating profit increased by 1.6% on a constant
currency basis to GBP6.3m (GBP2018 H1: GBP6.2m).
Adjusted operating margin, which is traditionally stronger in
the first half, increased by 50 basis points to 15.5%; excluding
the impact of foreign currency movement it has increased by 70
basis points, as ongoing efficiencies and cost savings continue to
benefit profitability.
Student Information Systems: On a constant currency basis,
Student Information Systems revenue remained consistent with the
previous year at GBP28.7m (2018 H1: GBP28.8m).
License sales decreased by GBP1.4m on a constant currency basis.
In EMEA sales increased by GBP0.2m reflecting strong account
management sales with existing customers and the recognition of new
license sales in the previous year Canterbury Christ Church
University, University of Portsmouth, Queen Mary's University,
Ravensbourne University London and Colleges Northern Ireland where
license revenue is recognised under IFRS15 as the implementation is
completed. In APAC sales fell by GBP1.7m reflecting the completion
of work in relation to prior years sales and the lack of new
customers coming to the market.
Implementation is in line on a constant currency basis,
reflecting that the delivery of the large contracts won in 2018 as
noted above. Callista continued to perform well with good margins
although accelerated development work was slightly lower than
2018.
Support & Maintenance revenue increased 5% on a constant
currency basis. This reflects the new license and account
management sales achieved, together with the contractual annual
inflationary uplift.
Cloud revenue has increased by 21% as more customers, including
newer contract wins, include Cloud solutions.
Overall operating profit increased by 2% to GBP9.2m on a
constant currency basis (2018 H1: GBP9.0m) and operating margin
increased to 32% (2018 H1: 31%).
Education Services: Overall revenue in Education Services
decreased by 9% on a constant currency basis to GBP11.7m (2018 H1:
GBP12.9m).
QAS revenue decreased by 5% to GBP9.1m (2018 H1: GBP9.5m).
Strong performance on UK contracts, coupled with increased
performance in the US and Professional Development & Training,
was offset by a reduction in Middle East revenue representing
almost 50% of revenue.
i-graduate revenue decreased by 29% to GBP0.8m (2018 H1:
GBP1.2m), mainly driven by the return of the Destination of Leavers
from Higher Education (DLHE) contract to HESA who have decided to
manage inhouse. The revenues for i-graduate are seasonal with a
stronger second half, although the southern hemisphere
international student barometer will be lower as the majority of
institutions partake every other year.
Overall operating profit decreased by 16% to GBP2.6m on a
constant currency basis (2018 H1: GBP3.2m) and operating margin
decreased to 23% (2018 H1: 25%). Improved profitability in
i-graduate due to restructuring and costs savings from operating as
one business with QAS have been offset by reduced margins on QAS
contract, notably in the Middle East.
Key Performance Indicators (KPIs)
The Group monitors its performance using the KPIs in the table
below.
KPIs
6
months Growth
to 2018 Constant
30 Constant
June 2019 2018 Variance Currency Currency
Revenue GBP40.4m GBP42.0m (4)% GBP41.7m (3)%
========== ========== ========== ========== ==========
Adjusted operating
profit(1) GBP6.3m GBP6.3m - GBP6.2m 1%
========== ========== ========== ========== ==========
Adjusted operating
margin(1) 15.5% 15.0% 50bps 14.8% 70bps
========== ========== ========== ========== ==========
Annual recurring
revenue
(6 months)(2) GBP19.9m GBP18.9m 5% GBP18.5m 7%
========== ========== ========== ========== ==========
Committed income(3,4) GBP123.5m GBP122.5m GBP1.0m GBP121.6m GBP1.9m
========== ========== ========== ========== ==========
Staff retention 93% 96% (30)bps
========== ========== ==========
Revenue / average GBP95.9 GBP91.7k GBP4.2m
FTE (4)
(GBP'000s: annualised)
========== ========== ==========
(1) Adjusted Operating Profit and Adjusted Operating Margin is
in respect of continuing operations which excludes "Other Items"
charges of GBP1.9m (H1 2018: charge of GBP2.1m).
(2) Annually Recurring Revenue is calculated assuming
maintenance revenue is received equally throughout the year.
(3) Committed income relates to the total value of orders which
have been signed on or before, but not delivered by, 30 June 2019,
based on the Total Contract Value, even though customers may be
permitted, under certain circumstances, to reduce their commitment
at a future date. This is reported on an IFRS15 basis and
represents the best estimate of business expected to be delivered
and recognised in future periods, and includes License sales,
Implementation work and two years of Support & Maintenance
revenue.
(4) 2018 committed income and revenue / average FTE comparatives
are as at 31 December 2018
Annual recurring revenue (ARR) includes Support &
Maintenance fees paid on all software and Cloud hosting services,
increase by 7% on a constant currency basis to GBP19.9m (2018 H1:
GBP18.5m). The growth includes the benefit of new license sales in
2018 and contractual inflationary uplift applied annually.
Committed income at 30 June 2019 this increased by GBP1.9m on a
constant currency basis to GBP123.5m (2018 FY: GBP121.6m). The
growth includes the benefit of new License sales in 2018 and
contractual inflationary uplift applied annually to Support &
Maintenance, but is impacted by GBP3.6m due to the reduction in the
term life of the contract with Callista to 2.5 years. The
acquisition of Crimson Consultants has added GBP3.0m of ARR from
Software-as-a-Service sales and committed professional services
(implementation) work.
One-off items: The adjusted operating profit in 2018 benefitted
by GBP0.4m from a number of one-off impacts which were not repeated
in the first half of 2019. This included GBP1.0m bad debt releases,
GBP(0.4)m of revenue contingencies, GBP0.3m of other provisions and
GBP(0.5)m data centre exit costs.
Product development costs: The Group spent GBP5.8m on product
development, of which GBP2.8m was capitalised in relation to Tribal
Edge, no further capitalised development took place on SchoolEdge
(2018 H1: GBP5.2m spent; GBP1.7m capitalised: GBP1.5m Tribal Edge,
GBP0.3m SchoolEdge). The Group spent GBP2.9m on current products
including SITS, ebs, SchoolEdge and Maytas, this was GBP0.6m lower
than the previous year (2018: GBP3.5m) due to increased efficiency
across all products.
Items excluded from adjusted profit figures: Certain items not
directly related to the trading business or regarded as exceptional
in nature have been 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 charges (including employer related
taxes) decreased to GBP0.5m (2018 H1: GBP1.1m), and are excluded
from the Adjusted Operating profit. The charges in the current year
relate to the Long-Term Incentive Plan options (LTIPs) which were
granted to the executive and senior management teams in 2016, 2017,
2018 and 2019.
-- Amortisation of IFRS3 Intangibles charge in relation to IFRS3
intangible assets of GBP0.6m (2018 H1: GBP0.9m) 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 relate to the
restructuring of the Group's operations, principally in Australia,
which was completed early in 2019, and includes a charge for
redundancy costs of GBP0.3m (2018 H1: GBP0.1m).
-- Legal costs: relate to the legal fees incurred in relation to
the items mentioned previously in the Legal Matters section.
-- Acquisition costs: include amounts relating to corporate
activity in the period, specifically the acquisition of Crimson
Consultants Limited.
Net Cash and Cash flow
Net cash at 30 June 2019 was GBP6.0m (H1 2018: GBP9.2m).
Cash flow
GBPm
6 months to 30 June 2019 2018
Net cash from operating activities (2.7) 0.5
====== ======
Capitalised product development on
Tribal Edge (3.0) (1.8)
====== ======
Capital expenditure (0.3) (0.6)
====== ======
Acquisition of Crimson Consultants (5.9) -
====== ======
Deferred consideration - (0.8)
====== ======
Dividend payment (2.1) (2.0)
====== ======
Net decrease in cash & cash equivalents (14.0) (4.7)
====== ======
Cash & cash equivalents at beginning
of the year 20.0 14.1
====== ======
Cash & cash equivalents at end of
period 6.0 9.4
====== ======
Less: Effect of foreign exchange rate
changes - (0.2)
====== ======
Net cash & cash equivalents at end
of period 6.0 9.2
====== ======
Operating cash inflow for the period was GBP(2.7)m (2018:
GBP0.5m). This reflects the Group's working capital profile, and
the additional cash requirements in the first half of the year;
most Support & Maintenance and Cloud Services renewals are
invoiced and collected towards the end of the calendar year. In QAS
there was one large contract receipt totalling GBP1.9m that was due
in June but was not received until July, and exit payments were
also made in relation to the restructuring in Australia. Cash
conversion is expected to normalise in the second half of the
year.
Share Options and Share Capital: On 7 June 2019, 3,360,563 share
options were granted to executive and senior management, including
760,563 nil-cost share options to Mark Pickett, Chief Executive
Officer as part of his ongoing remuneration. As at 30 June 2019,
there were 196,051,181 shares issued (2018 FY: 196,051,181).
Earnings per share: Diluted earnings per share increased by 21%
to 1.7p (2018 H1: 1.4p).
Adjusted diluted earnings per share from continuing operations
before other costs, including intangible asset amortisation,
restructuring costs and share based payment charges, which reflects
the Group's underlying trading performance, increased by 14% to
2.5p (2018 H1: 2.2p).
Dividends: The annual dividend for 2018 increased to 1.1p per
share (2017: 1.0p per share), paid by the Company in May 2019; the
Board reaffirms its intention to continue a progressive dividend
policy, with a single dividend payment each year following annual
results.
Condensed consolidated income statement
For the six months to 30 June 2019
Six months Six months
Other ended Other ended
items 30 June items 30 June
(note 2019 (note 2018
Adjusted 6) Total Adjusted 6) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Continuing operations
Revenue 4 40,374 - 40,374 41,989 - 41,989
Cost of sales (20,045) - (20,045) (20,828) - (20,828)
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Gross profit 20,329 - 20,329 21,161 - 21,161
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Total administrative expenses (14,064) (1,845) (15,909) (14,879) (2,064) (16,943)
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Operating profit 4 6,265 (1,845) 4,420 6,282 (2,064) 4,218
Investment income 33 - 33 18 - 18
Finance costs 7 (58) (86) (144) (13) (60) (73)
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Profit before tax 6,240 (1,931) 4,309 6,287 (2,124) 4,163
Tax (charge)/credit 8 (1,040) 354 (686) (1,748) 441 (1,307)
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Profit/(loss) for the
period 5,200 (1,577) 3,623 4,539 (1,683) 2,856
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
Earnings per share
Basic 9 2.7p (0.8)p 1.9p 2.3p (0.8)p 1.5p
Diluted 9 2.5p (0.8)p 1.7p 2.2p (0.8)p 1.4p
------------------------------- ----- --------- --------- ----------- --------- --------- -----------
All activities are from continuing operations
Condensed consolidated income statement
For the six months to 30 June 2019 (continued)
Other
items Year ended
(note 31 December
Note Adjusted 6) 2018
GBP'000 GBP'000 GBP'000
------------------------------- ------- --------- --------- -------------
Revenue 4 80,062 - 80,062
Cost of sales (40,837) - (40,837)
---------------------------------- ------- --------- --------- -------------
Gross profit 39,225 - 39,225
Total administrative expenses (28,430) (6,212) (34,642)
---------------------------------- ------- --------- --------- -------------
Operating profit 4 10,795 (6,212) 4,583
Investment income 46 - 46
Finance (costs)/income 7 (54) 274 220
---------------------------------- ------- --------- --------- -------------
Profit before tax 10,787 (5,938) 4,849
Tax (charge)/credit 8 (1,873) 1,171 (702)
---------------------------------- ------- --------- --------- -------------
Profit/(loss) for the year 8,914 (4,767) 4,147
---------------------------------- ------- --------- --------- -------------
Earnings per share
Basic 9 4.6p (2.5)p 2.1p
Diluted 9 4.3p (2.3)p 2.0p
---------------------------------- ------- --------- --------- -------------
Condensed consolidated statement of comprehensive income and
expense
For the six months to 30 June 2019
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ----------- ----------- -------------
Profit for the period 3,623 2,856 4,147
Other comprehensive income/(expense)
Items that will not be reclassified subsequently
to profit or loss:
Re-measurement of defined benefit pension schemes - - 430
Deferred tax on measurement of defined benefit
pension schemes - - (73)
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translation of foreign
operations 75 (513) (792)
---------------------------------------------------------- ----------- ----------- -------------
Other comprehensive income/(expense) for the period
net of tax 75 (513) (435)
---------------------------------------------------------- ----------- ----------- -------------
Total comprehensive income for the period attributable
to equity holders of the parent 3,698 2,343 3,712
---------------------------------------------------------- ----------- ----------- -------------
Condensed consolidated balance sheet
As at 30 June 2019
30 June 30 June 31 December
Note 2019 2018 2018
GBP'000 GBP'000 GBP'000
-------------------------------------- ------- --------- ---------- --------------
Non-current assets
Goodwill 10 29,953 20,728 20,517
Other intangible assets 11 14,023 13,417 12,718
Property, plant and equipment 1,571 1,737 1,762
Right of use assets 5 4,527 - -
Deferred tax assets 3,465 4,579 3,776
Contract assets 66 44 77
----------------------------------------- ------- --------- ---------- --------------
53,605 40,505 38,850
-------------------------------------- ------- --------- ---------- --------------
Current assets
Trade and other receivables 12 13,337 15,110 12,840
Contract assets 6,036 6,363 3,750
Current tax assets 97 86 73
Deferred tax assets - - 228
Cash and cash equivalents (excluding
bank overdrafts) 18 6,989 9,214 19,974
----------------------------------------- ------- --------- ---------- --------------
26,459 30,773 36,865
-------------------------------------- ------- --------- ---------- --------------
Total assets 80,064 71,278 75,715
----------------------------------------- ------- --------- ---------- --------------
Current liabilities
Trade and other payables 13 (7,406) (7,531) (6,755)
Contract liabilities (18,488) (17,222) (20,872)
Accruals (5,419) (7,194) (7,941)
Current tax liabilities (1,127) (2,888) (1,097)
Lease liabilities 5 (994) - -
Borrowings 18 (985) - -
Provisions 14 (209) (256) (879)
----------------------------------------- ------- --------- ---------- --------------
(34,628) (35,091) (37,544)
-------------------------------------- ------- --------- ---------- --------------
Net current liabilities (8,169) (4,318) (679)
----------------------------------------- ------- --------- ---------- --------------
Non-current liabilities
Contract liabilities (328) (709) (707)
Retirement benefit obligations (1,002) (1,718) (1,002)
Lease liabilities 5 (3,255) - -
Other payables 13 (1,872) (160) (62)
Deferred tax liabilities (550) (1,013) (713)
Provisions 14 (1,000) (349) (213)
----------------------------------------- ------- --------- ---------- --------------
(8,007) (3,949) (2,697)
-------------------------------------- ------- --------- ---------- --------------
Total liabilities (42,635) (39,040) (40,241)
----------------------------------------- ------- --------- ---------- --------------
Net assets 37,429 32,238 35,474
----------------------------------------- ------- --------- ---------- --------------
Equity
Share capital 16 9,803 9,803 9,803
Share premium 15,539 15,539 15,539
Other reserves 25,440 23,661 25,020
Accumulated losses (13,353) (16,765) (14,888)
----------------------------------------- ------- --------- ---------- --------------
Total equity attributable to
equity holders of the parent 37,429 32,238 35,474
----------------------------------------- ------- --------- ---------- --------------
Condensed consolidated cash flow statement
for the six months to 30 June 2019
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
Note GBP'000 GBP'000 GBP'000
-------------------------------------------- ------- ----------- ----------- -------------
Net cash (used in)/from operations 17 (2,737) 549 14,241
----------------------------------------------- ------- ----------- ----------- -------------
Investing activities
Interest received 33 17 46
Purchases of property, plant and equipment (279) (676) (1,203)
Expenditure on intangible assets (2,999) (1,769) (4,217)
Payment of deferred consideration
for acquisitions - (826) (826)
Acquisition of investments in subsidiaries (5,919) - -
Net cash outflow from investing activities (9,164) (3,254) (6,200)
----------------------------------------------- ------- ----------- ----------- -------------
Financing activities
Interest paid - (1) (1)
Equity dividend paid (2,147) (1,952) (1,952)
Net cash used in financing activities (2,147) (1,953) (1,953)
----------------------------------------------- ------- ----------- ----------- -------------
Net (decrease)/increase in cash and
cash equivalents (14,048) (4,658) 6,088
----------------------------------------------- ------- ----------- ----------- -------------
Net cash and cash equivalents at beginning
of period 19,974 14,082 14,082
Effect of foreign exchange rate changes 78 (210) (196)
----------------------------------------------- ------- ----------- ----------- -------------
Net cash and cash equivalents at end
of period 18 6,004 9,214 19,974
----------------------------------------------- ------- ----------- ----------- -------------
Condensed consolidated statement of changes in equity
For the six months to 30 June 2019
Share Share Other Accumulated Total
Capital Premium reserves losses Equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- --- -------- --------- ----------- ------------ -------------- -----------
Balance at 31 December 2017 as
previously reported 9,803 15,539 22,783 (15,573) 32,552
Effect of IFRS15 - - - (1,704) (1,704)
------------------------------------------- ---- ------------ ----------- ------------ ---------- -----------
Balance at 31 December 2017 restated 9,803 15,539 22,783 (17,277) 30,848
Profit for the period - - - 2,856 2,856
Other comprehensive expense for
the period - - - (513) (513)
Equity dividend paid - - - (1,952) (1,952)
Charge to equity for share-based
payments - - 878 - 878
Tax credit on charge to equity
for share-based payments - - - 121 121
Contributions by and distributions
to owners - - 878 (1,831) (953)
Balance at 30 June 2018 as previously
reported 9,803 15,539 23,661 (16,765) 32,238
Effect of IFRS15 - - - 193 193
Tax effect of IFRS15 - - - 265 265
------------------------------------------- ---- ------------ ----------- ------------ ---------- --------
Balance at 30 June 2018 restated 9,803 15,539 23,661 (16,307) 32,696
Profit for the period - - - 1,291 1,291
Other comprehensive income for
the period - - - 78 78
Charge to equity for share-based
payments - - 1,387 - 1,387
Tax credit on charge to equity
for share-based payments - - - 50 50
Foreign exchange difference on
share-based payments - - (28) - (28)
------------------------------------------- ---- ------------ ----------- ------------ ---------- --------
Contributions by and distributions
to owners - - 1,359 50 1,409
------------------------------------------- ---- ------------ ----------- ------------ ---------- --------
Balance at 31 December 2018 as
previously reported 9,803 15,539 25,020 (14,888) 35,474
Effect of IFRS16 5 - - - (73) (73)
------------------------------------------- ---- ------------ ----------- ------------ ---------- --------
Balance at 31 December 2018 restated 9,803 15,539 25,020 (14,961) 35,401
Profit for the period - - - 3,623 3,623
Other comprehensive loss for the
period - - - 75 75
Equity dividend paid - - - (2,147) (2,147)
Charge to equity for share-based
payments - - 420 - 420
Tax credit on charge to equity
for share-based payments - - - 57 57
------------------------------------------- ---- ------------ ----------- ------------ ---------- --------
Contributions by and distributions
to owners - - 420 57 477
------------------------------------------- ---- ------------ ----------- ------------ ---------- --------
Balance at 30 June 2019 9,803 15,539 25,440 (13,353) 37,429
---------------------------------- ------------ ------------ ----------- ------------ ---------- --------
Notes to the condensed consolidated financial information
for the six months to 30 June 2019
1. General information
The condensed consolidated financial information for the six
months ended 30 June 2019 was approved by the Board of Directors on
19 August 2018. This condensed consolidated interim financial
information does not comprise statutory accounts within the meaning
of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2018 were
approved by the Board of Directors on 19 March 2019. A copy of the
statutory accounts for that year has been delivered to the
Registrar of Companies. The auditor reported on those accounts: its
report was unqualified, and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
2. Accounting policies
The condensed consolidated set of financial statements included
in this half-yearly financial report has been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Services Authority.
The condensed consolidated financial information should be read
in conjunction with the annual financial statements for the year
ended 31 December 2018 which have been prepared in accordance with
IFRSs as adopted by the European Union.
In preparing these condensed interim financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were as stated within the consolidated financial statements for the
year ended 31 December 2018.
The accounting policies applied are consistent with those of the
annual financial statements for the year ended 31 December 2018
with the exception of the Leases policy. The introduction of IFRS16
has resulted in a new policy as follows:
All leases are treated as finance leases unless they are
classified as a short lease. Right-of-use assets are created by
reference to the lease liability, less adjustments for future
dilapidation costs. Right-of-use assets are amortised on a straight
line basis over the period of the lease, the amortisation period
being equivalent to the length of the lease. The implicit rate used
in the calculations is 1.8% + LIBOR.
3. Going concern
The Directors, having considered the cash-flow forecast, and
while noting the Group has net current liabilities, have performed
a risk assessment of likely downside scenarios and associated
mitigating actions, and have a reasonable expectation that adequate
financial resources will continue to be available for the
foreseeable future. Thus, they continue to adopt the going concern
basis in preparing the financial statements.
4. Segmental analysis
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 ("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; and
Education Services representing inspection and review services
which support the assessment of educational delivery, previously
Quality Assurance Solutions (QAS), and a portfolio of performance
improvement tools and services, including analytics, software
solutions, facilities and asset management, previously
i-graduate.
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.
Total Revenue Adjusted segment operating
profit
----------------------------------- ----------------------------------- ----------------------------------------
Six months Six months Six months Six months
ended ended Year ended ended ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2019 2018 2018 2019 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP000
---------------------------- ------------- ----------- -------------- ----------- ----------- --------------
SIS 28,656 29,147 56,922 9,067 9,247 16,506
Education Services 11,718 12,842 23,140 2,762 3,154 4,975
Total 40,374 41,989 80,062 11,829 12,401 21,481
---------------------------- ------------- ----------- -------------- ----------- ----------- --------------
Unallocated corporate
expenses (5,564) (6,119) (10,686)
---------------------------- ------------- ----------- -------------- ----------- ----------- --------------
Adjusted operating profit 6,265 6,282 10,795
Amortisation of IFRS 3 intangibles
(see note 6) (575) (909) (1,787)
Other items (1,270) (1,155) (4,425)
---------------------------- ------------- ----------- -------------- ----------- ----------- --------------
Operating profit 4,420 4,218 4,583
---------------------------- ------------- ----------- -------------- ----------- ----------- --------------
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 the 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 Education Services revenues of approximately 3% (31
December 2018: 5%) have arisen from the Segments largest customer:
within SIS revenues of approximately 4% (31 December 2018: 6%) have
arisen from the Segments largest customer.
Geographical information:
Revenue from external customers, based on location of the
customer, are shown below:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ----------- --------------
UK 24,220 20,470 42,554
Australia 9,564 12,068 22,234
Other Asia Pacific 1,954 3,005 5,529
North America and rest of world 4,636 6,446 9,745
40,374 41,989 80,062
--------------------------------- ----------- ----------- --------------
5. Effect of new accounting standards
The Group adopted IFRS16 "Leases" with effect from 1 January
2019. This has resulted in the group recognising right-of-use
assets and lease liabilities. For leases currently classified as
operating leases, under previous accounting requirements the group
did not recognise related assets or liabilities, and instead spread
the lease payments on a straight-line basis over the lease term.
The Group has applied the modified retrospective approach method
and has only recognised leases on the balance sheet as at 1 January
2019. Comparative amounts for the year prior to the first adoption
have not been restated. In addition it has been decided to measure
right-of-use assets by reference to the measurement of the lease
liability on that date, less adjustments for future dilapidation
costs. The key assumptions used in this assessment are as follows:
Straight line amortisation of the right-of-use assets; amortisation
period being equivalent to the length of the lease; and implicit
rate used in the calculations being 1.8% + LIBOR.
The effects of adopting IFRS 16 for the periods ending 30 June
2019 are as follows:
30 June 30 June
30 June 2019 2019 As would
2019 Effect of have been
As reported IFRS16 reported
GBP'000 GBP'000 GBP'000
--------------------------- ----------- ------------------- ----------- ---------------
Balance Sheet
Assets
Right of use assets 4,527 (4,527) -
Liabilities
Trade and other payables (7,406) (308) (7,714)
Lease liabilities (4,249) 4,249 -
Provisions (1,209) 773 (436)
Equity
Accumulated losses (13,353) 73 (13,280)
Profit and loss account
current year 3,623 876 4,499
6. Other items
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ----------- --------------
Acquisition related costs (135) - (62)
------------------------------------------ ----------- ----------- --------------
Share based payments (including employer
related taxes) (544) (1,096) (2,329)
------------------------------------------ ----------- ----------- --------------
-Impairment of development costs - - (983)
-Legacy Defined benefit schemes - - (73)
-Legal (278) - -
-Property related - - 7
-Restructuring and associated costs (313) (59) (985)
------------------------------------------ ----------- ----------- --------------
Other exceptional items (591) (59) (2,034)
Amortisation of IFRS 3 intangibles (575) (909) (1,787)
------------------------------------------ ----------- ----------- --------------
Total administrative costs (1,845) (2,064) (6,212)
Other financing costs (86) (60) (106)
Other financing income - - 380
Total other items before tax (1,931) (2,124) (5,938)
------------------------------------------ ----------- ----------- --------------
Tax on other items 354 441 1,171
Total other items after tax (1,577) (1,683) (4,767)
------------------------------------------ ----------- ----------- --------------
IAS1, paragraph 97, requires separate disclosure of such items
that are considered material by nature or value in the financial
statements. As such, 'other items' are not part of the Group's
underlying trading activities and include the following for the six
months ended 30 June 2018:
Acquisition costs: The numbers include amounts relating to
corporate activity in the period. (30 June 2019: GBP135,000; 30
June 2018 GBPnil; 31 December 2018: GBP62,000).
Share based payments: The numbers above include the movement in
associated employers taxes accrual (30 June 2019: GBP19,000; 30
June 2018: GBP155,000; 31 December 2018: GBP17,000) and the cash
paid on dividends on share options that have met performance
conditions (30 June 2019: GBP106,000; 30 June 2018: GBP46,000; 31
December 2018: GBP47,000). 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.
Other exceptional items: Amounts principally reflect the costs
arising in respect of the restructuring of the Group's operations
and the legal costs associated with the current contingent
liability (see note 19). The restructuring program has been be
executed in the first half of 2019 and associated costs have been
provided for. Amounts relate mainly to provision for redundancy
costs. (30 June 2019; GBP313,000; 30 June 2018: GBP59,000; 31
December 2018: GBP985,000).
Amortisation of IFRS3 intangibles: Amortisation arising on the
fair value of intangible assets acquired is separately disclosed as
other items. (30 June 2019: GBP575,000; 30 June 2018 GBP909,000; 31
December 2018: GBP1,787,000).
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 (30 June 2019: GBP86,000; 30 June 2018
GBP60,000; 31 December 2017: GBP106,000).
Financing income: Amounts relating to settlement gains on
defined benefit schemes (30 June 2019: GBPnil; 30 June 2018 GBPnil;
31 December 2018: GBP380,000).
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.
7. Finance costs/(income)
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------------------------------------------ ----------- ----------- --------------
Interest on bank overdrafts and loans 58 - 1
Amortisation and write off of loan arrangement
fees - - 12
Net interest payable on retirement benefit
obligations - - 41
Other interest payable - 13 -
------------------------------------------------ ----------- ----------- --------------
Adjusted Finance costs 58 13 54
------------------------------------------------ ----------- ----------- --------------
Unwinding of discounts 86 60 106
------------------------------------------------ ----------- ----------- --------------
Other finance costs 86 60 106
Total finance costs 144 73 160
------------------------------------------------ ----------- ----------- --------------
Settlement gain on defined benefit schemes - - (380)
------------------------------------------------ ----------- ----------- --------------
Total finance costs/(income) 144 73 (220)
------------------------------------------------ ----------- ----------- --------------
8. Tax
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------------------ ----------- ----------- --------------
Current tax
UK corporation tax - - 114
Overseas tax 253 1,752 702
Adjustments in respect
of prior periods - - (179)
----------------------------- ----------- ----------- --------------
Deferred tax 253 1,752 637
Current period 433 (445) 79
Adjustments in respect
of prior periods - - (14)
----------------------------- ----------- ----------- --------------
433 (445) 65
------------------------ ----------- ----------- --------------
Tax charge on losses 686 1,307 702
----------------------------- ----------- ----------- --------------
In addition to the amount charged to the income statement, a
deferred tax credit of GBP57,000 (30 June 2018: credit of
GBP121,000; 31 December 2018: credit of GBP171,000) has been
recognised directly in equity in relation to share schemes. A
deferred tax credit of GBPnil (30 June 2018: GBPnil; 31 December
2018: charge of GBP73,000) 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.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
9. Earnings per share
Earnings per share and diluted earnings per share are calculated
by reference to a weighted average of ordinary shares calculated as
follows:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBP '000 GBP '000 GBP '000
------------------------------------------------- ----------- ----------- --------------
Basic weighted average number of shares
in issue 195,224 195,223 195,224
Weighted average number of Employee share
options 10,546 15,446 10,546
------------------------------------------------- ----------- ----------- --------------
Weighted average number of shares outstanding
for dilution calculations 205,770 210,669 205,770
------------------------------------------------- ----------- ----------- --------------
Diluted earnings per share only reflects the dilutive effect of
share options for which performance criteria have been met.
As at 30 June 2019 there are 5,301,844 options that have met
vesting criteria and can be exercised. Together with other
potentially dilutive shares, based on options that have been
granted but have not yet met vesting criteria of 1,838,220, the
total number of potentially dilutive shares is 7,140,064 (31
December 2018: 7,140,064). In addition, there are a further
3,405,996 (31 December 2018: 3,405,996) potentially dilutive
matching share options that have been granted and have met vesting
criteria as at 30 June 2019.
The adjusted basic and diluted earnings per share figures shown
on the condensed consolidated income statement are included as the
directors believe that they provide a better understanding of the
underlying trading performance of the Group.
A reconciliation of how these figures are calculated is set out
below.
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
----------------------------- ----------- ----------- --------------
Net profit 3,623 2,856 4,147
----------------------------- ----------- ----------- --------------
Earnings per share
Basic 1.9p 1.5p 2.1p
Diluted 1.8p 1.4p 2.0p
----------------------------- ----------- ----------- --------------
Adjusted Net profit 5,200 4,539 8,914
Adjusted earnings per share
Basic 2.7p 2.3p 4.6p
Diluted 2.5p 2.2p 4.3p
----------------------------- ----------- ----------- --------------
Profit for the period Earnings per share
------------------------ ------------------------------------------------ ------------------------------------------
Six months Six months Six months Six months
ended ended Year ended ended ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2019 2018 2018 2019 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----------- ----------- -------------- ------------- ----------- --------------
Profit for the
period attributable
to equity share
holders 3,623 2,856 4,147 1.9p 1.5p 2.1p
------------------------ ----------- ----------- -------------- ------------- ----------- --------------
Add back:
Amortisation of
IFRS 3 intangibles
(net of tax) 412 647 1,271
Share based payments 420 800 2,237
Unwinding of discounts 86 60 106
Other items (net
of tax) 659 176 1,153
Total adjusted
items (net of tax) 1,577 1,683 4,767 0.8p 0.8p 2.5p
------------------------ ----------- ----------- -------------- ------------- ----------- --------------
Adjusted earnings 5,200 4,539 8,914 2.7p 2.3p 4.6p
------------------------ ----------- ----------- -------------- ------------- ----------- --------------
10. Goodwill
GBP'000
------------------------------- ----------
Cost
At 1 January 2019 101,748
Additions 9,416
Exchange differences 20
------------------------------- ----------
At 30 June 2019 111,184
------------------------------- ----------
Accumulated impairment losses
At 1 January 2019 81,231
At 30 June 2018 81,231
------------------------------- ----------
Net book value
At 30 June 2019 29,953
------------------------------- ----------
At 31 December 2018 20,517
------------------------------- ----------
The Group tests annually for impairment, or more frequently if
there are indicators that goodwill could be impaired. At the half
year, a review has been undertaken to ascertain if any indicators
have arisen of potential impairments. Based on the review
performed, no impairment indicators that would require an
impairment review have been noted.
11. Other intangible assets
Customer
contracts Acquired
and 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 2019 7,414 6,945 1,873 30,507 6,415 1,486 54,640
Additions - - - 2,812 175 12 2,999
Exchange differences 11 6 - 6 - - 23
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
At 30 June 2019 7,425 6,951 1,873 33,325 6,590 1,498 57,662
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
Amortisation
At 1 January 2019 6,563 5,287 561 22,577 5,509 1,425 41,922
Charge for the
period 383 191 187 719 177 33 1,690
Exchange differences 15 4 - 8 - - 27
At 30 June 2019 6,961 5,482 748 23,304 5,686 1,458 43,639
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
Carrying amount
At 30 June 2019 464 1,469 1,125 10,021 904 40 14,023
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
At 31 December
2018 851 1,658 1,312 7,930 906 61 12,718
---------------------- --------- --------------- --------------- ------------ --------- ---------- ---------
Software and customer contract 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 of development costs is
included within cost of sales; the amortisation for software,
customer contracts and relationships and business systems is
included within administrative expenses. Intellectual property was
acquired from WAMBIZ Limited in 2017 and is recorded as Acquired
Intellectual property, discounted for deferred consideration
payments which are included as a deferred consideration liability
in Trade and other payables. This asset is being amortised over a
period of 5 years.
12. Trade and other receivables
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------------------- --------- --------- ------------
Amounts receivable for the sale of services 9,495 11,966 9,452
Less: loss allowance (174) (671) (137)
--------------------------------------------- --------- --------- ------------
9,321 11,295 9,315
Other receivables 437 677 375
Prepayments 3,579 3,138 3,150
--------------------------------------------- --------- --------- ------------
13,337 15,110 12,840
--------------------------------------------- --------- --------- ------------
13. Trade and other payables
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- ------------
Current
Trade payables 1,388 1,178 1,461
Other taxation and social security 2,414 2,592 3,028
Other payables 1,506 3,334 1,793
Deferred consideration 2,098 427 473
------------------------------------ --------- --------- ------------
7,406 7,531 6,755
------------------------------------ --------- --------- ------------
Non-current
------------------------------------ --------- --------- ------------
Other payables 35 160 62
Deferred consideration 1,837 - -
------------------------------------ --------- --------- ------------
1,872 160 62
------------------------------------ --------- --------- ------------
Total 9,278 7,691 6,817
------------------------------------ --------- --------- ------------
14. Provisions
Property related Legal Restructuring Total
GBP'000 claims GBP'000 GBP'000
GBP'000
--------------------------------- ----------------------- --------- -------------- ---------
At 1 January 2019 440 - 652 1,092
IFRS 16 adjustment 772 - - 772
Increase/(release) in provision (77) 154 - 77
Utilisation of provision (97) - (652) (749)
Exchange rate movement 17 - - 17
--------------------------------------- ----------------- --------- -------------- ---------
At 30 June 2019 1,055 154 - 1,209
--------------------------------------- ----------------- --------- -------------- ---------
The provisions are split as
follows:
--------------------------------------- ----------------- --------- -------------- ---------
Property related Legal Restructuring Total
GBP'000 claims GBP'000 GBP'000
GBP'000
--------------------------------------- ----------------- --------- -------------- ---------
Within one year 55 154 - 209
More than one year 1,000 - - 1,000
Total 1,055 154 - 1,209
--------------------------------------- ----------------- --------- -------------- ---------
Provisions are recognised when the Group has a present
obligation as a result of a past event, and it is probable that the
Group will be required to settle the obligation. Provisions are
measured at the Directors' best estimate of the expenditure
required to settle the obligation at the balance sheet date, and
are discounted to present value where the effect is material.
Property related provision relates to the dilapidation costs
arising from exiting leasehold properties, under IFRS 16.
Restructuring provision represent amounts provided in respect of
the Group's restructuring and reorganisation and principally
reflect redundancy costs.
15. Acquisition of subsidiary
On 9 May 2019, the Group acquired 100% of the issued share
capital of Crimson Holdings Limited and its subsidiary Crimson
Consultants Limited (Crimson), a company incorporated in the UK
that is a leading provider of customer relationship management
(CRM) based solutions to the education market.
This transaction has been accounted for by the acquisition
method of accounting. This comprises an initial cash consideration
of GBP6.0m and a deferred contingent consideration of GBP4.0m (the
discounted figure at acquisition being GBP3.376m) which is payable
on the annual recurring revenue (ARR) growth of the acquired
business. Deferred contingent consideration that becomes due shall
be satisfied in the period from March 2020 to March 2021.
Due to the timing of the acquisition, the acquisition accounting
adjustments were not complete as at 30 June 2019, however, will be
finalised prior to 31 December 2019.
The provisional carrying amount of each class of Crimson
Consultants Limited's assets before combination is set out
below:
Book value
GBP'000
----------------------------------- -----------
Tangible assets 15
Trade and other receivables 723
Cash and cash equivalents 34
Trade and other payables (858)
Net liabilities acquired (86)
Goodwill arising on acquisition
(note 10) 9,416
-------------------------------------- -----------
Consideration
Satisfied by:
Initial cash consideration 5,954
Deferred contingent consideration 3,376
-------------------------------------- -----------
9,330
----------------------------------- -----------
The initial cash consideration paid to Crimson was satisfied
through existing cash balances.
Crimson Consultants Limited contributed revenue of GBP0.4m and
operating profit of GBPnil to the Group for the period between the
date of acquisition and the balance sheet date. Acquisition related
costs amounted for GBP0.1m.
Had the acquisition occurred on 1 January 2019, the Group's
revenue would have increased by GBP1.4m and its operating profit
reduced by GBP0.1m.
16. Share capital
Six months Six months Six months Six months
ended ended ended ended Year ended Year ended
30 June 30 June 30 June 30 June 31 December 31 December
2019 2019 2018 2018 2018 2018
number GBP'000 number GBP'000 number GBP'000
---------------------- ------------ ----------- ------------ ----------- -------------- --------------
Allotted, called
up and fully paid
At beginning of
the period 196,051,181 9,803 196,051,181 9,803 196,051,181 9,803
Issued during the - - - - - -
period
At end of the period 196,051,181 9,803 196,051,181 9,803 196,051,181 9,803
---------------------- ------------ ----------- ------------ ----------- -------------- --------------
The Company has one class of ordinary shares of 5p which carry
no right to fixed income.
17. Notes to the cash flow statement
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------------- ----------------- --------------------
Operating profit from continuing
operations 4,420 4,218 4,583
Depreciation of property, plant and
equipment 899 496 995
Amortisation and impairment of other
intangible assets 1,690 2,025 5,099
Share based payments 418 895 2,265
Research and development tax credit (180) - (325)
Net pension (credit)/charge - - 54
Other non-cash items 134 386 55
Operating cash flows before movements
in working capital 7,381 8,020 12,726
(Increase)/Decrease in receivables (2,159) (2,942) 2,034
Decrease in payables (8,036) (3,333) 1,086
-------------------------------------------- ----------------- ----------------- --------------------
Net cash (used in)/ from operating
activities before tax (2,814) 1,745 15,846
Tax (paid)/received 77 (1,196) (1,605)
-------------------------------------------- ----------------- ----------------- --------------------
Net cash (used in)/from operating
activities (2,737) 549 14,241
-------------------------------------------- ----------------- ----------------- --------------------
Net cash (used in)/from operating
activities before tax can be analysed
as follows:
Continuing operations (excluding
restricted cash) (2,814) 1,784 15,885
Decrease in restricted cash - (39) (39)
-------------------------------------------- ----------------- ----------------- --------------------
(2,814) 1,745 15,846
-------------------------------------------- ----------------- ----------------- --------------------
18. Analysis of net cash
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------- --------- --------- ---------------
Cash and cash equivalents 6,989 9,214 19,974
Overdrafts (985) - -
--------------------------------- --------- --------- ---------------
Net cash 6,004 9,214 19,974
--------------------------------- --------- --------- ---------------
Analysis of changes in net cash
-----------------------------------------------------------------
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------- --------- --------- --------------
Opening net cash 19,974 14,082 14,082
Net (decrease)/increase in cash
and cash equivalents (14,048) (4,658) 6,088
Effect of foreign exchange rate
changes 78 (210) (196)
--------------------------------- --------- --------- --------------
Closing net cash 6,004 9,214 19,974
--------------------------------- --------- --------- --------------
19. Contingent liabilities
On 24 January 2019 the Group received a letter of claim from
lawyers acting for a provider of a software platform on which a
number of the Group's material 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. 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 intend to defend these claims vigorously
at this stage and are of the opinion that the claims can be
successfully resisted. The information usually required by IAS 37
Provisions, Contingent Liabilities and Contingent Assets is not
disclosed on the grounds that it can be expected to prejudice
seriously the outcome of the litigation.
From time to time the Group is subject to potential litigation
claims. On the basis of legal advice, claims are being robustly
contested as to both liability and quantum. A provision of GBP0.2m
(30 June 2018: GBPnil, 31 December 2018: GBPnil) has been made for
defending these claims, where appropriate.
At any time, the Group is overseeing a portfolio of customer
implementation projects. Such projects may be complex, multi-phase
projects giving rise to significant operational risks which the
Group must manage. Such risks may, in certain instances, lead to
potential negotiations or disputes with customers which may give
rise to consequential financial or commercial obligations or
liabilities arising.
The Company and its subsidiaries have provided performance
guarantees issued by their banks on their behalf, in the ordinary
course of business totalling GBP1.1m (30 June 2018: GBP1.5m, 31
December 2018: GBP1.0m). These are not expected to result in any
material financial loss.
20. Related party disclosures
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
On 7 June 2019, Tribal Group plc ("the Company") granted
nil-cost options over a total of 760,563 ordinary shares
(representing approximately 0.40% of the Company's issued shares)
to Mark Pickett under the terms of its 2010 Long Term Incentive.
This award has been granted subject to performance conditions based
on the Group's Adjusted Operating Profit over a performance period
ending 31 December 2019. This award will, ordinarily, vest on the
third anniversary of the grant.
The remuneration of the key management personnel of the Group is
set out below in aggregate for each of the categories specified in
IAS 24 'Related Party Disclosures'. The members of the Group Board
and the Group's Executive Board are considered to be the key
management personnel of the Group.
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------------------------ --------- --------- ------------
Short-term employee benefits 1,069 1,166 3,674
Termination benefits - - 291
Share-based payments 203 895 2,164
------------------------------ --------- --------- ------------
1,272 2,061 6,129
------------------------------ --------- --------- ------------
21. Seasonality
The overall performance for the second half of the year will be
lower than for the first half as a result of phasing of Education
Services school inspections. In addition, i-graduate revenues and
profit are skewed to the fourth quarter of the calendar year, in
line with the start of the academic year.
Responsibility statement
The Directors' confirm that these condensed interim financial
statements have been prepared in accordance with the Disclosure and
Transparency Rules (DTR) of the Financial Services Authority and
that the interim management report includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report
The Directors of Tribal Group plc are listed in the Tribal Group
plc Report and accounts for the 12 month period ended 31 December
2018. A list of current Directors is maintained on the Tribal Group
plc website: www.tribalgroup.com.
The Directors are responsible for the maintenance and the
integrity of the Group's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
By order of the Board
Mark Pickett
Chief Executive
20 August 2019
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
IR CKCDNKBKBOFD
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