Information  X 
Enter a valid email address

Tribal Group PLC (TRB)

  Print      Mail a friend       Annual reports

Tuesday 20 August, 2019

Tribal Group PLC

Half-year Report

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)


2019

2018

Change

Change %

Revenue

£40.4m

£42.0m

£(1.6)m

(4)%

Adjusted operating profit 1,2

£6.3m

£6.3m

-

-

Adjusted EBITDA

£8.3m

£7.9m

£0.4m

5%

Statutory profit after tax

£3.6m

£2.9m

£0.7m

24%

Operating cash flow

£(2.7)m

£0.5m

£(3.2)m

(640)%

Net cash

£6.0m

£9.2m

£(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 £19.9m representing 49% of total revenue (2018 H1: £18.9m, 45% of total revenue)

·    Adjusted operating margin up 50bps to 15.5% (2018 H1: 15.0%)

·    Net cash of £6m following the £6m acquisition of Crimson Consultants

·    Committed income increased to £123.5m (2018 FY: £121.6m) - 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 £9m Education Services contract with NCETM in the UK

·    Completed acquisition of Crimson Consultants for £6m with £4m 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 £0.6m (2018 H1: £0.9m), restructuring costs of £0.3m (2018 H1: £0.1m), and share based payments £0.5m (2018 H1: £1.1m)

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 [email protected] 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
Shaun Dobson

 

Tulchan Communications LLP                           

James Macey White

David Ison

Tel: 020 7496 3000

 

 

Tel:  020 7353 4200

 

 

 

 

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 £40.4m (2018 H1: £42.0m), adjusted operating profit remained consistent at £6.3m (2018 H1: £6.3m), adjusted operating margin increased by 50 basis points to 15.5% (2018 H1: 15.0%) and statutory profit increased 27% to £3.6m.

 

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 revenue1 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 £28.7m (2018 H1: £28.8m).   

 

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 £11.7m (2018 H1: £12.9m).

 

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 £1m 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, £9m 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 £6m with a further £4m 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 £15m and £30m, 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 £40.4m (2018 H1: £42.0m). 

 

Adjusted operating profit was in line at £6.3m (2018 H1: £6.3m) 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 £3.6m (2018 H1: £2.9m) and diluted earnings per share were 1.7p (2018 H1: 1.4p).

 

At the end of the period, the Group had net cash of £6.0m, excluding the acquisition of Crimson Consultants this would have increased to £12.0m (2018 FY: £20.0m; 2018 H1: £9.2m).

 

Results

£m

6 months to 30 June

2019

2018

2018

Constant
Currency

Growth

Constant
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 £0.6m (2018 H1: £0.9m), restructuring costs of £0.3m (2018 H1: £0.1m), and share based payments £0.5m (H1 2018: £1.1m)

 

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 £0.3m in revenue and £0.2m 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 £40.4m (2018 H1: £41.7m).  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 £11.8m (2018 H1: £12.2m).

 

Central overheads, representing costs in HR, IT, Finance, Marketing and Management that can't be directly attributed to lines of business, reduced to £5.6m (2018 H1: £6.0m). 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 £6.3m (£2018 H1: £6.2m).

 

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 £28.7m (2018 H1: £28.8m).   

 

License sales decreased by £1.4m on a constant currency basis.  In EMEA sales increased by £0.2m 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 £1.7m 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 £9.2m on a constant currency basis (2018 H1: £9.0m) 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 £11.7m (2018 H1: £12.9m).

 

QAS revenue decreased by 5% to £9.1m (2018 H1: £9.5m).  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 £0.8m (2018 H1: £1.2m), 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 £2.6m on a constant currency basis (2018 H1: £3.2m) 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 to 30 June

2019

2018

 

Variance

2018

Constant Currency

Growth

Constant
Currency

Revenue

£40.4m

£42.0m

(4)%

£41.7m

(3)%

Adjusted operating profit1

£6.3m

£6.3m

-

£6.2m

1%

Adjusted operating margin1

15.5%

15.0%

50bps

14.8%

70bps

Annual recurring revenue

(6 months)2

£19.9m

£18.9m

5%

£18.5m

7%

Committed income3,4

£123.5m

£122.5m

£1.0m

£121.6m

£1.9m

Staff retention

93%

96%

(30)bps



Revenue / average FTE 4
(£'000s: annualised)

£95.9

£91.7k

£4.2m



 

1 Adjusted Operating Profit and Adjusted Operating Margin is in respect of continuing operations which excludes "Other Items" charges of £1.9m (H1 2018: charge of £2.1m).

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 £19.9m (2018 H1: £18.5m).  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 £1.9m on a constant currency basis to £123.5m (2018 FY: £121.6m).  The growth includes the benefit of new License sales in 2018 and contractual inflationary uplift applied annually to Support & Maintenance, but is impacted by £3.6m due to the reduction in the term life of the contract with Callista to 2.5 years.  The acquisition of Crimson Consultants has added £3.0m 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 £0.4m from a number of one-off impacts which were not repeated in the first half of 2019.  This included £1.0m bad debt releases, £(0.4)m of revenue contingencies, £0.3m of other provisions and £(0.5)m data centre exit costs.

 

Product development costs: The Group spent £5.8m on product development, of which £2.8m was capitalised in relation to Tribal Edge, no further capitalised development took place on SchoolEdge (2018 H1:  £5.2m spent; £1.7m capitalised: £1.5m Tribal Edge, £0.3m SchoolEdge).  The Group spent £2.9m on current products including SITS, ebs, SchoolEdge and Maytas, this was £0.6m lower than the previous year (2018: £3.5m) 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 £0.5m (2018 H1: £1.1m), 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 £0.6m (2018 H1: £0.9m) 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 £0.3m (2018 H1: £0.1m).

 

   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 £6.0m (H1 2018: £9.2m).

Cash flow

£m

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 £(2.7)m (2018: £0.5m).  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 £1.9m 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

 


Note

Adjusted

£'000

Other items

(note 6)

£'000

Six months ended

30 June 2019

Total

£'000

Adjusted

£'000

Other items

(note 6)

£'000

Six months ended

30 June 2018

Total

£'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)

 




 

 

 

 

 

 

Note

Adjusted

£'000

Other items

(note 6)

£'000

Year ended 31 December 2018

£'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

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

Year ended

31 December

2018

£'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

 




 

 

 

 

 

Note

30 June

2019

£'000

 

30 June

2018

£'000

 

31 December

2018

£'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

 




 

 

 

 

 

 

 

Note

Six months ended 30 June

2019

£'000

Six months ended 30 June

2018

£'000

Year ended 31 December

2018

£'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

 



Note

Share Capital

£'000

Share Premium

£'000

Other reserves

£'000

Accumulated losses

 £'000

Total Equity

£'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

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£'000

Six months

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£000

 

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

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£'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

2019

As reported

£'000

30 June

2019

Effect of IFRS16

£'000

30 June

2019 As would have been reported

£'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

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£'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: £135,000; 30 June 2018 £nil; 31 December 2018: £62,000).

 

Share based payments: The numbers above include the movement in associated employers taxes accrual (30 June 2019: £19,000; 30 June 2018: £155,000; 31 December 2018: £17,000) and the cash paid on dividends on share options that have met performance conditions (30 June 2019: £106,000; 30 June 2018: £46,000; 31 December 2018: £47,000). 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; £313,000; 30 June 2018: £59,000; 31 December 2018: £985,000).

 

Amortisation of IFRS3 intangibles: Amortisation arising on the fair value of intangible assets acquired is separately disclosed as other items. (30 June 2019: £575,000; 30 June 2018 £909,000; 31 December 2018: £1,787,000).

 

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: £86,000; 30 June 2018 £60,000; 31 December 2017: £106,000).

Financing income: Amounts relating to settlement gains on defined benefit schemes (30 June 2019: £nil; 30 June 2018 £nil; 31 December 2018: £380,000).

 

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

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£'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

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£'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 £57,000 (30 June 2018: credit of £121,000; 31 December 2018: credit of £171,000) has been recognised directly in equity in relation to share schemes.  A deferred tax credit of £nil (30 June 2018: £nil; 31 December 2018: charge of £73,000) 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

ended

30 June

2019

£ '000

Six months

ended

30 June

2018

£ '000

 

Year ended

31 December

2018

£ '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

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£'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

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£'000

Six months

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£'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

 


£'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

 


Software

£'000

Customer

contracts and

relationships

£'000

 

Acquired intellectual property

£'000

Development

costs

£'000

Business

systems

£'000

Software

licences

£'000

Total

£'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

2019

£'000

30 June

2018

£'000

31 December

2018

£'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

2019

£'000

30 June

2018

£'000

31 December

2018

£'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

£'000

Legal claims

£'000

Restructuring

£'000

Total

£'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

£'000

Legal claims

£'000

Restructuring

£'000

Total

£'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 £6.0m and a deferred contingent consideration of £4.0m (the discounted figure at acquisition being £3.376m) 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

£'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 £0.4m and operating profit of £nil to the Group for the period between the date of acquisition and the balance sheet date. Acquisition related costs amounted for £0.1m.

 

Had the acquisition occurred on 1 January 2019, the Group's revenue would have increased by £1.4m and its operating profit reduced by £0.1m.

 

16.          Share capital

 

 

Six months

ended

30 June

2019

number

Six months

ended

30 June

2019

£'000

Six months

ended

30 June

2018

number

Six months

ended

30 June

2018

£'000

 

Year ended

31 December 2018

number

 

Year ended

31 December

2018

£'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

ended

30 June

2019

£'000

Six months

ended

30 June

2018

£'000

 

Year ended

31 December

2018

£'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

2019

£'000

30 June

2018

£'000

31 December

2018

£'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

2019

£'000

30 June

2018

£'000

31 December

2018

£'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 £15 million and £30 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 £0.2m (30 June 2018: £nil, 31 December 2018: £nil) 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 £1.1m (30 June 2018: £1.5m, 31 December 2018: £1.0m).  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

2019

£'000

30 June

2018

£'000

31 December

2018

£'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 [email protected] or visit www.rns.com.
 
END
 
 
IR CKCDNKBKBOFD

a d v e r t i s e m e n t