Transcript Tribal Group plc 2007 Preliminary results

Tribal Group plc
Preliminary results for the nine months
ended 31 December 2007
Peter Martin
Chief Executive
Simon Lawton
Group Finance Director
26 March 2008
Contents

Highlights

Financial review

Operational review

Prospects
2
Highlights
Nine months to 31 December 2007




Revenue growth of 11%
Adjusted profit before tax up 98% to £11.1m (2006 : £5.6m)
Adjusted diluted EPS up 112% to 8.9p (2006 : 4.2p)
Final dividend of 1.8p; annualised increase of 13%
Pro forma 12 months to 31 December 2007




Adjusted profit before tax up 20% to £15.8m (2006 : £13.2m)
Adjusted diluted EPS up 20% to 12.7p (2006 : 10.6p)
Cash conversion 142%
Net debt reduced substantially to £6.8m
3
Financial review
Simon Lawton
Group Finance Director
4
Income statement (9 months)
Nine months ended
31 December
Audited
2007
£m
Pro forma
2006
£m
Growth
%
Continuing Operations
Turnover
188.7
166.7
+13%

Revenue increase of 11%

Operating profit* up 39% to £11.7m

Significant fall in interest and bank fees
153.3
138.2
+11%

Order book of £124m (2006: £108m)
Operating profit*
11.7
8.4
+39%

Bidding pipeline at £168m (interims: £84m)
Operating margin
7.6%
6.1%

Interest
(0.6)
(2.8)
Final dividend of 1.8p total. Dividend of
2.95p, equivalent annual increase of 13%
Profit before tax*
11.1
5.6
Tax
(3.1)
(1.6)
8.0
4.0
+100%
8.9p
4.2p
+112%
84,814
81,600
+4%
Revenue
Profit after tax*
Adjusted fully diluted EPS*
(pence)
No of WA diluted shares (‘000)
+98%
* Before amortisation of intangibles, share option costs, goodwill impairment and financial instrument costs
5
Pro forma income statement (12 months)
Pro forma year ended 31 December
2007
£m
2006
£m
Growth
%
Turnover
256.5
233.7
+10%
Revenue
209.2
194.3
+8%
Operating profit*
17.7
17.0
+4%
Operating margin
8.5%
8.7%
Interest
(1.9)
(3.8)
Profit before tax*
15.8
13.2
Tax
(4.3)
(3.9)
Profit after tax*
11.5
9.3
+24%
12.7p
10.6p
+20%
84,795
81,398
+4%
Continuing Operations
Adjusted fully diluted EPS* (pence)
No of WA diluted shares (‘000)
* Before amortisation of intangibles, share option costs, goodwill impairment and financial instrument costs
+20%
6
Committed revenue growth
£124m
£100m
£108m
£86m
£m
2004
2005
2006
2007
December
7
Committed revenue
At 1 January 2008
% of
Total
Education
Consulting
Support Services
£55m
£13m
£31m
£5m
£1m
£16m
£3m
£91m
74%
£14m
11%
£19m
15%
£124m
2008
£84m
2009
£35m
2010 and beyond
£5m
8
Balance sheet
December
2007
£m
Intangible assets
Other non-current assets
Net debt – core
Non-recourse debt – Mercury Health
March
2007
£m
191.2
195.9
9.1
58.8
(6.8)
(55.7)
-
(3.0)
(0.5)
Net working capital
(9.3)
(22.2)
181.2

Goodwill impairment of £9m for resourcing
business (no change to interims)

Strong working capital management

Deferred consideration of £3m will be settled in
cash in May

Gearing of 4% (31 March 2007 : 47%)

Retained earnings significantly improved to £37m
158.2
Share capital
79.0
78.9
Profit and loss reserves
36.6
9.9
Minority interest
1.1
1.6
Other reserves
64.5
67.8
181.2
158.2
Total equity and reserves
Balance sheet significantly strengthened by
profitable sale of Mercury Health
(18.1)
Deferred consideration payable
Net assets

9
Group cash flow
Pro forma year ended 31 December
2007
£m
2006
£m
Operating cash flow
- continuing operations
25.2
21.1
2.5
10.4
27.7
31.5
Interest
(2.1)
(5.4)
Tax
(0.7)
(5.1)
Net cash flow before investing & financing
24.9
21.0
Capital expenditure
(6.5)
(15.8)
Acquisitions
(2.2)
(0.2)
Dividends paid
(3.4)
(2.6)
Disposal of Mercury Health
36.3
-
Repayment of loans
(53.2)
10.9
Net change in cash
(4.1)
13.3
- discontinued operations

Operating profit to cash flow conversion for
continuing operations of 142% (2006: 124%)

Refund of tax of £1.6m due to prior year one-off
HMRC win

Capital expenditure of £6.5m (2006: £15.8m)
includes product development costs of £2.3m
(2006: £1.7m)
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Group net debt
December
2007
£m
Group net debt
Less: Mercury Health
non-recourse net debt
Group recourse net debt
March
2007
£m
6.8
73.8
-
(18.1)
6.8
55.7
Bank revolver facilities
40.0
125.0
Bank headroom
33.2
69.3


£40m bank facility until June 2012 with HBoS and
HSBC
Actual
Covenant
Interest cover
x10.0
>x3.0
Debt to EBITA
x0.4
<x3.5
Protected against future interest rate increases by
interest rate swaps through to 2010 at 4.99%
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Operational review
Peter Martin
Chief Executive
12
Analysis
Nine months to December 2007
Revenue
Education
40%
Consulting
32%
Support
services
28%
EBITA
Education
54%
Support
services
24%
Consulting
16%
13
Education
9 months to
31 Dec. 2007
9 months to
31 Dec. 2006
12 months to
31 Dec. 2007
12 months to
31 Dec. 2006
61,761
56,572
83,889
80,514
Operating profit £000
8,618
7,570
15,150
13,570
Operating margin (%)
14.0%
13.4%
18.1%
16.9%
Revenue £000
Financial summary (9 months)
Business review
 Revenue increased by 9%
 Good performance in 2007
 Operating profit up by 14%
 High level of contract wins
 Margin improvement mitigated by:
- investment in products and services
- significant bid activity
 Committed income 15% higher at start of 2008
Activities
Outlook
 Learning & Publishing. Programme delivery, learning
materials, offender learning, skills training and delivery
 Good order book and pipeline
 Software. Student administration systems, asset
management software, information management
 Services. Schools inspections, benchmarking,
consulting, academies and BSF
 Excellent performance in schools inspections
 Strengthened market position in software
 Continued investment in growth areas
 Increased bid activity
 Several senior appointments made
 International opportunities
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Consulting
9 months to
31 Dec. 2007
9 months to
31 Dec. 2006
12 months to
31 Dec. 2007
12 months to
31 Dec. 2006
50,084
43,719
69,408
61,166
Operating profit £000
3,420
2,422
3,899
4,567
Operating margin (%)
6.8%
5.5%
5.6%
7.5%
Revenue £000
Financial summary (9 months)
Business review
 Strong growth in revenue up 15%
 Continuing importance of frameworks
 Operating profit increased by 41%
 Good demand across housing & regeneration, health
and central government
 Operating margins rose to 6.8%
 Local government being restructured with new lead
appointed
 Investment in health commissioning
Activities
Outlook
 Management consulting
- Health
- Housing & regeneration
- Central government
- Local government
 Good levels of demand across consulting
 Focus on frameworks
 Importance of recruitment and retention
 International opportunities
15
Support services
9 months to
31 Dec. 2007
9 months to
31 Dec. 2006
12 months to
31 Dec. 2007
12 months to
31 Dec. 2006
43,022
39,555
58,402
55,347
Operating profit £000
3,825
2,686
5,035
5,209
Operating margin (%)
8.9%
6.8%
8.6%
9.4%
Revenue £000
Financial summary (9 months)
Business review
 Revenue increased by 9%
 Strong demand for architectural design services
 Operating profit 42% higher
 Two major PFI schemes closed
 Peterborough success fee (£1.25m) in part offsets
significant fall in resourcing profits
 Excellent progress in communications
Activities
 Disappointing performance in resourcing:
- move away from traditional media
- fall in senior vacancies in local government
- cost reductions implemented
- strengthened management structure
Outlook
 Architectural design. Health, education and science
 Strong order book and pipeline for architectural design
 Communications & PR
 Favourable trading conditions for communications
 Resourcing
 Resourcing performing to plan
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Management

Group HR Director appointed November 2007

Appointment of COO well-advanced

Several senior appointments made or planned

Senior Leadership team now fully established

Focus on collaboration:
 Respond to client needs
 Develop integrated solutions

Formal management reviews completed:
 Succession planning
 Talent development
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Prospects
Peter Martin
Chief Executive
18
Macro environment

Comprehensive Spending Review (CSR), October 2007
 Above average awards for education (5.6% p.a.) and health (4.0% p.a.)

Budget statement (March 2008)
 Confirmed CSR spending plans
 Extra funding for education

Gordon Brown (FT, 9 March 2008)
 “…greater diversity of providers, more choice and …more competition…”

Continuing government agenda:
 Public sector reform
 Focus on efficiencies
 Better value for money
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Group strategy

Focus on core public sector markets:
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



Delivery
Consulting
Education
Health
Housing & Regeneration
Local government
Central government
Support

Services span consulting, support and delivery

Development of integrated service offerings

Investment in growth areas



Health commissioning
BSF
Recruitment process outsourcing

International development

Selective acquisitions
20
Financial objectives (2008 – 2010)

Target double digit organic growth in annual revenue over the medium-term

Progressive improvement in operating margins

Increase committed income to 60% of annual revenue (from current ~40%)

Enhance earnings growth through selective acquisitions

Progressive dividend growth
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Current trading

Trading in line with our expectations since the start of the year

Delivered plus committed revenue 55% of 2008 plan at end of February

Continuing investment / higher bid activity in H1 2008, particularly in education

2008 will benefit from reduced interest charge

Pipeline of opportunities is strong

Look forward to 2008 and beyond with confidence
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Tribal Group plc
Preliminary results for the nine months
ended 31 December 2007
End