Transcript Tribal Group plc 2007 Preliminary results

Tribal Group plc
Half year results for the six months
ended 30 June 2008
Peter Martin
Chief Executive
Simon Lawton
Group Finance Director
19 August 2008
Contents

Highlights

Financial review

Operational review

Prospects
2
Highlights
 Revenue growth of 9% to £113.3m (2007: £103.8m)
 Adjusted operating profit up 10% to £9.5m (2007: £8.6m)
 Adjusted profit before tax up 38% to £9.1m (2007: £6.6m)
 Adjusted diluted EPS up 37% to 7.4p (2007: 5.4p)
 Interim dividend of 1.7p
 Acquisition of 72% of HELM Corporation completed for £15.1m
 Net debt £7.3m
3
Financial review
Simon Lawton
Group Finance Director
4
Financial performance
Profit before tax (£m)†
Revenue (£m)
Earnings per share (pence)†
15.4
209
194
10.4
9.1
8.4
102
2006
104
2007
12.2
13.0
6.6
113
2008
2006
2007
2008
7.4
6.4
5.4
2006
2007
Full year
2008
Interim
Note: Historic figures stated for continuing operations only
† Before amortisation of intangibles, goodwill impairment and financial instrument costs
5
Income statement
Six months to 30 June
2008
£m
2007
£m
Growth
%
Continuing Operations

Revenue increase of 9%
Turnover
143.6
127.1
+13%

Share-based payments now taken
above the line
Revenue
113.3
103.8
+9%

Operating profit* up 10% to £9.5m
9.5
8.6
+10%

Improved operating margin to 8.4%
Operating margin
8.4%
8.3%

Significant fall in interest and bank fees
Interest
(0.4)
(2.0)

Effective tax rate of 27.5%

Interim dividend 1.7p
Operating profit*
Profit before tax*
9.1
6.6
(2.5)
(1.6)
6.6
5.0
+32%
Adjusted fully diluted EPS* (p)
7.4p
5.4p
+37%
No of WA diluted shares (‘000)
84,988
84,756
Tax
Profit after tax*
+38%
* Before amortisation of intangibles, goodwill impairment and financial instrument costs
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Committed revenue growth
£124m
£100m
£133m
£108m
£86m
2004
2005
2006
December
2007
2008
June
7
Committed revenue
At 1 July 2008
% of
Total
Education
Consulting
Support services
£39m
£30m
£5m
£22m
£16m
£15m
£6m
£84m
63%
£27m
20%
£22m
17%
£133m
2008
£68m
2009
£50m
2010 and beyond
£15m
8
Current pipeline
At 1 July 2008
Education
£131m
£15m
£104m
£20m
Consulting
£12m
£22m
£94m
Support services
Total
£52m£16m
£6m
Jun 08
Dec 07
£245m
£168m
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Balance sheet
June
2008
£m
Intangible assets
December
2007
£m
209.8
191.2
Other non-current assets
10.9
9.1
Net debt
(7.3)
(6.8)
Dividend payable
(1.5)
-
Net working capital
(21.9)
(12.3)
Net assets
190.0
181.2
Share capital
82.4
79.0
Profit and loss reserves
40.8
36.6
Minority interest
1.7
1.1
Other reserves
65.1
64.5
190.0
181.2
Total equity and reserves

Intangible assets increased by £18.6m
due to acquisitions

Strong working capital management

Low debt includes benefit from
increase in restricted cash of £3.8m

Gearing of 3.9% (June 2007: 4.8%)
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Group cash flow
Six months ended 30 June
2008
£m
2007
£m
Operating cash flow
- continuing operations
19.6
15.5
3.8
1.8
-
2.5
23.4
19.8
Interest
(0.4)
(1.4)
Tax
(2.4)
(0.9)
Net cash flow before investing & financing
20.6
17.5
Capital expenditure
(2.0)
(4.0)
(18.0)
(0.3)
(1.2)
(1.0)
-
34.8
Increase / (repayment) of loans
6.8
(53.4)
Net change in cash
6.2
(6.4)
- increase in restricted cash
- discontinued operations
Acquisitions
Dividends paid
Disposal of Mercury Health

Operating profit to cash flow
conversion (excluding increase in
restricted cash) of 207%
(2007: 180%)

Capital expenditure of £2.0m
(2007: £4.0m) includes product
development costs of £0.8m
(2007: £1.0m)

Acquisition of HELM, minority
interests and two small bolt-ons
aggregate to £18.0m
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Group net debt
June
2008
£m
December
2007
£m
Group net debt
14.3
10.0
less restricted cash
(7.0)
(3.2)
Group debt
7.3

6.8

Bank revolver facilities
40.0
40.0
Bank headroom
32.7
33.2
£40m bank facility until June 2012 with
HBoS and HSBC
Actual
Covenant
Interest cover
x42.6
>x3.0
Debt to EBITA
x0.4
<x3.5
Protected against future interest rate
movements by interest rate swap
through to 2010 at 4.99%
12
Operational review
Peter Martin
Chief Executive
13
Analysis
Six months to June 2008
Revenue
Education
44%
Support
services
23%
Consulting
33%
* Before central costs
14
Education
Six months to
30 June 2008
Six months to
30 June 2007
50,527
45,523
Operating profit £000
7,483
7,961
Operating margin (%)
14.8%
17.5%
Revenue £000
Financial summary
Business review
 Revenue increased by 11%
 Broadening our software offering
 Operating profit fell 6%
 Excellent range of contract wins:
- school improvement
- employability
- science, technology, engineering and mathematics
- apprenticeships
 Margin impacted by:
- high software sales recorded in Q1 2007
- planned revenue investment in 2008
 Strong performance in schools inspections
Activities
Outlook
 Learning & Publishing. Programme delivery, learning
materials, offender learning, skills training and delivery
 85% of 2008 revenue secured
 Software. Student administration systems, asset
management software, information management
 Services. Schools inspections, benchmarking,
consulting, school improvement, academies and BSF
 Major contract opportunities
- schools inspections
- offender learning
- Welfare to Work
- BSF
 Increasing pipeline of international opportunities
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Consulting
Six months to
30 June 2008
Six months to
30 June 2007
37,467
35,247
Operating profit £000
3,318
2,604
Operating margin (%)
8.9%
7.4%
Revenue £000
Financial summary
Business review
 Revenue increased by 6%
 Good performance across all practices
 Operating profit increased by 27%
 Expanded HRLG practice
- acquisition of master planner
- integration of local government practice
- acquisition of local government consultancy
 Operating margin improved to 8.9%
 Development of health commissioning
 Acquisition of HELM Corporation
Activities
Outlook
 Management consulting
- Health
- Housing, regeneration and local government
(“HRLG”)
- Central government
- Tribal HELM
 85% of 2008 revenue secured
 Good levels of demand
 Expansion of frameworks
 Focus on margins
 International opportunities
16
Support services
Six months to
30 June 2008
Six months to
30 June 2007
26,182
24,977
Operating profit £000
1,945
1,436
Operating margin (%)
7.4%
5.7%
Revenue £000
Financial summary
Business review
 Revenue increased by 5%
 Strong demand in architecture
- appointed to major scheme in Swansea
- shortlisted on several significant opportunities
 Operating profit up by 35%
 Operating margin improved to 7.4%
 Good progress in communications
 Resourcing
- ahead of plan
- good level of new business wins
- markets remain challenging
Activities
Outlook
 Architectural design: health, education and science
 89% of 2008 revenue secured
 Communications & PR
 Excellent order book and pipeline for architecture
 Resourcing
 Expanding range of clients in communications
 Resourcing to perform in line with expectations
17
Acquisitions
Business
Activity
Rationale
Enterprise
Value
EBITA
HELM
Financial and management
consultancy in the UK
and overseas
Complementary services
International footprint
£21.0m
£3.4m
Urban Studio
Master planning and urban
design
Strategic gap in portfolio
£1.1m
£0.2m
RSe
Local government
consulting
Greater critical mass
Broadens service line and
client base
£1.0m
£0.2m
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Management
 Senior appointments made:
 Andy Field
 Stephen Harris
 Matthew Swindells
Chief Operating Officer
International Development Director
Managing Director, Health
 Seeking Non-Executive Director appointments
19
Prospects
Peter Martin
Chief Executive
20
Markets
 Business model proving resilient
 Tighter budgetary controls in the public sector but:
 Government priorities remain (particularly in health and education)
 Continued flow of significant contract opportunities:





OFSTED inspections
Healthcare commissioning
Offender learning
Welfare to Work
Health facilities
 Reform agenda continues:
 Performance improvement
 Efficiency and quality
 Value for money
21
Group strategy

Focus on core public sector markets:





Delivery
Consulting
Education
Health
Housing & Regeneration
Local government
Central government
Support

Services span consulting, support and delivery

Focus on competitive advantages



Domain expertise
Breadth of capability
Enhanced technology offering

International development

Selective acquisitions
22
Financial objectives (2008 – 2010)

Target of 10% organic growth in annual revenue over the medium-term

Progressive improvement in operating margins

Increase committed income to 60% of annual revenue

Enhance earnings growth through selective acquisitions

Progressive dividend
23
Current trading

Trading continues to be in line with our expectations

87% of 2008 planned revenue secured at 31 July 2008

Continued focus on margins

Pipeline of opportunities is good

Confident about prospects for remainder of 2008 and beyond
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Tribal Group plc
Half year results for the six months
ended 30 June 2008
End
This presentation is intended only as a summary of key points from Tribal Group
plc's announcement of its half year results for the period to 30 June 2008 ("the
Half Year Results 2008"). Accordingly, reference should be made to the Half
Year Results 2008 and not to this presentation