REG - Tribal Group PLC - Final Results <Origin Href="QuoteRef">TRBG.L</Origin> - Part 2
30/03/2017 07:07
- Part 2: For the preceding part double click ID:nRSd9548Aa
interest rate views and defined risk appetite, and forward rate agreements and interest swaps may be used,
where appropriate, to achieve the desired mix of fixed and floating rate debt. We have no open derivatives at 31 December
2016.
Foreign exchange risk
Tribal's reporting currency is Sterling. A number of its subsidiaries have different functional currencies, so increases
and decreases in the value of Sterling versus the currencies used by the Group's international operations will affect its
reported results, and the value of assets and liabilities on the consolidated balance sheet.
Tribal's principal currency exchange exposure is to the Australian dollar although as at 31 December 2016, the Group was
also exposed to movements in the rates between Sterling and the US dollar, South African Rand, and New Zealand dollar.
The Group Finance team oversees management of foreign exchange risk, and policies and procedures approved by the Board.
Where appropriate, forward foreign exchange contracts and options reduce potential financial exposure to an acceptable
level. There were no open contracts at the year end.
Contract risk
The Group seeks to reduce the risk on contracts including the risk of failure to deliver, legal claims and onerous
financial terms. This risk is mitigated through the use of appropriate legal resource to review contracts and an internal
control process for contract approval.
Effect of the decision of the UK to exit the European Union
We do not expect the decision of the UK to exit the European Union (Brexit) to have an adverse impact in the short term on
demand for Student Management Systems, and the longer term potential impact remains to be seen and is dependent upon the
exit terms agreed. Following the outcome of the Brexit vote, the Group saw some additional benefit in earnings due to the
fall in the value of UK Sterling.
Mark Pickett
Chief Financial Officer
Consolidated Income Statement
For the year ended 31 December 2016
Note Yearended31DecemberOtheritems 2016Adjusted (seenote 3) Total£'000 £'000 £'000 Yearended(Restated*) 31December(Restated*) Otheritems 2015Adjusted (seenote 3) Total£'000 £'000 £'000
Revenue Costofsales 90,255 - 90,255 (51,408) - (51,408) 106,725 - 106,725(68,676) - (68,676)
GrossprofitTotaladministrativeexpenses 38,847 - 38,847 (34,159) (4,625) (38,784) 38,049 - 38,049(35,515) (47,756) (83,271)
Operatingprofit/(loss) 2Investmentincome 4Financecosts 3,5 4,688 (4,625) 63 66 66(595) (398) (993) 2,534 (47,756) (45,222)49 49(1,083) (1,041) (2,124)
Profit/(loss)beforetaxTax(charge)/credit 6 4,159 (5,023) (864) (889) 596 (293) 1,500 (48,797) (47,297)(626) 2,487 1,861
Profit/(loss)fortheyearfrom continuingoperationsDiscontinuedoperations Lossfromdiscontinuedoperations 3,270 (4,427) (1,157) - - - 874 (46,310) (45,436) - (80) (80)
Profit/(loss)fortheyear 3,270 (4,427) (1,157) 874 (46,390) (45,516)
EarningspershareFromcontinuingoperations Basic anddiluted 7 Fromcontinuingand discontinuedoperations Basic anddiluted 7 1.9p (2.6)p (0.7)p 1.9p (2.6)p (0.7)p 0.9p (49.0)p (48.1)p 0.9p (49.0)p (48.2)p
All activities are from continuing operations
* In the current period the share based payment charge and movement in the associated employer related taxes accrual has
been reclassified so to disclose in Other items. The 2015 comparatives have been restated.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Yearended31December2016£'000 Yearended31December2015£'000
Lossfortheyear Othercomprehensiveincome/(expense): Itemsthatwillnotbereclassifiedsubsequentlytoprofitorloss: Remeasurementofdefinedbenefitpensionschemes Deferredtaxonmeasurementofdefinedbenefitpensionschemes Itemsthatmaybereclassifiedsubsequentlytoprofitorloss: Exchangedifferencesontranslationofforeignoperations (1,157) (1,706) 290 3,070 (45,516) (169) 34 (720)
Othercomprehensiveincome/(expense)fortheyearnetoftax 1,654 (855)
Totalcomprehensiveincome/(expense)fortheyearattributabletoequityholdersoftheparent 497 (46,371)
.
Consolidated Balance Sheet
As at 31 December 2016
Note 2016£'000 (Restated*)2015£'000
Non-currentassetsGoodwill 21,316 14,214 1,981 - 3,881 169 38,311 14,7843,431883,2131,126
8Otherintangibleassets
9Property,plantandequipmentRetirementbenefitsurplusDeferredtaxassetsAccruedincome
41,561 60,953
CurrentassetsInventoriesTradeandotherreceivables 8315,810 3,605 84 10,260 133 20,195 4,664- 3,896
10AccruedincomeCurrenttaxassetsCashandcashequivalents(excludingbankoverdrafts)
29,842 28,888
Total assets 71,403 89,841
CurrentliabilitiesTradeandotherpayables 11Accruals (7,066)(8,204)(19,35)(1,266)(1,427) (941) (7,043) (9,671) (21,730) (169) (2,160) (3,845)
DeferredincomeCurrent tax liabilitiesBorrowings
Provisions
(38,256) (44,618)
Netcurrentliabilities (8,414) (15,730)
Non-currentliabilitiesBorrowings -(1,026)(1,877) (818)(1,725)(211) (34,207)- (2,119)(646)- (2,091)
Otherpayables 11Deferredtaxliabilities
DeferredincomeRetirementbenefitobligations
Provisions
(5,657) (39,063)
Totalliabilities (43,913) (83,681)
Net assets 27,490 6,160
EquitySharecapitalSharepremiumOtherreservesAccumulatedlosses 9,76914,98920,879(18,147) 4,743 2120,503(19,107)
Totalequityattributabletoequityholders oftheparent 27,490 6,160
* In the current period the Group has reclassified its accrued and deferred income balances, so to disclose between current
and non-current assets and liabilities respectively. This has no impact on the results for the previous year.
Consolidated Statement of Changes in Equity
Share capital£'000 Share premium£'000 Other reserves£'000 Accumulated losses£'000 Total equity£'000
At1January2015 4,743 21 25,757 24,126 54,647
Lossfortheyear - - - (45,516) (45,516)
Othercomprehensivelossfortheyear - - - (855) (855)
Dividends - - - (1,794) (1,794)
Useofownsharestosettleshare-based paymentschemevesting - - 1,970 - 1,970
Credittoequityforshare-basedpayments - - (904) (1,364) (2,268)
Taxonchargetoequityforshare-basedpayments - - - (24) (24)
Transferfrommergerreserve - - (6,320) 6,320 -
At31 December2015and1January2016 4,743 21 20,503 (19,107) 6,160
Lossfortheyear - - - (1,157) (1,157)
Othercomprehensiveincomefortheyear - - - 1,654 1,654
Acquisitionofownshares - - (91) - (91)
Issueofequitysharecapital 5,026 17,091 - - 22,117
Costsassociatedwithissueofsharecapital - (2,123) - - (2,123)
Chargetoequityforshare-basedpayments - - 876 - 876
Taxonchargetoequityforshare-basedpayments - - - 54 54
Transferfrommergerreserve - - (409) 409 -
At31 December2016 9,769 14,989 20,879 (18,147) 27,490
Consolidated Cash Flow Statement
For the year ended 31 December 2016
Note Yearended31December2016£'000 Yearended31December2015£'000
Netcashfrom/(usedin)operatingactivities 13 8,274 (6,216)
InvestingactivitiesInterestreceivedGrossproceedsfromdisposalofSynergy 6619,421(872)(443)(1,932)(3,374)357 49--(1,679)(5,138)(4,510)-
12CostsassociatedwithdisposalofSynergy
12Purchasesofproperty,plantandequipmentExpenditureonintangibleassets
9PaymentofdeferredconsiderationforacquisitionsnetofcostacquiredRepaymentofEscrow(inrespectofHumanEdge)
Netcashinflow/(outflow)frominvestingactivities 13,223 (11,278)
Financingactivities Interestpaid Purchaseofownshares Grossproceedsonissueofshares Costsassociatedwithissueofshares EquitydividendpaidFeesforwaiverofloancovenant (460)(91)22,117(2,123)--(34,500) (811)---(1,794)(200)12,912
(Repayment)/drawdownofborrowingsandloanarrangementfees
Netcash(usedin)/fromfinancingactivities (15,057) 10,107
Netincrease/(decrease)incashandcashequivalents Cashandcashequivalentsatbeginningofyear Effectofforeignexchangeratechanges 6,440 1,736 657 (7,387)9,345 (222)
Cashandcashequivalentsatendofyear 8,833 1,736
Notes to the Financial Statements
1. General Information
The basis of preparation of this preliminary announcement is set out below.
The financial information set out above does not constitute the company's statutory accounts for the years ended 31
December 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar
of Companies and those for 2016 will be delivered following the company's annual general meeting.
Whilst the financial information included in this preliminary announcement has been completed in accordance with
International Financial Reporting Standards (IFRSs), this announcement itself does not contain sufficient information to
comply with IFRSs.
The financial information has been prepared on the historical cost basis, except for financial instruments.
Copies of this announcement can be obtained from the Company's registered office at King's Orchard, 1 Queen Street, Bristol
BS2 0HQ.
The full financial statements which comply with IFRSs will be posted to shareholders on or around 21 April 2017 and are
available to members of the public at the registered office of the Company from that date, and are now available on the
Company's website: www.tribalgroup.com.
2. Business segments
Information reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment
performance is focused on the nature of each type of activity. The Group's reportable segments and principal activities
under IFRS 8 are detailed below:
Student Management Systems ("SMS") represents the delivery of software and subsequent maintenance and support services
(previously Product Development and Customer Services) and the activities through which we deploy and configure our
software for our customers (previously Implementation Services);
i-graduate (previously Professional and Business Solutions), representing a portfolio of performance improvement tools and
services, including analytics, benchmarking and transformation services; and
Quality Assurance Solutions ("QAS"), representing inspection and review services which support the assessment of
educational delivery.
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.
Revenue AdjustedSegmentOperatingProfit
Yearended31December2016£'000 Yearended31December2015£'000 Yearended31December2016£'000 (Restated*) Yearended31December2015£'000
StudentManagement Systems i-graduateQualityAssuranceSolutions 61,007 8,534 20,714 62,701 13,622 30,402 4,724 901 2,532 3,163 229 2,900
Total 90,255 106,725 8,157 6,292
Unallocatedcorporateexpenses (3,469) (3,758)
AdjustedoperatingprofitAmortisationofIFRS3intangiblesOtheritems 4,688 (1,912)(2,713) 2,534 (1,686)(46,070)
Operatingprofit/(loss)InvestmentincomeFinancecosts 6366 (993) (45,222)49 (2,124)
LossbeforetaxTax(charge)/creditLossfortheyearfromdiscontinuedoperations (864) (293)- (47,297)1,861 (80)
Lossaftertaxanddiscontinuedoperations (1,157) (45,516)
The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit
represents the profit earned by each segment, without allocation of central administration costs, including Directors'
salaries, finance costs and income tax expense. This is the measure reported to the Group's Chief Executive for the purpose
of resource allocation and assessment of segment performance.
* As reported to the Chief Executive Officer, in the current period the share based payment charge and movement in the
associated employer related taxes accrual are reported as Other items. The 2015 comparatives have been restated.
Revenues of approximately 13% (2015: 18%) have arisen within our QAS segment from the Group's largest customer and revenues
of approximately 7% (2015: 6%) have arisen within our SMS segment from the Group's second largest customer.
Geographical information
Revenue from external customers, based on location of the customer, are shown below:
2016£'000 2015£'000
UK AsiaPacific NorthAmericaandrestoftheworld 46,469 31,819 11,967 72,350 23,699 10,676
90,255 106,725
Non-current assets
2016£'000 (Restated*)2015£'000
UK AsiaPacific NorthAmericaandrestoftheworld 19,171 22,376 14 41,090 19,853 10
41,561 60,953
* In the current period the Group has reclassified its accrued and deferred income balances, so to disclose between current
and non-current assets and liabilities respectively. This has no impact on the results for the previous year.
The Group's revenues from its major products and services were as follows:
Continuing operations
2016£'000 2015£'000
LicenceanddevelopmentImplementation MaintenanceOtherSystemsrelated i-graduateQualityAssuranceSolutions 10,84012,43032,4205,3178,53420,714 14,50411,71730,5135,96713,62230,402
90,255 106,725
3. Other items
2016£'000 (Restated*)2015£'000
ProfitonsaleofSynergy(seenote12)Otheritemsas(charges)/creditstoincomestatement -Acquisitioncosts -Gainonbargainpurchase -RepaymentofEscrow(inrespectoftheacquisitionofHumanEdge) -Movementindeferredcontingentconsideration** 301 - - 357 (607) - (198) 405 - 1,020
Acquisitionrelatedcosts (250) 1,227
-Impairmentofgoodwill -Impairmentofdevelopmentcostsandrelatedcharges - - (38,802) (7,989)
Impairmentcharges - (46,791)
-Onerouscontracts -CostsonclosureofSLSbusiness -Propertyrelated -Sharebasedpayments(includingemployerrelatedtaxes)* -Restructuringandassociatedcosts 115 (33) 136 (1,036) (1,946) 294 (823) 210 350 (537)
Otherexceptionalitems (2,764) (506)
Otheradministrativecosts -AmortisationofIFRS3intangibles (2,713) (1,912) (46,070) (1,686)
Totaladministrativeexpenses -Unwindingofdiscounts -Bankarrangementfeeswrittenoff -Feesassociatedwithwaiverofloancovenant (4,625) (205) (244) 51 (47,756) (585) - (456)
Otherfinancingitems (398) (1,041)
(5,023) (48,797)
Taxonotheritems 596 2,487
(4,427) (46,310)
* In the current period the Group's share based payment charge and movement in the associated employer taxes accrual
have been reclassified so to disclose in Other items. The 2015 comparatives have been restated.
* * Included in movement in deferred contingent consideration are £42,000 of professional fees incurred.
IAS 1, paragraph 97 requires separate disclosure of such items that are considered material by nature or value, that they
require separate disclosure in the financial statements. As such, 'other items' are not part of the Group's underlying
trading activities and include the following:
Profit on sale of Synergy; on 1 April 2016, the Group disposed of its Synergy children's services management information
systems business to Servelec Group plc for total consideration of £20.3m (£19.4m after adjustments for working capital).
Subsequent to the allocation of goodwill of £19.1m and costs arising in respect of the disposal, a profit on disposal of
£0.3m was recognised in the period. Further information is provided in note 12.
Acquisition costs: during the period, a final payment was made in respect of deferred consideration payable on acquisition
of i-graduate, which resulted in a true up of the amounts provided (£0.6m additional charge). In addition, a further true
up in respect of the Campus acquisition resulted in an additional £0.2m charge. Acquisition costs also includes a £0.4m
repayment of escrow in relation to Human Edge which was not previously held as a receivable on the balance sheet.
Other exceptional items: amounts principally reflect the costs arising in respect of the restructuring of the Group's
operations. The restructuring program was executed in the first half of 2016 and associated costs provided for. Amounts
include provision for redundancy costs, consolidation of the Group's office portfolio as well as the costs of termination
of the previous executive directors' employment contracts.
Share based payments: In 2016 share based payments have been disclosed in Other items, 2015 comparatives have been
restated. The numbers above include the movement in associated employers taxes accrual.
Amortisation of IFRS3 intangibles: amortisation arising on the fair value of intangible assets acquired is separately
disclosed as other items. (2016 - £1.9m: (2015 - £1.7m)).
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 (2016 - £0.2m: 2015 -
£0.6m). In addition, costs of £0.2m were incurred in respect of previously capitalised bank arrangement fees written off
following the revised financing agreement entered into during the year.
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.
4. Investment income
2016£'000 2015£'000
Netinterestreceivableonretirementbenefitobligations Otherinterestreceivable 12 54 34 15
66 49
5. Finance costs
2016£'000 2015£'000
Interestonbankoverdraftsandloans Amortisationandwriteoffofloanarrangementfees Otherinterestpayable 310 60 225 695 272 116
Financingcosts 595 1,083
Unwindingofdiscounts Bankarrangementfeeswrittenoff Feesassociatedwithwaiverofloancovenants 205244(51) 585-456
Otherfinancingcosts 398 1,041
Totalfinancingcosts 993 2,124
6. Tax
2016£'000 2015£'000
Currenttax UKcorporationtax Overseastax Adjustmentsinrespectofprioryears 116 690 309 354 173 (1,262)
Deferredtax Currentyear Adjustmentsinrespectofprioryears 1,115 (816)(6) (735) (2,125) 999
(822) (1,126)
Taxcharge/(credit)onlosses 293 (1,861)
The continuing tax charge can be reconciled to the profit from continuing operations per the income statement as follows:
2016£'000 2015£'000
Lossbeforetaxoncontinuingoperations (864) (47,297)
Taxcreditatstandardrateof20%(2015:20.25%) Effectsof: Overseastaxrates Expensesnotdeductiblefortaxpurposes Non-deductible goodwillimpairment Adjustmentsinrespectofprioryears AdditionaldeductionforR&Dexpenditure Shareschemes Movementintaxprovision Utilisationofunrecognisedtaxlosses Effect of changes in tax rates (173) 140 180 - 272 (87) - 116(358)203 (9,578) (134) 657,776 (263) (16)(8) 159 - 138
Taxexpense/(credit)fortheyear 293 (1,861)
In addition to the amount charged to the income statement a current tax credit of £nil (2015: £195,000) and a deferred tax
credit of £54,000 (2015: charge of £219,000) has been recognised directly in equity during the year in relation to share
schemes. A deferred tax credit of £290,000 (2015: £34,000) has been recognised in the Consolidated Statement of
Comprehensive Income in relation to Defined Benefit pension schemes.
The Group continues to hold an appropriate corporation tax provision in relation to the Group relief claimed from Care UK
for the year ended 31 March 2007, together with other appropriate group provisions.
The income tax expense for the year is based on the UK statutory rate of corporation tax for the period of 20% (2015:
blended rate of 20.25%). This rate reflects the reduction of the UK corporation tax rate from 21% to 20% from 1 April 2015.
Tax for other jurisdictions is calculated at the prevailing rates prevailing in the respective jurisdictions.
Further reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and 17% (effective from 1
April 2020) were substantively enacted on 26 October 2015 and 6 September 2016 respectively. This will reduce the Group's
future tax charge accordingly. The deferred tax balances at 31 December 2016 have been calculated based on these rates.
7. Earnings per share
Earnings per share and diluted earnings per share are calculated by reference to a weighted average number of ordinary
shares calculated as follows:
2016 thousands 2015 thousands
Weightedaveragenumberofsharesoutstanding: Basicweightedaveragenumberofsharesinissue 168,755 94,435
Weightedaveragenumberofsharesoutstandingfordilutioncalculations 168,755 94,435
Diluted earnings per share only reflects the dilutive effect of share options for which performance criteria have been met.
Previous share incentive schemes vest based on cumulative EPS for a three year period with the earliest vesting based on
the Group's results for the three years to 31 December 2016. None of the 721,171 remaining share options that were issued
in 2014 met the performance criteria.
In regards the diluted loss per share in 2015 and 2016, all potentially dilutive ordinary shares, including options and
deferred shares, are anti-dilutive as they would decrease the loss per share.
611,620 nil cost options granted to Mark Pickett, Group Chief Financial Officer will vest on 29 June 2017 as this award is
only subject to a time-limit condition. In addition all 3,405,996 Matching share options granted to Richard Last and Roger
McDowell are also subject to a time-limit condition. These will vest equally on 1 January 2017, 1 January 2018 and 1
January 2019.
The maximum number of potentially dilutive shares, based on options that have been granted but have not yet met vesting
criteria, is 5,367,189 (2015: 1,531,955). In addition there are a further 3,405,996 (2015: nil) potentially dilutive
matching share options that have been granted but have not yet met vesting criteria as at 31 December 2016.
The adjusted basic and diluted earnings per share figures shown on the 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:
2016 2015
Continuing£'000 Discontinued£'000 Total£'000 Continuing Discontinued Total£'000 £'000 £'000
Netloss (1,157) n/a (1,157) (45,436) (80) (45,516)
Earningspershare Basic anddiluted (0.7)p n/a (0.7)p (48.1)p (0.1)p (48.2)p
Adjustedearningspershare Basic anddiluted 1.9p n/a n/a 0.9p* n/a n/a
(Loss)/profit for the year Earnings per share
2016£'000 2015£'000 2016£'000 2015£'000
Lossfortheyearattributabletoequityshareholders (1,157) (45,516) (0.7)p (48.2)p
Addback:discontinuedoperations - 80 - 0.1p
Lossfortheyearfromcontinuingoperations (1,157) (45,436) (0.7)p (48.1)p
Addback: AmortisationofIFRSintangibles(netoftax) Impairmentof goodwill DisposalofSynergy RepaymentofEscrow Bankarrangementfeeswrittenoff Sharebasedpayments Gainonbargainpurchase Impairmentofdevelopmentcosts(netoftax) Unwindingofdiscounts Otheritems(netoftax) Movementindeferredcontingentconsideration 1,354 - (301) (357) 244 858 - - 205 1,817 607 1,197 38,802 - - - (279) (405) 6,323 585 1,107 (1,020)
Totaladjustingitems(netoftax) 4,427 46,310 2.6p 49.0p
Adjustedearnings 3,270 874 1.9p 0.9p
*The adjusted basic and diluted earnings per share figures for 2015 have been restated as the share based payment charge
and movement in the associated employer related taxes accrual has been reclassified so to disclose in Other items.
8. Goodwill
2016£'000 2015£'000
Cost AtbeginningofyearAllocationofgoodwilltodisposalofSynergybusinessExchangedifferences 119,542(19,107) 2,112 120,239- (697)
Atendofyear 102,547 119,542
Accumulatedimpairmentlosses Atbeginningofyear 81,231 42,429
Atendofyear 81,231 81,231
Netbookvalue Atendofyear 21,316 38,311
Atbeginningofyear 38,311 77,810
Goodwill acquired in a business is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to
benefit from the business combination. The carrying amount of goodwill has been allocated as follows:
2016£'000 2015£'000
StudentManagementSystems i-graduate 17,782 3,534 34,777 3,534
21,316 38,311
Goodwill is reviewed at least annually for impairment by comparing the recoverable amount of each cash generating unit
(CGU) with the goodwill, intangible assets and property, plant and equipment allocated to that CGU.
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use risk adjusted cash
flow projections based on the financial budget approved by management for the period to 31 December 2017. The budget was
prepared based on past experience, strategic plans and management's expectation for the markets in which they operate
including adjustments for known contract ends (i.e. Ofsted Early Years), contract related inflationary increases and
planned cost savings. The budget was extrapolated over an eight-year period with a growth assumption of 2% per annum. Cash
flows beyond the budget and extrapolation period were calculated into perpetuity using a growth rate of 2%.
This growth rate is in line with the expected average UK economy long term growth rate.
The cash flows projections are discounted at a post-tax discount rate of 12% (2015: 14%). The single discount rate, which
is consistently applied for all CGUs, is determined with reference to internal measures and available industry information
and reflects specific risks relevant to the Group.
In 2015 the Group suffered a significant downturn in its performance over the course of that year which, together with
conservative estimates of the future trading of the Group, led to material impairments totalling £38.8m being recorded
across the CGUs as follows: SMS £23.6m, i-graduate £5.5m and QAS £9.7m. QAS was fully impaired.
Impairment testing inherently involves a number of judgemental areas, including the preparation of cash flow forecasts for
periods that are beyond the normal requirements of management reporting; the assessment of the discount rate appropriate to
the Group and the estimation of the future revenue and expenditure of each CGU. Accordingly, management undertook stress
testing to understand the key sensitivities and concluded as follows:
SMS is the largest segment and also the most sensitive The discount rate for 2016 would need to increase to 17.3% for an
impairment to occur and the growth rate reduce to (3.8)% per annum. For i-graduate the discount rate for 2016 would need to
increase to 21.2% for an impairment to occur and the growth rate reduce to (8.1)% per annum. The Directors do not feel
these scenarios are likely to occur due to the significant increase required to the discount rate; the Group's strong
Backlog of £113.8m relating to the Total Contract Value of booked sales orders which have not yet been delivered (including
2 years Support & Maintenance, where it is contracted on an annually recurring basis); and, the Group's Annually Recurring
Revenue of £32.4m from software related maintenance fees in SMS.
Further to the impairment review, the Directors concluded that no impairment has arisen during the year.
9.Otherintangibleassets
Software Customercontracts&relationships Development costs Business systems Software licences Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At1January2015 6,747 6,600 29,633 4,735 - 47,715
Writtenoff - - (3,268) (11) - (3,279)
Additions 292 185 4,083 1,055 - 5,615
Disposals - - (403) (86) - (489)
Exchangedifferences (405) (172) (30) (5) - (612)
At31 December2015and1 January2016 6,634 6,613 30,015 5,688 - 48,950
Transfers - - - - 1,369 1,369
Additions - - 1,098 764 70 1,932
Disposals - - (6,994) - (35) (7,029)
Exchangedifferences 1,242 529 360 18 - 2,149
At31 December2016 7,876 7,142 24,479 6,470 1,404 47,371
Amortisation
At 1January2015 924 3,423 16,100 4,019 - 24,466
Writtenoff - - (3,268) (11) - (3,279)
Chargefortheyear 1,248 438 3,364 398 - 5,448
Impairmentloss - - 7,989 - - 7,989
Disposals - - (359) - - (359)
Exchangedifferences (44) (61) 5 1 - (99)
At 31 December 2015and 1January2016 2,128 3,800 23,831 4,407 - 34,166
Transfers - - - - 1,084 1,084
Chargefortheyear 1,422 490 1,411 162 166 3,651
Disposals - - (6,504) - (25) (6,529)
Exchangedifferences 489 168 122 6 - 785
At31 December2016 4,039 4,458 18,860 4,575 1,225 33,157
Carryingamount
At31 December2016 3,837 2,684 5,619 1,895 179 14,214
At31 December2015 4,506 2,813 6,184 1,281 - 14,784
Software and customer contracts and relationships have arisen from acquisitions and are amortised over their estimated
useful lives, which are 3-6 years and 3-12 years respectively. The amortisation period for development costs incurred on
the Group's product development is 3 to 7 years, based on the expected life-cycle of the product. Amortisation of
development costs is included within cost of sales; the amortisation for software, customer contracts and relationships,
business systems and software licences is included within administrative expenses.
Disposals of development cost of net book value of £490,000 correspond to the sale of the Synergy business (see note 12).
Included within Business Systems are finance systems with a carrying value of £1.6m (2015: £0.9m). Each system is being
amortised over a period of three to five years and have an average of three years left. Upgrades to our finance systems,
AX2012 and Longview phase II, are due to commence amortisation in January 2017 following a successful rollout to the
business.
10. Trade and other receivables
2016£'000 2015£'000
Amountsreceivableforthesaleofservices Allowancefordoubtfuldebts 14,373 (1,578) 17,700 (655)
Amountsrecoverable oncontracts Otherreceivables Prepayments 12,795 - 209 2,806 17,045 42 263 2,845
15,810 20,195
11. Trade and other payables
Current 2016£'000 2015£'000
Tradepayables Othertaxationandsocialsecurity Otherpayables Deferredconsideration 677 3,309 1,453 1,627 2,274 3,405 1,364 -
7,066 7,043
Non-current
Deferredconsideration 1,026 -
Total 8,092 7,043
Other payables are split as follows:
2016£'000 2015£'000
Goodsreceivednotinvoiced Fundsrestrictedinuse Othercreditors 246 212 995 424 262 678
1,453 1,364
12. Disposal of Synergy
On 1 April 2016 the Group disposed of its Synergy children's services management information system business to Servelec
Group plc.
ThenetassetsoftheSynergybusinessatthedateofdisposalwereasfollows: £'000
Intangibleassets 490
Tangibleassets 219
Tradeandotherreceivables 1,796
Tradeandotherpayables (3,364)
Attributablegoodwill 19,107
Netassets 18,248
Cashconsideration 19,421
Costsassociatedwiththedisposal (872)
Gainondisposal 301
Two of the Group's directors, Richard Last and Roger McDowell are also directors of Servelec Group plc; given the conflict
arising in respect of the disposal of Synergy to Servelec, neither director participated in the Board's consideration of
the disposal of Synergy.
Additionally, the Group has provided warranties and indemnities against certain liabilities as part of the disposal. The
Group believes that a material liability arising from such warranties provided is remote.
During 2016, the Synergy business generated revenues of £1.6m (2015: £6.3m), which all related to the Student Management
Systems segment, and included £1.0m (2015: £4.1m) of recurring software maintenance revenues.
The Synergy business delivered an operating profit £0.7m in 2016 (2015: £2.7m), stated before allocation of costs of
central support services which have not transferred to Servelec Group plc. These non-transferring activities include IT
services, HR, finance, legal, marketing and head office costs. Additionally, the operating profit for 2016 is stated before
exceptional charges of £nil (2015: £1.0m).
13. Notes to the cash flow statement
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