Trading Update and Interim Ma

RNS Number : 8427T

Tribal Group PLC

05 October 2010

 



5 October 2010

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.

Since the publication of the half year results in August, the Group has encountered significantly more challenging trading conditions than previously anticipated, particularly in its UK advisory activities.  As a result, the Board now believes that adjusted profit before tax for the year ending 31 December 2010 will be substantially below its previous expectations.

Our Education business has continued to make progress in the higher education and further education software markets and the new Early Years Ofsted contract has made a good start.  Whilst we have encountered delays in procurement decisions, particularly in respect of centrally-procured ICT contracts, we have recently won a £4m extension to our Ofsted contract to inspect children's centres in the south of England.  Internationally, our pipeline of school improvement opportunities in the United States has continued to improve.

Our Government business has seen a further material deterioration in trading conditions in the UK during the past two months with a significant contraction in demand for central government advisory work and continued delays in procurement timetables.  We have seen some modest increases in demand in our local government and social housing businesses but we do not expect any improvement in the central government market until at least the second half of 2011.  We are therefore extending our restructuring programme to reduce capacity and to streamline management and support functions so that our cost base reflects our expectations of future demand levels.  Overseas, our pipeline of international development opportunities has remained encouraging.

Our Health business has also seen very subdued conditions for UK advisory work as a result of delays and deferrals in procurement decisions.  We have reduced staff numbers and the level of overhead in our health advisory business in order to reflect anticipated market conditions.  In our health services business, we are continuing to deliver our major commissioning and informatics contracts.  We have also had positive discussions with customers about new opportunities arising from the recent publication of the government's health white paper.

The additional actions we are taking to reduce our cost base reflect our reduced revenue expectations for the remainder of 2010 and an anticipation that demand for our advisory activities during 2011 will remain subdued.  Given the level of operational gearing within our advisory activities, the benefit of the additional actions that we are now taking will not be realised until the start of 2011.   

We have continued the plans to establish a single, integrated technology development business that we announced in August. We are making good progress and expect to have completed the reorganisation before the end of the year.  We expect this exercise to achieve significant improvements in operational efficiencies from 2011.  

Along with many other suppliers of services to the public sector, we have been engaged in a dialogue with the new Coalition Government about the implications of the Comprehensive Spending Review.  The government is committed to generating significant and sustainable cost reductions and to the reform of public services.  In the short-term, this has reduced demand for our advisory services but, in the longer-term, we expect to see new opportunities in our service delivery and technology activities as an increasing range of public services is transferred to external organisations.

We have been encouraged by the level of engagement across the public sector, particularly in education, health and local government, about opportunities to take over the management and delivery of services or to establish shared service solutions.  We expect these discussions to accelerate following the publication of the Comprehensive Spending Review later this month as organisations explore new ways to reduce costs in an increasingly stringent funding environment.

Our two Support Services businesses, Resourcing and Communications, have continued to experience challenging trading conditions. We have made good progress in determining the appropriate strategic direction for these businesses and we expect to provide further updates over the next few weeks.

At the end of September 2010, our net debt was in line with our expectations at £27.5m.  Our new bank facilities total £48m, of which £40m are committed until 2015.

We announced in August that preliminary expressions of interest had been received which may or may not lead to an offer being made for Tribal.  Further announcements will be made as appropriate.

Our current trading continues to reflect the impact of reduced demand for advisory work and general delays in procurement decisions.  Whilst we do not expect the market environment to improve materially in the short term, we believe that the actions that we have taken will provide us with a more secure platform in which to enter 2011 and take advantage of the longer-term opportunities in the UK and the increasing demand for our services overseas. 

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For further information, please contact:

Tribal Group plc                                                                               Telephone: [phone]

Peter Martin, Chief Executive

Steve Breach, Group Finance Director

Weber Shandwick Financial                                                            Telephone: [phone]

Nick Oborne

Stephanie Badjonat

Clare Thomas

Editors' note:

Tribal is a leading public sector services company.  We provide service delivery, advisory and technology solutions focused on improving the quality and effectiveness of public services in the UK and internationally. Tribal's core markets are education, health and government.

Our people are sector experts and we work in partnership with a wide range of organizations, including schools, hospitals, local authorities, housing associations and government departments. Tribal has over 2,000 staff and our work spans 40 countries across the world. Tribal's shares are quoted on the London Stock Exchange (TRB). Links: Tribal Group plc website: www.tribalgroup.com  

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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