22nd Nov 2005 07:02
Tribal Group PLC22 November 2005 22 November 2005 Tribal Group plc Interim results for the six months ended 30 September 2005 Henry Pitman, Chief Executive of Tribal Group commented "We have had a solidperformance for the first half of the financial year and, with market conditionsbuoyant, the group is well placed to benefit from opportunities emerging frompublic sector reform." * A solid performance for the first half of the financial year * Organic revenue growth of 15 per cent * Implementation of healthcare contract on budget and schedule, with first two treatment centres now operational * New DfES contract for National Centre for Teaching of Mathematics Tribal Group today announces its interim results for the six months ended 30September 2005. This is the first time that the Group has reported under IFRS. Financial highlights: Unaudited Unaudited six months six months ended ended 30 September 30 September Percentage 2005 2004 change Revenue £98.0m £81.8m up 19.8% Operating profit* £9.4m £8.8m up 6.8% Adjusted profit before tax * £7.3m £6.8m up 7.4% Profit/(loss) before taxation £6.4m £(0.1)m Adjusted diluted earnings per 6.3p 6.4p down 1.6%share * Profit/(loss) for period £4.4m £(2.1)m Operating cash flow before Mercury £4.6m £2.2m up 109.1%Health** Proposed interim dividend 1.05p 1.0p up 5% * Operating profit, adjusted profit before tax and adjusted diluted earnings pershare are stated before amortisation of IFRS 3 intangibles of £0.2m (2004:£0.01m), goodwill impairment of £nil (2004: £3.9m), share option charges of£0.2m (2004: £0.9m), exceptional Mercury Health bid costs of £nil (2004: £2.0m).Adjusted profit before tax and adjusted diluted earnings per share are alsoamended for IAS 39 financial instruments adjustments of £0.5m (2004: £nil) (seepage 9 of the interim statement). ** Mercury Health operating cash outflows were £3.3m (2004: £2.0m) (see Note 8). Strone Macpherson, Chairman of Tribal Group plc, commented: "We have had a solid performance for the first half of the financial year, withgood progress being made across most of the Group. Our half year figuresreflect, as expected, the seasonal weighting of trading to the second half. Market conditions overall remain buoyant, with strong consulting demand andincreasing evidence of longer term outsourcing opportunities, particularly ineducation and health. There is some softness in the recruitment advertisingmarket and in healthcare PFI, where several architectural contracts have beendelayed. Our integrated divisional structure has enabled us to benefit from increasingjoint working across the Group resulting in a number of new contract wins. Sincethe start of the year, we have won two contracts with Ofsted for schoolinspections valued at £50m over four years; a contract with the Learning andSkills Council to manage prisoner learning valued at £11m over four years andseveral contracts with the DfES and LSC to deliver e-learning valued at £4m inall. We today announce that we have signed a prestigious three year contractwith the DfES, valued at £12m, to develop and run the National Centre forExcellence in the Teaching of Mathematics. The implementation of the Independent Sector Treatment Centres is proceeding toschedule and budget. The first two centres in Wycombe and Medway are now openand the third centre in Portsmouth will open shortly. We are now in the processof bidding for further diagnostic and elective surgery contracts. We recently announced our exclusive strategic alliances with Chilvers McCrea, aleading primary care business and with Frome Medical Practice, one of theleading GP practices in the country. These arrangements position us toparticipate in the emerging and potentially very sizeable primary care market. We are confident that trading for the year as a whole will be in line with ourexpectations." For further information contact: Henry Pitman, Chief Executive Tribal Group plc Tel. 01285 886020Simon Lawton, Group Finance Director Tribal Group plc Tel: 01285 886020 Neil Bennett/Colin Browne Maitland Tel: 020 7379 5151 A copy of the presentation on these results made to analysts on 22 November2005, will be made available on the Group's website: www.tribalgroup.co.uk from9am today. Tribal Group plc Unaudited interim results for the six months ended 30 September 2005. Chief Executive's statement ResultsFor the six months ended 30 September 2005, the Group's turnover increased by14.9 per cent to £123.8m (2004: £107.7m). Organic revenue growth was15 per cent, operating profit* was £9.4m (2004: £8.8m); operating margins* were9.6 per cent (2004: 10.8 per cent); adjusted profit before taxation* was £7.3m(2004: £6.8m); and basic earnings per share was 5.7p (2004: loss per share of3.0p). The Group reports a profit before tax of £6.4m (2004: £0.1m loss). The adjusted diluted earnings per share* was 6.3p (2004: 6.4p). The weightedaverage diluted shares in issue have increased almost 10 per cent from 74.2m to81.4m. * Operating profit, adjusted profit before tax and adjusted diluted earnings pershare are stated before amortisation of IFRS 3 intangibles, goodwill impairment,exceptional Mercury Health bid costs, and share option charges. Adjusted profitbefore tax and adjusted earnings per share are also amended for IAS 39 charges. Cash and net debtCash inflow from operating activities before Mercury Health for the six monthsto 30 September 2005 was £4.6m (2004: £2.2m) representing an operating profit tocash conversion of 51 per cent (2004: 24 per cent). This has been achievedthrough improved credit control. Net debt at 30 September 2005 was £76.6m, representing gearing of 52 per cent,and interest cover (before IAS 39 financial instruments charges of £0.5m) was4.2 times. Included within net debt is £11.0m drawn down under the non-recourseMercury Health project finance facility. On 14 October 2005, the Group agreed a new £180m syndicated bank facility until2010. Under the terms of the facility £125m is available under a revolving loan,£40m under a new performance bond facility and £15m for loan note guarantees.The working capital facility remains at £6m. The new performance bond facilitywill allow us to support Mercury Health in bidding for new elective surgery anddiagnostic contracts. We have now closed out almost all of our earn-out arrangements. The 2005earn-out obligations will be settled shortly leaving an estimated £6.9moutstanding of which £0.6m will be settled in cash and the remainder through theissue of shares (or cash, at our option) through to November 2007. DividendThe interim dividend is 1.05p per share (2004: 1.0p) which will be paid on13 January 2006 to shareholders on the register on 16 December 2005. Adoption of International Financial Reporting Standards ('IFRS')The results previously reported for the first half to 30 September 2004, and forour financial year to 31 March 2005, have been restated following our adoptionof IFRS in place of the UK Generally Accepted Accounting Practices (UK GAAP)used previously. The principal effect on our historic accounts arises fromdifferences in the treatment of defined benefit pension costs, goodwill, sharebased payment and the timing of recognition of dividends. These are explained inmore detail in a separate document 'Transition to International FinancialReporting Standards' that was published on the Tribal website(www.tribalgroup.co.uk) on 28 October 2005 and which is also available onrequest. In addition, we have adopted IAS32 'Financial Instruments: Disclosureand Presentation' and IAS39 'Financial Instruments: Recognition and Measurement'from 1 April 2005. Divisional tradingWe have decided to rationalise further the reporting of our activities (fromseven segments into four). We shall report under these new segments from 1 April2006 but will continue to show comparatives under the old sub-segments as partof these interim results and in our full current year results. All divisional operating profit and operating profit margins are stated beforeamortisation of IFRS 3 intangibles, goodwill impairment, share option chargesand exceptional Mercury Health bid costs. Consulting Services 6 months ended 6 months ended 12 months ended 30 September 2005 30 September 2004 31 March 2005 £000 £000 £000Revenue 29,564 25,582 55,238Operating profit 3,017 2,489 6,677Operating profit margin 10.2% 9.7% 12.1% Our consultancy services division comprises all of the Group's consultancyactivities. Consultancy achieved revenue growth of 16 per cent, all of which is organic.Operating profit improved strongly, up 21 per cent to £3.0m (2004: £2.5m). Thistranslated through to higher operating margins of 10.2 per cent (2004: 9.7 percent). The improvement is due to higher utilisation rates, lower use of associates andcost control through the divisional shared service centre. Utilisation ratesacross the business range from 67 per cent to 72 per cent. We have made goodprogress in our central government market increasing our fee earners from 25 to50 over the period. Our average daily fee rates rose 5 per cent despite keencompetition, particularly from the major international consultancy groups. In healthcare, we continue to be very actively involved with NHS Connecting forHealth, the NHS national IT programme and we have recently won an importantcontract for Integrated Service Improvement with the DoH. In local government and housing we have won contracts with Renfrewshire Councilfor housing stock transfer and are advising Bath and North Somerset Council onthe Bath Spa project. In central government, we have become one of the largest consultancy providersto the Environment Agency and won business with several other major departments,such as Revenue & Customs, for the first time. In October, we were awarded acontract by the Home Office's Active Communities Directorate to administer asignificant proportion of their grant programmes. Our consultancy markets remain buoyant in response to the Government's reformagenda. Although this has attracted greater competition from majorconsultancies, we are pleased to see overall gains in our market share. Inparticular, we have made significant progress in being short-listed in our firstfour submissions within the new IT services and consultancy procurementframework (Catalist). This is replacing the existing S-CAT framework from 2006. Support Services 6 months ended 6 months ended 12 months ended 30 September 2005 30 September 2004 31 March 2005 £000 £000 £000Revenue 35,382 31,154 70,397Operating profit 4,725 3,559 10,893Operating profit margin 13.4% 11.4% 15.5% Education 6 months ended 6 months ended 12 months ended 30 September 2005 30 September 2004 31 March 2005 £000 £000 £000Revenue 17,986 16,029 36,317Operating profit 2,017 1,743 5,766Operating profit margin 11.2% 10.9% 15.9% Technology 6 months ended 6 months ended 12 months ended 30 September 2005 30 September 2004 31 March 2005 £000 £000 £000Revenue 17,446 15,303 34,391Operating profit 2,708 1,816 5,127Operating profit margin 15.5% 11.9% 14.9% Our support services division comprises education and technology. With effect from 1 April 2006 we are merging our education and technologydivisions to create one of the largest education focused support servicesbusinesses in the UK. We expect to see many benefits from the merger including aclear market proposition that eliminates duplication of services, astrengthening of management and of our bid resources, improved business supportthrough shared services and enhanced career opportunities for staff. Overall revenue growth for the combined divisions was strong at 14 per cent.Operating profit growth was 33 per cent resulting in overall operating margingrowth to 13.4 per cent (2004: 11.4 per cent). We are seeing very positive opportunities in the education and learning market,with three recent large contract wins - Ofsted re-tender (£50m); delivery ofprison and youth offender learning in the South-West (£11m); several contractswith the DfES and LSC to deliver e-learning valued at £4m and the NationalCentre for Excellence in the Teaching of Mathematics (NCETM) (£12m). Tribal isnow firmly established as a major partner to the DfES and LSC. We are one ofonly a few companies who are able to offer a comprehensive and integrated rangeof services and products across the spectrum of education clients. Within the education division, revenue increased by 12 per cent, all of whichwas organic. The operating margins improved to 11.2 per cent (2004: 10.9 percent). Our distance-learning, e-learning and inspection businesses have performed welland we continue to make good progress in our education consultancy andbenchmarking businesses. Our teacher training business is performing close toexpectations albeit at much reduced volumes, reflecting, as previouslydiscussed, funding changes in this market. Within the technology division, revenue increased by 14 per cent, althoughorganic revenue fell by six per cent. Much of this fall is related to slowerdemand for new software products in our local education authority market.Operating margins increased strongly to 15.5 per cent (2004: 11.9 per cent). The pipeline of new bid opportunities is very encouraging. Professional Services 6 months ended 6 months ended 12 months ended September 2005 September 2004 31 March 2005 £000 £000 £000Revenue 30,394 25,631 55,892Operating profit 4,638 4,752 10,235Operating profit margin 15.3% 18.5% 18.3% Communications 6 months ended 6 months ended 12 months ended September 2005 September 2004 31 March 2005 £000 £000 £000Revenue 4,859 4,660 9,958Operating profit 1,435 1,086 2,364Operating profit margin 29.5% 23.3% 23.7% Property 6 months ended 6 months ended 12 months ended September 2005 September 2004 31 March 2005 £000 £000 £000Revenue 11,890 9,935 21,331Operating profit 725 1,216 2,640Operating profit margin 6.1% 12.2% 12.4% Resourcing 6 months ended 6 months ended 12 months ended 30 September 2005 30 September 2004 31 March 2005 £000 £000 £000Revenue 13,679 11,084 24,684Operating profit 2,478 2,450 5,231Operating profit margin 18.1% 22.1% 21.2% Our professional services division comprises communications, property andresourcing. Overall revenue growth across the professional services businesses was 19 percent but operating profit fell 2 per cent and the overall operating margin waslower at 15.3 per cent (2004: 18.5 per cent). Our communications business is performing very well delivering organic revenuegrowth of 4 per cent and a 32 per cent growth in operating profit. Operatingmargins increased to 29.5 per cent (2004: 23.3 per cent). We have maintained our position as a top ten PR agency and secured a number ofnew prestigious briefs including the promotion of the DfES London Challenge,administering the Edge Employer Awards for practical learning opportunities foryoung people and promoting the DTI's "Enterprising Britain" competition. Wecontinue to manage a number of national campaigns for the DfES, many of whichhave been extended this year. Within property, revenue increased by 20 per cent with organic revenue growth of10 per cent. However, operating profit and operating margins fell significantlydue to a loss making business unit, now closed and due to slippage on somehealth sector PFI and LIFT projects. We have a strong pipeline of business in both education and healthcare andexpect operating margins to improve in H2 as projects come on stream and webenefit from the usual spending pattern of our education clients. We continue to win work as part of the Academy programme in schools and haverecently won the first Skills Academy project, working for Arcadia. Resourcing increased revenue by 23 per cent but operating profit was unchangedand operating margins fell to 18.1 per cent (2004: 22.1 per cent). The traditional press recruitment advertising market is very challenging withthe growth of the free NHS on-line web portal; the recent onset of a recruitmentfreeze in many of our London NHS clients largely due to the strategic review ofthe number of Primary Care Trusts, and budgetary pressures in some localauthorities. We have won 26 of our 27 renewal bids retaining accounts worth £11million of media spend annually and have secured over £8 million of annualisednew business in the period. This has helped to offset the lower spending fromexisting clients. Despite the fall off in profit from recruitment advertising, our overall marginshave been supported by a strong performance from our executive search business,healthy growth in our interim management start-up business and a solidperformance from our healthcare supply business. We expect to see challenging markets in the second half of the year mitigated toan extent by some cost restructuring that will generate annualised savings of£0.4 million. We continue to develop new resourcing products to extend our range of servicesand counter the effect of changes in the marketplace. Delivery 6 months ended 6 months ended 12 months ended September 2005 September 2004 31 March 2005 £000 £000 £000Revenue 2,693 88 349Operating profit (214) (7) (345) Our delivery division comprises Mercury Health, the Group's healthcare deliverybusiness. The revenue and operating loss reported continue to be in line with expectationsreflecting the start-up nature of the business and the opening of the firstdiagnostic treatment centre at High Wycombe on 8 August 2005. Our second centreopened in Medway on 5 October 2005. Both centres opened on time and withinbudget. The implementation and construction of our remaining centres atPortsmouth and Haywards Heath are well advanced and are scheduled to open inDecember 2005 and June 2006 respectively. We are also providing interim electiveorthopaedic surgery at Haywards Heath and this contract is performing well. During the period, Mercury Health has tendered for regional diagnostic contractsas part of the second phase of NHS procurement of diagnostic services worth anestimated £1bn over five years. We are shortlisted on a number of regions and wehave now started developing our detailed proposals. Contract awards are notexpected before the second half of next year. In addition, the Government recently sought tenders for 24 elective surgeryprocurement schemes worth an estimated £2.5bn over five years. We have submittedpreliminary bids for a number of these contracts and we consider that, togetherwith our US clinical partners, Health Inventures and Hospital for SpecialSurgery, we are well placed to take advantage of this development and maintainour market share. All costs relating to these bids are currently being expensed. On 4 November 2005, we announced strategic alliances with Chilvers & McCrea, oneof the leading independent providers of primary care to NHS organisations andpatients, and Frome Medical Practice, one of the leading GP practices in thecountry. These two alliances position Mercury Health to become one of the leadingindependent sector providers of primary care services. We are already biddingfor a number of pilot primary care schemes to allow new providers to run GPpractices and provide other primary care services. Growth As indicated previously, we are concentrating our efforts on delivering organicgrowth from our existing businesses and winning large scale contracts. We have continued to increase our investment in our bidding and businessdevelopment capability, both in our core business and in Mercury Health. Thevalue of our 'big ticket' contract pipeline is at its highest level to date, atcirca £120m in the core business and at circa £1bn in Mercury Health. We expectthe forthcoming education and health White Papers to set out good opportunitiesfor the private sector to develop delivery capability in these markets. People The period has been very demanding for our senior management and for allemployees across the Group and it is thanks to their commitment and ability thatwe have achieved such progress. We have many very talented individuals across the Group and continue to attractvery able staff from our major competitors and from the public sector. Ouroverall staff numbers have increased to 2,100 (2004: 1,800). Prospects We have had a solid performance for the first half of the financial year withprogress being made across most of the Group. As usual, we expect ourperformance to be weighted towards the second half. Trading has continued inline with expectations during October. The board is confident that the Group continues to make good progress and iswell placed to benefit from the opportunities emerging from public sectorreform, to apply our integrated service offering to new contracts, particularlyin education and health. We expect trading for the full year to be in line with our expectations. Henry PitmanChief Executive Consolidated income statementFor the six months to 30 September 2005 (Restated under IFRS) Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Note £000 £000 £000 Turnover 123,767 107,718 229,470 Direct agency costs (25,759) (25,902) (49,613)------------------------- ----------- ----------- ----------Revenue 2 98,008 81,816 179,857 Cost of sales (57,067) (45,625) (102,772)------------------------- ----------- ----------- ---------- Gross profit 40,941 36,191 77,085------------------------- ----- ----------- ----------- ----------Administrative expenses beforeamortisation of IFRS 3 intangibles, (31,525) (27,355) (54,794)goodwill impairment, share optioncharges and exceptional Mercury Health bid costs------------------------- ----------- ----------- ----------Operating profit before amortisation 2 9,416 8,836 22,291of IFRS 3 intangibles, goodwillimpairment, share option charges andexceptional Mercury Health bid costs Amortisation IFRS 3 intangibles (216) (11) (322)Goodwill impairment - (3,933) (6,665)Share option charges (187) (905) (134)Exceptional Mercury Health bid costs - (1,991) (1,747)------------------------- ----- ----------- ----------- ---------- Total administrative expenses (31,928) (23,195) (63,662) ----------- ----------- ---------- Operating profit 9,013 1,996 13,423 Finance income 373 486 914------------------------- ----- ----------- ----------- ----------Finance charges (2,503) (2,544) (5,380)Financial instruments (483) - -------------------------- ----- ----------- ----------- ----------Finance costs (2,986) (2,544) (5,380) Net finance costs 3 (2,613) (2,058) (4,466)------------------------- ----------- ----------- ----------Profit/(loss) before taxation 6,400 (62) 8,957Taxation 4 (1,975) (2,030) (5,401)------------------------- ----------- ----------- ----------Profit/(loss) for the period 4,425 (2,092) 3,556 ----------- ----------- ---------- Attributable to:-Equity holders of the parent 4,303 (2,092) 3,253Minority interest 122 - 303------------------------- ----------- ----------- ---------- 4,425 (2,092) 3,556------------------------- ----------- ----------- ----------Earnings/(loss) per shareBasic 6 5.68p (3.02)p 4.56pDiluted 6 5.29p (3.02)p 4.15p Adjusted basic before amortisationofIFRS 3 intangibles, goodwill 6 6.77p 6.85p 16.84pimpairment, share option chargescosts and exceptional Mercury Healthbid costs and IAS 39 charges Adjusted diluted before amortisationof IFRS 3 intangibles, goodwill 6 6.30p 6.40p 15.32pimpairment, share option charges andexceptional Mercury Health bid costsand IAS 39 charges Consolidated balance sheetAt 30 September 2005 (Restated under IFRS) Unaudited Unaudited Audited 30 September 30 September 31 March 2005 2004 2005 Note £000 £000 £000 Non-current assets Goodwill 207,855 197,593 205,247 Other intangible assets 2,299 1,069 3,479 Property, plant and equipment 31,462 7,389 12,538 Investment property 180 89 180 Available for sale investments 151 190 151 Deferred tax assets 1,416 664 1,282------------------------- ----------- ---------- ---------- 243,363 206,994 222,877 ----------- ---------- ----------Current assets Inventories - work in progress 13,561 4,616 9,102 Trade and other receivables 55,274 40,645 56,315 Cash and cash equivalents 11,222 27,493 28,335------------------------- ----------- ---------- ---------- 80,057 72,754 93,752 ----------- ---------- ----------Total assets 323,420 279,748 316,629------------------------- ----------- ---------- ---------- Current liabilities Trade and other payables (63,223) (47,413) (65,851) Tax liabilities (7,278) (3,614) (5,758) Obligations under finance leases (11) (48) (20) Bank overdrafts and loans (4,092) (3,936) (3,802) Shares to be issued 7 (8,441) - - ----------- ---------- ---------- (83,045) (55,011) (75,431) ----------- ---------- ---------- Net current assets (2,988) 17,743 18,321------------------------- ----------- ---------- ---------- Non-current liabilities Bank loans (83,273) (71,423) (77,518) Pension liabilities (1,370) (277) (1,370) Deferred tax liabilities (775) (207) (1,058) Obligations under finance leases (436) (38) (26) Shares to be issued 7 (4,737) - - Other non current liabilities (1,729) (400) (411)------------------------- ----------- ---------- ---------- (92,320) (72,345) (80,383)------------------------- ----------- ---------- ---------- Total liabilities (175,365) (127,356) (155,814)------------------------- ----------- ---------- ---------- Net assets 148,055 152,392 160,815------------------------- ----------- ---------- ---------- Equity Share capital 3,826 3,468 3,748 Share premium account 89,167 79,636 86,928 Equity reserve 46,160 43,646 46,160 Shares to be issued 7 - 23,021 16,517 Retained earnings 7,855 1,272 5,568------------------------- ----------- ---------- ---------- Equity attributable to equity 147,008 151,043 158,921holders of the parent Minority interest 1,047 1,349 1,894------------------------- ----------- ---------- ----------Total equity and reserves 148,055 152,392 160,815------------------------- ----------- ---------- ---------- Consolidated statement of recognised income and expenseAt 30 September 2005 (Restated under IFRS) Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 Net profit/(loss) for the period 4,303 (2,092) 3,253Share options exercised 75 164 506Derecognition of share based - - (578)payment chargesRecognition of employee benefits - - (168)acquiredActuarial gain on defined benefit - - 105plansTransfer to cash flow hedge reserve (447) - -Deferred tax 134 - -Impact of adoption of IAS 39 on 1 (248) - -April 2005 ----------------------- ----------- ----------- ---------- Recognised income and expense for 3,817 (1,928) 3,118the period----------------------- ----------- ----------- ---------- Consolidated reconciliation of movements in equityAt 30 September 2005 (Restated under IFRS) Unaudited Unaudited Audited 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 Recognised income and expense for the 3,817 (1,928) 3,118period Ordinary dividend payable (1,530) (1,400) (2,150)------------------------- ---------- ----------- --------- 2,287 (3,328) 968 Shares issued 2,317 765 10,851Movement in shares to be issued - (2,067) (8,571)------------------------- ---------- ----------- --------- 4,604 (4,630) 3,248 Opening equity 158,921 155,673 155,673Impact of adoption of IAS 32 on 1 (16,517) - -April 2005 ------------------------- ---------- ----------- --------- Closing equity 147,008 151,043 158,921------------------------- ---------- ----------- --------- Consolidated cash flow statementFor the six months to 30 September 2005 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Note £000 £000 £000 Net cash from operating activities 8 (2,205) (5,512) 2,030 ---------- ----------- ----------Investing activities Interest received 567 688 914 Proceeds on disposal of available - - 170 for sale investments------------------------ ------ ---------- ----------- ---------- Proceeds on disposal of property 35 2,040 2,265 plant and equipment------------------------ ------ ---------- ----------- ---------- Purchases of property plant and (2,093) (3,133) (5,315) equipment (excluding Mercury Health) ------------------------ ------ ---------- ----------- ---------- Purchases of property plant and (15,311) (1,373) (2,652) equipment (Mercury Health)------------------------ ------ ---------- ----------- ---------- Purchases of property plant and (17,404) (4,506) (7,967) equipment------------------------ ------ ---------- ----------- ---------- Purchases of trading investments - - (35) Expenditure on product development (76) (261) (640)------------------------ ---------- ----------- ---------- Acquisitions (deferred (2,906) (2,538) (7,921) consideration and minority interests)------------------------ ---------- ----------- ---------- Net cash outflow from investing (19,784) (4,577) (13,214)activities ------------------------ ---------- ----------- ---------- Financing activities Equity dividend paid - - (2,135) Issue of shares 104 83 106 Repayment of borrowings (13,464) (4,232) (6,231) Repayments of obligations under (19) (9) (56) finance lease New bank loans 18,255 - 6,095------------------------ ---------- ----------- ---------- Net cash used in financing 4,876 (4,158) (2,221)activities ------------------------ ---------- ----------- ---------- Net decrease in cash and cash (17,113) (14,247) (13,405)equivalents Cash and cash equivalents at 28,335 41,740 41,740beginning of period ------------------------ ---------- ----------- ---------- Cash and cash equivalents at end of 9 11,222 27,493 28,335period ------------------------ ---------- ----------- ---------- Notes 1 Basis of preparation The Group's interim results for the six months ended 30 September 2005 are thefirst to be prepared in accordance with International Financial ReportingStandards (IFRS) as adopted by the EU. Consequently a number of the accountingpolicies adopted in the preparation of these interim financial statements aredifferent from those adopted in the financial statements for the year ending 31March 2005, which were prepared under UK GAAP. Details of the changes in accounting policies arising from the adoption of IFRS,together with restated information for the six months ended 30 September 2004and for the year ending 31 March 2005, have been included in a separate document'Transition to International Financial Reporting Standards' that was publishedon the Tribal website (www.tribalgroup.co.uk) on 28 October 2005 and which isalso available in hard copy on request. The accounting policies set out in that document have been consistently appliedto all periods presented in these interim financial statements with theexception of the impact of IAS 32 and IAS 39 Financial Instruments. Inaccordance with IFRS 1 'First Time Adoption of International Financial ReportingStandards', the Group has elected not to restate comparative information for theimpact of IAS 32 and IAS 39, but has only adopted these standards in the interimfinancial statements for the six months ended 30 September 2005. The effect ofthis adoption is disclosed in Note 3. Under IAS 39, the Group seeks to apply hedge accounting to interest rate swapswhere it is permissible. Due to the nature of its hedging arrangements, theGroup is unable to obtain hedge accounting in all cases. The Group continues,however, to enter into these arrangements as they provide certainty over theinterest rate applying to the Group's debt. These arrangements result in fixedand determined cash flows. The Group believes that these arrangements remaineffective, economic and commercial hedges. The effect of being unable to apply hedge accounting under IAS 39 to the Group'sdiscounted swap means that the movement in the fair value of the swap in theperiod is recognised in the finance charge for the period. Whilst the impactsdescribed above could be highly volatile on movements in interest rates, thevolatility will not be reflected in the cash flows of the Group, which will bedetermined by the hedge rate. The volatility introduced to the income statementas a result of this is not considered to be a realistic representation of theon-going operation of the business, and has therefore been excluded whencalculating adjusted earnings. Net assets have been adversely affected by the introduction of IAS 39. Includedwithin liabilities are derivative financial instruments totalling £1.2m at fairvalue which represents the total cost of buying out all the Group's interestrate swaps at market prices prevailing on 30 September 2005. The Group has determined that its interest rate hedging strategy is in the bestinterests of the business and its shareholders. It is not, therefore alteringits hedging activities in order to achieve a particular accounting presentationunder IFRS. These interim financial statements do not constitute full statutory accounts andare Unaudited. The Group has elected not to adopt full compliance with IAS 34'Interim financial reporting'. The consolidated financial statements are prepared under the historical costconvention modified to include the revaluation of certain assets. The unauditedinterim accounts were approved by the Board of Directors on 21 November 2005.The financial information for the year ended 31 March 2005 does not representfull accounts within the meaning of Section 240 of the Companies Act 1985. Thestatutory accounts for this period, which were prepared under UK GAAP, have beenfiled with the Registrar of Companies. The auditors' report on those accountswas unqualified. 2 Segmental analysis (Restated under IFRS) 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 Revenue Consulting Services 29,564 25,582 55,238Support Services 35,382 31,154 70,397Professional Services 30,394 25,631 55,892Delivery 2,693 88 349Inter segment (25) (639) (2,019)------------------------ ---------- ---------- ---------- 98,008 81,816 179,857------------------------ ---------- ---------- ---------- Operating profit before amortisationof IFRS 3 intangibles, goodwillimpairment, exceptional MercuryHealth bid costs and share optioncharges Consulting Services 3,017 2,489 6,677Support Services 4,725 3,559 10,893Professional Services 4,638 4,752 10,235Delivery (214) (7) (345)Central & bid costs (2,750) (1,957) (5,169)------------------------ ---------- ---------- ---------- 9,416 8,836 22,291------------------------ ---------- ---------- ---------- Exceptional Mercury Health bid costs of £nil (30 September 2004: £1,991,000; 31March 2005: £1,747,000) have been incurred in relation to bid and implementationcosts on the NHS Independent Sector Treatment Contract. In September 2004 theBoard received sufficient assurance to believe that the contract would reachfinancial close (which occurred in December 2004). Bid costs post September 2004have been capitalised in accordance with IAS 11 'Construction Contracts' and IAS16 'Property, Plant and Equipment'. 3 Finance costs IAS 39 'Financial Instruments: Recognition and Measurement' has not been appliedretrospectively but has been adopted on 1 April 2005. It has increased theinterest charge by £0.5m for the six months ended 30 September 2005. This is anon-cash adjustment arising primarily as a result of marking to market one ofthe Group's interest rate swaps which does not qualify for hedge accountingunder IAS 39. The effect of this charge has been included in the adjustments tobasic earnings when calculating adjusted earnings per share. 4 Taxation The taxation charge is calculated by applying the forecast full year effectivetax rate on operating profits adjusted for goodwill impairment and share optioncharges to the interim profit, similarly adjusted. 5 Dividends The Board has proposed an interim dividend of 1.05p per share, which will absorb£0.8m, will be paid on 13 January 2006 to ordinary shareholders on the registeron 16 December 2005. The shares will be quoted ex-dividend on 14 December 2005. 6 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: (Restated under IFRS) Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 thousands thousands thousands Basic weighted average number of shares 75,725 69,293 71,421in issue Employee share options 933 1,128 890Shares to be issued in respect of deferred 4,707 3,748 6,164consideration ----------------------------------- ------- ------- ------- Weighted average number of diluted shares 81,365 74,169 78,475outstanding----------------------------------- ------- ------- ------- (Restated under IFRS) 30 September 2005 30 September 2004 31 March 2005 Loss)/ Earnings Earnings Earnings Earnings Earnings earnings £000 per share £000 per share £000 per share pence pence pence Basic and adjusted basicearnings per share:-Profit/(loss) and basic 4,303 5.68p (2,092) (3.02)p 3,253 4.56pearnings/(loss) per shareAdjustments:-Amortisation of IFRS 3 151 0.20p 8 0.01p 225 0.31pintangibles (net of tax)Goodwill impairment - - 3,933 5.68p 6,665 9.33pShare option charges 187 0.25p 905 1.31p 134 0.19pExceptional Mercury Health - - 1,991 2.87p 1,747 2.45pbid costsIAS 39 adjustments 483 0.64p - - - - ------- ------ ------ ------ ------ ------Adjusted earnings and 5,124 6.77p 4,745 6.85p 12,024 16.84padjusted basic earnings per share-------------------- ------- ------ ------ ------ ------ ------Diluted and adjusted diluted earnings per share:-Profit/(loss) and diluted 4,303 5.29p (2,092) (3.02)p 3,253 4.15pearnings/(loss) per shareAdjustments:-IAS 33 adjustment* - - - 0.21p - -Amortisation of IFRS 3 151 0.19p 8 0.01p 225 0.29pintangibles (net of tax)Goodwill impairment - - 3,933 5.30p 6,665 8.49pShare option charges 187 0.23p 905 1.22p 134 0.16pExceptional Mercury Health - - 1,991 2.68p 1,747 2.23pbid costsIAS 39 adjustments 483 0.59p - - - - ------ ------ ------ ------ ------ ------ Adjusted earnings and 5,124 6.30p 4,745 6.40p 12,024 15.32padjusted diluted earnings per share-------------------- ------ ------ ------ ------ ------ ------ The adjusted basic and adjusted diluted earnings per share figure shown on theprofit and loss account is included as the directors believe that it provides abetter understanding of the underlying trading performance of the Group. * IAS 33 requires presentation of diluted earnings per share when a companycould be called upon to issue shares that would decrease net profit or increasenet loss per share. For a loss making company, net loss per share would only beincreased by the exercise of out-of-money options. Hence, no adjustment is madeto diluted earnings per share in the six months ended 30 September 2004. 7 Shares to be Issued IAS 32 'Financial Instruments: disclosure and presentation' has beenprospectively adopted from 1 April 2005. IAS 32 requires shares to be issuedtotalling £13.4m to be treated as liabilities since the value of the estimatedliability is known rather than the number of shares that will be issued. Thecomparative figures show shares to be issued within equity in accordance withprevious GAAP. 8 Note to the cash flow statement Reconciliation of operating profit to operating cash flows (Restated under IFRS) Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 Profit from operations 9,013 1,996 13,423 Adjustments for: Depreciation of property, plant 1,573 1,332 2,715and equipmentAmortisation of development 281 195 457expenditureAmortisation of intangible assets 216 11 322Impairment of goodwill - 3,933 6,665Increase in fair value of - - (91)investment propertyGain on disposal of available for - - (95)sale investmentsGain on disposal of property, (5) (63) (30)plant and equipmentShare option charges 187 905 134----------------------- ---------- ----------- --------- Operating cash flows before 11,265 8,309 23,500movement in working capital Increase in inventories (4,459) (2,518) (7,031)Decrease/(increase) in 1,406 4,661 (7,015)receivables(Decrease)/increase in payables (6,948) (10,277) 2,786----------------------- ---------- ----------- --------- Cash generated from operations 1,264 175 12,240 Income taxes paid (523) (3,104) (4,655)Interest paid (2,946) (2,583) (5,555)----------------------- ---------- ----------- --------- Net cash from operating (2,205) (5,512) 2,030activities----------------------- ---------- ----------- --------- Cash generated from operations 1,264 175 12,240 Add exceptional Mercury Health - 1,991 1,747bid costsAdd net outflow from Mercury 3,329 - 3,547Health operations ----------------------- --------- ---------- ------- Cash generated from operation 4,593 2,166 17,534before Mercury Health----------------------- --------- ---------- ------- 9 Cash management Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 £000 £000 £000 Cash at bank 9,125 24,058 26,810Cash collateralised deposits 2,097 3,435 1,525-------------------- ---------- ----------- --------- 11,222 27,493 28,335Loan notes (4,092) (3,936) (3,802)Bank loans (83,273) (71,423) (77,518)Finance leases (447) (86) (46)-------------------- ---------- ----------- --------- Net debt (76,590) (47,952) (53,031)-------------------- ---------- ----------- --------- Included within net debt is £11.0m (30 September 2004 and 31 March2005: £nil) drawn down under the non-recourse Mercury Health facility. Independent review report to Tribal Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 September 2005 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated statement ofrecognised income and expense, the consolidated reconciliation of movements inequity, the consolidated cash flow statement and related notes 1 to 9. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in note 1, the next annual financial statements of the group willbe prepared in accordance with International Financial Reporting Standards asadopted for use in the EU. Accordingly, the interim report has been prepared inaccordance with the recognition and measurement criteria of IFRS and thedisclosure requirements of the Listing Rules. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. Deloitte & Touche LLPChartered AccountantsBristol, UK21 November 2005 Notes: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but no controlprocedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination offinancial information differs from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Tribal Grp.