Annual Report and Accounts 2017
Empowering
the world of
education
Tribal Group plc Annual Report and Accounts 2017
Empowering the
world of education
Tribal is a world-class, education
focused company, providing the
expertise, software and services
needed by education and business
organisations worldwide, to
underpin student success.
We operate internationally
and serve hundreds of Higher
Education, Further Education and
Vocational institutions; thousands
of schools; and many Government
and State bodies, Training
Providers and Employers; in over
55 countries. Tribal employs over
800 professionals with deep
educational domain expertise,
across our offices in the UK,
Australia, New Zealand, Canada,
US, Middle East, Philippines
and Malaysia.
Introduction
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Strategic Report
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Governance
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Financial Statements
01
Highlights
Revenue
£84.9m
2017
2016
Adjusted operating profit
Statutory operating profit
£8.5m
£3.7m
£84.9m
2017
£8.5m
2017
£3.7m
£90.3m
2016
£4.7m
2016
£0.1m
down 6%
up 82%
up 1,059%
5,816%
Financial performance
10.1%
Adjusted Operating Margin1
2016: 5.2%
3.1%
Statutory Operating Margin1
2016: (1.3)%
3.2p
1.3p
Adjusted Earnings per Share1
2016: 1.9p
Statutory Profit per Share
2016: Loss of (0.7)p
£14.1m
Net Cash
2016: £8.8m
130%
Cash Conversion2
2016: 115%
1
2
Adjusted Operating Profit, Adjusted Operating Margin and Adjusted Earnings per Share is in respect
of continuing operations which excludes "Other Items" charges of £4.8m (2016: charge of £4.6m).
Cash Conversion is calculated as net cash from operating activities before tax from continuing
operations, less expenditure on intangible assets and property, plant and equipment, as a proportion
of adjusted operating profit.
From 2016, Share-based payments charges/(credits) are shown in "Other Items" and no longer part of
the adjusted operating results.
Operational performance
£37.5m
Annually Recurring Revenues1
2016: £35.5m
£120.4m
Backlog2
2016: £113.8m
1
2
Annually Recurring Revenues is defined as the software related support and maintenance fees and
from 2017 recurring cloud services revenue.
Backlog refers to the Total Contract Value of booked sales orders which have not yet been delivered
(including two years Support & Maintenance, where it is contracted on an annually recurring basis).
Contents
Introduction
01 Highlights
02 At a glance
03
Investment case
04 Chairman’s statement
Strategic report
08 Key strategic wins
10
Tribal Edge
12 Our business model
14 Our strategy
16 Chief Executive's report
24 CFO's report
30 Principal risks and uncertainties
32 Corporate and social responsibility
Governance
36 Board of Directors
38 Executive Management Team
40 Corporate Governance
44 Audit Committee report
45 Remuneration report
50 Directors’ report
Financial statements
54
Independent Auditor’s Report to the
Members of Tribal Group plc
58 Consolidated Income Statement
Consolidated Statement of
59
Comprehensive Income
60 Consolidated Balance Sheet
Consolidated Statement of
61
Changes in Equity
62 Consolidated Cash Flow Statement
63 Notes to the Financial Statements
101 Company only Balance Sheet
Company only Statement of
102
Changes in Equity
103 Notes to the Company Balance Sheet
Company information
108 Company Information
At a glanceOur portfolio consists of a range of world-class software and education services: market-leading Student Information Systems that underpin the student journey from recruitment to successful outcomes; a broad range of education services covering quality assurance, peer review, improvement and inspections; and a student survey and analysis business, i-graduate, that provides the leading global benchmarks for student experience.Our vision is simply:to empower the world of education.We strive to research, develop and deliver the products, services and solutions needed by education institutes across the world to support their primary goals of educating their students, providing optimum learning experiences and ultimately delivering successful outcomes. Our vision leads to a simple mission to guide our business.Our mission:to provide the expertise, software and services required by education and business organisations worldwide to underpin student success.Extensive and long-standing customer relationshipsWe enjoy deep and long-term relationships with our customers across all education sectors. Broad, complementary portfolioWe offer an extensive portfolio of Student Information software that is uniquely complemented with a wide range of Education Services, including quality assurance, assessment and benchmarking. Educational expertise and focusOur deep educational domain expertise has been developed through a long and successful history of working with, and focusing on, the education market, and our team includes many previous education practitioners. International delivery and insightOur business operates globally, and actively collects and shares best practice and market insight with our worldwide customer base.From easing the administrative and student management activities of universities, to partnering with schools and colleges to improve their performance, we look to offer the products and services that will enable education institutes to maintain their focus on the quality of learning and development offered to their students. Our key strengthsTribal Group plc Annual Report and Accounts 201702 Where we workInvestment caseTribal operates globally, with offices in the UK, Australia, New Zealand, Philippines, Malaysia, Middle East, Canada and the USA. We employ over 800 people worldwide, serving customers in over 55 countries. We have customers in Higher Education (HE), Further and Vocational Education (FE), Schools, Government and State bodies, training providers and employers. Who are our customersMarket Position600+ Universities100s of colleges1,000s of schoolsTraining providers, employers, Government and State departments#1 student information systems providerto HE in UK, Australia & New Zealandto FE in UK, Australia & New Zealandto UK Training providersWe work with100%of universities in New Zealand and90%in Australia50%of the UK Russell Group universities use Tribal’s Student Information Systems(cid:74)(cid:74)(cid:74)03Financial StatementsGovernanceStrategic ReportIntroduction 04
Tribal Group plc Annual Report and Accounts 2017
Chairman’s statement
Return to full statutory profit, doubling of operating margin to 10%,
Annually Recurring Revenue growing, and strong cash generation.
Tribal has maintained its market leadership with significant new customers
gained. Shareholder value is now being created in a sustainable manner.
With the Group placed on a sound financial footing in 2016, and
with many of its operational challenges addressed, I am pleased
to report that the Group has now returned to full year statutory
profit for the first time since 2013.
Annually Recurring Revenues, which now include cloud services,
grew over 5% to £37.5m, overall profitability doubled to an
adjusted operating margin of 10%, compared with 5% in 2016,
and the Group ended the year with net cash up 59%, at £14.1m
(2016: £8.8m). Shareholder value is now being created in a
sustainable manner as the Group continues to drive efficiencies
in the business: a further £3m of annualised savings was realised
in 2017, bringing the total annualised savings realised to £12.0m
since the initiation of the cost savings programme; this has driven
improved financial performance without impacting the Group’s
ability to serve its customers or drive its business forward.
For the year to 31 December 2017, Tribal Group achieved an
adjusted Operating Profit of £8.5m, up 82%, on a revenue
of £84.9m (2016: operating profit of £4.7m on a revenue of
£90.3m) and increased Adjusted Earnings per Share (diluted) to
3.2p (2016: 1.9p). The fall in revenue was adversely impacted by
a combination of the expiry of the Ofsted Early Years contract
in March 2017 and the disposal of Synergy in March 2016
– excluding these factors, the revenue increased by 6.5%,
particularly due to the strong performance in the remaining
Quality Assurance Solutions (QAS) business.
2017 confirmed that Tribal remains a leading international
provider of student information systems to universities,
colleges and schools in the UK, Australia and New Zealand
markets as well as elsewhere in the world. We serve a large
installed customer base, including many of the world's leading
universities and colleges.
During the year, the Group secured significant new contract wins
in the Higher Education sector, including Sheffield University
and Glasgow Caledonian University in the UK, and our third win
in Malaysia, at the University of Malaya. We also finalised a
AUD$27.5m (approx. £16.8m), four-year extension to the Callista
contract, which provides student information systems to
11 Australian universities for the on-going development of the
Callista product and seamless migration into the cloud ready
Tribal Edge platform.
Introduction
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Strategic Report
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Governance
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Financial Statements
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"Working with Tribal really has
revolutionised the way we manage
our learners.”
University of Sheffield's Advanced
Manufacturing Research Centre
UK
I am also pleased to note the strong performance in Further
Education and Work-based Learning where, in the UK, the growth
is being driven by significantly improved software sales to new
business customers, and in APAC, the Campus solution at the
British Council has been successfully rolled out to 34 countries.
In our i-graduate business there was a change of leadership in the
first half of the year, and we successfully secured a number of new
contracts. However, the overall participation by universities in the
key International Student Barometer survey towards the end of
2017 was disappointing, as more universities than expected chose
to skip a year. We look forward to welcoming them back into the
survey in 2018.
Employees
I would like to thank all our employees for their hard work and
commitment. The Group has undergone significant continued
change through 2017, and that inevitably brings uncertainty.
The support of the employees has been invaluable in bringing
the Group through this challenging period. Although there
is much still to do in 2018, the overall business structural
changes have largely been made, which should provide a more
settled and certain environment for 2018. I should also like to
thank my fellow directors for their hard work, determination
and persistence in seeking to improve the efficiency of the
Tribal business.
The Quality Assurance Solutions business also performed
well in 2017 and secured significant contract wins at the Abu
Dhabi Education Council, the Ministry of Education of Dubai &
Northern Emirates. In addition to broadening the offerings beyond
School Inspections to include Performance Benchmarking and
Professional Development & Training, QAS continues to have
opportunities to grow and develop its business both in the UK and,
more widely, to build on our existing contracts in the Middle East
and the USA.
Looking to the Future
In 2018, I expect Tribal to continue to secure new clients for
our Student Information Systems, with a strong pipeline of new
opportunities in Higher Education, and the prospect of continued
improvement in sales performance. Additionally, with a further
contract already secured in Dubai and a strong pipeline of new
work, QAS enters 2018 with confidence and optimism.
Revenues are expected to be broadly flat in 2018, which
represents a small growth excluding the impact of the final year
of Ofsted revenue in 2017.
I expect the operating margins to increase further, as the cost
savings achieved in 2016 and 2017 continue to benefit 2018.
We will continue to look for further efficiencies in 2018.
We will also continue to reshape our product development and
customer-facing support businesses to provide a more agile
and responsive customer-facing environment. As part of this
change, we are transitioning our current hosted customers
to a new data centre, in partnership with Rackspace. The
investment in this migration will provide us with increased
sales opportunities for hosting solutions to new and existing
customers, as well as providing a resilient platform for our next
generation, cloud-based Student Information System.
Although there remains much to do, I see the momentum continuing
into 2018 and beyond, as the Group continues to drive cost
efficiencies in the business and increasingly takes advantage of
the international market for student information systems.
Dividends
The Board believes that the payment of dividends is important
and has previously confirmed its intention to pursue a
progressive dividend policy once the Group’s financial
performance supported the payment of a dividend.
Given the good overall performance of the business in 2017 and
the strong closing cash position, the Group is now in a sustainable
financial position. The Board has therefore decided to propose a
dividend of 1p per share. This will be paid in May 2018, pending
ratification at the Company’s Annual General Meeting.
Outlook and Current Trading
We expect overall market conditions and demand for student
management systems to remain stable in 2018. While the timing
of deal closures and achievement of implementation milestones
remains difficult to predict, we are well positioned to continue
to benefit from the demand for student systems and upgrades.
We have already secured several software and service contract
wins in the early part of 2018.
With the introduction of IFRS15 in 2018, there will be some
impact on revenues and operating profit as the Group will
be required to spread the recognition of software revenues
over the duration of the implementation period, rather than
immediate recognition on installation. This is likely to cause
a modest transitional dip in revenues and operating profit in
2018, as large contract wins in year are spread over the future
implementation period.
Given the factors described above, and the strong platform
around which to build sustainable shareholder value, I expect
continued improvement in our profitability during the current year.
Approved by the Board of Directors on 22 March 2018
Richard Last
Chairman
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Tribal Group plc Annual Report and Accounts 2017
Case StudyTribal - the perfect fit for "Outstanding" Derwen College, UKDerwen College is a vibrant and pioneering college committed to promoting the vocational, educational, personal and social development of young people with a wide range of learning difficulties and disabilities, through personalised learning.Specialist provision comes with unique challenges and Derwen College needed a flexible student information system that could easily meet their exacting requirements. Derwen College chose ebs as the perfect fit.Tribal developed a staff portal specifically for Derwen College that allows all members of staff to report on all aspects of student behaviour, be it praise or concern for a student, instantly through any device. ebs collates this information to give a single overview of students’ progress. "We selected ebs because the system could easily be tailored to our needs, allowing our staff to easily monitor our students’ progress, and ultimately focus their valuable time on our learners’ success” said Maggie Furmanek, Director Finance & Resources, Derwen College. Introduction
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Strategic Report
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Governance
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Financial Statements
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Strategic Report08 Key strategic wins10 Tribal Edge12 Our business model 14 Our strategy16 Chief Executive's report24 CFO's report30 Principal risks and uncertainties32 Corporate and social responsibility 08
Tribal Group plc Annual Report and Accounts 2017
Key strategic wins
Higher Education
Employers and Training Providers
•
Callista group of Universities,
Australia (extension)
• University of Sheffield, UK
• University of Malaya, Malaysia
• University of South Wales, UK
• Heriot-Watt University, UK
• Glasgow Caledonian University, UK
•
Travis Perkins, UK
• Vista Training Solutions, UK
• Solvo Vir, UK
•
Ioda, UK
•
TRS Training Ltd, UK
• Randstad, UK
• Utilities Academy, UK
• British Council (expansion),
• Boots Opticians, UK
•
•
•
LMJ Training, UK
EY (Ernst & Young), UK
KPMG, UK
Worldwide
•
University Hospitals Bristol NHS
Foundation Trust, UK
•
IBM, UK
Introduction
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Strategic Report
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Governance
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Financial Statements
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Further/Vocational
Education
• Nottingham College, UK
• National Business College, UK
•
National College for High Speed
Rail, UK
• Bridgend College, UK
• Met Film School, UK
• Hampshire County Council, UK
Schools and Government bodies
•
•
Alabama State Education Dept.,
USA
NSW TAFE/Schools, Australia
(expansion)
•
•
•
•
Abu Dhabi Education Council
(ADEC), UAE
Ministry of Education (Dubai and
Northern Emirates), UAE
European Schools (on behalf of
the UK DoE)
New York State Education Dept.,
USA (extension)
Tribal Edge is Tribal’s new Student Information System. The initial modules were launched in the summer of 2017 and have sinced been in beta testing. We are now in a trial release with select customers from both Higher Education and Further Education. The first four modules are expected to be generally available later in 2018.Tribal Edge PlatformTribal Edge has been designed for the cloud, and following our recent collaboration agreement with Microsoft, will be made available on the Microsoft Azure cloud platform. The choice of Azure as a cloud technology has allowed us to take full advantage of the Microsoft development stack. We are using a Swagger framework to implement open APIs; and using authentication services provided by OpenId to create consistent and discoverable interfaces. This is enabling single-sign-on across modules and ensures new functionality can integrate with Tribal’s existing student management solutions, as well as third -party applications.Initial New Functionality We have initially developed new, rather than replacement functionality, to enable us to add value to our existing customers and provide compelling reasons for our customers to start adopting Tribal Edge. Overall, we are focusing much more on the student experience and looking to bring student management, including self-service, into the hands of the students themselves.The first four modules of Tribal Edge are shown over.Tribal EdgeTribal Group plc Annual Report and Accounts 201710 Introduction
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Strategic Report
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Governance
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Financial Statements
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Student View
A mobile app giving students anytime, anywhere availability
to see their day at a glance and enabling them to access all
information they need at their fingertips, all personalised to their
timetable, their lifestyle and where they are on their educational
journey. Student Engage is included within Student View.
Student Support
Ensures students are supported through the complete
education lifecycle. Institution support staff have a single view
of all student performance issues and identify opportunities
to deliver critical support to reduce drop-outs and maximise
student successes, while students have easy access to
support wherever they are.
Student Engage
A social collaboration app designed to operate like a social
network but with added safeguarding features that keep staff’s
professional and personal lives separate. It enables staff and
students to connect, communicate and collaborate with each
other safely and securely.
Student Insight
A learning analytics solution that monitors and tracks student
engagement, analysing student data from multiple sources, and
flagging students at potential risk, thus enabling the targeting of
students that need support. This timely intervention improves
outcomes and reduces dropouts.
Software as a Service (SaaS)
Tribal Edge will be made available as a SaaS (cloud-based) solution. It will be able to integrate to on-premise systems as well as
other cloud-based systems, making Tribal Edge easy to deploy. In general, modules will be available in both Further Education and
Higher Education versions, adapted to meet the specific needs of these markets. Tribal Edge will also be available in time at three
differing levels of functionality – Essential (the entry level solution); Enhanced (richer and more flexible); and Enterprise (the most
complete solution).
Each module can be used standalone or combined to provide a truly mobile, engaging and supportive experience for students and
staff that delivers deep insights to improve outcomes.
We provide world-class student information software and services to customers in selected markets across the world, using our resources and expertise to create value that is shared with our stakeholders, and empowering educators to help produce the next generation of leaders.Underpinning how we operate: Our Values See page 32How we maximise value creationOur Business UnitsOperationsOur development and support teams are in the UK and Australia, complemented with a development centre in the Philippines.We operate three Business Units:i-graduate 8% of salesProvision of comparative insight, helping educational institutions deliver a world-class student experience to enhance competitive advantage.Student Management Systems 71% of salesStudent information systems and services tailored to different education segments.Quality Assurance Solutions 21% of salesInspection services, advice and related services to support customers’ development.Our ResourcesLeading market shares for Student Information SystemsTrusted brand respected in education worldwideEducation services capability complementing student management softwareMarket insight from long standing customer relationshipsFresh leadership bringing clear business focusHighly skilled people with deep domain expertiseCulture that places customers at the heart of what we doOur business modelTribal Group plc Annual Report and Accounts 201712 Introduction
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Strategic Report
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Governance
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Financial Statements
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Our Software
Our Outputs
Our cloud-based and on-premise Student Information
Systems add value to education and business organisations
throughout the student lifecycle.
Our modules span:
Marketing
& Enquiries
Applications,
Offers &
Registration
Curriculum
Management
Learning &
Studying
Assessments &
Examinations
Student
Support
Learning
Analytics
Graduation
& Alumni
Management
Customers pay through a licence, implementation and
maintenance model.
Our Education Services
Our education services are offered internationally and cover
institutions from Early Years through to Higher Education, all
focused on improving learning and student outcomes.
Self-
assessment
& Review
Early Years
& School
Inspections
School
Improvement
Professional
Learning
Quality Mark
Student
Experience
Barometer
Destination
of Leavers
Surveys
Operational
Benchmarking
Generating returns and added value for all of
our stakeholders:
Customers
Solutions to enable managers to enhance the
quality of education and improve operational
performance, to attract, engage and retain
students throughout their learning journeys in a
cost-effective and flexible manner.
Students
Supporting a student's life-long learning
journey, through enhanced well-being, enriched
experience beyond the academic curriculum,
and seamless interaction with different learning
channels (physical and virtual).
Shareholders
Shareholder value and returns from profitable,
cash-generative growth with a high proportion of
recurring revenue and progressive dividends.
Employees
Interesting and rewarding careers, with the
opportunity to work with the leading educational
institutes across the globe.
Government agencies/
education funders
Independent quality assurance services
supporting the development of top class
education provision.
Our Values See page 32
Risk Management See page 30
Corporate Responsibility See page 32
How we maximise value creation
Our strategy for profitable growth is outlined on page 14
14
Tribal Group plc Annual Report and Accounts 2017
Our strategy
To focus on international education sectors – Higher Education, Further
Education and Vocational institutions, Schools, Government and State bodies,
Training Providers, and Employers – and to underpin student success through the
provision of expertise, software and services.
Strategic Priorities
The strategic direction of the business was set after a detailed review early in 2016 and our strategic priorities
remain unchanged.
Deliver Tribal Edge - the new Student Information Platform
Tribal Edge, is a cloud-based Student Information platform developed from a student centric perspective that will empower
institutions to enhance the student experience and support the most appropriate outcome for each unique student. Tribal Edge
will enable Tribal to offer a portfolio of applications and services to the education sector, developed by Tribal or by Tribal partners.
The Student Information Platform will focus on creating the underlying interfaces, data structures and embedded analytics that
enable these value-add solutions. Over time our current functionally rich applications will all reside within Tribal Edge.
Key measures: Revenue (sales of new modules to existing or new customers)
Progress in 2017: The first four Tribal Edge modules moved into beta at the end of 2017 and offer an enhanced student
information mobile app; an integrated, social collaboration platform; full lifecycle student support; and outcomes-based learning
analytics. All modules integrate with Tribal’s existing student systems. Early adopters have been identified and the Tribal sales
teams have been fully briefed, creating a solid foundation for sales growth in 2018.
Increase Annual Recurring Revenue
We will look to exploit the market direction of Software as a Service (SaaS) and cloud-based solutions, both with the introduction
of new solutions and in the provision of SaaS and cloud for existing products. This will enable an on-going higher value service
provision and a smoother income flow from those customers on SaaS. The move of existing systems into the cloud will also enable
a more rapid adoption of modules in our new Student Information framework.
Key measures: Annually Recurring Revenue; percentage of Revenue annually recurring
Progress in 2017: We established a partnership with the world-wide, market leading managed cloud provider, Rackspace, to
enable us to provide our customers with a rich set of cloud services. This partnership has enabled us to offer a flexible “Tribal
cloud” covering a comprehensive private cloud solution, as well as managed public cloud services on AWS and Azure. The majority
of new business sales are now on Tribal cloud; from 2017 cloud services revenue are incremental to the support and maintenance
fees when calculating Annually Recurring Revenue.
Annually Recurring Revenue increased by 5.5% to £37.5m (2016: £35.5m), which included £4.0m for cloud services (2016:
£3.3m), and represented 46% of revenue from continuing operations.
Introduction
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Strategic Report
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Governance
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Financial Statements
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Strategic Priorities
Grow market share in established and new territories
A four-prong growth strategy:
• Product penetration – with cross-selling and upselling opportunities for our large installed base of customers across both
systems and services;
• Market penetration – ensuring a pro-active approach to new business in existing territories, and selling add-on solutions to
sites without a Tribal Student Management System;
• Geographical expansion – continuing our international sales development in regions such as the Middle East and US and
reviewing target geographies including Canada, Singapore and Malaysia;
• Mergers and acquisitions – that broaden our applications or services portfolio, or increases our geographical footprint.
Key measures: Backlog
Progress in 2017: We continue to make progress with both product and market penetration with a rejuvenated sales effort in
2017. The acquisition of intellectual property accelerated our development of Tribal Edge modules as well as immediately giving
additional functionality that we successfully sold to existing Tribal customers.
On geography, we have continued to expand student information system sales in Malaysia and continue to prospect in Singapore
and Canada. Our education services business has won several school inspection contracts in the Middle East, has won another in
Alabama, US, and renewed the New York state contract.
Backlog increased 5.8% to £120.4m (2016: £113.8m).
Drive improved margin
With a clear focus on operational efficiency and managing our overall cost base against the anticipated revenue, we will continue
to improve upon our margins. A series of business process improvements have been established to improve our sales and delivery
capability, standardising practices across the Group and ensuring faster time to revenue. Continued margin improvement will
ultimately increase value to shareholders.
Key measures: Adjusted Operating Profit Margin
Progress in 2017: We continue to drive improved profitability achieving a margin of 10.1% (2016: 5.2%).
16
Tribal Group plc Annual Report and Accounts 2017
Chief Executive's report
Building our future
over
800
people serving customers in over
55
countries worldwide
£10.2m
Invested in product development
Building on the strong
foundations of 2016 we
have driven significant
and sustainable
improvements in
profitability
Introduction
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Strategic Report
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Governance
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Financial Statements
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Find out more
Read more about our financial performance in 2017
Understand more about the key performance indicators
we use to track our progress
24
25
With significant improvement in profitability as a result of continued restructuring and
efficiency drive, Tribal has maintained its market leadership, with strong sales momentum
and new customers gained; ongoing investment in the development of a next generation,
cloud-based platform for Student Information Systems1 provides a roadmap for new and
existing customers into the future.
In 2017, the Group has continued to build on the strong
foundations built in 2016 and has driven a significant and
sustainable improvement in profitability.
Revenues fell in 2017 to £84.9m (2016: £90.3m); however,
2016 revenue included £11.6m relating to the Ofsted contract
which successfully concluded in March 2017 (2017 Ofsted
revenue: £3.0m), and £1.7m from Synergy (disposed of in March
2016) and SLS (closed 2015). Excluding these items, revenue
relating to continuing operations increased by 6.5%, to £81.9m
(2016: £76.9m).
Annually Recurring Revenues, which from 2017 include cloud
services, increased by 5.5% to £37.5m (2016: £35.5m).
We identified areas where we can more effectively align the
Group’s resources to deliver material cost efficiencies and
improve margin without impacting the Group’s ability to serve our
customers or drive our business forward. Cumulative annualised
cost savings achieved since the start of the cost efficiencies
programme total £12.0m, of which £3.0 annualised savings were
realised in 2017 (2016: £9.0m annualised, of which £5.8m in year).
The impact of these actions has grown through the year, and
we can report a significantly improved trading performance for
2017, with the first full year statutory profit since 2013, and
adjusted operating profit up 82% to £8.5m (2016: £4.7m). This,
coupled with good cash generation, with net cash up 59% to
£14.1m (2016: £8.8m), has left the Group in a stronger position
at the end of the financial year.
2017 in summary
In our chosen regional markets and sectors, overall activity
levels for the replacement or enhancement of student
management systems have remained stable; we have seen
significantly improved win rates in our UK Further Education
and Work-based Learning businesses and we continue to win
new customers in the Higher Education sector, reaffirming
the strength of Tribal’s software and services portfolio, and
confirming that our international customer base and continued
market leading position provide a strong platform around which
to build long-term shareholder value.
The Group won significant new contracts in the Higher Education
sector, including at the University of Sheffield, a major UK
Russell Group University, as well as contracts with Glasgow
Caledonian University, University of South Wales and Heriot-
Watt University. We also secured our third Higher Education
customer in Malaysia at the University of Malaya.
Our Callista business, which provides student information
systems to 25% of Australian universities, performed well, and
we finalised a AUD$27.5m (approx. £16.8m), four-year extension
to our contract with the 11 Universities for the on-going
development of the Callista product with seamless migration
into the cloud-ready Tribal Edge product platform.
Quality Assurance Solutions (QAS) confirmed its position as a
market-leading international school inspections business. QAS
completed the first term as sole provider of school inspections
for the Department of Education and Knowledge in Abu Dhabi.
In Dubai, a contract with the Ministry of Education (MoE) for the
review of public schools was won and delivered. In 2018, the MoE
in Dubai also awarded us the contract for the review of private
schools. In the US, evaluations of schools and districts in New
York State continued under a new contract extension and similar
review work was won with a new state, Alabama. The contract
to provide the National Centre for Excellence in the Teaching of
Mathematics for the UK Department for Education was expanded
to include additional maths development in the North of England.
The Group's large customer base ensures it is well positioned
to take advantage of the increasing market trend to improve
student engagement, through our experience in data analytics
and student barometers from the i-graduate line of business.
Shareholder returns & dividends
Given recent performance of the business, a strengthened
balance sheet and confidence in the sustained profitability of
the business, the Board has declared a full year dividend of 1p
which will be paid in May 2018, pending approval at the AGM in
April 2018. The Board of Directors believes that the payment of
dividends is important, and will continue to pursue a progressive
dividend policy.
1 Student Information System (SIS) is the general industry term for education management solutions that encompasses Management Information Systems
(MIS), Customer (or Student) Relationship Management (CRM), business insight and data analytics products. Student Management System (SMS) is more
specifically the administration aspect of Student Information Systems. We refer to our heritage products as SMS, our new offerings (aligned with their wider
applicability) as SIS, and the general industry as student information.
18
Tribal Group plc Annual Report and Accounts 2017
Chief Executive's report continued
“Oxford chose to work with Tribal
because its SITS product is the
market leader, and there is a very
strong user base and an active user
group. We have found Tribal to be a
high quality and responsive company
to work with, with very good customer
engagement from consultancy staff
right up to Board level.”
Oxford University
UK
Product & Services Strategy
Tribal is a worldwide, software and services company focussed
on the education market. At the core of our business, we have
a portfolio of functionally rich student information systems
and these are being expanded with the development of a next
generation, cloud-based solution – Tribal Edge. Our new product
investment will focus on Tribal Edge and delivering a solution
that enables institutions to significantly enhance the student
experience they are able to offer.
• Student Support – ensures students are supported through
the complete education lifecycle. Institution support staff
have a single view of all student performance issues and
identify opportunities to deliver critical support to reduce
drop-outs and maximise student successes, while students
have easy access to support wherever they are.
• Student Insight – a learning analytics solution that monitors
and tracks student engagement, analysing student data from
multiple sources, and flagging students at potential risk, thus
enabling the targeting of students that need support. This
timely intervention improves outcomes and reduces dropouts.
The Student Engage module was kick-started with the
acquisition of intellectual property and exclusive distribution
rights for an existing private social network solution in the
education markets across the UK, Australia and New Zealand.
This gave both an existing customer base and a solution that
was actively used and could be developed upon, and is now
available as Student Engage, fully integrated into a single mobile
app, Student View.
The Group also continues to invest significantly in our existing
products; in 2017, the Group spent £10.2m (2016: £10.3m)
on product development, of which £2.1m (2016: £1.1m) was
capitalised, and related to development of SchoolEdge and the
new Tribal Edge solution. The remaining £8.1m (2016: £9.2m) was
expensed in year and related to product development costs and
related overheads for the existing SITS, ebs, and Maytas products.
A closed-beta (limited access) was completed at the end of
2017 and a full beta programme is now underway with both
Higher Education and Further Education customers in the UK and
in Australia. Several early adopters have also been identified and
they will receive the roll-out of new modules in early 2018. The
Student Insight module was also used as the enabling platform
in the ongoing trial of student analytics and analysis with JISC.
Tribal Edge was successfully launched at our UK Higher Education
conference in July. The launch was followed by a series of
roadshows to all our UK customers. This has drawn high interest and
secured commitments for beta sites and early adopters for the first
Tribal Edge modules. The launch to our Asia Pacific customers has
been equally well received, with those using Callista having agreed
a four-year contract extension that includes the integration of Tribal
Edge for their use in the near-term.
Our strategy for Tribal Edge has been to first develop a number of
new modules that deliver additional functionality for our Higher
and Further Education customers and that integrate to all our
core student information systems. The initial modules are:
• Student View – a mobile app giving students anytime,
anywhere availability to see their day at a glance and enabling
them to access all information they need at their fingertips,
all personalised to their timetable and their lifestyle. Student
View incorporates Student Engage.
• Student Engage – a social collaboration app designed to
operate like a social network but with added safeguarding
features that keep staff’s professional and personal
lives separate. It enables staff and students to connect,
communicate and collaborate with each other safely
and securely.
Our progress with Tribal Edge has been further enhanced
with a strategic partnership with Microsoft. Microsoft’s
Azure application development team will work with Tribal to
accelerate the creation of new functionality, enabling the
rapid development of an enhanced cloud-based platform and
the conversion of the current functionally-rich applications of
SITS:Vision and ebs to the Tribal Edge framework.
Outside of Higher and Further Education, we have continued
the successful development of SchoolEdge, a new, web-
based product for schools. Schools in Australia have adopted
many of the new modules on offer and the development
continues to offer a completely refreshed schools student
information system.
We have also continued to invest in our market-leading
employers and training providers solution, Maytas. This has seen
particular growth in the UK where the Government’s introduction
of the Apprenticeship Levy has encouraged companies to
explore and adopt apprentices. Maytas fully supports the
management of apprenticeship programmes including the
critical area of funding.
Business Structure
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
19
Tribal’s organisational structure has been simplified to
drive improved customer focus, more agile management,
responsiveness to local needs and clear accountability across
our business and is managed through three segments.
Within the Student Management Systems business, we have
adopted a primarily regional structure, split between Europe,
Middle East and Africa (EMEA), and Australia, New Zealand and
Asia-Pacific (APAC). QAS and i-graduate operate as independent
businesses and are managed globally.
Student Management Systems (SMS) focusses on the following
market sectors: Higher Education, Further Education, Colleges
and Employers (referred to in Australia as VET), and Schools, and
across three main markets, UK, Australia and New Zealand. Product/
Offerings are split between License & Development Services,
Support & Maintenance, Implementation, and Cloud Operations;
from 2017, SMS no longer includes K2 Asset Management (K2) or
Software Solutions, as they are non-core businesses and are now
included within the i-graduate line of business.
Quality Assurance Solutions covers inspection and review
services which support the assessment of educational delivery
including the Ofsted Early Years inspection contract. From 2017,
it also includes Performance Benchmarking.
i-graduate covers i-graduate student surveys and data
analytics as well as various non-core businesses, not forming
part of Student Management Systems or QAS. These include
K2 Asset Management, Software Solutions and Information
Matters. It no longer includes Performance Benchmarking, which
has moved to QAS in 2017.
33,474
32,211
Implementation Services
14,840
12,411
Cloud Services
4,004
3,322
3.9%
19.6%
20.5%
Revenues by LoB
License &
Development fees
Support &
Maintenance fees
Software & Related
Services
School Inspections
& related services
(excl Ofsted)
Survey & data analytics
(i-graduate)
Other Services
Non-Software
related services
Revenue £’000
2016
(restated)
2017
Change
9,989
10,973
(9.0%)
62,307
58,918
5.8%
14,119
10,925
29.2%
3,031
2,441
3,147
3,918
(3.7%)
(37.7%)
19,591
17,989
8.9%
6.5%
Continuing Operations
81,898
76,907
Ofsted contract revenues
(contract completed)
Synergy/SLS
(disposed of/ closed)
3,020
11,620
–
1,728
Total Revenue
84,918
90,255
(5.9%)
Revenue and profit for each segment are restated for 2016 to
reflect the above changes.
Annually Recurring
Revenue
37,478
35,533
5.5%
Product & Services revenues
The table below groups products and offerings, irrespective of
the segment in which they fall. Most license and related services
(Support & Maintenance, Implementation Services and Cloud
Services) relate to the Group’s Student Management Systems;
however, there are businesses which are non-core, managed
under the i-graduate line of business, which include license and
related services. This includes K2 and Software Solutions where
we continue to support and maintain the existing product; the
Group also has a software product, developed and sold by QAS,
to support Ofsted as they manage school inspections following
the conclusion of our Ofsted contract at the end of March 2017.
All revenue (which includes license, support & maintenance,
and other services) relating to Synergy (disposed of) and SLS
(closed) is shown separately.
“We wanted a technology partner with
the completeness of vision to help
us with the radical transformation
of post-16 education in Nottingham.
Tribal’s integrated technology suite
will enable us to deliver the level of
student experience, engagement and
outcomes to achieve our ultimate
ambition of creating one of the best
colleges in the country.”
Nottingham College
UK
20
Tribal Group plc Annual Report and Accounts 2017
Chief Executive's report continued
Overall, the revenue from License & Development fees has
fallen 9.0% to £10.0m (2016: £11.0m). This is due in part to
contracts successfully moving from a software development
phase further into the implementation phase. We have also seen
some Higher Education institutions moving towards a bundled
pricing model, where the contractual terms result in license
revenue being phased over time rather than being recognised
upfront, as previously. In 2017, the contract awarded by Glasgow
Caledonian University was based on a bundled pricing model
with contractual terms that resulted in the software license
recognition being phased over the implementation period.
For 2018, this transition ends with the move to IFRS15 accounting,
by which the Group’s revised revenue recognition policy requires all
significant license revenue to be spread over the implementation
period (as detailed in the Financial Review section).
Support & Maintenance retention rates remain high, and as a
result, our Annual Recurring Revenue base has continued to
grow. Support & Maintenance fees in the period were £33.5m
(2016: £32.2m), an increase of 3.9%.
Implementation services deliver the technical implementation
of our software products at customer sites, typically working
alongside customer teams. Implementation projects vary in
length, and range from a small number of days, to more than two
years for more complex projects. Revenues are typically based
on day rate fees, although we sometimes operate under fixed fee
contracts for defined implementation scopes. Overall growth of
19.6% was driven by the extensive implementation work at British
Council, University of Waikato and Massey University.
Cloud services cover the provision of managed IT services and
hosting services to customers to manage their Tribal products
either on premise, in a private cloud, or in a public cloud. These
services have grown by 20.5% in 2017, to £4.0m (2016: £3.3m)
as customers increasingly migrate their IT systems into the
cloud. These hosting services are recurring, and from 2017 the
Group will include Cloud services revenue in the calculation of
Annually Recurring Revenue.
School inspections & related services covers all products and
services offered by the QAS line of business which do not relate
to the sale of software licenses and related services.
Surveys & data analytics covers all products and services
offered by the i-graduate line of business which do not relate
to the sale of software licenses and related services.
Geographic revenues
Revenues generated in Tribal's key geographic markets were as
follows:
UK
Asia Pacific
Revenue
£’000
2017
2016
39,252
46,469
33,713
31,819
North America and rest of the world
11,953
11,967
84,918
90,255
Revenues in Asia Pacific have increased by 6%, mostly due to
the QAS contracts secured in Abu Dhabi and Dubai.
Headcount
UK
Asia Pacific
North America and rest of the world
Full Time Equivalent (FTE) headcount
Headcount
As at 31 December
2017
2016
542
287
21
850
820
741
323
25
1,089
1,041
Our overall workforce has reduced by 22% to a total headcount
of 850, down from 1,089 at 31 December 2016. Full time
equivalent headcount (FTE) has reduced by 221 FTEs in the year.
This follows an 18% headcount reduction in the previous year, a
total reduction of 473 heads (36%) since 31 December 2015.
Of these reductions in 2017, approximately 100 FTE reductions
were the result of specific actions taken as part of our cost
reduction program to drive increased profitability. The other
reductions were due to the winding down of the Ofsted contract,
and were transferred back to Ofsted under TUPE regulations.
“I am more than happy to recommend
Tribal and their SchoolEdge
solution to any school considering a
Timetabling solution.”
The Australian International School
Singapore
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
21
Segmental Performance
Results for each business segment are shown in the table
below. The Central and Group costs represent the aggregate of
all costs which support the Lines of Business, and which are not
directly and specifically attributable to each Line of Business.
This provides greater transparency into the profitability of
each business.
Revenue
£’000
Adjusted Operating
Profit £’000
2016
(restated)
2017
2016
(restated)
2017
Student
Management
Systems
60,026
59,005
17,613
12,021
i-graduate
7,101
8,705
1,064
1,007
Quality
Assurance
Solutions
Total Lines of
Business
Central /
Group costs 1
17,791
22,545
4,408
6,537
84,918
90,255
23,085
19,565
(14,543)
(14,877)
8,542
4,688
1 Central/Group: these are costs described as Unallocated Corporate
expenses and represent all costs which are not directly attributable or
controllable by the Line of Business. Costs include Finance, HR, Legal, IT,
General (non-Line of Business specific) Marketing costs, Corporate Services
and Board of Director costs including all attributable office costs. It was
detrmined the previous methodology allocated costs in a way that did not
represent the level of resource utilised by that business, and accordingly
did not provide sufficient insight into the underlying profitability of the
Lines of Business.
Student Management Systems
Overall activity levels in our markets and sectors for the
replacement or enhancement of student information systems
remain stable and we continue to see a steady stream of new
opportunities in all sectors.
In 2016, the Student Management System included combined
revenue of £1.7m and profits of £1.0m, from Synergy (disposed
of in March 2016) and SLS (closed in 2015).
Student Management Systems revenues increased by 1.7% to
£60.0m (2016: £59.0m). Excluding Synergy/SLS, SMS revenue
grew by 4.8%.
“We were really impressed with the
level of integration and efficiency
the combination of Maytas and
e-track could bring to our learner
management. The Tribal team
suggested the best combination of
systems and tools to address our
specific business needs.”
Travis Perkins
UK
Adjusted operating profit was £17.6m (2016: £12.0m) and the
adjusted operating margin was 29% (2016: 20%). Excluding
Synergy/SLS, SMS profit grew by 60%.
The capitalised development cost was £2.1m in 2017
(2016: £1.1m). This relates to continued development of our
SchoolEdge product and investment in our Tribal Edge next
generation, cloud-based student management system.
Total Revenue
Year ended
31 December £’000
2017
2016
60,025
59,005
Adjusted Operating Profit
17,613
12,021
Adjusted Operating Profit Margin
29%
20%
Capitalised Product Development
Expenditure
2,135
1,098
Amortisation of Development costs
(1,445)
(1,411)
The Group won significant new contracts in the Higher Education
sector, including a £4.3m contract for the implementation of the
full student information system at the University of Sheffield,
a major UK Russell Group University, as well as contracts
with Glasgow Caledonian University, the University of South
Wales and Heriot-Watt University. We secured our third Higher
Education customer in Malaysia, at the University of Malaya,
reaffirming Tribal as an international market leader in student
information systems.
22
Tribal Group plc Annual Report and Accounts 2017
Chief Executive's report continued
Within the Higher Education sector, our Callista business,
which was acquired in March 2015, and which provides student
information systems to 25% of Australian universities,
performed well, and we finalised a AUD27.5m (approx. £16.8m),
four-year extension to our contract with the 11 Universities for
the on-going development of the Callista product and seamless
migration into the cloud-ready Tribal Edge platform.
We have successfully completed key implementation stages at
Massey University and the University of Waikato in New Zealand,
as well as commencing the implementation of recent wins at
the University of the Arts London, the University of Malaya,
and Sheffield University. Other key implementation contracts
continue to proceed well, if slightly delayed, including Universiti
Teknologi Petronas (UTP) and Institut Teknologi Petroleum
Petronas (INSTEP) in Malaysia, and University of Bristol.
In the EMEA Further Education and Work-based Learning
(WBL) business, we continued to make strong progress in
2017, with key wins at Nottingham College, Bridgend College
and the Met Film School, and, following the introduction of the
apprenticeship levy, secured new WBL Maytas customers,
including Travis Perkins, Boots Opticians and EY (Ernst & Young).
In the APAC Further Education (referred to as VET in Australia/
New Zealand) and Schools sectors, the New South Wales
Student Administration and Learning Management (SALM)
programme has continued to deploy our ebs Student
Management System successfully; in 2017, we successfully
concluded the roll-out to 2,200 schools in New South Wales
(NSW). This is in addition to the 138 TAFE (Technical & Further
Education) campuses, which continue to operate successfully
– although, as previously noted, the NSW Government made a
“We’ve used Tribal software to
improve the experience for our
applicants. The University absolutely
pushes experience far more than
it does the nuts and bolts of
administration, which really
should be as invisible, but as
robust as possible.”
The University of St Andrews
UK
public announcement in June 2016 that they will be reviewing
their TAFE student enrolment system and will look to implement
a new, cloud-based solution. Tribal continues to discuss the
future solution with TAFE NSW but, regardless, we expect TAFE
NSW to be a customer into 2019, and the schools’ element of
SALM will continue as planned.
Within our Campus business, the implementation at the British
Council continues to proceed well, and we have now gone live in
119 locations in 34 countries worldwide.
Our other Student Information product for schools, SchoolEdge,
has enjoyed good customer retention rates during the
year. However, we have been informed that the dioceses
representing around 800 of the 1800 schools have decided
to move from Tribal to a student information system that
they are building in collaboration with two providers; we have
commenced discussions regarding transitional arrangement;
however, we expect to continue to provide software and
services to these schools into at least 2019.
i-graduate
Student surveys & data analytics
Other
Total Revenue
Adjusted segment operating profit
Adjusted operating margin
Year ended
31 December £’000
2017
3,031
4,070
7,101
1,064
15%
2016
3,147
5,558
8,705
1,007
12%
The i-graduate division provides a range of services for
managers of universities, colleges and schools, so they are able
to assess and enhance the quality of the education they provide
and improve their operational performance. Also included in
this line of business are non-core services. Products/Offerings
provided by this division include:
•
•
•
•
•
i-graduate student surveys & data analytics
K2 Asset Management
Software Solutions
Transformation and change advisory services
Information Management Services
This division’s activities have increasingly focused on those
skills and tools that closely relate to our student information
systems. Increasingly, we integrate these activities with our
software offerings.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
23
i-graduate line of business revenue in the period was £7.1m
(2016: £8.7m), a reduction of 18%.
Revenue from the core i-graduate student survey and data
analytics offerings fell 3.7% from £3.1m to £3.0m. In our
i-graduate business there was a change of leadership in the
first half of the year, and we successfully secured contracts in
Australia, including for the Australian Universities International
Student Barometer. We also extended the strategic partnership
with Universities UK International, delivering underpinning
research for the widely distributed UK's Competitive Advantage
report. However, the overall participation by universities in
the key International Student Barometer survey towards the
end of 2017 was disappointing, as more universities than
expected chose to skip a year. There were also costs of further
investment in the business and management transition. These
factors adversely impacted the segmental operating profit,
which fell to £0.4m (2016: £1.1m).
The revenue from the non-core businesses fell by £1.5m,
including £0.8m in K2 Asset Management and £0.4m in
Information Matters as the businesses are transitioned to a
maintenance mode. However, the focus on optimising margins
improved the operating profit to £0.7m (2016: £(0.1)m).
Quality Assurance Solutions
Education services
Ofsted contract revenues
Total Revenue
Adjusted segment operating profit
Adjusted operating margin
Year ended
31 December £’000
2017
2016
14,772
10,925
3,019
11,620
17,791
22,545
4,408
25%
6,538
29%
QAS provides inspection services used by the Office of
Standards in Education, Children’s Services and Skills (Ofsted),
the UK government agency responsible for monitoring quality in
settings such as colleges, schools and nurseries. These services
have also been purchased by government agencies in the US
and Middle East. Typically, we provide these services under
multi-year contracts, with fixed and variable pricing elements.
We also provide complementary services including training for
prospective quality assurance inspectors, training and software
tools for school leaders to prepare for inspections, online
professional development tools for teachers to enhance their
professional development, and other similar offerings.
“The successful implementation
of the single ebs can be largely
attributed to the efforts of a highly
skilled, highly capable and motivated
project team who worked across
sites to bring this project in on time,
under budget and in scope. The
expertise and commitment from
the Tribal NZ consulting team must
also be commended. This is the
first merger project of this scale
to be delivered and positions the
organisation well to provide student
support and services across our
numerous delivery locations.”
Toi Ohomai Institute of Technology
New Zealand
QAS revenue declined in the period by 21% to £17.8m. However,
in March 2017, the final Ofsted contract (“Early Years”) came to
a successful conclusion, as previously announced, to be taken
back in-house by Ofsted. Revenues relating to Ofsted contracts
were £3.0m, down from £11.6m in 2016.
The remaining Quality Assurance Solutions business, which
excludes the Ofsted contract, had a strong performance and grew
by 35% in 2017, to £14.8m. QAS has secured significant contract
wins at the Abu Dhabi Education Council, worth £8.4m over two
years, where we are the sole supplier of school reviews in Abu
Dhabi, and the Ministry of Education of Dubai & Northern Emirates.
The first tranche of these contracts was successfully delivered in
2017. In the US, we signed an extension to our contract with the
New York State Education Department, as well as gaining a new
customer, the Alabama State Education Department. We also
successfully retendered for the NCETM contract (National Centre
for Excellence in the Teaching of Maths).
QAS adjusted operating profit was £4.4m (2016: £6.5m), and
adjusted operating margins were 25% (2016: 29%).
Ian Bowles
Chief Executive Officer
24
Tribal Group plc Annual Report and Accounts 2017
CFO's report
For the year ended 31 December 2017, the Group's revenue from continuing operations was
£84.9m (2016: £90.3m). Adjusted operating profit increased by 82% to £8.5m (2016: £4.7m)
and adjusted operating profit margin improved to 10.1% (2016: 5.2%).
50% of the
UK Russell Group
use Tribal's Student
Information Systems
£14.1m
Net Cash
2016: £8.8m
Adjusted operating
profit increased by
82% to £8.5m
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
25
Revenue
£84.9m
2017
2016
Adjusted operating profit
Statutory operating profit
£8.5m
£3.7m
£84.9m
2017
£8.5m
2017
£3.7m
£90.3m
2016
£4.7m
2016
£0.1m
down 6%
up 82%
up 1,056%
5,816%
Overview
For the year ended 31 December 2017, the Group's revenue from
continuing operations was £84.9m (2016: £90.3m). Adjusted
operating profit increased by 82% to £8.5m (2016: £4.7m) and
adjusted operating profit margin improved to 10.1% (2016: 5.2%).
All other development costs are expensed as incurred,
and totalled £8.1m in 2017 (2016: £9.2m). This relates to
development of the existing product portfolio, including SITS,
ebs, K2 Asset Management and Maytas, and associated
overhead and management cost.
Adjusted profit before tax was £8.4m (2016: £4.2m) and
adjusted diluted earnings per share were 3.2p (2016: 1.9p). The
Group made a statutory profit after tax of £2.6m (2016: loss of
£1.2m), and a statutory operating margin of 3.1% (2016: (1.3)%).
At the end of the year the Group had net cash of £14.1m (2016:
net cash of £8.8m).
Results of Operations
Revenue
Revenue was lower by 6% at £84.9m in the year (2016: £90.3m).
However, total revenue in 2016 included £11.6m (2017: £3.0m)
from the expiry of contracted work for the Ofsted Early Years
contract, which successfully concluded in March 2017, and £1.7m
(2017: £nil) of combined revenue from Synergy (disposed of in
March 2016), and the SLS business (closed in 2015). Excluding
these amounts, revenue grew 6.5% to £81.9m in 2017 from
£76.9m in 2016.
Across our university and college customer base, retention
rates remained high, and as a result, our Support & Maintenance
revenue is 3.9% to £33.5m (2016: £32.2m, excluding Synergy),
representing 53% of the total revenue from our Student
Management Systems business (2016: 55%).
Adjusted Operating Profit (EBITA)
The adjusted operating profit was £8.5m (2016: £4.7m). Higher
margin recurring revenues and improved operational efficiencies
drove an increase in Gross Profit Margin to 50% (2016: 43%).
The ongoing cost reduction programme initiated in early 2016
has achieved cumulative annualised savings of £12.0m, of
which £5.2m were in-year savings (£3.2m from 2016, and a
further £2.0m in 2017), with an additional £1.0m of savings
which will be realised in 2018. The impact of foreign exchange
movement was £0.3m (2016: £0.7m).
There was a negative impact of £1.9m on earnings in 2017
compared to 2016, as a combined result of the expiry of the
Ofsted Early Years contract, which contributed £1.0m less in
2017 (2017: £1.0m; 2016: £2.0m), and the disposal in March
2016 of the Synergy/SLS business (£0.9m in 2016).
The adjusted operating profit is after capitalised development
costs of £2.1m (2016: £1.1m), reflecting the Group’s revised
product strategy focussing on development of the new Tribal
Edge platform and continued development of the SchoolEdge
product. Amortisation charges relating to capitalised
development were £1.4m (2016: £1.4m).
Key Performance Indicators (KPIs)
Revenue
£84.9m
(2016: £90.3m)
Adjusted Operating Profit
£8.5m
(2016: £4.7m)
Adjusted Operating Margin
10.1%
(2016: 5.2%)
Annually Recurring Revenue
£37.5m
(2016: £35.5m)
Backlog
£120.4m
(2016: £113.8m)
Cash Conversion
130%
(2016: 115%)
Staff Retention
87%
(2016: 84%)
Revenue per Employee
£104k
(2016: £87k)
Alternative Performance Measures
The Group uses alternative performance measures, detailed
below, to provide greater understanding of the underlying
performance of the business. There have been no changes to
the Group’s Alternative Performance Measures since 2016,
although the Annually Recurring Revenue now includes Cloud
services as they are considered recurring revenues; the 2016
comparative has been restated accordingly.
Adjusted Operating Profit / Adjusted Operating Margin /
Adjusted Earnings per Share
These measures are in respect of Operating Profit/(Loss) excluding
certain items not directly related to the trading business or
regarded as exceptional in nature. These items have been removed
from the adjusted profit figure and disclosed as “Other Items” on
the income statement. The main adjustments are as follows:
Share-based Payments
•
In 2017, Share-based payment charges of £1.7m (2016:
£1.0m) are excluded from the Adjusted Operating profit.
The charges in the current year relate to the matching
shares granted as part of the rights issue and share
subscriptions in April 2016 (£0.5m) and the Long Term
Incentive Plan options (LTIPs) which were granted to the
Executive Directors in June 2016 and 2017 (£0.6m), and
to the senior management team in June 2017 (£0.3m).
26
Tribal Group plc Annual Report and Accounts 2017
CFO's report continued
Amortisation of IFRS3 Intangibles
• The amortisation charge in relation to IFRS3 intangible assets
of £2.0m (2016: £1.9m) arose from separately identifiable
assets recognised as part of previous acquisitions.
The assets principally relate to software and customer
relationships and are amortised over their expected life
which was determined in the year the acquisition took place.
Restructuring and associated costs
• Costs of £1.0m (2016: £1.9m) were incurred, which relate
to redundancy costs for the restructuring of the Group’s
operations, initiated in 2016 and continued through 2017.
Sales Order Backlog
The sales order backlog relates to the total value of orders which
have been signed on or before, but not fully delivered by, 31
December 2017. This represents the best estimate of business
expected to be delivered and recognised in future periods, and
is based on the Total Contract Value (TCV) signed between
Tribal and the customer, even though customer contracts
may contain clauses which, under certain circumstances, may
permit customers to reduce their commitment at a future date.
Software Support & Maintenance (S&M) revenues are typically
subject to annual renewal; due to the high renewal rates, two
years of S&M revenues are included in the backlog calculation.
The total sales order backlog of the Group as at 31 December
2017 was up 5.8% at £120.4m (2016: £113.8m).
less capital expenditure and less capitalised development costs
(excluding acquired intellectual property). In 2017, free cash flow
was £8.0m (2016: £6.0m).
Development Costs
SchoolEdge
Tribal Edge
Capitalised Development costs
2017
(£m)
2016
(£m)
1.0
1.1
2.1
1.1
–
1.1
Amortisation of Development costs
(1.4)
(1.4)
Net Finance Costs
Overall financing costs were £0.3m (2016: £1.0m). Financing
costs on the Group’s loan facility decreased to £0.2m (2016:
£0.6m). Tribal streamlined its credit facilities with Lloyds Banking
Group and Clydesdale Bank, committed until June 2018, to
better match the Group's ongoing requirements, reducing its
revolving credit facility from £25m at the beginning of 2017 to
£15m from August 2017. From January 2018, the Group reduced
the facilities further, to £11m including overdraft facilities
and bank guarantee lines. Discussions are ongoing to renew
facilities. Other financing costs reduced to £0.1m (2016: £0.4m)
following reductions in the unwinding of discounts on deferred
consideration.
Annually Recurring Revenue (ARR)
The annually recurring revenue relates to the amount of revenue
in the year in respect of ongoing services, charged on a recurring
basis, usually annually, and which the Group considers is likely to
continue into the future. This includes the total annual Support
& Maintenance (S&M) fees relating to Tribal’s software products,
and from 2017, includes Cloud revenues, which relate to the
provision of ongoing, annually recurring hosting services provided
to customers in either a public or a private cloud environment.
Deferred Contingent Consideration
In March 2017, Tribal signed a variation to the Share Purchase
Agreement with the vendors of Sky Software Pty ("Campus"),
which amended the terms of the deferred contingent
consideration payments. Under the variation, it was agreed
that a combination of cash (AUD$980,325), 670,882 ordinary
shares and 1,339,286 share options would be paid/issued in
full and final settlement of all contingent obligations under the
Agreement.
The total ARR for 2017 is £37.5m (S&M £33.5m; Cloud services
£4.0m), which increased by 5.5% from £35.5m in 2016 (S&M
£32.2m; Cloud services £3.3m).
Operating Cash Conversion
Operating cash conversion is calculated as net cash from
operating activities before tax as a proportion of adjusted
operating profit. In 2017, operating cash conversation was
130% (2016: 115%).
Free Cash Flow
Free cash flow is included as a key indicator of the cash that is
generated by the Group and available for further investment or
distribution. It is calculated as net cash from operating activities
Going concern
Tribal had net cash of £14.1m at end of 2017, and a revolving
credit facility of £15m, committed until June 2018, of which
£6.5m was allocated to trading guarantees with customers at
31 December 2017.
“Without Tribal we would not be as
accurate or as knowledgeable as we
are. We would struggle to provide the
best experience to apprentices.”
Leonardo, UK
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“We chose Tribal because they
understand how to balance our need
for improved student results with
customised instructional support. Tribal
consultants challenge teachers and
principals to rethink their assumptions
and motivate them to take on high impact,
strategic school and classroom reforms.
Our students are the beneficiaries.”
Kent School District
US
Shareholder returns & dividends
The Board has proposed a full year dividend of 1p per share,
pending approval at the AGM on 24 April 2018. This will be paid
in May 2018, with an associated record date of 4 May 2018, an
ex-dividend date of 3 May 2018 and an anticipated payment
date of 25 May 2018. The Board of Directors intend to continue
to pursue a progressive dividend policy with a single dividend
payment each year following annual results.
Impact of IFRS15
IFRS 15 ‘Revenue from Contracts with Customers’ is effective
for periods beginning on or after 1 January 2018 and introduces
an amended framework for revenue recognition. The standard
provides revised guidance on revenue accounting, matching
the recognition of revenue to the delivery of performance
obligations in contractual arrangements for the provision of
products and services.
The Group has assessed the impact of adopting IFRS 15, and
has concluded that software license revenue will be recognised
over the duration of the project implementation period on a
percentage complete basis. This will spread the recognition of
license review over an extended period, rather than immediate,
upfront recognition of license revenue.
In 2017, this is expected to increase the revenue by £0.4m
to £85.3m and operating profit by £0.4m to £8.9m, a decrease
of £0.2m to accrued income and a decrease £0.6m to
deferred income.
The Group does not expect the capitalisation and amortisation
of commissions payments related to software licence sales to
have a material impact.
In 2018, the Group assessment is that there is likely to be
a modest transitional dip in revenue and operating profit as
large new contracts won in year are spread over the future
implementation period, exceeding the restatement of prior
year revenues.
The Group’s software products benefit from a significant
installed customer base, whilst its other activities are typically
delivered under the framework of long-term contracts.
Collectively, the Group has a range of customers across
different geographic areas, good levels of committed income
and a pipeline of new opportunities. While the Group has a net
current liability position, the Group’s forecasts and projections,
which allow for reasonable possible changes in trading
performance, show that the Group will be cash generative
across the forecast period.
The Directors have a reasonable expectation that the Group
has sufficient financial resources to continue in operational
existence for the foreseeable future. Accordingly, the Directors
continue to adopt the going concern basis in preparing the
financial statements.
Taxation
The corporation tax on continuing operations was £1.8m (2016:
£0.9m) and the adjusted effective tax rate was 21% (2016:
21%). This includes the impact of higher rates of taxation arising
in overseas jurisdictions.
As the Group continues to operate in international jurisdictions
with a higher rate of corporation tax, it is anticipated that the tax
charges on profits in the near- to medium-term future is likely to
be higher than the standard rate of UK corporation tax.
Share Capital
On 24 April 2017, the Company issued 670,882 shares as part of
the settlement of the deferred contingent consideration related
to the acquisition of Sky Software Pty (“Campus”).
As at 31 December 2017, there were 196,051,181 shares issued.
Related parties
Transactions with related parties during the period are set out in
note 32.
Earnings per share
Adjusted diluted earnings per share from continuing operations
before other costs, the results of businesses disposed of, and
intangible asset impairment charges and amortisation, which
reflects the Group's underlying trading performance, increased
to 3.2p (2016: 1.9p).
Statutory earnings per share (diluted) increased to 1.3p (2016:
loss of 0.7p).
CFO's report continuedNet Cash and CashflowThe Group strengthened its net cash position during the year with an end of year balance of £14.1m (2016: net cash £8.8m). The main movements in cashflow were as follows:Net Cash generated from operating activities• Operating cash inflow for the period was £11.1m (2016: £8.3m). Free cash flow is £8.0m (2016: £6.0m).Capital Expenditure• Capital expenditure totalled £4.4m (2016: £2.4m), comprising £2.1 (2016: £1.1m) on software product development, £1.5m (2016: £nil) on the acquisition of intellectual property from Wambiz and £0.8m (2016: £1.3m) on replacement of IT equipment and office premises.Acquisitions & Deferred Considerations• The Group made a total net payments £1.1m (2016: £3.0m) during the year in relation to the deferred consideration obligations of previous acquisitions being Campus £0.8m and Callista £0.3m. Pension ObligationsAs a consequence of certain contract awards, some employees participated in defined benefit pension schemes, the largest of which relates to the Ofsted Early Years inspection contract we entered during the year ended December 2010. Across these pensions schemes, the combined deficit calculated under IAS19 at the end of the year totalled £1.7m (2016: deficit of £1.7m), with gross assets of £11.0m and gross liabilities of £12.7m. Total actuarial gains recognised in the consolidated statement of comprehensive income are £0.1m (2016: loss of £1.7m). The Ofsted Early Years contract expired in March 2017, and those individuals working directly on the contract were transferred to Ofsted, under the Transfer of Undertakings (Protection of Employment) act (TUPE). Under the terms of the contract, they may elect to transfer their pension plan from Tribal to Ofsted. The Group is working with the Pension Ombudsman to finalise the scheme valuation and transitional arrangements which we hope to conclude in 2018.Financial RisksThe main financial risks the Group faces relate to the continued sales of our software, where a trading downturn puts a strain on the operating cash flow, credit risk arising from contractual delays or scope changes, fluctuations in interest rates, and foreign exchange risk.Funding arrangementsThe Group finances its operations by a combination of cash reserves from equity capital, retained profits and bank borrowings. The Group Finance team leads treasury management and operates within policies reviewed and approved by the Board. On 30 June 2016, the Group agreed amendments to the terms of its banking facilities which remain committed until June 2018. During 2017 the size of the overall credit facility has been voluntarily reduced from £25m to £15m, and reduced further in January 2018 to £11m. The maximum permissible leverage ratio (measured as the ratio of net debt to EBITDA) must not exceed 2x. The definition of EBITDA has also been defined to exclude certain non-cash and one-off trading impacts that have unfavourable impacts on the calculation. For the foreseeable future, the Group is forecast to operate within the bank covenant requirements set out in the facility agreements. Credit RiskThe Group seeks to reduce the risk of bad debts arising from non-payment by our customers. This risk is closely monitored by the Credit & Collections team, which form part of Group Finance. Tribal incurred no material bad debts during 2017. Interest Rate riskAt the end of 2017, Tribal had no bank loan indebtedness. However, the Group is exposed to interest rate risk because entities in the Group borrow funds at floating interest rates. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, and forward rate agreements and interest swaps may be used, where appropriate, to achieve the desired mix of fixed and floating rate debt. There are no open derivative financial instruments at the year end.Foreign exchange riskTribal's reporting currency is Sterling. A number of its subsidiaries have different functional currencies, so increases and decreases in the value of Sterling versus the currency used by the Group's international operations will affect its reported results, and the value of assets and liabilities on the consolidated balance sheet. Tribal's principal currency exchange exposure is to the Australian dollar although as at 31 December 2017, the Group was also exposed to movements in the rates between Sterling and the US dollar, United Arab Emirates Dirhams, South African Rand, and New Zealand dollar. See note 32 for further details.The Group Finance team oversees management of foreign exchange risk, and policies and procedures approved by the Board.Mark Pickett Chief Financial Officer“Using Stu-Talk to manage the two-way integration of data between the systems will ensure data consistency and allow us to maintain SITS as our single source of truth. We like the fact that all the interfaces will be maintained and tracked from within the SITS platform, this will undoubtedly save us time and effort on the support front.”Arts University Bournemouth UKTribal Group plc Annual Report and Accounts 201728 Introduction
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“Maytas offers an end-to-end
solution from one system. The
ability to easily access one,
accurate view of learners and
their progress stood out from
the competition.”
Boots Opticians
UK
30
Tribal Group plc Annual Report and Accounts 2017
Principal risks and uncertainties
The Group is exposed to a number of risks and uncertainties which could have a material
impact on the future performance of the Group. The table below summarises the key risks
that the Directors consider the business faces and how the Group seeks to mitigate them.
In addition to these, other risks of a financial nature are addressed in the CFO's report.
Risk area
Cause and Effect
Mitigation
Reputation
Cause:
Failure to deliver contractual commitments.
Failure to meet investor expectations.
Contract
tendering
Project
delivery
Innovation
and
technology
Information
security
Effect:
Adverse publicity relating to contract and solution
delivery with associated reputational damage and
financial risk.
Cause:
Poor commercial negotiation and documentation
on major contracts. Failure to adapt to local legal
framework on international projects. Penetration in new
markets increases risk of omissions and mistakes.
Effect:
Contract delivery failure, risk of legal claims or
onerous financial contract terms.
Cause:
Failure to meet project milestones and other
contractual requirements; customer subject to
own internal pressures.
Effect:
Non-payment or application of contractual penalty
clauses by customers.
Cause:
Increasing emergence and demand for cloud-
architected solutions for some legacy technology
platforms and core products.
Effect:
Technically obsolete platform and products.
Cause:
Data loss or system security breach. Increasing
regulatory data protection and information security
requirements including health related controls over
student management data.
Effect:
Losses of reputation with customers and in
market. Risk of regulatory penalty.
The Group maintains strong controls to ensure
successful project delivery.
The Board engages with investors on a
regular basis.
The Group maintains a formal Delegation of
Authority matrix to ensure appropriate visibility
and approval of all potential contracts.
The Group reviews project progress on a
monthly basis at Executive Management level
with Board oversight.
The Group is investing in a new Student Information
Systems product strategy with a Cloud Operations
(hosting) focus. This is continuing to move
functionality from existing platforms to newer
cloud-based applications.
The Group operates a Secure Data Centre and
continues to roll out ISO 27001 certification
across the business, and invest in security
software and training for all staff. In addition,
the Group has reviewed its GDPR obligations in
readiness for compliance in May 2018.
People
Cause:
Key employees leave the Group.
Effect:
Detrimental effect on customer relationships and
development pipeline.
The Group has incentive schemes designed to
attract, motivate and retain key employees, whilst
encouraging appropriate behaviours. We aim to
provide competitive remuneration packages for
all staff. No sole staff member is considered to be
a single point of failure.
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Case StudyUlster University: uncovering challenges and opportunities with Financial Benchmarking Based in Northern Ireland, Ulster University has a national and international reputation for excellence, innovation and regional engagement. The renowned institution aims to make a major contribution to the economic, social and cultural development of Ireland and as a university is always looking for improvements; their goal is to widen access to education, research and innovation and technology.As part of achieving their goals, Ulster University looked to Tribal to help provide clarity and detailed analysis of their financial profile, in the form of a financial benchmarking review.Financial Benchmarking provides reliable, objective and independently validated comparative data that helps managers see the financial performance of other universities, informing financial and strategic decision-making.“I found that the process and methodology adopted was very robust and the findings clearly communicated at both summary and at a detailed level. The team were at all times professional and knowledgeable on all aspects of the key findings” said Peter Hope, Chief Financial Officer at Ulster University. Tribal empowers educators and we are proud to support an industry that changes people’s lives and contributes so much to society. We believe in fairness, integrity, and ‘doing the right thing’. This means we treat our people well, and that we expect to give something back to the communities where we work, through our charitable activities. Corporate and social responsibilityOur valuesTribal brings together highly talented people in a creative and collaborative environment. In 2016, we revisited our values, ran over 25 workshops globally, and launched a new set of values. In 2017, we continued to embed this work, including launching on-the-spot awards to recognise those who “go the extra mile” and clearly demonstrate our values. Our role of honour for the year listed over 120 people from across the Company, in all areas of the business and from all regions.We continue to embed our values and challenge ourselves asking “What have you done today which shows our values in action?” Our values are:Trustworthy We value honest discussion, we anticipate, listen and respond to requirements and we rely on each otherPioneering We welcome change, we strive to innovate and we aim to meet the needs of the ever-evolving education market placeAccountable We take ownership, we keep our promises and are focused on delivering successful outcomesDedicated We are committed to our customers; work to secure long-term partnerships and we collaborate to deliver optimum solutionsOur peopleTribal’s capabilities are founded on the talent and expertise of our people. Our development, retention and recruitment strategies at all levels of the business have a strong emphasis on diversity. Our work with Business in the Community has helped us to benchmark our practices and seek new approaches to attracting, retaining and developing a diverse range of talent and we continually review our people practices, ensuring they enable all talent to thrive at Tribal. Our success as a growing international business is a tribute to our people’s energy, commitment and know-how. We invest in our people, providing them with the tools and training to support and enable them to realise their potential. We continue to build on our learning and development programmes. In 2017 we ran numerous courses, including business development programmes and the continuation of our Manager Academy which broadens the skills and commercial awareness of our leaders and future leaders. A highlight in 2017 was the successful piloting of e-learning as a part of our L&D strategy. This resulted in a significant investment to offer every Developer globally unlimited access to a leading-edge learning platform, Pluralsight. We also successfully piloted LinkedIn e-learning in several departments and have progressed a wider roll-out in 2018. Engaging with peopleTribal operates from a range of offices in the UK and around the world. Communication among our people is crucial. We use a combination of Group-wide updates, including webinars, as well as running specific local communication sessions. We supplement these events by The Strategic Report, comprising the 'Our business model', 'Our strategy', 'Principal risks and uncertainties', 'Chief Executive's report', 'CFO's report' and 'Corporate and social responsibility' sections, was approved by the Board of Directors on 22 March 2018 and signed on its behalf by:Ian Bowles Mark PickettChief Executive Officer Chief Financial Officercommunicating on a number of channels (email, internal bulletin boards), our corporate social media and in our now established bi-monthly staff news update – Tribal Talk.We continue to listen to our people and at the end of 2017 completed a detailed cross-Company engagement survey. The results of this will give us a baseline for planning further work in 2018 and ensuring we have an engaged and motivated team.Gender Pay EqualityTribal has published its first Gender Pay Gap statutory report for our UK employees, prepared as required under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 that came into effect in April 2017. Like the vast majority of UK companies, we do have a gender pay gap, primarily because there are more women than men in our lower paid roles, but fewer in higher paid ones.We are encouraged to see that, as far as the data is concerned, we are in a better or comparable position to UK businesses in relation to the Gender Pay Gap. For example, Tribal’s mean gender pay gap, at 14.5%, is below the UK national average of 17.4% as reported by The Office of National Statistics (ONS). Our median pay gap, at 18.8%, is only very slightly above the ONS national average of 18.4%.This gives us reassurance that we are starting from a better position than some, and whilst we do not underestimate the challenge at hand and impact of wider societal norms, we look forward to continuing and reviewing our progress in years to come. The Tribal FoundationTribal’s charity, the Tribal Foundation, supports projects in the UK and globally which reflect Tribal’s expertise in education. Tribal match every pound donated and the Foundation is also able to access additional funding from the EU and other sources including gift aid, which can make a huge impact on the quality of life of the people we support. Since its establishment, the Foundation has contributed around £0.6m to a variety of programmes.Tribal Group Foundation is a registered charity no. 1099110.Tribal Group plc Annual Report and Accounts 201732 Introduction
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CAUTIONARY STATEMENT
This information has been prepared solely to provide information to shareholders to assess how the Directors have performed
their duty to promote the success of the Group.
The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith
based on the information available to them up to the time of their approval of this report and such statements should be treated
with caution due to the inherent uncertainties, including both economic and business risk factors, which underlie any such
forward-looking statement.
Case StudyEngaging adult learning with Leeds City Council, UK Leeds City Council had a vision to engage more new learners to get involved with adult learning, and to promote adult learning courses to a wider audience in Leeds. Tribal’s leading learner management system, Maytas, has enabled them to make great steps towards achieving this vision. In September 2017 they launched the Leeds Adult Learning website, with Maytas being instrumental in enabling the effectiveness of this platform. The council quickly realised a learning management solution would not only meet their data processing requirements but would also help existing learners to progress onto further courses. Starting an adult learning course can be a huge decision for an individual, and Leeds City Council understood that the right solution could simplify this process for the learners. Leeds City Council engaged the Open Data Institute (ODI) and Innovation labs to create a searchable data driven website solution that integrated with Maytas. The result – Leeds Adult Learning – launched in September 2017. The website offers one platform for a range of adult learning courses across Leeds in a variety of different venues. The council also aims to expand the website to include data from the wider Leeds adult learning institutions as well as looking at options to utilise Maytas to support them as an apprenticeship employer-provider in 2018. “Tribal consultants listened closely to our ambitions, aspirations and high expectations of a system that could capture and process data from 30 subcontracted providers. It’s interesting seeing that become a reality, alongside being compliant with ESFA funding rules and data returns” said Keri Evans, Communities and Partnerships Senior Manager, Employment and Skills, at Leeds City Council. 34
Tribal Group plc Annual Report and Accounts 2017
Case StudyTertiary Education Commission New Zealand The Tertiary Education Commission (TEC) is responsible for the New Zealand Government’s $2.9 billion investment across over 700 tertiary education organisations in NZ. It leads the Government’s relationship with the tertiary education sector which includes universities, polytechnics, private training establishments, industry training organisation and other providers of higher education and training. On behalf of the TEC, Tribal has supplied for the last 10 years a performance benchmarking service to all Universities, Institutions of Technology & Polytechnics (ITPs) and Wānanga in NZ. This provides a comprehensive view of both financial and educational performance, looking at financial inputs and educational attainments, such as course completion rates, to provide a robust performance measurement and monitoring framework. Tribal’s benchmarking service, NZBT+, provides a holistic view of an institution’s performance by linking financial data and key qualitative indicators, helping identify areas where investment may be required, as well as opportunities for greater cost efficiencies. It offers an independent measurement of financial and educational performance to support informed strategic decision making and forward planning. “The biggest benefit of Tribal’s NZBT+ is how it has enabled education organisations to have meaningful self-assessment and self-review, so that they can have confidence to make informed decisions that ultimately benefit the students. The Tribal team’s flexibility and commitment to the partnership has allowed us to work together to support the success of our providers and help them deliver high-quality education for New Zealanders” said Julia Kennedy, Principal Advisor in the TEC’s Monitoring and Crown Ownership Team. Introduction
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Governance36 Board of Directors38 Executive Management Team40 Corporate Governance44 Audit Committee report45 Remuneration report50 Directors’ report 36
Tribal Group plc Annual Report and Accounts 2017
Board of Directors
Our Board has undergone significant change in the year. The Board, while smaller
than this time last year, has a good blend of backgrounds pertinent to the challenges
and opportunities Tribal faces.
Richard Last
Chairman
Ian Bowles
Chief Executive Officer
Appointed November 2015
Richard joined the Board in November 2015. He is currently
Chairman and Non-Executive Director of AIM listed Gamma
Communications plc, British Smaller Companies VCT 2 plc,
Arcontech Group plc, and Lighthouse Group plc. In addition,
Richard is Non-Executive Director of Corero Network Security
plc and ITE Group plc. Richard is a Fellow of the Institute of
Chartered Accountants in England and Wales (FCA).
• • •
Appointed February 2016
Ian joined Tribal in February 2016. He joined Tribal with a strong
track record of driving financial and operational improvement
and shareholder value creation, having held Board and other
senior management positions across a number of leading
IT companies. From 2007 to 2015, Ian was Chief Executive
Officer of Allocate Software, an AIM listed leading international
provider of specialist workforce management optimisation and
corporate governance, risk & compliance software, where he
oversaw strong organic and acquisitive growth in revenue
and profits, and its sale to HgCapital in 2015. Ian is currently
Non-Executive Director and investor in Locum’s Nest Ltd.
•
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Key to Committee Membership:
• Nomination Committee
• Remuneration Committee
• Audit Committee
Mark Pickett
Chief Financial Officer
Roger McDowell
Senior Independent Director
Appointed June 2016
Mark joined Tribal in July 2016 with many years’ experience
in the technology industry. Previously he was Chief Financial
Officer and Finance Director, UK of Computer Sciences Corp
(“CSC”), a US based global leader in technology enabled
business solutions and services. Mark also spent 18 years in a
variety of senior finance roles with Oracle across a number of
geographies, primarily in its software businesses.
Appointed November 2015
Roger joined the Board in November 2015. He is currently
serving as Non-Executive Chairman of Avingtrans plc, Non-
Executive Director of Premier Technical Services Group plc,
Proteome Sciences plc, Swallowfield plc and D4t4 Solutions plc.
• • •
The Executive Management team has continued to evolve with the addition of Phil Sanders (Managing Director, i-graduate), Peter Croft (Managing Director, APAC) and Chloe Payne (Director of HR). Executive Management TeamIan BowlesChief Executive Officer See biography on page 36Mark PickettChief Financial Officer See biography on page 37Jon BaldwinManaging Director – Higher Education Jon joined Tribal in May 2014 from Murdoch University. Jon has also held management, teaching and administration posts at University of Warwick, Queen Margaret College, Edinburgh and Lancashire Polytechnic, as well as teaching at the Open University and in Further Education and publishing papers and articles on a wide range of education-related topics.Mark WilsonManaging Director – EMEA Region Mark joined Tribal in December 2016 as the Managing Director for the EMEA region. Mark is an experienced business leader having spent over 20 years in national and international roles in software and services businesses. In that time he has enjoyed great success driving transformation and helping his clients maximise the value to their organisations of deploying technology enabled solutions.Phil SandersManaging Director – i-graduate Phil joined Tribal in 2004 and having supported Tribal across many areas of our business, became Managing Director of i-graduate in March 2017. Phil is an accomplished and dedicated executive with over 20 years’ experience, working within UK and international Education, and IT Product and Service companies. In that time, Phil has led several teams to grow existing business or establish new markets. Peter Croft, Managing Director – APAC Region Peter joined Tribal in September 2017 to lead the Asia Pacific business with a focus on delivering growth and benefits-driven customer experiences. Peter has over 20 years’ experience in successful leadership of IT enterprises in the APAC region, and has held directorships in Australian, UK, US and Malaysian technology companies.Tribal Group plc Annual Report and Accounts 201738 Chloe PayneDirector of HR Chloe joined Tribal’s HR team in 2007 and has been part of many notable aspects in Tribal’s evolution, including the early days of our internationalisation. Chloe was appointed to lead the function globally in April 2017. Prior to Tribal, Chloe worked in the Health sector, supporting a large social care organisation through a period of sustained growth, and at Cambridge Assessment where she managed their recruitment function internationally. Chris FarnathManaging Director – Cloud & Support ServicesChris joined Tribal in August 2016 to lead the Company’s cloud and support services, with a mission to deliver a timely and consistent customer experience, whether that be with solutions in the cloud environment or deployed on premise. Chris is an internationally accomplished business leader with over 25 years’ technology services experience in the business-to-business sector. Barbara StarukManaging Director – Product and DevelopmentBarbara joined Tribal in February 2015 and has 20 years of software industry experience. Barbara has led global market expansion, portfolio rationalisation and product transformation initiatives across multiple software product lines. Barbara has worked on large-scale government transformation programmes, such as the NHS’ National Programme for IT. Janet TomlinsonManaging Director – Quality Assurance SolutionsJanet joined Tribal at the end of 2009. Prior to this, Janet was Director of Education and Children’s Services in Oxfordshire. Janet has chaired a range of regional partnership boards, including Children’s Trusts, Safeguarding Boards, Education Action Zones and Creative Partnerships. She has also advised the Government on the educational impact of migration and on school inspection policy.Mike BeechMarketing Director Mike joined Tribal in March 2016 and heads up Tribal’s global marketing team. Responsible for the strategic development of Tribal’s marketing initiatives and driving awareness of the Group’s portfolio of capabilities, Mike has the expertise, drive and enthusiasm needed to ‘tell the Tribal story’ world-wide. (cid:74)(cid:74)(cid:74)39Financial StatementsGovernanceStrategic ReportIntroduction 40
Tribal Group plc Annual Report and Accounts 2017
Corporate Governance
Tribal is committed to high standards of corporate governance and maintaining sound
business ethics.
The Directors acknowledge the importance of good corporate governance and although not compulsory for companies
listed on AIM, have chosen to adopt the principles of the Quoted Companies Alliance Code (“QCA”) to the extent they
consider them appropriate for a company of the size and nature of Tribal Group plc.
The PLC Board applies the principles of good governance and supports a culture of open debate and constructive challenge to
enable Tribal to meet its objectives. In fulfilling their responsibilities, the Directors govern the Group in the best interest of the
Company and its shareholders whilst having due regard to the interests of other stakeholders including customers, employees,
suppliers and regulators.
The PLC Board
The PLC Board (“the Board”) is responsible for the Company’s
systems of corporate governance.
The Board plans to evaluate its performance and that of its
Committees through a process of regular dialogue and periodic
formal Board evaluations.
The Non-Executive Directors are Richard Last and Roger
McDowell, both are considered to be independent of
management and free from any business or other relationships
that could materially interfere with the exercise of their
independent judgement. The Non-Executive Directors meet
at least once a year without the Executive Directors present.
All Directors are required to submit to re-election each year
at the Annual General Meeting (“AGM”) of the Company.
All the Directors have access to the advice and services of the
Legal Counsel. Each Director is entitled, if necessary, to seek
independent professional advice at the Company’s expense.
The Board meets at least eight times each year with additional
meetings when circumstances and urgent business dictate.
At these meetings the Board reviews a schedule of reserved
matters including trading performance, financial strength,
strategy (including investment and acquisition opportunities),
risk management, controls, compliance, reports to
shareholders and succession management.
Delegated Authorities
All other matters not specifically reserved to the Board are
delegated to management in accordance with a schedule of
Delegated Authorities. These delegated authorities cover
expenditure, agreements, financial matters, remuneration and
agreements with third parties. Management is required to report
to the Board concerning authority exercised and matters which
come, or may come, within the scope of the Board.
Subsidiary Boards
The Group’s subsidiary companies operate a Board of
Directors that comprises at least one PLC Director and senior
management of the subsidiary as appropriate.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
41
Board Committees
The PLC Board has established three committees to assist in the effective operation of the Board: the Audit Committee, the
Remuneration Committee and the Nominations Committee. Each Committee has responsibility to the Board which are outlined
in formal Terms of Reference that have been approved by the Board. The Terms of Reference, which are available on the Group’s
website www.tribalgroup.com, are subject to annual review to ensure the Committees continue to follow best practice. The
Chairman of each Committee reports to the PLC Board after each Committee meeting and minutes are tabled at the next PLC
Board meeting.
Membership of Board Committees and attendance at Board and Committee meetings during the 12 month period under review
was as follows:
Number of meetings in period
Meetings attended by members:
Richard Last
Roger McDowell
Ian Bowles
Mark Pickett
* By invitation
PLC
Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
11
11
11
11
11
3
3
3
3*
3*
1
1
1
–
–
1
1
1
–
–
Audit Committee
The Audit Committee is chaired by Roger McDowell and comprises Richard Last. The Chief Executive Officer and representatives
from finance and our external auditors participate in the meeting as non-voting observers. The Committee meets three times a year.
The Committee oversees the Group’s financial reporting and internal controls, including their effectiveness and risk management
processes, and the external audit process and has the following responsibilities:
• Considering reports from the auditors on the annual and half-yearly financial statements
• Monitoring the integrity of the Group’s financial statements and formal announcements relating to the Group’s
financial performance
• Making recommendations to the Board on the appointment and remuneration of the external auditors
• Reviewing the independence and objectivity of the external auditors and the effectiveness of the audit process
• Considering reports on the effectiveness of the Group’s risk-management procedures and internal controls.
The Committee advise the PLC Board on the appointment, independence and objectivity of the external auditors and on the
remuneration for both audit and non-audit work. The Committee also discusses the nature, scope and results of the audit with
the external auditors. The Audit Committee Chairman separately meets with the external auditors during the course of the year.
The auditors’ report to the Audit Committee on matters including independence and non-audit fees on an annual basis. The specific
audit partner changes every five years. The amount charged by the external auditors for the provision of services during the 12
month period under review is set out in Note 5 of the financial statements on page 75.
42
Tribal Group plc Annual Report and Accounts 2017
Corporate Governance continued
Remuneration Committee
The Remuneration Committee is chaired by Roger McDowell
and includes Richard Last. The Committee meets at least
once a year.
The Committee sets the remuneration of the Directors,
including basic salary, bonuses and other incentive payments
and awards. It also ratifies policy proposals in respect of
remuneration of senior executives in the Group.
The Remuneration report which details the Directors’
remuneration, pension entitlements and service contracts,
including information on Directors’ interests, is set out on
pages 45 to 49.
Nominations Committee
The Nominations Committee is chaired by Richard Last and
includes Roger McDowell and Ian Bowles, who provides
Executive management insight. The Committee meets at
least once a year.
The Committee deals with appointments to the PLC Board,
monitors potential conflicts of interest and reviews the
independence of the Non-Executive Directors.
The PLC Board also operates the following management
Boards and committees:
Executive Board
The Executive Board is chaired by Ian Bowles. The members of
the Executive Board are drawn from the heads of the business
units and other operational areas. The Executive Board
typically meets monthly but the members interact frequently
in the normal course of their roles. The Executive Board
oversees the Group’s operational and financial performance
and is responsible for day-to-day management decisions in
line with the Group’s strategy. It also considers succession
planning and talent management. Further matters are outlined
in the Delegated Authorities.
Integrated Governance Committee
The Integrated Governance Committee is chaired by the Chief
Financial Officer and reports to the Chief Executive Officer.
The Committee meets monthly and includes representatives
from Finance, Information Services, Human Resources, Legal,
Compliance, Property and Procurement. There are separate
sub-committees for Health & Safety and Information Security
which monitor relevant legislative and regulatory requirements.
Internal controls and risk management
The Board is responsible for establishing and monitoring
internal control and risk management systems throughout
the Group and assessing their effectiveness. The Board
recognises that rigorous systems of internal control are
critical to the Group’s achievement of its business objectives
and that those systems are designed to manage rather than
eliminate risk of failure to achieve business objectives. The
internal control and risk management systems can only
provide reasonable, not absolute, assurance against material
misstatement or loss.
Tribal maintains a risk framework that contains the key risks
faced by the Group. The framework includes the impact
and likelihood of key risks and the controls and procedures
implemented to mitigate them. Risk management is embedded
within Tribal by:
• Setting strategic direction, including targets
• Maintaining a clear authorisation framework
• Reviewing and approving annual plans and budgets
• Maintaining documented policies and procedures
• Regularly reviewing and monitoring the Group’s performance
in relation to risk through monthly Board reports.
The Directors are also responsible for the Group’s system of
internal control and for reviewing its effectiveness.
The Audit Committee reviews the Group’s internal financial
controls and risk management systems and the Board reviews
the effectiveness of all the Group’s internal controls including
operational and compliance controls and risk management
systems in effect during the period.
To further manage risks faced by the Group, the Company
attempts to ensure that employees fully understand the
Group’s business strategy and objectives. The Group’s
communication and consultation programme includes regular
internal briefings by Directors to all employees throughout
the year. Regular meetings are held with staff and managers,
both to discuss specific issues and provide an exchange of
information. Email and the Group’s intranet site also provide
information to employees.
The Group operates a comprehensive budgeting system
whereby managers submit detailed budgets and forecasts,
which are reviewed and, where appropriate, amended by
Executive Directors prior to submission to the Board for
approval. Each month, actual results are reported against
budget and distributed to managers and are provided to the
Board in advance of meetings.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
43
Communication with shareholders
The Group reports formally to shareholders when its annual
and half-yearly financial statements are published. At the same
time, Executive Directors present the results to institutional
investors, analysts and the media. Notification of the date
of the AGM is sent to shareholders at least 21 working days
in advance of the meeting. Details of the AGM are set out in
the Notice of Meeting. The Directors are available at the AGM
to answer questions, both during the course of the meeting,
and informally afterwards. Contact with major shareholders
is principally maintained by the Chief Executive Officer and
the Chief Financial Officer, who ensure that their views are
communicated to the Board as a whole. The Chairman is also
available to discuss governance and other matters directly
with major shareholders. At every Board meeting, the Board
is provided with the latest brokers’ reports and a summary
of the contents of any meetings with shareholders. The
Board considers that the provision of these documents is a
practical and efficient way for both the Chairman and Senior
Independent Director to be informed of major shareholders’
opinions on governance and strategy and to understand any
shareholder issues and concerns.
Approved by the Board of Directors on 22 March 2018.
Richard Last
Chairman
44
Tribal Group plc Annual Report and Accounts 2017
Audit Committee report
The Audit Committee report details the key activities
undertaken during the year.
Activities of the Committee during the year
The Committee’s activities have focused on the accuracy of
financial reporting and the related statutory audit; and the
assessment of internal controls. During the year the Committee
was involved in the reviewing and approving of the annual report
and accounts for 2017 and the half year report and accounts
for 2017, overseeing the Group’s readiness for General Data
Protection Regulation (GDPR) compliance and reviewing the
Group’s banking arrangements. In addition, the Committee
reviewed the position of the Group’s independent external
auditors and re-appointed PricewaterhouseCoopers LLP.
Financial reporting and statutory audit
The Committee has reviewed with both management and the
external auditors the half year and annual financial statements,
focusing on:
• the overall truth and fairness of the results and financial
position, including the clarity of disclosures shown in the
statements and their compliance with statutory and best
practice requirements;
• the appropriateness of the accounting policies and practices
used in arriving at those results;
• the resolution of management’s significant accounting
judgements or of matters raised by the external auditors
during the course of their half year review and annual
statutory audit; and
• the quality of the Annual Report taken as a whole,
including disclosures on Governance, Strategy, Risks and
Remuneration, and whether it gives a fair and balanced
picture of the Group.
External audit
The Committee discussed, challenged and agreed with
PricewaterhouseCoopers LLP their detailed audit plans prepared
in advance of the audit, which set out their assessment of key
audit risks and materiality. The approach to their work on the half
year results was also discussed and agreed.
Accounting policies, practices and judgements
The selection of appropriate accounting policies and practices
is the responsibility of management, and the Committee
discussed these with both management and the external
auditors. Significant areas considered by the Committee in
relation to the 2017 financial statements are set out below.
Going concern
The Group is required to assess its ability to trade as a going
concern for at least 12 months from the signing of the annual
financial statements. The Committee reviewed management’s
assessment and concluded that it remained appropriate to
continue to adopt the going concern basis in preparing the
financial statements.
Revenue recognition
The Group’s operations include complex software delivery
programmes and service activities that can require judgements
to be made in relation to the timing of revenue recognition. The
Committee reviewed the revenue recognition judgements taken
and it was concluded that the judgements were appropriate.
Goodwill
The Group is required to test annually whether goodwill has
suffered any impairment and consider whether the fixed assets
used in the business are carried at an appropriate amount. The
Committee reviewed management’s impairment testing and
concluded that there was no impairment of goodwill or any of
the fixed assets used in the business.
Capitalised product development costs
The Group’s product development costs are capitalised
where the expenditure meets the criteria of IAS38, and
the recoverability assessed annually against expected
future cashflows. The Committee reviewed management’s
capitalisation process and recoverability assessment and
concluded the capitalisation was appropriate and there was
no impairment.
Assessment of internal financial control
Management is responsible for putting in place internal financial
controls over financial reporting and to protect the business
from identified material risks. The Committee continues to
monitor these closely and they are happy they are appropriate
for the business.
New accounting standards
The Committee has continued to be kept appraised of progress
of the Group’s preparations for the implementation of IFRS 15
(Revenue from Contracts with Customers) and IFRS 9 (Financial
Instruments) which the Group will implement in the year ending
31 December 2018.
Approved by the Audit Committee on 22 March 2018.
Roger McDowell
Chairman, Audit Committee
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
45
Remuneration report
The Remuneration report details the Group’s remuneration policy and the arrangements currently in place for remuneration
of both Executive and Non-Executive Directors
Remuneration policy
The full Directors’ remuneration policy is shown below for ease of reference, updated with minor changes. A shareholder vote on the
remuneration policy is not required except as set out below. The original version of the report is set out in the 2014 Annual Report,
which is available on the Group’s website (www.tribalgroup.com).
The table below details each element of pay and demonstrates how the remuneration policy is linked to overall Group strategy.
Element of Pay
Salary
Benefits
Pension
Annual Bonus
Long-term
Incentives
Purpose and link to
Strategy
To attract and retain
high-quality individuals
with the appropriate skills,
experience, and knowledge,
while also recognising their
on-going performance.
Operation including maximum
Performance Criteria
Salaries are reviewed annually or when an individual
changes position or responsibility. Salaries for the
current year are set out on page 47.
Assessment of personal and corporate
performance.
To provide a range of cost-
effective benefits which
are typical market practice.
The main benefits provided include private medical
insurance, a death in service benefit of four times
salary and private fuel.
To provide cost-effective
long-term retirement
benefits which are aligned
with market practice.
Contributions of 10% of salary are paid to Executive
Directors. An equivalent cash supplement may
be paid to an individual if the annual or lifetime
allowance has been met or exceeded.
None.
None.
To incentivise and reward
for the achievement of
in-year objectives, which
are linked to the Group’s
Adjusted Operating Profit.
To incentivise and reward
for the achievement of
long-term performance,
which is aligned to the
generation of shareholder
value.
An annual cash bonus is payable up to a maximum of
100% of salary for the Chief Executive Officer and
70% for the Chief Financial Officer, subject to the
achievement of performance targets. In all cases,
bonus payments are subject to the overriding
discretion of the Remuneration Committee.
An annual grant of nil-cost options, which vest after
three years subject to continued service and the
achievement of performance conditions.
The plan limit for an award in any year is 200% of
base salary. The normal policy will be to grant 100%
of base salary to the Chief Executive Officer and the
Chief Financial Officer.
Dividends which accrue on vested awards may be
paid as cash, or treated as reinvested and paid in
shares.
The Remuneration Committee reviews
the performance measures.
The Remuneration Committee reviews
the performance measures and targets
annually. The Remuneration Committee
has determined that a share price
growth target is an appropriate measure
for awards granted in 2016 and 2017.
No more than 33.3% of the award
would pay out for threshold levels of
performance.
All employee
plans
To encourage broad-based
employee shareholding in
the Group.
The Share Incentive Plan (SIP) currently provides all
employees with the opportunity to acquire shares in
a tax-efficient manner up to £150 per month.
None.
The Remuneration Committee (“the Committee”) operates the annual bonus plan and long-term incentive plans according to their
respective rules, the Listing Rules and HMRC rules where relevant.
46
Tribal Group plc Annual Report and Accounts 2017
Remuneration report continued
The use of performance measures
Annual bonus targets will include financial measures which reflect the performance of the business and are directly linked to the
Group’s Adjusted Operating Profit.
Long-term incentive performance measures are chosen to be aligned to long-term shareholder value creation by using a share price
growth measure.
Directors’ service contracts
Details of service agreements and notice periods are as follows:
Name
Ian Bowles
Mark Pickett
Richard Last1
Roger McDowell
Director
status
Executive
Executive
Effective date of
contract
17 February 2016
30 June 2016
Non-Executive – Chairman
17 November 2015
Non-Executive – Senior
Independent Director
17 November 2015
Expiry
Ongoing
Ongoing
2018 AGM
2018 AGM
Notice period for
both parties
6 months
6 months
–
3 months
1 Richard Last has no notice period.
Copies of each Director’s service agreement will be available for inspection at the AGM.
Under the terms of their appointment, the Non-Executive Directors have agreed to commit not less than 25 days per annum to their
roles. If they are required to commit in excess of 25 days per annum, they may be entitled to an additional fee at a suitable pro rata
rate per day.
Policy on payments for loss of office
The Committee aims to deal fairly with cases of termination, while attempting to limit compensation. Executives’ service contracts
provide the Committee with the discretion to make a payment in lieu of notice limited to base salary. The Committee also retains
the discretion to pay an annual bonus on a departure in certain circumstances. The rules of the long-term incentive plan set out the
treatment if a participant leaves employment prior to awards vesting. If the participant is considered a good leaver (through death,
retirement, injury or disability, redundancy, employment being transferred outside the Group, or any other reason the Committee
decides) then awards would normally vest on the normal vesting date. In the event of a change of control, an award may vest early
subject to the extent the performance conditions have been achieved and scaled back pro rata for service, although the Committee
has the discretion to disapply time pro-rating.
Non-Executive Directors have a defined notice period and no compensation or other benefits are payable other than the potential
share-based incentives in respect of Richard Last and Roger McDowell.
Risk
The Committee is cognisant of the need for the remuneration policy to operate within an effective risk management system. The
Committee reviews the various elements of remuneration on an annual basis, to ensure that they do not encourage any undue risk-
taking by Executive Directors or senior management. When setting performance targets for variable components of remuneration,
the Committee remains mindful of environmental, social and governance (“ESG”) issues. The Committee does not believe that the
current remuneration structure will encourage dysfunctional behaviours or would reward despite a negative ESG event.
Shareholder’s Views
The Committee considers shareholder feedback received at the AGM and during meetings with investors throughout the year, and
uses these views to help formulate the overall remuneration policy.
External Board Appointments
It is recognised that external non-executive directorships may be beneficial for both the Company and Executive. At the discretion
of the Board, Executive Directors are permitted to retain fees received in respect of any such non-executive directorship.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
47
Non-Executive Director Fees
The fees for the year ending 31 December 2018, which took effect from 1 January 2018 are as follows. These exclude any
expenses which the Non-Executive Directors may incur in relation to their duties.
Chairman
Basic Fee
Senior Independent Director Fee
Committee Chairman Fee*
From
1 January
2018
From
1 January
2017
£110,000
£110,000
£40,800
£40,800
£4,100
£5,100
£4,100
£5,100
Increase
Nil
Nil
Nil
Nil
* Committee chair fees are in addition, and applies to Audit and Remuneration Committee Chairman only
INFORMATION SUBJECT TO AUDIT
Remuneration payable for the financial year ending 31 December 2017
Director
Ian Bowles
Mark Pickett
Richard Last
Roger McDowell
Salary
Benefits 1
Bonus
LTIP 2
Pension
Total
2017
Total
2016
£270,000
£200,000
£110,000
£55,100
£2,293
£270,000
£304,416
£27,000
£873,709
£615,196
£1,200
£140,000
£252,794
£20,000
£613,994
£433,492
–
–
–
–
–
–
–
–
£110,000
£110,000
£55,100
£50,850
1 Benefits include private medical insurance and private fuel.
2 The cost reported in remuneration is equivalent to the share-based payment accounting charge incurred in the year.
Long Term Incentives Plan (LTIP) awards
On 30 June 2017 the Remuneration Committee approved LTIP awards to Ian Bowles and Mark Pickett respectively.
Type
Number of
Shares
Face
Value1
Ian Bowles
Nil-Cost Option
348,387
£292,443 1
(100% of salary)
Performance
Condition
Share price3
Mark Pickett Nil-Cost Option
247,678
£207,554 2
(100% of salary)
Share price3
Performance
Period
% Vesting
at threshold
Measured over
3 financial years to
30 June 2020
Measured over
3 years to 30 June
2020
33.33%
33.3%
1 Face value calculated based on share price on 17 February 2017 (77.5p).
2 Face value calculated based on share price on 31 March 2017 (80.75p).
3 Performance condition met prior to award being issued.
The share price performance condition is subject to the following targets:
Share price as at the third anniversary of the Grant Date
% of an Award that becomes capable of exercise
Less than 60p
60p–69.99p
70p–79.99p
80p or more
0%
33.33%
66.66%
100%
48
Tribal Group plc Annual Report and Accounts 2017
Remuneration report continued
Share Matching Plan
The Share Matching Plan was approved by shareholders in 2017. The terms of the Share Matching Plan proposed that, on the basis
that Richard Last and Roger McDowell subscribed for their Non-Executive Director (NED) Subscription Shares, they were offered
rights to acquire additional Share Matching Plan Shares on the terms of the Share Matching Plan.
On 3 May 2016, the date of the Group’s listing on AIM, Richard Last and Roger McDowell each subscribed for 2,272,727 NED
Subscription Shares at 22p each and each was granted nil cost share options over 1,702,999 Matching Plan Shares. The Matching
Plan Shares are not subject to any performance conditions and will vest in three equal tranches on 1 January 2017, 2018 and 2019.
The Matching Plan Shares will not vest unless the relevant Director remains a Director and has not given notice to terminate his
Directorship on the applicable vesting date.
No Matching Plan Shares have vested or been exercised in the year.
Share Award Interests
The interests of Directors in share options were as follows:
At 1
January
2017
Granted
Lapsed Exercised
At 31
December
2017
Exercise
Price
Price on
date of
grant
Date from
which
exercisable
Expiry
Date
Ian Bowles
LTIP – 28 June 2016
2,454,546
LTIP – 28 June 2017
Mark Pickett
LTIP – 30 June 2016
LTIP – 30 June 2016
LTIP – 28 June 2017
–
–
–
–
–
–
611,620
611,621
–
–
–
–
–
–
– 2,454,546
–
348,977
–
–
–
611,620
611,621
247,678
Nil
Nil
Nil
Nil
Nil
22.0p
June 2019 June 2026
83.8p
June 2020 June 2027
32.7p
June 2017 June 2026
32.7p
June 2019 June 2026
83.8p
June 2020 June 2027
The closing share price at 31 December 2017 was 81.0p and during the year ranged from 58.5p to 94.0p. There have been no
variations to the terms and conditions or performance criteria for share awards during the financial year.
INFORMATION NOT AUDITED
Directors’ Shareholdings
The table below sets out the Directors’ current shareholdings as at 31 December 2017. The shareholding guideline for the Chief
Executive and Chief Financial Officer is to hold shares to the value of their base salary within no more than five years of appointment.
Director
Ian Bowles
Mark Pickett
Richard Last
Roger McDowell
Beneficially
Owned
1,336,363
–
2,272,727
2,272,727
% of Salary/
Fee held
401%
–
1,674%
3,341%
LTIP
Options
2,803,523
1,470,919
–
–
Share
Matching
Plan Option
–
–
1,702,999
1,702,999
Note: % of salary/fees held is calculated by reference to the value of the individual’s shareholding in Tribal valued at the share price on the close of business on
31 December 2017.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
49
All-Employee Plans
The Committee believes wider employee share ownership can act as an additional retention and motivation vehicle, and therefore
encourages broad based participation in the SIP scheme. During the year, employees, including the Executive Directors, were invited
to take part in the SIP. The Committee regularly monitors the participation level in the all-employee arrangements.
Position against dilution limit
The share incentive plans operate in line with the ABI principle, which requires that all commitments must not exceed 10% of the
issued share capital in any rolling 10 year period. Given the Company’s issued share capital, the number of employees and the level
of participation in the LTIP, the Committee believe that operating a single 10% in 10 year limit for all share plans remains appropriate.
The Group’s position against the dilution limit at 31 December 2017 was 6.2%.
Executive Directors external appointments
Executive Directors are permitted to accept an external non-executive position with the Board’s approval. Any fees received in respect
of these appointments may be retained by the Executive. No such fees were received by the Executive Directors during the year.
Approved by the Remuneration Committee on 22 March 2018.
Roger McDowell
Chairman, Remuneration Committee
"
50
Tribal Group plc Annual Report and Accounts 2017
Directors’ report
The Directors present their report and audited
consolidated financial statements for the year ended
31 December 2017.
Principal activities
Tribal Group plc is incorporated as a public limited company,
and is registered in England and Wales with registered number
4128850. Its registered office is at Kings Orchard, One Queen
Street, Bristol BS2 0HQ.
The Company acts as a holding company with a number of
trading subsidiaries that provide education related systems,
solutions and consultancy services. There was no significant
change in this activity during the year. The subsidiary
undertakings of the Company are listed in note 33.
Results and dividends
The profit for the year, after taxation, amounted to £2,619,000
(2016: loss of £1,157,000). The Directors have declared a full
year dividend of 1p per share for 2017 (2016: no dividend),
pending approval at the AGM on 24 April 2018.
Long-term financing
The Group has a three year revolving credit facility committed
until June 2018 totalling £15m including a £1m overdraft facility
and £6.5m for trading guarantees with customers as at 31
December 2017. During the year the Group voluntarily reduced
the facility from £25m and has further reduced it to £11m from
January 2018. At the end of 2017 none of the overdraft facility
was drawn down. Following a review of the Group’s forecasts
and projections, the Directors consider the Group is well placed
to meet its funding requirements for the foreseeable future.
Information about the use of financial instruments by the Group
is given in note 31 of the financial statements.
Risks and uncertainties
The Group’s principal risks and uncertainties are explained in
the Strategic Report on page 30. Risks of a financial nature are
addressed in the CFO’s report on page 24 to 28, and note 31 of
the financial statements.
Directors’ indemnities
The Company has made qualifying third party indemnity provisions
for the benefit of its Directors, which remain in force at the date of
this report and throughout the year. Directors’ and officers’ liability
insurance is provided for all Directors of the Company.
Directors retiring
The names of the Directors who served during the year and up to
the date of signing the financial statements are set out on page
41. All Directors are required to submit to re-election each year
and will be proposed for re-election at the forthcoming AGM.
The appointment and replacement of Directors is governed
by the Company’s Articles of Association, the UK Corporate
Governance Code, the Companies Act 2006 and related
legislations. The Articles themselves may be amended by
special resolution of the shareholders.
Directors’ interests and share capitals information regarding
Directors’ interests in the Company, including share options,
are detailed in the Remuneration report on page 45 and 49.
Political and Charitable contributions
During the year, the Group made charitable contributions
totalling £8,000 (2016: £12,000). These contributions were
made to a variety of causes and to both local and national
charities. There were no political donations.
Share capital
Details of the authorised and issued share capital are shown
in note 24 to the financial statements. The Company has one
class of ordinary shares, which carry no right to fixed income.
Each share carries the right to one vote at general meetings of
the Company. During the year, the Company issued 670,882
ordinary shares of 1p (2016: 100,531,058).
Branches
The Group has overseas branches in Australia, New Zealand,
South Africa, Abu Dhabi, Botswana, Saudi Arabia and Hungary.
Employees
Tribal is a business which is highly dependent on its people.
We seek to attract, develop and retain high-calibre staff and,
as a consequence, our customers can be assured that the
service they receive is among the best available. The Group’s
commitment to its people is discussed in the Corporate
responsibility section on page 32.
The Group is an equal opportunities employer and bases all
decisions on individual ability, regardless of race, religion,
gender, sexual orientation, age or disability. Applications for
employment by disabled persons will always be fully considered,
having regard to their particular aptitudes and abilities. Should
any employee become disabled, every practical effort is made
to provide continued employment. Depending on their skills
and abilities, they enjoy the same career prospects and scope
for realising their potential as other employees. Appropriate
training is arranged for disabled employees, including retraining
for alternative work for those who become disabled, to promote
their career development within the organisation.
The Board has considered the recommendations made in the
Davies Report, published in February 2011, entitled ‘Women on
Boards’ and while appointments will continue to be made based
upon merit, the Group has implemented and continues to support
its “Women in Tribal Initiative” and has appointed representatives
to promote those recommendations, where appropriate.
Research and development
The Group continues to invest in research and development of
software products, as set out in notes 5 and 15 of the financial
statements. This has resulted in a number of new modules
to existing software products in our APAC region which we
expect to contribute to the growth of our business and the
development of the Group’s next generation cloud-based
Student information System, TribalEdge. Total research and
development expenditure moved to £4.7m (2016: £3.2m) of
which £2.1m (2016: £1.1m) was capitalised.
Post balance sheet events
There have been no significant events since the balance sheet date.
Future development
An indication of likely future developments in the business of
the Group is included in the Strategic Report.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
51
Annual General Meeting
The Company’s AGM will be held on 24 April 2018. The notice
convening the AGM and an explanation of the business to be put to
the meeting are contained in a separate circular to shareholders.
The Directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group and Company’s performance, business model
and strategy.
Independent auditors
PricewaterhouseCoopers LLP have expressed their willingness
to continue in office as auditors and a resolution to re-appoint
them will be put to the AGM.
Directors’ responsibility statement
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group financial statements in accordance
with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Company financial
statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law). Under company law the
Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and Company and of the profit or loss of
the Group and Company for that period. In preparing the financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable IFRSs as adopted by the European
Union have been followed for the Group financial statements
and United Kingdom Accounting Standards, comprising
FRS 101, have been followed for the Company financial
statements, subject to any material departures disclosed
and explained in the financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Gompany
and enable them to ensure that the financial statements
comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors of the ultimate parent company are responsible
for the maintenance and integrity of the of the ultimate parent
company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed in
Directors’ responsibility statement confirm that, to the best of
their knowledge:
• the Company financial statements, which have been prepared
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”,
and applicable law), give a true and fair view of the assets,
liabilities, financial position and profit of the Company;
• the Group financial statements, which have been prepared
in accordance with IFRSs as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the Group; and
• the Directors’ Report includes a fair review of the development
and performance of the business and the position of the Group
and Company, together with a description of the principal risks
and uncertainties that it faces.
Corporate Governance
The Company’s statement on corporate governance compliance
can be found in the corporate governance report on pages
40 to 43 of the Annual Report and Accounts. The corporate
governance report forms part of this Directors’ report and is
incorporated by reference.
Statement of disclosure of information to auditors
In accordance with Section 418, Directors’ reports shall include
a statement, in the case of each Director in office at the date
the Directors’ report is approved, that:
• So far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware.
• He has taken all the steps that he ought to have taken as a
Director in order to make himself aware of any relevant audit
information and to establish that the Company’s auditors are
aware of that information.
Approved by the Board of Directors and signed on its behalf by;
Mark Pickett
Chief Financial Officer
Ian Bowles
Chief Executive
Kings Orchard
1 Queen Street
Bristol
BS2 0HQ
Registered number 4128850
22 March 2018
52
Tribal Group plc Annual Report and Accounts 2017
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
53
Financial Statements54 Independent Auditor’s Report to the Members of Tribal Group plc58 Consolidated Income Statement59 Consolidated Statement of Comprehensive Income60 Consolidated Balance Sheet61 Consolidated Statement of Changes in Equity62 Consolidated Cash Flow Statement63 Notes to the Financial Statements101 Company only Balance Sheet102 Company only Statement of Changes in Equity103 Notes to the Company Balance SheetCompany information 108 Company Information 54
Tribal Group plc Annual Report and Accounts 2017
Independent Auditors’ Report
to the Members of Tribal Group plc
Report on the audit of the financial statements
Opinion
In our opinion:
• Tribal Group plc’s Group financial statements and parent company financial statements (the “financial statements”) give a
true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2017 and of the Group’s
profit and cash flows for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”,
and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts 2017 (the “Annual Report”), which
comprise: the consolidated and Company only balance sheets as at 31 December 2017; the consolidated income statement and
consolidated statement of comprehensive income, the consolidated cash flow statement, and the consolidated and Company
only statements of changes in equity for the year then ended; and the notes to the financial statements, which include a
description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
• Overall group materiality: £845,000 (2016: £900,000), based on 1% of Total revenue.
• Overall parent company materiality: £438,000 (2016: £360,000), based on 0.6% of Total Assets.
• We focused our group audit scope primarily on the operations of the main UK trading entity and the
Australian sub group.
• The UK branch of Tribal Education Limited and Australian sub group, were subject to full scope audit.
• These operations represent the principal business units and account for 85% (2016: 91%) of the
Group’s revenue.
• Revenue recognition.
•
Impairment of indefinite life intangibles.
The scope of the audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there
was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
55
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make
on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks
identified by our audit.
Key audit matter
Revenue recognition
The Group has recognised £85 million (2016: £90 million) of revenue
in the year. The Group’s key revenue recognition policies are set out
in note 1 to the financial statements. The risk relates to the key
judgements required in applying these policies.
The accounting judgements can be complex when associated with
recognition of invoiced and accrued income for contracts where
there are specific ongoing delivery challenges, history of slow or
non-payment, ongoing commercial negotiations, contract claims or
contract losses. There is also a risk that invoiced and accrued revenue
on such contracts may not be recoverable.
The timing of when delivery has occurred for software/ licences can
also be complex (as no physical delivery usually occurs with software
and encryption keys being sent electronically). Given the material
nature of the Group’s licence contracts there is a risk that licence
revenues are recorded in the wrong period.
Impairment of indefinite life intangibles
The carrying value of goodwill as at 31 December 2017 was £21.1million
allocated to three cash generating units (CGUs) related to the Group’s three
business segments. No impairment has been recognised in the current year.
Further detail is included in note 13 to the financial statements (“Goodwill”)
and notes 1 and 2 which set out the Group’s accounting policy and critical
judgements in relation to the impairment of goodwill.
The standard for impairment of assets, IAS 36, states that all indefinite
lived intangible assets (those not subject to amortisation), including
goodwill, should be tested for impairment annually.
Management have identified the cash generating units (CGUs) for the
impairment as being; Student Management Systems, i-graduate and
Quality Assurance Services. The impairment assessment has been
performed against the assets and liabilities allocated to these segments.
Estimation of the recoverable amount requires management to make
assumptions in respect of forecast operating cash flows, long-term
growth rates and discount rates. The assumptions and judgements
in assessing the carrying value of the intangibles are judgemental,
giving rise to risk in respect of valuation.
How our audit addressed the key audit matter
We sought to identify those contracts where
management may have encountered unexpected
complexities in delivering the project. We made
inquiries of operational management to identify
contract claims or potential losses, reviewed project
financial information and sought evidence of payment
against milestones.
We evaluated recoverability of invoiced and accrued
income by selecting a risk-based sample of projects
and obtaining evidence to support recoverability,
including subsequent payments, explanations from
operational teams, customer correspondence, and
history of customer payments.
We obtained customer acceptance of licences near
the year end to ensure management have followed
the documented policies and procedures prior to
recognising licence revenue.
We evaluated the appropriateness of the key
assumptions driving the cash flow forecasts including
forecast future performance, discount rates and
short and long-term growth rates. We considered
the accuracy of prior year forecasts and performed
sensitivities across the reporting segments.
We concluded that the assumptions used by
management were reasonable.
We also ensured that the disclosures in relation to
the assumptions and sensitivities, particularly in
relation to the i-graduate CGU where the headroom
was lowest and therefore most sensitive to changes in
assumptions were appropriate.
Given this management has disclosed relevant
sensitivities (see note 13).
We determined that there were no key audit matters applicable to the parent company to communicate in our report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group and the parent company, the accounting processes and
controls, and the industry in which they operate.
The Group principally operates from the UK and Australia, accounting for 85% of total revenues, and across 3 business segments,
SMS, i-graduate and QAS. All Group entities moved onto a common general ledger platform from 1 January 2017 giving improved
reporting capability of the Group’s results, while the Australian finance function moved into the UK during the year.
56
Tribal Group plc Annual Report and Accounts 2017
Independent Auditors’ Report
to the Members of Tribal Group plc continued
The UK and Australian operations were scoped for full audit procedures, along with specific line items in other territories where
they contributed between 5–15% of a specific line item. Across the components subject to audit the population covered by our
audit sample is 97% (2016: 76%) of the Group’s consolidated revenue. The lowest level of coverage we obtained for any financial
statement line item was 59%.
At the parent entity level we also tested the consolidation process, including testing of consolidation journals, and carried out
analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated
financial information of the remaining components not subject to full scope audit.
The UK firm performed all audit work except the audit of Australian tax balances where we determined the Australian firm had the
better expertise and knowledge.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of
our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements,
both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall
materiality
How we
determined it
Rationale for
benchmark
applied
Group financial statements
£845,000 (2016: £900,000).
Parent company financial statements
£438,000 (2016: £360,000).
1% of Total revenue.
0.6% of Total Assets.
The business has experienced significant volatility in recent years
and the Group has gone under a significant restructure, following a
significant divestment in the prior year, new management team and
strategy. Accordingly revenue is deemed to be the most appropriate
benchmark, we also note that it is a key metric that the Company’s
analysts use to track and measure the Group’s performance.
The parent company is a holding
company and does not trade. Total
assets reflecting primarily the
investment in the trading companies
best represents the nature and purpose
of the entity.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.
The materiality allocated was £739,000 for both significant components.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £42,000 (Group
audit) (2016: £27,000) and £21,900 (Parent company audit) (2016: £18,000) as well as misstatements below those amounts that,
in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:
• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the Group’s and parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least
twelve months from the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and
parent company’s ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
57
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report
certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’
Report for the year ended 31 December 2017 is consistent with the financial statements and has been prepared in accordance
with applicable legal requirements.
In light of the knowledge and understanding of the Group and parent company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibility Statement set out on page 51, the Directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true
and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability
to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• the parent company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Sam Taylor (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Reading
22 March 2018
58
Tribal Group plc Annual Report and Accounts 2017
Consolidated Income Statement
For the year ended 31 December 2017
Adjusted
£’000
Note
Other items
(see note 6)
£’000
Year ended
31 December
2017
Total
£’000
Adjusted
£’000
Other items
(see note 6)
£’000
Year ended
31 December
2016
Total
£’000
3
84,918
(42,401)
42,517
–
–
–
84,918
90,255
(42,401)
(51,408)
42,517
38,847
–
–
–
90,255
(51,408)
38,847
Continuing operations
Revenue
Cost of sales
Gross profit
Total administrative expenses
(33,975)
(4,815)
(38,790)
(34,159)
(4,625)
(38,784)
Operating profit/(loss)
4, 5
8,542
(4,815)
3,727
4,688
(4,625)
Investment income
Finance costs
8
6, 9
20
(179)
–
(128)
20
66
(307)
(595)
–
(398)
Profit/(loss) before tax
8,383
(4,943)
3,440
4,159
(5,023)
Tax (charge)/credit
10
(1,757)
936
(821)
(889)
596
63
66
(993)
(864)
(293)
Profit/(loss) for the year
6,626
(4,007)
2,619
3,270
(4,427)
(1,157)
Earnings per share
Basic
Diluted
12
12
3.4p
3.2p
1.3p
1.3p
1.9p
1.9p
(0.7)p
(0.7)p
All activities are from continuing operations
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
59
Consolidated Statement
of Comprehensive Income
For the year ended 31 December 2017
Profit/(loss) for the year
Other comprehensive (expense)/income:
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes
Deferred tax on measurement of defined benefit pension schemes
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive (expense)/income for the year net of tax
Year ended
31 December
2017
£’000
Year ended
31 December
2016
£’000
Note
2,619
(1,157)
27
22
55
(9)
(436)
(390)
(1,706)
290
3,070
1,654
Total comprehensive income for the year attributable to equity holders of the parent
2,229
497
Tribal Group plc Annual Report and Accounts 201760Consolidated Balance Sheet Note2017£’0002016£’000Non-current assetsGoodwill 1321,11321,316Other intangible assets1413,86314,214Property, plant and equipment151,5771,981Deferred tax assets224,2753,881Accrued income15016940,97841,561Current assetsInventories–83Trade and other receivables1613,62515,810Accrued income4,8513,605Current tax assets10684Cash and cash equivalents (excluding bank overdrafts)1814,08210,26032,66429,842Total assets73,64271,403Current liabilitiesTrade and other payables19(6,888)(7,066)Accruals(8,593)(8,204)Deferred income(17,934)(19,352)Current tax liabilities(2,573)(1,266)Borrowings20–(1,427)Provisions21(1,250)(941)(37,238)(38,256)Net current liabilities(4,574)(8,414)Non-current liabilitiesOther payables19(551)(1,026)Deferred tax liabilities 22(1,276)(1,877)Deferred income(113)(818)Retirement benefit obligations27(1,718)(1,725)Provisions21(194)(211)(3,852)(5,657)Total liabilities(41,090)(43,913)Net assets32,55227,490EquityShare capital249,8039,769Share premium15,53914,989Other reserves2522,78320,879Accumulated losses(15,573)(18,147)Total equity attributable to equity holders of the parent32,55227,490Notes 1 to 33 form part of these financial statements. The Company’s registered number is 4128850.The financial statements on pages 58 to 100 were approved by the Board of Directors and authorised for issue on 22 March 2018 and were signed on its behalf by:Ian Bowles Mark PickettDirector DirectorAs at 31 December 2017 Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
61
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
At 1 January 2016
Loss for the year
Other comprehensive income for the year
Acquisition of own shares
Issue of equity share capital
Costs associated with issue of share capital
Charge to equity for share-based payments
Tax credit on charge to equity for share-based payments
Transfer from merger reserve
Note
23
10
Share
capital
£’000
4,743
–
–
–
–
–
–
5,026
17,091
–
–
–
–
(2,123)
–
–
–
Share
premium
£’000
Other
reserves
£’000
Accumulated
losses
£’000
Total
equity
£’000
21
20,503
(19,107)
6,160
–
–
(91)
–
–
876
–
(409)
(1,157)
(1,157)
1,654
1,654
–
–
–
–
54
409
(91)
22,117
(2,123)
876
54
–
At 31 December 2016 and 1 January 2017
9,769
14,989
20,879
(18,147)
27,490
Profit for the year
Other comprehensive expense for the year
Issue of equity share capital
Charge to equity for share-based payments
Tax credit on charge to equity for share-based payments
Transfer from other payables for share-based payments
–
–
–
–
34
550
–
–
–
23
10
19
–
–
–
–
–
–
1,393
–
511
2,619
2,619
(390)
(390)
–
–
345
–
584
1,393
345
511
At 31 December 2017
9,803
15,539
22,783
(15,573)
32,552
62
Tribal Group plc Annual Report and Accounts 2017
Consolidated Cash Flow Statement
For the year ended 31 December 2017
Net cash from operating activities
Investing activities
Interest received
Gross proceeds from disposal of Synergy
Costs associated with disposal of Synergy
Purchases of property, plant and equipment
Expenditure on intangible assets
Payment of deferred consideration for acquisitions
Repayment of Escrow (in respect of Human Edge)
Year ended
31 December
2017
£’000
Year ended
31 December
2016
£’000
11,117
8,274
Note
28
20
–
–
(803)
(3,559)
(1,157)
–
66
19,421
(872)
(443)
(1,932)
(3,374)
357
15
14
Net cash (outflow)/inflow from investing activities
(5,499)
13,223
Financing activities
Interest paid
Purchase of own shares
Gross proceeds on issue of shares
Costs associated with issue of shares
Repayment of borrowings and loan arrangement fees
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
(101)
–
–
–
(25)
(126)
5,492
8,833
(243)
18
14,082
(460)
(91)
22,117
(2,123)
(34,500)
(15,057)
6,440
1,736
657
8,833
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
63
Notes to the Financial Statements
1. Accounting policies
General information
Tribal Group plc (the Company) is a company incorporated and domiciled in the United Kingdom under the Companies Act. The
Company is a public limited company which is listed on the Alternative Investment Market (AIM). The address of the registered
office is given on page 108. The principal activities of the Company and its subsidiaries (the Group) and the nature of the Group’s
operations are set out in note 4 and in the strategic report on pages 7 to 33. The financial statements are presented in pounds
sterling because that is the currency of the primary economic environment in which the Group operates. Foreign operations
are included in accordance with the policies set out below. The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been consistently applied to all the years presented,
unless otherwise stated.
Basis of preparation
The financial statements on pages 58 to 100 have been prepared in accordance with International Financial Reporting
Standards (IFRSs) and IFRS Interpretation Committee (IFRS IC) as adopted by the European Union and therefore the Group financial
statements comply with Article 4 of the EU IAS Regulation and the Companies Act 2006 applicable to Companies reporting
under IFRS.
The financial information has been prepared on the historical cost basis, except for financial instruments (Share based payments)
which are recognised at fair value.
The preparation of financial statements in conforming with IFRSs requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degreee of judgement or complexity, or ares where assumptions and estimates are significant to the financial statements
are disclosed in note 2.
Adoption of new and revised standards
In the current financial year, the Group has applied a number of amendments to IFRSs and new interpretations by the International
Accounting Standards Board (“IASB”) that are mandatorily effective for an accounting period that begins on or after 1 January 2017
including amendments to IAS 7 Statement of cashflow disclosure, IAS 12 Recognition of deferred tax assets for unrealised losses,
and Annual Improvements to IFRS Standards 2014–2016 Cycle. Their adoption has not had any material impact on the disclosures
or on the amounts reported in these financial statements.
At the date of the authorisation of these financial statements, the following Standards and Interpretations which have not been
applied in these financial statements were in issue but not yet effective (and in some cases had not been adopted by the EU):
IFRS 2 (amendments)
IFRS 9
Share based payments
Financial Instruments
IFRS 15 (amendments)
Revenue from contracts with customers
IFRS 16
IFRS 17
Leases
Insurance contracts
IFRS 4 (amendments)
‘Insurance contracts’ regarding the implementation of IFRS 9 ‘Financial Instruments’
IFRIC 22
IFRIC 23
Foreign currency transactions and advance consideration
Uncertainty over income tax treatments
Annual Improvements 2015-2017 Cycles
The Group has assessed the impact of adopting IFRS 15, and has concluded that software License revenue will be recognised
over the duration of the project Implementation period on a percentage complete basis. This will spread the recognition of License
revenue over an extended period, rather than immediate, upfront recognition. There will be no changes to the timing of the recognition
of Implementation or Support & Maintenance revenue. In 2017, this is expected to increase the revenue by £0.4m to £85.3m and
operating profit by £0.4m to £8.9m, a decrease of £0.2m to accrued income and a decrease of £0.6m to deferred income.
The Group is currently assessing the impact of adopting IFRS 9 however it is not anticipated that the new standard will have a
material impact on the Group.
It is anticipated that IFRS 16 could have a potentially material impact on the Group. For IFRS 16 it is not practicable to provide a
reasonable estimate of the effect of these standards until a detailed review has been completed.
64
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
1. Accounting policies continued
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is achieved where the Company:
• has the power over the investee;
•
is exposed, or has the rights, to variable returns from its involvement with the investee: and
• has the ability to use its power to affect its returns.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate. All intra group transactions, balances, income
and expenses are eliminated on consolidation.
Adoption of the going concern basis
The Directors, having considered the cash-flow forecast, and while noting the Group has net current liabilities, have performed a
risk assessment of likely downside scenarios and associated mitigating actions, and have a reasonable expectation that adequate
financial resources will continue to be available for the foreseeable future. Thus, they continue to adopt the going concern basis in
preparing the financial statements.
Revenue recognition
Revenue is measured at the fair value of the consideration receivable from the provision of goods and services to third party
customers in the normal course of business. Revenue is stated excluding sales tax and trade discounts. The particular recognition
policies applied in respect of the various potential elements of short-term or repeat service contracts are as set out below. Analysis
has been provided by revenue stream:
Student Management Systems:
• Revenue on perpetual software licences is recognised on transfer to the customer of the risks and rewards of ownership
providing there are no unfulfilled obligations that are essential to the functionality of the product. If such obligations exist,
revenue is recognised as they are fulfilled. The transfer of the risks and rewards takes place when the customer has the
opportunity to access the software. Depending on the specific nature of the product in question and whether they are a new
site, or an existing customer purchasing new modules, the customer has the opportunity to access the software when links
are provided, licence keys issued, or installation completed.
• Revenue from term software licences is spread over the period of the licence.
• Revenue from contracts for software maintenance and support is recognised on a pro rata basis over the contract period,
reflecting the Group’s obligation to support the relevant software products and update their content over the contract period.
• Other services that are purchased for a specific term are recognised on a pro rata basis over the contract period. This includes
services such as hosting and managed IT services.
• Revenue from software implementation, consultancy and other services that involve the purchase of a number of days is
recognised as the service is provided.
Quality Assurance Services and i-graduate:
Revenue from the sale of services is recognised upon transfer to the customer of the risks and rewards of ownership. This is
generally when services are performed for customers. The method by which the Group measures the service being performed
varies depending on the nature of the contract, but will typically be driven by either time incurred or deliverables delivered as
appropriate to the particular arrangement with the customer.
Interest is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
For multi-element contracts that include more than one revenue stream, the fair value of the component parts is established and
revenue recognised for each element in line with the relevant policy above. Where separate contracts are entered into at or near the
same time, with the same entity and were negotiated as a package, they are treated as a single arrangement.
In addition to this, the Group has long-term contracts for the provision of more complex, project-based services including
arrangements that involve significant production, modification, or customisation of software. Where the outcome of such long-
term project-based contracts can be measured reliably, revenue and costs are recognised by reference to the stage of completion
of the project at the balance sheet date. This is measured by the proportion that development time incurred for work performed to
date bears to the estimated total development time required. Variations in contract work and claims are included to the extent that
the amount can be measured reliably and its receipt is considered probable.
Where the outcome of a long-term project-based contract cannot be estimated reliably, contract revenue is recognised to the
extent of contract costs that it is probable will be recovered. When it is probable that the total contract costs will exceed total
contract revenue, the expected loss is recognised as an expense within administrative expenses immediately.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
65
1. Accounting policies continued
Deferred contingent consideration
The Group has a number of deferred consideration obligations arising from previous acquisitions which are subject to both
contingent and non-contingent performance criteria. All acquisitions are now outside of the measurement period for fair value
acquisition accounting.
The accounting for changes in the fair value of deferred contingent consideration, and non-contingent consideration if applicable,
that do not qualify as measurement period adjustments, and for which consideration is classified as an asset or liability is
remeasured at subsequent reporting dates at fair value with the corresponding gain or loss being recognised in profit or loss.
Any equity based consideration is recognised in equity at the date it is agreed and would not be remeasured at subsequent
reporting dates, with subsequent settlement accounted for within equity.
Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date).
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the net of the acquisition date
amounts of the identifiable assets acquired and liabilities assumed.
If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the
consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously
held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash-generating units (“CGUs”) expected to benefit from the combination. CGUs (or groups of
CGUs) to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that
the unit may be impaired. If the recoverable amount of the CGU (or groups of CGUs) is less than its carrying amount, the impairment
loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGUs (or group of CGUs) and then to the other
assets of the CGU (or groups of CGUs) pro rata on the basis of the carrying amount of each asset. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
On disposal of a subsidiary or a division, the attributable amount of goodwill is included in the determination of the profit and loss on
disposal. Goodwill arising on acquisition before the date of transition to IFRSs has been retained at the previous UK GAAP amounts,
subject to being tested for impairment at that date.
Merger reserve
The merger reserve comprises the non-statutory premium arising on shares issued as consideration for acquisitions of
subsidiaries where merger relief under the relevant section of the Companies Act applies. To the extent that the creation of
goodwill originally gave rise to a merger reserve, upon impairment an appropriate amount is transferred from the merger reserve
to the profit and loss reserve.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment (if any). Tangible and Intangible assets are amortised over their estimated
useful lives (see notes 14 and 15).
The recoverable amount is the higher of fair value less costs to sell and the value in use. The estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised
as income immediately.
66
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
1. Accounting policies continued
Business systems
The Group’s business systems are treated as an intangible asset where the probable future economic benefits arising from the
investment can be assessed with reasonable certainty at the time the costs are incurred. Costs included are those directly
attributable to the design, construction and testing of new systems (including major enhancements) from the point of inception
to the point of satisfactory completion. Maintenance and minor modifications are expensed against the income statement as
incurred. These assets are amortised by equal instalments over an average of five years.
Internally generated intangible assets – research and development costs
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally generated intangible asset arising from the Group’s product development is recognised only if all of the following
conditions have been demonstrated:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset; and
• the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Internally generated intangible assets are amortised on a straight-line basis over their useful economic lives of 2 to 7 years. Where
no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in
which it is incurred.
Acquired Intangibles
Acquired intangibles are stated at cost, net of amortisation and any recognised impairment loss. These assets are amortised on a
straight line basis over their useful economic lives of 5 years.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation and any recognised impairment loss. Depreciation is charged
so as to write off the cost of each asset, other than properties in the course of construction, by equal instalments over their
estimated useful economic lives as follows:
• Leasehold buildings – life of the lease
• Fixtures, fittings and other equipment – 3 to 7 years
Leases
Operating lease rentals are charged against income on a straight-line basis over the period of the lease. Benefits received and
receivable as an incentive to enter into an operating lease are spread on a straight-line basis over the lease term.
Other items
IAS 1, “Presentation of Financial Statements”, provides no definitive guidance as to the format of the income statement, but states
key lines which should be disclosed. It also encourages the disclosure of additional line items and the reordering of items presented
on the face of the income statement when appropriate for a proper understanding of the entity’s financial performance.
The Company has adopted a policy of disclosing separately on the face of its Group income statement the effect of any
components of financial performance considered by the Directors to be not directly related to the trading business or regarded as
exceptional, or for which separate disclosure would assist in a better understanding of the financial performance achieved.
Both materiality and the nature and function of the components of income and expense are considered in deciding upon such
presentation. Such items may include, inter alia, impairment charges relating to goodwill and other intangible assets, the financial
effect of major restructuring and integration activity, gains or losses associated with acquisitions (including the costs of such
acquisitions, movements in deferred contingent consideration and the associated unwind of any discount thereon), profits or
losses arising on business disposals, share based payments and other items where separate disclosure is considered appropriate
by the Directors, including the taxation impact of the aforementioned items.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
67
1. Accounting policies continued
Retirement benefit costs
The Group operates two defined contribution pension schemes that are established in accordance with employment terms set by
the employing companies. The assets of these schemes are held separately from those of the Group in independently administered
funds. The amount charged against profits represents the contributions payable to the scheme in respect of the accounting period.
Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes, where
the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.
For defined benefit retirement schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with
actuarial valuations being carried out at the end of each reporting period. Remeasurement comprising actuarial gains and losses,
the effect of the asset ceiling (if applicable) and the return on scheme assets (excluding interest) are recognised immediately in the
balance sheet with a charge or credit to the Statement of Comprehensive Income in the period in which they occur. Remeasurement
recorded in the Statement of Comprehensive Income is not recycled. Past service cost is recognised in profit or loss in the period
of scheme amendment. Net interest is calculated by applying a discount rate to the net defined benefit liability or asset. Defined
benefit costs are split into three categories:
• current service cost, past service cost and gains and losses on curtailments and settlements;
• net interest expense or income; and
•
remeasurement.
The Group presents the first component of defined benefit costs within cost of sales and administrative expenses in the
consolidated income statement. Curtailment gains and losses are accounted for as past-service cost. Net interest expense
or income is recognised within finance costs. The retirement benefit obligation recognised in the consolidated balance sheet
represents the deficit or surplus in the Group’s defined benefit pension schemes. Any surplus resulting from this calculation is
limited to the present value of any economic benefits available in the form of refunds from the schemes or reductions in future
contributions to the schemes.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will
be required to settle the obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle
the obligation at the balance sheet date, and are discounted to present value where the effect is material.
A property related provision is recognised and measured as a provision when the Group has a present obligation arising under a
property related contract. This includes dilapidation costs arising from exiting a leasehold property where the costs are not all
expected to be incurred during the next year. For a business that is closed or to be discontinued the provision reflects the costs
associated with exiting the property leased by the discontinued or closed business.
An onerous contracts provision is recognised and measured as a provision when the Group has a present obligation arising under an
onerous contract. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of
meeting the obligations under the contract exceed the economic benefits expected to be received under it.
A legal claims provision is recognised and measured as a provision when the Group has a present obligation arising under a legal
claim. This includes anticipated costs to resolve any contractual disputes and any anticipated costs in respect of disputes arising
on previously disposed of businesses.
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a
valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main
features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from
the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the
ongoing activities of the entity.
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered
to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it.
68
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
1. Accounting policies continued
Foreign currencies
Transactions in currencies other than the local functional currency are recorded at the rates of exchange on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at
the rates prevailing on the balance sheet date, with differences recognised in profit or loss in the period in which they arise.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the
balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences
arising, if any, are recognised directly within equity within other comprehensive income. Such translation differences are recognised
as income or expense in the period in which the operation is disposed of. Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured
at fair value at the date of grant. This is expensed on a straight-line basis over the vesting periods of the instruments. At each
balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect
of the particular vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such
that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
Fair value is measured by use of an adjusted Black-Scholes model for the LTIPs awarded pre 2016, 2016 matching shares,
2017 LTIPs (including the CSOP) , and a Monte-Carlo model for the LTIPS awarded in 2016, as these will vest dependent on
market conditions.
Tax
Current tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying values of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
The carrying value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at
the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax in the income
statement is charged or credited, except when it relates to items charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current
tax assets and liabilities on a net basis.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL),
‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on
the nature and purpose of the financial assets and is determined at the time of initial recognition. The Group does not currently hold
any held-to-maturity investments or ‘available for sale’ financial assets.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income
over the relevant period. The effective rate is the rate that exactly discounts estimated future cash receipts (including all fees on
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of a financial asset, or, where appropriate, a shorter period.
Interest is recognised on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
69
1. Accounting policies continued
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market
are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when
the recognition of interest would be immaterial.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets
are impaired where there is objective evidence that, as a result of one or more event that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been impacted.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are
subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could
include the Group’s past experience of collecting payments, as well as observable changes in national or local economic conditions
that correlate with default on receivables.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade
receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered
uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited
against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and
the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised
impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of AFS equity securities, impairment losses previously recognised through profit or loss are not reversed through profit or
loss. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.
Cash and cash equivalents
Cash comprises cash in hand and deposits repayable on demand, less overdrafts payable on demand which have a right of offset
against cash balances. These instruments are readily convertible to a known amount of cash and are subject to an insignificant risk
of change in value.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the assets expire, or it transfers
the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither
transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the
Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains
substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial
asset and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issued costs.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities
are subsequently measured at amortised cost using the effective interest rate method, with interest expense recognised on
an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
70
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
1. Accounting policies continued
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of these assets, until
such time as the assets are substantially ready for their intended use. All other borrowing costs are recognised in profit or loss in
the period in which they are incurred.
2. Critical accounting judgements and sources of estimation uncertainty
In the process of applying the Group’s accounting policies, which are described in note 1, the Board has made the following
judgements that have the most significant effect on the amounts recognised in the financial statements.
Goodwill and other intangible assets
The carrying value of goodwill at the year-end is £21.1m (2016: £21.3m). An annual impairment review is required under IAS 36
‘Impairment of assets’ involving judgement of the future cash flows and discount rates for cash-generating units. The Group
prepares such cash flow forecasts derived from the most recent budgets approved by the Board of Directors. Further details of
the other assumptions used are given in note 13.
The carrying value of other intangible assets is £13.9m (2016: £14.2m). Judgement is required to assess whether costs meet the
criteria for capitalisation set out in IAS 38, the useful life of those assets, and subsequently the consideration of the potential need
for impairment of these assets, in particular in relation to their expected ability to generate future revenue.
Revenue recognition
The Group’s revenue recognition policies are disclosed in note 1. In some cases, particularly in relation to significant software
delivery programmes on which we are engaged in a number of international settings, judgement is required to determine the most
appropriate measure of the fair value and the timing of revenue and profit recognition related to the services and products that have
been delivered to customers at the balance sheet date. In particular before any licence revenue can be recognised, the licence must
have been delivered and installed at the customers premises and be available to use by the customer in the environment on which
installation will take place. Judgement is also required in the assessment of the risk of recoverability of any associated receivables
and accrued income where invoicing and/or payment is subject to certain future milestones. Programme delivery requirements,
software specification and customer expectations may evolve during the course of these major projects. This may result in
developments to ongoing commercial arrangements that could materially impact the basis of financial judgements made at a period
end. Therefore the potential impact of these evolving obligations and the overall customer project status must be considered
carefully and where appropriate reflected in accounting judgements.
3. Revenue
An analysis of the Group’s revenue is as follows:
Continuing operations
Sales of services
Total revenue
2017
£’000
2016
£’000
84,918
90,255
84,918
90,255
Sales of services are defined as education related systems or solutions and consultancy services. Further details of the nature of
the services provided are disclosed in note 4.
Sales of goods are not material and are therefore not shown separately. Included in sales of services is £0.4m (2016: £0.5m) related
to software licence revenues recognised as a result of a periodic review of our licence entitlement resulting from changes in our
customers’ enrolled student numbers.
There is no revenue in respect of discontinued operations.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
71
4. Business segments
Information reported to the Group’s Chief Executive for the purposes of resource allocation and assessment of segment
performance is focused on the nature of each type of activity. The Group’s reportable segments and principal activities under
IFRS 8 are detailed below:
Student Management Systems (“SMS”) represents the delivery of software and subsequent maintenance and support services
and the activities through which we deploy and configure our software for our customers;
i-graduate, represents a portfolio of performance improvement tools and services, including analytics, software solutions, facilities
and asset management; and
Quality Assurance Solutions (“QAS”), representing inspection and review services which support the assessment of
educational delivery.
In accordance with IFRS 8 ‘Operating Segments’, information on segment assets is not shown, as this is not provided to the chief
operating decision-maker. Inter-segment sales are charged at prevailing market prices.
Revenue
Adjusted Segment
Operating Profit
Year ended
31 December
2017
£’000
Restated
Year ended
31 December
2016
£’000
Year ended
31 December
2017
£’000
Restated
Year ended
31 December
2016
£’000
As previously
reported
Year ended
31 December
2016
£’000
Student Management Systems
i-graduate
Quality Assurance Solutions
Total
Unallocated corporate expenses
Adjusted operating profit
Amortisation of IFRS 3 intangibles
Other items
Operating profit
Investment income
Finance costs
Profit/(loss) before tax
Tax charge
Profit/(loss) after tax
60,026
7,101
17,791
84,918
59,005
8,705
22,545
90,255
17,613
1,064
4,408
12,021
1,007
6,537
23,085
19,565
(14,543)
(14,877)
4,724
901
2,532
8,157
(3,469)
4,688
(1,912)
(2,713)
63
66
(993)
(864)
(293)
8,542
(2,034)
(2,781)
3,727
20
(307)
3,440
(821)
2,619
4,688
(1,912)
(2,713)
63
66
(993)
(864)
(293)
(1,157)
(1,157)
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 1. Segment
profit represents the profit earned by each segment, without allocation of central administration costs, including Directors’ salaries,
finance costs and income tax expense. This is the measure reported to the Group’s Chief Executive for the purpose of resource
allocation and assessment of segment performance.
From the beginning of 2017, the basis of cost allocation for each of the Lines of Business has changed. It was determined that
the previous methodology allocated central costs (which include Finance, HR, Legal, IT, Corporate services., Marketing and Office
costs) in a way that did not represent the level of resource utilised by that business, and accordingly did not provide sufficient
insight into the underlying profitability of the Line of Business. The segmental analysis of Adjusted Operating profit now allocates
all directly attributable and controllable direct and overhead costs to its business segment. The central and group costs now
represent the aggregate of all costs which support the Lines of Business, and which are not directly and specifically attributable
to each Line of Business.
Within QAS revenues of approximately 4% (2016: 13%) have arisen from the Segments largest customer; within SMS revenues of
approximately 8% (2016: 7%) have arisen from the Segments largest customer.
72
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
4. Business segments continued
Geographical information
Revenue from external customers, based on location of the customer, are shown below:
UK
Asia Pacific
North America and rest of the world
Non-current assets
UK
Asia Pacific
North America and rest of the world
The Group’s revenues from its major products and services were as follows:
Continuing operations
Licence and development fees
Implementation services
Support & Maintenance
Cloud services
Other services
School inspections & other related services (QAS)
i-graduate survey & data analytics
2017
£’000
39,252
33,713
11,953
84,918
2017
£’000
19,636
21,336
6
2016
£’000
46,469
31,819
11,967
90,255
2016
£’000
19,171
22,376
14
40,978
41,561
2017
£’000
9,989
14,840
33,474
4,004
2,441
17,139
3,031
Restated
2016
£’000
11,284
13,342
32,422
3,357
4,159
22,545
3,147
84,918
90,255
2016 is restated to identify cloud services separately and reallocate Performance Benchmarking to “School inspections & other
related services (QAS)” from “i-graduate surveys & data analytics”.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
73
5. Operating profit for the year
Operating profit/(loss) for the year is stated after charging/(crediting):
Staff costs (excluding amounts capitalised)
Depreciation and other amounts written off property, plant and equipment
Amortisation of acquired IFRS 3 intangible assets
Amortisation of software licences
Amortisation of business systems
Amortisation of development costs and acquired Intellectual Property
Profit on sale of Synergy
Net impairment loss on trade receivables
Research and development expenditure (includes staff costs noted above)
Net foreign exchange gains/(losses)
The analysis of auditors’ remuneration is as follows:
Fees payable to the Company’s previous auditors for other services
– other assurance
Fees payable to the Company’s current auditors for the audit of the Company’s annual report
Fees payable to the Company’s current auditors and its associates for other services to the Group:
– the audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
– audit related assurance services
Total non-audit fees
Total auditor’s remuneration
Non-audit fees in 2017 arose as a result of the half year review and technical workshops.
Fees payable to PricewaterhouseCoopers LLP and the previous auditors and its associates for non-audit services to the
Company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a
consolidated basis.
Non-audit fees in 2016 have been split between those payable to the Group’s previous auditors in respect of the Rights Issue and
disposal of Synergy (£481,000), and those payable to the current auditors in 2016 (£33,000).
Note
2017
£’000
2016
£’000
7
15
14
14
14
14
16
49,527
56,829
1,190
2,034
134
642
1,506
1,912
166
162
1,632
1,411
–
820
4,678
331
(301)
864
3,213
(115)
2017
£’000
2016
£’000
–
110
159
269
40
40
309
481
107
153
260
33
514
774
74
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
6. Other items
Profit on sale of Synergy
– Repayment of Escrow (in respect of the acquisition of Human Edge)
– Movement in deferred contingent consideration
Acquisition related costs
2017
£’000
–
–
(29)
(29)
2016
£’000
(301)
357
(607)
(250)
Share based payments (including employer related taxes)
(1,732)
(1,036)
– Onerous contracts
– Costs on closure of SLS business
– Property related
– Restructuring and associated costs
Other exceptional items
Other Administrative costs
– Amortisation of IFRS 3 intangibles
Total administrative expenses
– Unwinding of discount on deferred consideration
– Bank arrangement fees written off
– Fees associated with waiver of loan covenant
Other financing items
Tax on other items
–
–
–
(1,020)
(1,020)
(2,781)
(2,034)
(4,815)
(128)
–
–
(128)
(4,943)
936
(4,007)
115
(33)
136
(1,946)
(1,728)
(2,713)
(1,912)
(4,625)
(205)
(244)
51
(398)
(5,023)
596
(4,427)
IAS 1, paragraph 97 requires separate disclosure of such items that are considered material by nature or value, that they require
separate disclosure in the financial statements. As such, ‘other items’ are not part of the Group’s underlying trading activities and
include the following:
Acquisition costs: during the period, a final payment was made in respect of deferred consideration payable on acquisition of
Callista, which resulted in a true up of the amounts provided (2017: £29,000: 2016 £250,000).
Other exceptional items: amounts principally reflect the costs arising in respect of the restructuring of the Group’s operations. The
restructuring program was executed in the first half of 2017 and associated costs provided for. Amounts relate mainly to provision
for redundancy costs. (2017: £1,020,000: 2016: £1,946,000).
Share based payments (see note 23): The numbers above include the movement in associated employers taxes accrual (2017:
£339,000: 2016: £160,000).
Amortisation of IFRS3 intangibles: amortisation arising on the fair value of intangible assets acquired is separately disclosed as
other items. (2017: £2,034,000: 2016: £1,912,000).
Financing charges: consistent with the treatment of movements in deferred consideration, the unwind of the discount on deferred
consideration is separately presented as other financing costs in the income statement (2017: £128,000: 2016: £398,000).
Taxation: the tax credit arising on the above items is presented on a consistent basis with the underlying cost or credit to which it
relates and therefore is also presented separately on the face of the income statement.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
75
7. Staff numbers and costs
The average monthly number of persons employed under contracts of service by the Group (including Executive Directors) during
the year was as follows:
Selling, operations and marketing
Finance and administration
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs
Restructuring costs
Share option charge
2017
number
802
123
925
2017
£’000
43,303
3,720
2,228
996
1,393
2016
number
972
189
1,161
2016
£’000
47,962
3,869
2,988
2,232
876
51,640
57,927
The total payroll costs above include £2,135,000 (2016: £1,098,000) capitalised as development costs (see note 14).
Net interest expense relating to pension schemes of £42,000 (2016: credit of £12,000) and administrative expenses of £21,000
(2016: £21,000) are reported elsewhere and are therefore excluded from the figures above.
8. Investment income
Net interest receivable on retirement benefit obligations
Other interest receivable
2017
£’000
2016
£’000
–
20
20
12
54
66
76
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
9. Finance costs
Interest on bank overdrafts and loans
Amortisation and write off of loan arrangement fees
Net interest payable on retirement benefit obligations
Other interest payable
Adjusted Finance costs
Unwinding of discounts
Bank arrangement fees written off
Fees associated with waiver of loan covenants
Other finance costs
Total finance costs
10. Tax
Current tax
UK corporation tax
Overseas tax
Adjustments in respect of prior years
Deferred tax
Current year
Adjustments in respect of prior years
Tax charge on profits
2017
£’000
51
36
42
50
179
128
–
–
128
307
2016
£’000
310
60
–
225
595
205
244
(51)
398
993
2017
£’000
2016
£’000
100
1,529
(165)
116
690
309
1,464
1,115
(641)
(2)
(643)
821
(816)
(6)
(822)
293
See note 22 for further analysis of movements in the deferred tax position. The continuing tax charge can be reconciled to the profit
from continuing operations per the income statement as follows:
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
77
10. Tax continued
Profit/(loss) before tax on continuing operations
Tax credit at standard rate of 19.25% (2016: 20%)
Effects of:
Overseas tax rates
Expenses not deductible for tax purposes
Adjustments in respect of prior years
Additional deduction for R&D expenditure
Movement in tax provision
Utilisation of unrecognised tax losses
Effect of changes in tax rates
Tax expense for the year
2017
£’000
3,440
662
180
64
(167)
(7)
–
(125)
214
821
2016
£’000
(864)
(173)
140
180
272
(87)
116
(358)
203
293
In addition to the amount charged to the income statement a current tax credit of £nil (2016: £nil) and a deferred tax credit of
£345,000 (2016: credit of £54,000) has been recognised directly in equity during the year in relation to share schemes. A deferred
tax charge of £9,000 (2016: credit of £290,000) has been recognised in the Consolidated Statement of Comprehensive Income in
relation to Defined Benefit pension schemes.
The Group continues to hold an appropriate corporation tax provision in relation to the Group relief claimed from Care UK for the year
ended 31 March 2007, together with other apppropriate Group provisions.
The income tax expense for the year is based on the UK statutory rate of corporation tax for the period of 19.25% (2016: 20%).
This rate reflects the reduction of the UK corporation tax rate from 20% to 19% from 1 April 2017. Tax for other jurisdictions is
calculated at the prevailing rates prevailing in the respective jurisdictions.
A further reduction in the UK corporation tax rate from 19% to 17% ( effective from 1 April 2020) was substantively enacted on 6
September 2016. This will reduce the Group’s future tax charge accordingly. The deferred tax balances at 31 December 2017 have
been calculated based on these rates.
11. Dividends
Proposed final dividend for the year ended 31 December 2017 of 1.0 pence
(year ended 31 December 2016: nil pence) per share
2017
£’000
1,961
2016
£’000
–
12. Earnings per share
Earnings per share and diluted earnings per share are calculated by reference to a weighted average number of ordinary shares
calculated as follows:
Weighted average number of shares outstanding:
Basic weighted average number of shares in issue
Weighted average number of employee share options
Weighted average number of shares outstanding for dilution calculations
2017
thousands
2016
thousands
195,011
168,755
10,729
–
205,740
168,755
78
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
12. Earnings per share continued
Diluted earnings per share only reflects the dilutive effect of share options for which performance criteria have been met. Previous
share incentive schemes vest based on cumulative EPS for a three year period with the earliest vesting based on the Group’s
results for the three years to 31 December 2017. None of the 552,928 remaining share options that were issued in 2015 met the
performance criteria.
In regards the diluted loss per share in 2016, all potentially dilutive ordinary shares, including options and deferred shares, are
anti-dilutive as they would decrease the loss per share.
The maximum number of potentially dilutive shares, based on options that have been granted but have not yet met vesting criteria,
is 10,084,612 (2016: 5,367,189). In addition there are a further 3,405,996 (2016: 3,405,996) potentially dilutive matching share
options that have been granted but have not yet met vesting criteria as at 31 December 2017.
The adjusted basic and diluted earnings per share figures shown on the consolidated income statement on page 58 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:
Net Profit/(loss)
Earnings per share
Basic
Diluted
Adjusted earnings per share
Basic
Diluted
2017
£’000
2,619
1.3p
1.3p
3.4p
3.2p
2016
£’000
(1,157)
(0.7)p
(0.7)p
1.9p
1.9p
Profit/(loss) for the year attributable to equity shareholders
Add back:
Profit/(loss) for the year
Earnings per share
2017
£’000
2,619
2016
£’000
(1,157)
2017
£’000
1.3p
2016
£’000
(0.7)p
Amortisation of IFRS intangibles (net of tax)
1,444
1,354
Disposal of Synergy
Repayment of Escrow
Bank arrangement fees written off
Share based payments
Unwinding of discounts
Other items (net of tax)
Movement in deferred contingent consideration
Total adjusting items (net of tax)
Adjusted earnings
–
–
–
1,393
128
1,013
29
4,007
6,626
(301)
(357)
244
876
205
1,799
607
4,427
3,270
2.1p
3.4p
2.6p
1.9p
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
79
13. Goodwill
Cost
At beginning of year
Disposals
Allocation of goodwill to disposal of Synergy business
Exchange differences
At end of year
Accumulated impairment losses
At beginning of year
At end of year
Net book value
At end of year
At beginning of year
2017
£’000
2016
£’000
102,547
119,542
(10)
–
(193)
–
(19,107)
2,112
102,344
102,547
81,231
81,231
21,113
21,316
81,231
81,231
21,316
38,311
Goodwill acquired in a business is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from
the business combination. The carrying amount of goodwill has been allocated as follows:
Student Management Systems
i-graduate
2017
£’000
17,579
3,534
21,113
2016
£’000
17,782
3,534
21,316
Goodwill is reviewed at least annually for impairment by comparing the recoverable amount of each cash generating unit (CGU) with
the goodwill, intangible assets and property, plant and equipment allocated to that CGU.
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use risk adjusted cash flow
projections based on the financial budget approved by management for the period to 31 December 2018. The budget was prepared
based on past experience, strategic plans and management’s expectation for the markets in which they operate including adjustments for
known contract ends, contract related inflationary increases and planned cost savings. The budget was extrapolated over an eight-year
period with a growth assumption of 2% per annum. Cash flows beyond the budget and extrapolation period were calculated into perpetuity
using a growth rate of 2%. This growth rate is in line with the expected average UK economy long-term growth rate.
The cash flows projections are discounted at a post-tax discount rate of 11.27% (2016: 12%). The single discount rate, which is
consistently applied for all CGUs, is determined with reference to internal measures and available industry information and reflects
specific risks relevant to the Group.
Impairment testing inherently involves a number of judgemental areas, including the preparation of cash flow forecasts for periods
that are beyond the normal requirements of management reporting; the assessment of the discount rate appropriate to the Group
and the estimation of the future revenue and expenditure of each CGU. Accordingly, management undertook stress testing to
understand the key sensitivities and concluded as follows:
SMS is the largest segment and has significant impairment headroom as such no reasonable sensitivities would cause an impairment.
i-graduate is the smallest segment and the impairment headroom is the most sensitive. The discount rate for 2017 would need
to increase to 11.8% for an impairment to occur or the growth rate reduce to 1.4% per annum. For example, if the growth rate
decreased to 1.0% and the discount rate was 11.0% it would result in an impairment of approximately £54,000. One of the
significant assumptions in i-graduate is the increase of profits in the budget for the period to 31 December 2018. It should be noted
that the i-graduate budget was prepared on a bottom-up basis which the Directors consider to be a prudent, low case position with
known potential upside, albeit with some risk attached. The Directors do not feel these sensitivity scenarios or a combination of
the two are likely to occur. Additionally, the annually recurring nature of the surveys and data analytics i-graduate undertakes give
further comfort. The Directors will however continue to closely monitor the position given the sensitivity of the segment.
Further to the impairment review, the Directors concluded that no impairment has arisen during the year.
80
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
14. Other intangible assets
Customer
contracts &
relationships
£’000
Acquired
Intellectual
Property
£’000
Software
£’000
Development
costs
£’000
Business
systems
£’000
Software
licences
£’000
Total
£’000
Cost
At 31 January 2016
6,634
6,613
Transfers
Additions
Disposals
–
–
–
–
–
–
Exchange differences
1,242
529
At 31 December 2016
and 1 January 2017
7,876
7,142
Additions
Disposals
Exchange differences
At 31 December 2017
Amortisation
At 1 January 2016
Transfers
Charge for the year
Disposals
Exchange differences
At 31 December 2016
and 1 January 2017
Charge for the year
Disposals
Exchange differences
–
–
(109)
7,767
2,128
–
1,422
–
489
4,039
1,529
–
(93)
–
–
(46)
7,096
3,800
–
490
–
168
4,458
505
–
(27)
–
–
–
–
–
–
1,873
–
–
30,015
5,688
–
48,950
–
1,098
(6,994)
360
24,479
2,135
–
(79)
–
764
–
18
1,369
70
(35)
–
1,369
1,932
(7,029)
2,149
6,470
1,404
47,371
97
(191)
(2)
77
(12)
–
4,182
(203)
(236)
1,873
26,535
6,374
1,469
51,114
–
–
–
–
–
–
23,831
4,407
–
34,166
–
1,411
(6,504)
122
–
162
–
6
1,084
166
1,084
3,651
(25)
(6,529)
–
785
18,860
4,575
1,225
33,157
187
1,445
–
–
–
(24)
642
(191)
(1)
134
(12)
–
4,442
(203)
(145)
At 31 December 2017
5,475
4,936
187
20,281
5,025
1,347
37,251
Carrying amount
At 31 December 2017
At 31 December 2016
2,292
3,837
2,160
2,684
1,686
–
6,254
5,619
1,349
1,895
122
179
13,863
14,214
Software and customer contracts and relationships have arisen from acquisitions and are amortised over their estimated useful
lives, which are 3–6 years and 3–12 years respectively. The amortisation period for development costs incurred on the Group’s
product development is 3 to 7 years, based on the expected life-cycle of the product. Amortisation of development costs is
included within cost of sales; the amortisation for software, customer contracts and relationships, business systems and software
licences is included within administrative expenses.
Included within Business Systems are finance systems with a carrying value of £1.3m (2016: £1.6m). Each system is being
amortised over a period of three to five years and have an average of three years left.
On 5 June 2017, the Group acquired Intellectual property from Wambiz Limited. The initial cash consideration was £1,250,000,
with further consideration of £289,000 amd £485,000 payable at the end of years 1 and 2 respectively. An intangible asset of
£1,873,000 has been recorded under Acquired intellectual property, discounted for deferred payments which have been recorded
as a deferred consideration liability in Trade and other payables. This asset is being amortised over a period of 5 years.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
81
15. Property, plant and equipment
Cost
At 1 January 2016
Additions
Transfers
Disposals
Exchange differences
Leasehold
improvements
£’000
3,035
63
–
(430)
114
Fixtures,
fittings
and other
equipment
£’000
5,392
380
Total
£’000
8,427
443
(1,369)
(1,369)
(424)
268
(854)
382
At 31 December 2016 and 1 January 2017
2,782
4,247
7,029
Additions
Disposals
Exchange differences
At 31 December 2017
Accumulated depreciation and impairment
At 1 January 2016
Charge for the year
Transfers
Disposals
Exchange differences
At 31 December 2016 and 1 January 2017
Charge for the year
Disposals
Exchange differences
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
49
(12)
(19)
754
(125)
(46)
803
(137)
(65)
2,800
4,830
7,630
1,758
513
–
(252)
96
2,115
287
(12)
(6)
3,238
993
4,996
1,506
(1,084)
(1,084)
(391)
177
2,933
903
(125)
(42)
(643)
273
5,048
1,190
(137)
(48)
2,384
3,669
6,053
416
667
1,161
1,314
1,577
1,981
The fair value of the Group’s property, plant and equipment is not materially different to its carrying amount.
There are £4.5m (2016 revised: £2.9m) worth of assets that are fully depreciated within property, plant and equipment.
82
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
16. Trade and other receivables
Amounts receivable for the sale of services
Allowance for doubtful debts
Other receivables
Prepayments
2017
£’000
12,202
2016
£’000
14,373
(1,713)
(1,578)
10,489
12,795
516
2,620
209
2,806
13,625
15,810
The Group’s principal financial assets are cash and cash equivalents and trade and other receivables which represent the Group’s
maximum exposure to credit risk in relation to financial assets. The Group’s credit risk is primarily related to its trade receivables. The credit
risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
All receivables are due within one year in both current and prior years.
Trade receivables
Trade receivables are measured at amortised cost. The average credit terms on sales is 30 days (2016: 30 days). The Group sells
the majority of its services to the public sector or related bodies and institutions, and as such there is a low incidence of default. All
overdue debts are assessed on an individual basis and a provision for irrecoverable amounts is determined by reference to specific
circumstances and past default experience.
Included in the Group’s trade receivable balance are debtors with a carrying amount of £4.1m (2016: £5.5m), which are past due
at the reporting date and which have not been impaired, as there has not been a significant change in the credit quality and the
Group believes that the amounts are still recoverable. The Group does not hold any collateral over these balances. Of the total trade
receivables balance at the end of the year, four customers (2016: three) held balances outstanding of more than 5%, being £1.1m,
£1.0m, £0.7m and £0.6m (2016: £1.1m, £0.7m and £0.6m). The average age of receivables is 47 days (2016: 44 days).
Ageing of past due but not impaired trade receivables:
30–60 days
60–90 days
90–120 days
120+ days
Total
Movement in the allowance for doubtful debts:
Balance at the beginning of the year
Provision for receivables impaired
Amounts written off during the year
Unused amounts reversed
Transferred from accrued income
Balance at the end of the year
2017
£’000
2,086
769
734
517
2016
£’000
2,661
1,567
391
849
4,106
5,468
2017
£’000
1,578
1,073
(685)
(253)
–
2016
£’000
655
1,020
(13)
(156)
72
1,713
1,578
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
83
16. Trade and other receivables continued
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable
from the date the credit was initially granted up to the reporting date. The Group’s credit risk is relatively low because a high
proportion of trade or other receivables have sovereign or close to sovereign credit rating. Accordingly, the Directors believe that
there is no further credit provision required in excess of the allowance for doubtful debts.
Ageing of impaired trade receivables:
30–60 days
60–90 days
90–120 days
120+ days
Total
2017
£’000
15
4
616
1,078
1,713
2016
£’000
603
3
43
929
1,578
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
Accrued income
Accrued income is measured at amortised cost. Accrued income inherently has some contractual risk associated with it related to
the specific and ongoing risks in each individual contract with a customer.
Impairments recognised in the income statement in respect of accrued income amount to £0.1m (2016: £0.3m).
17. Long-term contracts
At the end of 2017, trade and other receivables included amounts due from contract customers (included within accrued income) of
£0.1m (2016: £0.2m) and trade and other payables included amounts due to contract customers (included within deferred income)
of £nil (2016: £0.5m).
Contract costs incurred plus recognised profits less recognised losses to date
Less: progress billings
2017
£’000
1,295
(688)
607
2016
£’000
1,321
(1,236)
85
At 31 December 2017, retentions held by customers for contract work amounted to £nil (2016: £0.2m).
There are no amounts included in trade and other receivables arising from long-term contracts due for settlement after more than
12 months.
£1.3m (2016: £1.3m) of contract revenue has been recognised.
18. Cash and cash equivalents
Cash and cash equivalents of £14.1m (2016: £10.3m) comprise cash held by the Group and short-term bank deposits with an
original maturity of three months or less. The carrying amount of these assets approximates their fair value. Of the above balance,
£nil (2016: £0.2m) represents funds restricted in use by the relevant commercial terms of certain trading contracts. These terms
have been complied with.
The credit quality of cash at bank can be assessed by reference to external credit ratings. The Group has not changed it’s risk
appetite during the year, however one of the Group’s main banks has been downgraded in the period. The following table has been
sourced from Moodys credit ratings.
84
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
18. Cash and cash equivalents continued
Aa1
Aa2
Aa3
A1
A2
Baa1
Baa2
Baa3
Cash and cash equivalents include the following for the purposes of the statement of cashflows:
Cash and cash equivalents
Bank overdrafts (note 20)
19. Trade and other payables
Current
Trade payables
Other taxation and social security
Other payables
Deferred consideration
Non-current
Other payables
Deferred consideration
Total
2017
£’000
–
–
3,836
6,970
3,021
39
216
–
2016
£’000
573
4,020
–
5,260
209
25
141
32
14,082
10,260
2017
£’000
14,082
–
14,082
2017
£’000
429
2,596
3,038
825
6,888
153
398
551
7,439
2016
£’000
10,260
(1,427)
8,833
2016
£’000
677
3,309
1,453
1,627
7,066
–
1,026
1,026
8,092
The average credit period taken for trade purchases is 5 days (2016: 7 days). For most suppliers, no interest is charged on the trade
payables for the first 30 days from the date of invoice. Thereafter, in some cases, interest may be charged on the outstanding
balances due to certain suppliers at various interest rates. The Group has financial risk management policies in place to ensure that
all payables are paid within a reasonable timeframe. The Directors consider that the carrying amount of trade and other payables
approximates their fair value.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
85
19. Trade and other payables continued
Deferred consideration reflects amounts in respect of the Campus and Wambiz acquisitions. During 2016 all deferred consideration
became non-contingent, and hence transferred from Provisons into other payables. In March 2017, a variation to the Share Purchase
Agreement was signed with the vendors of Tribal Campus Pty Limited (previously Sky Software Pty), which amended the terms of the
deferred contingent consideration payments. Under the variation, it was agreed that a combination of cash, shares and share options
would be paid/issued in full and final settlement of all contingent obligations under the Agreement. As a result an amount of £511,000,
representing the fair value of the share options, was transferred from other payables to the share based payment reserve.
Other payables are split as follows:
Goods received not invoiced
Funds restricted in use
Other creditors
2017
£’000
1,650
39
1,349
3,038
2016
£’000
246
212
995
1,453
20. Borrowings
The Group has a borrowings facility under a £15m revolving credit facility which includes a £1m committed overdraft facility, and
a £6.5m committed guarantee facility. The total facility is committed until June 2018, subject to compliance with covenants and
was agreed in August 2017. As at 31 December 2017, the Group had net cash of £14.1m (2016: of £8.8m), reflecting gross cash
balances of £14.1m (2016: £10.3m) offset by nil outstanding on the overdraft facility (2016: £1.4m). The Directors estimate that
the book values of the Group’s borrowings reflect the fair values thereof. The bank loans are all denominated in UK sterling at floating
rates. At 31 December 2017, the weighted average interest rate paid was 2.0% (2016: 3.0%). The interest rate is reset for a period
of one, three or six months at LIBOR plus a variable margin determined by covenant calculations.
There was £7.5m (2016: £13.5m) available but undrawn of the revolving credit facility at 31 December 2017. In addition, at the
year-end there was £1.0m available but undrawn in respect of the overdraft facility, and £5.0m available but undrawn in respect
of the Guarantee facilty, giving total underlying headroom of £13.5m (2016: £19.4m). £1.5m is currently allocated to the
Guarantee facility.
The revolving credit facility was voluntarily reduced to £11m in January 2018.
21. Provisions
At 1 January 2017
Increase/(release) in provision
Utilisation of provision
Exchange rate movement
Transfer from accruals
At 31 December 2017
Property
related
£’000
Onerous
contracts
£’000
Legal
claims
£’000
Restructuring
£’000
531
427
(51)
(5)
24
926
232
(156)
(1)
(2)
97
170
379
–
(37)
–
–
342
10
91
(95)
–
–
6
Total
£’000
1,152
362
(184)
(7)
121
1,444
86
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
21. Provisions continued
The provisions are split as follows:
2017
Within one year
After more than one year
Total
2016
Within one year
After more than one year
Total
Property
related
£’000
Onerous
contracts
£’000
Legal
claims
£’000
Restructuring
£’000
732
194
926
453
78
531
170
–
170
232
–
232
342
–
342
246
133
379
6
–
6
10
–
10
Total
£’000
1,250
194
1,444
941
211
1,152
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will
be required to settle the obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle
the obligation at the balance sheet date, and are discounted to present value where the effect is material.
Property related provision relates to the dilapidation costs arising from exiting leasehold properties where the costs are not all
expected to be incurred during the next year.
Onerous contracts provision relates to a specific contract and represents the unavoidable costs of meeting the obligations under
the contract that exceed the economic benefits expected to be received under it.
Legal claims provision relates to a specific contract and represents the anticipated costs to resolve the contractual dispute.
Restructuring provision represent amounts provided in respect of the Group’s restructuring and reorganisation and principally
reflect redundancy costs.
22. Deferred tax
The amounts provided for deferred tax and the amounts for which credit has been taken are set out below:
Deferred tax assets
Depreciation in excess of capital allowances
Other timing differences
Share-based payments
Tax losses
Retirement benefit schemes
Deferred tax liabilities
Intangible assets
2017
£’000
661
920
771
1,631
292
4,275
(1,276)
(1,276)
2,999
2016
£’000
1,096
354
199
1,939
293
3,881
(1,877)
(1,877)
2,004
The Directors are of the opinion, based on currently available forecasts, that these timing differences will reverse in the near future
and when they do there will be sufficient taxable profits to recognise the impact of this in the income statement. Accordingly, the
Directors believe that it is more likely than not that the deferred tax assets will be recoverable.
The Group has recognised a deferred tax asset of £1,631,000 (2016: £1,939,000) on tax losses carried forward in the UK of
£9,596,000 (2016: £10,206,000).
The Group has an unrecognised deferred tax asset of £nil (2016: £218,000) in relation to further tax losses carried forward in the
UK of £nil (2016: £1,148,000) and Australia of £nil (2016: £nil).
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
87
22. Deferred tax continued
The Group and Company have no further unrecognised deferred tax assets or liabilities.
The movement in deferred tax assets and liabilities during the year and prior year was as follows:
Temporary
differences on
non-current
assets
£’000
Retirement
benefit
schemes
£’000
Other
temporary
differences
£’000
At 1 January 2016
Foreign exchange differences
(Charge)/credit to income statement
Items taken directly to equity
Credit recognised in consolidated statement
of comprehensive income
At 31 December 2016 and 1 January 2017
Adjustments to opening balances
Foreign exchange differences
(Charge)/credit to income statement
Items taken directly to equity
Credit recognised in consolidated statement
of comprehensive income
At 31 December 2017
1,148
–
(52)
–
–
1,096
(364)
–
(71)
–
–
661
(16)
–
19
–
290
293
–
–
8
–
(9)
292
Total
£’000
1,094
(256)
822
54
290
2,004
–
16
643
345
(9)
(38)
(256)
855
54
–
615
364
16
706
345
–
2,046
2,999
Included in other temporary differences are deferred tax assets of £1,631,000 (2016: £1,939,000) relating to tax losses carried
forward and other timing differences of £1,691,000 (2016: £553,000). The balance also includes a deferred tax liability, in relation
to intangible assets of £1,276,000 (2016: £1,877,000).
There are no unrecognised deferred tax liabilities.
The deferred tax assets are expected to be settled as follows: £271,000 less than 12 months from 31 December 2017 and
£4,003,000 greater than 12 months from 31 December 2017.
The impact of changes in tax rates on deferred tax balances of £214,000 (2016: £203,000) has been charged to the income
statement and is included within the total credit to the income statement of £643,000 (2016: £822,000) disclosed above.
23. Share-based payments
The Group recognised the following charges/(credits) related to equity-settled share-based payment transactions:
LTIPs (incorporating the CSOP) awarded in 2017
LTIPs awarded in 2016
Matching
SAYE
Total
2017
£’000
317
567
509
–
1,393
2016
£’000
–
378
509
(11)
876
88
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
23. Share-based payments continued
Awards made to eligible employees under the LTIP schemes are nil cost options with an award period of four years.
LTIPs awarded in 2016
Awards in 2016, to eligible employees, vest according to a target share price on the third anniversary of the date of grant. The
amount of awards that will vest will range between 0% and 100% of those granted based on a target share price between 60p
and 80p.
Matching shares
The matching shares are only subject to a time-limit conditions. The matching share options will vest equally over three years and
may be exercised at any time during the period of two years from the applicable vesting dates (1 January 2017, 1 January 2018 and
1 January 2019), but not sold during that period. One third of these options have now vested.
SAYE
The SAYE scheme provides for a purchase price equal to mid market value at date of grant. The 2008 SAYE scheme was granted
at a discount to market value of 20% and was available as a three, five or seven-year scheme. All options have now lapsed and the
Scheme has finished.
LTIPs awarded in 2017 (includig the CSOP)
New awards in 2017 to Ian Bowles (348,387) and Mark Pickett (247,678) will vest on 29 June 2020 and are subject to a time-limit
condition and continued employment.
During 2017 a new CSOP scheme was introduced as part of the 2010 LTIP Plan. Eligible employees received awards under this
scheme. Options can only be exercised after a three year period if the share price is above 80p.
Options outstanding during the year are as follows:
Matching
LTIP- nil cost
LTIP (inc CSOP)
Number
of options
thousands
Weighted
average
exercise
price
Number
of options
thousands
Weighted
average
exercise
price
Number
of options
thousands
Weighted
average
exercise
price
Outstanding at 1 January 2017
3,406
£nil
5,367
Exercised during the year
Granted during the year
Lapsed during the year
Outstanding at 31 December 2017
Exercisable at 31 December 2017
Weighted average remaining contractual life (years)
Weighted average share price at date of exercise
–
–
–
3,406
1,135
3.0
–
–
–
–
£nil
–
–
–
–
1,935
(753)
6,549
611
8.4
–
£nil
–
£nil
£nil
£nil
£nil
–
–
–
–
–
–
3,535
£0.80
–
–
3,535
£0.80
–
9.5
–
–
£0.80
–
Share options outstanding at the year-end have the following exercise prices: LTIP: £nil, Matching shares £nil and CSOP £0.80.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
89
23. Share-based payments continued
The Group has used a Monte-Carlo valuation model for the LTIPs awarded in 2016 and an adjusted Black-Scholes valuation model
for the pre 2016 LTIP awards, Matching shares, 2017 LTIP awards( including the new CSOP plan) in order to incorporate a discount
factors into the fair value to reflect the performance conditions of the LTIP grants and Matching shares. The following table sets out
the information about how the fair value of the grants are calculated:
19 April 2016 28 June 2016
30 June 2016
30 June 2016*
30 June 2017*
2 July 2017
Date of grant
Type of grant
Share price
Exercise price
Expected dividend yield
Risk-free interest rate
Expected volatility
Term (years)
Option fair value
Expiry date
Matching
£0.44875
£nil
0%
1.17%
75%
3.0
£0.449
01 January
2021
LTIPs
£0.505
£nil
0%
0.14%
68.04%
3.0
£0.316
27 June
2026
No of options issued
3,405,996
3,591,020
No of options outstanding
3,405,996
3,391,020
*These awards have no market based performance conditions.
LTIPs
£0.505
£nil
0%
0.14%
68.04%
3.0
£0.318
29 June
2026
611,621
611,621
LTIPs
£0.5075
£nil
0%
0.14%
68.04%
3.0
£0.508
29 June
2026
611,620
611,620
LTIPs LTIPs (inc CSOP)
£0.838
£nil
0%
0.14%
61%
3.0
£0.79
30 June
2027
£0.78
£0.80
0%
0.14%
61%
5.0
£0.407
2 July
2027
1,935,351
3,535,000
1,935,351
3,535,000
The expected life used in the models have been adjusted, based on management’s best estimate, for the effects of non-
transferability, exercise restrictions and behavioural considerations.
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the term commensurate
with the expected term immediately prior to the date of grant.
There have been 1,339,286 options over shares that have not been recognised in accordance with IFRS 2. These options
were issued to the vendors of Sky Software Pty as part of the deferred consideration payable. These options are subject to a
performance condition measured over a maximum 3 year period ending 30 June 2020.
24. Share capital
Allotted, called up and fully paid
At beginning of the year
Issued during the year
At end of the year
2017
number
2017
£’000
2016
number
195,380,299
9,769
94,849,241
670,882
34 100,531,058
196,051,181
9,803 195,380,299
2016
£’000
4,743
5,026
9,769
The Company has one class of ordinary shares which carry no right to fixed income.
On 24 April 2017, 670,882 shares were issued as part of the settlement of the Campus acquisition.
90
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
25. Other reserves
Capital
reserve
£’000
Merger
reserve
£’000
Own share
reserve
£’000
At 31 December 2015
Acquisition of own shares
Movement in relation to share-based payment (net)
Transfer from merger reserve
9,545
11,713
–
–
–
–
–
(409)
At 31 December 2016 and 1 January 2017
9,545
11,304
Movement in relation to share-based payment (net)
–
–
At 31 December 2017
9,545
11,304
(765)
(91)
–
–
(856)
–
(856)
Share-
based
payment
reserve
£’000
10
–
876
–
886
1,904
2,790
Total
£’000
20,503
(91)
876
(409)
20,879
1,904
22,783
The capital reserve of £9.5m (2016: £9.5m) resulted from a share exchange when Tribal Group plc was listed in February 2001.
The merger reserve of £11.3m (2016: £11.3m) relates to the premium arising on shares issued subject to the provisions of section
612 of the Companies Act 2006 (previously section 131 of the Companies Act 1985), net of cumulative goodwill impairment of
£58.7m (2016: £58.7m) in respect of related acquisitions deemed to be impaired.
The own share reserve of £(0.9)m (2016: £(0.9)m) represents the cost of 827,692 shares (2016: 827,692) in Tribal Group plc held
by the Employee Share Ownership Trust to satisfy certain options under the Group’s share option schemes.
The share-based payment reserve represents the reserve arising from the application of IFRS 2.
26. Lease commitments
The Group as lessee
2017
£’000
2016
£’000
Minimum lease payments under operating leases recognised as an expense in the year
1,529
1,551
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable
operating leases which fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
2017
£’000
895
1,402
426
2,723
2016
£’000
1,735
2,447
380
4,562
Operating lease payments mainly represent rentals payable by the Group for its office properties. Leases are negotiated for an
average term of five years and rentals are fixed for an average of three years.
During the year the Group signed a five year commitment with Rackspace to provide Cloud hosting services for Tribal and its
customers, rising to an annual commitment of £1.75m.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
91
27. Retirement benefit schemes
The Group operates a number of defined contribution and defined benefit pension schemes within individual subsidiaries and
contributes to certain employees’ personal pension plans. The pension charge for the year ended 31 December 2017 was
£2.2m (2016: £3.0m), of which £2.0m (2016: £2.4m) related to defined contribution schemes and £0.2m (2016: £0.6m) to defined
benefit schemes.
Contributions amounting to £0.2m (2016: £0.2m) were payable to the funds at the year end and are included in current liabilities.
Defined benefit schemes
At 31 December 2017, the Group operated two defined benefit pension schemes for the benefit of certain deferred employees
of its subsidiaries in the UK. These schemes are administered by separate funds that are legally separated from the Company. The
trustees of the pension funds are required by law to act in the interest of the funds and of all relevant stakeholders in the schemes.
The trustees of the pension funds are responsible for the investment policy with regard to the assets of the funds.
Scheme 1– the Prudential Platinum Pension Fund
Tribal Education Limited, a Group subsidiary, participates in the Prudential Platinum Pension Fund (“PPP”), which is a defined
benefit arrangement. The last full actuarial valuation of this scheme was carried out by a qualified independent actuary as at
31 December 2015.
The Tribal Education section of the Prudential Platinum Pension Fund had 36 deferred members at the year-end. Employer
contributions amounting to £21,000 were paid in the year ended 31 December 2017 (2016: £21,000). The accounting figures have
been calculated using the valuation as at 31 December 2015, updated on an approximate basis to 31 December 2017 by a qualified
independent actuary.
Scheme 2 – the Federated Pension Plan
Tribal Education Limited, a Group subsidiary, participates in the Federated Pension Plan (“FPP”), which is a defined benefit
arrangement. The Ofsted employees were transferred back to Ofsted in March 2017 and the plan closed to future accrual. All of
the active members at 31 March 2017 were transferred to the deferred section of the plan. The treatment of the defined benefit
scheme is currently being discussed with Ofsted. The last full actuarial valuation of this scheme was carried out by a qualified
independent actuary as at 5 April 2015.
The Tribal Education section of the Federated Pension Plan had 210 deferred members at the year-end. Employer contributions
amounting to £185,000 were paid in the year ended 31 December 2017 (2016: £427,000). The accounting figures have
been calculated using the valuation as at 5 April 2015, updated on an approximate basis to 31 December 2017 by a qualified
independent actuary.
The assets of the funds have been taken at market value and the actuarial assumptions used to calculate scheme liabilities under
IAS 19 ‘Employee Benefits’ for both schemes are:
Inflation
Salary increases
Rate of discount
Pension in payment increases
2017
% per
annum
2016
% per
annum
2.40–3.40
2.50–3.50
nil
2.4
nil
2.6
2.40–3.40
2.50–3.50
The salary increase assumption is nil as the FPP members have transferred to Ofsted in March 2017, leaving only deferred members.
In addition the PPP only has deferred members.
The mortality assumptions adopted at 31 December 2017 imply the following life expectations:
Aged 60 in 2017
Aged 60 in 2037
Males
Females
27.7
30.0
29.9
32.3
92
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
27. Retirement benefit schemes continued
The analysis of the schemes’ assets at the balance sheet date was as follows:
Equities
Corporate Bonds
Gilts
Cash
2017
£’000
7,101
3,677
127
108
2016
£’000
6,568
3,403
122
99
Total fair value of scheme assets
11,013
10,192
All equities and corporate bonds are quoted on active markets.
The sensitivities regarding the principal assumptions used to measure the schemes’ liabilities are set out below:
Assumption
Discount rate
Rate of inflation
Rate of mortality
Change in assumption
Impact on scheme liabilities
Increase by 0.5%
Increase by 0.5%
Increase by one year
Decrease by 11%
Increase by 13%
Increase by 3%
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice,
this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined
benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated
with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability
recognised within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.
The amount included in the balance sheet arising from the Group’s obligation in respect of its defined benefit schemes is as follows:
Present value of defined benefit obligations
Fair value of scheme assets
Deficit in schemes
Liability recognised in the balance sheet
Reconciliation of opening and closing balances of the fair value of scheme assets:
Fair value of scheme assets at beginning of year
Expected return on assets
Actuarial gains/(losses) due to investment returns different from the return implied by the
discount rate
Contributions by employer
Contributions by scheme participants
Benefits paid
Administration expenses
Fair value of scheme assets at end of year
2017
£’000
2016
£’000
(12,731)
(11,917)
11,013
10,192
(1,718)
(1,718)
(1,725)
(1,725)
2017
£’000
10,192
265
484
206
23
(136)
(21)
2016
£’000
8,692
334
863
448
64
(188)
(21)
11,013
10,192
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
93
27. Retirement benefit schemes continued
Reconciliation of opening and closing balances of the present value of the defined benefit obligations:
Defined benefit obligation at beginning of year
Current service cost
Interest cost
Contributions by scheme participants
Actuarial loss/(gain) – experience
Actuarial loss/(gain) – demographic assumptions
Actuarial loss – financial assumptions
Benefits paid
Change in irrecoverable surplus in year
Defined benefit obligation at end of year
2017
£’000
11,917
191
307
23
68
50
311
(136)
–
2016
£’000
8,604
546
322
64
(763)
(26)
3,551
(188)
(193)
12,731
11,917
The Group’s contribution rate for 2017 was 0% (2016: 0%) for the Prudential Platinum Fund and 43.8% (2016: 43.8%) for the
Federated Pension Plan.
The Group expects to make contributions of £52,000 to the defined benefit schemes during the next financial year.
Analysis of amounts recognised in the consolidated income statement for the defined benefit schemes is as follows:
Current service cost
Administration expenses
Recognised in arriving at operating profit
Other finance costs
Interest on pension scheme liabilities
Expected return on pension scheme assets
Net finance expense/(credit)
Total charge to income statement
Analysis of actuarial loss in the consolidated statement of comprehensive income:
Actual return less expected return on pension scheme assets
Experience gains and losses arising on the scheme liabilities
Changes in assumptions underlying the present value of scheme liabilities
Change in irrecoverable surplus
Total actuarial gains and losses recognised in the consolidated statement of
comprehensive income
2017
£’000
191
21
212
307
(265)
42
254
2017
£’000
484
(118)
(311)
–
55
2016
£’000
546
21
567
322
(334)
(12)
555
2016
£’000
863
789
(3,551)
193
(1,706)
94
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
27. Retirement benefit schemes continued
Cumulative actuarial losses recognised in the consolidated statement of comprehensive income since 1 April 2004 are
£1,375,000 (2016: profits of £1,430,000).
The history of experience adjustments is as follows:
Present value of defined benefit obligations
Fair value of scheme assets
(Deficit)/surplus in the scheme
Experience adjustments arising on scheme assets:
Amount
Percentage of the scheme assets
Experience adjustments arising on scheme liabilities:
Amount
Percentage of the present value of the scheme liabilities
2017
£’000
2016
£’000
(12,731)
(11,917)
11,013
(1,718)
10,192
(1,725)
484
4%
118
1%
863
8%
789
7%
2015
£’000
(8,604)
8,692
88
(166)
(2%)
77
1%
2014
£’000
(8,149)
8,270
121
267
3%
(64)
(1%)
No assets are invested in the Group’s own financial instruments, properties or other assets used by the Group.
28. Notes to the cash flow statement
Operating profit from continuing operations
Gain on disposal of Synergy
Depreciation of property, plant and equipment
Amortisation and impairment of other intangible assets
Share based payments
Movement in deferred consideration
Other non-cash items
Operating cash flows before movements in working capital
Decrease in inventories
Decrease in receivables
Decreases in payables
Net cash from operating activities before tax
Tax received
Net cash from operating activities
Net cash from operating activities before tax can be analysed as follows:
Continuing operations (excluding restricted cash)
Decrease in restricted cash
2017
£’000
3,727
–
1,190
4,442
1,393
29
69
10,850
83
1,044
(931)
11,047
70
11,117
2017
£’000
11,220
(173)
11,047
2013
£’000
(6,158)
6,936
778
383
6%
1,391
23%
2016
£’000
63
(301)
1,506
3,651
876
566
(486)
5,875
50
4,139
(2,295)
7,769
505
8,274
2016
£’000
7,819
(50)
7,769
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
95
29. Analysis of net cash
Cash and cash equivalents (note 18)
Overdrafts (note 20)
Net cash
Analysis of changes in net cash
Opening net cash/(debt)
Net increase/(decrease) in cash and cash equivalents
Effect of foreign exchange rate changes
Decrease in bank loans and overdrafts
Amortisation of loan arrangement fees and similar charges
Closing net cash
2017
£’000
14,082
–
14,082
2017
£’000
8,833
5,492
(243)
–
–
14,082
2016
£’000
10,260
(1,427)
8,833
2016
£’000
(32,471)
6,440
657
34,500
(293)
8,833
30. Contingent liabilities
From time to time the Group is subject to potential litigation claims. On the basis of legal advice, claims are being robustly contested
as to both liability and quantum. A provision of £0.4m (2016: £0.4m) has been made for defending these claims, where appropriate
(see note 21).
At any time, the Group is overseeing a portfolio of customer implementation projects. Such projects may be complex, multi-phase
projects giving rise to significant operational risks which the Group must manage. Such risks may, in certain instances, lead to
potential negotiations or disputes with customers which may give rise to consequential financial or commercial obligations or
liabilities arising.
The Company and its subsidiaries have provided performance guarantees issued by its banks on its behalf, in the ordinary course of
business, totalling £1.5m (2016: £4.2m). These are not expected to result in any material financial loss.
As disclosed in note 33, Tribal Holdings Limited and International Graduate Insight Group Limited have taken advantage of the
exemption available under Section 394A/ 479A of the Companies Act 2006 in respect of the requirements for audit. As a condition
of the exemption, the Company has guaranteed the year-end liabilities of these subsidiaries until they are settled in full. The
liabilities of the subsidiaries at the year-end was £21,145,000 (2016: £15,236,000). These are inclusive of intercompany liabilities.
31. Financial instruments
Capital risk management
The Group manages its capital to ensure the entities in the Group will be able to continue as going concerns, while maximising
the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists
of debt, which includes the borrowings disclosed in note 20, cash and cash equivalents (see note 18) and equity attributable to
equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in Consolidated Statement of
Changes in Equity and notes 24 and 25.
Gearing ratio
The Gearing ratio at the year-end is as follows:
Net cash
Equity
Net cash to equity ratio
2017
£’000
14,082
32,552
43.3%
2016
£’000
8,833
27,490
32.1%
96
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
31. Financial instruments continued
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in note 1 to the financial statements.
Categories of financial instruments
The Directors consider that the book value of the financial assets and liabilities is equal to their fair value.
31 December 2017
Financial assets
Cash and cash equivalents
Trade receivables and other receivables*
Accrued income
Financial liabilities
Trade payables and other payables**
Accruals
Deferred non-contingent consideration
Financial
Liabilities
measured at
amortised cost
£’000
Loans and
receivables
£’000
14,082
11,005
5,001
30,088
–
–
–
–
–
–
–
–
3,620
8,593
1,223
Total
£’000
14,082
11,005
5,001
30,088
3,620
8,593
1,223
13,436
13,436
31 December 2016
Financial assets
Cash and cash equivalents (excluding bank overdrafts)
Trade receivables and other receivables*
Accrued income
Financial liabilities
Trade payables and other payables**
Borrowings
Accruals
Deferred non-contingent consideration
* Excluding amounts that relate to non-financial instruments of tax and prepayments
** Excluding amounts that relate to non-financial instruments of tax
Financial
Liabilities
measured at
amortised cost
£’000
Loans and
receivables
£’000
10,260
13,004
3,774
27,038
–
–
–
–
–
–
–
–
–
2,130
1,427
8,204
2,653
14,414
Total
£’000
10,260
13,004
3,774
27,038
2,130
1,427
8,204
2,653
14,414
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
97
31. Financial instruments continued
The above tables have been stated at undiscounted values with the exception of deferred consideration. The undiscounted value of
the deferred consideration is £1,341,000 (2016: £2,755,000), versus a discounted value of £1,223,000 as at 31 December 2017
(2016: £2,653,000).
There are no financial instruments held at fair value (2016 : £nil).
Financial risk management objectives
Treasury management is led by the Group finance team, which is responsible for managing the Group’s exposure to financial
risk. It operates within a defined set of policies and procedures reviewed and approved by the Board. This includes both foreign
exchange risk and interest rate risk. The Group’s exposure to interest rate fluctuations on its interest-bearing assets and liabilities is
selectively managed, using interest rate swaps where appropriate. This is an ongoing risk and the Board will continue with this policy.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
Market risk
As the Group’s international activities grow, its exposure to overseas markets also increases in non-core territories outside of the
UK and Australasia. There have been no other significant changes to the Group’s exposure to market risk, or the manner in which it
manages and measures the risk.
Foreign currency risk management
The Group undertakes an increasing number of transactions denominated in foreign currencies. Here, exposures to exchange rate
fluctuations arise. Exchange rate exposures are managed within approved policy parameters and the Group enters into forward
foreign exchange contracts where appropriate.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date
are as follows:
Euros
Australian Dollar
United States Dollar
Saudi Arabian Riyal
South African Rand
New Zealand Dollar
Canadian Dollar
Philippine Peso
United Arab Emirates Dirham
Malaysian Ringgit
Bahraini Dinar
Other
Assets
Liabilities
31 December
2017
£’000
31 December
2016
£’000
31 December
2017
£’000
31 December
2016
£’000
815
5,847
1,130
89
1,032
2,660
247
206
3,836
1,037
57
6
448
4,236
363
491
629
2,213
82
172
1,079
227
709
34
22
–
23
–
–
–
–
–
–
7
–
–
–
–
44
–
–
–
–
–
–
–
–
–
16,962
10,683
52
44
Foreign currency sensitivity analysis
The Group is primarily exposed to the following currencies: US Dollar, Euro, Australian Dollar, New Zealand Dollar, South African Rand,
Canadian Dollar, United Arab Emirates Dirham, Saudi Arabia Riyal, Philippine Peso, Bahraini Dinar and Malaysian Ringgit.
If Sterling were to strengthen or weaken by 10% against the relevant foreign currencies, the balances in the table above would give
rise to an increase/reduction in profit of £1,695,000 (2016: £990,000). This sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation at the period-end for a 10% change in foreign currency rates.
10% represents management’s assessment of the reasonably possible change in foreign exchange rates.
98
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
31. Financial instruments continued
Interest rate risk management
The Group is exposed to interest rate risk because entities in the Group borrow funds at floating interest rates. Hedging activities
are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging
strategies are applied. There are no hedges in place as at 31 December 2017 (2016: nil).
The Group’s exposure to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management
section of this note.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative
instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of the liability
outstanding at the balance sheet date was outstanding for the whole year. A 1.0% increase or decrease is used when reporting
interest rate risk internally to the Board and represents management’s assessment of the reasonably possible change in interest
rates. If interest rates had been 1.0% higher/lower and all other variables were held constant, the Group’s profit for the year ended
31 December 2017 would decrease/increase by £nil (2016: decrease/increase by £27,000) This is due to a net cash position for
the year.
Credit risk management
The Group’s principal financial assets are cash and cash equivalents and trade and other receivables. The Group’s credit risk is
relatively low because a high proportion of trade and other receivables have a sovereign or close to sovereign rating. Of the total
trade receivables balance at the end of the year, £3.4m is due from four customers (2016: £2.4m from three customers).
Contract risk management
Accrued income inherently has some contractual risk associated with it related to the specific and ongoing risks in each individual
contract with a customer.
Liquidity risk management
The Group manages liquidity risk by maintaining adequate cash reserves and banking facilities, and by continuously monitoring
forecast and actual cash flows. The Group has access to committed financing facilities; the total unused amount was £7.5m at the
balance sheet date (2016: £13.5m). In addition, at the year-end, there was a £1.0m (2016: £3.6m) undrawn overdraft facility and
a £5.0m undrawn guarantee facility The Group expects to meet its obligations from operating cash flows. The Group also had cash
balances at 31 December 2017 of £14.1m (2016: £10.3m) as detailed in note 18. Net cash at the year-end was £14.1m (2016:
£8.8m), giving underlying headroom at the balance sheet date of £13.5m (2016: £19.4m). £1.5m is currently allocated to the
Guarantee facility.
32. Related party disclosures
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed in this note.
On 3 July 2017, Tribal Group plc (“the Company”) granted company share options over a total of 2,110,000 ordinary shares
(representing approximately 1.08% of the Company’s issued shares) to members of the senior management team under the
Company share option plan. The options were granted with an option price of 80p.
On 30 June 2017 Tribal Group plc (“the Company”) granted nil-cost options over a total of 1,339,286 ordinary shared (representing
approximately 0.68% of the Company’s issued shares) to the vendors of Sky Software pty as part of the deferred consideration
payable. On the same day a further 596,065 nil cost options (representing approximately 0.3% of the Company’s issued shares
were granted to Mark Pickett, the Group’s Chief Financial Officer and Ian Bowles the Group’s Chief Executive Officer, under the terms
of its 2010 Long Term Incentive Plan. All of the awards are subject to a performance condition measured over a maximum of a 3 year
period ending 30 June 2020.
The remuneration of the key management personnel of the Group is set out below in aggregate for each of the categories specified
in IAS 24 ‘Related Party Disclosures’. The members of the Group Board and the Group’s Executive Board are considered to be the key
management personnel of the Group.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
99
32. Related party disclosures continued
Remuneration of key management personnel
The remuneration of the key management personnel of the Group, is set out below in aggregate for each of the categories specified
in IAS 24 ‘Related Party Disclosures’.
Salaries and short-term employee benefits
Termination benefits
Share-based payments
2017
£’000
3,824
–
1,277
5,101
2016
£’000
3,458
454
874
4,786
Included within Directors’ emoluments are pension costs of £74,000 (2016: £52,000) in respect of accruals and payments made
to two (2016: three) Directors’ individual defined contribution pension schemes. Disclosures on Directors’ remuneration, share
options, long-term incentive schemes, and pension contributions are contained in the Directors’ remuneration section within the
audited part of the Remuneration report on pages 45 to 49 and form part of these audited financial statements. Arrangements with
the Group’s pension schemes are set out in note 27.
33. Subsidiaries
The Group consists of a parent company (limited by shares) Tribal Group plc, incorporated and domiciled in England and Wales and
a number of subsidiaries held directly and indirectly by Tribal Group plc, which operate and are incorporated around the world. Tribal
Education Limited also operates branches in New Zealand, South Africa, Hungary, Botswana and Abu Dhabi.
Tribal Group plc has guaranteed the liabilities of Tribal Holdings Limited and International Graduate Insight Group Limited in order
that they qualify for the exemption from audit under Section 394A/479 of the Companies Act 2006 in respect of the year ended
31 December 2017.
Information about the composition of the Group at the end of the reporting period is as follows:
Name of Entity
Tribal Education Limited
Address of
the registered office
Nature of Business
Kings Orchard, 1 Queen Street, Bristol, BS2
0HQ, UK
Education related
systems and solutions
Tribal Holdings Limited
Kings Orchard, 1 Queen Street, Bristol, BS2
0HQ, UK
Holding Company
International Graduate
Insight Group Limited
Kings Orchard, 1 Queen Street, Bristol, BS2
0HQ, UK
Educational consultancy
services
Human Edge Software
Corporation PTY Limited
Level 1, 17 Madden Grove, Richmond, VIC
3121. Australia
Education related
systems and solutions
Tribal Campus PTY
Limited
Level 7, 50 Pitt Street, Sydney, NSW. 2000.
Australia
Education related
systems and solutions
Tribal Group PTY Limited
Level 7, 50 Pitt Street, Sydney, NSW. 2000.
Australia
Education related
systems and solutions
Callista Software
Services PTY Limited
Level 7, 50 Pitt Street, Sydney, NSW. 2000.
Australia
Education related
systems and solutions
Tribal Technology
Limited
Kings Orchard, 1 Queen Street, Bristol, BS2
0HQ, UK
Non-Trading Company*
Tribal Middle East SPC
Limited
81, 1901 Road 1704, Manama, Alhoora,
Kingdom of Bahrain
Education related
systems and solutions
Tribal Resourcing
Limited
Kings Orchard, 1 Queen Street, Bristol, BS2
0HQ, UK
Non-Trading Company*
Tribal Group (Malaysia)
SDN
Lot 6.05, Level 6, KPMG Tower, 8 First
Avenue, Bandar Utama 47800 Petaling Jaya,
Selangor Darul Ehsan, Malaysia
Education related
systems and solutions
Proportion of
ordinary shares
held directly by
parent (%)
Proportion of
ordinary shares
held by the
Group (%)
100%
100%
–
–
–
–
–
100%
100%
100%
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100
Tribal Group plc Annual Report and Accounts 2017
Notes to the Financial Statements continued
33. Subsidiaries continued
Name of Entity
Address of
the registered office
Tribal Group South Africa
(PTY) Limited
2 Alexandra Avenue, Unit 8, Craighall.
Gauteng, 2196, South Africa
Tribal Systems Canada
Limited
1100 One Bentall Centre, 505 Burrard
Street, Box 11, Vancouver, BC V7X 1M5,
Canada
Nature of Business
Education related
systems and solutions
Education related
systems and solutions
Tribal Education INC
4015 Hillsboro Pike, Suite 210, Nashville, TN
37215, USA
Education related
systems and solutions
Human Edge Software
Philippines
12th Floor, West Trade Centre, 132 West
Avenue, Quezon City, Philippines 1104
Education related
systems and solutions
i-graduate USA LLC
1007 N Orange Street, 9th Floor,
Wilmington, Delaware, 19801, USA
Educational consultancy
services
Class Measures INC
100 Tower Park Drive, Suite A, Woburn MA
01801, USA
Education related
systems and solutions
Class Measures Limited
Kings Orchard, 1 Queen Street, Bristol, BS2
0HQ, UK
Dormant Company
Tribal GEC Limited
6th Floor, Alexandra House, 18 Chater Road,
Central, Hong Kong
Dormant Company*
Cambridge Early Years
Training and Education
Company Limited
6th Floor, Alexandra House, 18 Chater Road,
Central, Hong Kong
Dormant Company*
Tribal Group Asset
Company Limited
Level 7, 50 Pitt Street, Sydney, NSW. 2000.
Australia
Dormant Company
* These four companies are in the process of being struck off.
Proportion of
ordinary shares
held directly by
parent (%)
Proportion of
ordinary shares
held by the
Group (%)
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
In addition Tribal Group Foundation, registered office Kings Orchard, 1 Queen Street, Bristol, BS2 0HQ is a registered Company and
charity, but not a subsidiary for the purposes of these financial statements.
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
101
Company only Balance Sheet
As at 31 December 2017
Investments
Current assets
Debtors
Deferred tax assets
Cash at bank and in hand
Total current assets
Total assets
Creditors: amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium
Merger reserve
Own share reserve
Share-based payment reserve
Retained earnings:
At 1 January
Profit/(loss) for the year attributable to the owners
Other changes in retained earnings
At 31 December
Equity shareholders’ funds
Notes 34 to 44 form part of these financial statements.
Note
36
2017
£’000
2016
£’000
65,993
63,464
37
38
39
40
2,561
949
1
3,511
69,504
(26,262)
(22,751)
43,242
43,242
9,803
15,539
11,304
(856)
2,790
3,975
394
293
4,662
2,825
190
1
3,016
66,480
(26,413)
(23,397)
40,067
40,067
9,769
14,989
11,304
(856)
886
4,403
(886)
458
3,975
43,242
40,067
The financial statements on pages 101 to 107 of Tribal Group plc (registered number 4128850) were approved by the Board of
Directors and authorised for issue on 22 March 2018. They were signed on its behalf by:
Ian Bowles
Director
Mark Pickett
Director
102
Tribal Group plc Annual Report and Accounts 2017
Company only Statement of Changes in Equity
For the year ended 31 December 2017
Called up
Share
capital
£’000
Note
Share
premium
£’000
Merger
reserve
£’000
Own
share
reserve
£’000
Share
based
payment
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
At 1 January 2016
4,743
21
11,713
(765)
10
4,403
20,125
Loss and total comprehensive loss
for the year
Issue of share capital
Costs associated with issue of
share capital
Charge to equity for share-based
payments
Own shares acquired in period
Tax credit on charge to equity for
share-based payments
Transfer from merger reserve
At 31 December 2016 and 1 January
2017
Profit and total comprehensive profit
for the year
Issue of share capital
Charge to equity for share-based
payments
Tax credit on charge to equity for
share-based payments
–
–
5,026
17,091
–
–
–
–
–
(2,123)
–
–
–
–
–
–
–
–
–
–
(409)
–
–
–
–
(91)
–
–
–
–
–
876
–
–
–
(886)
(886)
–
–
–
–
49
409
22,117
(2,123)
876
(91)
49
–
9,769
14,989
11,304
(856)
886
3,975
40,067
–
34
–
–
–
550
–
–
–
–
–
–
–
–
–
–
–
–
1,904
394
–
–
394
584
1,904
–
293
293
At 31 December 2017
9,803
15,539
11,304
(856)
2,790
4,662
43,242
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
103
Notes to the Company Balance Sheet
34. Significant accounting policies
Tribal Group plc is a public limited company incorporated and domiciled in England and Wales.
The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company meets
the definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial Reporting Council. As
permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to
share-based payment, financial instruments, capital management, presentation of comparative information in respect of certain
assets, presentation of a cash-flow statement and certain related party transactions.
Where required, equivalent disclosures are given in the consolidated financial statements.
The financial information has been prepared on the going concern and historical cost basis. The principal accounting policies
adopted are the same as those set out in note 1 to the consolidated financial statements except as noted below.
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
35. Profit for the year
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own profit and loss account
for the year. The profit for the Company amounted to £0.4m (2016: loss of £0.9m). The independent auditors’ remuneration for audit
services to the Company was £110,000 (2016: £107,000).
36. Investments
Cost
At 1 January 2016
Capital contribution relating to share-based payments
Movement in long-term loans
At 1 January 2017
Capital contribution relating to share-based payments
Movement in long-term loans
Impairments
At 31 December 2017
Shares in
subsidiary
undertakings
£’000
Long-term
loans
£’000
Total
£’000
14,595
42,861
57,456
51
–
14,646
834
–
(3,735)
11,745
–
5,957
48,818
–
5,430
–
54,248
51
5,957
63,464
834
5,430
(3,735)
65,993
Long-term loans are treated as investments as they are non repayable.
The Directors have considered the value of the above investments and are satisfied that the aggregate value of each investment is
not less than its carrying value. The investments in subsidiaries are all stated at cost less provision.
Details of the Companies subsidiaries are given in note 33 to the consolidated financial statements.
37. Debtors
Amounts owed by group undertakings
Other debtors
2017
£’000
2,425
136
2,561
2016
£’000
2,795
30
2,825
All amounts owed by group undertakings are unsecured, have no fixed repayment date, no interest is charged and amounts are
repayable on demand. All debtors fall due within one year.
104
Tribal Group plc Annual Report and Accounts 2017
Notes to the Company Balance Sheet continued
38. Deferred tax asset
Deferred taxation
At start of year
Credit to income statement
Items taken directly to equity
At end of year
The deferred tax asset is analysed as follows:
Share schemes
Other timing differences
Deferred tax assets are all non-current assets.
2017
£’000
2016
£’000
190
466
293
949
2017
£’000
665
284
949
28
113
49
190
2016
£’000
190
–
190
The Company has an unrecognised deferred tax asset of £nil (2016: £195,000) in relation to tax losses carried forward of £nil
(2016: £1,148,000).
39. Creditors: amounts falling due within one year
Amounts owed to group undertakings
Trade and other creditors
Accruals
2017
£’000
24,810
505
947
2016
£’000
25,556
206
651
26,262
26,413
All amounts owed to group undertakings are unsecured, have no fixed repayment date, no interest is charged and amounts are
repayable on demand. All creditors fall due within one year.
40. Called up share capital
Allotted, called up and fully paid
At beginning of the year
Issued during the year
At end of the year
2017
number
2017
£’000
2016
number
195,380,299
9,769
94,849,241
670,882
34 100,531,058
196,051,181
9,803 195,380,299
2016
£’000
4,743
5,026
9,769
On 24 April 2017 670,882 shares were issued as part of the settlement of the Campus acquisition.
Details of options in respect of shares outstanding at 31 December 2017 are as follows:
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
105
40. Called up share capital continued
Employee share option schemes:
2015 LTIP
2016 LTIP
2016 LTIP
2017 LTIP
2016 Matching
2017 LTIP (inc CSOP)
Total Tribal Group plc share option schemes
Details of share-based payments are given in note 23 to the consolidated financial statements.
41. Share premium and other reserves
At 1 January 2016
Loss for the year
Issue of share capital
Costs associated with issue of share capital
Own shares acquired in period
Charge to equity for share-based payments
Tax on charge to equity for share-based payments
Merger
reserve
£’000
11,713
–
–
–
–
–
–
Transfer from merger reserve
(409)
Share
premium
reserve
£’000
21
–
17,091
(2,123)
–
–
–
–
Own share
reserve
£’000
(765)
–
–
–
(91)
–
–
–
At 31 December 2016 and 1 January 2017
11,304
14,989
(856)
Profit for the year
Issue of share capital
Charge to equity for share-based payments
Tax on charge to equity for share-based payments
–
–
–
–
–
550
–
–
–
–
–
–
At 31 December 2017
11,304
15,539
(856)
Number
outstanding
‘000
Price
payable
Date from
which
exercisable
March 2018
June 2019
June 2017
June 2020
£nil
£nil
£nil
£nil
–
4,003
611
1,935
6,549
3,406
3,535
13,490
£nil January 2017,
2018, 2019
£0.80
July 2020
Share-based
payment
reserve
£’000
10
–
–
–
–
876
–
–
886
–
–
1,904
–
2,790
Retained
earnings
£’000
4,403
(886)
–
–
–
–
49
409
3,975
394
–
–
293
4,662
The merger reserve of £11.3m (2016: £11.3m) relates to the premium arising on shares issued subject to the provisions of section
612 of the Companies Act 2006.
The own share reserve of £(0.9)m (2016: £(0.9)m) represents the cost of 827,692 (2016: 872,692) shares in Tribal Group plc held
by the Employee Share Ownership Trust to satisfy certain options under the Group’s share option schemes. See note 23 of the
consolidated accounts for details of the Group’s share options schemes.
The retained earnings reserve is distributable.
106
Tribal Group plc Annual Report and Accounts 2017
Notes to the Company Balance Sheet continued
42. Contingent liabilities
A cross-guarantee exists between Group companies in respect of bank facilities which was £nil as at 31 December 2017
(2016: £nil).
In addition the Company and its subsidiaries have provided performance guarantees issued by its bank on its behalf in the ordinary
course of business, totalling £1.5m (2016: £4.2m). They are not expected to result in any material financial loss.
As disclosed in Note 33, Tribal Holdings Limited and International Graduate Insight Group Limited have taken advantage of the
exemption available under Section 394A/ 479A of the Companies Act 2006 in respect of the requirements for audit. As a condition
of the exemption, the Company has guaranteed the year-end liabilities of these subsidiaries until they are settled in full. The
liabilities of the subsidiaries at the year-end was £21,145,000 (2016: £15,236,000). These are inclusive of intercompany liabilities.
43. Financial Instruments
All Company risks are aligned to those of the Group. Details of the risks relating to the Group are given in note 31 to the consolidated
financial statements.
31 December 2017
Financial assets
Cash
Debtors*
Financial liabilities
Creditors
31 December 2016
Financial assets
Cash
Debtors*
Financial liabilities
Creditors
* Excluding amounts that relate to non-financial instruments of prepayments.
Financial
Liabilities
measured at
amortised
cost
£’000
Financial
liabilities at
fair value
through profit
and loss
£’000
–
–
26,262
26,262
Financial
Liabilities
measured at
amortised
cost
£’000
Financial
liabilities at
fair value
through profit
and loss
£’000
–
–
–
–
–
–
Loans and
receivables
£’000
1
2,425
2,426
Loans and
receivables
£’000
1
2,795
2,796
–
–
26,413
26,413
Total
£’000
1
2,425
2,426
26,262
26,262
Total
£’000
1
2,795
2,796
26,413
26,413
–
–
–
–
–
–
–
–
–
–
Introduction
(cid:74)
Strategic Report
(cid:74)
Governance
(cid:74)
Financial Statements
107
44. Staff numbers and costs
The average monthly number of persons employed under contracts of service by the Company during the year was as follows:
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs
Restructuring costs
Share option charge
2017
number
5
2016
number
8
2017
£’000
1,026
454
34
–
1,070
2,584
2016
£’000
1,655
157
65
454
835
3,166
Cost of Directors’ emoluments were incurred by the Company and are included in the Remuneration Report on pages 45 to 49.
E-communications
As an alternative to receiving documents through the post,
shareholders can receive important information online,
including annual and half-year reports and notices of meetings.
Registering for e-communications also enables shareholders
to obtain secure online access to personal shareholding details,
change address details, request new share certificates and
check dividend payments.
To register for e-communications, please visit
https://www.capitashareportal.com
Duplicate accounts
If you receive two or more copies of the Annual Report and
Accounts and/or multiple cheques for each dividend payment,
it means that you have more than one shareholder account.
To receive just one Annual Report and Accounts and one cheque
for each dividend payment, please contact the Company’s
registrars, Link Asset Services, on 0871 664 0300, and ask
for your accounts to be amalgamated.
(Calls cost 12p per minute plus your phone company’s access
charge. Calls outside the United Kingdom will be charged at
the applicable international rate. We are open between 09:00
– 17:30, Monday to Friday excluding public holidays in England
and Wales).
Financial calendar
Annual General Meeting
24 April 2018
108
Tribal Group plc Annual Report and Accounts 2017
Company Information
Tribal Group plc
Registered in England and Wales
Company number: 4128850
Registered office
Kings Orchard
1 Queen Street
Bristol
BS2 0HQ
T: 0845 123 6001
E: info@tribalgroup.com
www.tribalgroup.com
Company secretary
Mark Pickett
N+1 Singer Capital Markets Limited
1 Bartholomew Lane
London
EC2N 2AX
Stockbrokers
Investec Bank plc
2 Gresham Street
London
EC2V 7QP
Financial adviser
Investec Bank plc
2 Gresham Street
London
EC2V 7QP
Principal bankers
Lloyds Bank
PO Box 112
Canon’s House, Canon’s Way
Bristol
BS99 7LB
Independent auditors
PricewaterhouseCoopers LLP
3 Forbury Place
23 Forbury Road
Reading
RG1 3JH
Solicitors
Osborne Clarke
2 Temple Back East
Temple Quay
Bristol
BS1 6EG
Registrars
Link Asset Services (formerly Capita Registrars Limited)
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tribal Group plc
Registered in England and Wales
Company number: 4128850
Registered office
Kings Orchard
1 Queen Street
Bristol
BS2 0HQ
T: 0845 123 6001
E: info@tribalgroup.com
www.tribalgroup.com