TIDMTRB
RNS Number : 5425G
Tribal Group PLC
18 March 2020
18 March 2020
Tribal Group plc
("Tribal" or the "Group")
Preliminary Results year ended 31 December 2019
Tribal (AIM: TRB), a leading provider of software and services
to the international education management market, today announces
its preliminary results for the year ended 31 December 2019.
Financial highlights
-- Adjusted Operating Profit (EBITDA) up 9% to GBP15.4m* (2018:
GBP14.1m*), Adjusted Operating Profit after depreciation (EBITA) up
8% to GBP11.7m (2018: GBP10.8m)
-- Overall revenue down 2% at GBP78.2m (2018: GBP80.1m); SIS
revenue increased 3%, Education Services fall mainly timing
-- Statutory Profit After Tax up 48% to GBP6.1m (2018: GBP4.1m)
before inclusion of one-off platform dispute resolution costs of
GBP9.1m, inclusion results in a final Statutory Loss After Tax of
GBP3.0m
-- Annual Recurring Revenue (ARR) increased by 7% to GBP42.3m
(2018: GBP39.5m) representing 54% of revenue, 69% of
software-related revenue
-- Committed Income increased by 10% to GBP133.6m (2018:
GBP121.6m), including new SIS customers and 5 large Education
Services re-tenders
-- Strong operational cash conversion during the year of 105%
(2018: 132%); net cash at end of year of GBP16.5m (2018:
GBP20.0m)
-- Progressive annual dividend payment with the Board
recommending a 9% increase to 1.2p per share (2018: 1.1p); this is
expected to be paid at the end of July 2020
* Adjusted Operating Profit is in respect of continuing
operations and is stated excluding "Other Items" charges of
GBP14.1m (2018: GBP6.2m). Other Items include the provision for the
resolution of the platform dispute, Share-based Payments, Deferred
Contingent Consideration, Amortisation of IFRS3 Intangibles, and
Restructuring and associated costs
Operational highlights
-- One new University won in the UK Higher Education sector and 11 Further Education Colleges
-- Two new SITS customers added in Australia, and significant ongoing ebs work on TAFE
-- Education Services won all five major retenders across the
UK, USA and Middle East as well as a new contract in Sharjah, value
of total contracts won GBP29m
-- Increased investment in the Tribal Edge, first module went live in early 2020
-- Crimson Consultants (Tribal Dynamics) acquired, provides CRM
solutions and will form important part of Tribal Edge
-- Dispute with software platform provider on royalty payments resolved
Mark Pickett, Chief Executive, commented:
"I am pleased with the improved performance in 2019, and we
started 2020 well with a number of new contracts won. However in
light of recent events, our overriding concern for 2020 is to
mitigate the impact of the coronavirus outbreak on the business and
protect shareholder value. We will continue to focus on our
strategic priorities while ensuring the wellbeing of our customers,
partners and staff."
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No.596/2014.
Ends
For further information please contact:
Tribal Group plc
Tel: 0117 313 6371
Richard Last, Chairman
Mark Pickett, Chief Executive Officer
Paul Simpson, Acting Chief Financial Officer
Investec Bank plc
Tel: 020 7597 5970
Sara Hale
Virginia Bull
William Godfrey
N+1 Singer Capital Markets Limited
Tel: 0207 496 3000
Shaun Dobson
Tulchan Communications LLP
Tel: 0207 353 4200
James Macey White
Matt Low
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
I am pleased to report a good year of progress with improved
growth in the following key financial metrics - Adjusted Operating
Profit, Adjusted Operating Margin, Annual Recurring Revenue and
Committed Income. The Group has continued to make strong progress
developing the new Tribal Edge platform with the first module
complete and available in early 2020. We made our first business
acquisition for five years with the purchase of Crimson Consultants
(now Tribal Dynamics), a provider of customer relationship
management ('CRM') software solutions which will complement
existing and future sales and, in addition, we have resolved the
dispute with a platform provider.
Results
The Adjusted Operating Profit (EBITDA) increased to GBP15.4m
(2018: GBP14.1m) and the Adjusted Operating Margin (EBITDA)
increased to 19.6% (2018: 17.7%). Revenue in the year was 2.3%
lower than last year at GBP78.2m (2018: GBP80.1m) however this
mostly reflects the timing of certain contracts into early
2020.
Annual Recurring Revenue (ARR) increased by 7.1% to GBP42.3m
(2018: GBP39.5m). Committed Income at 31 December 2019 increased to
GBP133.6m (2018: GBP121.6m).
The Statutory Profit after tax for the year was impacted by the
resolution of the dispute with the platform provider, with expected
costs of GBP9.1m resulting in an overall loss for the year of
GBP3.0m (2018: profit of GBP4.1m); excluding this provision
Statutory Profit would have increased by 48% to GBP6.1m.
The Group continued to be cash generative with strong operating
cash flows of GBP12.4m (2018: GBP14.2m), before investment in the
development of Tribal Edge and the acquisition of Crimson
Consultants. We closed the year with net cash of GBP16.5m (2018:
GBP20.0m).
Business Performance
The Group won business with existing and new customers for our
SITS software. There has been a softer backdrop to the Higher
Education market globally with limited new opportunities coming to
market, however we had a significant new contract win towards the
end of the year at the University of Northampton, with Tribal
replacing the incumbent provider with a cloud hosted full SITS
solution, including CRM, following a competitive tender
process.
Sales of our education business systems ("ebs") and Maytas
solutions for Further Education and Vocational Learning providers,
including TAFEs in Australia, continued to perform well with a
number of notable new wins including Dyson, Capital City Colleges
Group and UCFB (University Campus of Football Business).
In Education Services we won five new re-tenders for contracts
with a total contract value for all new contracts of GBP29m,
including the National Centre for Excellence in the Teaching of
Maths (NCETM) in the UK, the New York State Education Department
inspections contract in the US and inspections for the Abu Dhabi
Department of Education and Knowledge (ADEK) in the Middle
East.
Tribal Edge
The first phase of the development of our cloud-based software
solution is nearing completion, with the first new module on the
Tribal Edge platform released at the start of 2020. This is a
significant milestone in the development of Tribal Edge. Further
modules are in development and we expect to release the Admissions
module towards the end of 2020. We are already selling a number of
Edge ready modules on our existing platforms, including Student
Engage which is our social collaboration app for students and
teachers.
Acquisition
We made the key strategic acquisition of Crimson Consultants
(now Tribal Dynamics) during the year, a business focused on CRM
solutions such as student recruitment for education institutions
built on the Microsoft Dynamics platform. These solutions
complement and enhance our existing software solutions and provide
opportunities to cross up-sell into existing customers and
importantly competitor sites. This can be on a stand-alone basis,
as a combined offering alongside SITS or ebs, and as part of Tribal
Edge. I would like to take this opportunity to welcome our new
colleagues into Tribal.
Platform resolution
Early in 2019 we notified the stock exchange that the Group had
received a letter of claim from lawyers acting for a provider of a
software platform on which a number of the Company's material
products are based. The Board were pleased to announce at the start
of 2020 that it had reached a non-binding agreement with the
platform provider to settle all historic liabilities resulting in a
payment of GBP9.1m including anticipated legal costs. Whilst the
Board did not consider the claim to be justified, it was keen to
resolve the matter at the earliest opportunity to remove risk and
uncertainty from the business and our customers. On 13 March 2020
it was announced that an agreement had been signed. This includes
entering into a new 10 year VAR agreement, with effect from 1
January 2020 thus bringing this matter to a close.
Management changes
Mark Pickett was appointed as Chief Executive Officer earlier in
the year, having previously been Acting Chief Executive Officer and
Chief Financial Officer, and Paul Simpson was appointed as Acting
Chief Financial Officer having previously been the Global Financial
Controller. Mike Cope was appointed as Chief Technology Officer, a
new role for Tribal. Mike joined from University College London, an
existing SITS customer, where he was CIO and his experience will be
invaluable as we drive adoption of Tribal Edge.
Nigel Halkes was appointed to the Board as a non-executive
director at the start of 2020. Nigel joins following a successful
35-year career at EY, retiring as Managing Partner, UK and Ireland
Markets. His deep experience of advising and growing technology
businesses is highly valuable to Tribal. The Board is committed to
diversity throughout the company and will seek to appoint a woman
to the Board at the time of the next appointment.
Employees
The Board recognises the hard work and commitment shown by our
employees across the world. Our employees are essential to Tribal's
continued success and on behalf of the Board I would like to
express our thanks.
Dividend
Tribal remains committed to a progressive dividend policy and
the Board is pleased to propose an annual dividend in respect of
the year ended 31 December 2019 of 1.2p (pending approval at the
AGM on 27 April 2020), representing a 9% increase on 2018. The
dividend is expected to be paid at the end of July 2020, with an
associated record date of 19 June 2020 and ex-dividend date of 18
June 2020.
Brexit
Tribal welcomes the increased certainty following the UK's
recent exit from the European Union (Brexit). As post-exit trade
negotiations progress we do not expect any short-term impact
however we continue to monitor the position as areas concerning
reduced funding for research projects and a fall in overseas
student numbers could put pressure on universities' finances which
may result in curtailment or delays in new investment.
Outlook and Coronavirus (Covid-19)
Tribal won a significant new SITS customer at the start of 2020
with Kaplan Australia, a large training provider in Australia,
which followed on from the new contract win at the University of
Northampton late in 2019.
Tribal is not immune to the consequences of the spread of the
Coronavirus (Covid-19) and the impact it is having on the business
and Education communities. In Australia, where the academic year
started in February 2020, it has affected the ability of
international students (particularly Chinese students) to take up
their places at universities. We have also seen schools temporarily
closed in the UAE which has affected our ability to carry out
school inspections. We are seeing educational institutions
diverting people and financial resources to dealing with the
effects of this issue. Tribal itself has robust business continuity
plans and will continue to support its customers and deliver its
projects. It is however likely that existing projects will be
delayed as customer resources are diverted elsewhere, and we also
expect award of new projects to be on hold until matters become
clearer. Should a significant number of schools and universities
close (albeit temporarily) it is likely to impact Tribal's
Education Services ability to deliver and complete benchmarking,
surveys, and school inspections. We do expect there to be a
significant financial impact on the Group in the current year
however at this time, due to the constantly changing situation
globally we are currently unable to quantify, with any degree of
certainty the impact on the Group. We are monitoring the situation
daily and will advise the market accordingly.
We do though, remain positive about the medium and longer-term
prospects for the Group.
Richard Last
Chairman
Business Review
Introduction
It has been a year since I was appointed as CEO at Tribal and I
am pleased to report that the Group has seen continued improvements
in its core metrics of Annual Recurring Revenue, Adjusted Operating
Profit and Margin percentages.
Strategically, I have set out our priorities to:
1) Continue to drive new sales through our portfolio of products
in existing and new geographies. Our core products, in particular
SITS in Higher Education and ebs in Further Education, are leaders
in their markets and continue to secure new customers.
2) Deliver on the Tribal Edge strategy which provides a
compelling vision to new and existing customers to embrace our
next-generation, best-of-breed Student Information System (SIS)
solutions. As a native cloud SIS, it provides a competitive
differentiator in acquiring new customers and protects Tribal's
customer base for a generation by providing the most efficient,
lowest cost route for an existing customer to achieve a
comprehensive, integrated, open-standards SIS which maximise the
student experience and reduce technical complexity and IT cost.
3) Support our new and existing customers in taking advantage of
cloud technologies by broadening the portfolio of value-add
solutions and services offered. This includes building a partner
programme to offer market leading cloud solutions on our Edge
platform; targeted acquisitions which broaden our Student
Information System offering and; lowering total cost for our
customers by providing seamless, pre-built integrations.
These provide additional revenue and margin opportunities for
Tribal from existing customers, particularly in relation to
improving student experience and driving greater cost efficiencies.
In line with our strategy, Tribal is moving to becoming a
cloud-only company, and I am pleased to report that all our
existing products, including SITS and ebs, are now already
available in the public cloud.
In this regard, we are already seeing significant customer-led
cloud opportunities, as institutions increasingly look to move
their existing systems into a Public Cloud environment to reduce
complexity and lower their internal IT spend. Through the critical
nature of the SMS system, Tribal has a differentiated value
proposition in providing expert support to the whole technology
stack, from application to infrastructure, which enables Tribal to
increase its share-of-wallet from existing customers. This is also
a significant step on the journey to become a cloud-only SaaS
system, as these are delivered as annual recurring cloud
services.
In addition, our successful acquisition of Crimson Consultants
(now Tribal Dynamics) broadened our portfolio of solutions that we
deliver on the Tribal Edge Platform, including, for example, our
Marketing, Enquiries and Recruitment solutions, which integrate
seamlessly with the Open Day and Admissions solutions. In addition
to enabling our up-sell and cross-sell strategy we will actively
seek further acquisitions to provide further cloud-based solutions,
as well as building a partner ecosystem of best-of-breed solutions,
all pre-integrated onto our Edge platform, which maximise the
value-add for the customer, but minimises the total cost.
We continue to successfully build out our next generation,
cloud-native Edge platform, which will provide a SaaS platform at
lower total cost for our customers but provide increased revenue
from the customer for the cloud hosting element. I am delighted
that we have successfully rolled out our first module on this
platform, in early 2020, to our Australian customers. Work
continues apace, and the next modules, for Admissions, will be
ready for our first customer adoption later in 2020. Thereafter, we
will see further modules being delivered to customers at regular
intervals. We see significant interest from our existing customer
base, as it supports a Public-Cloud strategy at the lowest cost for
a university.
2019 in summary
Student Information Systems
Student Information Systems performed well in the period with
results ahead of last year.
We continued to implement our full SITS student information
system software at a number of larger Higher Education customers in
the UK including The University of Sheffield, Hull University, The
University of Portsmouth, Canterbury Christ Church University, St
Mary's University Twickenham, Glasgow Caledonian University and
Ravensbourne University London. In Australia and the wider APAC
region we continued to implement full SITS at the University of
Malaya in Malaysia, together with additional work at the University
of Sydney.
The overall market for new customers in both the UK and APAC
softened through the year with limited tenders coming to market;
however, we have been successful in converting the opportunities
that have arisen. Tribal secured a new full SITS customer in the UK
towards the end of the year at the University of Northampton
following a competitive tender process and, just after the year
end, signed a further large new SITS customer with Kaplan
Australia, a large training provider. We also saw our first sale of
SITS Accelerate, a more standardised templated version of SITS, to
a smaller training provider in Australia; we expect to see more
sales of this solution, including outside of the traditional Higher
Education SITS market.
Our Callista student information system software, which is used
by 11 universities in Australia, representing almost 25% of
Australian universities, continued to perform well completing the
second year of a four-year contract extension.
We won 11 new customers for our ebs software in the UK including
Capital City Colleges Group, London's largest further education
group, and five new Higher Education alternate provider including
Dyson and UCFB (University Campus of Football Business), offering
the world's first degrees dedicated to the football and sports
industry. Sales to the vocational learning market in both the UK
and APAC performed well, although the in-year revenue was partly
reduced by the shift to subscription selling and the delivery of
larger implementations, both of which result in revenue being
spread over time.
In Australia ebs is used in the New South Wales TAFEs (Technical
and Further Education colleges) at over 130 campuses and in the
Department of Education (DoE) schools' contract. The New South
Wales (NSW) contract has been very successful this year and we have
delivered a number of solutions and upgrades to the software as
part of their OneTAFE programme which aims to bring together the 11
TAFEs onto one common platform; this work will continue into 2020.
However, as previously announced, the TAFE NSW contract will come
to an end in the near future. The OneTAFE work is part of the
preparation for migration of the TAFEs to the new provider,
although this is not expected to conclude for at least two years.
The DoE schools' contract is in a steady state, and we continue to
provide support to around 2,000 schools.
We provide our SchoolEdge solution to a further 1,800 schools in
Australia and combined with the DoE contract our software is used
in approximately one third of Australian schools. As highlighted in
previous years, two of the school's dioceses (New South Wales and
Victoria) which represent about 800 schools will migrate away to a
new product provider over the next 2-3 years. The migration is
progressing slowly, and we continue to see good retention levels
with these schools. The product is now in a steady state and we
continue to sell additional modules to existing customer, including
archiving solutions, as well as agreeing multi-year deals for
support.
In the Work-based Learning market in the UK we had a successful
year with our Maytas solution for apprenticeship management with
sales to 17 new customers including Sopra Steria/Construction
Industry Training Board (CITB), Siemens and BMI Healthcare. We
delivered to Sopra Steria within 7 months, the largest Maytas
implementation to date. We have also started to see sales to Higher
Education institutions, a new market sector for Maytas, as part of
the government's degree apprenticeships programme.
Our software is used by the British Council across 47 countries
using a bespoke version of Campus. We continue to provide support
as part of this contract and secured a renewal until 2021, however
the large implementation work that benefitted previous years has
now ended.
Education Services
Education Services had a good sales year winning all five of the
major re-tenders it competed for with an overall win rate across
all tenders of 86% and securing GBP29m worth of contracts. The
major re-tenders won were with the National Centre for Excellence
in the Teaching of Maths (NCETM) in the UK, the New York State
Education Department inspections contract in the US, inspections
for the Abu Dhabi Department of Education and Knowledge (ADEK) in
the Middle East, Inspection of European Schools and benchmarking
for the New Zealand Tertiary Education Commission (TEC). In
addition, we won three new states in the US for inspections
(Louisiana, Utah and Washington) and secured a major piece of work
with a new emirate in the Middle East, Sharjah.
The financial performance in Education Services was behind last
year; although we won the large re-tender in Abu Dhabi (ADEK), the
timing of the inspections work was largely delayed by the customer
to 2020 resulting in a reduction to 2019 revenue. It is noted,
however that the UK performed very well, benefitting from the NCETM
and Advanced Maths Support Programme (AMSP) contracts.
Acquisition
On 10 May 2019, Tribal acquired Crimson Consultants (now Tribal
Dynamics), the UK's market-leading provider of customer
relationship management ('CRM') based solutions to the education
market. Crimson's technology provides valuable, additional
functionality to Tribal Edge. It will accelerate its speed to
market and reduces Tribal's requirement to develop this
capability.
Since acquisition Tribal Dynamics, has won a number of new
contracts including the University of Durham, Northampton
University and Aberdeen University. There is a growing pipeline of
opportunities for early 2020 in both the UK, Australia and the
wider APAC region.
2020 outlook
With the new SITS customers at University of Northampton, Kaplan
and the smaller, SITS Accelerate win at HETI in Australia, there
was a strong start to 2020. Budgets remain tight and there are only
a limited number of new customer opportunities coming to market;
however, due to our market leading products we have been successful
in converting those opportunities that have arisen. Our growing
number of services available will enable further cross-sell and
up-sell opportunities and, in addition we continue to work on a
good pipeline of opportunities, particularly around moving our
customers into the Public Cloud.
The recent outbreak of Covid-19 is of concern; this has the
potential to significantly impact our business as customers will
look to delay projects as they divert resource to deal with their
response to the outbreak. The Australian universities, in
particular, are heavily dependent on Chinese students, who were
unable to commence their university semester in February.
Institutions will also be less likely to make decisions regarding
new projects, so that could impact the pipeline of new SITS and ebs
opportunities as well as Education Services, where schools'
inspections, benchmarking and surveys are all likely to be
impacted. Extensive sickness in both Tribal's and our customers'
workforce will also limit our ability to complete project work and
realise revenue.
Tribal has effective business continuity plans to support
customers' systems, and we will look to mitigate the impact.
However, this outbreak will affect Tribal's results this year but,
at this stage, due to the constantly changing situation globally it
is too early to be able to fully quantify the impact.
We will continue to focus on margins by driving efficiencies
within the organisation in 2020. The software lines of business
will be combined into one division, driving functional efficiencies
across the Group, with single regional teams for implementation,
Cloud delivery, sales and management. We will also actively explore
further offshoring opportunities into our Manila Shared Services
Centre.
Overall, we have made good progress in the year reported and we
will continue to execute our operational strategy in order to
deliver sustained value for all our stakeholders. We remain
confident in the medium to long-term; however our outlook for the
year will be impacted. We are monitoring the situation daily and
are taking immediate corrective actions to help mitigate the
financial impact as a result of Coronavirus.
Mark Pickett
Chief Executive Officer
Financial Review
Results
Constant
Currency Reported
GBPm 2019 2018(4) Change 2018 Change
============================= ======= ========== ======= ========= =======
Revenue 78.2 79.6 -1.8% 80.1 -2.3%
Student Information Systems 58.6 57.1 2.6% 57.6 1.7%
Education Services 19.6 22.5 -13.0% 22.4 -12.6%
============================= ======= ========== ======= ========= =======
Adjusted Operating Profit
(EBITA)(1, 2)
(Before Central Overheads) 22.0 21.3 3.1% 21.5 2.2%
Student Information Systems 17.9 16.7 7.7% 16.9 6.1%
Education Services 4.0 4.6 -13.6% 4.6 -12.2%
============================= ======= ========== ======= ========= =======
Adjusted Operating Margin
(EBITA) (1, 2)
(Before Central Overheads) 28.1% 26.7% 140bps 26.8% 130bps
Student Information Systems 30.6% 29.2% 140bps 29.3% 130bps
Education Services 20.5% 20.6% -10bps 20.4% 10bps
============================= ======= ========== ======= ========= =======
Central Overheads(5) (10.3) (10.5) -2.2% (10.7) -3.6%
============================= ======= ========== ======= ========= =======
Adjusted Operating Profit
(EBITA) (1, 2) 11.7 10.8 8.2% 10.8 7.9%
============================= ======= ========== ======= ========= =======
Adjusted Operating Margin
(EBITA) (1, 2) 14.9% 13.5% 140bps 13.5% 140bps
============================= ======= ========== ======= ========= =======
Adjusted Operating Profit
(EBITDA)(1, 3) 15.4 14.1 9.1% 14.1 8.9%
============================= ======= ========== ======= ========= =======
Adjusted Operating Margin
(EBITDA) (1, 3) 19.6% 17.7% 190bps 17.6% 200bps
============================= ======= ========== ======= ========= =======
Statutory (Loss)/Profit
before Tax (2.9) 4.8 (160)% 4.8 (160)%
Statutory (Loss)/Profit
after Tax (3.0) 4.1 (173)% 4.1 (173)%
============================= ======= ========== ======= ========= =======
Annual Recurring Revenue 42.3 39.1 8.1% 39.5 7.1%
============================= ======= ========== ======= ========= =======
1. Adjusted Operating Profit and Adjusted Operating Margin are
in respect of continuing operations and excludes charges reported
in "Other items" of GBP14.4m (2018: GBP5.9m), refer to note 7 in
the Financial Statements.
2. EBITA is calculated by taking the Adjusted Operating Profit
before the allocation of Central Overheads and excludes Interest,
Tax and Amortisation.
3. EBITDA is calculated by taking the Adjusted Operating Profit
after the allocation of Central Overheads and excludes Interest,
Tax, Depreciation and Amortisation.
4. 2018 results are updated for constant currency - the Group
has applied 2019 foreign exchange rates to 2018 results to present
a constant currency basis, when applied to 2018 results there is a
reduction in Revenue of GBP0.5m, a reduction to Adjusted Operating
Profit (before Central Overheads) of GBP0.2m and Adjusted Operating
Profit of GBPnil.
5. Central Overheads are made up of costs that are not directly
attributable to either Student Information Systems or Education
Services
Revenue
Revenue in the year was 1.8% lower than last year at GBP78.2m on
a constant currency basis (2018: GBP79.6m adjusted for the negative
impact of foreign exchange of GBP0.5m; GBP80.1m as reported).
The Group has chosen to present its results in the Financial
Review on an adjusted basis to give a true reflection of
year-on-year performance and account for the adverse impact of
foreign exchange movements in the year. Approximately 39% of
Tribal's income in the year was generated outside the UK and is
therefore subject to foreign exchange movement. During 2019, the
continued strengthening of sterling, particularly against the
Australian Dollar, has impacted revenue. Consistent with reporting
last year, the results for 2018 have been adjusted to reflect the
foreign exchange rates prevailing during 2019 to provide a
"constant currency" comparative.
Note this 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" in in the Business and
Financial Reviews.
Adjusted Operating Profit (EBITDA)
The Adjusted Operating Profit (EBITDA) was GBP15.4m (2018:
GBP14.1m constant currency; GBP14.1m reported). The Adjusted
Operating Margin (EBITDA) increased to 19.6% (2018: 17.7% constant
currency; 17.6% reported). The Adjusted Operating Profit (EBITA)
was GBP11.7m (2018: GBP10.8m constant currency; GBP10.8m reported).
The Adjusted Operating Margin (EBITA) increased to 14.9% (2018:
13.5% constant currency; 13.5% reported).
Tribal previously reported Adjusted Operating Profit on an EBITA
basis (Earnings Before Interest, Tax and Amortisation). We have now
moved to reporting on an EBITDA basis (Earnings Before Interest,
Tax, Depreciation and Amortisation) at an overall Group level to
bring the business in line with reporting by peer groups, and the
assessments made by market analysts. Reporting at segment level
will remain on an EBITA basis.
Central Overheads costs fell by GBP0.2m to GBP10.3m (2018:
GBP10.5m constant currency; GBP10.7m reported). The Group adopted
IFRS 16 "Leases" effective 1 January 2019 as a result of this rent
charges have been replaced by the depreciation on the right-of-use
assets recognised. In 2018 rent of GBP0.8m was included in Central
Overheads, in 2019 this was replaced by interest and depreciation
on ROU assets of GBP1m. The Group continues to identify cost saving
measures and effectively manages its cost base.
Statutory (Loss)/Profit after Tax
The Operating Profit before the costs relating to the platform
dispute increased by 48% to GBP6.1m (2018: GBP4.1m). Including the
platform dispute costs the Statutory Operating Loss was GBP3.0m
(2018: profit GBP4.1m). The Statutory (Loss)/Profit before Tax
decreased to GBP(3.0)m (2018: Profit GBP4.8m reported).
Annual Recurring Revenue
Annual Recurring Revenue (ARR), comprising Support &
Maintenance Fees and Cloud Services together with Subscription
License fees where the license revenue is received over the life of
the contract, increased by 8.1% to GBP42.3m (2018: GBP39.1m
constant currency : GBP39.5m reported), representing 71.8% of
Software & Related revenue and 53.8% of total Group revenue
(2018: 63.6% and 45.2% respectively). Growth has been generated in
both Support & Maintenance revenues and Cloud revenues, where
we continue to see increased demand from customers. We are also
seeing growth in recurring license sales, particularly in
Vocational Learning, where customers are purchasing on a
subscription (term license) basis with license and support sold as
a bundled offering, rather than as perpetual license sales.
Segmental performance
The Group provides software and non-software related services to
educational customers, both public and private. These services are
managed across two lines of business (segments), Software
Information Systems (SIS) and Education Services (ES). The majority
of software sales are across our core Student Information Systems
business together with a small amount of software sales in
Education Services, reported under Other.
Student Information Systems (SIS) focusses 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, Malaysia and Canada. Products and offerings are split
between License & Development Services, Support &
Maintenance, Implementation, and Cloud Operations. A number of
software solutions are provided including SITS, SITS Accelerate,
ebs and Maytas together with the Dynamics solutions following the
acquisition of Crimson Consultants earlier in the year. For 2019
reporting all of our Data Managed Services work is included in SIS,
this was previously split between SIS and Other, and 2018 has been
updated for comparison.
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, and performance benchmarking (formerly known
as Quality Assurance Solutions (QAS)), and student surveys and data
analytics (previously referred to as i-graduate). This segment also
covers various non-core software businesses including K2 Asset
Management, Software Solutions and Information Matters. These are
businesses that are mature fully developed solutions that operate
profitably and continue to be supported.
Student Information Systems (SIS)
Constant
Currency Reported
GBPm 2019 2018 Change 2018 Change
============================ ====== ========== ======= ========= =======
Revenue 58.6 57.1 2.6% 57.6 1.7%
License & Development Fees 6.4 6.5 -1.8% 6.5 -1.8%
Support & Maintenance Fees 32.6 31.3 4.1% 31.7 2.8%
Implementation Services 12.8 13.5 -5.3% 13.6 -5.9%
Cloud Services 6.0 5.2 17.2% 5.2 16.8%
Other Services 0.8 0.7 22.2% 0.7 21.2%
============================ ====== ========== ======= ========= =======
Adjusted Operating Profit 17.9 16.7 7.7% 16.9 6.1%
============================ ====== ========== ======= ========= =======
Adjusted Operating Margin 30.6% 29.2% 140bps 29.3% 130bps
============================ ====== ========== ======= ========= =======
Student Information Systems revenue increased by 2.6% to
GBP58.6m (2018: GBP57.1m constant currency; GBP57.6m reported)
compared to a decrease in the previous year.
Overall the market for replacement student information systems
in the UK, Australia and wider APAC region has slowed with a
reduced number of opportunities coming to market compared to
previous years. Tribal has been successful in the opportunities
that have arisen and won a new full SITS implementation at the
University of Northampton at the end of the year from a competitor.
Since 2016 Tribal has displaced over 21 competitive student
information systems and replaced four home grown solutions in
universities.
License & Development fees relate to the sale of new
software licenses as well as customer paid enhancements
(development fees) to previous sales. Tribal's core Student
Information Systems products include:
- SITS (Student Information Technology System) used by around
50% of universities in the UK, including 50% of the Russell Group
universities, as well as universities in Australia, New Zealand,
Malaysia, Canada, Southern Ireland, Hungary and Malta
- Tribal Dynamics, a suite of customer relationship management ('CRM') based solutions
- Callista, a bespoke student management system implemented in 11 Australian universities
- ebs (education business system) used by colleges and training
institutes in the UK (including Northern Ireland)
- Maytas, for training providers and apprenticeship providers
- Student Engage, a social collaboration mobile technology application sold across all markets
- School Edge and ebs Schools used by around 4,000 schools in Australia
In addition, non-SIS software sales includes K2 (asset
management software) and Software Solutions (bespoke software
development). These are businesses that operate profitably and
continue to be supported, although there is limited investment in
future development of the solutions and little proactive sales and
marketing activity.
License & Development fees revenue remained consistent with
the previous year at GBP6.4m (2018: GBP6.5m constant currency;
GBP6.5m 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 up to
four years to recognise. We continue to recognise license revenue
from wins in previous years including the five large Higher
Education wins in the UK from 2018, as well as ongoing smaller
module sales in the current year to existing customers. There have
been new sales in Further Education (FE) although the revenue on
these sales have been impacted slightly by the move to subscription
selling where the license is bundled with the support and
maintenance fee which is paid for and recognised over the life of
the contract, rather than upfront.
Implementation services deliver the technical implementation of
our software products at customer sites, typically working
alongside customer teams. Implementation projects vary in length,
and range from a small number of days, to more than two years for
more complex projects. Revenues are typically based on day rate
fees, although we sometimes operate under fixed fee contracts for
defined implementation scopes. Revenue was reduced by 5.3% to
GBP12.8m (2018: GBP13.5m constant currency; GBP13.6m reported). In
the UK revenue grew by 31% to GBP8.6m reflecting the ongoing
implementations from sales in earlier years as well as additional
work won in year with existing customers. In APAC revenue decreased
by 43% to GBP3.7m due to the completion of implementations from
sales in previous year and limited new opportunities coming to
market to provide new work.
Support & Maintenance fees in the period increased by 4.1%
to GBP32.6m (2018: GBP31.3m constant currency; GBP31.7m reported).
This reflects the strong retention rates in our customer base and
their ongoing commitment to Tribal solutions.
Cloud services cover the provision of managed IT services and
hosting services to customers to manage their Tribal products
either on premise, in a private cloud, or in a public cloud. We
continue to see increasing demand for cloud services across all
markets. Revenue has grown by 17.2% to GBP6.0m (2018: GBP5.2m
constant currency; GBP5.2m reported).
Other software & related services include revenue from the
conferences that Tribal provides to customers in the Higher
Education and Further Education sectors, and research and
development tax credits (RDEC) received in the UK in relation to
product development work undertaken.
In the Higher Education market Tribal completed the
implementation of full SITS at University of Hull, Central European
University and University of the Arts, London. We continue to
implement full SITS at University of Portsmouth, Canterbury Christ
Church University, the University of Sheffield, Glasgow Caledonian
University, Ravensbourne University and St Mary's University,
Twickenham, with most of the projects expected to finish over the
next couple of years. In addition, we have seen a good level of
sales to existing customers over the year to provide new modules
and additional functionality.
In Asia Pacific, we continue to implement full SITS at the
University of Malaya, however the majority of implementations are
now completed, and we have moved to a steady state with these
customers. Our Callista business completed the second year of a
four year renewal and continues to perform well with annualised
support and delivery revenues in excess of GBP8m (AUD15m). We have
been developing the new TCSI module (Transforming the Collection of
Student Information) with these customers for submitting student
information to the government. This will go-live in early 2020 on
the Edge platform. There will be additional revenue from this
module from the Callista group and other non-Callista customers in
Australia. The in-year demand for additional technical developments
outside the scope of the core renewal was lower than previous
years, mainly due to the customers focus on TCSI.
The demand for Cloud services continued to increase with all of
the new universities won in 2018 elected to have provision of their
SITS software from the Cloud, either a Private Cloud in a data
centre or the Public Cloud rather than managed On Premise by an
in-house IT team.
On 10th May 2019, Tribal Group plc acquired Tribal Dynamics,
formerly Crimson Consultants. The initial cash consideration was
GBP6m with a further GBP4m contingent consideration based on
meeting an annual recurring revenue target. The acquisition was
financed through existing cash resources and the integration has
been successful since acquisition. Tribal Dynamics contributed
revenue of GBP1.8m and operating profit of GBP0.2m to the Group for
the period between the acquisition and balance sheet dates. Had the
acquisition occurred on 1 January 2019, the Group's revenue would
have increased by GBP2.7m and its operating profit increased by
GBP0.2m, before central overheads. Dynamics sales are on a SaaS
(Software as a Service) basis, together with fees for initial
implementation work. The SaaS revenue has helped improve the
Group's Annual Recurring Revenue by GBP0.8m for the year.
In Further Education/Vocational Learning, the Group won two new
Further Education college contracts, including a significant win at
Capital City Colleges Group, one of the largest college groups in
the UK. This follows our win in 2018 with Colleges Northern
Ireland, consolidating ebs as the leading Further Education student
management system in the UK. We also signed a large contract with
Sopra Steria to implement our Maytas product to manage the
apprenticeship programme for the Construction industry Training
Board. The size of these contracts resulted in license revenue
being recognised over a longer period of time due to the move to
IFRS revenue recognition. It also had an adverse impact compared to
the prior year where the majority of deals were smaller in size and
fully recognised in year. In the year we have seen an increase in
subscription type sales, where the license, support and cloud
services are bundled into one sale proposition and recognised over
the life of the contract. Over 73% of new sales across Further
Education and Work-based learning in the UK were subscription
based. The overall impact to current year revenue of subscription
sales on larger deals is approximately GBP0.3m, this will however
benefit future years.
In the Further Education / Vocational Learning sectors in
Australia and the wider APAC region, we have seen above expectation
levels of work in certain areas of the TAFE market, however as
highlighted last year there has been a slowdown in the wider market
as contracts have reached maturity and moved into steady state of
support and maintenance with limited new investment - this is the
case at the British Council which runs a bespoke version of Campus
across 47 counties, English Language Partners in New Zealand
(ELPNZ) where we completed the first deployment of a cloud-based
ebs platform in region in 2018, TAS TAFE and several NZ FE clients.
The contract to support the 138 TAFEs (Technical & Further
Education) in New South Wales, Australia has been very successful
in year and we have provided a significant amount of new
implementation work as they move to a single access system as part
of their OneTAFE project; this significant work will continue into
2020.
We have taken the decision to migrate the small number of
customers on our mainstream Campus product, mainly in Australia and
New Zealand, to our ebs solution. We expect this to conclude in the
first half of 2020 and will no longer provide Campus as a solution,
with the exception of the bespoke British Council version; this
will help improve future margins in this part of the business as we
only invest in and support one product.
In the Schools sector, we continue to support the 2,200 schools
in the Student Administration and Learning Management (SALM)
programme in New South Wales, Australia. The contract revenues are
now mainly from support and maintenance, with the implementation
work from previous years now completed.
Our other school's product, SchoolEdge, continues to be used by
over 1,500 schools in Australia and continues to generate good
support and maintenance revenues. We completed the development of
the SchoolEdge solution last year and there is no new investment in
the product outside of limited roadmap releases and statutory
updates. We have seen limited new sales however the attrition rate
with existing customers has been lower than expected at 12%. The
840 Catholic systemic schools previously earmarked for movement
onto their own student management system platform has been
progressing slowly, with only 53 of the 376 CECV schools moving to
a competitor product now since the migration began in 2017. The
migration of the 468 CeNET schools also continues to progress
slowly with limited migration to the alternative SMS platform since
the pilot rollout commenced in 2016. We will continue to support
these schools through this elongated transition and have also
developed an archiving solution to help with the migration, this
will provide additional revenues to Tribal following the migration
as we continue to support the customers with their historic data.
The migration is expected to take place over the next two years to
the end of 2020. We will continue to receive revenue from schools
prior to their migration and a one-off following migration and will
work with the Dioceses to ensure smooth migration.
The Annual Recurring Revenue in SIS, which relates to Support
& Maintenance, Cloud services and Subscription license/support
sales, increased by almost 6% to GBP38.7m (2018: GBP36.5m constant
currency; GBP36.9m reported) and represents 66% of SIS revenue
(2018: 64%). Support and maintenance renewals have minimal
attrition and the demand for cloud services continues to grow.
The Adjusted Operating Profit in Student Information Systems
increased by 7.7% to GBP17.9m (2018: GBP16.7m constant currency;
GBP16.9m reported) and Adjusted Operating Margin increased to 30.6%
(2018: 29.2% constant currency; 29.3% reported). The improvement in
both profit and margin is driven by increased revenue in Support
& Maintenance and Cloud services which has been delivered off a
similar cost base to the previous year, together with efficiency
improvements in implementation services.
Education Services (ES)
Constant
Currency Reported
GBPm 2019 2018 Change 2018 Change
================================= ====== ========== ======== ========= ========
Revenue 19.6 22.5 -13.0% 22.4 -12.6%
School Inspections & Related
Services 15.5 16.5 -6.2% 16.4 -5.6%
Asset management and software
solutions 2.1 2.6 -20.3% 2.6 -20.2%
Surveys & Data Analytics 1.8 2.6 -31.3% 2.6 -31.8%
Information Management Services 0.3 0.5 -45.4% 0.5 -45.4%
Technology Services - 0.3 -100.0% 0.3 -100.0%
Adjusted Operating Profit 4.0 4.6 -13.6% 4.6 -12.2%
================================= ====== ========== ======== ========= ========
Adjusted Operating Margin 20.5% 20.6% -10bps 20.4% 10bps
================================= ====== ========== ======== ========= ========
Education Services revenue decreased by 13.0% to GBP19.6m (2018:
GBP22.5m constant currency; GBP22.4m reported).
The revenue from School Inspections & Related Services
decreased by 6.2% to GBP15.5m (2018: GBP16.5m constant currency;
GBP16.4 reported).
School inspections & related services are delivered globally
with sales in the UK, North America, the Middle East, Australia and
New Zealand. Inspection services are provided to government and
non-government bodies in the UK, US and Middle East. These tend to
be multi-year contracts with fixed and variable pricing elements.
Related complementary services include training for prospective
quality assurance inspectors, training and software tools for
school leaders to prepare for inspections, online professional
development tools for teachers to enhance their professional
development, and other similar offerings.
There was a strong performance in the UK, ahead of 2018, as the
business delivered the NCETM contract (National Centre for the
Excellence in the Teaching of Mathematics), a GBP9m three year
contract to help improve mathematics teaching in England, and the
Advanced Maths Support Programme (AMSP), a GBP2.0m 2 year contract
in partnership with MEI (Mathematics in Education and Industry), a
national programme designed to increase the maths education levels
of our population and better prepare young people for
apprenticeships, work, and higher education. In addition, we
provided quality assurance to the Department for Education (DfE)
for their new gold-standard National Professional Qualifications
(NPQ). The contract ensures qualifications are independently
verified, nationally consistent, and of the highest quality across
the country. The contract has been agreed for an initial three-year
period, worth up to GBP2m per year.
In the USA, we continued to deliver assessments for the New York
State Education Department contract (NYSED) and won a new GBP10.1m
five-year contract that runs to 2024. We also won and delivered
inspections work in three new states - Utah, Washington and
Louisiana.
In the Middle East, we won work in a new emirate, Sharjah, and
delivered a number of small projects in Bahrain. We successfully
completed the school's inspections contract in Abu Dhabi with ADEK
(The Department of Education and Knowledge) in the first half of
the year and won the tender for further school inspections work in
the second half of the year. The majority of the inspections were
however delayed to the start of 2020 resulting in a fall in revenue
compared to 2018.
In New Zealand, we secured a one-year extension to the
benchmarking contract with the Tertiary Education Council (TEC).
Other benchmarking work is run across the world and performed
consistently with the previous year.
The revenue for Surveys & Data Analytics fell by 31.3% to
GBP1.8m (2018: GBP2.6m constant currency; GBP2.6m reported).
Surveys & data analytics, which includes benchmarking,
provides a range of services for managers of universities, colleges
and schools to assess and enhance the quality of education they
provide and improve their operational performance. These services
are provided globally, the largest product being the International
Student Barometer which is performed annually for each of the
Northern and Southern hemispheres.
The International Student Barometer operates across the Northern
and Southern hemispheres. The Northern hemisphere barometer revenue
included the 2018/2019 academic year for the first half of the year
and the 2019/2020 academic year for the second half of the year and
was consistent with the previous year. The Southern hemisphere
barometer operates within the Tribal financial year and the
majority of universities partake on a bi-annual basis. 2019 was an
"off" year resulting in lower revenues. The Group run a number of
smaller surveys across the world and has benefitted from a number
of new wins including in South East Asia.
The revenue in our information management services business,
Information Matters, fell to GBP0.3m (2018: GBP0.5m constant
currency; GBP0.5m reported) as customers cease their requirements
or take work in house. We continue to see demand for advice on
General Data Protection Regulation (GDPR) compliance.
Information management services is a complementary consultancy
service providing advice on information and records management
including General Data Protection Regulation (GDPR) compliance.
The revenue from Asset Management (K2) and Software Solutions,
decreased by 20.3% to GBP2.1m (2018: GBP2.6m constant currency;
GBP2.6m reported) as two of the larger customers ceased their
requirements in the year; this will see a further reduction in 2020
as the full year effect is reflected. These two businesses continue
to operate profitably and be supported; however, they are non-core
with limited investment benefits and will reduce over time.
The Adjusted Operating Profit in Education Services decreased by
13.6% to GBP4.0m (2018: GBP4.6m constant currency; GBP4.6m
reported), however the Adjusted Operating Margin remained
consistent at 20.5% (2018: 20.6% constant currency; 20.4%
reported). The profit decrease was mainly driven by the revenue
reductions in School Inspections & Related Services and Asset
Management & Software Solutions. The majority of the
inspections work is delivered by associates as a variable cost paid
on a project delivery basis, this helped to maintain the profit and
margin. The profit in Surveys and Data Analytics improved to
GBP0.6m (2018: GBP0.4m reported; GBP0.4m reported) following
significant restructuring of the business following its move to new
shared management and resource sharing as part of Education
Services.
Product Development
GBPm 2019 2018 Change
====================== ===== ===== =======
Product Development 12.3 11.2 9%
====================== ===== ===== =======
Of which capitalised 6.2 4.1 33%
Tribal Edge 5.9 3.7 38%
Tribal Dynamics 0.2 - 100%
School Edge - 0.5 (0%)
====================== ===== ===== =======
Of which expensed 4.7 5.7 (20%)
SITS 1.5 1.9 (22%)
ebs 1.4 1.7 (15%)
Maytas 0.2 0.2 (18%)
SchoolEdge 0.4 0.5 (41%)
Tribal Dynamics 0.2 - 100%
Other 1.0 1.4 (48%)
====================== ===== ===== =======
Of which amortised 1.4 1.4 2%
====================== ===== ===== =======
Non-client funded Product Development spend was GBP12.3m, of
which GBP6.2m was capitalised (2018: GBP11.2m spent, GBP4.1m
capitalised). The net P&L charge after removing capitalised
spend decreased by 15.0% to GBP6.2m (2018: GBP7.1m), and GBP4.8m
excluding amortisation (2018: GBP5.7m). We continue to invest in
our core products, adding new modules and additional functionality
as well as statutory updates. In the year we acquired Crimson
Consultants adding the Dynamics suite of modules, we invested
GBP0.2m in these products.
The Group continued to invest in the Tribal Edge platform, the
next generation, cloud-based platform for student information
systems in the Higher Education and Further Education &
Colleges sectors. Capitalised Product Development spend increased
to GBP5.9m (2018: GBP3.7m) as the Tribal Edge development team
increased in size to accelerate the development for the release of
the first modules in 2020.
Investment in SchoolEdge, the Group's student information system
for schools, ceased at the end of 2018 (2017: GBP1.0m) following
the completion of the development of the core set of SchoolEdge
modules.
The Group also undertakes client funded product development work
in relation to the Callista student management system on behalf of
a group of 11 universities in Australia.
Geographic revenue
Reported
GBPm 2019 2018 Change
================== ===== ========= ========
Revenue 78.2 80.1 (2.3)%
================== ===== ========= ========
UK 47.4 42.6 11.5%
Asia Pacific 23.5 27.8 (15.2)%
Rest of world(1) 7.2 9.7 (25.7)%
(1. Including USA, Canada and Middle East)
Tribal's key geographic markets are the UK (61% of total
revenue), Asia Pacific including Australia, New Zealand and
Malaysia (30%); and, North America and the rest of the world
including Middle East (9%).
UK revenues increased 11.5% due to significant new customers in
both Higher Education and Further Education together with new
contract wins for QAS and revenue generated from Tribal Dynamics
since acquisition.
Asia Pacific revenues reduced by 15.2%, primarily due to larger
implementations coming to an end in the year, a limited pipeline
for new implementations as well as reduced sales in the school's
market.
Revenue for the Rest of the world reduced by 25.7%, due to the
conclusion of larger QAS contracts in the Middle East and the
rephasing of ongoing work into 2020.
Key Performance Indicators (KPIs)
Reported
2019 2018 Change
=========================== ========== ========== =========
Revenue GBP78.2m GBP80.1m (2.3)%
Adjusted Operating
Profit (EBITDA)* GBP15.4m GBP14.1m 11.4%
Adjusted Operating
Margin* 19.6% 17.6% 1.4pp
Annual Recurring
Revenue (ARR) GBP42.3m GBP39.5m 7.1%
Committed Income
(Backlog) GBP133.6m GBP121.6m 9.8%
Operating Cash Conversion 105% 132% (27.0)pp
Free Cash Flow GBP5.3m GBP8.8m (39.8)%
Staff Retention 87.9% 89.0% (1.2)pp
Revenue / Average
FTE GBP92.0k GBP91.7k 0.3%
* Current year Adjusted Operating Profit and Adjusted Operating
Margin are before depreciation. As reported last year Adjusted
Operating Profit including depreciation, 2019: GBP11.7m (2018:
10.8m) a growth of 7.9% and Adjusted Operating Margin including
depreciation, 2019:14.9% (2018: 13.5%)
Committed Income (Backlog)
The Committed Income (backlog) relates to the total value of
orders which have been signed on or before, but not delivered by 31
December 2019. This represents the best estimate of business
expected to be delivered and recognised in future periods and
includes 2 years of Support & Maintenance revenue. At 31
December 2019 this increased to GBP133.6m (2018: GBP121.6m
reported). The majority of the increase relates to significant
contract wins in Education Services.
Annual Recurring Revenue (ARR)
2019 2018 Change
====================== ===== ===== ========
Support 33.7 32.9 2.46%
Cloud 6.5 5.7 14.97%
Subscription License 2.1 1.0 120.39%
====================== ===== ===== ========
ARR 42.3 39.5 7.12%
====================== ===== ===== ========
The Annual Recurring Revenue (ARR) includes Support &
Maintenance fees paid on all software, Cloud hosting services, and
License sold on a subscription basis. The 2018 ARR is restated to
include License sold on a subscription basis. Overall the Annual
Recurring Revenue total increased by 9.9% to GBP42.3m (2018:
GBP38.5m reported).
Operating cash conversion
Operating cash conversion is calculated as net cash from
operating activities after tax as a proportion of adjusted
operating profit. In 2019, operating cash conversion was 105%
(2018: 132% reported).
Free cash flow
Free cash flow is included as a key indicator of the cash that
is generated by the Group and available for further investment or
distribution. It is calculated as net cash from operating
activities less capital expenditure and less capitalised
development costs (excluding acquired intellectual property). In
2019, free cash flow was GBP5.3m (2018: GBP8.8m reported).
Headcount and staff retention
2019 2018 Change
====================== ===== ===== ========
Headcount 879 900 (2.3)%
====================== ===== ===== ========
UK 585 581 0.7%
Asia Pacific 250 302 (17.2)%
Rest of world(1) 15 17 (11.8)%
====================== ===== ===== ========
Full Time Equivalent
(FTE) 850 873 (2.6)%
====================== ===== ===== ========
(1. Including USA, Canada and Middle East)
Our overall workforce has decreased by 2.3% to a total headcount
of 879, down from 900 at 31 December 2018; this is after adding an
additional 42 heads from the acquisition of Crimson
Consultants.
The total Full Time Equivalent (FTE) headcount has decreased by
23 FTEs to 850 (2018: 873 FTEs). Headcount in the UK and Rest of
World is consistent with prior year, the decrease of 52 heads in
APAC is driven by the Group's change of focus from the School Edge
product to the Tribal Edge platform.
The Revenue per Average FTE metric is consistent with prior year
at GBP92.0k for 2019 (2018: GBP91.7k). On an operational headcount
basis (excluding Product Development), the revenue per FTE for 2019
is GBP104.6k (2018: GBP100.0k)
We note, though, that despite the extent of change within the
Group, our staff retention has marginally decreased to 87.9% (2018:
89%).
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, or 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 7 of the Financial
Statements however the main items are as follows:
-- Employee related share option charges
In 2019, share based payment charges (including employer related
taxes) totalled GBP1.7m (2018: GBP2.3m), and are excluded from the
Adjusted operating profit.
On 7 June 2019 760,563 nil-cost share options were granted to
Mark Pickett under the terms of the 2010 LTIP. On 7 June 2019
2,900,000 and 16 September 2019 300,000 share options were granted
to senior management under the Company share option plan. On 1
November 2019, 92,778 share options were granted Mark Pickett and
senior management under the Company SAYE plan.
On 18 December 2019 Richard Last and Roger McDowell each
exercised 1,702,999 Matching shares.
-- Amortisation of IFRS 3 intangibles
The amortisation charge in relation to IFRS 3 intangible assets
of GBP1.3m (2018: GBP1.8m) arose from separately identifiable
assets recognised as part of previous acquisitions. The assets
principally relate to software and customer relationships and are
amortised over their expected life which was determined in the year
the acquisition took place.
-- Restructuring and associated costs
These costs relate to the restructuring of the Group's
operations and the charge for the year is GBP0.8m (2018: GBP1.0m).
At the end of 2018 the Group announced the restructure of the
management of its i-graduate business in the UK and the SchoolEdge
development team in Asia Pacific, with costs arising in 2019 mainly
due to redundancies. There are no restructuring provisions
recognised as at 31 December 2019.
Net cash and cashflow
GBPm 2019 2018 2017 Change
================================== ======= ====== ====== =======
Net cash flow from operating
activities 12.4 14.2 11.1 3.1
Net cash outflow from investing
activities (13.2) (6.2) (5.5) (0.7)
Net cash outflow from financing
activities (2.9) (1.9) (0.1) (1.8)
================================== ======= ====== ====== =======
Net (decrease)/increase in
cash & cash equivalents (3.7) 6.1 5.5 0.6
Cash & cash equivalents at
beginning of the year 20.0 14.1 8.8 5.3
================================== ======= ====== ====== =======
Cash & cash equivalents at
end of period 16.3 20.2 14.3 5.9
Less: Effect of foreign exchange
rate changes 0.2 (0.2) (0.2) -
================================== ======= ====== ====== =======
Net cash & cash equivalents
at end of period 16.5 20.0 14.1 5.9
================================== ======= ====== ====== =======
Cash and cash equivalents at 31 December 2019 were GBP16.5m
(2018: GBP20.0m).
Operating cash inflow for the period was GBP12.4m (2018:
GBP14.2m). The working capital movement decreased to GBP0.3m (2018:
GBP3.1m), as a result of strong cash management including a
significant reduction in trade debtors and trade payables.
Cash outflow from investing activities was GBP13.2m (2018:
GBP6.2m). The Group has seen a decrease in capital expenditure
primarily due to lower fit out costs in 2019, as well as ongoing
spend on equipment costs (2019: GBP0.6m; 2018: GBP1.2m). Spend on
product development increased to GBP6.3m (2018: GBP4.2m) in line
with the Group's Edge strategy. The Group made a payment of GBP0.5m
for deferred consideration (2018: GBP0.8m), this was the final
payment in respect of the intellectual property acquired in 2017.
The Group made a payment of GBP5.9m in respect of the acquisition
of Crimson Consultants in May 2019.
Cash outflow from financing activities increased to GBP2.9m
(2018: GBP1.9m). The Group continued the payment of dividends in
the year with GBP2.1m returned to shareholders. Following the
adoption of IFRS 16 effective from 1 January 2019, rent payments
previously recognised in net operating profit from operating
activities are now shown as payment of lease liabilities within net
cash outflows from financing activities GBP1.0m. This is offset
with the issue of shares (GBP0.2m) to satisfy exercises of
share-based payment schemes.
Finance costs and funding arrangements
Net finance costs remained consistent at GBP0.1m in the year
(2018: GBP0.1m). The Group had a GBP2m committed overdraft facility
in the UK and a $2m committed overdraft facility in Australia, both
facilities are committed for a 12-month period ending September
2020 and October 2020 respectively. At 31 December 2019 both
overdrafts were available but undrawn.
Shareholders returns and dividends
The Board has proposed a full year dividend of 1.2p per share
(2018: 1.1p per share). Following the reinstatement of the dividend
in 2017, paid by the Company in May 2018 and May 2019, the Board
reaffirms its intention to continue a progressive dividend policy,
with a single dividend payment each year following annual
results.
Going concern
Tribal had cash and cash equivalents of GBP16.5m at the end of
2019 plus access to an undrawn UK and Australian overdraft of
GBP2.0m and $AUD 2.0m respectively. On 21 January 2020 the Group
entered into a 3 year GBP10m multicurrency revolving facility with
HSBC with the option to extend by a further 2 years. The facility
was put in place to cover general corporate and working capital
requirements of the Group.
On 13 March 2020 the Group reached an agreement to settle the
dispute with a platform provider for past royalties. This includes
entering into a new 10 year VAR agreement, with effect from 1
January 2020 thus bringing this matter to a close. The expected net
settlement, including legal fees totals GBP9.1m.
The Group benefits from strong annual recurring revenues and
cash generation, it also has a significant pipeline of committed
income. At this time, we are unable to determine with any degree of
certainty the impact Coronavirus will have on the Group. It is
Managements expectation, based on current circumstances, that there
will be a material reduction in Education Services revenue and
License and Implementation revenues over the next 6 months as a
result of the temporary closure of many education institutions
globally. We do not expect Support and Maintenance and Cloud
revenues to be affected. As part of this assessment, management
have included various sensitivities to better understand the impact
to the business, this includes but is not limited to, a decrease in
revenue, a decrease in cash receipts and the impact of meeting our
covenant requirements should we draw down on the available
facility. Management would also introduce cost saving measures to
mitigate the impact on profit and cash if necessary. We do though
remain positive about the medium- and longer-term prospects for the
Group.
The Directors, having considered the cash-flow forecast, and
while noting the Group has net current liabilities, have performed
a risk assessment of likely downside scenarios and associated
mitigating actions. Based on this assessment they have a reasonable
expectation that adequate financial resources will continue to be
available for at least 12 months from the date of approval of the
financial statements. Thus, they continue to adopt the going
concern basis in preparing the financial statements.
Taxation
The corporation tax on continuing operations was GBP2.5m (2018:
GBP1.9m) and the adjusted effective tax rate was 22% (2018: 21%).
This includes the impact of higher rates of taxation arising in
overseas jurisdictions.
As the Group continues to operate 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 is likely
to be higher than the standard rate of UK corporation tax.
Goodwill and Intangibles
Intangible assets arising on the acquisition of Tribal Dynamics
are in respect of customer relationships and contracts GBP1.6m and
software GBP2.7m. Goodwill of GBP5.9m arising on the acquisition of
Tribal Dynamics is attributable to synergies, the assembled
workforce, and potential future relationships, contracts and
software. The Group assesses goodwill at least annually for
impairment, with no factors being identified in the current
year.
Right of Use asset and Lease Liability
The Group adopted IFRS 16 "Leases" with effect from 1 January
2019. This has resulted in the Group recognising right-of-use
assets GBP4.1m and lease liabilities GBP4.2m. For leases previously
classified as operating leases, under previous accounting
requirements the Group did not recognise related assets or
liabilities, and instead spread the lease payments on a
straight-line basis over the lease term.
Share options and share capital
On 7 June 2019 and 16 September 2019, respectively 2,600,000 and
300,000 share options were granted to senior management, excluding
Mark Pickett. On 7 June 2019, 760,563 nil-cost share options were
granted to Mark Pickett as part of his ongoing remuneration. On 1
October 2019 the 2019 SAYE Scheme was launched in the UK, a total
of 1,116,879 ordinary shares were granted to 176 employees who
elected to participate.
As at 31 December 2019, there were 199,579,784 shares issued
(2018: 196,051,181).
Earnings per share (EPS)
Adjusted diluted earnings per share from continuing operations
before other costs and intangible asset impairment charges and
amortisation, which reflects the Group's underlying trading
performance, increased by 7% to 4.6p (2018: 4.3p).
Statutory earnings per share (diluted) decreased by 175% to
(1.5)p (2018: 2p) as a result of the statutory loss made in the
year of GBP2.9m (2018: statutory profit GBP4.1m).
Pension obligations
At 31 December 2019, the Group operated two defined benefit
pension schemes for the benefit of certain deferred employees of
its subsidiaries in the UK. These schemes are administered by
separate funds that are legally separated from the Company. 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 pensions schemes, the combined deficit calculated
under IAS19 at the end of the year totalled GBP0.5m (2018: deficit
of GBP1.0m), with gross assets of GBP7.7m and gross liabilities of
GBP8.3m (2018: GBP6.8m and GBP7.8m respectively). Total actuarial
gains recognised in the consolidated statement of comprehensive
income are GBP0.5m (2018: GBP0.4m).
Section 172
Engaging, consulting and action on the needs of different
stakeholders is critical for the development and delivery of a
culture and strategy that achieves long-term success. Tribal
undertakes meaningful engagement with its stakeholder groups to
build trust and supports the ethos of Section 172 of the Companies
Act 2006 which sets out that the Directors should have regard to
stakeholder interest when discharging their duty to promote the
success of the Company. The Board always strives to act in the best
interest of the Group and to be fair and balanced in its approach
to stakeholder management. The needs of different stakeholders are
always considered as well as the consequences of any decision in
the long-term and the importance of our reputation for high
standards of business conduct.
Risks
Financial risks
The main financial risks the Group faces relate to the continued
sales of our software, where a trading downturn puts a strain on
the operating cash flow, credit risk arising from contractual
delays or scope changes, fluctuations in interest rates, and
foreign exchange risk.
Operating cash flow risk
The Group benefits from significant annually recurring revenue
which is received throughout the year. A 12 month rolling cash flow
forecast is updated on a monthly basis to help identify any risk in
future operating cash flows.
Credit risk
The credit risk arising from contractual delays or scope changes
is reviewed monthly by the PLC Board. The Group seeks to reduce the
risk credit losses arising from non-payment by our customers. This
risk is closely monitored by the Credit & Collections team,
which form part of Group Finance. Tribal incurred no material
credit losses during 2019.
Interest rate risk
At the end of 2019, Tribal had no bank loan indebtedness.
However, the Group is exposed to interest rate risk because
entities in the Group hold cash and cash equivalents at floating
interest rates. Hedging activities are evaluated regularly to align
with interest rate views and defined risk appetite, and forward
rate agreements and interest swaps may be used, where appropriate,
to achieve the desired mix of fixed and floating rate debt. There
are no open derivative financial instruments at the year end.
Foreign exchange risk
Tribal's reporting currency is Sterling. A number of its
subsidiaries have different functional currencies, so increases and
decreases in the value of Sterling versus the currency used by the
Group's international operations will affect its reported results,
and the value of assets and liabilities on the consolidated balance
sheet. Tribal's principal currency exchange exposure is to the
Australian dollar although as at 31 December 2019, the Group was
also exposed to movements in the rates between Sterling and the US
dollar, United Arab Emirates Dirhams, South African Rand, and New
Zealand dollar. See note 31 for further details.
The Group Finance team oversees the management of foreign
exchange risk, and policies and procedures approved by the
Board.
Effect of the UK exiting the European Union (Brexit)
We do not expect the process of the UK exiting the European
Union (Brexit) to have an adverse impact in the short-term demand
for student information systems. The longer term potential impact
remains to be seen and is dependent upon the final exit terms
agreed. The Group has seen fluctuations in exchange rates during
the Brexit process and any strengthening in the value of Sterling
would have an adverse impact on earnings. There are a small number
of contracts with customers based in the European Union; however,
the loss of these contracts would not have a material impact on the
Group. The Group also employs a number of European Union nationals,
but they do not form a significant part of the workforce.
Paul Simpson
Acting Chief Financial Officer
Consolidated Income Statement
For the year ended 31 December 2019
Year ended Year ended
Other items 31 December Other items 31 December
(see note 2019 (see note 2018
Adjusted 7) Total Adjusted 7) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Continuing operations
Revenue 3 78,210 - 78,210 80,062 - 80,062
Cost of sales (39,028) - (39,028) (40,837) - (40,837)
--------------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Gross profit 39,182 - 39,182 39,225 - 39,225
Total administrative
expenses (27,530) (14,098) (41,628) (28,430) (6,212) (34,642)
--------------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Operating profit/(loss) 4 11,652 (14,098) (2,446) 10,795 (6,212) 4,583
Investment income 6 59 - 59 46 - 46
Finance (costs)/income 7 (162) (344) (506) (54) 274 220
--------------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Profit/(loss) before
tax 11,549 (14,442) (2,893) 10,787 (5,938) 4,849
Tax (charge)/credit 8 (2,518) 2,448 (70) (1,873) 1,171 (702)
--------------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Profit/(loss) attributable
to the owners of
the parent 9,031 (11,994) (2,963) 8,914 (4,767) 4,147
--------------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Earnings per share
--------------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Basic 10 4.6p (6.1)p (1.5)p 4.6p (2.5)p 2.1p
--------------------------- ---- -------- ----------- ------------ -------- ----------- ------------
Diluted 10 4.4p (5.9)p (1.5)p 4.3p (2.3)p 2.0p
--------------------------- ---- -------- ----------- ------------ -------- ----------- ------------
All activities are from continuing operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
(Loss)/profit for the year (2,963) 4,147
Other comprehensive (expense)/income:
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement of defined benefit pension
schemes 490 430
Deferred tax on measurement of defined benefit
pension schemes (83) (73)
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of foreign
operations (627) (792)
--------------------------------------------------- ------------ ------------
Other comprehensive expense for the year
net of tax (220) (435)
Total comprehensive (expense)/income for the year
attributable to equity holders of the parent (3,183) 3,712
--------------------------------------------------- ------------ ------------
Consolidated Balance Sheet
As at 31 December 2019
2019 2018
Note GBP'000 GBP'000
-------------------------------------------- ---- -------- ----------------
Non-current assets
Goodwill 11 25,879 20,517
Other intangible assets 12 19,469 12,718
Property, plant and equipment 1,438 1,762
Right-of-use assets 4,110 -
Net investment in lease 220 -
Deferred tax assets 4,462 4,004
Contract assets 129 77
-------------------------------------------- ---- -------- ----------------
55,707 39,078
-------------------------------------------- ---- -------- ----------------
Current assets
Trade and other receivables 13 10,791 12,840
Net investment in lease 46 -
Contract assets 3,864 3,750
Current tax assets 2 73
Cash and cash equivalents 16 16,463 19,974
-------------------------------------------- ---- -------- ----------------
31,166 36,637
-------------------------------------------- ---- -------- ----------------
Total assets 86,873 75,715
-------------------------------------------- ---- -------- ----------------
Current liabilities
Trade and other payables 14 (7,027) (6,755)
Accruals (14,437) (7,941)
Contract liabilities (22,940) (20,872)
Current tax liabilities (1,864) (1,097)
Lease liabilities (933) -
Provisions (450) (879)
-------------------------------------------- ---- -------- ----------------
(47,651) (37,544)
-------------------------------------------- ---- -------- ----------------
Net current liabilities (16,485) (907)
Non-current liabilities
Other payables 14 (1,970) (62)
Deferred tax liabilities (1,093) (713)
Contract liabilities (78) (707)
Retirement benefit obligations (540) (1,002)
Lease liabilities (3,286) -
Provisions (936) (213)
-------------------------------------------- ---- -------- ----------------
(7,903) (2,697)
-------------------------------------------- ---- -------- ----------------
Total liabilities (55,554) (40,241)
-------------------------------------------- ---- -------- ----------------
Net assets 31,319 35,474
-------------------------------------------- ---- -------- ----------------
Equity
Share capital 9,979 9,803
Share premium 15,539 15,539
Other reserves 26,029 25,020
Accumulated losses (20,228) (14,888)
-------------------------------------------- ---- -------- ----------------
Total equity attributable to equity holders
of the parent 31,319 35,474
-------------------------------------------- ---- -------- ----------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Share Share Other Accumulated Total
capital premium reserves losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- --------- ----------- --------
Balance at 31 December 2017
restated 9,803 15,539 22,783 (16,819) 31,306
Profit for the year - - - 4,147 4,147
Other comprehensive expense
for the year - - - (435) (435)
Total comprehensive expense
for the year - - - 3,712 3,712
------------------------------------ -------- -------- --------- ----------- --------
Equity dividend paid - - - (1,952) (1,952)
Charge to equity for share-based
payments - - 2,265 - 2,265
Foreign exchange difference
on share-based payments - - (28) - (28)
Tax credit on charge to equity
for share-based payments - - - 171 171
------------------------------------ -------- -------- --------- ----------- --------
Contributions by and distributions
to owners - - 2,237 (1,781) 456
------------------------------------ -------- -------- --------- ----------- --------
Balance at 31 December 2018
as previously reported 9,803 15,539 25,020 (14,888) 35,474
Effect of IFRS 16 - - - (85) (85)
Tax effect of IFRS 16 - - - (9) (9)
------------------------------------ -------- -------- --------- ----------- --------
Total Effect of IFRS 16 - - - (94) (94)
------------------------------------ -------- -------- --------- ----------- --------
Balance as at 31 December 2018
restated 9,803 15,539 25,020 (14,982) 35,380
Loss for the year - - - (2,963) (2,963)
Other comprehensive expense
for the year - - - (220) (220)
------------------------------------ -------- -------- --------- ----------- --------
Total comprehensive expense
for the year - - - (3,183) (3,183)
------------------------------------ -------- -------- --------- ----------- --------
Issue of equity share capital 176 - - - 176
Equity dividend paid - - - (2,147) (2,147)
Charge to equity for share-based
payments - - 1,042 - 1,042
Foreign exchange difference
on share-based payments - - (33) - (33)
Tax credit on charge to equity
for share-based payments - - - 84 84
------------------------------------ -------- -------- --------- ----------- --------
Contributions by and distributions
to owners 176 - 1,009 (2,063) (878)
------------------------------------ -------- -------- --------- ----------- --------
At 31 December 2019 9,979 15,539 26,029 (20,228) 31,319
------------------------------------ -------- -------- --------- ----------- --------
Consolidated Cash Flow Statement
For the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
Note GBP'000 GBP'000
--------------------------------------------------- ---- ------------ ------------
Net cash from operating activities 16 12,359 14,241
--------------------------------------------------- ---- ------------ ------------
Investing activities
Interest received 51 46
Purchases of property, plant and equipment (577) (1,203)
Expenditure on intangible assets (6,300) (4,217)
Payment of deferred consideration for acquisitions (485) (826)
Acquisition of investments in subsidiaries
- cash consideration 17 (5,904) -
Acquisition of investments in subsidiaries
- cash acquired 34 -
--------------------------------------------------- ---- ------------ ------------
Net cash outflow from investing activities (13,181) (6,200)
--------------------------------------------------- ---- ------------ ------------
Financing activities
Interest paid (119) (1)
Proceeds on issue of shares 176 -
Payment of lease liabilities (865) -
Proceeds from sub-leases 52 -
Equity dividend paid (2,147) (1,952)
--------------------------------------------------- ---- ------------ ------------
Net cash used in financing activities (2,903) (1,953)
--------------------------------------------------- ---- ------------ ------------
Net (decrease)/increase in cash and cash
equivalents (3,725) 6,088
Cash and cash equivalents at beginning of
year 19,974 14,082
Effect of foreign exchange rate changes 214 (196)
--------------------------------------------------- ---- ------------ ------------
Cash and cash equivalents at end of year 16,463 19,974
--------------------------------------------------- ---- ------------ ------------
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 2019
or 2018, but is derived from those accounts. Statutory accounts for
2018 have been delivered to the Registrar of Companies and those
for 2019 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 2019 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
posted to shareholders on or around 3 April 2020 and are available
to members of the public at the registered office of the Company
from that date, and are now available on the Company's website:
www.tribalgroup.com .
2. Effect of new accounting standards
The Group adopted IFRS16 "Leases" with effect from 1 January
2019. This has resulted in the Group recognising right-of-use
assets and lease liabilities. For leases previously classified as
operating leases, under previous accounting requirements the Group
did not recognise related assets or liabilities, and instead spread
the lease payments on a straight-line basis over the lease term.
The Group has applied the modified retrospective approach and has
only recognised leases on the balance sheet as at 1 January
2019.
Comparative amounts for the year prior to the first adoption
have not been restated. In addition, it has been decided to measure
right-of-use assets by reference to the measurement of the lease
liability on that date as if the new standard had always been
applied in line with transitional provisions. Future dilapidation
costs have been added as part of the cost of the right-of-use
asset.
The lease liability on 1 January 2019 has been measured at the
present value of the remaining lease payments discounted using the
incremental borrowing rate at that date.
The key assumptions used in this assessment are as follows:
Straight line amortisation of the right-of-use assets; amortisation
period being equivalent to the length of the lease; and implicit
rate used in the calculations being 1.8% + LIBOR (0.85%).
On transition to IFRS 16 the weighted average incremental
borrowing rate applied to lease liabilities recognised under IFRS
16 was 2.65%.
The effects of adopting IFRS 16 as at 1 January 2019 are as
follows:
IFRS 16 carrying
as at
Carrying amount Effect of 1 January
31 Dec 2018 IFRS 16 2019
GBP'000 GBP'000 GBP'000
------------------------------------------- ---------------- ---------- -----------------------
Right-of-use assets - 4,176 4,176
Net investment in lease - 313 313
Trade and other payables (rent incentives) (6,755) 308 (6,447)
Lease liabilities - (4,882) (4,882)
Accumulated losses (14,888) 85 (14,803)
------------------------------------------- ---------------- ---------- -----------------------
The following is a reconciliation of total operating lease
commitments at 31 December 2019 (as disclosed in the financial
statements to 31 December 2018) to the lease liabilities
recognised at 1 January 2019.
GBP'000
--------------------------------------- --------------
Balance at 31 December 2018 5,394
Leases with remaining lease term of
less than 12 months and low value
leases (73)
Lease liabilities before discounting 5,321
Discounted using incremental borrowing
rate (439)
----------------------------------------- --------------
Balance at 1 January 2019 recognised
under IFRS 16 4,882
----------------------------------------- --------------
3. 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.
North
America
and
UK Australia Other APAC rest of Total
31 December 2019 GBP000 GBP000 GBP000 the GBP000
world
GBP000
Licence and development fees 5,992 152 149 80 6,373
Implementation Services 8,591 2,610 1,135 417 12,753
Support & Maintenance 14,869 15,656 1,254 843 32,622
Cloud Services 5,154 752 26 111 6,043
Other services 804 20 - - 824
Schools inspections & other related
services (QAS) 11,689 - 1,054 5,095 17,838
i-graduate survey & data analytics 327 333 403 694 1,757
------------------------------------ ------- ---------- ----------- -------- -------
47,426 19,523 4,021 7,240 78,210
------------------------------------ ------- ---------- ----------- -------- -------
North
America
and
UK Australia Other APAC rest of Total
GBP000 GBP000 GBP000 the GBP000
world
31 December 2018 GBP000
Licence and development fees 5,977 110 424 (21) 6,490
Implementation Services 6,534 4,107 2,436 479 13,556
Support & Maintenance 13,613 16,179 1,314 624 31,730
Cloud Services 4 ,347 715 25 87 5,174
Other services 1 ,237 229 1 (787) 680
Schools inspections & other related
services (QAS) 9 ,870 - 1,084 8,901 19,855
i-graduate survey & data analytics 9 76 894 245 462 2,577
------------------------------------ ------- ---------- ----------- -------- -------
42,554 22,234 5,529 9,745 80,062
------------------------------------ ------- ---------- ----------- -------- -------
Net contract assets/(liabilities)
Contract Contract
Asset/(Liability) Asset/(Liability)
2019 2018
GBP000 GBP000
------------------------------------------------------ ------------------ ------------------
Opening contract balance post IFRS 15 (17,752) (14,750)
Of which released to income statement 17,112 14,416
New billings and cash in excess of revenue recognised (18,385) (17,418)
------------------------------------------------------ ------------------ ------------------
Closing contract balance (19,025) (17,752)
------------------------------------------------------ ------------------ ------------------
Of the GBP18,385,000 new billings and cash in excess of revenue
recognised, GBP535,000 related to Tribal Dynamics Limited. This
amount is also included in the closing contract balance.
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.
License revenue is recognised over the duration of the project
implementation period on a percentage completion basis based on
timesheet data of actual days delivered versus number of expected
days for the project.
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. See note
31.
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 GBP0.2m (2018: GBP0.2m) and will
be released in line with the total contract revenue. No amount has
been impaired at 31 December 2019 or 2018.
Remaining performance obligations
License revenue is recognised over the duration of the project
implementation period on a percentage completion basis. For large
deals, which may typically have an implementation period of two
years or more, the recognition of License revenue is spread over an
extended period, rather than immediate upfront recognition.
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 2019
2020 2021 2022 Thereafter Total
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ------- ------- ------- ---------- -------
Licence and development fees 4,364 2,826 1,439 36 8,665
Implementation Services 7,680 703 208 - 8,591
Support & Maintenance 32,894 29,362 11,012 293 73,561
Cloud Services 5,629 4,888 2,048 146 12,711
Other services 300 174 23 - 497
Schools inspections & other
related services (QAS) 13,875 7,633 3,862 2,850 28,220
i-graduate survey & data analytics 696 278 281 70 1,325
----------------------------------- ------- ------- ------- ---------- -------
65,438 45,864 18,873 3,395 133,570
----------------------------------- ------- ------- ------- ---------- -------
At 31 December 2018
2019 2020 2021 Thereafter Total
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ------- ------- ------- ---------- -------
Licence and development fees 3,887 1,658 482 26 6,053
Implementation Services 6,955 2,465 170 55 9,645
Support & Maintenance 32,448 29,201 17,558 1,007 80,214
Cloud Services 5,278 4,071 2,199 497 12,045
Other services 166 157 158 - 481
Schools inspections & other
related services (QAS) 10,540 1,613 311 - 12,464
i-graduate survey & data analytics 622 15 14 - 651
----------------------------------- ------- ------- ------- ---------- -------
59,897 39,180 20,892 1,585 121,554
----------------------------------- ------- ------- ------- ---------- -------
An analysis of the Group's revenue is as follows:
2019 2018
GBP'000 GBP'000
Continuing operations
Sales of services 78,210 80,062
---------------------- -------- --------
Total revenue 78,210 80,062
---------------------- -------- --------
Sales of services are defined as education related systems or
solutions and consultancy services. Further details of the nature
of
the services provided are disclosed in note 5. Sales of goods
are not material and are therefore not shown separately. Included
in sales of services is GBP0.6m (2018: GBP0.8m) 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.
4. 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; and
-- Education Services ('ES') representing inspection and review
services which support the assessment of educational delivery,
previously Quality Assurance Solutions (QAS), and a portfolio of
performance improvement tools and services, including analytics,
software solutions, facilities and asset management, previously
i-graduate.
Tribal previously identified and reported under 3 operating
segments namely Student Management Systems (SMS), i-graduate and
Other (IGRAD) and Quality Assurance Services (QAS). The operating
segments were changed at the beginning of the year and now consist
of Student Information Systems (SIS) and Education Services (ES).
The change is primarily due to restructuring in i-graduate whereby
IGRAD and QAS are amalgamated into one operating segment - ES.
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.
Adjusted Segment
Revenue Operating Profit
-------------------------- --------------------------
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ------------ ------------
Student Information Systems 58,615 57,630 17,937 16,911
Education Services 19,595 22,423 4,014 4,570
----------------------------------- ------------ ------------ ------------ ------------
Total 78,210 80,062 21,481 21,481
----------------------------------- ------------ ------------ ------------ ------------
Unallocated corporate expenses (10,299) (10,686)
----------------------------------- ------------ ------------ ------------ ------------
Adjusted operating profit 11,652 10,795
Amortisation of IFRS 3 intangibles (1,331) (1,787)
Other items (12,767) (4,425)
----------------------------------- ------------ ------------ ------------ ------------
Operating (loss)/profit (2,446) 4,583
Investment income 59 46
Finance (costs)/income (506) 220
----------------------------------- ------------ ------------ ------------ ------------
(Loss) /profit before tax (2,893) 4,849
Tax charge (70) (702)
----------------------------------- ------------ ------------ ------------ ------------
(Loss)/profit after tax (2,963) 4,147
----------------------------------- ------------ ------------ ------------ ------------
Depreciation and amortisation is allocated to segment profits
and is included in adjusted segment operating profit as above.
The
amount included in SIS is GBP1.8m (2018: GBP2.0m) and within
Education Services GBP0.1m (2018: GBP0.2m).
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 4% (2018:
5%) have arisen from the Segments largest customer; within SIS
revenues of approximately 7% (2018: 6%) have arisen from the
Segments largest customer.
Geographical information
Revenue from external customers, based on location of the
customer, are shown below:
2019 2018
GBP'000 GBP'000
UK 47,426 42,554
Australia 19,523 22,234
Other Asia Pacific 4,021 5,529
North America and rest of the world 3,127 2,666
Rest of the world 4,113 7,079
------------------------------------ -------- --------
78,210 80,062
------------------------------------ -------- --------
Non-current assets (excluding deferred tax)
2019 2018
GBP'000 GBP'000
UK 34,440 17,884
Australia 15,607 16,940
Other Asia Pacific 892 248
North America and rest of the world 64 2
Rest of the world 25 -
------------------------------------ -------- --------
51,028 35,074
------------------------------------ -------- --------
5. Other items
2019 2018
GBP'000 GBP'000
------------------------------------------------- -------- --------
Acquisition related costs (237) (62)
------------------------------------------------- -------- --------
Platform dispute (9,133) -
------------------------------------------------- -------- --------
Employee related share option charges (including
employer related taxes) (1,717) (2,329)
------------------------------------------------- -------- --------
- Impairment of development costs - (983)
- Write off of business systems (646) -
- Legacy Defined benefit schemes (90) (73)
-Other legal costs (150) -
- Property related - 7
- Restructuring and associated costs (794) (985)
------------------------------------------------- -------- --------
Other items (1,690) (2,034)
------------------------------------------------- -------- --------
Amortisation of software and customer contracts
& relationships (1,331) (1,787)
------------------------------------------------- -------- --------
Total administrative expenses (14,098) (6,212)
------------------------------------------------- -------- --------
Other financing costs (344) (106)
Other financing income - 380
------------------------------------------------- -------- --------
Total other items before tax (14,442) (5,938)
Tax on other items 2,448 1,171
------------------------------------------------- -------- --------
Total other items after tax (11,994) (4,767)
------------------------------------------------- -------- --------
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 legal and due
diligence costs acquisition of Tribal Dynamics Holdings Limited
in
the period total GBP237,000 (2018: GBP62,000), (see note 33).
Under IFRS3 these amounts have been expensed as are not eligible
for
capitalisation. These are considered to be one off costs in the
year.
Platform dispute: Amounts relating to the Platform dispute and
the agreement to settle the dispute for past royalties and
associated legal costs in the period total GBP9,133,000 (2018:
GBPnil). An accrual of GBP8,200,000 has been made at the year end
to
settle all historic liabilities and outstanding legal costs.
Employee related share option charges. The numbers above
include:
- Share based payments (see note 23) plus foreign exchange GBP33,000 (2018: GBP28,000);
- the movement in associated employers taxes accrual (2019: GBP(52,000): 2018: GBP17,000);
- the cash paid on dividends on share options that have met
performance conditions (2019: GBP155,000: 2018: GBP47,000). 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 (2019:
GBP572,000: 2018: GBPnil). 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 the year the Group upgraded its accounting system to
Microsoft Dynamics D365 to allow the Group's finance team to access
new functionalities and thus providing operating efficiencies.
After the successful upgrade the remaining life of AX 2012 was
reviewed and management concluded that this asset should be fully
impaired in line with IAS 36 paragraph 12(e) due to the obsolesce
of the asset (2019: GBP646,000: 2018: GBPnil) (see note 15);
- Legacy defined benefit schemes relate to the Prudential
Platinum and Federated Pension Funds to which no current Tribal
employee is a member. Costs arising relate to administration
charges;
- Legal costs associated with the data breach in Tribal Campus,
an Australian subsidiary of the Group, announced on 12 August 2019,
amounted to GBP150,000 (2018: GBPnil). The amounts expensed are the
excess not covered by the Group's Insurance policy; and
- Restructuring and associated costs relate to the restructuring
of the Group's operations. At the end of 2018 the Group announced
the restructure of the management of its i-graduate business in the
UK and the SchoolEdge development team in Asia Pacific with costs
arising in 2019 mainly due to redundancies (2019: GBP794,000: 2018:
GBP985,000).
Amortisation of software and customer contracts and
relationships: Amortisation arising on the fair value of intangible
assets
acquired is separately disclosed. (2019: GBP1,331,000: 2018:
GBP1,787,000).
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 (2019: GBP344,000:
2018:
GBP106,000).
Other financing income: Amounts relating to settlement gains on
defined benefit schemes (2019: GBPnil: 2018: GBP380,000).
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.
6. Investment income
2019 2018
GBP'000 GBP'000
Other interest receivable 51 46
Interest receivable on leased assets 8 -
------------------------------------- -------- --------
Total investment income 59 46
------------------------------------- -------- --------
7. Finance costs/(income)
2019 2018
GBP'000 GBP'000
Interest on bank overdrafts and loans 4 1
Amortisation and write off of loan arrangement fees - 12
Net interest payable on retirement benefit obligations 27 41
Interest expense on lease liabilities 131 -
------------------------------------------------------- -------- --------
Adjusted Finance costs 162 54
------------------------------------------------------- -------- --------
Unwinding of discounts 344 106
------------------------------------------------------- -------- --------
Other finance costs 344 106
------------------------------------------------------- -------- --------
Total finance costs 506 160
Settlement gain on defined benefit schemes - (380)
------------------------------------------------------- -------- --------
Total finance costs/(income) 506 (220)
------------------------------------------------------- -------- --------
8. Tax
2019 2018
GBP'000 GBP'000
------------------------------------------ -------- --------
Current tax
UK corporation tax - 114
Overseas tax 1,299 702
Adjustments in respect of prior years (406) (179)
------------------------------------------ -------- --------
893 637
------------------------------------------ -------- --------
Deferred tax
Current year (1,143) 79
Adjustments in respect of prior years 320 (14)
------------------------------------------ -------- --------
(823) 65
------------------------------------------ -------- --------
Tax charge on profits 70 702
------------------------------------------ -------- --------
The continuing tax charge can be reconciled to the profit from
continuing operations per the income statement as follows:
2019 2018
GBP'000 GBP'000
------------------------------------------------------ -------- --------
(Loss)/profit before tax on continuing operations (2,893) 4,849
------------------------------------------------------ -------- --------
Tax (credit)/charge at standard UK rate of 19% (2018:
19%) (550) 921
Effects of:
Overseas tax rates 349 (56)
Expenses not deductible for tax purposes 268 156
Adjustments in respect of prior years (86) (193)
Additional deduction for R&D expenditure 8 18
Movement in transfer pricing tax provision - (64)
Utilisation of unrecognised tax losses (7) 9
Effect of changes in tax rates 88 (89)
------------------------------------------------------ -------- --------
Tax expense for the year 70 702
------------------------------------------------------ -------- --------
In addition to the amount charged to the income statement a
current tax credit of GBPnil (2018: GBPnil) and a deferred tax
credit of
GBP84,000 (2018: GBP171,000) has been recognised directly in
equity during the year in relation to share schemes. A deferred
tax
charge of GBP83,000 (2018: GBP73,000) 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 no progress in the Care UK case in the
year to 31 December 2019. Under IFRIC 23 management have reviewed
this uncertain tax provision and in line with the new standard do
not consider it appropriate to make any adjustments due to the lack
of progression in the year.
The income tax expense for the year is based on the UK statutory
rate of corporation tax for the period of 19% (2018: 19%). Tax for
other jurisdictions is calculated at the prevailing rates
prevailing in the respective jurisdictions.
A further reduction in the UK corporation tax rate from 19% to
17% (effective from 1 April 2020) was substantively enacted on
6
September 2016. This will reduce the Group's future tax charge
accordingly. The deferred tax balances at 31 December 2019 have
been calculated based on these rates.
9. Dividends
2019 2018
GBP'000 GBP'000
Amounts recognised as distributions to equity holders
in the period:
Final dividend for the year ended for the year ended
31 December 2018 of 1.1 pence
(year ended 31 December 2017: 1.0 pence) per share 2,147 1,952
Proposed final dividend:
Proposed final dividend for the year ended 31 December
2019 of 1.2 pence
(year ended 31 December 2018: 1.1 pence) per share 2,451 2,147
------------------------------------------------------- -------- --------
The Board regularly review the available distributable reserves
of Tribal Group plc to ensure they are protected for future
dividend payments.
The proposed dividend per share has been calculated on the
number of shares expected to be in issue at the date of payment.
This includes allotments of shares since the year end.
10. Earnings per share
Earnings per share and diluted earnings per share are calculated
by reference to a weighted average number of ordinary shares
calculated as follows:
2019 2018
thousands thousands
-------------------------------------------------- ---------- ----------
Weighted average number of shares outstanding:
Basic weighted average number of shares in issue 196,626 195,224
Weighted average number of employee share options 7,241 10,546
-------------------------------------------------- ---------- ----------
Weighted average number of shares outstanding for
dilution calculations 203,867 205,770
-------------------------------------------------- ---------- ----------
Diluted earnings per share only reflects the dilutive effect of
share options for which vesting criteria have been met.
The maximum number of potentially dilutive shares, based on
options that have been granted but have not yet met vesting
criteria, is 5,281,859 (2018: 7,140,064) This includes 1,116,879
options in the 2019 SAYE Scheme. In addition there are a
further
3,405,996 (2018: 3,405,996) potentially dilutive matching share
options that have been granted but have not yet met vesting
criteria as at 31 December 2019. These Matching share options
were exercised on 18 December 2019, however the shares were
not allotted until early January 2020.
The adjusted basic and diluted earnings per share figures shown
on the consolidated income statement are included as the Directors
believe that they provide a better understanding of the underlying
trading performance of the Group. A reconciliation of how these
figures are calculated is set out below:
2019 2018
GBP'000 GBP'000
----------------------------- -------- --------
Net (Loss)/profit (2,963) 4,147
----------------------------- -------- --------
Earnings per share
Basic (1.5)p 2.1p
Diluted (1.5)p 2.0p
----------------------------- -------- --------
Adjusted net profit 9,031 8,914
----------------------------- -------- --------
Adjusted earnings per share
Basic 4.6p 4.6p
Diluted 4.4p 4.3p
----------------------------- -------- --------
(Loss)/profit for
the year Earnings per share
---------------------------------------- ------------------- --------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- --------- -------- --------- ---------
(Loss)/profit for the year attributable
to equity shareholders (2,963) 4,147 (1.5)p 2.1p
---------------------------------------- --------- -------- --------- ---------
Add back:
Amortisation of IFRS intangibles (net
of tax) 1,003 1,271
Share based payments 1,009 2,237
Unwinding of discounts 344 106
Platform dispute 9,133 -
Other items (net of tax) 505 1,153
---------------------------------------- --------- -------- --------- ---------
Total adjusting items (net of tax) 11,994 4,767 6.1p 2.5p
---------------------------------------- --------- -------- --------- ---------
Adjusted earnings 9,031 8,914 4.6p 4.6p
---------------------------------------- --------- -------- --------- ---------
11. Goodwill
2019 2018
GBP'000 GBP'000
------------------------------ -------- --------
Cost
At beginning of year 101,748 102,344
Additions (note 17) 5,870 -
Exchange differences (508) (596)
------------------------------ -------- --------
At end of year 107,110 101,748
------------------------------ -------- --------
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 25,879 20,517
------------------------------ -------- --------
At beginning of year 20,517 21,113
------------------------------ -------- --------
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:
2019 2018
GBP'000 GBP'000
---------------------------- -------- --------
Student Information Systems 22,345 16,983
Education Services (ES) 3,534 3,534
---------------------------- -------- --------
25,879 20,517
---------------------------- -------- --------
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.
From 1 January 2019 the i-graduate business was combined with
QAS under one new CGU 'Education Services' (ES) and is led
by Janet Tomlinson. The change is primarily due to restructuring
in i-graduate whereby IGRAD and QAS are amalgamated into one
operating segment - ES.
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 2020. 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 cashflows. The
growth assumption is 2% per annum for SIS (2018; 2%) and 2% for ES
(2018: 4%). 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 9.3% (2018: 10.4%). 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 100% would trigger an
impairment in SIS and ES respectively. A decline in growth rate to
(24%) in SIS and (91%) in ES would result in an impairment.
Management does not consider these changes possible but considers a
slight increase in discount rate to 10% and zero growth may be
possible as a result of the current economic environment. As a
result of the analysis, there is headroom of GBP79.8 million and
GBP26.8 million in SIS and ES respectively.
As a result, management does not believe a reasonably possible
change in the key assumptions may cause impairment.
12. Other intangible assets
Customer Acquired
contracts Intellectual Development Business Software
Software & relationships Property costs systems licences Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
Cost
At 1 January 2018 7,767 7,096 1,873 26,535 6,374 1,469 51,114
Additions - - - 4,145 46 26 4,217
Disposals - - - - - (7) (7)
Exchange differences (353) (151) - (173) (5) (2) (684)
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2018
and 1 January
2019 7,414 6,945 1,873 30,507 6,415 1,486 54,640
Acquisitions 2,718 1,607 - - - - 4,325
Additions - - - 6,141 156 3 6,300
Disposals - - - - (1,480) - (1,480)
Exchange differences (301) (128) - (135) (8) - (572)
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2019 9,831 8,424 1,873 36,513 5,083 1,489 63,213
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
Amortisation
At 1 January 2018 5,475 4,936 187 20,281 5,025 1,347 37,251
Charge for the
year 1,358 429 374 1,383 487 85 4,116
Impairment - - - 983 - - 983
Disposals - - - - - (7) (7)
Exchange differences (270) (78) - (70) (3) - (421)
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2018
and 1 January
2019 6,563 5,287 561 22,577 5,509 1,425 41,922
Charge for the
year 861 470 98 1,412 223 60 3,124
Disposals - - - - (834) - (834)
Exchange differences (287) (80) - (96) (5) - (468)
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2019 7,137 5,677 659 23,893 4,893 1,485 43,744
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
Carrying amount
At 31 December
2019 2,694 2,747 1,214 12,620 190 4 19,469
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
At 31 December
2018 851 1,658 1,312 7,930 906 61 12,718
--------------------- --------- ---------------- ------------- ----------- -------- --------- --------
Software and customer contracts and relationships have arisen
from acquisitions and are amortised over their estimated useful
lives, which are 3 to 8 years and 3 to 12 years respectively.
The additions in the period relate to the acquisition of Tribal
Dynamics Limited (see note 33). The amortisation period for
development costs incurred on the Group's product development is 5
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, business systems
and software licenses are all included within administrative
expenses.
Included within Business Systems are finance systems with a
carrying value of GBP0.2m (2018: GBP0.9m). During 2019
management
took the decision to write off the AX finance system (GBP0.6m)
following a successful implementation of the new D365 system which
has now been capitalised. This system is being amortised over a
period of ten years and has nine years left.
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 CGU's. The use of
this method requires the estimation of future cashflows and the
determination of a discount rate in order to calculate the
present value of the cashflows.
The impairment testing allocates all assets relating to specific
CGUs, including goodwill, other intangibles, property, plant
and
equipment and net current assets and liabilities.
Towards the end of 2018 management identified some challenges in
the APAC school's business. To mitigate some of the
challenge it was decided to reduce investment in the sector and
halt future software development where it is not supported
by committed sales. The decision to stop work on modules 3 was
taken at the end of the year and in line with the Group's
policy,
work undertaken throughout that year was capitalised as the view
at the time was that the capitalised value was supportable.
Management concluded that as at 31 December 2018 there was an
impairment in Development Costs, being the whole of modules 3 in
SchoolEdge totalling GBP1m, being the software sold into schools in
Australia only. This asset belongs to the SIS segment and has been
booked through 'other items, administrative expenses' (see note 7)
in the financial statements and is consistent with the treatment of
other 'non-trading' adjustments.
On 5 June 2017 the Group acquired Intellectual property from
Wambiz Limited. The initial cash consideration was
GBP1,250,000.
Further consideration of GBP289,000 was paid in 2018 and
GBP485,000 paid in 2019. All consideration has now been paid. An
intangible asset of GBP1,873,000 has been recorded under Acquired
intellectual property. The Wambiz code has been incorporated within
the new app/Engage platform of Tribal Edge, the amortisation time
frame of this is expected to be fifteen years in line with the rest
of Tribal Edge. Subsequently, management have changed the UEL of
this asset from 5 to 15 years in accordance with IAS 8.36. This has
been treated as a change in accounting estimate from 1 January 2019
and therefore prior periods have not been adjusted. The net impact
of this change in accounting estimate is a reduction in the
amortisation charge of GBP277,000.
13. Trade and other receivables
2019 2018
GBP'000 GBP'000
Amounts receivable for the sale of services 8,070 9,452
Less: loss allowance (441) (137)
-------------------------------------------- -------- --------
7,629 9,315
Other receivables 330 375
Prepayments 2,832 3,150
-------------------------------------------- -------- --------
10,791 12,840
-------------------------------------------- -------- --------
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.
14. Trade and other payables
2019 2018
GBP'000 GBP'000
----------------------------------- -------- --------
Current
Trade payables 800 1,461
Other taxation and social security 3,156 3,028
Other payables 1,378 1,793
Deferred contingent consideration 1,693 -
Deferred consideration - 473
----------------------------------- -------- --------
7,027 6,755
----------------------------------- -------- --------
Non-current
Deferred contingent consideration 1,939 -
Other payables 31 62
----------------------------------- -------- --------
1,970 62
----------------------------------- -------- --------
Total 8,997 6,817
----------------------------------- -------- --------
The average credit period taken for trade purchases is 10 days
(2018: 30 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:
2019 2018
GBP'000 GBP'000
---------------------------- -------- --------
Goods received not invoiced 538 685
Other creditors 840 1,108
---------------------------- -------- --------
1,378 1,793
---------------------------- -------- --------
Deferred contingent consideration reflects amounts in respect of
the acquisition of Tribal Dynamics Limited, payable over a
period of 2 years. The amounts are contingent upon the
performance with the amounts provided reflecting management's
best
estimate of the future annual recurring revenue ("ARR") of this
entity and the resultant payments due under the Sale and Purchase
Agreement. The amounts above have been discounted at a rate of
11.69%. The undiscounted value of the deferred consideration is
GBP4,000,000 (2018: GBPnil) versus a discounted value of
GBP3,632,000 (2018: GBPnil).
15. Borrowings
As at 31 December 2019 the Group has the following committed
borrowing facilities: a GBP2.0m committed overdraft facility in
the UK and a $AUD 2.0m committed overdraft facility in
Australia. The UK overdraft is committed for a 12 month period
ending
September 2020, and the Australian overdraft committed for a 12
month period ending October 2020. As at 31 December 2019,
the Group had cash and cash equivalents of GBP16.5m (2018: of
GBP20.0m). The Directors estimate that the book values of the
Group's borrowings reflect the fair values thereof.
At the year-end there was GBP2.0m available but undrawn in
respect of the UK overdraft facility and $AUD 2.0m available but
undrawn in respect of the Australian overdraft facility.
On 21 January 2020 the Group entered into a new 3 year GBP10m
multi-currency revolving facility with HSBC with the option to
extend to a further 2 years. The facility was put in place to cover
general corporate and working capital requirements of the
Group.
16. Notes to the cash flow statement
2019 2018
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Operating (loss)/profit from continuing operations (2,446) 4,583
Depreciation of property, plant and equipment 879 995
Depreciation of right-of-use assets 1,043 -
Amortisation and impairment of other intangible
assets 3,770 5,099
Share based payments 1,042 2,265
Research and development tax credit (176) (325)
Net pension charge 3 54
Other non-cash items (428) 55
--------------------------------------------------- -------- --------
Operating cash flows before movements in working
capital 3,687 12,726
Decrease in receivables 2,248 2,034
Increase in payables 6,245 1,086
--------------------------------------------------- -------- --------
Net cash from operating activities before tax 12,180 15,846
Tax received/(paid) 179 (1,605)
--------------------------------------------------- -------- --------
Net cash from operating activities 12,359 14,241
--------------------------------------------------- -------- --------
Net cash from operating activities before tax can be analysed as
follows:
2019 2018
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Continuing operations (excluding restricted cash) 12,180 15,885
Decrease in restricted cash - (39)
-------------------------------------------------- -------- --------
12,180 15,846
-------------------------------------------------- -------- --------
17. Acquisition of subsidiary
On 10 May 2019, the Group acquired 100% of the issued share
capital of Tribal Dynamics Holdings Limited (formerly Crimson
Holdings Limited) and its subsidiary Tribal Dynamics Limited
(Dynamics) (formerly Crimson Consultants Limited), a company
incorporated in the UK that is a leading provider of customer
relationship management (CRM) based solutions to the education
market.
This technology acquired provides valuable, additional
functionality to Tribal Edge. It will accelerate its speed to
market and reduces Tribal's requirement to develop this
functionality. Additionally, Dynamics brings with it a broad
existing customer base and strong relationships with Higher
Education universities and Further Education colleges.
This transaction has been accounted for by the purchase method
of accounting. This comprises an initial cash consideration of
GBP5.9m and a deferred contingent consideration of GBP4.0m (the
discounted figure at acquisition being GBP3.3m) which is payable
on
the annual recurring revenue (ARR) growth of the acquired
business calculated at the end of each financial year (2019 and
2020).
Deferred contingent consideration that becomes due shall be
satisfied in the period from March 2020 to March 2021. For
every
5% of the target ARR hurdle missed undiscounted contingent
consideration reduces by GBP100,000. As at the date of this report,
the ARR for the year ended 31 December 2019 is yet to be agreed
with the vendors.
The provisional carrying amount of each class of Crimson
Consultants Limited's assets before combination is set out
below:
Fair value Acquisition Provisional
Book value adjustments adjustments fair value
GBP000 GBP000 GBP000 GBP000
---------------------------------- ---------- ------------ ------------ -----------
Intangible assets - - 4,325 4,325
Tangible assets 15 (15) - -
Trade and other receivables 310 - - 310
Contract assets 331 - - 331
Cash and cash equivalents 34 - - 34
Trade and other payables (394) (51) - (445)
Contract liabilities (486) - - (486)
Deferred tax liabilities - - (735) (735)
---------------------------------- ---------- ------------ ------------ -----------
Net (liabilities)/assets acquired (190) (66) 3,590 3,334
Goodwill arising on acquisition 5,870
---------------------------------- ---------- ------------ ------------ -----------
Consideration - satisfied by:
Initial cash consideration 5,904
Deferred contingent consideration 3,300
---------------------------------- ---------- ------------ ------------ -----------
9,204
---------------------------------- ---------- ------------ ------------ -----------
The initial cash consideration paid to Dynamics was satisfied
through existing cash balances. The acquisition led to a net cash
outflow, taking into account the cash acquired, of
GBP5,870,000.
Intangible assets arising on acquisition are in respect of
customer relationships and contracts (GBP1.6m) and software
(GBP2.7m).
The goodwill arising on acquisition is attributable to
synergies, the assembled workforce, and potential future
relationships,
contracts and software.
Trade and other receivables are held at fair value and as at the
date of acquisition 100% of these trade receivables are expected to
be collected.
Tribal Dynamics Limited contributed revenue of GBP1.8m and
operating profit of GBP0.2m to the Group for the period between the
date of acquisition and the balance sheet date. Acquisition related
costs amounted to GBP0.2m (2018: GBP0.1m) and are included in
administrative expenses in the Consolidated Income Statement and in
the operational cashflows in the Consolidated Cashflow
Statement.
Had the acquisition occurred on 1 January 2019, the Group's
revenue for the year to December 2019 would have increased by
GBP2.7m and its operating profit increased by GBP0.2m.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFEEEWESSELD
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March 18, 2020 03:00 ET (07:00 GMT)
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