Tribal is a very different company today to the one that reported results this time last year, or even six months ago. The uncertainty over its future ownership was brought to an end in May (see here) and it is now focused on the education, learning and training markets having disposed of its Health, Government & Resourcing businesses to Capita and TMP (see here) in the spring. On to top of all that, it’s in the midst of a ‘cost reduction programme’ targeting annualised savings of c£5m.
Against this backdrop of uncertainty and change, it’s encouraging to see that Tribal has managed top line growth – revenues from continuing operations were up almost 10% in the first half to £57.5m. Adjusted operating profit (for continuing ops, before the nasty bits) was £3.9m (2010: £3.7m) giving a margin of 6.8%, down from 7.1% the year before. Once you take the nasty bits into account, Tribal was loss-making at the pre-tax level to the tune of -£0.7m for continuing ops (compared to a profit of £1.3m in the same period last year), or -£23.9m as reported (2010: profit £0.3m). However, Tribal’s cost cutting efforts do appear to be working and it expects profits to be weighted towards the second half as a result.
Tribal now has two business units, Technology and Services. Technology supplies high value software products and some bespoke solutions to the education and training sector, while Services delivers long term service contracts in the sector, such as its deals with Ofsted for school inspection. Unsurprisingly, although no figures were provided, both divisions have reportedly found the UK market tough going as the effects of cuts to public sector spending and policy uncertainty are felt.
UK education specialists RM and interactive learning technologies supplier Promethean World have both reported similar conditions recently, but with a more pronounced impact on their results (see Promethean: revenue decline slows in Q2 and RM warns on full year for starters). This context makes Tribal’s performance in the first half even more impressive. It helps that Tribal is more focused on the higher and further education software markets than RM, and has long term services contracts to support it. Moreover, Tribal has a better developed international business to fall back on than RM (though not Promethean). It is these international markets that have contributed to growth with significant contract wins in Australia, New Zealand and the US.
If it’s allowed a period of stability and sees the benefits of its cost cutting programme, the newly-education and training focused Tribal stands a good chance of delivering on management’s expectations and, to borrow Chairman John Ormerod’s words, “mak[ing] progress over the medium term”.