Tribal Grp. Regulatory News (TRB)

26 Mar 2007 07:03

Tribal Group PLC26 March 2007 Tribal Group plc 26th March 2007 Tribal Group plc ("Tribal" or the "Company") Sale of Mercury Health SUMMARY - Tribal has agreed to sell Mercury Health to Care UK Plc for a gross enterprise value of £77 million. - Tribal to receive estimated net cash proceeds of £52 million at completion after deducting transaction costs and net third party debt that will be transferred with the business. - Post the sale, Tribal will be a focused provider of high value consultancy and support services and, increasingly, service delivery solutions to the UK public sector. - Tribal intends to use all of the net cash proceeds to pay down debt, providing Tribal with a strong platform to grow both organically and, as appropriate, by acquisition. - The current dividend is to be maintained with a progressive dividend policy expected going forward. - The sale is conditional, inter alia, on shareholder approval and on Department of Health consent. The circular to shareholders and notice convening an Extraordinary General Meeting of the Company recommending approval of the sale will be dispatched to shareholders shortly. Commenting on the sale, Henry Pitman, Chief Executive of Tribal, said: "We are very pleased that we have achieved such a good outcome for shareholdersand for the continuing Tribal Group. As a result of this sale, which will considerably strengthen Tribal's balancesheet, the Group will now re-focus its efforts on delivering consultancy,support services and, increasingly, service delivery solutions to education,health and other public sector markets. I would like to thank the management team at Mercury Health for their effortsover the last few years, during which time they have created, from a standingstart, one of the most successful and exciting healthcare businesses in the UK.I have no doubt that Mercury Health will build on this success as part of CareUK." For further information please contact: Henry Pitman, Chief Executive, Tribal Group plc Tel: 01285 886020Simon Lawton, Group Finance Director, Tribal Group plc Tel: 01285 886020Colin Browne, Maitland Tel: 020 7379 5151 Introduction------------ Tribal, a leading provider of consultancy and professional support services to the UK public sector, is pleased to announce that it has conditionally agreed to sell its healthcare delivery division, Mercury Health Holdings Limited ("Mercury Health"), to Care UK Plc ("Care UK") for a gross enterprise value of £77 million. On completion of the sale, Tribal will receive estimated net cash proceeds of £52 million after deducting transaction costs and net third party debt that will be transferred with Mercury Health. The Board intends to use all net cash proceeds of the sale to reduce Tribal indebtedness. Following the sale, Group net debt is expected to fall below £15m. Background and reasons for the sale----------------------------------- To date, Mercury Health has prospered as part of Tribal, having had significant success in bidding for and securing major contracts in the first and second phases of the Department of Health's Independent Sector Treatment Centre procurement programme. However, Mercury Health's contracts require substantial implementation expenditures and sizeable guarantees to the Department of Health which must be supported either by way of parent company guarantee or cash collateral. As Mercury Health has grown, this has placed increased pressure on Tribal's financial resources and has become a constraint on the development of both the continuing Tribal Group and Mercury Health. Therefore, the Tribal Board believes that Mercury Health has reached a stage in its development where it would be in the best interests of Tribal shareholders for Tribal and Mercury Health to be operated as separate businesses. The Board has decided to sell Mercury Health for, inter alia, the following reasons: - to crystalise the value generated by the development of Mercury Health;- as noted above, the capital requirements and balance sheet structure of Mercury Health are expected to differ significantly from those of the continuing Tribal Group. The Board believes this will increasingly impact the organic and acquisition growth strategies of the two businesses and, therefore, their long term values; and- there are no material operating synergies between Mercury Health and the continuing Tribal Group and the operating activities of Mercury Health are fundamentally different to those of Tribal's other businesses. Continuing Group strategy------------------------- Post the sale of Mercury Health, Tribal will continue to provide a wide range ofhigh value consultancy and support services and, increasingly, service deliverysolutions to the UK public sector, with a continued focus on the growth areas ofeducation and health. The continuing Tribal Group will offer an integrated solution, thereby enablingthe business to bid for complex contracts which often require the combination ofconsultancy and service delivery skills. Such contracts offer multi-year termswhich should increase the visibility of the continuing Tribal Group's revenuesgoing forward. The business expects to deliver long term, sustained organic growth through:strong account management of the existing customer base; increasing capacity inthe areas of highest growth potential; diversifying into new niche markets; andincreasing the level of committed revenue by successfully bidding formulti-year, service delivery contracts. To augment the benefits of revenue growth, the continuing Tribal Group aims todeliver margin improvement through: strong performance management; a selectiveapproach to both clients and contract opportunities; improved project andprogramme costing procedures; and robust control of the operating cost base.Significant progress has been made in this regard with operational andperformance management already strengthened considerably, a number ofunderperforming businesses recently exited and the centralisation of procurementand support functions nearly complete. The continuing Tribal Group intends to support organic growth by making selectedbolt-on acquisitions as and when appropriate opportunities arise. Suchacquisitions would be expected to strengthen the continuing Tribal Group'sposition in its existing markets and to add skills and complementary serviceswhich reinforce its integrated service offering. Current trading and future prospects------------------------------------ Since the update on current trading and the prospects for the Company providedin the interim statement on 28 November 2006, there has been no material changeto the Board's expectations for the continuing Tribal Group. As previouslyindicated, March is forecast to be a significant contributor to the full yearresults. In addition, the timing and achievability of reaching financial closefor the Peterborough PFI hospital scheme by 31 March year end remains uncertain. The sale will result in a profit on disposal of £27 million and is expected tobe earnings dilutive in the first financial year following completion. It is intended that the current dividend will be maintained and the Board wouldexpect, in the absence of any significant capital expenditure requirements forfuture contracts or developments, that the dividend policy going forward shouldbe progressive. Information on Mercury Health----------------------------- Mercury Health, which was established in 2003 and is incorporated in the UK, is one of the leading independent providers of a wide range of elective (planned) surgery and clinical diagnostic services, provided under the Department of Health's Independent Sector Treatment Centre programme, and primary care services to NHS patients. For the year ended 31 March 2006, Mercury Health generated revenue of £14.6 million and profit before taxation of £0.3 million. As at 31 March 2006, net liabilities and gross assets of Mercury Health were £2.6 million and £50.6 million respectively. The members of the executive board of Mercury Health are as follows: Keith Evans Mercury Health Group Managing DirectorSteve Breach Mercury Health Group Finance DirectorMark Smith Mercury Health Group Strategy DirectorJeanette McMillan Managing Director, Elective SurgeryPaul Hobson Managing Director, DiagnosticsMark Hunt Managing Director, Primary and Community CareHilary Thomas Mercury Health Group Medical Director This information is provided by RNS The company news service from the London Stock Exchange