Download Preliminary results for the year ended 31 December

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Tribal Group plc
Preliminary results for the year
ended 31 December 2008
Peter Martin
Chief Executive
Simon Lawton
Group Finance Director
17 March 2009
Agenda

Summary

Financial performance

Business review

Outlook

Q&A
Financial Highlights
Year ended 31 December
2008
2007
Increase
£234.0m
£209.2m
+12%
£18.6m
£15.4m
+21%
Earnings per share*
14.7p
12.2p
+20%
Dividend per share
4.35p
3.93p†
+11%
£21.4m
£22.4m
136%
137%
Revenue
Profit before tax*
Operating cash flow
Operating cash conversion
* : Before amortisation of intangibles, goodwill impairment and financial instrument costs
† : Pro rata annualised basis
3
Business Achievements

Improved operational performance

Strengthened senior management team

Internal reorganisation implemented

Acquisitions successfully integrated

International development progressed

Increased committed income and sales pipeline
4
Outlook
Committed income at 1 January
2009
£139m
2008
£124m
Sales pipeline at 1 January
2009
£297m
2008
£168m
5
Financial performance
Simon Lawton
Group Finance Director
6
Financial Performance
Revenue (£m) *
Profit before tax (£m) * †
Earnings per share (pence) * †
18.6
234
194
15.4
209
14.7
13.0
12.2
10.4
2006
2007
2008
2006
2007
2008
2006
2007
2008
* Continuing operations only
†
Before amortisation of intangibles, goodwill impairment and financial instrument costs
7
Income Statement
Twelve months ended
31 December
2008
£m
2007
£m
Growth
%
Continuing Operations
Turnover
294.2
256.5
+15%
Revenue
234.0
209.2
+12%
Operating profit*
19.8
17.3
+14%
Operating margin
8.5%
8.3%
Interest
(1.2)
(1.9)
Profit before tax*
18.6
15.4
Tax
(5.0)
(4.4)
Profit after tax*
13.6
11.0
+24%
Adjusted fully diluted EPS* (p)
14.7p
12.2p
+20%
No of WA diluted shares (‘000)
86,459
84,795
+21%

Revenue increase of 12%

Operating profit* up 14% to £19.8m

Improved operating margin to 8.5%

Significant fall in interest and bank fees

Effective tax rate of 26.8%

Earnings per share up 20% to 14.7p

Final dividend 2.65p; total dividend of 4.35p
* Before amortisation of intangibles, goodwill impairment and financial instrument costs
8
Committed Income
At 1 January 2009
% of
Total
Consulting
Support Services
£21m
£53m
Education
£33m
£18m
£5m
£4m £1m
£4m
£4m
£79m
57%
£38m
27%
£22m
16%
£139m
2009
£104m
2010
£29m
2011 and beyond
£6m
9
Sales Pipeline
At 1 January 2009
Education
£164m
£104m
£86m
Consulting
£12m
£22m
£47m
Support Services
Total
£52m£16m
£6m
Jan 09
Jan 08
£297m
£168m
10
Balance Sheet
December
2008
£m
December
2007
£m
217.5
191.2
11.2
9.1
Net debt
(19.7)
(6.8)
Net working capital
(13.6)
(12.3)
Net assets
195.4
181.2
Share capital
83.1
79.0
Profit and loss reserves
45.9
36.6
Minority interest
1.8
1.1
Other reserves
64.6
64.5
195.4
181.2
Intangible assets
Other non-current assets
Total equity and reserves

Intangible assets increased by £26.3m
due to acquisitions

No goodwill impairment

Net debt increased by £12.9m
following acquisitions

Strong working capital management

Gearing of 10.1% (December 2007 :
3.8%)
11
Group Cash Flow
Twelve months ended 31 December
2008
£m
2007
£m
Operating cash flow
- continuing operations
26.9
23.6
- (decrease) / increase in restricted cash
(1.3)
1.6
-
2.6
25.6
27.8
Interest
(0.9)
(2.1)
Tax
(3.3)
(0.7)
Net cash flow before investing &
financing
21.4
25.0
Capital expenditure
(5.1)
(6.5)
Free cash flow
16.3
18.5
(19.0)
-
Minorities and deferred consideration
(5.6)
(2.2)
Dividends paid
(4.4)
(3.4)
-
36.3
Increase / (repayment) of loans
10.6
(53.2)
Net change in cash
(2.1)
(4.0)
- discontinued operations
Acquisitions
Disposal of Mercury Health

Operating profit to cash flow
conversion of 136%
(2007 : 137%)

Free cash flow of £16.3m (2007 :
£18.5m)

Capital expenditure of £5.1m
(2007 : £6.5m) includes product
development costs of £1.9m
(2007 : £2.3m)

Five acquisitions completed for
£19.0m
12
Group Net Debt
December
2008
£m
December
2007
£m
Group net debt
21.7
10.0
Less : restricted cash
(2.0)
(3.2)
Group debt
19.7
6.8
Bank revolver facilities (to 2012)
40.0
40.0
6.0
3.0
26.3
36.2
Working capital facility
Bank headroom

£40m bank facility until June 2012 with
HBoS and HSBC
Actual
Covenant
Interest cover
x16.7
>x3.0
Debt to EBITA
x0.9
<x3.5

Interest rate swap in place over £25m
of debt through to 2010 providing
interest rate certainty at 4.99%

Current margin 75 bps
13
Business review
Peter Martin
Chief Executive
14
Market Analysis
2008 Revenue : £234m
Education
Central Government
Health
Housing and Regeneration
Local Government
UK Public Sector
International
Private Sector
38%
20%
16%
9%
9%
92%
4%
4%
15
Business Stream Analysis
2008 Revenue: £234m
2008 Operating Profit*: £27.4m
Education
41%
Education
52%
Consulting
36%
Consulting
30%
Support Services
23%
Support Services
18%
* Before central group costs
16
Education
Year ended 31 December
2008
2007
Revenue (£000)
96,408
91,581
Operating profit (£000)
14,303
14,928
Operating profit margin (%)
14.8%
16.3%
Financial performance
Business review
 Revenue increased by 5% to £96.4m
 New chief executive appointed – November 2008
 Operating profit fell by 4% to £14.3m
 Reorganisation being implemented – six market facing
business units
 Good performance in software, training and delivery
contracts and inspections
 Restructuring / investment costs in H1 2009
 Margin impacted by:
- contract / business mix
- investment in products and services
- increase in bid costs / development capability
 Committed income of £79m at January 2009
 2009 margin anticipated to be at similar level
 Good range of international opportunities
 Ofsted contract award (£75m over 6 years)
 UK sales pipeline remains healthy
17
Consulting
Year ended 31 December
2008
2007
85,191
68,666
Operating profit (£000)
8,250
4,911
Operating margin (%)
9.7%
7.2%
Revenue (£000)
Financial performance
Business review
 Revenue increased by 24% to £85.2m
 Significant increase in committed income to £38m at
January 2009
 Operating profit increased by 68% to £8.3m
 Contribution of £2.4m from acquisitions
 Operating margins increased to 9.7%
 Excellent performance in Central Government
 Good results from Health
- establishment of commissioning business
- strategic acquisitions
 Housing, Regeneration & Local Government
- integration (local government)
- acquisitions (regeneration, local government)
- softer trading conditions in regeneration
 Continued importance of frameworks
 Anticipate tightening in the spending environment but…
 Public sector reform agenda will continue:
- performance improvement
- commissioning
- value for money
- resource allocation
 Strong pipeline in UK and internationally
 Strong performance from Tribal HELM
18
Support Services
Year ended 31 December
2008
2007
54,277
51,997
Operating profit (£000)
4,861
4,041
Operating margin (%)
9.0%
7.8%
Revenue (£000)
Financial performance
Business review
 Revenue increased by 4% to £54.3m
 Architecture
- record order book in health
- no significant dependence on PFI
- uncertainty in FE / reducing cost base
 Operating profit increased by 20% to £4.9m
 Margin improved significantly
 Architecture made good progress
- health contracts / new frameworks
 Excellent performance from Communications
- acquisition / rebranding
 Resourcing exceeded expectations despite difficult
markets
 Communications
- acquisition provides distinctive, integrated offering
- digital capability established
- activity levels high
 Resourcing
- challenging conditions likely to continue
- new business wins remain high
 Committed income of £22m
19
Outlook
Peter Martin
Chief Executive
20
Macro Outlook

Tribal operates in the public services industry (PSI)

The Julius report (July 2008)* confirmed the importance of the UK PSI





Worth £79bn in 07/08 – 6% of GDP
Employs 1.2m people
Fastest growing sectors: health, education and environment
Competitive tendering reduces costs
Significant export potential

OGC estimates UK public sector consultancy spend at £2.8bn

World Bank alone spends $1.5bn a year on public sector reform in the
developing world
* The Public Services Industry review by Dr DeAnne Julius CBE published by the Department for Business, Enterprise and Regulatory Reform
21
Macro Outlook

09/10. Headline spending plans to be maintained



Tightening being seen ‘on the ground’, but…
Pressure to reform, improve performance and achieve better value for money
10/11. Post-election retrenchment

Public sector finances will have deteriorated, however “…maintaining the
government’s spending plans for the NHS, schools, defence and international
development…” David Cameron, 5 January 2009

Tribal’s business driven by change, not by overall spending patterns

Current pipeline

Top 30 opportunities (by value)




73% health or education
22% international
~4% capital-related
~1% PFI-related
22
2009 Priorities

Retain focus on existing sectors

Increase market share

Develop international activities

Exploit competitive advantages:




Increase committed income:



Domain expertise
Breadth of capability
Technology
Larger, longer-term contracts
Pipeline conversion
Control overheads / reduce costs / planned investment
23
Current Trading

Delivered plus committed revenue 49% of 2009 plan at end of February

H1 : restructuring costs £1.0m / investments of £0.7m

Restructuring


Cost reductions will generate annualised cost savings of at least £4m
Investments



New health and education initiatives
International development
Business development / bid costs

Strong pipeline / Ofsted contract secured

Further progress anticipated in 2009
24
Q&A
Client Feedback
Education
“The
success of the NCETM is in no small part due to Tribal’s expertise in portal development, project management
and in many other areas. The blend of Tribal’s expertise and NCETM’s mathematics education experts has proved
very successful in developing an innovative model for a national centre and thus establishing the NCETM ‘from
scratch’. The Centre is now highly regarded across England and internationally.”
Celia Hoyles OBE, Director, National Centre for Excellence in the Teaching of Mathematics and
Professor of Mathematics Education, Institute of Education, University of London
Health
“Tribal have demonstrated their ability and skill in both influencing and challenging the organisation in relation to the
key priority areas, and have done so by a process of engagement and support across the organisation. Tribal are a
valued and dynamic partner, who both share our core values and have helped us to aspire to realise our potential”
Hilary Heywood - Programme Director, Ashton, Leigh & Wigan Primary Care Trust
Central Government
“Tribal bring expertise and are transparently committed to achieving our goals. You have seamlessly become part of
the organisation and that is a big benefit for us. Many of the stakeholders involved have commented about the value
that you are adding. People are feeding back how different it all feels now, how fresh the approach is and that it
embodies everything that the organisation should be. You have created a real buzz about the work.”
Director of Projects and Programmes, Rural Payments Agency
International
“The project is creating a continuously growing, critical mass of senior officers who feel comfortable in handling
change.
At the same time, its development programme is letting the Government of Bangladesh see that
improvements are possible if our officers have the right skills and proper support. It is also helping with key
improvements in governance that will benefit important areas such as poverty reduction.”
Secretary, Ministry of Establishment, Government of Bangladesh
26
Tribal Group plc
Preliminary results for the year
ended 31 December 2008
END
This presentation is intended only as a summary of key points from Tribal
Group plc’s announcement of its results for the year ended 31 December 2008
(“the Full Year Results 2008”). Accordingly, reference should be made to the
Full Year Results 2008 and not to this presentation.