REG - Tribal Group PLC - Preliminary Results
24/03/2023 07:00
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RNS Number : 0861U Tribal Group PLC 24 March 2023
24 March 2023
Tribal Group plc
("Tribal" or "the Group")
Preliminary Results for the year ended 31 December 2022
Tribal (AIM: TRB), a leading provider of software and services to the
international education market, announces its preliminary results for the year
ended 31 December 2022.
Financial performance
· As announced in the Group's Trading Update on 23 February 2023, the Group's
trading performance for 2022 has been significantly impacted by implementation
delays on the Nanyang Technological University ("NTU") contract, due to
changing scope and complexity, resulting in substantially increased ongoing
costs and lower recognisable revenue
· The underlying business remains strong, with Group revenue increasing 2% to
£83.6m (2021: £82.2m constant currency), following a strong performance
across Cloud and Edge offerings and School Inspection Services; offsetting
lower recognisable revenue from NTU
· Annual Recurring Revenue (ARR) remained flat at £51.2m (2021: £51.2m at
constant currency), reflecting a 10% growth in the Group's strategic products,
offset by declining revenues as anticipated, from Tribal's non-core historic
and schools' systems contracts
· Our Education Services business "ES" performed well, with revenue increasing
9% to £15.4m (2021: £14.2m constant currency) and operating margin
increasing by 10.1pp to 25% (2021: 15% constant currency)
· Group adjusted EBITDA of £7.4m (2021: £16.8m constant currency) reflects
operating losses relating to the NTU contract and an onerous contract
provision of £4.5m for future losses. Without the impact of NTU, margins
would have been consistent with historic levels
· Statutory Profit before tax for the year decreased to £0.4m (2021: £8.6m
constant currency)
· Adjusted operating cash conversion of 89% (2021: 104%) and negative free cash
flow of £5.3m (2021: £5.4m positive), reflecting the impact of the NTU
contract, resulting in net debt of £3.4m
· The Board are proposing an annual dividend of 0.65p per share (2021:1.3p per
share) expected to be paid at the end of July 2023
Operational performance
· Tribal received notification on 17 March 2023 that NTU has purported to
terminate the contract and reserved its rights to claim damages. Tribal
rejects NTU's right to terminate and considers its purported termination a
wrongful repudiation of the contract. Tribal has however accepted NTU's
wrongful repudiation, elected to treat the contract as at an end and reserved
its rights.
· Continued good sales performance, adding five major Cloud contracts from
existing customers, University of Sunderland, Birmingham City University,
University for the Creative Arts, University of Reading and University of East
Anglia, adding £1.7m to ARR
· Expansion into new geographies with the signing of a five-year SITS:Vision
contract with the British University of Vietnam
· Appointment of new Head of ES and strong business performance, renewing
several significant UK contracts and signing two new contracts. The Board is
considering its strategic options and opportunities for the Education Services
business
Outlook
· The NTU contract has now been ended and both parties will participate in a
mediation process, the timing and outcome of which is presently uncertain
· Tribal:Cloud continues to represent a considerable near-term addressable
opportunity with a further three deals signed post year end, University of
Wolverhampton, Royal Veterinary College and University of the Arts London,
with combined ARR of £1.1m
· Following a review of investment strategy, Group capitalised product
development will be significantly reduced in 2023, while maintaining
development on our existing portfolio where we are seeing promising ARR growth
· Despite the lower EBITDA levels for FY22 the overall prospects for Tribal
remain positive. With an expanding customer base, advanced service offering
and continued contract and ARR momentum, we have entered FY23 with good sales
momentum.
Mark Pickett, Chief Executive, commented:
"We have continued to execute against our growth strategy, transitioning our
existing customers to the cloud while securing new customers in our key
geographies. Despite the lower EBITDA levels for FY22 due to the substantially
increased costs relating to the NTU contract and its subsequent termination,
the positive sales performance and successful go live of multiple customer
implementations in the year demonstrates the strength of our offerings,
effectiveness of our cloud strategy and continued contract and ARR momentum.
Based on the performance in the year and having reviewed the group's cash flow
forecasts, specifically with regard to the significant uncertainties around
the resolution of the NTU contract, the Board have concluded that it would be
prudent to reduce the final dividend by 50%. It is the Board's intention to
return to its former policy of dividend progression when circumstances allow.
We believe the education market globally is becoming more attuned to the
benefits of SaaS and cloud offerings which presents a supportive market
backdrop for Tribal and its strategic investment into and development of
cutting-edge technologies. These factors enable us to remain focused on
delivering our key strategic priorities during 2023 and despite the setback in
FY22, we remain confident in our ability to meet customer demand going
forward."
Tribal Group plc Tel: +44 (0) 117 311 5293
Mark Pickett, Chief Executive Officer
Diane McIntyre, Chief Financial Officer
Investec Bank plc (NOMAD & Joint Broker) Tel: +44 (0) 20 7597 5970
Virginia Bull, Nick Prowting, Carlo Springardi
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, Will Ellis Hancock
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.
Chairman's Statement
Tribal's performance this year has been dominated by our NTU contract, which
was impacted by implementation delays due to changing scope and complexity.
Lower recognisable revenue and increased costs led to short-term pressures
on the business while the implementation phase was ongoing. The NTU contract
has now been ended and both parties will participate in a mediation process in
an attempt to achieve a resolution, but the timing and outcome of that process
and any private negotiations to that end, is presently uncertain.
However, there have also been many signs of ongoing positive progress and the
underlying performance of the business has been good. Sales performance has
been robust, our customer base has grown, we have seen several large customer
implementations successfully go-live, our product development efforts have
continued to augment our product set and we have focused our sales and
marketing strategy. The success of these efforts can be seen in the 10% growth
in Annual Recurring Revenue (ARR) relating to the Group's core products.
Tribal is financially solid, core ARR continues to grow and net retention
rates remain high. Education Services has also had a strong year, recovering
strongly from the pandemic and is well set for a year of growth in 2023.
We see an increasing appetite from the higher education sector to transition
their existing Student Information Systems to the cloud and anticipate this to
be the main driver for uptake of our current range offerings over the next 3-5
years as well as our existing core SITS:Vision offering, which continues to
sell well. The Board has therefore decided to continue to invest and focus on
sales and marketing of our existing mature products and the Edge products
recently released or currently in development, but to pause investment in new,
additional modules for the time being. Further details of this will be in
covered in the CEO statement. Given the challenges seen in 2022, we will
temporarily pause exploring M&A opportunities.
With competition amongst universities continuing to increase we anticipate the
Admissions product, which considerably streamlines and improves the Admissions
process for both the institution and prospective students, will be a long-term
growth driver for Tribal. The first customer for Tribal Admissions is set to
go live in 2023.
Financial performance
Notwithstanding the costs relating to the NTU contract, Tribal has seen
another year of progress against our key performance indicators.
Closing ARR committed as at 31 December 2022 remained flat at £51.2m (2021:
£51.2m constant currency) however, core ARR increased 10% to £45.8m (2021:
£41.7m constant currency) reflecting the Group's momentum selling its
strategic products, offset by declining revenues as anticipated from Tribal's
non-core historic and schools' systems contracts and the termination of the
NTU contract. Revenue for the year increased by 1.6% to £83.6m (2021: £82.2m
constant currency) due to a solid performance across the Group's Cloud and
Edge offerings and School Inspection Services. Growth was significantly
impacted by the delivery on the NTU contract resulting in lower recognisable
revenue.
Group adjusted EBITDA of £7.4m (2021: £16.8m constant currency) reflects
operating losses relating to the NTU contract and an onerous contract
provision of £4.5m for future losses. Without the impact of NTU, margins
would have been consistent with historic levels.
Despite the lower EBITDA levels, the Group saw significant growth in other
areas of the business including Education Services which increased by 8.7% to
£15.4m (2021: £14.2m constant currency) as the main UK contracts continued
to track well throughout the year in addition to new contract wins in the
Middle East.
Dividend
Tribal remains committed to a progressive dividend policy, however based on
the performance in the year and having reviewed the Group's cash flow
forecasts, specifically with regard to the significant uncertainties around
the resolution of the NTU contract outlined above, the Board have concluded
that it would be prudent to reduce the final dividend by 50% to 0.65p per
share. It is the Board's intention to return to its former policy of dividend
progression when circumstances allow.
Environment, Social and Governance (ESG)
Tribal is committed to activities that benefit the environment and society,
underpinned by good governance. As part of our journey to continually improve
our approach and performance in these areas, the ESG Committee, chaired by
Non-Executive Director, Nigel Halkes, focuses on six priority focus areas for
the Group, each with key initiatives and objectives for the year and
appropriate ownership from across our Executive Management Team. We have made
good progress on many of these programmes and have set new objectives for
2023, we are committed to their sustained delivery and will continue to build
on our activities in 2023 and beyond. You can read a full report on these
priority areas within the ESG section of the Annual Report.
People
In the year we have continued to invest in our teams, in particular we have
bolstered our executive team, with three refocused roles covering Service
Delivery, Customer Success and Sales. Creating unity through the organisation
and providing a supportive environment for all to flourish is a key strategic
objective for Tribal and one in which we excel. I would like to thank all our
teams around the world for their continued energy and commitment to providing
world-class education software.
Ukraine
The Directors have considered the impact of the ongoing situation in Ukraine
and have concluded there is currently minimal risk to business continuity as
we do not have a presence in the region. The Group continues to support all
colleagues who are directly impacted by the conflict and will monitor the
situation closely.
Outlook
The market appetite for our leading solutions continues to be positive, and
the demand for our extended portfolio of products from both existing and new
customers is good. As previously flagged, we anticipate growth rates to be
lower initially, as new wins are offset by the tailing off of historic high
margin contracts, but we believe the increased scalability and market
applicability of our newer offerings mean we are well positioned to increase
our growth rates over the medium term. The NTU contract has now been ended and
both parties will participate in a mediation process, the timing and outcome
of which is presently uncertain.
The Board is cognisant of the challenging wider economic backdrop and in this
type of inflationary environment keen cost control is imperative. The business
is being run efficiently and effectively, and we have the financial resources
to execute on the growth strategy.
Richard Last
Chairman
Chief Executive's Review
Introduction
Tribal demonstrated solid progress in 2022 in terms of sales performance and
our transition to a SaaS business, whilst maintaining our market-leading
position in our core geographies and supporting our growing customer base. The
underlying business remains strong, with 10% high quality ARR growth from our
strategic software business, Education Services revenue growing strongly at
9%, offset by expected declines in our non-core SIS business. However, the
Group's results this year have been overshadowed by our NTU contract.
NTU Contract
Tribal received notification on 17 March 2023 that NTU has purported to
terminate the contract and reserved its rights to claim damages. Tribal
rejects NTU's right to terminate and considers its purported termination a
wrongful repudiation of the contract. Tribal has however accepted NTU's
wrongful repudiation, elected to treat the contract as at an end and reserved
its rights. The contract requires the parties to participate in mediation in
an attempt to achieve a resolution, but the timing and outcome of that process
and any private negotiations to that end is presently uncertain. It is
possible that there may be a significant adverse financial impact on the
Group, but as no financial demands have yet been enumerated, currently the
Board cannot fully assess any such potential impact. We do not expect a
resolution in the near term and will provide updates as and when appropriate.
Whilst EBITDA is lower than the prior year due to the impact of the NTU
contract, revenue for the year was in line with the Board's expectations
reflecting the continued positive sales performance across the business.
Expanding customer base
We achieved a consistent level of new wins in the year, adding new customers
across our range of software in key geographies and, notably, we secured five
new contracts to migrate customers to Tribal:Cloud and three new SITS: Vision
customers, adding a combined total of £2.6m to ARR. We are increasingly
seeing the benefits of the investments we have made in the evolution and
expansion of our offering, positioning Tribal at the forefront of the evolving
education industry with the ability to address a broader market in a way not
previously possible.
We have carefully invested in our people and operations throughout the year as
we evolve our operational model to ensure service levels are maintained for
long-term profitable growth and remain robust. While the global macro-economic
environment continues to be challenging, our high levels of recurring revenues
and consistent win rate provide us with confidence that we can meet our
ambitious growth aspirations.
With student numbers continuing to increase both domestically and
internationally, we anticipate the demand for our products will continue to
grow, supporting our growth ambitions.
Market drivers and addressable opportunity
The education market globally continues to evolve as expected. It is becoming
more attuned to the benefits of SaaS and cloud offerings which present a
supportive market backdrop for our business.
Universities increasingly recognise the role the cloud can play in driving
their own internal efficiencies and to improve the overall student experience,
so as to attract and retain the best talent over the long term. In recent
years, universities have also witnessed a growing number of applicants; with
the total number of student enrolments in the UK increasing by 13% since the
2019/20 academic year. This in turn has led to increased demand for our
solutions as our suite of products help our customers to address and service
this growing population at a faster rate than previously possible.
It is becoming increasingly clear that for many universities, their first step
to the cloud is to transition their existing SIS into the cloud, so that they
can reduce their in-house IT requirements and benefit from the enhanced user
experience provide by Tribal's managed cloud service. We anticipate that
this process of moving key student management systems to the cloud will be the
main focus for our customers over 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 core SITS:Vision and cloud-native
Edge products in the next few years, across our key geographies and believe
our teams are well placed to service the opportunity provided by this mass
transition of universities to cloud-based computing.
Delivering on our strategy
Our aim is to provide education technology solutions to customers globally,
as-a-service. Transitioning to the delivery of a broader set of solutions, via
the 'as-a-service' model will increase our addressable market across a greater
number of geographies, drive revenue and margin expansion, while enabling
universities to focus on the delivery of exceptional education to their
students.
To achieve this aim whilst growing ARR, we launched our five-year objectives
in 2021 which are supported by our three pillared growth strategy:
· expanding our share of customer wallet through sales of our existing offerings
and transitioning customers to the Cloud;
· expanding our addressable market through product set expansion via both
R&D and acquisition; and
· expanding our geographical reach.
Whilst we have made solid progress across many of these areas during the year,
due to the continued impact of the NTU contract, we will review the timelines
around achievement of these objectives.
Top line ARR remained flat, the addition of new customers in our core product
set increased ARR by 10%, however this was offset by the reduction of revenue
from historic Australian government contracts and non-core schools' systems
contracts in Australia and the termination of the NTU contract. We are pleased
with the continued 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.
This year's successes included:
· the winning of three new SITS:Vision customers;
· the transition of five flagship customers into the Tribal:Cloud;
· successful go-live of three Cloud implementations in the year;
· the launch of Tribal Data Engine; and
· continued sales momentum in Semestry.
During 2022 Semestry's ARR has grown by more than 50%, increasing customer
numbers and making good inroads into the UK market. We continue to develop new
customer relationships globally and look for complementary partnerships and
acquisitions, to accelerate our expansion.
2023 will focus on rebalancing our results from the impacts of the NTU
contract and we will temporarily pause exploring investment opportunities to
scale the business, either in new geographies or to expand our Edge family.
Our sales and marketing efforts will now be focused on our comprehensive
portfolio of existing cloud-based offerings, being our foundation products,
SITS, ebs and Maytas, in the Tribal:Cloud and our native-cloud based Edge
modules, such as Semestry, Dynamics, Engage and Tribal Data Engine (TDE). We
see substantial opportunities for these offerings across both existing and new
customers.
Innovation
The higher education market is undergoing significant change. Some of the
trends have been present for several years but the pandemic accelerated the
speed of change in many areas. Innovation in higher education is not simply
about new ways of working, to thrive, institutions must become better at
adapting to change.
Through constant product and process innovation we're helping institutions
adapt to change. Removing systems friction and brittle processes to free
people and resources to innovate and ensure service resilience in an
ever-changing landscape. This includes addressing:
· continuous changes in government policy;
· demand for flexible learning;
· student fee pressures;
· challenges of institutions achieving Net Zero;
· soaring number of applications; and
· ongoing regulatory obligations.
Reduction in development spend of future modules
The Group is committed to product innovation and supporting our customers in
their journey to the cloud. 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.
The Board has taken the decision to focus development spend in 2023 and 2024
on our existing Edge products, such as Admissions and Tribal Data Engine.
Development of Admissions is continuing with our pilot customers and we plan
to launch our marketing campaign to the wider market in advance of the 2024
academic year.
Overall, management is targeting a significant reduction in Edge development
in 2023 as the peak of development investment on Admissions has passed.
Increased speed of delivery and implementation
In addition to the development of new capabilities we also continuously seek
ways to ensure our customers can implement and go live with our cloud products
more quickly, through the introduction of more standardised offerings. We were
delighted this year to see three of our cloud customers go live within the
year, of which two were completed within seven months, demonstrating the
successes being achieved.
Geographic expansion
We have leading market shares in the geographies in which we operate. In the
UK over 65% of all Higher Education institutions use our student management
systems, in Australia we support one-quarter of universities, and in New
Zealand three of the eight universities. In Southeast Asia, we support the
largest public and largest private universities in Malaysia, and this year we
have expanded further with new customer wins including Middlesex University in
Dubai and Universiteit Leiden in The Netherlands. We will continue to focus on
growth in these geographies and we anticipate our SaaS product offerings will
allow us to expand further into new geographies, due to its more easily
digestible modular approach. The knowledge gained from the experience of
working on the NTU contract will be considered as we assess new markets, and
in particular Singapore, to ensure an appropriate balance of risk and reward.
Operations and people
We have an exceptional team at Tribal creating value through market-leading
technology and we are continually investing in our people agenda to enhance
our position as a growing international business. We are driven by our
purpose, to enable student success through expertise, software and services
and we rely on the talent and expertise of our people for this purpose to
succeed. Our team has a deep understanding of the education market, developed
through working in partnership with our customers and operating in senior
roles for leading education institutions.
The key initiatives enabling our people to develop their true potential
includes our bespoke competency framework, which underpins a range of Career
Pathways. Through this framework, we aim to help each employee understand how
they can develop in their current role as well as plan for their future growth
and development. We also run remote business development programmes focusing
on the expansion of our Manager Academy. The Academy broadens the skills and
commercial awareness of our leaders and future leaders and supports our
Digital Learning strategy.
Our evolving operational model, which is built upon our increasing focus on
customer success and alignment to Tribal's 'as-a-service' transition, started
to prove effective this year. During the year, we made two executive hires
focusing on Service Delivery and Customer Success. Paul Davies has been
appointed as Global Professional Services director and Tawfiq Sleett as Global
Customer Services Director. Both bring a wealth of experience from global SaaS
providers, are focused on improving customer success and have been appointed
to the Executive Board. The Executive Board was further supported by the
appointment of Cheryl Watson as the Sales Director in order to focus on
continued sales momentum. Cheryl has worked at Tribal for over ten years and
has a wealth of experience of our customers and product offerings.
The new target operating model is also now being supported by the
implementation of new SaaS financial systems and processes, intended to give
our customers a more personalised experience and to maximise the value of each
of the Group's products.
Professional Services includes the implementation of all our software products
at customer sites, typically working alongside customer teams. It continues
to be delivered remotely and the team has been bolstered by the Global
Delivery Centre (GDC) in Kuala Lumpur, Malaysia which has performed strongly
during the year. The GDC is now made up of around 30 employees and continues
to grow; it is now at a level of maturity for the delivery of Tribal's
products.
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 a major competitor, responsible for
the strategy and commercial growth of its UK business.
Student Information Systems (SIS)
Student Information Systems, our core segment which targets the further and
higher education sectors through our range of software offerings, delivered a
strong performance in the year, growing customer numbers and revenue and as a
result entered the new financial year with a solid pipeline of opportunities.
We continued to win new customers and transition existing customers onto our
cloud offerings.
Our wins in previous years and those in 2022, mean we currently have several
significant SIS implementations underway, the vast majority of which are
progressing well.
In the year, we had five key wins with existing customers, University of
Sunderland, Birmingham City University, University for the Creative Arts,
University of Reading and University of East Anglia, 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 £1.7m as well as providing an adoption pathway to our SaaS products, the
Company's cloud-native offerings.
In addition, we signed several significant contracts with new customers
including a seven-year contract with the University of Plymouth, a four-year
Semestry contract with the University of Birmingham and a new five-year
SITS:Vision contract with the British University of Vietnam. Together, these
contracts have a total value of £8.3m, adding £1.1m in incremental Annual
Recurring Revenue. 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.
Notwithstanding the NTU contract, we are pleased overall with the positive
signs of potential across Tribal's key geographies, 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 (ES) has been curating and delivering Quality
Assurance services to ministries of education and other education agencies
around the world for many years, across a wide scope of areas across the
education sector. These services include overall school quality, leadership
and teaching quality, as well as many specialist areas such as new teacher
competence, Early Years, literacy and numeracy.
The appointment of Matt Davis as Managing Director of ES from March 2022, has
seen the revision and implementation of a new three-year strategy for the
business, targeting sustainable growth between FY23 - FY25. The strategy will
initially focus on creating a clearer identity for Education Services and in
particular articulating the value it creates for our customers: supporting
governments and education institutions to deliver on their strategic ambitions
to improve the quality and impact of education.
Education Services has continued to perform well throughout the year,
delivering strong results. As educational institutions and organisations
around the world saw a return to the classroom following the pandemic, demand
for the Quality Assurance services ES provides has steadily increased.
Over the course of the year ES has delivered major Quality Assurance contracts
to bodies in the UK, US and the Middle East, and has been working with
hundreds of individual schools on our Quality Mark accreditation. At present,
Tribal is running highly successful projects across its key geographies.
As previously reported, in the UK this year, we successfully tendered for
renewals as prime contractor of two major contracts with the Department for
Education (DfE) in England: NCETM (£8.7m over two years) and Quality
Assurance of the National Professional Qualifications programme 'NPQ', total
contract value of £6.5m over four years. In July 2022 we successfully renewed
a third major UK contract, the Advanced Maths Support Programme 'AMSP' with a
total contract value of £2.6m, and also won a two-year contract with the
National Tutoring Programme 'NTP', with a total contract value of £2.4m,
securing our position with our key customer in the UK services market.
During the second half, we successfully mobilised the National Tutoring
Programme (NTP), meeting all contractual requirements and establishing
important processes required to evaluate the quality of Tuition Partners in
the UK.
We have continued to win new contracts throughout the year with highlights
including a contract to deliver inspections on behalf of the Sharjah Private
Education Authority (SEPA) in the UAE and an extension to our work with the
Gulf Sector Skills body. Trading in the Surveys and Benchmarking business was
positive, with this sector now seeing a strong recovery since the pandemic,
setting us up for a positive 2023.
There is continuing opportunity in the Middle East, where the macro-economic
environment is more positive and our core capabilities in understanding school
quality, supporting improvement and helping teachers to improve; supporting
the school to work transition, remain the key strategic interests of almost
all education policy makers at any level. Building on momentum from the
previous year and with a clear strategy now in place, the outlook for the
division remains positive.
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. The implementation of these initiatives was successful
throughout 2022 and we will continue to build on our activities in 2023.
This year we worked within the Group's risk management framework and using the
Taskforce on Climate-related Financial Disclosure (TCFD) guidance have begun
our impact assessment of risk and opportunities relating to the transition to
a lower-carbon economy. In 2023 we will work towards implementing mitigating
actions and applicable recommendations of TCFD in each of the four thematic
areas; governance, strategy, risk management and targets and metrics.
In 2023, our ESG journey will focus on 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. In particular, it is important that we have an inclusive
organisation where diverse talent is developed, engaged and retained to allow
us to add value and grow as an international business.
2023 areas of focus
The resolution of the NTU contract will continue to be a key area of focus
during 2023, given uncertainty on the outcome, timing and financial impact.
Within our core business, we will focus on the transition of our existing
customers to the Tribal:Cloud, the sale of further SaaS products and the
delivery of our first early adopter Admissions customers. We will also look to
develop new customer relationships globally as well as partnerships to
accelerate our future growth.
Outlook
The Group has traded in line with Board expectations since the start of the
new financial year, entering 2023 with good sales momentum, signing a further
three Tribal:Cloud contracts post year end, with a combined ARR of £1.1m. We
have adjusted our capital investment plans, recognising the balance required
between the execution of our growth strategy and recovery from the impact of
the NTU contract.
We believe the education market globally is becoming more attuned to the
benefits of SaaS and cloud offerings which presents a supportive market
backdrop for Tribal following its strategic investment into and development of
cutting-edge technologies. We remain focused on delivering our key strategic
priorities during 2023 and despite the setback in the year, we remain
confident in our ambition and ability to meet global demand and deliver on our
growth strategy going forward.
Mark Pickett
Chief Executive Officer
Financial review
Results
£m 2022 Constant Currency 2021(3) Change constant currency Change constant currency %
2021
Reported
Revenue 83.6 81.1 82.2 1.4 1.6%
Student Information Systems 68.2 67.3 68.0 0.2 0.2%
Education Services 15.4 13.8 14.2 1.2 8.7%
Gross Profit 31.3 41.8 42.0 (10.7) (25.4)%
Gross Profit Margin 37.5% 51.5% 51.1% - (13.6)pp
Adjusted Operating Profit (EBITDA) (1, 2) 17.9 25.8 25.9 (8.0) (30.6)%
(Before Central Overheads)
Student Information Systems 14.0 23.6 23.8 (9.8) (40.4)%
Education Services 3.9 2.2 2.1 1.7 81.6%
Central Overheads (4) (10.4) (9.3) (9.3) (1.3) (11.4)%
Net foreign exchange (losses)/gain (0.1) 0.1 0.1 (0.2) (189.1)%
Adjusted Operating Profit (EBITDA) (1, 2) 7.4 16.6 16.8 (9.3) (55.3)%
Adjusted Operating Margin (EBITDA) (1, 2) 8.9% 20.5% 20.4% - (11.5)pp
Statutory Profit before Tax 0.4 8.6 8.6 (8.2) (95.5)%
Statutory (Loss)/Profit after Tax (0.5) 7.0 7.0 (7.5) (107.3)%
Annual Recurring Revenue 51.2 50.3 51.2 - -
(1.) (Adjusted Operating Profit and Adjusted Operating Margin are in respect of
continuing operations and exclude charges reported in "Other items" of £3.8m
(2021: £5.4m), refer to Note 6 in the Financial Statements.)
(2.) (EBITDA is calculated by taking the Adjusted Operating Profit after the
allocation of Central Overheads and excludes Interest, Tax, Depreciation and
Amortisation.)
(3.) (2021 results adjusted are updated for constant currency - the Group has
applied 2022 foreign exchange rates to 2021 results to present a constant
currency basis, when applied to 2021 results there is an increase in Revenue
of £1.1m, an increase to Adjusted Operating Profit (before Central Overheads)
and Adjusted Operating Profit of £0.1m.)
(4.) (Central Overheads are made up of costs that are not directly attributable to
either Student Information Systems or Education Services.)
The financial review presents the reported results for 2022 and 2021, and the
2021 results restated to "constant currency" using 2022 rates to exclude
foreign currency impact. The change percentages and comparatives are shown on
the 2021 constant currency numbers. The presentation disclosed as "constant
currency" is an alternative performance measure and not a statutory reporting
measure prepared in line with International Financial Reporting Standards
(IFRS) and disclosed as "reported". The Group has chosen to present its
results on a constant currency basis to reflect the year-on-year performance
and account for the impact of foreign exchange movements in the year.
Revenue
Revenue increased 1.6% to £83.6m (2021: £82.2m constant currency, £81.1m
reported). Notwithstanding the NTU contract, the Group's Student Information
Systems segment performed well, with significant growth of 29% seen across
Cloud and Edge revenue streams driven by new customer wins. This increase was
largely offset by the continued delay seen by Professional Services in
delivering the implementation phase of the NTU contract.
Education Services revenue increased by 8.7% to £15.4m (2021: £14.2m
constant currency; £13.8m reported) as the main UK contracts continued to
track well throughout the year in addition to new contract wins in the Middle
East.
38% of Tribal's revenue in the year was generated outside the UK and is
therefore subject to foreign exchange movement.
Gross Profit has decreased 25.4% to £31.3m (2021: £42.0m constant currency,
£41.8m reported) and the margin percentage has decreased to 37.5% (2021:
51.1% constant currency, 51.5% reported). The margin percentage decrease is
largely due to the recognition of the onerous contract provision and a decline
in Professional Services margin caused by the NTU contract implementation.
Adjusted Operating Profit (EBITDA)
The Adjusted Operating Profit (EBITDA) decreased £9.3m to £7.4m (2021:
£16.8m constant currency; £16.6m reported). The Adjusted Operating Margin
(EBITDA) decreased to 8.9% (2021: 20.4% constant currency; 20.5% reported).
Due to the challenges experienced with the delivery of the NTU contract, an
onerous contract provision of £4.5m has been recognised for future losses,
which represents the unavoidable costs of meeting the obligations under the
contract in excess of the expected economic benefits to be received. Excluding
this provision, adjusted operating profit would be £11.9m and adjusted
operating margin would be 14.3%.
Central Overheads, representing costs in HR, IT, Finance, Marketing and
Management that aren't directly attributable to lines of business increased by
£1.3m to £10.4m (2021: £9.3m constant currency and reported). The increase
was primarily due to increased global insurance costs and legal and
professional fees in line with market trends. Margins will continue to be
under pressure next year due to the impact of inflation on salaries and global
insurance is expected to continue to rise in 2023.
We continue to focus on reducing overhead costs and have continued to grow our
Manila office in the Philippines to support central back-office functions,
product development, ebs and SchoolEdge product support and other business
services. The Group continues to identify cost saving measures and effectively
manage its cost base.
Statutory (Loss)/Profit after Tax
The Statutory (Loss) / Profit after tax for the year decreased by 107.3% to a
loss of £(0.5)m (2021: £7.0m reported). Excluding the costs of the Veritas
Programme, a one-off project, in the year of £1.3m (2021: £1.7m) and the
onerous contract provision of £4.5m (2021: £nil) the underlying profit
decrease was 23.5%. The tax charge reduced to £0.9m (2021: £1.6m reported)
due to the unrecognised deferred tax in respect of the Singapore branch
losses, on the basis we do not anticipate future profits to be generated to
utilise these losses.
Segmental performance
The Group provides software and non-software related services to the
international educational market. These services are managed across two
divisions, SIS and ES.
Student Information Systems (SIS)
£m 2022 Constant Currency 2021 Change constant currency %
Change constant currency
2021
Reported
Foundation Support & Maintenance 25.4 26.0 26.2 (0.8) (2.9)%
Foundation Software 7.2 5.4 5.4 1.8 33.3%
Cloud Services 8.5 6.8 6.9 1.6 24.0%
Edge 4.8 3.4 3.4 1.4 39.6%
Professional Services 11.2 12.7 12.8 (1.6) (12.5)%
Core Revenue 57.1 54.2 54.7 2.4 4.5%
Other Software & Services 11.0 13.1 13.4 (2.3) (17.3)%
Total Revenue 68.2 67.3 68.0 0.1 0.2%
Adjusted Operating Profit 14.0 23.6 23.8 (9.8) (40.4)%
Adjusted Operating Margin 20.6% 35.0% 35.0% - (14.4)pp
Student Information Systems focuses on software-related solutions to the
Higher Education, Further Education, Colleges and Employers (referred to in
Australia as VET), and Schools sectors across the main geographic markets
being the UK, Australia, New Zealand, Singapore, Malaysia, Netherlands and
Canada.
SIS revenue increased marginally by 0.2% to £68.2m (2021: £68.0m constant
currency; £67.3m reported). Revenue generated from our core product offerings
increased 4.5% to £57.1m (2021: £54.7m constant currency and reported). The
increase was impacted by the changing scope and complexity of the NTU
contract, resulting in substantially lower recognisable revenue than
originally anticipated. Revenue from other software and services declined
17.3% to £11.0m (2021: £13.4m constant currency, £13.1m reported) as
discussed below.
The Group secured multiple new customer wins throughout the year across
Tribal's range of software, reflecting the evolving product suite, technology
leadership and increasing activity levels within the education sector
globally.
Foundation Support & Maintenance fees in the period on our Foundation
products (primarily SITS, Callista, ebs, Maytas, K2 and SID) decreased 2.9% in
the period. Several ebs and Maytas customers moved onto Software-as-a-Service
(SaaS) contracts in the year, resulting in £0.2m of associated revenues
transferring from support to software.
Foundation Software includes the sale of new perpetual and subscription
software licenses on our Foundation products. Revenue in the period increased
33.3% to £7.2m (2021: £5.4m constant currency, £5.4m reported). Under
IFRS15 license revenue is recognised as the software is implemented on a
percentage complete basis, resulting in the revenue from larger
implementations taking more than two years to recognise. Key new customers
include University of Plymouth, University of East Anglia and The Leeds
Conservatoire and British University Vietnam.
Cloud Services cover the provision of Tribal:Cloud, a fully managed public
cloud services and other hosting services supporting Tribal products, either
on-premise in a private cloud, or more increasingly in a public cloud.
Cloud revenues have continued to increase and are up 24.0% to £8.5m (2021:
6.9m constant currency, £6.8m reported). As previously discussed, the Group
closed a number of significant sales to existing customers, transitioning
their existing on-premise Tribal SITS software, SITS:Vision, into the
Tribal:Cloud. We continue to have positive conversations across our extensive
customer base as they explore the benefits a move to the cloud can bring to
their organisation and are confident of continued uptake. At the end of 2022
22% of our 126 SITS:Vision customers had signed up to Tribal:Cloud.
Edge revenues saw an increase of 39.6% to £4.8m (2021: £3.4m constant
currency and reported), due to sales across our range of products such as
Semestry, Support and Wellbeing and Engage.
Professional Services includes the implementation of all our software products
at customer sites, typically working alongside customer teams. Implementation
projects vary in length and complexity, ranging from a small number of days to
more than two years for complex projects. Revenues are either a day rate fee,
or performed under a fixed fee for defined implementation scope. Professional
services have continued to be delivered remotely where appropriate, in most
instances, and the team has been bolstered by the Global Delivery Centre (GDC)
in Kuala Lumpur, Malaysia which has grown 39% in the year.
Professional Services revenue decreased by 12.5% to £11.2m (2021: £12.8m
constant currency, £12.7m reported) as a result of the challenges with the
NTU contract implementation. Furthermore, a significant amount of resource is
working on the NTU contract which has reduced the teams capacity to deliver on
other work as a result.
Other Software & Services revenue decreased 17.3% to £11.0m (2021:
£13.4m constant currency, £13.1m reported) 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 £3.1m.
Adjusted Operating Profit decreased by (40.4)% to £14.0m (2021: £23.8m
constant currency; £23.6m reported) and Adjusted Operating Margin decreased
to 20.6% (2021: 35.0% constant currency and reported). SIS margin reduced due
to low margins from the implementation of the NTU contract compounded by the
fact the team have had lower capacity to deliver on higher margin contracts.
Due to the challenges experienced with the delivery of the NTU contract, an
onerous contract provision of £4.5m had been recognised, which represents the
unavoidable costs of meeting the obligations under the contract in excess of
the expected economic benefits to be received. Excluding this provision, SIS's
adjusted operating profit would be £18.5m and adjusted operating margin would
be 27.2%.
Education Services (ES)
£m 2022 Constant Currency 2021 Change constant currency Change constant currency %
2021
Reported
School Inspections & Related Services 12.7 11.1 11.4 1.3 11.7%
I-graduate - Surveys & Data Analytics 2.7 2.7 2.8 (0.1) (3.9)%
Total Revenue 15.4 13.8 14.2 1.2 8.7%
Adjusted Operating Profit 3.9 2.2 2.1 1.7 81.6%
Adjusted Operating Margin 25.0% 16.3% 15.0% - 10.1pp
Education Services (ES) provides non-software related solutions globally
across the same market sectors. The core offerings are inspection and review
services which support the assessment of educational delivery, performance
benchmarking, student surveys, and data analytics.
Education Services revenue increased by 8.7% to £15.4m (2021: £14.2m
constant currency; £13.8m reported).
The revenue from School Inspections & Related Services increased by 11.7%
to £12.7m (2021: £11.4m constant currency; £11.1m reported).
Performance continued to improve throughout the year, with successful tenders
for renewals of three major contracts with the Department for Education in
England: The National Centre for Excellence in the Teaching of Mathematics
"NCETM" (£8.7m total contract value over two years), Quality Assurance of the
National Professional Qualifications programme "NPQ", (£6.5m total contract
value over four years) and the Advanced Maths Support Programme "AMSP" (£2.6m
total contract value over two years). In addition, winning a two-year contract
with the National Tutoring Programme "NTP" total contract value of £2.4m.
In the Middle East a new six-month contract was won in the year with the
Sharjah Private Education Authority "SEPA" (£3.0m total contract value) to
deliver School Inspections in addition to continued delivery on smaller, high
margin, contracts in the UAE and Bahrain.
The revenue for Surveys & Data Analytics decreased by 3.9% to £2.7m
(2021: £2.8m constant currency; £2.7m reported). The revenues from Surveys
are reduced, as expected, due to the seasonality of the Southern Hemisphere
International Student Barometer which most institutions participate every
other year.
The Adjusted Operating Profit in Education Services increased by 81.6% to
£3.9m (2021: £2.2m constant currency; £2.1m reported), the Adjusted
Operating Margin also increased 10.1pp to 25.0% (2021: 16.3% constant
currency; 15.0% reported), this increase is largely due to the variable cost
model it operates and the successful delivery of higher margin contracts in
2022 compared to the lower margin ADEK contract which was completed at the end
of 2021.
Product Development
£m 2022 2021 Reported Change
Product Development 14.4 15.9 (10.3)%
Of which capitalised 10.3 10.2 2.3%
Edge 10.3 10.1 1.4%
Other Products - 0.1 (100.0)%
Of which expensed 4.1 5.8 (39.1)%
Foundation Products 2.0 2.2 (11.7)%
Edge 1.3 2.2 (76.3)%
Other Products 0.8 1.3 (48.0)%
Amortisation 1.3 1.0 24.1%
The Group spent £14.4m on Product Development, of which £10.3m was
capitalised in relation to Edge, including Dynamics and Semestry (2021:
£15.9m spent, £10.2m capitalised, £5.8m expensed). In 2021 £0.1m was
capitalised in relation to Education Services' E-Evidence application, this
has been written off due to a change in focus by new management in the year.
We regularly review our Edge strategy, which provides a compelling vision to
new and existing customers to embrace our next-generation, best-of-breed,
cloud-native SIS solutions, to improve delivery to customers. As a
cloud-native SIS, Edge provides a competitive differentiator in targeting and
acquiring new customers. In addition, it protects Tribal's customer base by
providing the most efficient, lowest cost route to achieve a comprehensive,
integrated, open-standards SIS which maximises the student experience and
reduces the technical complexity and IT cost for our customers.
Our continued investment in Edge across our existing product sets and
Admissions saw capitalised product development spend increased to £10.3m
(2021: £10.1m) as the Edge development team reached its peak of development
activities to deliver Admissions. Management is expecting capitalised product
development to reduce significantly in 2023 as the peak of development
investment has passed.
Expensed product development decreased 39.1% to £4.1m (2021: £5.8m) of which
£2.0m (2021: £2.2m) related to our Foundation products, £1.3m (2021:
£2.2m) related to Edge and £0.8m (2021: £1.3m) related to other products.
Product development costs of £0.7m in 2021, relating to our Australian
Government Contracts, has been reallocated from Foundation to Other products.
2021 included a one-off charge of £0.8m relating to pre-2021 capitalised
costs being expensed to align with our future Edge offerings.
Key Performance Indicators (KPIs)
£m 2022 2021 2021 Constant Currency
Reported Change constant currency Change constant currency %
Revenue 83.6 81.1 82.2 1.4 1.6%
- Student Information Systems 68.2 67.3 68.0 0.1 0.2%
- Education Services 15.4 13.8 14.2 1.2 8.7%
Adjusted Operating Profit (EBITDA)(1) 7.4 16.6 16.8 (9.3) (55.3)%
Adjusted Operating Margin(1) 8.9% 20.5% 20.4% - (11.5)pp
Annual Recurring Revenue (ARR)(2) 51.2 50.3 51.2 - -
Gross Revenue Retention (GRR)(3) 91% 93% - - (2)pp
Net Revenue Retention (NRR)(4) 104% 106% - - (2)pp
Committed Income (Order Book) 172.9 172.5 176.6 (3.7) (2.1)%
Operating Cash Conversion(6) 89% 104% 104% - (15.0)pp
Free Cash (Out)/In Flow (5.3) 5.4 5.4 (10.7) (198)%
Staff Retention 83.6% 86.9% - - (3.3)pp
Revenue per operational FTE(5) £102.0k £100.1k £101.4k £0.6k 0.6%
(1. ) (Adjusted Operating Profit and Adjusted Operating Margin are in respect of
continuing operations and exclude charges reported in "Other items" of £3.8m
(2021: £5.4m), refer to Note 6 in the Financial Statements. EBITDA is
calculated by taking the Adjusted Operating Profit after the allocation of
Central Overheads and excludes Interest, Tax, Depreciation and Amortisation.)
(2. ) (ARR is a forward-looking metric representing committed revenues as at 31
December 2022 and includes Support & Maintenance fees paid on all
software, License sold on a subscription basis, Cloud services and Edge
sales.)
(3. ) (Calculated as a percentage of recurring revenue retained from existing
customers at 1 January including contract expiry, cancellations or downgrades
in the year)
(4. ) (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)
(5. ) (Revenue per operational FTE is the average FTE for the year excluding average
FTE associated with capitalised Product Development. In 2022 152.3 FTE were
capitalised (2021: 126.1))
(6. ) (Operating cash conversion is calculated as net cash from operating activities
before tax, excluding the cash outflow of £1.2m (2021: £1.7m) on the Veritas
programme and £0.6m (2021: £nil) of redundancy payments as a proportion of
adjusted operating profit (EBITDA) excluding the onerous contract provision of
£4.5m (2021: £nil).)
The above Alternative Performance Measures (APM) are not Statutory Accounting
Measures and are not intended as a substitute for statutory measures. A
reconciliation of Statutory Operating Profit and Adjusted Operating Profit
(EBITDA) has been provided in the financial statements.
Annual Recurring Revenue (ARR)
£m 2022 2021 Constant
Reported Currency Change Change %
2021
Foundation Support & Maintenance 24.8 24.7 25.0 (0.2) (1.0)%
Foundation Subscription 5.4 3.8 3.8 1.6 42.6%
Cloud Services 10.2 8.2 8.3 1.9 23.4%
Edge 5.4 4.5 4.6 0.8 18.0%
Core product ARR 45.8 41.2 41.7 4.1 9.9%
Other Software & Services 5.4 9.1 9.5 (4.1) (43.5)%
Total ARR 51.2 50.3 51.2 - -
ARR is a key forward looking financial metric of the Group and is an area of
strategic focus. 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 relating to our core product offering increased by 9.9% to £45.8m (2021:
£41.7m constant currency, £41.2m reported) driven by wins across our core
product offerings, offset by the decrease of £1.3m relating to the NTU
contract and other churn.
As previously reported, ARR relating to other software and services has
decreased 43.5% to £5.4m (2021: £9.5m constant currency, £9.1m reported).
£0.6m relates to the decrease in Department of Education ARR following a
contract extension to June 2024, we expect the remaining ARR of £1.5m to drop
in 2023 subject to historic Government and Schools' contracts migrating onto
an alternative solution.
NRR 104% (2021: 106%) has decreased by 2pp. Upsell to existing customers has
been consistent year on year, highlighting the strong growth opportunities
within our existing customer base, in particular migrations of on-premise
customers into the cloud. This has been offset by expected churn in Callista
as two customers have exited, as well as expected churn in School Edge as
customers continue to migrate to alternative suppliers decreasing GRR by 2pp
91% (2021: 93%).
Committed Income (Order Book)
The Committed Income (Order Book) relates to the total value of orders across
SIS and ES, which have been signed on or before, but not delivered by 31
December 2022. This represents the best estimate of business expected to be
delivered and recognised in future periods and includes two years of Support
& Maintenance revenue. At 31 December 2022 this decreased to £172.9m
(2021: £176.6m constant currency, £172.5m reported). Committed Income
decreased due to the removal of the NTU contract £5.6m, with the remainder
due to the anticipated reduction in historic Australian Government contracts
and SchoolEdge churn offset by new contract wins in ES, Cloud and Edge.
Operating cash conversion
Operating cash conversion is calculated as net cash from operating activities
before tax, excluding the cash outflow of £1.2m (2021: £1.7m) on the Veritas
programme and £0.6m (2021: £nil) of redundancy payments as a proportion of
adjusted operating profit (EBITDA) excluding the onerous contract provision of
£4.5m (2021: £nil). In 2022, operating cash conversion was 89% (2021: 104%
reported). The decrease in operating cash conversion is a result of an
increase in non-cash items and the temporary decline in working capital.
Free cash flow
Free cash flow is included as a key indicator of the cash that is generated
(or absorbed) 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. Free cash
flow in 2022 decreased to and outflow of £(5.3)m (2021: inflow of £5.4m
reported), investment in product development increased £0.4m to £10.6m
(2021: £10.2m) and proceeds on shares sold to satisfy exercises of
share-based payment schemes reduced to £0.6m (2021: £3.2m). Net cash used in
operating activities before tax decreased £6.6m to £8.9m (2021: £15.5m).
Full Time Equivalent (FTE) and staff retention
2022 2021 Change
UK 622 651 (29)
Asia Pacific 317 317 1
Rest of world(1) 13 14 (2)
Full Time Equivalent (FTE) 952 982 (31)
(1. Including USA, Canada and Middle East.)
Our overall workforce has decreased by 3.1% to a total FTE of 952 from 982 at
31 December 2021 primarily in the UK.
On an operational FTE basis (excluding Capitalised Product Development), the
revenue per average operational FTE increased to £102.0k (2021: £101.4k
constant currency, £100.1k reported).
The reduction in headcount reflects our ongoing strategy to drive efficiencies
whilst growing our global delivery capability in Malaysia and the Philippines.
We note our staff retention has decreased to 83.6% (2021: 87.0%) in line with
the market trends, with the last quarter of 2022 returning to pre-pandemic
levels of attrition.
Items excluded from adjusted profit figures
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, 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:
In 2022, share-based payment charges (including employer related taxes)
totalled £0.5m (2021: £1.6m), and are excluded from the Adjusted operating
profit. On 11 April 2022, 552,941 nil-cost share options were granted to Mark
Pickett (317,647) and Diane McIntyre (235,294) under the terms of the 2010
Long-Term Incentive Plan.
· Amortisation of IFRS 3 intangibles:
The amortisation charge in relation to IFRS 3 intangible assets of £1.1m
(2021: £0.9m) arose from separately identifiable assets recognised as part of
previous acquisitions. The assets principally relate to software and customer
relationships and are amortised over their expected life which was determined
in the year the acquisition took place.
· Internal Systems Transformation Programme "Veritas":
Between the end of 2020 and the end of 2022, the Group has been running the
Veritas Programme which went live in January 2023. 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. Following
clarified guidance issued in relation to IAS 38, £1.3m (2021: £1.7m) of
costs have been expensed to the income statement.
· Restructuring and associated costs:
These costs relate to the restructuring of the Group's operations to implement
the new target operating model as part of the Veritas programme. The charge
for the year is £0.6m (2021:£nil) due to planned restructures at the start
of the year. There are no restructuring provisions recognised as at 31
December 2022.
Net cash and cash flow
£m 2022 2021 Change
Net cash flow from operating activities before tax 8.7 15.5 (6.8)
Tax paid (2.6) (1.6) (1.0)
Purchases of property, plant and equipment (0.7) (0.6) (0.1)
Net lease payments (0.9) (0.9) -
Capitalised product development (10.4) (10.2) (0.2)
Proceeds from shares 0.6 3.2 (2.6)
Free cash flow (5.3) 5.4 (10.7)
Net cash outflow from other investing activities (1.0) (6.1) 5.2
Net cash inflow/ (outflow) from other financing activities 3.2 (2.7) 5.9
Net decrease in cash & cash equivalents (3.1) (3.4) 0.3
Cash & cash equivalents at beginning of the year 5.9 9.5 (3.6)
Less: Effect of foreign exchange rate changes - (0.2) 0.2
Cash & cash equivalents at end of period 2.9 5.9 (3.0)
Borrowings (6.3) - (6.3)
Net (debt)/cash & cash equivalents at end of period (3.4) 5.9 (9.3)
Net (debt) / cash and cash equivalents at 31 December 2022 were £(3.4)m
(2021: £5.9m).
Operating cash inflow for the period was £6.1m (2021: £13.9m) significantly
lower than last year due to the impact of the NTU contract.
Cash outflow from investing activities was £12.1m (2021: £16.9m). Spend on
purchases of property, plant and equipment totalled £0.7m (2021: £0.6m).
Spend on product development increased to £10.4m (2021: £10.2m) in line with
the Group's product investment programme. The Group made a payment of £1.0m
for deferred consideration (2021: £2.2m), of which £0.6m was the final
earn-out from the Semestry acquisition, the remaining £0.4m was earn-out
payments for Eveoh, paid on a quarterly basis over the two year earn-out
period ending September 2023. In 2021 the Group made an upfront net payment of
£4.2m in respect of the acquisition of Semestry Limited, there have been no
acquisitions in 2022.
Cash inflow/(outflow) from financing activities increased to £2.9m (2021:
(0.4)m). The Group paid a final dividend of 1.3p per share in the year with
£2.7m returned to shareholders. Bank loan arrangement fees and interest in
the period totalled £0.3m (2021: £0.2m). This is offset with the proceeds
from the issue of shares totalling £0.6m (2021: £3.2m) to satisfy exercises
of share-based payment schemes. During the year the group drew down a net of
£6.3m from the £10m loan facility to assist with working capital
requirements, this remains outstanding at year end.
Funding arrangements
On 21 January 2020 the Group entered into a three year £10m multicurrency
revolving facility with HSBC with the option to extend by a further two years,
both of which have been exercised with the facility expiring in December 2024.
The facility was put in place to cover general corporate and working capital
requirements of the Group, as at 31 December 2022 £6.3m (2021: £nil) of the
loan was utilised. The Group had a £2m committed overdraft facility in the UK
and a AUD$2m committed overdraft facility in Australia, both facilities are
committed for a 12-month period ending August 2023 and October 2023
respectively. At 31 December 2022 £0.1m of the UK overdraft was drawn. To
offset the impact of movements in foreign exchange the Group entered into
three forward contracts to hedge the movement between AUD:GBP. These contracts
expired in the year and generated a net change in fair value of £nil (2021:
£0.2m). The Group will continue to manage foreign exchange exposure during
2023.
In February 2023, to manage short-term working capital requirements, Tribal
converted £7m of the £10m uncommitted accordion into its existing loan
facility, increasing the total facility to £17m.
Shareholders returns and dividends
Tribal remains committed to a progressive dividend policy, however based on
the performance in the year and having reviewed the group's cash flow
forecasts, specifically with regard to the significant uncertainties around
the resolution of the NTU contract outlined above, the Board have concluded
that it would be prudent to reduce the final dividend by 50%. It is the
Board's intention to return to its former policy of dividend progression when
circumstances allow.
The Board is proposing a final dividend in respect of the year ended 31
December 2022 of 0.65p, pending approval at the AGM on 30 May 2023. The
anticipated payment date is 27 July 2023, with an associated record date of 23
June 2023 and ex-dividend date of 24 June 2023. In July 2022 Tribal paid a
final dividend of 1.3p per share in recognition of the year ended 31 December
2021. The Board intends to continue a progressive dividend policy, with a
single dividend payment each year following annual results.
Going concern
As at 31 December 2022, the Group had cash and cash equivalents of £2.9m
(2021: £5.9m) and borrowings of £6.3m (2021: £nil). The Group had a £2m
committed overdraft facility in the UK and a AUD$2m committed overdraft
facility in Australia, both facilities are committed on a 12-month rolling
period ending August 2023 and October 2023 respectively. At the year-end there
was £1.97m available but undrawn in respect of the UK overdraft facility
(£35,000 had been drawn down) and $AUD2m available but undrawn in respect of
the Australian overdraft facility.
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 by entering a £17m loan facility to cover temporary working capital
requirements of the Group and corporate merger and acquisition activity, if
required, which expires in December 2024.
The Group benefits from strong annual recurring revenues and cash generation,
it also has a significant pipeline of committed income as it enters 2023 which
provides a good level of protection and certainty to the business. While the
Group's net current liability position has increased to £25.0m from £20.9m
in 2021, the increase is driven by the increase in borrowings of £6.3m and
the recognition of an onerous contract provision of £4.5m. The remaining net
current liabilities is primarily made up of net contract liabilities of
£19.5m (2021: £17.6m) relating to deferred customer revenue recognised in
accordance with IFRS 15.
The Group had a positive end to the year for sales, closing several
significant sales to new and existing customers, and expanding its global
footprint. The financial impact of the pandemic and the changing
expectations of students, means that never has the need for cloud-based
solutions for the Education market been more pressing. The investments the
Group continue to make position Tribal at the forefront of this evolution in
the industry, in addition, the Board has engaged advisors and is considering
its strategic options and opportunities for the Education Services business.
Management have assessed a range of outcomes in relation to the NTU contract
and its potential impact on the Group's cash flows. If mediation is not
successful, it may result in litigation. Should the contract result in
litigation, timelines will be uncertain but are considered unlikely to be
resolved within the next 12 months. Management is undertaking a range of
actions, including assessing all discretionary spend, in order to improve cash
flows as a matter of prudence.
In assessing the Group's going concern position the Directors have considered
all relevant facts, latest forecasts, an assessment of the risks faced by the
Group, and considered potential changes in trading performance with particular
focus on the challenges faced with the implementation of the NTU contact. 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 highly unlikely,
and therefore does not have a significant impact on the Group's ability to
continue as a going concern. Accordingly, the Directors have a reasonable
expectation that the Group and the Company has adequate resources to continue
in operational existence for at least 12 months from the date of approval of
the financial statements and the foreseeable future. Thus, they continue to
adopt the going concern basis in preparing the financial statements.
Taxation
The corporation tax on adjusted profit before tax was £2.9m (2021: £2.2m).
The increase was due to the unrecognised deferred tax in respect of the
Singapore branch losses, on the basis we do not anticipate future profits to
be generated to utilise these losses, and an increase in tax generated in
international jurisdictions with a higher rate of corporation tax. It is
anticipated that the tax charges on profits in the near- to medium-term future
are likely to be higher than the standard rate of UK corporation tax.
Share options and share capital
On 11 April 2022, 552,941 nil-cost share options were granted to Mark Pickett
(317,647) and Diane McIntyre (235,294) as part of their ongoing remuneration.
1,847,373 shares were issued during the year in order to satisfy exercises of
share-based payment schemes. The exercise costs of 5p, 58.2p, 71p, 79.6p and
80p per share for the LTIPs resulted in cash receipts of £0.6m.
Earnings per share (EPS)
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 by 89% to 0.6p (2021:
5.6p) due to the decrease in adjusted profit before tax and the reduced tax
charge in the year.
Statutory basic earnings per share decreased by 106% to (0.2)p (2021: 3.3p) as
a result of the statutory loss increase in the year to £(0.5)m (2021:
statutory profit £7.0m).
In 2021 1,490,169 vested LTIP and CSOP shares that had not yet been exercised,
were in error only included in the diluted EPS calculation. In the current
year these options have been included in the basic calculation and the prior
year has been restated to 3.3p from 3.4p per share.
Pension obligations
At 31 December 2022, the Group operated two defined benefit pension schemes
for the benefit of certain deferred employees of its subsidiaries in the UK
which are closed to new members. These schemes are administered by separate
funds that are legally separated from the Parent Company and relate to a
historic contract within Education Services. The trustees of the pension funds
are required by law to act in the interest of the funds and of all relevant
stakeholders in the schemes. The trustees of the pension funds are responsible
for the investment policy with regard to the assets of the funds.
Across the pension schemes, the combined surplus calculated under IAS 19 at
the end of the year was £0.1m (2021: deficit of £0.2m), with gross assets of
£8.1m and gross liabilities of £5.4m (2021: £8.8m and £9.0m respectively).
Total actuarial gains recognised in the consolidated statement of
comprehensive income are £0.3m (2021: £0.7m). The Company does not have an
unqualified right to apply any surplus on one of the schemes and consequently
a surplus of £2.6m has not been recognised.
Diane McIntyre
Chief Financial Officer
Consolidated income statement
For the year ended 31 December 2022
Note Adjusted Other items (see Note 6) £'000 Year ended 31 December 2022 Adjusted Other items (see Note 6) £'000 Year ended 31 December 2021
£'000
£'000
Total Total
£'000 £'000
Continuing operations
Revenue 2 83,585 - 83,585 81,148 - 81,148
Cost of sales (52,250) - (52,250) (39,335) - (39,335)
Gross profit 31,335 - 31,335 41,813 - 41,813
Total administrative expenses (26,886) (3,670) (30,556) (27,846) (5,079) (32,925)
Operating profit/(loss) 4,449 (3,670) 779 13,967 (5,079) 8,888
Investment income 5 25 - 25 255 - 255
Finance costs 6 (323) (94) (417) (230) (299) (529)
Profit/(loss) before tax 4,151 (3,764) 387 13,992 (5,378) 8,614
Tax (charge)/credit 7 (2,907) 2,010 (897) (2,240) 619 (1,621)
Profit/(loss) attributable to 1,244 (1,754) (510) 11,752 (4,759) 6,993
the owners of the parent
Earnings per share
Basic 9 (0.2)p 3.3p*
Diluted 9 (0.2)p 3.2p*
All activities are from continuing operations.
*Restated see Note 9
Consolidated statement of comprehensive income
For the year ended 31 December 2022
Note Year ended Year ended
31 December 2022
31 December 2021
£'000 £'000
(Loss)/profit for the year (510) 6,993
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes 262 728
Deferred tax on measurement of defined benefit pension schemes (66) (131)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 595 (917)
Other comprehensive income/(expense) for the year net of tax 791 (320)
Total comprehensive income for the year attributable 281 6,673
to equity holders of the parent
Consolidated balance sheet
As at 31 December 2022
Note 2022 2021
£'000
£'000
Non-current assets
Goodwill 10 29,176 28,582
Other intangible assets 11 43,667 35,947
Property, plant and equipment 1,044 962
Right-of-use assets 1,435 2,309
Net investment in lease 70 -
Deferred tax assets 5,064 5,233
Retirement benefit scheme assets 72 -
Contract assets - 1,610
80,528 74,643
Current assets
Trade and other receivables 12 12,505 10,602
Net investment in lease 47 -
Contract assets 6,676 6,178
Current tax assets 421 -
Cash and cash equivalents 15 2,891 5,924
22,540 22,704
Total assets 103,068 97,347
Current liabilities
Trade and other payables 13 (5,788) (6,081)
Accruals (8,622) (9,253)
Contract liabilities (26,004) (23,571)
Current tax liabilities (1,145) (2,456)
Lease liabilities (728) (878)
Borrowings (35) -
Provisions (5,194) (1,349)
(47,516) (43,588)
Net current liabilities (24,976) (20,884)
Non-current liabilities
Other payables 13 (209) (131)
Deferred tax liabilities (2,930) (2,953)
Contract liabilities (141) (1,864)
Retirement benefit obligations - (215)
Lease liabilities (721) (1,449)
Borrowings (6,250) -
Provisions (483) (807)
(10,734) (7,419)
Total liabilities (58,250) (51,007)
Net assets 44,818 46,340
Equity
Share capital 10,611 10,519
Share premium 83 18,961
Other reserves 28,598 27,978
Accumulated losses 5,526 (11,118)
Total equity attributable to equity holders of the parent 44,818 46,340
Consolidated statement of changes in equity
For the year ended 31 December 2022
Note Share Share premium Other reserves Accumulated losses Total
capital
£'000
£'000
£'000
equity
£'000
£'000
Balance as at 31 December 2020 10,285 15,951 26,926 (15,530) 37,632
Profit for the year - - - 6,993 6,993
Other comprehensive income for the year - - - (320) (320)
Total comprehensive income for the year - - - 6,673 6,673
Issue of equity share capital 234 3,010 - - 3,244
Equity dividend paid - - - (2,505) (2,505)
Credit to equity for share-based payments - - 1,078 - 1,078
Foreign exchange difference on share-based payments - - (26) - (26)
Tax credit on credit to equity for share-based payments - - - 244 244
Contributions by and distributions to owners 234 3,010 1,052 (2,261) 2,035
Balance at 31 December 2021 10,519 18,961 27,978 (11,118) 46,340
Loss for the year - - - (510) (510)
Other comprehensive expense for the year - - - 791 791
Total comprehensive income for the year - - - 281 281
Issue of equity share capital 92 481 - - 573
Share premium capital reduction - (19,359) - 19,359 -
Equity dividend paid - - - (2,736) (2,736)
Credit to equity for share-based payments - - 589 - 589
Foreign exchange difference on share-based payments - - 31 - 31
Tax credit on credit to equity for share-based payments - - - (260) (260)
Contributions by and distributions to owners 92 (18,878) 620 16,363 (1,803)
At 31 December 2022 10,611 83 28,598 5,526 44,818
Consolidated cash flow statement
For the year ended 31 December 2022
Note Year ended Year ended
31 December 2022
31 December 2021
£'000 £'000
Net cash from operating activities 15 6,106 13,889
Investing activities
Interest received - -
Purchases of property, plant and equipment (716) (563)
Expenditure on intangible assets (10,369) (10,224)
Payment of deferred consideration for acquisitions (994) (2,180)
Acquisition of investments in subsidiaries - cash consideration - (4,512)
Acquisition of investments in subsidiaries - cash acquired - 317
Proceeds from sub-lease 29 52
Net gain on forward contracts 23 249
Net cash outflow from investing activities (12,027) (16,861)
Financing activities
Interest paid (229) (65)
Loan arrangement fees (9) (45)
Loan drawdown 8,500 15,000
Loan repayment (2,250) (15,000)
Proceeds on issue of shares 573 3,244
Payment of lease liabilities (943) (1002)
Interest paid on lease liabilities (60) (85)
Equity dividend paid (2,736) (2,505)
Net cash used in financing activities 2,846 (458)
Net decrease in cash and cash equivalents (3,075) (3,430)
Cash and cash equivalents at beginning of year 5,924 9,520
Effect of foreign exchange rate changes 7 (166)
Cash and cash equivalents at end of year 2,856 5,924
Notes to the financial statements
1. General information
The basis of preparation of this preliminary announcement is set out below.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2022 or 2021 but is derived
from those accounts. Statutory accounts for 2021 have been delivered to the
Registrar of Companies and those for 2022 will be delivered following the
Company's annual general meeting. The auditor BDO LLP has reported on the
statutory financial statements for the year ended 31 December 2022 and the
audit report was unqualified.
Whilst the financial information included in this preliminary announcement has
been completed in accordance with International Financial Reporting Standards
(IFRSs), this announcement itself does not contain sufficient information to
comply with IFRSs. The financial information has been prepared on the
historical cost basis, except for financial instruments.
Copies of this announcement can be obtained from the Company's registered
office at King's Orchard, 1 Queen Street, Bristol BS2 0HQ.
The full financial statements which comply with IFRSs will be communicated to
shareholders via their selected preference and are available to members of the
public at the registered office of the Company from that date and are now
available on the Company's website: www.tribalgroup.com
(http://www.tribalgroup.com) .
2. Revenue for contracts with customers
The Group has split revenue into various categories which is intended to
enable users to understand the relationship with revenue segment information.
For 2021 reporting Asset Management, Software Solutions and Information
Managed Services revenue is now included in SIS as it more closely aligns
with the Software side of the business. This totals £2.7m and was previously
included within Education Services. 2020 has been updated for comparison with
£2.6m revenue being reassigned.
31 December 2022 UK Australia Other APAC North America Total
and Rest of
£000
£000 £000 £000
the world
£000
Foundation - Support & Maintenance 15,668 7,112 1,617 1,023 25,420
Foundation - Software 6,575 106 515 21 7,217
Cloud Services 6,577 1,351 425 144 8,497
Edge 3,870 400 142 346 4,758
Professional Services 7,618 1,191 2,181 231 11,221
Core SIS 40,308 10,160 4,880 1,765 57,113
Other software & services 3,240 7,808 - - 11,048
Total SIS 43,548 17,968 4,880 1,765 68,161
Schools inspections & other related services (QAS) 7,176 - - 5,570 12,746
i-graduate survey & data analytics 1,126 126 1,080 346 2,678
Total ES 8,302 126 1,080 5,916 15,424
Total 51,850 18,094 5,960 7,681 83,585
31 December 2021 UK Australia Other APAC North America Total
and Rest of
£000
£000 £000 £000
the world
£000
Foundation - Support & Maintenance 15,945 7,375 1,709 925 25,954
Foundation - Software 4,927 81 324 71 5,403
Cloud Services 5,097 1,326 237 145 6,805
Edge 2,903 363 125 3 3,394
Professional Services 8,004 2,153 2,338 173 12,668
Core SIS 36,876 11,298 4,733 1,317 54,224
Other software & services 4,266 8,816 - - 13,082
Total SIS 41,142 20,114 4,733 1,317 67,306
Schools inspections & other related services (QAS) 6,888 - - 4,181 11,069
i-graduate survey & data analytics 945 371 1,091 366 2,773
Total ES 7,833 371 1,091 4,547 13,842
Total 48,975 20,485 5,824 5,864 81,148
Net contract liabilities
Contract asset/(liability) Contract asset/(liability)
2022 2021
£000 £000
Opening contract balance (17,647) (19,435)
Of which released to income statement 17,405 19,128
New billings and cash in excess of revenue recognised (19,227) (17,340)
Closing contract balance (19,469) (17,647)
Balances arise on contract assets and liabilities when cumulative payments
received from customers at the balance sheet date do not necessarily equal the
amount of revenue recognised on contracts. Customers are on standard payment
terms, which may result in settlement of invoices prior to the recognition of
associated revenue.
Contract assets inherently have some contractual risks associated with them
related to the specific and ongoing risks in each individual contract with a
customer. The impairment of contract assets/(liabilities) reflects provisions
recognised against contract assets in relation to these risks.
The amount of incremental costs to obtain a contract which extends over a
period of more than 12 months has been recognised as an asset in prepayments
totalling £0.5m (2021: £0.5m) and will be released in line with the total
contract revenue. No amount has been impaired at 31 December 2022 or 2021.
Remaining performance obligations
The amount of revenue that will be recognised in future periods on these
contracts when those remaining performance obligations will be satisfied is
analysed as follows:
At 31 December 2022
2023 2024 2025 Thereafter Total
£000 £000 £000 £000 £000
Foundation - Support & Maintenance 24,635 24,472 15,783 6,389 71,279
Foundation - Licence 5,876 5,275 3,187 134 14,472
Cloud Services 8,947 8,320 5,618 2,334 25,219
Edge 4,648 4,560 2,996 1,263 13,467
Professional Services 7,093 1,303 74 12 8,482
Core SIS 51,199 43,930 27,658 10,132 132,919
Other software & services 7,577 3,541 1,982 9 13,109
Total SIS 58,776 47,471 29,640 10,141 146,028
Schools inspections & other related services (QAS) 12,013 8,120 2,101 141 22,375
i-graduate survey & data analytics 2,121 1,033 878 439 4,471
Total ES 14,134 9,153 2,979 580 26,846
TOTAL 72,910 56,624 32,619 10,721 172,874
At 31 December 2021
2022 2023 2024 Thereafter Total
£000 £000 £000 £000 £000
Foundation - Support & Maintenance 24,814 24,063 16,191 12,609 77,677
Foundation - Licence 4,563 3,438 2,764 2,068 12,833
Cloud Services 7,557 6,982 4,816 4,283 23,638
Edge 4,132 4,012 2,890 1,724 12,758
Professional Services 12,694 1,062 107 127 13,990
Core SIS 53,760 39,557 26,768 20,811 140,896
Other software & services 9,873 4,000 2,542 677 17,092
Total SIS 63,633 43,557 29,310 21,488 157,988
Schools inspections & other related services (QAS) 6,756 2,136 660 - 9,552
i-graduate survey & data analytics 1,501 1,157 978 1,279 4,915
Total ES 8,257 3,293 1,638 1,279 14,467
TOTAL 71,890 46,850 30,948 22,767 172,455
An analysis of the Group's revenue is as follows:
2022 2021
£'000 £'000
Continuing operations
Sales of services 83,585 81,148
Total revenue 83,585 81,148
Further details of the nature of the services provided are disclosed in Note
4.
Sales of goods are not material and are therefore not shown separately.
Included in sales of services is £1.7m (2021: £0.8m) related to software
license revenues recognised as a result of a periodic review of our license
entitlement resulting from changes in our customers' enrolled student numbers.
There is no revenue in respect of discontinued operations.
3. Business segments
Information reported to the Group's Chief Executive for the purposes of
resource allocation and assessment of segment performance is focused on the
nature of each type of activity. The Group's reportable segments and
principal activities under IFRS 8 are detailed below:
· Student Information Systems (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,
being the Chief Executive. Inter-segment sales are charged at prevailing
market prices.
Revenue Adjusted segment operating profit
Year ended Year ended Year ended Year ended
31 December 2022 £'000
31 December 2021 £'000
31 December 2022 £'000
31 December 2021 £'000
Student Information Systems 68,161 67,306 11,876 22,404
Education Services 15,424 13,842 3,719 2,229
Total 83,585 81,148 15,595 24,633
Unallocated corporate expenses (11,146) (10,666)
Adjusted operating profit 4,449 13,967
Amortisation of software and customer contracts & relationships (see Note (1,098) (947)
6)
Other items (see Note 6) (2,572) (4,132)
Operating profit 779 8,888
Investment income 25 255
Finance costs (417) (529)
Profit before tax 387 8,614
Tax charge (897) (1,621)
(Loss)/Profit after tax (510) 6,993
Associated depreciation and amortisation is allocated to segment profits and
is included in adjusted segment operating profit as above. The amount included
in SIS is £2.6m (2021: £1.1m) and within Education Services £0.1m (2021:
£nil).
The accounting policies of the reportable segments are the same as the Group's
accounting policies described in Note 1. Segment profit represents the profit
earned by each segment, without allocation of central administration costs,
including Directors' salaries, finance costs and income tax expense. This is
the measure reported to the Group's Chief Executive for the purpose of
resource allocation and assessment of segment performance.
Within Education Services revenues of approximately 5% (2021: 4%) have arisen
from the segment's largest customer; within SIS revenues of approximately 4%
(2021: 4%) have arisen from the segment's largest customer.
Geographical information
Revenue from external customers, based on location of the customer, is shown
below:
2022 2021
£'000 £'000
UK 51,850 48,975
Australia 18,094 20,485
Other Asia Pacific 5,960 5,824
North America 3,616 3,149
Rest of the world 4,065 2,715
83,585 81,148
Non-current assets (excluding deferred tax)
2022 2021
£'000 £'000
UK 60,746 54,314
Australia 14,350 13,391
Other Asia Pacific 305 1,637
North America 52 68
Rest of the world 11 -
75,464 69,410
4. Other items
2022 2021
£'000
£'000
Acquisition related costs (186) (765)
Employee related share option charges (including employer related taxes) (450) (1,628)
- Internal systems transformation programme "VERITAS" (1,321) (1,715)
- Restructuring and associated costs (615) (24)
Amortisation of software and customer contracts & relationships (1,098) (947)
Total administrative expenses (3,670) (5,079)
Other financing costs (94) (299)
Total other items before tax (3,764) (5,378)
Tax on other items 2,010 619
Total other items after tax (1,754) (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 relating to the consultancy and legal costs
of potential acquisitions in the period total £186,000. In 2021 the costs
related to the acquisition of Semestry Limited, and the acquisition of Eveoh
BV's assets into Semestry Netherlands BV (2021: £832,000). Under IFRS 3 these
amounts were expensed as they are not eligible for capitalisation. Also in
2021 accounting for changes in the fair value of the contingent deferred
consideration were remeasured as part of the earn-out agreement with Tribal
Dynamics Limited, and the corresponding gain was recognised in the income
statement (2021: £(67,000)). These are all considered to be one-off costs in
the year.
Employee related share option charges. The numbers above include:
· share-based payments (see note 22) plus foreign exchange (2022:
£(31,000): 2021: £27,000);
· the movement in associated employers taxes accrual (2022: £(215,000):
2021: £494,000);
· the amounts accrued and paid on dividends on share options that have
met performance conditions (2022: £(15,000): 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 (2022: £91,000: 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.
Other items are detailed below:
· during 2022 and 2021 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. Following clarified guidance issued in relation to IAS 38,
£1,321,000 of costs have been expensed to the income statement (2021:
£1,715,000). The upgrade is material and non-recurring in nature. The system
went live in January 2023 and all further costs will be expensed as part of
the Group's underlying activities;
· restructuring and associated costs relate to the restructuring of the
Group's operations (2022: £615,000: 2021: £24,000).
Amortisation of software and customer contracts and relationships:
Amortisation arising on the fair value of intangible assets acquired is
separately disclosed. (2022: £1,098,000: 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
(2022: £94,000: 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.
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. This includes a
release of £1.3m tax provision previously recognised in relation to the Group
relief claim from Care UK for the year ended 31 March 2007.
5. Investment income
2022 2021
£'000
£'000
Fair value movement on forward exchange contract 23 249
Interest receivable on leased assets 2 6
Total investment income 25 255
6. Finance costs
2022 2021
£'000
£'000
Interest on bank overdrafts and loans 229 70
Loan arrangement fees 9 45
Net interest payable on retirement benefit obligations 4 14
Interest expense on lease liabilities 81 101
Adjusted finance costs 323 230
Unwinding of discounts 94 299
Other finance costs 94 299
Total finance costs 417 529
7. Tax
2022 2021
£'000
£'000
Current tax
UK corporation tax (1,381) (319)
Overseas tax 1,967 2,017
Adjustments in respect of prior years 483 (103)
1,069 1,595
Deferred tax
Current year (212) (2)
Adjustments in respect of prior years 40 28
(172) 26
Tax charge on profits 897 1,621
The continuing tax charge can be reconciled to the profit from continuing
operations per the income statement as follows:
2022 2021
£'000
£'000
Profit before tax on continuing operations 387 8,614
Tax charge at standard UK rate of 19% (2020: 19%) 74 1,637
Effects of:
Overseas tax rates 619 688
Expenses not deductible for tax purposes 14 190
Adjustments in respect of prior years 523 (74)
Additional deduction for R&D expenditure (23) (13)
Share scheme costs 19 (174)
Fixed assets ineligible depreciation (14) (47)
Utilisation of unrecognised tax losses 989 84
Movement in tax provision (1,405) (371)
Effect of changes in tax rates 101 (299)
Tax expense for the year 897 1,621
In addition to the amount charged to the income statement a current tax credit
of £24,000 (2021: £53,000) and a deferred tax charge of £284,000 (2021:
£395,000) has been recognised directly in equity during the year in
relation to Share Schemes. A deferred tax charge of £726,000 (2021:
£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. There has been some
progress in the Care UK case in the year to 31 December 2022. Under IFRIC 23
management have reviewed this uncertain tax provision and now consider it
appropriate to make an adjustment due to the progression in the year. See note
30.
The income tax expense for the year is based on the UK statutory rate of
corporation tax for the period of 19% (2021: 19%). Tax for other jurisdictions
is calculated at the prevailing rates in the respective jurisdictions.
In the 3 March 2021 Budget, it was announced that the UK tax rate will
increase to 25% from 1 April 2023. As the rate of 25% has been substantively
enacted at the balance sheet date, the deferred tax balances have been
calculated at 25%.
8. Dividends
2022 2021
£'000
£'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2020 of 1.2 pence 2,736 2,505
(Interim dividend for the year ended 31 December 2020: 1.1 pence) per share
Proposed final dividend:
Proposed final dividend for the year ended 31 December 2021 of 1.3 pence 1,379 2,735
(year ended 31 December 2020: 1.2 pence) per share
The Board regularly reviews the available distributable reserves of Tribal
Group plc to ensure they are protected for future dividend payments.
9. Earnings per share
Basic earnings per share and diluted earnings per share are calculated by
reference to a weighted average number of Ordinary Shares calculated as
follows:
Restated*
2022 2021
thousands
thousands
Weighted average number of shares outstanding:
Basic weighted average number of shares in issue 211,627 209,073
Weighted average number of employee share options 3,236 5,557
Weighted average number of shares outstanding for dilution calculations 214,863 214,630
(*The 2021 basic calculation has been re-stated to include 1,490,169 LTIP and
CSOP shares that have met the vesting criteria but have yet to be exercised.
The previously reported share numbers used are as follows: Basic weighted
average shares 207,986,000; Dilutive weighted average shares 7,047,000; Total
weighted average shares 214,981,000. The previously reported EPS was as
follows: Basic 3.4p; Adjusted Basic 5.7p. The diluted EPS did not change.)
Diluted earnings per share reflects the dilutive effect of LTIP and CSOP share
options for which vesting criteria have been met. In regards the diluted loss
per share in 2022, all potentially dilutive ordinary shares, including options
are anti-dilutive as they would decrease the loss per share.
The maximum number of potentially dilutive shares, based on options that have
been granted but have not yet met vesting criteria, is 3,328,168 (2021:
7,125,172). This includes 92,157 options in the 2019 SAYE Scheme (2021:
876,512).
The adjusted basic and diluted earnings per share figures shown 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:
Restated*
2022 2021
£'000 £'000
Net profit (510) 6,993
Earnings per share
Basic (0.2)p 3.3p
Diluted (0.2)p 3.2p
Adjusted net profit 1,244 11,752
Adjusted earnings per share
Basic 0.6p 5.6p
Diluted 0.6p 5.5p
Profit for the year Earnings per share
Restated *
2022 2021 2022 2021
£'000
£'000
£'000
£'000
Profit for the year attributable to equity shareholders (510) 6,993 (0.2)p 3.3p
Add back:
Amortisation of IFRS intangibles 889 1,083 - -
Share-based payments 324 1,400 - -
Internal systems transformation programme "VERITAS" 1,139 1,460 - -
Unwinding of discounts 94 299 - -
Movement in deferred consideration - (67) - -
Other acquisition costs 186 832 - -
Restructuring and associated costs 456 - - -
Reduction of tax provision (1,352) - - -
Other items (net of tax) 18 (248) - -
Total adjusting items 1,754 4,759 0.8p 2.3p
Adjusted earnings 1,244 11,752 0.6p 5.6p
10. Goodwill
2022 2021
£'000
£'000
Cost
At beginning of year 109,813 107,892
Additions - 2,543
Exchange differences 594 (622)
At end of year 110,407 109,813
Accumulated impairment losses
At beginning of year 81,231 81,231
At end of year 81,231 81,231
Net book value
At end of year 29,176 28,582
At beginning of year 28,582 26,661
Goodwill acquired in a business is allocated, at acquisition, to the
cash-generating units (CGUs) that are expected to benefit from the business
combination. The carrying amount of goodwill has been allocated as follows:
2022 2021
£'000
£'000
Student Information Systems (SIS) 25,642 25,048
Education Services (ES) 3,534 3,534
29,176 28,582
Goodwill is reviewed at least annually for impairment by comparing the
recoverable amount of each cash generating unit (CGU) with the goodwill,
intangible assets and property, plant and equipment allocated to that CGU.
The recoverable amount of a CGU is determined based on value in use
calculations. These calculations use risk adjusted cash flow projections based
on the financial budget approved by management for the period to 31 December
2023. The budget was prepared based on past experience, strategic plans and
management's expectation for the markets in which they operate including
adjustments for known contract ends, contract related inflationary increases
and planned cost savings. The budget was extrapolated over a five-year period
in line with previous calculations and to give greater clarity on future cash
flows. The growth assumption is 2% per annum for SIS (2021: 2%) and 2% for ES
(2021: 2%). Cash flows beyond the budget and extrapolation period were
calculated into perpetuity using the same growth rates. These growth rates are
in line with the expected average UK economy long-term growth rate.
The cash flows projections are discounted at a pre-tax discount rate of 10.9%
(2021: 10.8%). The single discount rate, which is consistently applied for
both CGUs, is determined with reference to internal measures and available
industry information and reflects specific risks relevant to the Group.
Impairment testing inherently involves a number of judgemental areas,
including the preparation of cash flow forecasts for periods that are beyond
the normal requirements of management reporting; the assessment of the
discount rate appropriate to the Group and the estimation of the future
revenue and expenditure of each CGU. Accordingly, management undertook stress
testing to understand the key sensitivities and concluded as follows:
A rise in discount rate to 32% and 210% would trigger an impairment in SIS and
ES respectively. A decline in growth rate of EBITDA (22%) in SIS and (43.8%)
in ES would result in an impairment. Management does not consider these
changes possible but considers a slight increase in discount rate to 12% and
zero growth may be possible as a result of the current economic environment.
As a result of the analysis, there is headroom of £106.3 million and £9.7
million in SIS and ES respectively.
As a result, management does not believe a reasonably possible change in the
key assumptions may cause impairment.
11. Other intangible assets
Acquired Acquired Acquired intellectual property Development costs Business systems Software licenses Total
Software Customer contracts & relationships £'000 £'000 £'000 £'000 £'000
£'000 £'000
Cost
At 1 January 2021 10,293 8,620 1,873 43,619 5,319 1,489 71,213
Acquisitions 2,305 1,289 - 1,237 - - 4,831
Additions - - - 10,224 - - 10,224
Disposals - - - (905) (4,496) - (5,401)
Exchange differences (365) (156) - (162) (5) (1) (689)
At 31 December 2021 12,233 9,753 1,873 54,013 818 1,488 80,178
and 1 January 2022
Adjustments - - - 23 (30) - (7)
Additions - - - 10,294 75 - 10,369
Disposals - - - (9,171) (793) (1,445) (11,409)
Exchange differences 349 149 - 155 5 1 659
At 31 December 2022 12,582 9,902 1,873 55,314 75 44 79,790
Amortisation
At 1 January 2021 8,141 6,299 734 25,255 4,920 1,488 46,837
Acquisitions - - - 366 - - 366
Charge for the year 529 418 75 933 24 1 1,980
Disposals - - - - (4,315) - (4,315)
Exchange differences (365) (111) - (155) (5) (1) (637)
At 31 December 2021 8,305 6,606 809 26,399 624 1,488 44,231
and 1 January 2022
Charge for the year 628 470 141 1,160 20 - 2,419
Disposals - - - (9,058) (644) (1,445) (11,147)
Exchange differences 350 113 - 156 - 1 620
At 31 December 2022 9,283 7,189 950 18,657 - 44 36,123
Carrying amount
At 31 December 2022 3,299 2,713 923 36,657 75 - 43,667
At 31 December 2021 3,928 3,147 1,064 27,614 194 - 35,947
Software, customer contracts and relationships and intellectual property that
have arisen from acquisitions are amortised over their estimated useful lives,
which are 3 to 8 years, 3 to 12 years, and 15 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 and impairment of development costs, amortisation for software,
customer contracts and relationships, intellectual property, business systems
and software licenses are all included within administrative expenses.
Included within Business systems are finance systems with a carrying value of
£0.1m (2021: £0.2m). Phase I of the D365 implementation was fully written
off in the year. The Veritas programme, which 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,
went live on 1 January 2023. £75,000 of costs have been capitalised and in
line with IAS 38 £1,321,000 of costs have been expensed to the income
statement (2021: £1,715,000). Business systems are amortised over 10 years.
In addition, a review of all business systems, development cost and software
licences was undertaken in the year and £11.1m of fully depreciated assets
have been written off as no longer in use.
The Group is required to test annually if there are any indicators of
impairment. The recoverable amount is determined based on value in use
calculations of identified CGUs. The use of this method requires the
estimation of future cash flows and the determination of a discount rate in
order to calculate the present value of the cash flows.
A review of the Group's capitalisation was undertaken resulting in £0.1m of
AI development costs previously capitalised being written off.
The impairment testing allocates all assets relating to specific CGUs,
including goodwill, other intangibles, property, plant and equipment and net
current assets and liabilities.
12. Trade and other receivables
2022 2021
£'000
£'000
Amounts receivable for the sale of services 7,387 5,629
Less: loss allowance (194) (187)
7,193 5,442
Other receivables 828 693
Prepayments 4,484 4,467
12,505 10,602
The Group's principal financial assets are cash and cash equivalents and trade
and other receivables which represent the Group's maximum exposure to credit
risk in relation to financial assets. The Group's credit risk is primarily
related to its trade receivables. The credit risk on liquid funds is limited
because the counterparties are banks with high credit ratings assigned by
international credit rating agencies.
All receivables are due within one year in both current and prior years.
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
13. Trade and other payables
2022 2021
£'000
£'000
Current
Trade payables 1,010 1,712
Other taxation and social security 2,498 2,728
Other payables 2,280 1,641
5,788 6,081
Non-current
Other payables 209 131
209 131
Total 5,997 6,212
The average credit period taken for trade purchases is 10 days (2021: 17
days). For most suppliers, no interest is charged on the trade payables for
the first 30 days from the date of invoice. Thereafter, in some cases,
interest may be charged on the outstanding balances due to certain suppliers
at various interest rates. The Group has financial risk management policies in
place to ensure that all payables are paid within a reasonable time frame. The
Directors consider that the carrying amount of trade and other payables
approximates their fair value.
Other payables are split as follows:
2022 2021
£'000
£'000
Goods received not invoiced 712 826
Other creditors 1,568 815
2,280 1,641
14. Borrowings
The Group had a £2m committed overdraft facility in the UK and a AUD$2m
committed overdraft facility in Australia, both facilities are committed for a
12-month rolling period ending August 2023 and October 2023 respectively. As
at 31 December 2022, the Group had cash and cash equivalents of £2.9m (2021:
£5.9m). At 31 December 2022 £0.1m of the UK overdraft was drawn.
At the year-end there was £1.97m available but undrawn in respect of the UK
overdraft facility (£35,000 had been drawn down) and $AUD2m available but
undrawn in respect of the Australian overdraft facility.
On 21 January 2020 the Group entered into a 3 year £10m multicurrency
revolving facility with HSBC with the option to extend by a further 2 years,
both of which have been exercised with the facility expiring in December 2024.
On 20 February 2023, to manage the short-term working capital requirements,
Tribal converted £7m of the £10m uncommitted accordion into its existing
loan facility, increasing the total facility to £17m. The facility was put in
place to cover general corporate and working capital requirements of the
Group. During the year the full £8.5m was drawn down and £2.25m repaid, so
as at 31 December 2022 £6.25m (2021: £nil) of the loan was utilised.
15. Notes to the cash flow statement
2022 2021
£'000
£'000
Operating profit from continuing operations 779 8,888
Depreciation of property, plant and equipment 623 650
Depreciation of right-of-use assets 1,036 985
Amortisation and impairment of other intangible assets 2,419 1,980
Share-based payments 589 1,078
Movement in contingent deferred consideration - (67)
Research and development tax credit (177) (204)
Net pension credit (29) (29)
Other non-cash items 23 874
Operating cash flows before movements in working capital 5,263 14,155
Increase in receivables (808) (3,093)
Increase/(decrease) in payables 4,252 4,472
Net cash from operating activities before tax 8,707 15,534
Net tax paid (2,601) (1,645)
Net cash from operating activities 6,106 13,889
Net cash from operating activities before tax can be analysed as follows:
2022 2021
£'000
£'000
Continuing operations 8,904 15,534
16. Contingent liabilities
The Company and its subsidiaries have provided performance guarantees issued
by its banks on its behalf, in the ordinary course of business, totalling
£0.8m (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.
As disclosed in Note 34, Tribal Holdings Limited, Tribal Dynamics Limited,
Tribal Dynamics Holdings Limited, Semestry Limited and International Graduate
Insight Group Limited have taken advantage of the exemption available under
Section 394A/479A of the Companies Act 2006 in respect of the requirements for
audit. As a condition of the exemption, the Company has guaranteed the
year-end liabilities of these subsidiaries until they are settled in full. The
liabilities of the subsidiaries at the year-end were £64,309,000 (2021:
£60,736,000). These are inclusive of intercompany liabilities of £60,963,120
(2021: £58,340,634).
As disclosed in note 10, there has been some progress in the Group relief
claim from Care UK for the year ended 31 March 2007, which resulted in
management reducing the uncertain tax provision previously recognised by
£1.3m. A provision of £0.1m still remains, this being calculated as the
maximum adjustment that Tribal may have to pay. Correspondence to date from
HMRC does not suggest that there will be any adjustment to the original claim
Tribal submitted, however until the case is closed HMRC's position could
change. Following legal advice, Tribal signed a further standstill agreement
until 31 December 2023 and the case is yet to be formally closed by HMRC.
The Group delivers complex multi-year projects which from time to time give
rise to significant operational risks. Such risks may, in certain
circumstances, lead to potential negotiations or disputes with customers which
may give rise to consequential financial or commercial obligations or
liabilities arising. The Group has a material contract which has been
terminated with both parties reserving rights. The parties are required to
participate in mediation in an attempt to achieve a resolution but the timing
and outcome of that process and any private negotiations to that end is
presently uncertain. It is possible that there may be a significant adverse
financial impact on the Group, but as no financial demands have yet been
enumerated, currently the Board cannot fully assess such potential impact. The
range of any settlement is not disclosed as it could be prejudicial to the
outcome.
17. Post balance sheet events
In February 2023, to manage the short-term working capital requirements,
Tribal converted £7m of the £10m uncommitted accordion into its existing
loan facility, increasing the total facility to £17m.
Tribal received notification on 17 March 2023 that NTU has purported to
terminate the contract and reserved its rights to claim damages. Tribal
rejects NTU's right to terminate and considers its purported termination a
wrongful repudiation of the contract. Tribal has accepted NTU's wrongful
repudiation, elected to treat the contract as at an end and reserved its
rights. The contract requires the parties to participate in mediation in an
attempt to achieve a resolution.
Following the cessation of the NTU contract, no adjustment has been made to
the 31 December 2022 financial statements as it is a non-adjusting event after
the year end.
At 31 December 2022 the balance sheet included contract assets of £0.8m,
refund liability of £0.9m and onerous contract provision of £4.5m
recognised for future losses, representing the unavoidable costs of meeting
the obligations under the contract in excess of the expected economic benefits
to be received in relation to the NTU contract. The outcome of the outcome of
the mediation process will determine the subsequent treatment of the balances
referred to above.
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