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    REG - Tribal Group PLC - Half Yearly Report <Origin Href="QuoteRef">TRBG.L</Origin> - Part 1

    Picture of Tribal logoTribalAnnouncement
    29/10/2014 12:22
    RNS Number : 9452O
    Tribal Group PLC
    13 August 2014
    Tribal Group plc
    13 August 2014
    Half year results for the six months ended 30 June 2014
    Summary
     Strong revenue and profit growth by Systems; the repositioning of Solutions towards technology based revenues is accelerating 
     International expansion continuing, with important new software customers in Australia, New Zealand, South Africa and Canada; international revenues up to 32% of total revenues (HY 2013: 24%; FY 2013: 26%)
     Adjusted operating profit1 up by 4% from 5.4m to 5.6m
     Adjusted operating margin1 held at 9%, reflecting investment to drive future revenue growth 
     Strong operating cash flow, with cash conversion of 142%, up from 71%
     Interim dividend of 0.60p, 20% up on prior year
     Investment in our international platform and product development ongoing; integration of recent bolt-on acquisitions progressing well
    Financial Summary

    Six months ended
    30 June 2014
    Six months ended 
    30 June 2013
    Change
    Revenue
    63.4m
    62.1m
    2%
    Adjusted EBITDA1
    8.4m
    7.4m
    13%
    Adjusted operating profit1
    5.6m
    5.4m
    4%
    Adjusted profit before tax1
    4.9m
    4.9m
    -
    Statutory (loss)/profit before tax
    (8.4)m
    4.3m
    (295)%
    Adjusted earnings per share1
    4.30p
    4.90p
    (12)%
    Interim dividend
    0.60p
    0.50p
    20%
    International revenues
    32%
    24%
    33%
    Cash conversion2
    142%
    71%
    25%
    Notes: 
    1 Adjusted EBITDA, adjusted operating profit and adjusted EPS are in respect of continuing operations, excluding trading losses of closed businesses in 2013 of 0.1m, intangible asset amortisation and impairment of 11.9m (2013: 0.1m), net exceptional costs of 1.0m (2013: nil) and in the case of adjusted EPS unwinding of hedge accounting reserve in 2013 of 0.2m, unwind of discount on deferred contingent consideration of 0.4m (2013: 0.1m) and the related tax credit of 0.7m (2013: 0.1m). 
    2  Cash conversion is calculated as net cash from operating activities before tax from continuing operations before exceptional cash flows less capital expenditure as a proportion of adjusted operating profit adjusted for working capital movements arising directly on acquisition. 
    Keith Evans, Chief Executive of Tribal, commented: "Tribal made solid progress in the first half of the year, increasing revenues and adjusted profits while investing in the international infrastructure and products that will drive Tribal's sustainable growth. Recent bolt on acquisitions, which have also enhanced our technology and market reach, are integrating well. With a healthy pipeline of opportunities, our expectations for the full year remain unchanged."
    Further Information
    A presentation of these results will be made to analysts and investors at 09.30am today at the offices of Weber Shandwick, 2 Waterhouse Square, 140 Holborn, London EC1N 2AE. A copy of the presentation will be available later this morning on the Tribal Group website: www.tribalgroup.com.
    Tribal Group plc
    Tel: 0117 311 5293
    Keith Evans, Chief Executive 

    Steve Breach, Group Finance Director



    Weber Shandwick Financial
    Tel: 020 7067 0700
    Nick Oborne

    Stephanie Badjonat

    Canaccord Genuity Limited
    Tel: 020 7523 8000
    Simon Bridges

    Cameron Duncan



    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 Statement
    Introduction
    Tribal has continued to realise the key elements of its strategic objectives. We remain focused on bringing technology to all that we do, helping our customers to manage and deliver excellent education and training.
    Our ambition to build a truly international business is becoming a reality as we grow through new customer relationships, complemented by carefully chosen acquisitions, in our growing number of international markets.
    We are also continuing the investment to support our future organic development. Our product development programme is being sustained, and we are increasing the stature of our international infrastructure.
    Financial performance
    Revenue for the six months ended 30 June 2014 was 63.4m (2013: 62.1m), an increase of 2%. At a divisional level, our Systems revenues grew by 16% to 35.6m (2013: 30.6m), underpinned by another period of strong international expansion. As we continue to focus our activities in those areas where we can most successfully leverage our technology assets, our Solutions revenues decreased to 28.0m (2013: 31.7m).
    Adjusted operating profit was 5.6m (2013: 5.4m), an increase of 4%, with adjusted operating margins of 9% (2013: 9%). Consistent with our long term vision, we are investing to ensure we have the right management capacity, skills, resources and business systems to support future revenue growth. Whilst our sustained investment programme affects short-term operating margins we anticipate enhanced growth potential and margin improvement in the medium-term.
    Adjusted profit before tax was 4.9m (2013: 4.9m), and adjusted earnings per share were 4.3p (2013: 4.9p), a 12% decrease largely arising as a result of non-recurring tax credits which benefitted the prior year, and the write-off of bank facility fees associated with our refinancing at the start of the year.
    Following Ofsted's announcement that it intends to take schools quality assurance activities in-house from September 2015, our assessment of the value of goodwill relating to our Solutions business has required an impairment charge of 9.2m. Additionally, following our acquisition of Sky Software and Human Edge during the period, we have determined that certain software products in our pre-existing portfolio have now been superseded by acquired technology, and a 1.8m impairment charge has accordingly been recognised in the period. As a result, our statutory loss before tax for the period was 8.4m (2013: profit of 4.3m).
    Tribal generated excellent operating cash flow in the period. Cash conversion was 142% (2013: 71%), supporting our on-going investment in new software development (2.4m) and our bolt-on acquisition programme (net cash consideration of 15.2m). Net debt at 30 June 2014 was 13.5m (30 June 2013: 9.3m), an increase arising primarily from these investment activities.
    Strategic progress
    Our international customer base is developing well. Approximately 32% (HY 2013: 24%; FY 2013: 26%) of our revenues were generated internationally in the period. At the same time, our focus on technology-based activities is reflected by an increasing emphasis on Systems revenues, which now represent 56% of our total revenue (FY 2013: 51%).
    Asia Pacific
    Our business in Asia Pacific has grown substantially since we entered the region in 2010. We have successfully delivered major software programmes for important institutions such as University of Sydney and the Department of Education in New South Wales, whilst also securing a range of new university and college customers for our systems in Australia and New Zealand.
    Our regional credentials in colleges and schools have been reinforced through our recent acquisitions of Sky Software and Human Edge. The latter also brings an offshore software development centre in the Philippines, and early stage customer relationships elsewhere in South East Asia.
    North America
    We are gaining a demonstrable track-record in North America. Our quality assurance solutions have now been deployed in Tennessee, New York State and Massachusetts, and our performance improvement solutions have been used in more than 90 US and Canadian universities.
    The scope of our student management system deployment for University of British Columbia (UBC) is expanding, and we are now piloting our system with a further major Canadian university.
    Other international regions
    Our work in the Middle East is progressing well, and our major 6.3m systems contract with the University of South Africa, the largest university in Africa with over 370,000 students, now takes us into a further English-speaking regional growth market.
    United Kingdom
    The UK education market is the foundation of our business, with strong market positions held by the majority of our management systems.
    We are continuing to see good opportunities for our systems and performance improvement solutions in Higher Education in the UK, offset by lower activity levels in UK further education colleges and training providers. 
    Tribal's future position in the UK schools market is also now increasingly focussed on the provision of systems and performance improvement solutions to schools managers. Our schools quality assurance work with Ofsted will expire towards the end of 2015, although our work with Ofsted at the "Early Years" level is expected to continue for the foreseeable future. As this area of work reduces over time, our "Synergy" range of children's services and school-level management systems is showing encouraging progress.
    Market commentary
    Higher education
    Governments in our regional markets consider higher education as a route to economic prosperity, but at the same time are facing fiscal challenges. This is leading to flat or reducing public funding for higher education, which is being offset by increasing student fee requirements.
    Thus students are becoming more demanding, and the quality of the "student experience" becomes ever more important. Pursuit of international students, and the additional funds which flow from them, is intensifying. As a result of these drivers, we are continuing to see good activity levels as universities seek innovative ways to understand and organise their businesses, and to deliver high quality education.
    United Kingdom
    Within our established customer base, we are increasingly working with our customers to assist their adoption of best practice in student administration, refreshing their approach to using our software as their business requirements evolve. We are currently engaged on change programmes at St Andrews University, University of Westminster and Anglia Ruskin University in this way.
    Institutions are also forming innovative collaborations, creating new opportunities for us. For example, our student management system is now being deployed to a consortium of eight law schools around the UK on a cloud-based Software as a Service model, streamlining administration and enhancing management information across an otherwise dispersed campus structure.
    International
    In Asia Pacific, our long term major implementation programme with the University of Sydney has successfully reached full golive. We have also recently been appointed as preferred supplier to two significant universities in Asia Pacific.
    Elsewhere, our university systems are gaining good momentum. As previously mentioned, we have now entered the South African market with the University of South Africa, and we are expanding our customer base in North America with a pilot programme underway with a second major Canadian university.
    Vocational Learning
    Skills development is a key issue for all established education systems. Key themes include enhancing the responsiveness of vocational learning to the needs of employers (including blended-environment learning on-the-job and in the classroom), and improving the overall employability of learners.
    These trends continue to create demand for our systems and for our performance improvement solutions (particularly our analytics solutions for colleges).
    United Kingdom
    In the UK, we have secured a 6.1m contract to provide our cloud-based Sky Software student management system to the British Council to support its English language teaching programme across its 100 training centres around the world.
    This programme will see our system operating in over 40 languages, and being deployed in 59 countries.
    International
    In Australia, our work for the SALM programme is advancing well, and the recently acquired Sky Software business is integrating well with the wider Tribal product portfolio.
    Schools K-12
    Across our regional markets, governments are active on school improvement programmes, typically emphasising delivery of a school education which produces a well-rounded, highly-skilled labour force.
    Common themes include the introduction of market-based choice for parents' selection of schools for their children, an increasing use of analytic tools to drive up standards, a more personalised approach to learning and efforts to bring closer linkage between schools and vocational learning systems.
    United Kingdom
    In the UK, our schools activities will increasingly focus on the delivery of systems and performance improvement tools, particularly to groups of schools under academy chain frameworks.
    Our partnership with the Outwood Grange Academy Trust (OGAT) is progressing well, and a number of OGAT's schools are now live on Synergy-in-Schools. Amongst other new customers for this system, we are collaborating with our largest Further Education college customer, Newcastle College Group (NCG), to provide Synergy-in-Schools to support the integration of school academies into NCG's education network.
    International
    In Australia, our schools student management system activities are now substantial. The SALM programme expects to deliver our systems to around 2,200 schools in New South Wales, and our recently acquired Human Edge business is supporting approximately 1,900 additional schools and education management organisations throughout Australia and South East Asia. We are already seeing good synergies developing between Human Edge and our existing schools system portfolio.
    Divisional Performance
    Systems
    Six months ended 30 June
    2014
    m
    2013
    m
    Revenue


     Licence and development fees
    12.1
    8.6
     Implementation
    10.0
    11.3
     Maintenance
    11.1
    9.0
     Other
    2.4
    1.7

    35.6
    30.6
    Of which:


     UK
    56%
    61%
     International
    44%
    39%

    100%
    100%



    Adjusted segment operating profit (see note 4)
    7.5
    5.8
    Adjusted operating profit margin
    21%
    19%



    Systems product development investment
    2.3
    2.9
    Our Systems business' revenue grew by 16% to 35.6m (2013: 30.6m). International revenues represented 44% (2013: 39%) of total income. Divisional adjusted operating profit was 7.5m (2013: 5.8m) including 1.9m from the recently acquired Sky Software business, supported by Tribal's international delivery capacity. The adjusted operating margin was 21% (2013: 19%).
    We have seen good overall trading conditions in the UK in our Systems business during the period. Domestic revenues grew to 19.9m (2013: 18.7m), an increase of 6%. Additionally, we have continued to experience strong international growth. International revenues were 15.7m (2013: 11.9m), an increase of 32% driven through the contribution of acquired businesses in the period, new customer wins and the continued delivery of large projects such as the SALM programme.
    Licence revenues and development fees increased significantly once again. Delivery of software for new customers such the University of South Africa and British Council, supplemented by extension of existing large customer programmes such as those with University of British Columbia and University of Kent, has driven strong licence revenue growth. Complementing our new software sales, our development work on the SALM programme has continued during the period. This phase of activity is now approaching completion, having commenced in mid-2012. Licence and development revenues from the SALM programme were 3.3m (2013: 3.6m).
    Implementation revenues increased significantly on the back of the SALM programme in 2013, and this stream of activity has remained strong in the period. SALM implementation revenues were 2.9m (2013: 4.9m). Outside the SALM programme, we have seen a number of our university customers extend timelines on their systems implementation programmes, resulting in deferral of some of our activities. As we move forward, we expect to see activity levels increasing in our major implementation projects.
    Our annuity maintenance income base has continued to grow alongside our increasing installed customer base, with maintenance fees in the period of 11.1m (2013: 9.0m), an increase of 23%. Maintenance fees on the SALM programme were 1.6m (2013: 0.3m).
    Adjusted operating margins increased to 21% (2013: 19%). As previously explained, our investment in our international management, business development and delivery capacity is progressing strongly, and is intentionally running ahead of anticipated revenue growth. Operating margin growth will continue to be constrained as we make this investment.
    Our investment in new product development remains strong although having undertaken a phase of significant investment to build platforms which will resonate in international markets our product investment levels are likely to now represent a smaller percentage of revenue over the coming years.
    Solutions
    Six months ended 30 June
    2014
    m
    2013
    m
    Revenue


    Performance Improvement Solutions


    Benchmarking and analytics
    2.0
    3.0
    Professional development and training support
    8.1
    9.6
    Learning and assessment
    1.8
    3.4

    11.9
    16.0
    Quality Assurance Solutions
    16.1
    15.7

    28.0
    31.7
    Of which:


     UK
    85%
    91%
     International
    15%
    9%

    100%
    100%



    Adjusted segment operating profit (see note 4)
    1.0
    1.9
    Adjusted operating profit margin
    4%
    6%



    Solutions product development investment
    0.1
    0.6
    Our Solutions business' revenue in the period was 28.0m (2013: 31.7m), a reduction of 12%. International revenues represented 15% (2013: 9%) of total income. Divisional adjusted operating profit was 1.0m (2013: 1.9m), and adjusted operating margins were 4% (2013: 6%).
    The re-shaping of our Solutions business towards our long term vision of technology-based revenues across international markets is accelerating. Those aspects of our Solutions activities which fit less well with these key characteristics will progressively become a smaller part of our business over time.
    Performance improvement solutions
    Our benchmarking and analytics work is showing good underlying progress, although key customer programmes are expected to show an increased weighting towards the second half of the year.
    Tribal's professional development and training support programmes will evolve over the course of the coming year. At the present time, our work includes the provision of careers advice solutions in the offender management market. We will be withdrawing from this market over the remainder of 2014, but will maintain our focus on the development of our software-based training support programmes such as those with the National Centre for Excellence in the Teaching of Mathematics.
    Our learning and assessment solutions experienced slow market conditions in the first half of 2014. At the start of the year, Further Education colleges experienced difficulties securing clarity of Government funding commitments due to challenges with a new funding information system provided by the Skills and Funding Agency. At that time, many colleges adopted a cautious stance, and slowed their spending commitments. Following resolution of these problems, we have seen colleges' activity levels returning to normal levels in recent months.
    Quality assurance solutions
    Alongside our work for Ofsted in the UK, we have been diversifying and growing our customer base for our quality assurance solutions. Our future approach seeks to deliver our quality assurance activities through increasing use of technology; using this approach, our software and methodologies are now active in the Middle East in Abu Dhabi, Qatar, Bahrain and Saudi Arabia, and our work in the US is progressing well across New York State and Massachusetts.
    People
    We are fortunate at Tribal in employing talented staff who are motivated by working with our customers to deliver systems and solutions which support the delivery of education, learning and training. As an increasingly international business, our development creates new opportunities and challenges for our people. We are very grateful for the continued support of our staff across Tribal, and their commitment to realising our strategic goals.
    Risks and uncertainties
    Our risk management policies and key risks are documented on pages 34-39 of the Group's report and accounts for the year ended 31 December 2013, which can be found at www.tribalgroup.com/investors. Our key risks remain materially unchanged since that report.
    In summary, the key risk areas faced by the Group, and examples of the consequences of risks crystallising in these areas, are:
     Resource allocation - which may cause substandard delivery of key contracts, reputational damage, and excessive resource and management stretch; 
     People - which may lead to inability to attract and retain staff, destabilise morale and create shortfalls in operational capabilities; 
     Geographic distribution - which may cause over-stretch of management control, resource capacity challenges, foreign exchange currency risk and damage from unforeseen local market conditions;
     Competitive positioning - which may result in aggressive commercial action by competitors or inappropriate pricing strategies in new markets; 
     Innovation and technology - which may render existing software products and solutions obsolete; 
     Reputation - which may cause loss of key contracts, or loss of customer confidence and trust; 
     Governance and controls - which may cause poor control particularly of international expansion; 
     Customer demands - which may change unpredictably as a result of political, economic or policy change. Changing customer demands may impact existing contracted activity, and can create uncertainty in the timing of new business wins; and 
     Intellectual property - which may result in loss of control over or infringement of key elements of our intellectual property. 
    Going concern
    The Group has sufficient financial resources for its foreseeable requirements. Tribal maintains sizeable cash balances, and has a revolving credit facility of 40m which is committed until June 2018. A further 10m is available on a non-committed basis under an accordion arrangement.
    The Group's software products benefit from a significant installed customer base, whilst its other activities are underpinned by a portfolio of long-term contracts. Collectively, the Group has a range of customers across different geographic areas, good levels of committed income and a strong pipeline of new opportunities. The Group's forecasts and projections, which allow for reasonably possible changes in trading performance, show that the Group will be cash generative across the forecast period. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully.
    The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis in preparing the financial statements.
    Foreign exchange
    As Tribal grows in international markets, we are increasingly doing business in foreign currencies. Whilst we seek to hedge against foreign exchange risk where appropriate, fluctuations in foreign currencies affect our reported profits. 
    Our operating profit for the six months ended 30 June 2014 would have been approximately 0.7m higher if foreign currency denominated transactions in the period had been recorded at exchange rates consistent with these pertaining in the first half of 2013.
    Taxation
    Our increasing international revenues mean that our operations are becoming subject to jurisdictions in which corporate tax rates are above those in the UK. As a result our effective tax rate for ongoing activities is expected to rise progressively in the medium-term, although the majority of our profits will continue to be taxed in the UK.
    Dividend
    The Board has declared a dividend of 0.60p in respect of the six months ended 30 June 2014 (2013: 0.50p). This will be paid on 17 October 2014 to shareholders on the register on 19 September 2014. The ex-dividend date will be 17 September 2014.
    Related parties
    Transactions with related parties during the period are set out in note 22.
    Outlook
    Tribal made solid progress in the first half, increasing revenues and adjusted profits while investing in the international infrastructure and products that will drive sustainable growth. Recent bolt-on acquisitions, which have also enhanced our technology and market reach, are integrating well. With a healthy pipeline of opportunities, our expectations for the full year remain unchanged.
    Looking forward into 2015 and beyond, our work with Ofsted will reduce and we will accelerate the repositioning of our Solutions business towards technology-based revenue streams. Whilst this may reduce short-term headline revenue growth rates in our Solutions business, we anticipate stronger medium-term revenue growth and margin improvement.
    12 August 2014

    Key Performance Indicator
    Objective
    Six months ended 30 June 2013
    Six months ended 30 June 2014
    Outlook
    Adjusted operating margin
    Maintain and enhance our operating margin
    8.7%
    8.8%
    Our increasing focus on software-based activities is expected to support continued improvement in our operating margins, partly offset by our investment in our business' international capabilities in the near term.
    Adjusted earnings per share
    Long-term sustainable growth in EPS
    4.9p
    4.3p
    Good opportunities in our existing and new markets, and a focus on enhancing the efficiency of our activities, support our pursuit of sustainable EPS growth.
    Internationalisation
    Increasing the proportion of overall revenue generated from international markets
    24%
    32%
    We expect our revenues to continue to grow in our international markets during the remainder of 2014.
    Cash conversion
    Generate strong operating cash flow
    71%
    142%
    We have generated excellent operating cash flow during the first half of 2014, supporting our investment programme and funding of our bolt-on acquisitions.
    Product development investment
    Sustained investment in development of existing and new products 
    9%
    6%
    We expect to maintain strong levels of investment in the medium-term, although after a period of investment in platforms for international markets, product investment is likely to represent a smaller percentage of revenue in the coming years.
    Order book
    Strong order book supporting enhanced revenue visibility
    At 31 Dec 2013
    127m
    At 30 June 2014
    114m
    The year on year movement in our order book primarily reflects the maturity of our Ofsted inspection contracts. Technology is becoming increasingly pervasive throughout our work; this focus is reflected in the changing shape of our order book.
    Staff retention
    Optimise retention of skilled staff
    81%
    79%
    As we proceed with our strategy plan, and demonstrate the strength of Tribal's position in its markets, staff feedback indicates that our people continue to be confident in their future within Tribal. We must take care to manage the pressures on our staff that arise from the international growth path down which we have advanced.
    Condensed consolidated income statement
    for the six months to 30 June 2014




    Sixmonths


    Sixmonths


    ended


    ended


    30June


    30June


    2014


    2013
    Adjusted
    Other items (see note 5) 
    Total
    Adjusted
    Other items (see note 5)
    Total


    Note
    '000
    '000
    '000
    '000
    '000
    '000

    Continuingoperations








    Revenue
    4
    63,390
    -
    63,390
    62,093
    -
    62,093

    Costofsales

    (39,459)
    -
    (39,459)
    (39,457)
    -
    (39,457)

    Gross profit

    23,931
    -
    23,931
    22,636
    -
    22,636

    Otheradministrativeexpenses

    (18,288)
    (12,018)
    (30,306)
    (17,247)
    (45)
    (17,292)

    AmortisationofIFRS3intangibles

    -
    (906)
    (906)
    -
    (115)
    (115)

    Totaladministrativeexpenses

    (18,288)
    (12,924)
    (31,212)
    (17,247)
    (160)
    (17,407)

    Operatingprofit/(loss)
    4
    5,643
    (12,924)
    (7,281)
    5,389
    (160)
    5,229

    Investmentincome

    2
    -
    2
    16
    -
    16

    Othergainsandlosses
    6
    -
    -
    -
    -
    (227)
    (227)

    Financecosts
    7
    (755)
    (384)
    (1,139)
    (548)
    (124)
    (672)

    Profit/(loss)beforetax
    5
    4,890
    (13,308)
    (8,418)
    4,857
    (511)
    4,346

    Tax
    8
    (788)
    699
    (89)
    (309)
    80
    (229)

    Profit/(loss)fortheperiodfromcontinuingoperations

    4,102
    (12,609)
    (8,507)
    4,548
    (431)
    4,117

    Discontinuedoperations








    (Loss)/profitfromdiscontinuedoperations
    9
    -
    (124)
    (124)
    -
    384
    384

    Profit/(loss)fortheperiod

    4,102
    (12,733)
    (8,631)
    4,548
    (47)
    4,501

    Earningspershare








    Fromcontinuingoperations








    Basic and diluted
    10
    4.3p
    (13.3)p
    (9.0)p
    4.9p
    (0.5)p
    4.4p

    Fromcontinuinganddiscontinuedoperations








    Basic and diluted
    10
    4.3p
    (13.0)p
    (9.1)p
    4.9p
    (0.1)p
    4.8p
     Condensed consolidated income statement


    Note
    Adjusted 
    '000
    Other items (see note 5)
    '000
    Year ended
    31 December
    2013
    Total
    '000
    Continuingoperations
    Revenue
    4
    125,485
    -
    125,485
    Costof sales

    (75,466)
    -
    (75,466)
    Grossprofit

    50,019
    -
    50,019
    Otheradministrativeexpenses:

    (34,260)
    (30)
    (34,290)
    AmortisationofIFRS3intangibles

    -
    (231)
    (231)
    Totaladministrativeexpenses

    (34,260)
    (261)
    (34,521)
    Operatingprofit
    4
    15,759
    (261)
    15,498
    Investmentincome

    37
    -
    37
    Othergainsandlosses
    6
    -
    (453)
    (453)
    Financecosts
    7
    (1,235)
    (350)
    (1,585)
    Profitbeforetax

    14,561
    (1,064)
    13,497
    Tax
    8
    (2,889)
    169
    (2,720)
    Profitfortheyearfromcontinuingoperations

    11,672
    (895)
    10,777
    Discontinuedoperations
    Profitfromdiscontinuedoperations
    9
    -
    788
    788
    Profitfortheyear

    11,672
    (107)
    11,565
    Earningspershare
    Fromcontinuingoperations




    Basic and diluted
    10
    12.5p
    (1.0)p
    11.5p
    Fromcontinuinganddiscontinuedoperations




    Basic and diluted
    10
    12.5p
    (0.2)p
    12.3p
    Condensed consolidated statement of comprehensive income
    for the six months to 30 June 2014

    Six months
    ended
    30 June
    2014
    '000
    Six months
    ended
    30 June
    2013
    '000
    Year
    ended 
    31 December
    2013
    '000
    (Loss)/profit for the period
    (8,631)
    4,501
    11,565
    Items that will not be reclassified subsequently to profit of loss:



    Remeasurement of net defined benefit pension asset
    -
    230
    1,412
    Items that may be reclassified subsequently to profit or loss:



    Transfer from cash flow hedge reserve
    -
    226
    453
    Deferred tax
    73
    272
    (82)
    Exchange differences on translation of foreign operations
    (10)
    (40)
    (581)
    Total comprehensive (expense)/income for the period attributable to equity holders of the parent
    (8,568)
    5,189
    12,767
    Condensed consolidated balance sheet
    at 30 June 2014


    Note
    30June
    2014
    '000
    30June
    2013
    '000
    31December
    2013
    '000
    Non-currentassets




    Goodwill
    12
    79,695
    77,550
    78,652
    Otherintangibleassets
    13
    24,638
    14,845
    16,732
    Property,plantandequipment

    2,763
    3,041
    3,085
    Investments

    1
    1
    1
    Retirement benefit surplus

    778
    -
    778
    Deferredtaxassets

    2,898
    2,198
    2,209


    110,773
    97,635
    101,457
    Currentassets




    Inventories

    918
    999
    714
    Tradeandotherreceivables
    14
    32,561
    26,944
    28,915
    Cashandcashequivalents
    20
    15,885
    8,094
    7,555


    49,364
    36,037
    37,184
    Totalassets

    160,137
    133,672
    138,641
    Currentliabilities




    Tradeandotherpayables
    15
    (19,221)
    (11,002)
    (12,438)
    Accruals

    (13,713)
    (11,587)
    (12,871)
    Deferred income

    (27,100)
    (25,837)
    (24,575)
    Taxliabilities

    (2,248)
    (2,691)
    (3,197)
    Provisions
    16
    (8,527)
    (2,193)
    (3,296)


    (70,809)
    (53,310)
    (56,377)
    Netcurrentliabilities

    (21,445)
    (17,273)
    (19,193)
    Non-currentliabilities




    Bankloans
    20
    (29,338)
    (17,432)
    (12,114)
    Retirementbenefitobligations
    18
    -
    (313)
    -
    Deferredtax liabilities

    (2,188)
    (5)
    (389)
    Provisions
    16
    (1,504)
    (1,633)
    (1,531)


    (33,030)
    (19,383)
    (14,034)
    Totalliabilities

    (103,839)
    (72,693)
    (70,411)
    Netassets

    56,298
    60,979
    68,230
    Equity




    Sharecapital

    4,743
    4,685
    4,685
    Share premium

    20
    -
    -
    Otherreserves

    25,826
    27,728
    28,042
    Retainedearnings

    25,709
    28,566
    35,503
    Total equity attributable to equity holders of the parent

    56,298
    60,979
    68,230
    Condensed consolidated statement of changes in equity
    for the six months to 30 June 2014

    Share capital
    '000
    Share premium
    '000
    Other reserves
    '000
    Retained earnings
    '000
    Total equity
    '000
    Balanceat1January2014
    4,685
    -
    28,042
    35,503
    68,230
    Totalcomprehensiveexpensefortheperiod
    -
    -
    -
    (8,568)
    (8,568)
    Movement in own shares
    -
    -
    (1,967)
    -
    (1,967)
    Issue of share capital
    58
    20
    -
    -
    78
    Dividends
    -
    -
    -
    (1,031)
    (1,031)
    Chargetoequityforshare-basedpayments
    -
    -
    (249)
    (195)
    (444)
    Balanceat30June2014
    4,743
    20
    25,826
    25,709
    56,298
    Forthesixmonthsto30June2013






    Share capital
    '000
    Share premium
    '000
    Other reserves
    '000
    Retained earnings
    '000
    Total equity
    '000
    Balanceat1January2013
    4,685
    -
    26,913
    24,345
    55,943
    Totalcomprehensiveincomefortheperiod
    -
    -
    174
    5,015
    5,189
    Dividends
    -
    -
    -
    (794)
    (794)
    Credittoequityforshare-basedpayments
    -
    -
    641
    -
    641
    Balanceat30June2013
    4,685
    -
    27,728
    28,566
    60,979
    Fortheyearended31December 2013






    Share capital
    '000
    Share premium
    '000
    Other reserves
    '000
    Retained earnings
    '000
    Total equity
    '000
    Balanceat1January2013
    4,685
    -
    26,913
    24,345
    55,943
    Totalcomprehensiveincomefortheyear
    -
    -
    349
    12,418
    12,767
    Dividends
    -
    -
    -
    (1,260)
    (1,260)
    Credittoequityforshare-basedpayments
    -
    -
    780
    -
    780
    Balanceat31December2013
    4,685
    -
    28,042
    35,503
    68,230
    Condensed consolidated cash flow statement
    for the six months to 30 June 2014


    Note
    Sixmonths
    ended
    30 June
    2014
    '000
    Sixmonths
    ended30June
    2013
    '000
    Yearended
    31December
    2013
    '000
    Netcashfromoperatingactivities
    19
    12,528
    7,403
    18,646
    Investingactivities




    Interestreceived

    2
    16
    37
    Proceedsondisposalofdiscontinuedoperations

    321
    338
    638
    Purchasesofproperty,plantandequipment

    (560)
    (658)
    (1,552)
    Expenditureonproductdevelopmentandbusinesssystems

    (2,509)
    (3,490)
    (6,994)
    Acquisitionsanddeferredconsideration

    (15,160)
    (2,521)
    (2,521)
    Netcashoutflowfrominvestingactivities

    (17,906)
    (6,315)
    (10,392)
    Financingactivities




    Interestpaid

    (280)
    (309)
    (670)
    Purchase of own shares

    (2,792)
    -
    -
    Proceeds on issue of own shares

    78
    -
    -
    Equitydividendpaid

    -
    -
    (1,260)
    Draw down/(repayment)ofborrowings

    16,747
    (1,081)
    (6,647)
    Netcash from/(usedin)financingactivities

    13,753
    (1,390)
    (8,577)
    Netincrease/(decrease)incashandcashequivalents

    8,375
    (302)
    (323)
    Cashandcashequivalentsatbeginningofperiod

    7,555
    8,424
    8,424
    Effectofforeignexchangeratechanges

    (45)
    (28)
    (546)
    Cashandcashequivalentsatendofperiod
    20
    15,885
    8,094
    7,555
    Notes to the condensed consolidated financial information
    for the six months to 30 June 2014
    1. Generalinformation
    The condensed consolidated financial information for the six months ended 30 June 2014 was approved by the Board of Directors on 12 August 2014.
    The information for the year ended 31 December 2013 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. 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, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
    2. Accountingpolicies
    The annual financial statements of Tribal Group plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.
    In the current financial year, the Group has applied for the first time IFRS 10 'Consolidated Financial Statements', IFRS 11 'Joint Arrangements', IFRS 12 'Disclosure of Interests in Other Entities', IAS 27 (revised 2011) 'Separate Financial Statements', IAS 28 (2011) 'Investments in Associates and Joint Ventures' including the amendments to the transitional guidance and the amendments to IFRS10, IFRS 12 and IAS 27 'Investment Entities'. The adoption of these standards has had no material impact. Otherwise, the same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.
    3. Going concern
    The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.
    4. Segmentalanalysis
    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.
    Geographical information: revenue from external customers
    Six months
    ended
    30 June
    2014
    '000
    Six months
    ended
    30 June
    2013
    '000
    Year
    ended
    31 December
    2013
    '000
    UK
    43,385
    47,364
    92,709
    Asia Pacific
    13,715
    11,675
    25,584
    North America and rest of the world
    6,290
    3,054
    7,192

    63,390
    62,093
    125,485
    The principal activities are as follows:
    Systems: a range of proprietary software products and related services to support the business needs of education, learning and training providers.
    Solutions: a range of services to support the improvement of education, learning and training delivery by our customers.

    Six months
    ended 30 June
    2014
    '000
    Six months ended
    30June
    2013
    '000
    Year
    ended
    31December
    2013
    '000
    Revenue



    Systems
    35,579
    30,586
    64,206
    Solutions
    28,030
    31,657
    61,570
    Intersegment
    (219)
    (150)
    (291)
    Continuingoperations
    63,390
    62,093
    125,485
    Segmentadjustedoperatingprofit



    Systems
    7,527
    5,776
    14,826
    Solutions
    1,049
    1,943
    6,066
    Unallocatedcorporateexpenses
    (2,933)
    (2,330)
    (5,133)
    Segmentadjustedoperatingprofit
    5,643
    5,389
    15,759
    AmortisationofIFRS3intangibles
    (906)
    (115)
    (231)
    Impairment of goodwill
    (9,232)
    -
    -
    Other costs
    (2,786)
    (45)
    (30)
    Operatingprofit
    (7,281)
    5,229
    15,498
    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.
    Of the total Group revenues, approximately 20% (December 2013: 21%) have arisen within our Solutions division from the Group's largest customer and revenues of approximately 13% (December 2013: 15%) have arisen within our Systems division from the Group's second largest customer.
    Of the total "Amortisation of IFRS 3 intangibles", 0.8m arose in relation to the Systems segment and 0.1m in relation to the Solutions segment. Impairment of goodwill arises entirely in relation to the Solutions segment. Of the total "Other costs", 2.1m arose in relation to the Systems segment and 0.7m in relation to the Solutions segment.
    5. Other items (including closed businesses and exceptional costs)

    Six months
    ended 
    30 June
    2014
    '000
    Six months ended
    30June
    2013
    '000
    Year
    ended
    31December
    2013
    '000
    Closedbusinesses:



    -Otherrestructuringcosts-closedbusinesses
    -
    (65)
    (93)
    Operatinglossfromclosedbusiness
    Otheritems:
    -
    (65)
    (93)
    -Acquisitioncosts
    (345)
    (62)
    (54)
    -Propertyrelated
    (630)
    82
    117
    -Unwinding of discount ondeferredconsideration
    (384)
    (124)
    (350)
    -Impairment of goodwill
    (9,232)
    -
    -
    -Impairment of development costs
    (1,811)
    -
    -
    -AmortisationofIFRS3intangibles
    (906)
    (115)
    (231)
    -Unwinding of hedge accounting reserve
    -
    (227)
    (453)

    (13,308)
    (511)
    (1,064)
    Property related costs in 2014 relate primarily to the relocation of the Group's Head Office. An onerous lease charge arises on the exit of our previous property. The new property benefits from a significant lease incentive with the effect that the overall relocation programme is cash neutral.
    6. Other gains and losses

    Six months
    ended
    30 June
    2014
    '000
    Six months
    ended
    30 June
    2013
    '000
    Year
    ended 
    31 December
    2013
    '000
    Unwinding of hedge accounting reserve
    -
    227
    453
    7. Finance costs

    Six months
    ended
    30 June
    2013
    '000
    Six months
    ended
    30 June
    2012
    '000
    Year
    ended 
    31 December
    2012
    '000
    Interest on bank overdrafts and loans
    378
    469
    979
    Write off of loan arrangement fees
    338
    -
    -




    Unwinding of discount on deferred contingent consideration
    384
    124
    350
    Other interest payable
    39
    79
    256

    1,139
    672
    1,585
    8. Tax

    Six months
    Ended
    30 June
    2014
    '000
    Six months
    ended 30 June
    2013
    '000
    Year ended
    31 December
    2013
    '000
    Continuingoperations



    Currenttax
    UKcorporationtax
    (36)
    990
    3,096
    Overseastax
    958
    30
    343
    Adjustmentsinrespectofpriorperiods
    (9)
    (609)
    (551)

    913
    411
    2,888
    Deferredtax
    Currentperiod
    (833)
    (175)
    (258)
    Adjustmentsinrespectofpriorperiods
    9
    (7)
    90

    (824)
    (182)
    (168)
    Taxcharge on result
    89
    229
    2,720
    DiscontinuedoperationsCurrenttax
    36
    117
    54
    Deferredtax
    -
    -
    -
    Total



    Currenttax
    UKcorporationtax
    -
    1,107
    3,150
    Overseastax
    958
    30
    343
    Adjustmentsinrespectofpriorperiods
    (9)
    (609)
    (551)

    949
    528
    2,942
    Deferredtax
    Current period
    (833)
    (175)
    (258)
    Adjustmentsinrespectofpriorperiods
    9
    (7)
    90

    (824)
    (182)
    (168)
    Taxcharge
    125
    346
    2,774
    In addition to the amount charged to the income statement, a deferred tax credit of 73,000 (2013: 272,000) has been taken directly to equity.
    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. 
    9. Discontinuedoperations
    Discontinued operations include the Health & Government, Resourcing and Communications businesses which were disposed of during 2010 and 2011. The Resourcing and Communications sales were trade and assets deals and so there continue to be transactions, for example as leases associated with those businesses wind down. 
    The results of the discontinued operations which have been included in the consolidated income statement were as follows:

    Six months
    ended
    30 June
    2014
    '000
    Six months
    ended
    30 June
    2013
    '000
    Year
    ended 
    31 December
    2013
    '000
    Operating profit before amortisation of IFRS 3 intangibles and exceptional costs
    18
    13
    13
    Exceptional costs
    46
    345
    712
    Operating profit
    64
    358
    725
    Attributable tax charge
    (36)
    (117)
    (54)
    (Loss)/profit on disposal of discontinued operations
    (152)
    143
    117
    Net (loss)/profit attributable to discontinued operations
    (124)
    384
    788
    Operating cash flows for discontinued operations
    36
    94
    446
    Investing cash flows for discontinued operations
    321
    337
    638
    Total cash flows for discontinued operations
    357
    431
    1,084
    10. Earningspershare
    Earnings per share and diluted earnings per share are calculated by reference to a weighted average number of ordinary shares calculated as follows:

    Six months
    ended
    30 June
    2014
    '000
    Six months
    ended
    30 June
    2013
    '000
    Year
    ended 
    31 December
    2013
    '000
    Basic weighted average number of shares in issue
    94,769
    93,696
    93,696
    Employee share options
    -
    -
    -
    Weighted average number of shares for the purpose of calculating diluted earnings per share
    94,769
    93,696
    93,696
    Diluted earnings per share only reflects the dilutive effect of share options for which performance criteria have been met at the reporting date. The maximum number of potentially dilutive shares, based on options that have been granted but have not yet met vesting criteria is 4,046,135 (December 2013: 3,521,109).
    The adjusted 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
    2014
    '000
    Six months
    ended
    30 June
    2013
    '000
    Year
    ended 
    31 December
    2013
    '000
    Earnings



    From continuing operations



    Net (loss)/profit from continuing operations attributable to equity holders of the parent
    (8,507)
    4,117
    10,777
    Earnings per share



    Basic and diluted
    (9.0)p
    4.4p
    11.5p
    From continuing and discontinued operations



    Net (loss)/profit from continuing and discontinued operations attributable to equity holders of the parent
    (8,631)
    4,501
    11,565
    Earnings per share



    Basic and diluted
    (9.1)p
    4.8p
    12.3p

    Sixmonths
    ended 30June
    2014
    '000
    Sixmonths
    ended
    30June
    2013
    '000
    Yearended
    31December
    2013
    '000
    Adjustedearnings



    Fromcontinuingoperations



    Net (loss)/profit from continuing operations attributable to equity holders of the parent
    (8,507)
    4,117
    10,777
    Amortisation of IFRS 3 intangibles (net of tax)
    698
     88
    177
    Impairment of goodwill
    9,232
    -
    -
    Impairment of development costs (net of tax)
    1,422
    -
    -
    Unwinding of discount on deferred consideration
    384
    124
    350
    Exceptional costs (net of tax)
    873
    45
    20
    Financial instrument charge (net of tax)
    -
    174
    348
    Adjustedearnings from continuing operations
    4,102
    4,548
    11,672
    Adjustedearningspershare from continuing operations



    Basic and diluted
    4.3p
    4.9p
    12.5p
    Fromcontinuinganddiscontinuedoperations



    Net (loss)/profitfromcontinuinganddiscontinuedoperationsattributabletotheequityholder
    (8,631)
    4,501
    11,565
    AmortisationofIFRS3intangibles(netoftax)
    698
    88
    177
    Impairment of goodwill
    9,232
    -
    -
    Impairment of development costs (net of tax)
    1,422
    -
    -
    Unwindingofdiscountondeferredconsideration
    384
    124
    350
    Exceptional(credits)/costs(netoftax)
    836
    (220)
    (638)
    Discontinuedoperations and associated tax adjustments
    161
    (109)
    (130)
    Financialinstrumentcharge(netoftax)
    -
    174
    348
    Adjustedearnings from continuing and discontinued operations
    4,102
    4,548
    11,672
    Adjustedearningsper share from continuing and discontinued operations



    Basic and diluted
    4.3p
    4.9p
    12.5p
    11.Dividends




    Sixmonths
    ended 30June
    2014
    '000
    Sixmonths
    ended30June
    2013
    '000
    Yearended
    31December
    2013
    '000
    Amountsrecognisedasdistributionstoequityholdersintheperiod:



    Interimdividendfortheyearended31December2013of0.50pencepershare
    -
    -
    466
    Finaldividendfortheyearended31December2013of1.10pencepershare(2012:0.85pencepershare)
    1,031
    794
    794

    1,031
    794
    1,260
    The Board has declared an interim dividend of 0.60 pence per share (2013: 0.50 pence per share), which will result in a cash outflow of 0.6m (2012: 0.5m).
    The interim dividend was approved by the Board on 12 August 2014 and has not been included as a liability as at 30 June 2014. 
    The dividend is payable on 17 October 2014 to ordinary shareholders who are on the register on 19 September 2014. The shares will be quoted ex-dividend on 17 September 2014.
    12. Goodwill

    '000
    Cost

    At 1 January 2014
    108,232
    Additions
    10,200
    Exchange differences
    75


    At 30 June 2014
    118,507
    Accumulated impairment losses

    At 1 January 2014
    29,580
    Impairment
    9,232


    At 30 June 2014
    38,812
    Net book value
    At 30 June 2014
    79,695


    At 31 December 2013
    78,652
    The Group tests annually for impairment or more frequently if there are indications that goodwill might be impaired. During the period, Ofsted announced its intention to in-source one of the two inspections contracts held by the Group at the end of the current contract term in August 2015. As a result we have reassessed the goodwill relating to the Solutions business, which holds these contracts, for potential impairment. The recoverable amount of the Solutions CGU group was determined from a value in use calculation. The key assumptions for this are those regarding discount rates, short to medium term trading performance, longer term growth rates and expected changes to selling prices, sales volumes and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. Changes in selling prices, sales volumes and direct costs are based on past practices and expectations of future changes in the market.
    The Group prepares cash flow forecasts derived from the most recent financial projections approved by the Board up to the end of 2015 and has extrapolated cash flows in perpetuity based on an estimated growth rate of 2%. This rate does not exceed the average long-term growth rate for the relevant markets and reflects the ongoing caution in the market. The discount rate applied was 14% (2013: 14%) which is based on the WACC for the business with an appropriate risk adjustment.
    This assessment indicates that based on our current projections for that business, an impairment of 9.2m is required. If the profitability over the forecast period were to fall below expectations there would be a requirement for a further impairment of goodwill. For example if profitability were 10% below expectations across the forecast period, a further impairment of 3.1m would be required. We will continue to conduct regular reviews to monitor this.
    The additions to goodwill in the period arise entirely in relation to the Systems segment (5.9m in relation to the acquisition of Sky Software and 4.3m in relation to the acquisition of Human Edge). The impairment arises entirely in relation to the Solutions segment.
    13. Other tangible assets

    Software
    '000
    Customer contracts and 
    relationships
    '000
    Development
    costs
    '000
    Business
    systems
    '000
    Total
    '000
    Cost





    At 1 January 2014
    -
    3,785
    24,874
    4,440
    33,099
    Additions
    7,035
    2,947
    2,349
    160
    12,491
    Exchange differences
    50
    9
    -
    -
    59
    At 30 June 2014
    7,085
    6,741
    27,223
    4,600
    45,649
    Amortisation





    At 1 January 2014
    -
    2,618
    10,220
    3,529
    16,367
    Charge for the period
    312
    594
    1,700
    232
    2,838
    Impairment loss
    -
    -
    1,811
    -
    1,811
    Exchange differences
    -
    -
    (5)
    -
    (5)
    At 30 June 2014
    312
    3,212
    13,726
    3,761
    21,011
    Carrying amount





    At 30 June 2014
    6,773
    3,529
    13,497
    839
    24,638
    At 31 December 2013
    -
    1,167
    14,654
    911
    16,732
    Software and customer contract and relationships have arisen from acquisitions, and are amortised over their estimated useful lives, which is over 5-12 years. The amortisation period for development costs incurred on the Group's software development and product development is three to five years based on the expected life-cycle of the product. The Group' corporate business systems software is amortised over an average of five years from the date it first comes into use. Certain historical development costs have been impaired following a review of the Group's product portfolio after the acquisitions of Sky Software and Human Edge.
    14. Tradeandotherreceivables

    30 June
    2014
    '000
    30 June
    2013
    '000
    31 December
    2013
    '000
    Trade receivables 
    17,937
    15,018
    18,276
    Amounts recoverable on contracts
    106
    362
    270
    Other receivables
    550
    650
    283
    Prepayments
    3,482
    3,143
    2,705




    Accrued income
    10,486
    7,771
    7,381

    32,561
    26,944
    28,915
    15. Tradeandotherpayables

    30 June
    2014
    '000
    30 June
    2013
    '000
    31 December
    2013
    '000
    Trade payables 
    3,849
    4,682
    3,000
    Other taxation and social security
    6,557
    3,872
    4,558
    Other payables
    8,815
    2,448
    4,880

    19,221
    11,002
    12,438
    16. Provisions

    30 June
    2014
    '000
    30 June
    2013
    '000
    31 December
    2013
    '000
    At beginning of period
    4,827
    1,682
    1,682
    Increase/(reduction) in provision in period
    271
    (421)
    (828)
    On acquisition of subsidiary
    7,312
    2,860
    3,962
    Exchange rate movement
    101
    -
    -
    Unwinding of discount on deferred consideration
    384
    124
    350




    Utilisation of provision
    (2,864)
    (419)
    (339)
    At end of period
    10,031
    3,826
    4,827
    The provisions are split as follows:
    Less than one year:
    30 June
    2014
    '000
    30 June
    2013
    '000
    31 December
    2013
    '000
    Future lease costs
    -
    235
    6
    Deferred contingent consideration
    7,760
    1,450
    2,782
    Potential litigation claims
    767
    508
    508

    8,527
    2,193
    3,296
    More than one year:
    30 June
    2014
    '000
    30 June
    2013
    '000
    31 December
    2013
    '000
    Future lease costs
    -
    98
    -
    Deferred contingent consideration
    1,504
    1,535
    1,531

    1,504
    1,633
    1,531
    The potential litigation claims are expected to be resolved within one year and are therefore shown within current liabilities. However, it is possible that these claims may take longer to resolve, or the Group may not be promptly notified that the claim has been dropped. The claim may be settled at amounts higher or lower than that provided, depending on the outcome of the commercial or legal arguments. The provision made is management's best estimate of the Group's liability based on past experience, commercial judgement and legal advice. Further details are contained in note 21.
    17. Acquisitionofsubsidiary
    On 6 March 2014, the Group acquired 100% of the issued share capital of Sky Software Pty Limited ('Sky Software'), a company incorporated in Australia that provides cloud-based student management systems to the vocational and higher education markets in Australia, the Asia Pacific region and elsewhere in the world. 
    This transaction has been accounted for by the purchase method of accounting. The total expected cost of acquisition is 9.4m. This comprises an initial cash consideration of 1.1m and deferred consideration of 8.3m (the discounted figure at acquisition being 7.3m) which is payable based on the future profits of the acquired business. At the period end, the equivalent figure was 7.6m. 
    Deferred contingent consideration that becomes due shall be satisfied in the period from March 2015 to March 2018. 
    The maximum amount payable is 10.9m.
    The provisional carrying amount of each class of Sky Software Pty Limited's assets before combination is set out below:

    Bookvalue
    '000
    Acquisitionadjustments
    '000
    Provisional fair valueadjustments
    '000
    Provisionalfairvalue
    '000
    Intangibleassets
    1,697
    4,814
     (1,697)
    4,814
    Tangibleassets
    2
    -
    -
    2
    Tradeandotherreceivables
    111
    -
    -
    111
    Cashandcashequivalents
    60
    -
     -
    60
    Tradeandotherpayables
    (1,423)
    -
    -
    (1,423)
    Deferredtax liabilities
    -
    (963)
    -
    (963)
    Netassetsacquired
    447
    3,851
    (1,697)
    2,601
    Goodwillarisingonacquisition



    5,852
    Consideration
    Satisfiedby:




    Initialcashconsideration



    1,141
    Deferredcontingentconsideration



    7,312




    8,453
    The cash consideration paid by Tribal to date of 1.1m was satisfied through the Group's existing revolving loan facility. The net cash out flow from the acquisition, after taking account of the cash acquired, was 1.1m.
    The goodwill arising on the acquisition is attributable to synergies, the assembled workforce, and potential future relationships, contracts and software.
    Intangible assets arising on acquisition are in respect of software (4.0m) and customer relationships and contracts (0.8m).
    Sky Software Pty Limited contributed revenue of 2.6m and operating profit of 1.9m to the Group for the period between the date of acquisition and the balance sheet date. 
    Acquisition related costs amounted to 0.1m.
    Had the acquisition occurred on the 1 January 2014, the Group's revenue would have increased by 2.9m and its operating profit by 1.8m.
    On 2 June 2014, the Group acquired 100% of the issued share capital of Human Edge Software Corporation Pty Limited ('Human Edge'), a company incorporated in Australia that provides student management systems primarily to the Australian schools market. 
    This transaction has been accounted for by the purchase method of accounting. The total cost of acquisition was 14.0m, all of which was paid up front; there is no deferred element to the consideration.
    The provisional carrying amount of each class of Human Edge Software Corporation Limited's assets before combination is set out below:

    Bookvalue
    '000
    Acquisitionadjustments
    '000
    Provisional fair valueadjustments
    '000
    Provisional fair value
    '000
    Intangibleassets
    -
    -
    5,168
    5,168
    Tradeandotherreceivables
    5,256
    (10)
    -
    5,246
    Cashandcashequivalents
    2,732
     - 
     -
    2,732
    Tradeandotherpayables
    (2,520)
    10
    -
    (2,510)
    Deferredtax liabilities
    -
    -
    (1,033)
    (1,033)
    Netassetsacquired
    5,468

    4,135
    9,603
    Goodwillarisingonacquisition



    4,348
    Consideration
    Satisfiedby:




    Cash consideration



    13,951
    The cash consideration paid by Tribal of 14.0m was satisfied through the Group's existing revolving loan facility. The net cash out flow from the acquisition, after taking account of the cash acquired, was 11.2m. 
    The goodwill arising on the acquisition is attributable to synergies, the assembled workforce, and potential future relationships, contracts and software. 
    Intangible assets arising on acquisition are in respect of the software (3.0m) and customer relationships (2.2m). 
    Human Edge Software Corporation Pty Limited contributed revenue of 0.3m and operating profit of 0.1m to the Group for the period between the date of acquisition and the balance sheet date. 
    Acquisition related costs amounted to 0.2m.
    Had the acquisition occurred on the 1 January 2014, the Group's revenue would have increased by 1.8m and its operating profit by 0.5m.
    18. Defined benefit schemes
    Two of the Group's subsidiary undertakings participate in defined benefit pension schemes: Tribal Technology Limited participates in the TfL Pension Fund, and Tribal Education Limited participates in the Federated Pension Plan and the Prudential Platinum Pension Fund.
    Payments to pension schemes in the period were 0.5m (2013: 0.7m).
    19.Notetothecashflowstatement
    Reconciliationofoperating (loss)/profittooperatingcashflows


    Sixmonths
    ended 30June
    2014
    '000
    Sixmonths
    ended30June
    2013
    '000
    Yearended
    31December
    2013
    '000
    Operating (loss)/profitfromcontinuingoperations
    (7,281)
    5,294
    15,591
    Operatinglossfromclosedbusinesses
    -
    (65)
    (93)

    (7,281)
    5,229
    15,498
    Operatingprofitfromdiscontinuedoperations
    64
    358
    725
    Depreciationofproperty,plantandequipment
    823
    882
    1,707
    Impairment of goodwill
    9,232
    -
    -
    Amortisation and impairment ofotherintangibleassets
    4,649
    1,277
    2,894
    Netpensioncredit
    -
    -
    (156)
    Loss on disposal of property, plant and equipment
    80
    -
    -
    Research and development credit
    (150)
    -
    (322)
    Movement indeferredconsideration
    13
    -
    -
    Share-based payments
    381
    641
    780
    Operatingcashflowsbeforemovementsinworkingcapital
    7,811
    8,387
    21,126
    Increaseininventories
    (204)
    (94)
    190
    Decrease/(increase)inreceivables
    1,170
    1,048
    (1,326)
    (Decrease)/increaseinpayablesandprovisions
    5,648
    (1,274)
    824
    Netcashfromoperatingactivitiesbeforetax
    14,425
    8,067
    20,814
    Taxpaid
    (1,897)
    (664)
    (2,168)
    Netcashfromoperatingactivities
    12,528
    7,403
    18,646
    Netcashfromoperatingactivitiesbeforetaxcanbeanalysedasfollows:



    Continuingoperations(excludingrestrictedcash)
    11,526
    7,808
    16,413
    Increase/(decrease)inrestrictedcash
    2,863
    165
    3,955

    14,389
    7,973
    20,368
    Discontinued operations
    36
    94
    446

    14,425
    8,067
    20,814

    20. Analysisofnetdebt


    30 June
    2014
    '000
    30 June
    2013
    '000
    31 December
    2013
    '000
    Non restricted cash
    8,258
    7,120
    2,791
    Restricted cash
    7,627
    974
    4,764
    Gross cash
    15,885
    8,094
    7,555
    Syndicated bank facility (net of bank arrangement fees)
    (29,338)
    (17,432)
    (12,114)
    Net debt
    (13,453)
    (9,338)
    (4,559)
    Analysis of changes in net debt.

    30 June
    2014
    '000
    30 June
    2013
    '000
    31 December
    2013
    '000
    Opening net debt
    (4,559)
    (9,850)
    (9,850)
    Net increase/(decrease) in cash and cash equivalents
    8,375
    (302)
    (323)
    Effect of foreign exchange rate changes
    (45)
    (28)
    (546)
    (Increase)/decrease in bank loans
    (17,224)
    842
    6,160
    Closing net debt
    (13,453)
    (9,338)
    (4,559)
    Restricted funds represent funds restricted in use by the relevant commercial terms of certain trading contracts.
    21. Contingentliabilities
    The Group has received notification of a number of potential litigation claims, the majority of which relate to discontinued activities. On the basis of legal advice, claims are being robustly contested as to the liability and quantum. A provision of 0.8m (30 June 2013: 0.5m, 31 December 2013: 0.5m) has been made for defending these claims, where appropriate (see note 16). 
    A cross-guarantee exists between Group companies in respect of bank facilities totalling 20.2m (30 June 2013: 13.2m, 31 December 2013 5.9m). 
    In addition, the Company and its subsidiaries have provided performance guarantees issued by their banks on their behalf, in the ordinary course of business totalling 8.9m (30 June 2013: 10.3m, 31 December 2013: 9.4m). These are not expected to result in any material financial loss.
    22. Relatedpartydisclosures
    Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. No material contract or arrangement has been entered into during the period, nor subsisted at 30 June 2014, in which a director had a material interest. See note 18 for details of amounts paid to the Group's pension schemes in the period.
    The remuneration of the directors, who are 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'.


    Six months
    ended
    30 June
    2013
    '000
    Six months
    ended
    30 June
    2012
    '000
    Year
    ended
    31 December
    2012
    '000
    Short-term employee benefits
    488
    469
    1,272
    Share-based payments
    219
    388
    501

    707
    857
    1,773
    Responsibility statement
    We confirm that to the best of our knowledge:
    (a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
    (b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
    (c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). 

    By order of the Board




    Keith Evans
    Chief Executive
    Steve Breach
    Group Finance Director


    12 August 2014

    Independent review report to Tribal Group plc
    We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014, which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 22. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
    This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
    Directors' responsibilities
    The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
    As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
    Our responsibility
    Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
    Scope of review
    We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
    Conclusion
    Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
    Deloitte LLP
    Chartered Accountants and Statutory Auditor 
    Bristol, United Kingdom
    12 August 2014

    This information is provided by RNS
    The company news service from the London Stock Exchange
      END
    IR LLFLSTLIFLIS

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