Interim Management Statement

RNS Number : 4443B

Tribal Group PLC

27 October 2009

 



27 October 2009

Tribal Group plc

Trading Update and Interim Management Statement 

Tribal Group plc ("Tribal" or the "Group"), a leading provider of professional services to the public sector in the UK and internationally, provides the following update on trading covering the period from 30 June 2009 to date. 

Current trading

Since the publication of the half year results in August, the Group has encountered  significantly  more challenging trading conditions in certain areas of activity.   As a result, the Board now believes that underlying profit before tax for the year ending 31 December 2009 will be in line with the prior year (as adjusted for discontinued operations. 2008 : £17.8m) (See Note). 

The Education business has continued to make good progress and has performed in line with expectations, with good demand for our software products, particularly amongst local authorities. We have won a number of significant contracts, both in the UK and internationally, and are seeing increasing levels of overseas interest in our education offering.  Committed income for 2010 and beyond remains very encouraging. 

Within Consulting, activity levels have remained in line with expectations in central government. However, we have seen a significant softening in trading conditions in our housing, local government and health consulting practices. Delays in procurement timetables and in contract approvals and pressures on fee rates have become increasingly evident in recent weeks.  

Our regeneration activities have continued to encounter a very difficult market environment and, as we do not expect the business to return to acceptable levels of profitability in the foreseeable  future, we have taken the decision to close the majority of the business. The closure will result in an exceptional cost of £2.5m and a write-off of goodwill of £4.0m. In the nine months to 30 September 2009, the activities being closed made a trading loss of £1.0m.  

Within Support Services, our architectural business has made progress in the health market and has seen steady growth in its pipeline of international opportunities. However, architectural demand in the further education market remains very subdued. Resourcing has performed well in difficult markets, but our communications and advertising business has seen material reductions in spending patterns.

At 30 September 2009, our committed income was £210m (against £217m at 30 June 2009) and our sales pipeline was £266m (30 June 2009 : £258m).  

Strategic developments         

Tribal is well placed to support the public sector as it changes and reforms to adjust to an environment in which budgets will fall and the pressure to improve outcomes in key areas of government policy will increase.  Whilst subdued conditions for traditional consultancy are likely to continue, we are seeing an increase in opportunities to undertake larger scale cost reduction and organisational change projects. Tribal has been responding to the changing market environment by focusing its resources on providing a broader range of services into the education and  health  markets and to support the wider public sector reform agenda.    

In order to improve the market focus and productivity of our business, we are establishing our Health activities as a separate business stream under the leadership of Matthew Swindells. The Health business is one of the leading providers of professional services to organisations across the NHS. In recent weeks, we have continued to win commissioning support contracts  and we are shortlisted on a number of other material opportunities. We believe that there is significant potential to build on our existing market positions and domain expertise in order to develop a broader range of services to NHS organisations. 

We are establishing a new Government Services business stream focused on the public sector reform agenda. This will replace the current Consulting business and consist of a single, integrated UK practice and an international development practice. As part of these changes, we are in negotiations to acquire the outstanding minority interests in our central government consulting practice and our international development business, TribalHELM. The new business stream will be led by Rob Garner, who currently leads our central government business. 

We are also implementing a significant cost reduction programme across all of our activities to ensure that the Group is well-placed to take advantage of opportunities and has the capacity to invest in areas of growth. In aggregate, we are targeting annualised savings of at least £5m. 

Financial position

At 30 September 2009, net debt was in line with our expectations at £19.6m. Our bank facilities total £46m, of which £40m are committed until June 2012.

Outlook

Whilst a number of our markets will remain challenging, we believe that there are significant opportunities to grow the business, both in the UK and internationally. Education and health will remain priorities for all governments and the pressure for public sector reform will increase. The actions that we are taking will further strengthen the Group in areas that are strategically important to its future growth.

Note: Underlying profit before tax is after adjusting for restructuring costs and before the results of discontinued operations. Restructuring costs of £1.1m (2008 : £nil) were reported in the half year results. The regeneration  activity will be reported as a discontinued operation (2009 loss : £1.0m, 2008 profit : £0.8m)  

End 

For further information, please contact: 

Tribal Group plc                                                     Tel: [phone]  

Peter Martin, Chief Executive  

Simon Lawton, Group Finance Director  

Weber Shandwick                                                 Tel: [phone]

Nick Oborne

Stephanie Badjonat 

Clare Thomas   

Editors' note:  

Tribal provides professional services focused on improving the delivery of public services in the UK and internationally. Our core markets are in education, health, central government, local government and housing. Tribal employs over 2,300 staff and its shares are quoted on the London Stock Exchange (TRB).  

Links: Tribal Group plc website: www.tribalgroup.co.uk  

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 and the financial information is unaudited. 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.  

 

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