REG - Tribal Group PLC - Interim results
16/08/2022 07:00
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RNS Number : 0934W Tribal Group PLC 16 August 2022
16 August 2022
Tribal Group plc
("Tribal" or "the Group")
Interim Results for the six months ended 30 June 2022 (unaudited)
Tribal (AIM: TRB), a leading provider of software and services to the
international education market, is pleased to announce its interim results for
the six months ended 30 June 2022.
Results 2022 H1 2021 H1 Change Constant Currency(3) Change %
6 months to 30 June 2021 H1 Constant Currency(3) Constant Currency(3)
Reported
Revenue £42.4m £39.3m £39.4m £3.0m 7.7%
Adjusted Operating Profit (EBITDA) (2) £7.1m £9.2m £9.0m £(1.9)m (21.6)%
Adjusted Operating Profit Margin (EBITDA) (2) 16.7% 23.3% 22.9% - (6.2)pp
Annual Recurring Revenue (ARR) £53.7m £50.3m £51.3m £2.4m 4.8%
at period end (1) (versus 31 Dec 2021)
Free Cash Flow (4) £(10.0)m £0.5m £0.5m £(10.5)m (2183)%
Net (Borrowing)/Cash £(4.8)m £4.3m £4.3m £(9.1)m (211)%
Statutory Profit after Tax £1.6m £4.4m £4.4m £(2.9)m (65)%
Statutory Earnings per Share (basic) 0.7p 2.1p 2.1p (1.4)p (66)%
Operational Highlights
· Continued good sales performance, adding three further Cloud
contracts from existing customers, University of Sunderland, Birmingham City
University and University for the Creative Arts
· Migration of existing customers to Tribal:Cloud continues to
represent a considerable near-term addressable opportunity
· Expansion into new geographies with the signing of a five-year
SITS:Vision contract with the British University of Vietnam
· Our largest SIS contract to date, Nanyang Technology University "NTU"
provides an exciting platform for expansion into Southeast Asia. However,
delivery has been impacted by an extension of timelines partly as a result of
earlier Covid-19 related travel restrictions, with implementation continuing
into 2023. This has had a short term but significant detrimental impact to
both EBITDA and working capital during 2022
· Successful renewal of two existing UK Government contracts within
Education Services, the Advanced Maths Support Programme "AMSP" and The
National Centre for Excellence in the Teaching of Mathematics "NCETM" both for
a two-year term
· Continued investment in our offering, people and operations, to
capitalise on the growing activity within the education market, including
£5.4m investment in Edge product development.
Financial Performance (constant currency)
· Annual Recurring Revenue (ARR) of £53.7m, an increase of 4.8%
since year end providing a clear pathway for future profitable growth. Main
ARR growth coming from sales of Tribal:Cloud and Edge
· Group Revenue up 7.7% to £42.4m reflecting a solid performance
across the business, especially our Cloud and Edge offerings and professional
services
· Cloud Services revenue saw a large increase of 32% to £4.1m as
customers continue to migrate to Tribal:Cloud and Edge increased significantly
to £2.3m
· Continued recovery of Education Services following Covid-19 with
stable revenue of £6.9m and improved operating margin up 35.8% to £1.7m
· EBITDA down by 21.6% to £7.1m mainly due to increased costs
associated with the implementation phase of the NTU contract
· Net borrowing of £4.8m mainly due to EBITDA and working capital
impacts from delayed delivery on our NTU contract, as cash becomes payable on
meeting project milestones. Management anticipates an improved cash position
by year end, although a net debt position is still expected. The extent of the
improvement is dependent on the timing of project milestones
· Committed Income (Order Book) increased 5.6% to £186.5m.
Outlook
· While cognisant of inflationary cost pressures, with an expanding
customer base, advanced service offering and continued contract and ARR
momentum, the Board remains confident in delivering results for 2022 in line
with current Board expectations. However, margin recovery in the second half
of the year is dependent on project delivery milestones on the NTU contract
· The Board expects revenue growth in the Group's strategic products
to continue to increase over time, although this will be partially offset in
the next couple of years by declining revenues from Tribal's higher margin,
historic contracts
· The Board remains confident in the strategy and outlook for the
Group and sees increasing proof that the education market globally is becoming
more attuned to the benefits of SaaS and cloud offerings.
(1)( ) Annual Recurring Revenue (ARR) at period end includes Support &
Maintenance fees, Cloud Services and Subscription Licence
and is assessed as contracted ARR at 30 June 2022 and 31 December 2021, of
which is still to be delivered.
(2 )Adjusted Operating Profit (EBITDA) and Adjusted Operating Margin is in
respect of continuing operations and exclude charges reported in 'Other items'
of £2.5m (2021 H1: £2.0m), refer to note 6 in this report, and before
Interest, Tax, Depreciation and Amortisation.
(3 )2021 H1 results restated to "constant currency" using 2022 rates to
exclude foreign currency impact
(4) Free cash flow is calculated as cash generated before dividends, interest
and finance charges, deferred consideration, and investments in subsidiaries.
In prior years' free cash flow was calculated based on net cash from operating
activities less capital expenditure and less capitalised development costs
(excluding acquired intellectual property), the prior period comparative has
been restated to reflect the change in definition.
Mark Pickett, Tribal's CEO, commented: "We continued to successfully execute
against our growth strategy in the first half of the year, transitioning our
existing customers to the cloud while securing new customers in our key
geographies. Education Services also performed extremely well during the first
half, and we expect this trend to continue. EBITDA, while lower in the period
than the prior year, due to a short-term impact from a major customer
implementation, is expected to recover in the second half.
"We are seeing growing evidence of our customer base wishing to transition to
Tribal:Cloud, which represents a significant addressable opportunity for
Tribal, alongside our existing Edge modules which are providing a growing
revenue contribution to the Group.
"Overall, the picture for Tribal remains positive, with an expanding customer
base, advanced service offering and continued contract and ARR momentum."
For further information, please contact:
Tribal Group plc Tel: +44 (0) 117 311 5293
Mark Pickett, Chief Executive Officer
Diane McIntyre, Chief Financial Officer & Company Secretary
Investec Bank plc (NOMAD & Joint Broker) Tel: +44 (0) 20 7597 5970
Sara Hale, Virginia Bull, Will Godfrey
Singer Capital Markets Limited (Joint Broker) Tel: +44 (0) 20 7496 3000
Shaun Dobson, Tom Salvesen, Alex Bond
Alma PR Tel: +44 (0) 203 405 0205
Caroline Forde, Hannah Campbell
About Tribal Group plc
Tribal Group plc is a pioneering world-leader of education software and
services. Its portfolio includes Student Information Systems; a broad range of
education services covering quality assurance, peer review, benchmarking and
improvement; and student surveys that provide the leading global benchmarks
for student experience. Working with Higher Education, Further and Tertiary
Education, schools, Government and State bodies, training providers and
employers, in over 55 countries; Tribal Group's mission is to empower the
world of education with products and services that underpin student success.
Chief Executive's Review
Introduction
We achieved a positive top line performance in the first half, successfully
navigating the transition of the business to higher quality, recurring
revenues from our newer software offerings, generating an overall increase in
ARR by 5% to £53.7m (2021 FY: £51.3m).
We achieved a good sales performance in the first six months of the year,
added new customers across our range of software in key geographies and
secured three new contracts to migrate customers to Tribal:Cloud. As
previously announced, EBITDA in the period is lower than the prior year due
primarily to increased costs associated with a major customer implementation,
however EBITDA performance is expected to recover through the course of the
second half reflecting the Group's continued focus on improved operational
performance. Education Services performed well during the period across all
key geographies, particularly in the UK where we secured all three of the
largest contracts out for tender in the quality assurance services market, two
of which were renewals of existing contracts.
We remain on track to take our early adopter Admissions customers live from H2
onwards. We also continue to develop new customer relationships globally and
look for complementary partnerships and acquisitions, to accelerate our
expansion.
We have continued to carefully invest in our people and operations to deliver
on our growing customer footprint across the globe as we evolve our
operational model to ensure service levels are maintained for long term
profitable growth. While cognisant of the growing inflationary pressures,
these have been successfully navigated to date.
Market, Strategy and Addressable opportunity
The education market globally is becoming more attuned to the benefits of SaaS
and cloud offerings which present a supportive market backdrop for the
business. Student wellbeing, engagement, recruitment and hybrid learning are
all factors driving universities to consider how best to modernise their
Student Information Systems (SIS) and embrace digital transformation. It is
becoming increasingly clear that for many universities, the first step is to
transition their existing SIS into the cloud, such that they can reduce their
in-house IT requirements and benefit from the enhanced user experience and
computing power the cloud can provide.
Given the generally slow-moving nature of the higher education market, we
anticipate this first step of moving to the cloud will likely be the main area
of focus for our customers for the next three to five years, before then
expanding into a greater number of next-generation, cloud native applications.
We see significant opportunities for our SITS:Vision and Edge products in the
next few years, particularly in South East Asia. In light of the size of the
opportunity from the combined sales of Edge and SITS:Vision, it provides the
opportunity to review the timing of the market requirements and our Edge
development roadmap. The Group is committed to product innovation and
supporting our customers in their journey to the cloud.
Approximately 20% of our customer base have bought Tribal:Cloud, 70% of which
relate to new customers. The remaining 30% have taken the step of
transitioning their existing SITS:Vision system into Tribal:Cloud. With each
customer transition ultimately presenting at least a 50% uplift to ARR, while
delivering overall cost-savings to the customers, we believe this transition
alone presents a considerable near-term addressable opportunity for Tribal.
Operations and people
We are continually evolving our people agenda to enhance the Group's growth
and transformation as a business.
Our agenda is focused on fuelling performance with a clear alignment to our
Group objectives, as we rely on the talent and expertise of our people for the
business to succeed. We want to ensure each employee has the clarity of
purpose, motivation, support, and recognition to execute on our objectives.
Our evolving operational model is built upon our increasing focus on customer
success and alignment to Tribal's 'as-a-service' transition. In the first
half, this has included the introduction of three new executive roles focusing
on Service Delivery and Customer Success. Paul Davies has been appointed as
Professional Services director and Tawfiq Sleett as a Customer Services
director. Both bring a wealth of experience from global SaaS providers and are
focused on improving customer success. The Tribal Education Services team
comprises experts in education, quality assurance and programme management and
has been reinvigorated with the appointment of Matt Davis, the new Managing
Director of the division, in March 2022. Matt brings over 20 years' experience
in the education sector, a decade of which was spent as regional director of
the Education Development Trust, responsible for the strategy and commercial
growth of its UK business.
All three have been appointed to the executive Board, freeing up the time of
other employees to focus on sales execution. The new target operating model is
also now being supported by the implementation of new SaaS financial systems
and processes.
We continue to invest in our people, providing them with the tools and
training to support and allow them to realise their potential, with clear
alignment to our Group objectives. Communication with our people and
maintaining wellbeing is crucial, especially as we continue to feel the impact
of the pandemic. We have focused on supporting all aspects of our people's
health and wellbeing providing ongoing and additional support through our
Employee Assistance Programme.
Student Information Systems (SIS)
Student Information Systems, our core segment which targets the further and
higher education sectors through our range of software offerings, continued to
deliver a positive performance in the first half, growing customer numbers and
revenue. We continued to win new customers and transition existing customers
onto our cloud offerings.
During the period, we signed three further Cloud contracts for existing
customers, University of Sunderland, Birmingham City University and University
for the Creative Arts, to migrate their current Tribal Student Management
Systems SITS:Vision to the Tribal:Cloud, providing an improved student
experience and delivering operational efficiencies for the universities. The
contracts range from three to five years, with a combined total contract value
of £5m, generating incremental annual recurring revenues of £0.9m as well as
providing an adoption pathway to Tribal Edge, the Company's cloud native
offerings.
In addition, we signed a new five year SITS:Vision contract with the British
University of Vietnam with a total contract value of £1.7m and £0.2m
incremental annual recurring revenues. We continue to have positive
conversations across our extensive customer base as they explore the benefits
a move to the cloud can bring their organisation and are confident of
continued uptake.
Our largest SITS deal to date, worth approximately £17m over eight years,
with Nanyang Technology University "NTU" launched in early 2021 and
implementation has continued during the first half of the new year and is
expected to continue into 2023. This is a partnership encompassing
SITS:Vision, Tribal:Cloud and Edge products, which demonstrates the relevance
of our broad suite of leading solutions. Due to earlier Covid-19 related
travel restrictions, the timelines for this contract increased which in turn
increased costs and as a result EBITDA in H1 was lower than the prior year.
However, EBITDA performance is expected to recover through the course of the
second half, reflecting the Group's continued focus on improved operational
performance.
With a significant number of large contract opportunities expected to come to
market over the coming years, we believe the experience we have gained from
this implementation, our knowledge of local market requirements and localised
product set will provide us with a strong platform from which to target growth
in South East Asia.
We were pleased to complete the acquisitions of Semestry and MyTimetable in
April and November 2021, respectively and we are happy with the progress of
the integration. Since acquisition, Semestry has secured 16 new customers,
growing Semestry ARR by 59% since 31 December 2021, representing an
acceleration of its historic growth rate. The products can be sold across our
extensive customer base, as universities seek to increase engagement with
their students and offer more personalised experiences. Whilst we continue to
explore investment opportunities to scale the business and enter new
geographies, we are focusing on consolidating the Semestry and My Timetable
acquisitions in the short term.
As part of our five-year objectives, we are focused on transitioning our
existing customers to the cloud while securing new customers in key
geographies and these recent wins are a clear demonstration of our ability to
execute effectively against our plan.
We are pleased with these positive signs of potential and although it will
take time for full adoption of our solutions by our customers due to the
annual cycle of the academic year, we remain confident in the significant
long-term opportunities.
Education Services (ES)
Tribal Education Services has been delivering Quality Assurance services to
ministries of education and other education agencies around the world for many
years, in many varied areas of education, such as overall school quality,
leadership and teaching quality, and in many specialist areas such as new
teacher competence, Early Years, literacy and numeracy.
Education Services trading performance improved throughout the period, as many
geographies move into a post pandemic world. We are currently delivering major
Quality Assurance contracts to bodies in the UK, US and the Middle East, and
working with hundreds of individual schools on our Quality Mark accreditation.
At present, Tribal is running highly successful projects across its key
geographies, which are as varied as the National Centre for Excellence in
Teaching Mathematics "NCETM" for the Department of Education in England,
support for a government in the Gulf to establish a Sector Skills
organisation, as well as review and improve support for all of the schools in
New York State.
In the UK, we successfully tendered for renewals as prime contractor of two
major contracts with the Department for Education in England: NCETM (£8.7m
over 2 years) and Quality Assurance of the National Professional
Qualifications programme "NPQ", total contract value of £6.5m over 4 years.
In July 2022 we successfully renewed a third major UK contract, the Advanced
Maths Support Programme "AMSP" total contract value of £2.6m and won a
two-year contract with the National Tutoring Programme "NTP" total contract
value of £2.4m securing our position with our key customer in the UK services
market. There is a strong pipeline of opportunities heading into H2; we expect
performance to continue to improve.
School closures in the US continued to hamper business development
opportunities. The New York State Education Department (NYSED) contract had a
solid performance as we worked closely with NYSED to ensure continued delivery
despite the restrictions from the pandemic. In the Middle East our core areas
of expertise remain well aligned to customer priorities and we see a good
pipeline of opportunities in H2 and beyond.
Environmental, Social and Governance (ESG)
Tribal is committed to activities that benefit the environment and society,
underpinned by good governance. At the end of 2021, the ESG Committee
identified six priority focus areas for the Group, each with key initiatives
and objectives for 2022 and appropriate ownership from across our Executive
Management Team.
Our focus throughout the remainder of 2022 is to work within the Group's risk
management framework and using the Taskforce on Climate-related Financial
Disclosure (TCFD) scenario-based risk and opportunity assessment criteria,
identify risks and opportunities presented by climate change. We will complete
a thorough impact assessment of risk and opportunities relating to the
transition to a lower-carbon economy and implement mitigating actions and
applicable recommendations of TCFD in each of the four thematic areas;
governance, strategy, risk management and targets and metrics.
The Group have maintained the ISO27001 Standard for Information Security and
the ISO9001 Standard for Quality Management and have expanded our ISO scope
for our most recent acquisition of Semestry, in April 2021.
The next phase of our ESG journey is to critically consider what is most
important for our business and how our ESG efforts can align with the
commercial context, enable the achievement of organisational goals and provide
a source of competitive advantage.
Outlook
We have enjoyed a period of good progress as we continue to execute against
our growth strategy, transitioning our existing customers to the cloud while
securing new customers in our key geographies. While we have experienced
a temporary reduction in EBITDA performance in the period, due to a
short-term impact from a major customer implementation, overall, the picture
for the business remains positive, with an expanding customer base, advanced
service offering and continued contract and ARR momentum. While cognisant of
inflationary cost pressures, the Board remains confident in delivering results
for 2022 in line with current Board expectations, however margin recovery in
the second half of the year is dependent on project delivery milestones on the
NTU contract.
We expect revenue growth in our strategic products with improving margins over
time as we gain scale. As previously reported, this will be partially offset
in the next couple of years by declining revenues from our high margin,
historic Australian government contracts and non-core schools' systems
contracts. With a clear strategy in place and increasing proof that the
education market globally is becoming more attuned to the benefits of SaaS and
cloud offerings, we look to the future with confidence.
Mark Pickett
Chief Executive Officer
Business Review
Financial review
Results 2021 H1 2021 Change Change
6 months to 30 June Reported Constant Constant Constant
Currency
Currency
Currency %
£m 2022 H1
Revenue 42.4 39.3 39.4 3.0 7.7%
Student Information Systems 35.5 32.6 32.5 2.9 9.0%
Education Services 6.9 6.7 6.8 0.1 1.6%
Adjusted Operating Profit 13.0 14.7 14.5 (1.5) (10.3)%
(before Central Overheads)(1)
Student Information Systems 11.3 13.3 13.2 (1.9) (14.7)%
Education Services 1.7 1.4 1.3 0.4 35.8%
Central Overheads(2) (5.9) (5.5) (5.5) (0.4) (8.2)%
Adjusted Operating Profit (EBITDA) (1) 7.1 9.2 9.0 (1.9) (21.6)%
Adjusted Operating Margin (EBITDA) (1) 16.7% 23.3% 22.9% - (6.2)pp
(1) Adjusted Operating Profit and Adjusted Operating Margin is in respect of
continuing operations and exclude charges reported in 'Other items' of £2.5m
(2021 H1: £2.0m), refer to note 6 in this report, and before Interest, Tax,
Depreciation and Amortisation.
(2.) Central overheads are made up of costs that are not directly attributable
to either Student Information Systems or Education Services.
( )
Nearly 40% of Tribal's income is generated outside the UK and is therefore
subject to foreign exchange movement. Overall, there was a favourable impact
on last year's results due to foreign exchange fluctuations of £0.1m in
Revenue and an adverse impact of £0.2m in Adjusted Operating Profit, due to
the Group's exposure to foreign exchange movements, in particular the
Australian dollar, US dollar and Singapore dollar.
The Revenue and Adjusted Operating Profit by segment in the table shows the
reported results for 2022 H1 and 2021 H1, and the 2021 H1 results restated to
"constant currency" using 2022 rates to exclude foreign currency impact. The
growth percentages shown are on the 2021 constant currency numbers. All
comparatives reported below are on a constant currency basis.
Revenue in the six months ended 30 June 2022 was up 7.7% to £42.4m (2021 H1:
£39.4m).
Student Information Systems continued to perform well, increasing by 9% to
£35.5m (2021 H1: £32.5m).
Core revenue increased 13.8% to £30.2m (2021 H1: £26.5m).
Foundation Software grew 30% to £3.4m (2021 H1: £2.6m) because of new
customer wins and upsells across all our Foundation products. This was offset
by a reduction in our Foundation Support & Maintenance revenue which
decreased 1% to £12.7m (2021 H1: £12.9m) as the contractual uplifts were
offset with the exit of one of the two Callista customers as expected. At the
end of 2021 nine of the eleven Callista customers renewed for a further
five-year term, the second exit is expected to occur in H2 2022.
Cloud Services saw a large increase of 32% to £4.1m (2021 H1: £3.1m) as
customers continue to migrate to Tribal: Cloud and Edge increased
significantly to £2.3m (2021 H1: £1.4m), 33% of the growth is organic and
the remaining 67% is due to the successful acquisition of Semestry in April
2021.
Professional Services revenue increased 18% to £7.7m (2021 H1: £6.5m)
primarily due to delivery on the NTU contract compared to H1 2021.
Other Software and Services revenue decreased 12.2% to £5.3m (2021 H1:
£6.0m) due to continued Australian SchoolEdge churn in addition to the
previously announced planned reduction in development work on the Technical
and Further Education colleges New South Wales, "TAFE NSW" contract. The TAFEs
transition to their new provider is expected to conclude during the second
half of 2023 at which point no further revenue will be generated, TAFE's
contribution to the Group's annual recurring revenue totals £3m.
Consistent with the 2021 annual report, 2021 reported numbers now include
revenue and costs of Asset Management, Software Solutions and Information
Managed Services, which were previously in Education Services, as it aligns
more closely to the Software segment, of which revenue was 2021 H1: £1.4m
constant currency and reported, and associated operating margin was 2021:
£1.3m constant currency and reported. Refer to 31 December 2021 Annual Report
for additional detail on the changes to our revenue streams.
Education Services increased by 1.6% to £6.9m (2021 H1: £6.8m).
School Inspections and Related Services revenue increased to £5.7m (2021 H1:
£5.5m) as the main UK contracts continued to track well, in particular the
National Professional Qualifications "NPQ" contract delivery improved in H1
2022 as a result of the phasing in prior years and the delivery of the Skills
Bahrain contract which started in July 2021.
Surveys and Data Analytics revenue decreased to £1.2m (2021 H1: £1.3m).
The revenues for Surveys are reduced, as expected, due to the seasonality of
the Southern Hemisphere International Student Barometer with most institutions
participating every other year.
SaaS Metrics
We introduced some key revenue metrics as at 31 December 2021 to measure
progress as the Group continues its transition to a SaaS delivery model. Both
GRR and NRR remained consistent with the previous half year period.
£m 2021 H1 Change Change
Constant Constant Constant
Currency
Currency
Currency %
2022 H1
Annual Recurring Revenue (ARR)(1) £53.7m £51.3m £2.4m 4.8%
Gross Revenue Retention (GRR)(2) 95% 95% - -
Net Revenue Retention (NRR)(3) 100% 101% (1)% (1)pp
1. ARR is a forward-looking metric representing committed revenues as at 30
June 2022 and includes Support & Maintenance fees paid on all software,
License sold on a subscription basis, Cloud services and Edge sales.
2.Calculated as a percentage of recurring revenue retained from existing
customers at 1 January including contract expiry, cancellations or downgrades
in the year
3. Calculated as a percentage of recurring revenue retained from existing
customers at 1 January including upsells as well as contract expiry,
cancellations or downgrades in the year
Adjusted Operating Profit (EBITDA) decreased by 21.6% to £7.1m (2021 H1:
£9.0m) and Adjusted Operating Margin decreased to 16.7% (2021 H1: 22.9%).
Student Information Systems Adjusted Operating Profit decreased to £11.3m
(2021 H1: £13.2m) and Adjusted Operating Margin decreased to 31.8% (2021 H1:
40.7%).
The decrease in operating profit and margin is twofold. A direct result of a
change in product mix, with increased Edge and Cloud sales which have a lower
initial margin whilst we continue to invest in our teams to build scale in our
service offerings. A programme of operational cost improvements within our
Cloud environments is underway for delivery throughout the second half of the
year. This is coupled with lower-than-normal margins on Professional Services
as a result of lower implementation margins from the NTU contract and
increased use of contractors.
Education Services Adjusted Operating Profit increased to £1.7m (2021 H1:
£1.3m) and Adjusted Operating Margin increased to 24.5% (2021 H1: 18.3%),
this increase is largely due to the variable cost model it operates and the
mix of higher margin contracts and continued remote delivery.
Central overheads, representing costs in HR, IT, Finance, Marketing and
Management that are not directly attributable to lines of business increased
8.2% to £5.9m (2021 H1: £5.5m). The increase was largely due to unfavourable
foreign exchange movements and higher global insurance costs in line with
market trends. The Group continues to focus on reducing overhead costs and
continues to identify cost saving measures to effectively manage its cost
base.
Statutory Profit After Tax was £1.6m (2021 H1: £4.4m). Adjusted basic
earnings per share from continuing operations before other costs and
intangible asset impairment charges and amortisation which reflects the
Group's underlying trading performance decreased 31% to 2.0p (2021 H1: 2.9p)
due to the decreased adjusted profit before tax and the associated tax charge.
Statutory basic earnings per share decreased 66% to 0.7p (2021 H1: 2.1p) as a
result of the statutory profit decrease in the period.
Key Performance Indicators (KPIs)
The Group monitors its performance using the KPIs in the table below.
KPIs 2021 H1 2021 Change Change
6 months to 30 June Reported Constant Currency Constant Constant
Currency
Currency %
2022 H1
Revenue £42.4m £39.3m £39.4m £3.0m 7.7%
Adjusted Operating Profit (EBITDA)(2, 3) £7.1m £9.2m £9.0m £1.9)m (21.6)%
Adjusted Operating Margin (EBITDA)(2, 3) 16.7% 23.3% 22.9% - (6.2)pp
Annual Recurring Revenue (ARR) at period end(1) (versus 31 Dec 2021) £53.7m £50.3m £51.3m £2.4m 4.8%
Committed Income (Order Book)(4,5) £186.5m £172.5m £176.5m £10.0m 5.6%
Free Cash Flow (7) £(10.0)m £0.5m £0.5m £(10.5)m (2183)%
Operating Cash Conversion (14)% 63% 63% - (77)pp
Staff Retention 92% 95% 95% - (3)pp
Revenue / Average FTE (5) £101.7k £100.9k £101.1k £0.6k 0.6%
(£'000s: annualised)
(1) Annual Recurring Revenue (ARR) at period end includes Support &
Maintenance fees, Cloud Services and Subscription Licence and is assessed as
contracted ARR at the 30 June 2022 and 31 December 2021, of which some is
still to be delivered.
(2) Adjusted Operating Profit and Adjusted Operating Margin is in respect of
continuing operations which excludes "Other Items"
charges of £2.5m (2020 H1: charge of £2.0m) refer to note 6 in this
report
(3 )EBITDA is calculated by taking the Adjusted Operating Profit after the
allocation of Central Overheads and excludes Interest, Tax, Depreciation and
Amortisation
(4) Committed income (Order Book) relates to the total value of orders which
have been signed on or before, but not delivered by, 30 June 2022. This is
reported on an IFRS15 basis and represents the best estimate of business
expected to be delivered and recognised in future periods, and includes
License sales, Implementation work and two years of Support & Maintenance
revenue
(5) 2021 committed income and revenue / average FTE comparatives are as at
31 December 2021
(6) Revenue/Average Operational FTE is the average FTE for the period
excluding average FTE associated with capitalised Product Development. In H1
2022 151.3 FTE were capitalised (H1 2021: 118.1)
(7) Comparative restated - refer to Free Cash Flow section below
Annual Recurring Revenue (ARR) at period end, is a key forward looking metric
and continues to be an area of strategic focus. In line with our strategy, our
aim is to grow ARR in our core products through the delivery of Software as a
Service contracts, providing increased quality of earnings. ARR increased by
4.8% on a constant currency basis to £53.7m (2021 FY: £51.3m). An element of
growth includes contractual inflationary uplifts applied annually on our
Foundational Support and Maintenance contracts, however the main growth is the
attributable to new Edge software sales which saw an increase of 10.5% and the
continued successful migration of 3 key customers to the Tribal:Cloud which
has increased 13.7% in the period.
Committed Income (Order Book) relates to the total value of orders across SIS
and ES which have been signed off, on or before, but not delivered by 30 June
2022. This represents the best estimate of business expected to be delivered
and recognised in future periods and includes 2 years of Support and
Maintenance revenue. As of 30 June 2022 this increased 5.6% to £186.5m (2021
FY: £176.5m). The majority of the increase relates to the new wins and
contract extensions across both ES and SIS, offset by work delivered in the
first half of the year.
Product Development Costs: The Group spent £8.1m on product development, of
which £5.4m (2021 H1: £4.5m) was Edge, including Dynamics and Semestry. Edge
investment to date, including Dynamics and Semestry, totals £33.6m. The net
P&L charge after removing capitalised spend was £2.6m (2021 H1:
£2.8m), and £2.1m excluding amortisation (2021 H1: £2.3m). We continue to
invest in our Foundation products, adding new modules and additional
functionality as well as statutory updates, the costs of which are expensed.
Net (Borrowings) / Cash and Cash flow
Cash flow
6 months to 30 June 2021 H1
£m 2022 H1 Reported
Net cash (used in)/ from operating activities before tax (1.8) 5.1
Tax and other items (2.8) (1.7)
Capitalised product development (5.6) (5.3)
Proceeds from shares 0.2 2.6
Free Cash Flow (10.0) 0.5
Consideration paid for acquisitions, inc. deferred consideration (0.8) (5.5)
Loan drawdown 7.5 2.5
Net (decrease) in cash & cash equivalents (3.3) (2.4)
Cash & cash equivalents at beginning of the year 5.9 9.5
Cash & cash equivalents at end of period 2.6 7.1
Less: Effect of foreign exchange rate changes 0.1 (0.3)
Cash & cash equivalents at end of period 2.7 6.8
Borrowings (7.5) (2.5)
Net (Borrowings) / Cash at the end of the period (4.8) 4.3
( )
The Group used net cash of £1.8m in operating activities before tax (2021 H1:
Net cash generated from operating activities before tax £5.1m) from reduced
operating cash flows from continuing operations £6.4m (2021 H1 £8.7m) and
higher than traditional first half deterioration in working capital £8.2m
(2021 H1 £3.6m). The higher working capital movement is mainly due to delayed
delivery on our NTU contract and impact on timing of project milestone
payments.
Tax and other items include £0.8m additional net tax paid in the first half
year totalling £1.9m (2021 H1: £1.1m) as a result of increased overseas
corporation tax payments of £0.6m due to higher overseas profits in 2021
compared to 2020 and £0.2m relates to the timing of receiving UK research and
development tax refunds. In addition, the net gain on forward foreign exchange
contracts reduced by £0.2m in the first half of 2022 compared to 2021 H1
reflecting the trends in AUD to GBP over both periods.
In line with the Group's product investment strategy, there has been a
continued increase in capitalised product development spend totalling £5.6m
(2021 H1: £5.3m). Proceeds from the issue of shares was £2.4m lower
totalling £0.2m (2021 H1: £2.6m) due to the timing of share sales related to
share-based payments schemes.
Consideration paid for acquisitions, including deferred consideration
decreased by £4.7m to £0.8m (2021 H1: £5.5m) due to the Semestry Limited
acquisition in April 2021 of £4.2m and a £0.5m reduction in deferred
consideration payments as the final payment relating to the Dynamics
acquisition was paid in H1 2021. The remaining deferred consideration in
respect of the acquisition of the assets of Eveoh BV is £0.4m which is likely
to be paid before the end of the two year earnout period ending September
2023.
The loan drawdown increased £5m to £7.5m (2021 H1: £2.5m) to assist with
the working capital requirements in the first half of the year.
Operating Cash Conversion is calculated as net cash (used in) / from operating
activities before tax as a proportion of adjusted operating profit (EBITDA)
excluding the cash outflow of £0.8m (2021 H1: £0.7m) on the Veritas
programme and was (14)% compared to (2020 H1: 63%). Cash conversion has been
impacted by the deterioration in working capital as explained above.
Net Borrowings and Free Cash Flow
At the end of the period, the Group had Net Borrowings of £4.8m (2021 FY: Net
Cash £5.9m; 2021 H1: Net Cash £4.3m) and Free Cash Flow of £(10.0)m (2021
H1: £0.5m).
Free cash flow is included as a key indicator of the cash that is generated by
the Group and is available for acquisition related investment, interest and
finance charges and, or distribution to shareholders. It is calculated as net
cash generated before dividends, interest and finance charges, deferred
consideration, and investments in subsidiaries. In prior years' free cash flow
was calculated based on net cash from operating activities less capital
expenditure and less capitalised development costs (excluding acquired
intellectual property), the prior year comparative has been restated to
reflect the change in definition.
The Group has bank facilities of £10m of which £7.5m was drawn down as at 30
June 2022 (2021 H1: £2.5m) and continues to closely monitor its cash flows.
Management anticipates an improved cash position by year end, although a net
debt position is still expected. The extent of the improvement is dependent on
the timing of project milestones.
Items excluded from adjusted profit figures: The Group has a policy of
disclosing separately on the face of its Group income statement the effect of
any components of financial performance considered by the Directors to be not
directly related to the trading business or regarded as exceptional, and for
which separate disclosure would assist in a better understanding of the
financial performance achieved. A full explanation of "Other Items" is
included in note 6 of the Financial Statements, however the main items are as
follows:
· Employee-related Share Option charges (including employer related
taxes) increased to £0.6m (2021 H1: £1.1m) and are excluded from the
Adjusted Operating profit. The charges in the current year relate to the
Long-Term Incentive Plan options (LTIPs) which were granted to the executive
and senior management teams in 2019, 2020, 2021 and 2022.
· Internal Systems Transformation Programme "Veritas" Since the end
of 2020 the Group has been running the Veritas Programme. This includes an
upgrade to its accounting system (Microsoft Dynamics D365) and is part of a
wider implementation of a new target operating model and processes to provide
greater operating efficiencies and reporting functionalities. In 2022, £0.7m
costs have been expensed in the period. At the end of 2021 £0.2m of costs
capitalised in 2020 were expensed to the income statement alongside £1.5m of
costs in 2021. The upgrade is material and non-recurring in nature.
· Amortisation of IFRS3 Intangibles charge in relation to IFRS3
intangible assets of £0.5m (2021 H1: £0.3m) arose from separately
identifiable assets recognised as part of previous acquisitions. The assets
principally relate to software and customer relationships and are amortised
over their expected life, this was determined in the year the acquisition took
place.
· Restructuring and associated costs relate to the restructuring of
the Group's operations, including properties totalling £0.5, (2021 H1: £nil;
31 December 2021: £24,000).
· Acquisition costs of £0.1m (2021 H1: £0.5m) include amounts
relating to legal and due diligence costs of the acquisition of Semestry
Limited and the acquisition of Eveoh BV's assets into Semestry Netherlands BV.
Share Options and Share Capital: The shares issued during the period were in
order to satisfy exercises of share-based payment schemes. 314,406 shares were
issued between January and June 2022. The exercise costs resulted in cash
receipts of £0.2m. As at 30 June 2022, there were 210,688,779 shares issued
(2021 FY: 210,374,373).
Dividends: The final dividend for 2021 of 1.3p was paid by the Company in July
2022. It is Tribal's expectation that a final dividend will be paid following
the release of annual results in line with its dividend policy.
Condensed consolidated income statement
For the six months to 30 June 2022
Note Adjusted Other Six months ended Adjusted Other Six months ended
£'000 (note 6) 30 June 2022 £'000 (note 6) 30 June 2021
£'000 Total £'000 Total
£'000 £'000
Continuing operations
Revenue 4 42,413 - 42,413 39,290 - 39,290
Cost of sales (22,785) - (22,785) (18,146) - (18,146)
Gross profit 19,628 - 19,628 21,144 - 21,144
Total administrative expenses (13,883) (2,479) (16,362) (13,337) (1,988) (15,325)
Operating profit/(loss) 4 5,745 (2,479) 3,266 7,807 (1,988) 5,819
Investment income 54 - 54 217 - 217
Finance costs 6 (95) (110) (205) (118) - (118)
Profit/(loss) before tax 5,704 (2,589) 3,115 7,906 (1,988) 5,918
Tax (charge)/credit 7 (1,412) (134) (1,546) (2,025) 533 (1,492)
Profit/(loss) attributable to the owners of the parent 4,292 (2,723) 1,569 5,881 (1,455) 4,426
Earnings per share
Basic 8 2.0p (1.3)p 0.7p 2.9p (0.8)p 2.1p
Diluted 8 2.0p (1.3)p 0.7p 2.8p (0.7)p 2.1p
All activities are from continuing operations
Condensed consolidated income statement
For the six months to 30 June 2022 (continued)
Adjusted Other Year ended 31 December 2021
£'000 (note 6) £'000
£'000
Note
Revenue 4 81,148 - 81,148
Cost of sales (39,335) - (39,335)
Gross profit 41,813 - 41,813
Total administrative expenses (27,846) (5,079) (32,925)
Operating profit/(loss) 4 13,967 (5,079) 8,888
Investment income 255 - 255
Finance costs 6 (230) (299) (529)
Profit/(loss) before tax 13,992 (5,378) 8,614
Tax (charge)/credit 7 (2,240) 619 (1,621)
Profit/(loss) attributable to the owners of the parent 11,752 (4,759) 6,993
Earnings per share
Basic 8 5.7p (2.3)p 3.4p
Diluted 8 5.5p (2.3)p 3.2p
Condensed consolidated statement of comprehensive income and expense
For the six months to 30 June 2022
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Profit for the period 1,569 4,426 6,993
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to profit or loss:
Re-measurement of defined benefit pension schemes - - 728
Deferred tax on measurement of defined benefit pension schemes - 57 (131)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 811 (654) (917)
Other comprehensive income/(expense) for the period net of tax 811 (597) (320)
Total comprehensive income for the period attributable to equity holders of 2,380 3,829 6,673
the parent
Condensed consolidated balance sheet
As at 30 June 2022
30 June 30 June 31 December
2022 2021 2021
Note £'000 £'000 £'000
Non-current assets
Goodwill 9 29,285 31,276 28,582
Other intangible assets 10 40,540 29,614 35,947
Property, plant and equipment 1,053 1,066 962
Right of use assets 1,188 2,805 2,309
Net investment in lease 93 151 -
Deferred tax assets 5,033 4,544 5,233
Contract assets 94 152 1,610
77,286 69,608 74,643
Current assets
Trade and other receivables 11 11,438 12,968 10,602
Net investment in lease 47 46 -
Contract assets 10,492 5,627 6,178
Current tax assets 136 4 -
Cash and cash equivalents (excluding bank overdrafts) 17 2,718 6,791 5,924
24,831 25,436 22,704
Total assets 102,113 95,044 97,347
Current liabilities
Trade and other payables 12 (6,730) (5,383) (6,081)
Contract liabilities (22,430) (22,959) (23,571)
Accruals (7,682) (7,641) (9,253)
Current tax liabilities (1,829) (2,653) (2,456)
Lease liabilities (801) (907) (878)
Provisions 13 (794) (1,679) (1,349)
(40,266) (41,222) (43,588)
Net current liabilities (15,436) (15,786) (20,884)
Non-current liabilities
Contract liabilities (187) (582) (1,864)
Retirement benefit obligations (215) (958) (215)
Lease liabilities (560) (2,085) (1,449)
Other payables 12 (125) (182) (131)
Deferred tax liabilities (2,904) (1,534) (2,953)
Borrowings 17 (7,500) (2,500) -
Provisions 13 (757) (932) (807)
(12,248) (8,773) (7,419)
Total liabilities (52,514) (49,995) (51,007)
Net assets 49,603 45,049 46,340
Equity
Share capital 14 10,534 10,479 10,519
Share premium 19,186 18,363 18,961
Other reserves 28,573 27,556 27,978
Accumulated losses (8,690) (11,349) (11,118)
Total equity attributable to equity holders of the parent 49,603 45,049 46,340
Condensed consolidated cash flow statement
for the six months to 30 June 2022
Six months ended 30 June Six months ended 30 June Year ended 31 December
2022 2021 2021
£'000 £'000 £'000
Note
Net cash (used in )/from operations 16 (3,760) 3,994 13,889
Investing activities
Interest received - -
Purchases of property, plant and equipment (395) (356) (563)
Expenditure on intangible assets (5,593) (5,281) (10,224)
Acquisition of Investments in subsidiaries - cash consideration 14 - (4,524) (4,512)
Acquisition of Investments in subsidiaries - cash acquired - 317 317
Payment of deferred contingent consideration for acquisitions (788) (1,326) (2,180)
Net gain on forward contracts 54 214 249
Net cash outflow from investing activities (6,722) (10,956) (16,913)
Financing activities
Interest paid (71) (66) (165)
Loan arrangement fees (9) (45) (45)
Loan drawdown 7,500 2,500 15,000
Loan repayment - - (15,000)
Equity dividend paid - - (2,505)
Proceeds on issue of shares 241 2,606 3,244
Proceeds from sub-leases 4 26 52
Payment of lease liabilities (462) (511) (987)
Net from/(cash used) in financing activities 7,203 4,510 (406)
Net decrease in cash and cash equivalents (3,279) (2,452) (3,430)
Net cash and cash equivalents at beginning of period 5,924 9,520 9,520
Effect of foreign exchange rate changes 73 (277) (166)
Net cash and cash equivalents at end of period 17 2,718 6,791 5,924
Condensed consolidated statement of changes in equity
For the six months to 30 June 2021
Note Share Capital Share Premium Other reserves Accumulated losses Total Equity
£'000 £'000 £'000 £'000 £'000
Balance at 31 December 2020 as previously reported 10,285 15,951 26,926 (14,944) 38,218
Impact of prior year adjustment - - - (586) (586)
Balance at 31 December 2020 restated 10,285 15,951 26,926 (15,530) 37,632
Profit for the period - - - 4,426 4,426
Other comprehensive income for the period - - - (597) (597)
Total comprehensive income for the period - - - 3,829 3,829
Issue of equity share capital 194 2,412 - - 2,606
Credit to equity for share-based payments - - 650 - 650
Tax credit on credit to equity for share-based payments - - - 352 352
Foreign exchange difference on share-based payments - - (20) - (20)
Contributions by and distributions to owners 194 2,412 630 352 3,588
Balance at 30 June 2021 10,479 18,363 27,556 (11,349) 45,049
Profit for the period - - - 2,567 2,567
Other comprehensive expense for the period - - - 277 277
Total comprehensive income for the period - - - 2,844 2,844
Issue of equity share capital 40 598 - - 638
Equity dividend paid - - - (2,505) (2,505)
Credit to equity for share-based payments - - 428 - 428
Tax credit on credit to equity for share-based payments - - - (108) (108)
Foreign exchange difference on share-based payments - - (6) - (6)
Contributions by and distributions to owners 40 598 422 (2,613) (1,553)
Balance at 31 December 2021 10,519 18,961 27,978 (11,118) 46,340
Profit for the period - - - 1,569 1,569
Other comprehensive expense for the period - - - 811 811
Total comprehensive income for the period - - - 2,380 2,380
Issue of equity share capital 15 225 - - 240
Credit to equity for share-based payments - - 558 - 558
Tax charge on credit to equity for share-based payments - - - 48 48
Foreign exchange difference on share-based payments - - 37 - 37
Contributions by and distributions to owners 15 225 595 48 883
Balance at 30 June 2022 10,534 19,186 28,573 (8,690) 49,603
Notes to the condensed consolidated financial information
for the six months to 30 June 2022
1. General information
The condensed consolidated financial information for the six months ended 30
June 2022 was approved by the Board of Directors on 16 August 2022. This
condensed consolidated interim financial information does not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006.
Statutory accounts for the year ended 31 December 2021 were approved by the
Board of Directors on 16 March 2022. A copy of the statutory accounts for
that year has been delivered to the Registrar of Companies. The auditor
reported on those accounts: its report was unqualified, and did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
2. Accounting policies
The condensed consolidated set of financial statements included in this
half-yearly financial report has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority.
The condensed consolidated financial information should be read in conjunction
with the annual financial statements for the year ended 31 December 2021 which
have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
In preparing these condensed interim financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were as stated within the
consolidated financial statements for the year ended 31 December 2021.
The accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 December 2021.
3. Going concern
Tribal had net cash and cash equivalents of £2.7m at the end of H1 2022, this
includes £7.5m drawdown of the £10m bank facility. There is also access to
an undrawn UK and Australian overdraft of £2.0m and $AUD 2.0m respectively.
The Group entered into a £10m facility to cover general corporate and working
capital requirements of the Group. Tribal Group plc has undertaken to make
adequate financial resources available to the Group to meet its current and
future obligations as and when they fall due.
Tribal's main business is software related through the provision of Student
Information Systems (SIS) to education institutions globally. Revenue is
generated from the sale of software licenses and related implementation work,
and the ongoing provision of support & maintenance and cloud/hosting
services. The Group benefits from strong annual recurring revenues and cash
generation, it also has a significant pipeline of committed income for the
remainder of 2022 and into 2023 which provides a good level of protection and
certainty to the business. The Group's net current liability position has
decreased to £15.4m from £15.8m in H1 2021, it is still being driven by the
recognition of IFRS 16 lease liabilities as current liabilities of £0.8m, and
net current contract liabilities of £22.4m relating to deferred customer
revenue recognised in accordance with IFRS 15.
The Group had a positive start to the year, closing several significant sales
to new and existing customers, and expanding its global footprint. The
investments the Group continue to make position Tribal at the forefront of
this evolution in the industry. The start of the year has been cash depletive
and although management anticipates an improved cash position by year end, a
net debt position is still expected. The extent of the improvement is
dependent on the timing of project milestones. Management is monitoring costs
closely and would also introduce cost saving measures to mitigate the impact
on profit and cash if necessary.
The Company has guaranteed the year-end liabilities of its subsidiaries.
In assessing the Company's going concern position and the Group's ability to
provide the necessary financial support, the Directors have considered all
relevant facts and latest forecasts and assessment of the risks faced by the
Group, considering reasonably possible changes in trading performance. In
addition, management have sufficiently stress tested the latest forecasts, to
the point where either the Group cannot meet its liabilities or is in breach
of banking covenants and have concluded that this position is remote and does
not have a significant impact on the Groups ability to continue as a going
concern. Accordingly, after making enquiries and receiving confirmation of
Group support as set out above, the directors have a reasonable expectation
that the Company has adequate resources to continue in operational existence
for at least 12 months from the date of approval of the interim report and the
foreseeable future. Thus, they continue to adopt the going concern basis in
preparing the financial statements.
4. Segmental analysis
Information reported to the Group's Chief Executive for the purposes of
resource allocation and assessment of segment performance is focused on the
nature of each type of activity. Since 2021 Asset Management, Software
Solutions and Information Managed Services revenue is included in SIS as it
more closely aligns with the Software side of the business. This had
previously been included within ES. June 2021 has been updated for comparison
with £1.4m revenue being reassigned. The Group's reportable segments and
principal activities under IFRS 8 are detailed below:
Student Information ("SIS") represents the delivery of software and subsequent
maintenance and support services and the activities through which we deploy
and configure our software for our customers, including software solutions,
asset management and information managed services; and
Education Services ("ES") represents inspection and review services which
support the assessment of educational delivery, and a portfolio of performance
improvement tools and services, including analytics.
In accordance with IFRS 8 'Operating Segments' information on segment assets
is not shown as this is not provided to the Chief Operating decision-maker.
Inter-segment sales are charged at prevailing market prices.
Total Revenue Adjusted segment operating profit
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
30 June 30 June 31 December 30 June 30 June 31 December
2022 2021 2021 2022 2021 2021
£'000 £'000 £'000 £'000 £'000 £000
Student Information Systems 35,470 32,552 67,306 10,235 12,230 22,404
Education Services 6,943 6,738 13,842 1,643 1,336 2,229
Total 42,413 39,290 81,148 11,878 13,566 24,633
Unallocated corporate expenses (6,133) (5,759) (10,666)
Adjusted operating profit 5,745 7,807 13,967
Amortisation of software and customer contracts & relationships (547) (339) (947)
Other items (1,932) (1,649) (4,132)
Operating profit 3,266 5,819 8,888
4. Segmental analysis (cont.)
Depreciation and amortisation is allocated to segment profits and is included
in adjusted segment operating profit as above. The amount included in SIS is
£1.0m (30 June 2021: £1.0m; 31 December 2021 £1.2m) and within Education
Services £0.1m (30 June 2021: £nil; 31 December 2021: £nil).
The accounting policies of the reportable segments are the same as the Group's
accounting policies. Segment profit represents the profit earned by each
segment, without the allocation of central administration costs, including
Directors' salaries, finance costs and income tax expense. This is the
measure reported to the Group's Chief Executive for the purpose of resource
allocation and assessment of segment performance.
Within Education Services revenues of approximately 4% (31 December 2021: 4%)
have arisen from the Segments largest customer: within SIS revenues of
approximately 7% (31 December 2021: 4%) have arisen from the Segments largest
customer. These percentages are calculated against total revenue.
Geographical information:
Revenue from external customers, based on location of the customer, are shown
below:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
UK 25,086 23,117 48,975
Australia 9,106 10,582 20,485
Other Asia Pacific 4,871 2,627 5,824
North America 1,880 1,795 3,149
Rest of the world 1,470 1,169 2,715
42,413 39,290 81,148
5. Alternative Performance Measures (APM)
A number of non-IFRS adjusted profit measures are used in this interim report
and financial statements. Adjusting items are excluded from our headline
performance measures by virtue of their size and nature, in order to reflect
management's view of the performance of the Group. Summarised below is a
reconciliation between statutory results to adjusted results. The Group
believes that alternative performance measures such as adjusted EBITDA are
commonly reported by companies in the markets in which it competes and are
widely used by investors in comparing performance on a consistent basis
without regard to factors such as depreciation and amortisation, which can
vary significantly depending upon accounting methods (particularly when
acquisitions have occurred), or based on factors which do not reflect the
underlying performance of the business. The adjusted profit after tax earnings
measure is also used for the purpose of calculating adjusted earnings per
share.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Statutory Operating profit 3,266 5,819 8,888
Amortisation of Development cost and acquired Intellectual Property 475 520 1,008
Amortisation of other intangibles 11 13 25
Depreciation on Property, Plant & Equipment 318 345 650
Depreciation of right-of use assets 512 478 985
Amortisation of software and customer contracts & relationships 547 339 947
Other exceptional costs 1,338 523 2,504
Employee related share option charges 594 1,126 1,628
Adjusted Operating Profit (EBITDA) 7,061 9,163 16,635
6. Other items
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Acquisition related costs (67) (508) (765)
Employee related share option charges (including employer related taxes) (594) (1,126) (1,628)
Internal systems transformation programme "VERITAS" (707) - (1,715)
Restructuring and associated costs (564) (15) (24)
Amortisation of software and customer contracts and relationships (547) (339) (947)
Total administrative expenses (2,479) (1,988) (5,079)
Other financing costs (110) - (299)
Total other items before tax (2,589) (1,988) (5,378)
Tax on other items (134) 533 619
Total other items after tax (2,723) (1,455) (4,759)
The Group has adopted a policy of disclosing separately on the face of its
Group income statement the effect of any components of financial performance
considered by the Directors to be not directly related to the trading business
or regarded as exceptional, or for which separate disclosure would assist in a
better understanding of the financial performance achieved. Both materiality
and the nature and function of the components of income and expense are
considered in deciding upon such presentation. As such, 'other items' are not
part of the Group's underlying trading activities and include the following:
Acquisition related costs: Amounts in the current year relate to ongoing
possible acquisitions £67,000. In the prior year amounts relate to the legal
and due diligence costs of the acquisition of Semestry Limited, and the
acquisition of Eveoh BV's assets into Semestry Netherlands BV (30 June 2021:
£575,000; 31 December 2020: £832,000). Under IFRS 3 these amounts were
expensed as they are not eligible for capitalisation. These are considered to
be one-off costs in the year. In addition, changes in the fair value of
contingent deferred consideration have been remeasured at relevant reporting
dates and the corresponding gain has been recognised in the income statement
(30 June 2021: £(67,000): 31 December 2021: £(67,000)).
Employee related share option charges include:
· share based payments (30 June 2022: £595,000; 30 June 2021:
£671,000; 31 December 2021: £1,058,000) plus foreign exchange (30 June 2022:
(£37,000)); 30 June 2021: £20,000; 31 December 2021: £27,000);
· the movement in associated employers taxes accrual (30 June 2022:
£36,000; 30 June 2021: £408,000; 31 December 2021: £494,000);
· the amounts accrued and paid on dividends on share options that
have met performance conditions (30 June 2022: £nil; 30 June 2021: £5,000;
31 December 2021: £(10,000)). When the Company declares a cash dividend, some
option holders are entitled to a 'dividend equivalent'. This is a payment in
cash and/or additional shares with a value determined by reference to the
dividends that would have been paid on the vested shares in respect of
dividend record dates occurring during the period between the grant of the
Award and the date on which it becomes exercisable; and
· a nominal value paid to employees as a bonus (30 June 2022:
£nil; 30 June 2021: £62,000; 31 December 2021: £65,000). Under Companies
Act 2006 rules a nominal value must be paid to issue new shares, however under
the rules of the LTIP and Matching Shares Schemes the Company will pay the
nominal value to the participants as a bonus.
Internal systems transformation programme "Veritas" has been running since
2020. This includes an upgrade to its accounting system (Microsoft Dynamics
D365) and is part of a wider implementation of a new target operating model
and processes to provide greater operating efficiencies and reporting
functionalities. In 2021, £181,000 of costs capitalised in 2020 were expensed
to the income statement alongside £1,534,000 of costs in 2021. £707,000
costs have been expensed in the period to 30 June 2022. The upgrade is
material and non-recurring in nature.
Restructuring and associated costs relate to the restructuring of the Group's
operations, including properties. (30 June 2022: £549,000; 30 June 2021:
£nil; 31 December 2021: £24,000).
Amortisation of software and customer contracts and relationships:
Amortisation arising on the fair value of intangible assets acquired is
separately disclosed. (30 June 2022: £547,000; 30 June 2021: £339,000; 31
December 2021: £947,000).
Other financing charges: Consistent with the treatment of movements in
deferred consideration, the unwind of the discount on deferred consideration
is separately presented as other financing costs in the income statement (30
June 2022: £110,000; 30 June 2021: £nil; 31 December 2021: £299,000).
Taxation: The tax credit arising on the above items is presented on a
consistent basis with the underlying cost or credit to which it relates and
therefore is also presented separately on the face of the income statement.
7. Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Interest on bank overdrafts and loans 44 19 70
Loan arrangement fees 9 45 45
Net interest payable on retirement benefit obligations - - 14
Interest expense on lease liabilities 42 54 101
Adjusted Finance costs 95 118 230
Unwinding of 110 - 299
discounts
Other finance costs 110 - 299
Total finance costs 205 118 529
8. Tax
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Current tax
UK Corporation tax - - (319)
Overseas tax 1,311 1,091 2,017
Adjustments in respect of prior periods - (1) (103)
1,311 1,090 1,595
Deferred tax
Current period 170 445 (2)
Adjustments in respect of prior periods 65 (43) 28
235 402 26
Tax charge on profits 1,546 1,492 1,621
In addition to the amount charged to the income statement a current tax credit
of £nil (30 June 2021: £nil; 31 December 2021: £53,000) and a deferred tax
credit of £48,000 (30 June 2021: charge of £234,000; 31 December 2021:
charge of £395,000) has been recognised directly in equity in relation to
share schemes. A deferred tax credit of £nil (30 June 2021: £57,000; 31
December 2021: charge of £131,000) has been recognised in the Consolidated
Statement of Comprehensive Income in relation to Defined Benefit pension
schemes.
The Group continues to hold an appropriate corporation tax provision in
relation to the Group relief claimed from Care UK for the year ended 31 March
2007, together with other appropriate Group provisions.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual earnings.
9. Earnings per share
Earnings per share and diluted earnings per share are calculated by reference
to a weighted average of ordinary shares calculated as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
thousands thousands thousands
Basic weighted average number of shares in issue 210,230 206,362 207,934
Weighted average number of Employee share options 6,355 4,530 7,047
Weighted average number of shares outstanding for dilution calculations 216,585 210,892 214,981
Diluted earnings per share only reflects the dilutive effect of share options
for which performance criteria have been met.
The maximum number of potentially dilutive shares, based on options that have
been granted but have not yet met vesting criteria, is 6,354,753 (31 December
2021: 7,125,172). This includes 814,438 options in the 2019 SAYE Scheme (31
December 2021: £876,512).
The adjusted basic and diluted earnings per share figures shown on the
condensed consolidated income statement are included as the directors believe
that they provide a better understanding of the underlying trading performance
of the Group.
A reconciliation of how these figures are calculated is set out below.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Net profit 1,569 4,426 6,993
Earnings per share
Basic 0.7p 2.1p 3.4p
Diluted 0.7p 2.1p 3.2p
Other items after tax (note 5) 2,723 1,445 4,759
Earnings per share
Basic (1.3)p (0.8)p (2.3)p
Diluted (1.3)p (0.7)p (2.3)p
Adjusted Net profit 4,292 5,881 11,752
Adjusted earnings per share
Basic 2.0p 2.9p 5.7p
Diluted 2.0p 2.8p 5.5p
10. Goodwill
£'000
Cost
At 1 January 2022 109,813
Exchange differences 703
At 30 June 2022 110,516
Accumulated impairment losses
At 1 January 2022 81,231
At 30 June 2022 81,231
Net book value
At 30 June 2022 29,285
At 31 December 2021 28,582
The Group tests annually for impairment, or more frequently if there are
indicators that goodwill could be impaired. At the half year, a review has
been undertaken to ascertain if any indicators have arisen of potential
impairments. Based on the review performed, no impairment indicators that
would require an impairment review have been noted.
11. Other intangible assets
Software Customer Development Business Software Total
£'000 contracts and Acquired intellectual property costs systems licences £'000
relationships £'000 £'000 £'000 £'000
£'000
Cost
At 1 January 2022 12,233 9,753 1,873 54,013 818 1,488 80,178
Cost adjustments - - - (7) - - (7)
Additions - - - 5,518 76 - 5,525
Exchange differences 413 177 - 183 6 1 780
At 30 June 2022 12,646 9,930 1,873 59,707 900 1,489 86,545
Amortisation
At 1 January 2022 8,305 6,606 809 26,399 624 1,488 44,231
Charge for the period 314 233 37 438 11 - 1,033
Exchange differences 414 136 - 184 6 1 741
At 30 June 2022 9,033 6,975 846 27,021 641 1,489 46,005
Carrying amount
At 30 June 2022 3,613 2,955 1,027 32,686 259 - 40,540
At 31 December 2021 3,928 3,147 1,064 27,614 194 - 35,947
Software and customer contract and relationships have arisen from
acquisitions, and are amortised over their estimated useful lives, which are
3-8 years and 3-12 years respectively. The amortisation period for
development costs incurred on the Group's product development is 3 to 15
years, based on the expected life-cycle of the product. Amortisation of
development costs is included within cost of sales; the amortisation for
software, customer contracts and relationships and business systems is
included within administrative expenses.
Included within Business systems are finance systems with a carrying value of
£0.3m (2021: £0.2m). Phase I of the D365 implementation was fully
capitalised and is being amortised over a period of ten years. The Veritas
programme commenced in October 2020 and is part of a wider implementation of a
new target operating model and processes to provide greater operating
efficiencies and reporting functionalities across the Group. £76,000 of costs
have also been expensed in the six months to 30 June 2022.
12. Trade and other receivables
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Amounts receivable for the sale of services 6,651 8,259 5,629
Less: loss allowance (96) (109) (187)
6,555 8,150 5,442
Other receivables 542 709 693
Prepayments 4,341 4,109 4,467
11,438 12,968
10,602
13. Trade and other payables
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Current 1,803 777 1,712
Trade payables
Other taxation and social security 3,050 3,029 2,728
Other payables 1,877 1,577 1,641
6,730 5,383 6,081
Non-current
Other payables 125 182 131
125 182 131
Total 5,191 5,565 6,212
14. Provisions
Deferred Contingent Consideration
Property £'000
related Other Total
£'000 £'000 £'000
At 1 January 2022 920 1,083 153 2,156
Increase in provision 43 111 - 154
Utilisation of provision - (788) - (788)
Exchange rate movement 24 - 5 29
At 30 June 2022 987 406 158 1,551
The provisions are split as follows:
Deferred Contingent Consideration
Property related £'000
£'000 Other Total
£'000 £'000
Within one year 433 203 158 794
More than one year 554 203 - 757
Total 987 406 158 1,551
Provisions are recognised when the Group has a present obligation as a result
of a past event, and it is probable that the Group will be required to settle
the obligation. Provisions are measured at the Directors' best estimate of the
expenditure required to settle the obligation at the balance sheet date, and
are discounted to present value where the effect is material.
Property related provision relates to the estimated future dilapidation costs
arising from exiting leasehold properties, under IAS 37. This provision is
discounted at 2.65%. It also includes costs from exiting onerous leases.
Other provision relates to the recoverability of input VAT in the Philippines.
This provision is not discounted.
Deferred consideration reflects amounts in respect of the acquisitions of
subsidiary undertakings payable over a period of up to 2 years. Certain
amounts are contingent upon the performance of the acquired entities with
amounts reflecting management's best estimate of the future profitability of
those entities and the resultant payment due under the terms of the Sale and
Purchase Agreement. The deferred consideration is discounted at 18%.
Deferred contingent consideration reflects an amount in respect of the
acquisition of the assets of Eveoh BV. The amount has been calculated upon the
performance of the entity in the period to 30 June 2022 and the resultant
payments are due under the Sale and Purchase Agreements. As at 30 June 2022
deferred contingent consideration amounts to £406,000 for the assets of Eveoh
BV. During the period payments totalling £166,000 were made.
At 31 December 2021 there was £622,000 of deferred contingent consideration
due to the owners of Semestry. During 2022 a final payment of £622,000 was
made.
The remaining deferred consideration for Eveoh is likely to be paid in 2022
and 2023.
Deferred contingent consideration was misclassified as Other payables in Trade
and other payables in June 2020: £1,476,000.
15. Share capital
Six months Six months Six months Six months Year
ended ended ended ended ended Year ended
30 June 30 June 30 June 30 June 31 December 2021 31 December
2022 2022 2021 2021 number 2021
number £'000 number £'000 £'000
Allotted, called up and fully paid
At beginning of the period 210,374,373 10,519 205,698,309 10,285 205,698,309 10,285
Issued during the period 314,406 15 3,872,410 194 4,676,0646 234
At end of the period 210,688,779 10,534 209,570,719 10,479 210,374,373 10,519
The Company has one class of ordinary shares of 5p which carry no right to
fixed income.
314,406 shares were issued during the period in order to satisfy exercises of
share-based payment schemes. The exercise costs of 58.2p, 71p, 79.6p and 80p
per share for the LTIPs resulted in cash receipts of £0.2m.
16. Notes to the cash flow statement
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Operating profit from continuing operations 3,266 5,819 8,888
Depreciation of property, plant and equipment 318 345 650
Depreciation of right-of-use assets 488 478 985
Amortisation and impairment of other intangible assets 1,033 872 1,980
Share based payments 557 650 1,078
Movement in deferred consideration - (67) (67)
Research and development tax credit (121) (81) (204)
Net pension credit - - (29)
Other non-cash items 848 696 874
Operating cash flows before movements in working capital 6,389 8,712 14,155
Increase in receivables (3,647) (3,417) (3,093)
(Decrease)/increase in payables (4,537) (180) 4,472
Net cash (used in)/from operating activities before tax (1,795) 5,115 15,534
Net tax paid (1,965) (1,121) (1,645)
Net cash (used in)/from operating activities (3,760) 3,994 13,889
Net cash (used in)/from operating activities before tax can be analysed as
follows:
Continuing operations (1,795) 5,115 15,534
17. Analysis of net (borrowings)/cash
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Cash and cash equivalents 2,718 6,791 5,924
Borrowings (7,500) (2,500) -
(4,782) 4,291 5,924
Net (borrowings)/cash
Analysis of changes in net cash
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Opening net cash 5,924 9,520 9,520
Increase in bank loans (7,500) (2,500) -
Net decrease in cash and cash equivalents (3,279) (2,452) (3,430)
Effect of foreign exchange rate changes 73 (277) (166)
Closing net (borrowings)/cash (4,782) 4,291 5,924
18. Contingent liabilities
The Company and its subsidiaries have provided performance guarantees issued
by their banks on their behalf, in the ordinary course of business totalling
£1.3m (30 June 2021: £0.8m, 31 December 2021: £1.2m). These are not
expected to result in any material financial loss and the likelihood of using
these guarantees is assessed as remote.
19. Related party disclosures
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
The remuneration of the key management personnel of the Group is set out below
in aggregate for each of the categories specified in IAS 24 'Related Party
Disclosures'. The members of the Group Board and the Group's Executive Board
are considered to be the key management personnel of the Group.
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Short-term employee benefits 965 745 2,524
Termination benefits 132 26 26
Share-based payments 325 494 732
1,422 1,265 3,282
20. Seasonality
There is limited annual seasonality within the Group. Our SIS customers are on
an annual billing cycle with implementation projects being invoiced based on
milestones being met. There is some seasonality within the ES business as
Surveys revenue is reduced as institutions only participate in the Southern
Hemisphere International Student Barometer every other year.
Responsibility statement
The Directors' confirm that these condensed interim financial statements have
been prepared in accordance with the Disclosure and Transparency Rules (DTR)
of the Financial Services Authority and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8,
namely:
• An indication of important events that have occurred during the first six
months and their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
• Material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report
The Directors of Tribal Group plc are listed in the Tribal Group plc Report
and accounts for the 12 month period ended 31 December 2021. A list of
current Directors is maintained on the Tribal Group plc website:
(http://www.vernalis.com) www.tribalgroup.com (https://www.tribalgroup.com/) .
The Directors are responsible for the maintenance and the integrity of the
Group's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
By order of the Board
Mark
Pickett
Chief
Executive
16 August 2022
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