20th Jun 2006 07:01
Tribal Group PLC20 June 2006 Tribal Group plc Preliminary results for the year ended 31 March 2006 Highlights • Strong organic revenue growth during the year, up by 19 per cent • Profit before tax* up 6.7 per cent at £19m • Full year dividend up 10 per cent to 3.3p • Excellent cash conversion of 123 per cent and free cash flow of £19.1m • Successful integration into six divisions has delivered a robust operating structure • Strong financial and operational performance by Mercury Health "This has been a successful period for the Group and the Board is confidentabout prospects." - Strone Macpherson, Chairman Financial highlights Year ended 31 March 2006 2005 Turnover £259.9m £229.5m +13.2% Revenue £214.8m £179.9m +19.4% Operating profit £23.3m £13.4m Adjusted operating profit* £24.1m £22.3m +8.1% Operating margins* 11.2% 12.4% Profit before tax* £19.0m £17.8m +6.7% Profit on ordinary activities before £17.5m £9.0mtaxation Profit on ordinary activities after £12.8m £3.6mtaxation Adjusted diluted earnings per share* 17.2p 15.3p +12.4% Basic earnings per share 16.2p 4.6p Free cash flow £19.1m £2.9m Operating profit to cash conversion* 123% 60% Note: \* The adjusted operating profit, operating margins, profit before tax andadjusted diluted earnings per share are stated before goodwill impairment of£nil (2005: £6.7m), intangible asset amortisation of £0.3m (2005: £0.3m), shareoption costs of £0.4m (2005: £0.1m), IAS 32/39 finance costs of £0.8m (2005:£nil) and exceptional bid costs of £nil (2005: £1.7m) (see page 12 and page 19). Chairman's statement I am pleased to report on the results of Tribal Group plc for the year ended 31March 2006. This has been a successful period for the Group, during which wehave further strengthened our position as a leading professional supportservices and consultancy business, predominantly operating in the UK publicsector. During the year, the Group has generated strong organic growth throughits core consultancy and support services businesses in education; localgovernment, housing and regeneration; health and social care; and centralgovernment; and has successfully developed its healthcare delivery business,Mercury Health. We have delivered strong turnover growth for the year, up 13 per cent at £259.9m(2005: £229.5m). Operating profit* was £24.1m (2005: £22.3m) and operatingmargins* were 11.2 per cent (2005: 12.4 per cent). Profit before tax* was up 6.7per cent at £19.0m (2005: £17.8m), profit after tax was £12.8m (2005: £3.6m) andadjusted diluted earnings per share* were 17.2p (2005: 15.3p). During the year, the Group generated free cash flow of £19.1m (2005: £2.9m),representing an operating profit* to cash conversion rate of 123 per cent (2005:60 per cent). Net debt at the year end was £75.9m including the non-recourseMercury Health project debt of £20.2m. Our gearing was 47 per cent and ourinterest cover was 4.7 times. At 31 March 2006, the Group's committed revenuewas £333m. Note: \* The operating profit, operating margins, profit before tax and adjusteddiluted earnings per share are stated before goodwill impairment of £nil (2005:£6.7m), intangible asset amortisation of £0.3m (2005: £0.3m), share option costsof £0.4m (2005: £0.1m), IAS 32/39 finance costs of £0.8m (2005: £nil) andexceptional bid costs of £nil (2005: £1.7m) see page 12 (consolidated incomestatement) and page 19 (earnings per share note). Operating structure We now have three reporting segments: consulting services, education andtechnology services, and healthcare delivery. Within this structure, we havecontinued to strengthen management and financial reporting arrangements and havefurther invested in our business development teams. We are seeing significantbenefits from an ever strengthening Tribal brand and from offering a moreintegrated package of services across our customer base. Our ability to do thiswill increasingly differentiate Tribal from other competitors in our markets,opening up more opportunities and increasing barriers to entry. Mercury Health During the year, the major focus for Mercury Health was the implementation ofthe £214m contract we signed with the NHS in December 2004, to design, build andmanage a regional network of treatment centres for elective surgery anddiagnostic procedures. The first three centres in Wycombe, Medway and Portsmouthare now open, on time and to budget, and performing well. The fourth and largestcentre, in Mid-Sussex, will open at the end of June. Mercury Health has a significant market share of this emerging market and iswell placed to develop into a major UK healthcare provider. We are currentlybidding for several contracts as part of the £3.5bn Phase 2 procurements fordiagnostics and elective surgery. We are also bidding for a number of primary care opportunities and we announcetoday our first primary care contract in City & Hackney. This contract is an important first step in the development of our primary care business. Dividend The board is pleased to announce that it is recommending a final dividend of2.25p per share, making a total of 3.3p per share for the year (2005: 3.0p).Subject to approval at Tribal's 2006 annual general meeting, this dividend willbe paid on 13 October 2006 to Tribal's shareholders on the register at 22September 2006. People The Group is a people-based business and its success is a result of the broadbase of talented employees across the Group. We would like to put on record thethanks of the board to our 2,300 employees at all levels. Their efforts haveensured that Tribal continues to be one of the most respected and dynamiccompanies in its markets. Seasonal weighting Our business has always been weighted to the second half and in particular tothe final quarter of the year. The weighting towards the second half of the yearwill be even more pronounced this year with first half profits and earningsexpected to be below last year. This is partly due to the increasing seasonal weighting of revenue to the secondhalf, in line with government spending. However, this year, the first half willalso be impacted by higher Mercury Health bid costs, higher interest costs (as aresult of the Group's investment in Mercury Health) and only a partialcontribution from Mercury Health's largest centre in mid-Sussex. Prospects Tribal is firmly established as a major supplier of high value-added consulting,education and healthcare delivery services. We have a robust business model witha balanced and extensive range of services operating across public sectormarkets. We are well placed to capitalise on the increasing number ofopportunities arising from the Government's public sector reform agenda. We continue to diversify our service offering, focusing primarily on deliveringorganic growth, increasing the level of committed revenue by winning long termcontracts, and by leveraging our relationships and advisory expertise to developdelivery services in our principal markets. We have strengthened our divisional management structure during the year and arenow in a stronger position to achieve further improvements in margins throughboth operational efficiency and the centralisation of support services. The board is confident about the Group's prospects. Strone MacphersonChairman20 June 2006 Chief Executive's statement During the year, our businesses have continued to strengthen their serviceofferings and deliver an integrated package of services drawn from across theGroup. This capability, alongside our excellent relationships with public sectororganisations, positively differentiates Tribal from its competitors. Markets We continue to operate in expanding markets and to benefit from increasinggovernment expenditure, particularly in education and health. We now work insectors that account for over £275bn of annual government spending. The maindriver for our business continues to be the expanding role of the private sectorin both advising the public sector and delivering services on its behalf. In the year ended 31 March 2006, 95 per cent (2005: 94 per cent) of our revenueswere from the public sector and we expect to retain this focus in the immediatefuture. We are, however, starting to see good opportunities to transfer andapply the skills we have developed to the private sector. Operating review Tribal's businesses now report in three segments: consulting services, educationand technology services and healthcare delivery. All divisional operating profit and operating profit margins are stated beforeamortisation of IFRS 3 intangibles, goodwill impairment, share option chargesand exceptional bid costs. Consulting services Consulting services is managed through four divisions: consulting, resourcing,communications and property. Year ended Year ended 31 March 2006 31 March 2005 £000 £000Revenue 122,743 110,750Operating profit 15,464 16,912Operating profit margin 12.6% 15.3% Consulting Year ended Year ended 31 March 2006 31 March 2005 £000 £000Revenue 63,242 55,238Operating profit 6,965 6,677Operating profit margin 11.0% 12.1% Consulting achieved good levels of revenue growth, up 14 per cent to £63.2m. Operating profit was up by 4 per cent, but operating margins were lower comparedwith 2005. We have now developed into one of the 'top six' major consulting practicesoperating in the public sector, with expertise across health, local government,regeneration, housing and central government. Overall, the market for consultancyremains strong, with demand driven by the Government's efficiency agenda and theincreasing pace and complexity of its reforms. During the year, we delivered a solid performance across the portfolio, withvery strong performances in central government off-setting lower than plannedlevels of utilisation in health, housing and local government. In central government, we have recruited some very high quality consultants intothe Group, growing numbers from 35 to over 60. We continue to widen ourportfolio of clients, with work won at the Ministry of Defence, EnvironmentAgency, Revenue & Customs, Forensic Science Service, Office for NationalStatistics, Department for Rural Affairs and several high profile departmentswithin the Home Office. We have made a significant investment in the re-tendering of the Office ofGovernment Commerce's 'Catalist' consultancy framework (formerly S-Cat). TribalConsortium has now been awarded a total of 15 'Catalist' consultancy frameworkagreements by OGC buying solutions, an executive agency of the Office ofGovernment Commerce in the Treasury. We have been awarded more consultancyagreements under this framework than any other company. In healthcare, utilisation rates have fallen in health planning and financialmanagement. This is, in large part, the result of the reorganisation ofstrategic health authorities and primary care trusts, which has delayed decisionmaking and increased uncertainty over the future of PFI schemes and funding issues generally across the NHS. Now that the picture is clearer and PFI projects are moving ahead, we are more confident about the outlook for these parts of the business. Both the informatics and equipping areas have performed strongly. In informatics, we continue to win a number of important contracts including support to the National Programme for IT within the NHS in England, and a contract to support the development of IT for the NHS in Wales. We have won equipping consultancy work with West Hertfordshire NHS Trust and with several PFI consortia. In local government, regeneration and housing, market conditions have overallremained strong, although utilisation rates have been impacted by thereorganisation of our management arrangements and investment in additional teamsto service new areas of opportunity. During the year, we continued to win a range of consulting assignments in local government for performance management, capital projects and organisational learning. We have also won a wide range of economic development and regeneration projects, including a three year contract as the private sector partner to the Boston Area Regeneration Company; further high profile housing stock transfer assignments across England, Scotland and Wales, and a major long term programme for administration of grants to the voluntary sector. The integration of the division has now been completed, enabling us to provide astrong and unified brand proposition to the marketplace. Coupled with our newoperational structure, this will considerably strengthen both our profile anddelivery capability, and ensure we offer our customers a fully integratedportfolio of advisory and transformational services. The appointment of Ian McCagherty as the new chief executive will furtherstrengthen overall divisional management and our shared service arrangements forfinance, IT and HR have started to yield savings as well as improve operationalefficiency. Resourcing Year ended Year ended 31 March 2006 31 March 2005 £000 £000Turnover 71,296 74,297Revenue 26,193 24,603Operating profit 4,276 5,231Operating profit margin 16.3% 21.3% Resourcing increased revenues to £26.2m, up 6 per cent. Operating profit has fallen by 18 per cent to £4.3m and operating margins havefallen by five percentage points to 16.3 per cent. This is a satisfactory result in a more difficult recruitment market. Ourrecruitment advertising business has had a particularly challenging year, duringwhich turnover has fallen, despite winning new contracts worth an annualised£14m. The NHS market has been particularly weak. The reorganisation of primarycare trusts and funding deficits in several NHS trusts has resulted in a 34 percent fall in our recruitment advertising volumes, with some trusts reducingtheir spend by up to 45 per cent. In the last quarter of the financial year,advertising volumes stabilised and we expect the market in the current year to be less turbulent. In response to the increasing shift of recruitment advertising to the internet,we have increased our investment in our web-based recruitment products. Duringthe year, our recruitment job site for senior management, 'careers for leaders',moved into profit and, since the year end, we have launched a dedicated job sitefor head teachers and senior management in schools. We will launch otherproducts in due course. During the year, the performances of our executive and interim search businesseshave been very strong, and we have reinforced our position as one of theleading consultancies in local government, housing and education. We continue todevelop services in other parts of the public sector. As in other areas of our business, there are now increasing barriers to entry.During the year, we won three preferred supplier contracts with Luton Counciland the London Boroughs of Hackney and Lambeth; and were awarded frameworkcontracts with Wolverhampton Council, London Borough of Waltham Forest,Nottingham City Council and Birmingham City Council. Looking forward, we intend to focus on delivering an integrated HR offering andon new service provision such as neutral vendor contracts, where there areopportunities to bid for large scale contracts to manage temporary and permanentstaffing supply services, and work in partnership with local authorities toreduce expenditure on staffing overall. Communications Year ended Year ended 31 March 2006 31 March 2005 £000 £000Revenue 10,571 9,958Operating profit 2,887 2,364Operating profit margin 27.3% 23.7% Communications achieved good levels of revenue growth, up 6 per cent to £10.6m. During the year, operating profit increased by 22 per cent to £2.9m with marginsup to 27.3 per cent. The integration of the business has been successful and we are now able to offerour customers a comprehensive package of services. We are already seeing thebenefits of this approach. With £5.7m of fee income derived from consumer campaigns, we are now the numberone independent agency in PR Week's rankings for consumer PR and number eight inits overall rankings. We have continued to win high profile new contracts during the year with theNational Lottery Promotions Unit, the Department for Education and Skills (DfES)and the Department of Trade and Industry. Framework contracts are becoming increasingly important . We are now on therosters for the Central Office of Information, the DfES, the Department for Workand Pensions and the Department of Health. While we will continue to focus on organic growth, we are in parallel looking ata small number of acquisitions which will enable us to strengthen and broadenour proposition to customers. Property Year ended Year ended 31 March 2006 31 March 2005 £000 £000Revenue 23,603 21,331Operating profit 1,336 2,640Operating profit margin 5.7% 12.4% Property achieved good revenue growth, up 11 per cent to £23.6m. Operating profits were down 49 per cent to £1.3m with a large fall in margins to5.7 per cent. Architecture The market for architectural services has been very strong ineducation with progressively larger projects in the further education,universities and schools' markets. During the year, we won contracts withColchester College of Further Education and Bournemouth University. We have alsobeen successful in the Academy programme, where we are now appointed as projectmanagers and designers on a number of academies including the Arcadia FashionAcademy in London. In healthcare, it has been a difficult year in which there has been considerableuncertainty over the future of PFI. Several large projects have been delayed,resulting in revenue slippage and impacting margins in 2006. Followingclarification of the Government's position, we are hopeful that projects willmove forward again and that margins will improve in 2007. We expect ourconsortium to reach financial close on the £220m Peterborough hospital PFIscheme in late 2006. We have been awarded a place, as one of three consortia, onthe £1.2bn NHS All Wales 'Designed for Life' capital spend framework contract tobe delivered over the next four to six years, working as the architecturalpartner of HBG construction. Over the medium term, we expect fewer major acute hospitals to be built as morehealthcare is delivered through primary care and in independent sector, and NHS,treatment centres. As a result, we are adjusting our focus to reflect thischange. During the year, significant new work has been won through the LIFTprimary care programme. We have now reached financial close on the AccringtonLIFT scheme and our consortia are preferred bidders on various other schemes. Wehave also designed four independent sector treatment centres for Mercury Health. Our architectural business, which has an extensive reach across education andhealth, is now ranked as the third largest in the UK by the Architect's Journal. Property services Our project management, surveying and town planning businesseshave had a good year, particularly in education. A number of significantcontracts have been won over the period including Herefordshire College andSuffolk College. In 2006/7, we will add capacity to our property servicesbusiness by increasing our project management headcount. This will enable us tostrengthen our position in education and extend our services into other publicsector markets. The divisional management has been strengthened by the appointment of Simon Hallas the divisional chief executive. The shared service arrangements in finance,IT and HR will improve business efficiency and the newly formed divisionalbusiness development function will help us to market a fully integrated propertyservice to our clients. Our established presence in education and health means we remain well placed tobenefit from the high levels of capital spend in these markets. Education and technology services Year ended Year ended 31 March 2006 31 March 2005 £000 £000Revenue 79,184 70,397Operating profit 13,735 10,893Operating profit margin 17.3% 15.5% Education and technology achieved good levels of revenue growth, up 12 per centto £79.2m. Operating profit has increased by 26 per cent to £13.7m, with operating marginsincreasing to 17.3 per cent. This has been an outstanding year for the division, with good performancesacross the board. We are now firmly established as one of the UK's leadingeducation businesses, offering a broad range of services to schools, localeducation authorities, further education colleges, the Learning and SkillsCouncil (LSC), universities and to the DfES and its agencies. The implementation of our largest education contract to date, a £50m contractwith the Office for Standards in Education (Ofsted), was completed to plan, andduring this financial period we have inspected a total of 1,300 schools. Overthe next few years, we expect that Ofsted will assume responsibility for thework of other inspectorates including the Adult Learning Inspectorate and forearly year's education and childcare inspections. This will give us theopportunity to develop further our inspection services. We continue to have considerable success with our school improvement programme,'Pupil Champions!', which now provides teacher support to 51 schools indisadvantaged areas through contracts with the DfES and local authorities. Wehave seen some excellent results; 90 per cent of schools improved theirpercentage of five A* to C grades this year. Our education consulting and benchmarking business has continued to develop itsservices, winning significant new work in further and higher education. We haverecently announced an important contract with the Quality Improvement Agency(QIA) to provide a national improvement service to the learning and skillssector. We will identify, train, support and deploy a network of around 100specialist advisers. We have also won a contract to benchmark expenditure in allfurther education colleges in Wales through ElWa, the Welsh learning and skillsbody. During the year, we secured an important £15m contract from the DfES to developand manage, in partnership with Plymouth University, the National Centre forExcellence in Teaching Mathematics. This work will be aligned with a more recent£2m assignment we have also secured with the QIA to provide networks of subjectlearning coaches for maths teachers in post-16 education. Our student administration software businesses in the further education,work-based learning, children's services and university sectors have had asuccessful year, increasing market share and launching new products. A number ofnew contracts have been won including Regent College (an independentinstitution) and Doncaster College. We have also won a number of new assetmanagement contracts. We have continued to build on our successful distance learning and e-learningoffering. Since 2001, we have supplied distance learning to over 300,000learners through more than 150 FE colleges and training providers. We have won anumber of important new e-learning contracts, many of which involve thedevelopment of industry leading learning technologies such as m-learning, thedelivery of learning through mobile phones. Recent contract wins include theAccess to Employment Programme, a European funded project to support access toemployment and career development for minority ethnic people. The market in teacher and lecturer training remains difficult. However, this hasbeen compensated by several new training contract wins during the year includinga £10.7m contract with the LSC to deliver learning to offenders in prison andduring probation. Since the year end, we have signed a £3m three year contractwith Thames Valley Police to support the training of probationer policeofficers. We continue to develop our information management capability with a number ofnew customers won in the local government and private sectors. Our education and technology business is very well positioned in the sector. Wehave developed an extensive range of high value niche education services: e andm-learning; information, advice and guidance; curriculum design; professionaldevelopment; and distance learning. We are able to offer these to our customers,along with other services from across the Group, as a bundled service offering.For example, by combining education curriculum advice with property andarchitectural advice, or education consultancy with software products. Thebreadth of our service offering, the range of our technical skills and ourin-depth knowledge of our markets, increasingly differentiates us from ourcompetitors. Mercury Health - healthcare delivery Year ended Year ended 31 March 2006 31 March 2005 £000 £000Revenue 14,550 349Operating profit 1,476 (345) Mercury Health, the Group's healthcare delivery subsidiary, performed stronglywith revenue of £14.6m and operating profit of £1.5m after bid costs. This has been a very successful first year of trading for Mercury Health, duringwhich we have exceeded all our financial and operational expectations. In December 2004, we signed a £214m contract with the NHS to design, build,staff and manage a regional network of five treatment centres. We have nowopened a diagnostic centre in Wycombe, an elective surgery centre in Medway andan elective surgery, diagnostic and minor injuries unit and walk-in centre in Portsmouth. All these centres have opened on time and to budget. The fourth and largest centre, an elective orthopaedic facility, will open at the end of June in Haywards Heath, Sussex. The fifth and smallest centre in Havant is expected to open in 2008. To date, the clinical performance of the centres has been excellent and theresponse from the NHS and from patients has been very encouraging. Last year, the Secretary of State for Health, Patricia Hewitt, announced Phase 2of the national procurement of independent sector treatment centres (ISTC). Theprocurement embraces both diagnostic and elective surgery capacity and has anoverall value of £700m per annum, some £3.5bn over the five year contractperiod. Mercury Health is currently short-listed on a number of contracts.Preferred bidder announcements are expected later this year. In parallel with developing a diagnostic and elective surgery business, MercuryHealth is also starting to build a primary care business. In November 2005, weannounced that we had formed two strategic partnerships with organisationsinvolved in running GP practices. At the end of last year, the Department ofHealth issued the first national procurement in primary care, with six pilotschemes. We are pleased to announce today that Mercury Health has beensuccessful in winning a five year contract, valued at £4.5m, with City & HackneyPCT to operate a GP practice and walk-in centre. The contract is strategicallyimportant for Mercury Health, placing us in a strong position to participate in this emerging market. There is increasing consensus within the NHS that the independent sector willplay a significant role in the delivery of healthcare. Having secured more than10 per cent of the first wave of ISTC contracts, Mercury Health is well placedto become one of the largest providers of clinical services to the NHS. People Tribal continues to employ and attract some of the most talented people in ourmarkets. Our headcount has increased through organic growth by 16 per centduring the year. Our success is a result of the high quality of advice andservices that our 2,300 employees and over 1,000 associates deliver for ourcustomers. I would like to thank them all for their hard work over the last yearand for their contribution to ensuring Tribal is one of the most excitingbusinesses to work for in our sector. Prospects We have developed a comprehensive service offering and have a very strongposition in our public sector markets. Our divisional operating structure is nowhelping us to deliver improved operational performance and win contracts whichinvolve several parts of the Group. We are in an excellent position to build onthis strong platform. We have also made good progress in developing MercuryHealth, which is well positioned to become a major healthcare business. Webelieve that the prospects for the Group are encouraging. Henry J PitmanChief Executive20 June 2006 Consolidated income statementfor the year ended 31 March 2006 2006 2005 Before other Other Before other Other administrative administrative administrative administrative expenses and expenses and expenses and expenses and financial financial financial financial instruments instruments instruments instruments costs costs costs costs Note Total Total £'000 £'000 £'000 £'000 £'000 £'000Continuingoperations Turnover 259,897 - 259,897 229,470 - 229,470Direct agency costs (45,103) - (45,103) (49,613) - (49,613) ------- ------- ------- ------- ------- ------- Revenue 214,794 - 214,794 179,857 - 179,857Cost of sales (122,008) - (122,008) (102,772) - (102,772) ------- ------- ------- ------- ------- ------- Gross profit 92,786 - 92,786 77,085 - 77,085 ------- ------- ------- ------- ------- ------- Net administrative (68,708) - (68,708) (54,794) - (54,794)expenses Other administrativeexpenses:Share option charges - (449) (449) - (134) (134)Amortisation of - (316) (316) - (322) (322)IFRS 3 intangiblesGoodwill impairment - - - - (6,665) (6,665)Exceptional bid - - - - (1,747) (1,747)costs ------- ------- ------- ------- ------- ------- Total administrative (68,708) (765) (69,473) (54,794) (8,868) (63,662)expenses ------- ------- ------- ------- ------- ------- Operating profit 24,078 (765) 23,313 22,291 (8,868) 13,423 Finance income 446 - 446 914 - 914 ------- ------- ------- ------- ------- ------- Finance charges (5,522) - (5,522) (5,380) - (5,380)Financial - (765) (765) - - -instruments Finance costs (5,522) (765) (6,287) (5,380) - (5,380) ------- ------- ------- ------- ------- ------- Net finance (5,076) (765) (5,841) (4,466) - (4,466)costs ------- ------- ------- ------- ------- ------- Profit before 19,002 (1,530) 17,472 17,825 (8,868) 8,957taxationTaxation 4 (4,751) 97 (4,654) (5,498) 97 (5,401) ------- ------- ------- ------- ------- ------- Profit for the 14,251 (1,433) 12,818 12,327 (8,771) 3,556year fromcontinuing operations ======= ======= ======= ======= ======= ======Attributable to:-Equity holders 12,544 3,253of the parentMinority interest 274 303 ------- ------- 12,818 3,556 ======= ======= Earnings per shareFrom continuing operationsBasic 3 18.1p (1.9p) 16.2p 16.8p (12.2p) 4.6pDiluted 3 17.2p (1.8p) 15.4p 15.3p (11.2p) 4.1p Consolidated statement of recognised income and expensefor the year ended 31 March 2006 Note 2006 2005 £'000 £'000 Actuarial (loss)/gain on defined 10 (594) 105benefit plansTransfer to cash flow hedge reserve 10 51 -Deferred tax 10 163 - ------ ------ Net expenses recognised directly to (380) 105equityProfit for the year 12,818 3,556 ------ ------Total recognised income 12,438 3,661and expense for the year ====== ======Attributable to:Equity holders of the parent 12,164 3,358Minority interest 274 303 ====== ======Change in accounting policyto adopt IAS32 and 39 Equity holders of the parent (248) - Consolidated balance sheetat 31 March 2006 Note 2006 2005 £'000 £'000Non-current assetsGoodwill 6 206,392 205,247Other intangible assets 3,255 3,479Property, plant and equipment 40,962 12,538Investment property 200 180Investments 151 151Deferred tax assets 823 1,282 ------- ------- 251,783 222,877 ------- -------Current assetsInventories 11,495 9,102Trade and other receivables 7 59,170 56,315Cash and cash equivalents 22,615 26,810Collateralised cash 1,392 1,525 ------- ------- 94,672 93,752 ------- -------Total assets 346,455 316,629 ======= =======Current liabilitiesTrade and other payables 8 (69,938) (65,254)Tax liabilities (5,399) (5,758)Obligations under finance leases (78) (20)Bank overdrafts and loans (2,907) (3,802)Shares to be issued (6,102) - ------- ------- (84,424) (74,834) ------- -------Net current assets 10,248 18,918 ------- -------Non-current liabilitiesBank loans (96,556) (77,518)Pension liabilities (1,977) (1,370)Deferred tax liabilities (939) (1,058)Obligations under finance leases (351) (26)Shares to be issued (135) -Deferred consideration - (411) ------- ------- (99,958) (80,383) ------- -------Total liabilities (184,382) (155,217) ======= =======Net assets 162,073 161,412 ======= =======EquityShare capital 4,008 3,748Share premium account 80,771 80,156Capital reserve 10 9,545 9,545Merger reserve 10 52,164 43,387Own shares reserve 10 (1,668) -Share based payment reserve 10 889 597Hedging reserve 10 6 -Shares to be issued - 16,517Retained earnings 10 15,173 5,568 ------- -------Equity attributable to equity 160,888 159,518holders of the parent ------- -------Minority interest 1,185 1,894Total equity 162,073 161,412 ======= ======= Consolidated cash flow statementfor the year ended 31 March 2006 Note 2006 2005 £'000 £'000 £'000 £'000 Net cash from operating 9 26,194 7,585activities ======= ======= Investing activitiesInterest paid (7,524) (5,555)Interest received 446 914Proceeds on disposal of - 170investmentsProceeds on disposal of property 34 2,265plant and equipmentPurchases of property plant and (4,039) (5,315)equipment - otherPurchases of property plant and (26,569) (2,652) equipment - Mercury Health ------- ------- Purchases of property plant and (30,608) (7,967)equipmentPurchases of trading investments - (35)Expenditure on product (1,048) (640)developmentAcquisitions (deferred (3,642) (7,921)consideration and minorityinterests) ------- -------Net cash outflow from investing (42,342) (18,769)activities ======= =======Financing activitiesEquity dividend paid (2,362) (2,135)Issue of shares 304 106Repayment of borrowings (15,400) (6,231)Repayments of obligations under (57) (56)finance leaseNew bank loans 31,538 6,095Movements in collateralised cash 133 5,942Purchase of own shares (1,668) -Loan to third party (535) - ------- -------Net cash from financing 11,953 3,721activities ======= =======Net decrease in cash and cash (4,195) (7,463)equivalents Cash and cash equivalents at 26,810 34,273beginning of year ------- ------- Cash and cash equivalents at end 22,615 26,810of year ======= ======= Notes to the preliminary announcement 1. General information The basis of preparation of this preliminary announcement is set out below. The financial information in this announcement, which was approved by the Boardof Directors on 20 June 2006, does not constitute the Company's statutoryaccounts for the years ended 31 March 2006 or 2005, but is derived from theseaccounts. Statutory accounts for 2005 have been delivered to the Register of Companies andthose for 2006 will be delivered following the Company's annual general meeting.The auditors have reported on these accounts; their reports were unqualified anddid not contain statements under S237 (2) or (3) of the Companies Act 1985. The preliminary announcement has been prepared in accordance with the accountingpolicies adopted under IFRS for the first time with a transition date of 1 April2005. The disclosures required by IFRS 1 'First-time Adoption of InternationalFinancial Reporting Standards' concerning the transition from UK GAAP to IFRScan be found in our announcement of 28 October 2005, 'Transition toInternational Financial Reporting Standards'. The financial statements have been prepared on the historical cost basis. The Group has adopted IAS 32 'Financial Instruments: Disclosure andPresentation' and IAS 39 'Financial Instruments: Recognition and Measurement'with effect from 1 April 2005. Derivatives are initially accounted for andmeasured at fair value. The gain or loss on re-measurement is taken to theincome statement except where the derivative is a designated cash flow hedginginstrument. 2. Segmental information The Group is currently organised into three business streams - Consultingservices, Education and technology services and Healthcare delivery. For the purpose of the Group's segmental reporting, Consulting services isdivided into four segments in line with internal management reporting to givesix primary business segments. Segment information about the businesses is presented below:- Year ended 31 March 2006 Education and technology Healthcare Communications Property Resourcing Consulting services delivery Eliminations Consolidated 2006 2006 2006 2006 2006 2006 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000RevenueExternal sales 10,099 23,190 25,587 62,568 78,800 14,550 - 214,794Inter-segment 472 413 606 674 384 - (2,549) -sales ------- ------ ------- ------- ------- ------- ------- -------Total revenue 10,571 23,603 26,193 63,242 79,184 14,550 (2,549) 214,794 ======= ====== ======= ======= ======= ======= ======= ======= Segment profit 2,887 1,336 4,276 6,965 13,735 1,476 - 30,675 ======= ====== ======= ======= ======= ======= ======= ======= Unallocated corporate (6,597)expensesAmortisation of IFRS3 (316)intangiblesShare option charges (449) -------Operating profit 23,313Finance income 446Finance costs (6,287) -------Profit before 17,472taxationTaxation (4,654) -------Profit for 12,818the period ------- Year ended 31 March 2005 Education and technology Healthcare Communications Property Resourcing Consulting services Delivery Eliminations Consolidated 2005 2005 2005 2005 2005 2005 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000RevenueExternal 9,772 21,119 24,379 54,624 69,614 349 - 179,857salesInter-segment 186 212 224 614 783 - (2,019) -sales ------- ------ ------- ------- ------- ------- ------- ------- Total revenue 9,958 21,331 24,603 55,238 70,397 349 (2,019) 179,857 ======= ====== ======= ======= ======= ======= ======= ======= Segment profit 2,364 2,640 5,231 6,677 10,893 (345) - 27,460 ======= ====== ======= ======= ======= ======= ======= ======= Unallocated corporate (5,169)expensesAmortisation of IFRS3 (322)intangiblesGoodwill impairment (6,665)Share option charges (134)Exceptional (1,747)bid costs -------Operating profit 13,423Finance income 914Finance costs (5,380) -------Profit before 8,957taxationTaxation (5,401) -------Profit for 3,556the period ======= 3. Earnings per share Earnings per share and diluted earnings per share are calculated by reference toa weighted average number of ordinary shares calculated as follows: 2006 2005 thousands thousandsWeighted average number of sharesoutstanding:Basic weighted average number of shares in issue 77,255 71,421Employee share options 763 890Shares to be issued in respect of 3,255 6,164deferred consideration -------- --------Weighted average number of shares outstanding for 81,273 78,475dilution calculations ======== ======== The adjusted basic and adjusted diluted earnings per share figures shown on the consolidation 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: 2006 2005 Earnings Earnings Earnings Earnings per share per share £'000 pence £'000 penceBasic and adjusted basic earningsper share:Profit and basic earnings per 12,544 16.2p 3,253 4.6pshareAdjustments:Share option charges 449 0.6p 134 0.2pAmortisation of IFRS 3 intangibles 316 0.4p 225 0.3p(net of tax)Goodwill impairment - - 6,665 9.3pExceptional bid costs - - 1,747 2.4pFinancial instruments charge (net 668 0.9p - -of tax) ------- ------- ------- -------Adjusted earnings and adjusted 13,977 18.1p 12,024 16.8pbasic earnings per share ======= ======= ======= =======Diluted and adjusted dilutedearnings per share:Profit and diluted earnings per 12,544 15.4p 3,253 4.1pshareAdjustments:Share option charges 449 0.6p 134 0.2pAmortisation of IFRS 3 intangibles 316 0.4p 225 0.3p(net of tax)Goodwill impairment - - 6,665 8.5pExceptional bid costs - - 1,747 2.2pFinancial instruments charge (net 668 0.8p - -of tax) ------- ------- ------- -------Adjusted earnings and adjusted 13,977 17.2p 12,024 15.3pdiluted earnings per share ======= ======= ======= ======= 4. Taxation The effective rate of tax on operating profit before share option charges,amortisation of IFRS 3 intangibles, goodwill impairment and exceptional bidcosts of 25% (2005: 30.8%) due to releases of prudent prior year tax provisionsno longer required. 5. Dividends 2006 2005 £'000 £'000Amounts recognised as distributions to equityholders in the period: Final dividend for the year ended 31 March 2005 of 1,530 1,4002.0 pence (2004: 2.0 pence) per shareInterim dividend for the year ended 31 March 2006 832 750of 1.05 pence (2005: 1.0 pence) per share ------ ------ 2,362 2,150 ====== ======Proposed final dividend for the year ended 31 March 1,804 1,5302006 of 2.25 pence (2005: 2.0 pence) per share ====== ====== The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in these financial statements. 6. Goodwill 2006 2005 £'000 £'000Cost At beginning of year 232,949 221,835Additions - including minority interests 4,136 15,387Revisions to prior years (2,991) (4,273) ------- ------- At end of year 234,094 232,949 ======= =======AmortisationAt beginning of year 27,702 21,037Impairment - 6,665 ------- ------- At end of year 27,702 27,702 ======= =======Net book valueAt end of year 206,392 205,247 ======= ======= Revisions to prior years primarily relate to changes in estimates of the likelyfinal settlement values under various earn out agreements, which are dependenton post acquisition performance. 7. Trade and other receivables 2006 2005 £'000 £'000 Trade receivables 45,431 45,537Other receivables 1,675 1,037Prepayments and accrued income 12,020 8,350Amounts recoverable on contracts 44 1,391 ------- ------- 59,170 56,315 ======= ======= 8. Trade and other payables 2006 2005 £'000 £'000 Trade payables 24,147 25,457Other taxation and social security 12,503 9,264Other payables 1,892 1,539Accruals and deferred income 30,623 27,796Deferred consideration 254 1,198Fair value of interest rate swaps 519 - ------- ------- 69,938 65,254 ======= ======= 9. Notes to the cash flow statement 2006 2005 £'000 £'000 Operating profit from continuing operations 23,313 13,423 Depreciation of property, plant and equipment 3,600 2,715Amortisation of development expenditure 435 457Amortisation of intangible assets 316 322Impairment of goodwill - 6,665Net pension charge 13 29Gain on disposal of available for sale investments - (95)Gain on disposal of property, plant and equipment (24) (30)Increase in fair value of investment property (20) (91)Share option charges 449 134Decrease/(increase) in receivables 1,539 (6,636)Increase/(decrease) in payables 4,008 (1,649)(Increase)/decrease in inventories (25) 543Exceptional items - 1,747Tax paid (3,365) (4,655) ------- ------- Net cash from operating activities 30,239 12,879(excluding Mercury Health) Mercury Health:- increase in inventories (2,330) (7,574)- increase in receivables (2,224) (379)- increase in payables 509 4,406Exceptional items - (1,747) ------- ------- Net cash from operating activities 26,194 7,585 Tax paid 3,365 4,655 ------- ------- Net cash from operating activities before tax 29,559 12,240 ======= ======= 10. Reserves Share Own based Capital Merger share payment Hedging Retained reserve reserve reserve reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2005 9,545 43,387 - 597 - 5,568 59,097Impact of adoption - - - - (30) (218) (248)of IAS 39 ------- ------- ------- ------- ------- ------- -------Restated at 1 9,545 43,387 - 597 (30) 5,350 58,849April 2005Dividends paid - - - - - (2,362) (2,362)Net profit for the - - - - - 12,544 12,544yearPremium on share - 8,777 - - - - 8,777issuesShare options - - - - - (100) (100)exercisedActuarial loss ondefined benefitplans - - - - - (594) (594)Fair valuemovement on cashflow hedges - - - - 51 - 51Deferred tax - - - - (15) 178 163Own shares - - (1,668) - - - (1,668)purchasedCredit in relationto share basedpayment - - - 449 - - 449Transfers - - - (157) - 157 - ------- ------- ------- ------ ------- ------- -------At 31 March 2006 9,545 52,164 (1,668) 889 6 15,173 76,109 ======= ======= ======= ====== ======= ======= ======= * The allocation between share premium and merger reserve has been revised to reflect the provisions of S131 of the Companies Act 1985 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Tribal Grp.