Tribal Grp. Regulatory News (TRB)

26 Mar 2008 07:01

Tribal Group PLC26 March 2008 26 March 2008 Tribal Group plc ("Tribal" or the "group") Audited preliminary results for the nine months ended 31 December 2007 "A significantly improved financial performance across the Group with normalisedprofits and earnings substantially ahead." Strone Macpherson, Chairman Tribal Group plc publishes its audited preliminary results for the nine monthsended 31 December 2007. The reported period is shorter than a full year due tothe change in year end from March to December. We have therefore includedlike-for-like comparisons between the nine months ended 31 December 2007 and thepro forma nine month period to 31 December 2006. In order to assist further withanalysis and comparison, unaudited pro forma information for the years ended 31December 2006 and 31 December 2007 has also been provided and can be found inPart II of this document. The nine months statutory numbers are presented inPart I of this document. Highlights Nine months to 31 December 2007 compared to pro forma nine months to 31 December2006 • Revenue growth of 11% to £153.3m (2006: £138.2m) • Adjusted operating profit up 39% to £11.7m (2006: £8.4m) • Adjusted profit before tax up 98% to £11.1m (2006: £5.6m) • Adjusted diluted EPS up 112% to 8.9p (2006: 4.2p) • Final dividend of 1.8p, an annualised increase of 13% • Successful sale of Mercury Health completed at a profit of £27m Pro forma 12 months to 31 December 2007 • Revenue increased by 8% to £209.2m (2006: £194.3m) • Adjusted operating profit up 4% to £17.7m (2006: £17m) • Adjusted profit before tax up 20% to £15.8m (2006: £13.2m) • Adjusted diluted EPS up 20% to 12.7p (2006: 10.6p) • Cash conversion 142% • Net debt reduced substantially to £6.8m Statutory for the nine months ended 31 December 2007 • Profit before tax £1.2m (year ended 31 March 2007: loss £4.3m) • Profit for the period £25.4m (year ended 31 March 2007: loss £8.6m) Financial summary Normalised pro forma results for the ninemonths ended 31 December 2007 2006 Turnover £188.7m £166.7m +13%Revenue £153.3m £138.2m +11%Adjusted operating profit £11.7m £8.4m +39%Adjusted operating margin 7.6% 6.1% Adjusted profit before tax £11.1m £5.6m +98%Adjusted diluted earnings per share 8.9p 4.2p +112% Note: Adjusted results are presented to provide a better indication of theunderlying financial performance of the continuing operations. The adjustedoperating profit excludes goodwill impairment of £9m (2006: £14.4m), intangibleasset amortisation of £0.2m (2006: £0.2m) and share option costs of £0.5m (2006:£0.1m). The adjusted profit before tax and adjusted earnings per share excludethe financial instrument charge of £0.2m (2006: £nil) and, in the case ofadjusted earnings per share, the profit on disposal of Mercury Health. Normalised pro forma results for the yearended 31 December 2007 2006 Turnover £256.5m £233.7m +10%Revenue £209.2m £194.3m +8%Adjusted operating profit £17.7m £17.0m +4%Adjusted operating margin 8.5% 8.7% Adjusted profit before tax £15.8m £13.2m +20%Adjusted diluted earnings per share 12.7p 10.6p +20%Operating cash flow £22.4m £10.6m Operating profit to cash conversion 142% 124% Note: The adjusted operating profit excludes goodwill impairment of £9m (2006:£14.4m), intangible asset amortisation of £0.3m (2006: £0.3m) and share optioncosts of £0.4m (2006: £0.2m). The adjusted profit before tax and adjustedearnings per share exclude the financial instrument charge of £0.1m (2006: £nil)and, in the case of adjusted earnings per share, the profit on disposal ofMercury Health. Operating cash flow is defined as net cash from continuing operating activitiesless interest. Statutory results Nine months Year ended ended 31 December 31 March 2007 2007 Turnover £188.7m £234.5mRevenue £153.3m £194.1mOperating profit/(loss) £1.9m £(0.3)mProfit/(loss) before tax £1.2m £(4.3)mLoss after tax £(1.8)m £(7.2)mBasic and diluted loss per share (2.6)p (9.8)pProfit/(loss) for the period £25.4m £(8.6)m Note: The normalised, pro forma and statutory results, with the exception ofprofit for the period, are for continuing operations only and so exclude thediscontinued operations of Mercury Health. The statutory results include in theprofit for the period the profit on the disposal of Mercury Health. Further information A presentation of these results will be made to analysts and investors at 9.30amon 26 March 2008 and a copy of this will be made available later that morning onthe Tribal Group website: www.tribalgroup.co.uk Tribal Group plc Tel: 020 7323 7110Peter Martin, Chief ExecutiveSimon Lawton, Group FinanceDirector Maitland Tel: 020 7379 5151Colin BrowneAnthony Silverman Editors' note: Tribal Group provides a range of consultancy, support anddelivery services focused on improving the delivery of public services in theUK. Our core markets are in education, health, housing and regeneration, centralgovernment and local government. The Group employs approximately 2,000 staff andits shares are quoted on the London Stock Exchange (TRB.L). Links: Tribal Group website: www.tribalgroup.co.uk Chairman's statement As previously announced, Tribal has changed its year end and is reporting thenine month results to 31 December 2007 and the pro forma 12 month performance to31 December 2007. The nine month period to 31 December 2007 has beencharacterised by a significantly improved financial performance across theGroup, with normalised profits and earnings substantially ahead of thecomparable nine month period in 2006. We are pleased by the level of organic revenue growth of 11% during the period.This growth in the continuing business, combined with the improvement inoperating margins* from 6.1% to 7.6%, allowed operating profit* to improve by39% to £11.7m. Profit before tax* nearly doubled to £11.1m and diluted earningsper share* increased by 112% to 8.9p. The successful completion of the sale ofMercury Health during the period realised a profit of £27m and enabled us toreduce net debt significantly to £6.8m at the period end. Demand for our services remained strong in our core markets of education,health, housing and regeneration, central and local government. Overall, ourbusinesses performed well with good growth in education and a significantimprovement in the performance of consulting. In support services, tradingconditions were challenging for our resourcing activities as reported in ourinterim results. However, this was offset by strong performances from ourarchitectural practice and communications business. Following the appointment of Peter Martin as chief executive in June 2007, wereviewed the Group's core competencies, competitive strengths and growthopportunities. The review confirmed Tribal's focus on its core activity ofproviding a range of consulting, support and delivery services that improve thequality and value for money of public services. We have identified significant opportunities for organic growth, building on theGroup's broad service offering and domain expertise to provide integratedsolutions for clients. We are seeking to increase the proportion of committedrevenue generated by our support and delivery services thereby increasing ourearnings visibility. We have introduced measures to improve profitability and are driving greatercollaboration across the Group by ensuring that our internal structures,processes and incentives enable us to shape our offering to meet the complexneeds of our clients. Our principal financial goal is to drive earnings growth over the medium-termthrough double digit increases in annual revenue and progressive improvement inoperating margins. We are continuing to invest in our systems and managementresources in order to support our growth objectives. We are recommending a final dividend of 1.8p, which makes the nine monthdividend a total of 2.95p, equivalent to an annual increase of 13%. In September 2007, Sheila Forbes CBE retired from the Board. In her three yearsas a non-executive director, Sheila made a valuable contribution to the growthof Tribal and we wish her well in her new role as Principal of St Hilda'sCollege, Oxford. Henry Pitman, Tribal's founder and former chief executive, is stepping down fromhis non-executive role on the board with effect from 26 March. On behalf of theboard and shareholders, I would like to thank Henry for his vision inestablishing Tribal and the enormous contribution he has made since 1999, whichhas seen the Group become a major provider of consulting, support and deliveryservices to the public sector in the UK. Henry has entered into an agreementwith the Group that places certain restrictions on any share sales for a periodof 12 months. The Company will, in due course, seek the appointment of anadditional independent non-executive director. We have been pleased by the Group's trading performance since the start of theyear. We have secured a number of important new contract wins and the level ofcommitted revenue and the strength of the pipeline is encouraging. The Board isconfident about Tribal's prospects for 2008 and beyond. Strone MacphersonChairman26 March 2008 * The operating profit, operating margin, profit before tax and diluted earningsper share are stated in accordance with the definitions given above in thefinancial summary. Chief executive's statement Results for the nine months ended 31 December 2007 Tribal's core business is working in partnership with our client organisationsto improve the planning and delivery of essential public services. The Groupoffers an integrated portfolio of consulting, support and delivery serviceswhich enable our clients to meet increasingly challenging quality and efficiencygoals. A favourable market environment for Tribal's services has enabled us to delivergood revenue growth in the period and we continue to see significantopportunities to grow and develop our businesses. Financial results We are pleased to report a significant improvement in financial performance forthe nine months ended 31 December 2007. The Group's revenue from continuingoperations for the period was up 11% at £153.3m (2006: £138.2m). Operatingprofit* increased by 39% to £11.7m (2006: £8.4m) and the operating margin*increased from 6.1% to 7.6%. Profit before tax* was up 98% at £11.1m (2006:£5.6m) and the diluted earnings per share* increased by 112% to 8.9p (2006:4.2p). On a pro forma basis, the revenue for the year ended 31 December 2007 was up 8%at £209.2m (2006: £194.3m). Operating profit* increased by 4% to £17.7m (2006:£17.0m) and the operating margin* was 8.5% (2006: 8.7%). Profit before tax* wasup 20% at £15.8m (2006: £13.2m) and the diluted earnings per share* were up 20%at 12.7p (2006: 10.6p). The statutory profit before tax for the nine months ended 31 December 2007 of£1.2m (year ended 31 March 2007: loss of £4.3m) is after an impairment charge of£9.0m (March 2007: £14.4m), associated with our resourcing business, which weannounced in our Interim Results Statement on 21 November 2007. Retained profitfor the period was £25.4m (March 2007: loss of £8.6m), reflecting the profitrealised on the disposal of Mercury Health. During the 12 months ended 31 December 2007, the Group generated operating cashflow from continuing operations of £22.4m (2006: £10.6m), an operating profit*to cash conversion of 142% (2006: 124%). Net debt at the year end was £6.8m. * The operating profit, operating margin, profit before tax and diluted earningsper share are stated in accordance with the definitions given above in thefinancial summary. Dividend Tribal is pleased to announce that it is recommending a final dividend of 1.8pper share, making a total of 2.95p per share for the nine month period to 31December 2007. Subject to approval at Tribal's 2008 Annual General Meeting(AGM), this dividend will be paid on 11 July 2008 to shareholders on theregister at 13 June 2008. On a pro rata annualised basis, the interim and finaldividends totalling 2.95p for the nine month period to 31 December 2007represent an increase of 13%. Markets The Government's continuing commitment to improve the quality and value formoney of public services remains the key driver of market growth for Tribal'sconsultancy, support and delivery services. The Comprehensive Spending Review settlement in October 2007 and the budgetstatement in March 2008 confirmed public spending and investment plans for thenext three years, creating significant opportunities for the private sector tosupport the effective and efficient delivery of public services. Within theoverall spending plans for the period to 2011, above average awards were made inreal terms to our two most important market sectors: education (5.6% per annum)and health (4% per annum). In addition to the scale of the Government's reform agenda and the drive forimproved standards, our markets are increasingly characterised by newopportunities to work with public sector organisations as they explore theirchanging role. Tribal shares with many of its clients a commitment to the ethos of publicservice, but we are also able to bring to those clients the commercial rigourand financial expertise of the private sector. We see increasing demand for theGroup's broad service offering and domain knowledge, and we are continuouslydeveloping integrated solutions to support the implementation of specificinitiatives and fulfil complex client needs. In the nine months ended 31 December 2007, 96% of our revenue was from thepublic sector. Our principal markets were as follows: education 48%, health 17%,central government 14%, housing and regeneration 10% and local government 7%.While the UK public sector will remain the core focus for our business, we seesignificant growth potential from marketing our services internationally and weare actively exploring a number of opportunities. Operating review Segmental operating profit and operating profit margin figures for the ninemonths ended 31 December 2007 are stated in accordance with the business segmentinformation in note 2 to the accounts. Pro forma segmental information for thenine months ended 31 December 2006 was published on our website on 4 July 2007.Pro forma segmental information for the year ended 31 December 2006 is stated inaccordance with the business segment information in the unaudited pro formafinancial information in Part II of this document. Education Unaudited Unaudited Unaudited pro forma pro forma pro forma Nine months nine months year year ended ended ended ended 31 December 31 December 31 December 31 December 2007 2006 2007 2006 £000 £000 £000 £000 Revenue 61,761 56,572 83,889 80,514Operating profit 8,618 7,570 15,150 13,570Operating profit margin 14.0% 13.4% 18.1% 16.9% Our education businesses saw an increase in revenue of 9.2% to £61.8m (2006:£56.6m) during the nine month period ended 31 December 2007. Operating profitwas 14% higher at £8.6m (2006: £7.6m) and operating margins improved to 14%(2006: 13.4%). We have seen good demand for our services across all of oureducation businesses as we continue to focus on key areas of the Government'sagenda for education and skills. We are an established 'partner of choice' for the Department for Innovation,Universities and Skills (DIUS), Department for Children, Schools and Families(DCSF), the Quality Improvement Agency (QIA), the TUC and several majoremployers. During the period, our learning and publishing business launched new trainingproducts for handheld computers and created innovative services combiningInformation and Communication Technologies (ICT) and more traditionalface-to-face learning in our work for McDonald's and Ford Motor Company. We havealso drawn on our technology and innovation capabilities to develop theGovernment's 'English for Life and Work' portal. This development work underpinsthe cross-government English for Speakers of Other Languages (ESOL) strategy. The business has shown steady growth over the period with important wins focusedon developing education policy. We bid successfully to develop the nationalstrategy for improving adult numeracy and to deliver a programme to work withfamilies to improve language, literacy and numeracy. We secured a frameworkagreement to provide consultancy, support and delivery services to theChildren's Workforce Development Council, and as part of the 'Alliance forLifelong Learning', we successfully tendered to manage the work of the BasicSkills Agency. Tribal is also a major provider of information, advice and guidance to people inprison and this area of the business continues to grow. Our contracts forexisting provision in the South West and East of England have been extended andwe are in the process of preparing a detailed bid for the next stage of theoffender learning programme, which is worth up to £20m a year over a five yearperiod. Our student and institution administration software products continue to performwell. We lead the market in further education (FE), higher education (HE) andwork-based learning in the UK. In addition, around 70% of local authorities useour software to manage children's services operations or to control and optimisetheir building assets. We are securing more long-term managed services IT contracts in both the publicand private sectors. We continue to develop new solutions for our existingmarkets and see strong growth potential in new areas such as children's servicesand health. There is also considerable opportunity for our software productsoverseas and this will be a focus for our new business development activity inthe coming period. Tribal is the largest provider of school inspections in the UK and our educationservices business has continued to perform well in the third year of ourexisting contract with Ofsted. This places us in a strong position to secure anew contract from September 2009. In addition, Ofsted is considering outsourcinga greater proportion of its work which would significantly increase the size ofthe current market. The growing overseas school inspection and improvementmarket also provides us with significant opportunities. Our Building Schools for the Future (BSF) consulting team is securing animportant position as a provider of education services and has won contracts inSouthwark, Rochdale, Kirklees and Blackburn & Darwen. Tribal also remains a keypartner in taking forward the Government's flagship academy programme; in theperiod we have won two new academy projects in Birmingham. Our Pupils' Champions school improvement programme has supported 3,000 studentsand their teachers, and 80% of the schools involved reported a significantimprovement in standards. Our benchmarking services business has seen growth inthe HE sector as well as overseas, where we have secured a major national FEcontract in New Zealand worth £2m. Consulting Unaudited Unaudited Unaudited pro forma pro forma pro forma Nine months nine months year year ended ended ended ended ended 31 December 31 December 31 December 31 December 2007 2006 2007 2006 £000 £000 £000 £000Revenue 50,084 43,719 69,408 61,166Operating profit 3,420 2,422 3,899 4,567Operating profit margin 6.8% 5.5% 5.6% 7.5% The nine month period ended 31 December 2007 saw a considerable improvement inthe performance of our consulting business with revenue increasing by 15% to£50.1m (2006: £43.7m) and operating profit increasing by 41% to £3.4m (2006:£2.4m). Operating margins rose to 6.8% (2006: 5.5%). The operating performancewas a reflection of the continuing demand for our consulting services across thepublic sector and tighter operational control. Our health consulting business continues to be at the forefront of theimplementation of government policy initiatives. A highlight of the period wasbeing appointed as a supplier on a major new Department of Health frameworkagreement. The Framework for procuring External Support for Commissioners (FESC)provides primary care trusts (PCTs) with easy access to expert suppliers tosupport the commissioning of local healthcare. Our major contract wins during the period included leadership development, inpartnership with the King's Fund, for the Health Service Executive in Irelandand support for the NHS Research Capability Programme. Our support for the NHSNational Programme for IT through the Secondary Uses Service Programme wasextended, building on our current work helping to reduce hospital treatmentwaiting times and developing commissioning. We are also working with the PPP joint venture, Partnerships UK, to support thedevelopment of the primary and community care services provided by PCTs. Thiswork will enable them to implement new ways of working and deliver innovativecare pathways which improve the quality of care delivered to patients. We anticipate that the publication of the next stage of Lord Darzi's strategicreview of the health service in the summer of 2008 will provide further growthopportunities for our health business. These are likely to be focused oncommissioning services, the further development of care outside hospitals anddeveloping health services personalised to the needs of the individual. During the period, we brought together our housing and regeneration consultingbusinesses to provide a more integrated offering to clients and to better alignour operations with their requirements. Our market focus is supporting thedelivery of the Government's policy of increasing the supply of housing and thecreation and regeneration of sustainable communities. Our housing and planning consultancy performed well during the period. We havestrengthened our position in social housing, working with a wide range ofclients to assist them in mergers, transfers of housing stock from localauthorities, seeking funding for development opportunities and in shaping theirdevelopment plans. A key development has been the expansion of our regeneration practice inFebruary 2008, with the acquisition of a leading master planning team. This hasenabled us to offer an integrated solution to the challenges of housingdevelopment and regeneration, and to deliver larger and more complex projects. During the period, we supported the development of the new Housing andRegeneration Bill, the creation of the new Homes and Communities Agency andgovernment programmes such as the First Time Buyers Initiative to improvehousing affordability. Tribal continued its strong growth in central government consulting, with anincrease of 20% in revenue over the comparable period in 2006. In addition tofavourable market conditions, our performance has also been driven by our focuson providing clients with better service and value for money, and successfullyattracting high calibre employees. We continue to develop key NHS, Home Office, Foreign and Commonwealth Office,justice and policing accounts and see significant opportunities for ourprocurement and supply chain services. New wins included places on the MoD andHM Revenue and Customs consulting frameworks. We anticipate an increasingreliance on IT by government departments and we are building our capability tooffer advisory services in this area, as well as exploring opportunities toextend our reach into other government departments and agencies. We are currently restructuring our local government practice in order to betterposition the business to take advantage of market opportunities, includingchanges in the regulatory environment and the continued drive for greaterefficiency. These new consultancy opportunities are focused on the effectivenessof local partnerships and the governance and performance management role oflocal government. During the period, Tribal was appointed to all ten categories of the HealthierCommunities procurement framework. The contract, issued by the Improvement andDevelopment Agency for local government, runs until October 2011 and will enablea wide range of bodies, including strategic health authorities, localauthorities, PCTs and key government departments, to access Tribal's servicesand expertise. Support services Unaudited Unaudited Unaudited pro forma pro forma pro forma Nine months nine months year year ended ended ended ended 31 December 31 December 31 December 31 December 2007 2006 2007 2006 £000 £000 £000 £000Revenue 43,022 39,555 58,402 55,347Operating profit 3,825 2,686 5,035 5,209Operating profit margin 8.9% 6.8% 8.6% 9.4% Our support services businesses increased revenue by 9% to £43m (2006: £39.6m)during the nine month period ended 31 December 2007. Operating profit was 42%higher at £3.8m (2006: £2.7m) and operating margins increased to 8.9% (2006:6.8%). The overall performance was supported by the £1.25m of fees earned forreaching financial close on the Peterborough PFI hospital project, but alsoreflected the challenging trading conditions experienced by our resourcingbusiness. It was a particularly strong period for our architectural design business. Wereached financial close on significant PFI hospital schemes in addition toPeterborough, including North Middlesex and NHS Local Improvement Finance Trust(LIFT) projects in Bury, Tameside and Glossop. We continued to see many newopportunities through the 'ProCure 21' framework and the 'Designed for Life'healthcare framework in Wales and we are bidding for a new health framework inScotland. Science will also be an important area of growth. We have won important new commissions through university frameworks. AtBournemouth we have begun work on a new business school and at Oxford Universitywe won three repeat commissions following the completion of a major researchcomplex. FE has been buoyant with wins at Gateway College in Leicester andSEEVIC College. We have increased our capacity to focus on key marketopportunities such as BSF. Our Cape Town office has grown steadily in support of our UK business and is nowplanning to expand into providing architectural design services in support ofpublic sector prospects in South Africa. Our communications business achieved strong new business and organic growth andwas named as the UK's No 1 consumer PR agency in the annual PR Week survey forthe second year running. We secured significant new work with clients such as Barclays, Cannons HealthClubs, Everyclick and the Department of Transport, and won a contract toencourage the use of ICT in learning. We also successfully tendered for anumber of DCSF contracts including the promotion of the new diplomas for 14-19year olds. It was a challenging trading environment for our resourcing business, which sawreductions in advertising spend during the period, a further shift to onlinemedia and a decrease in senior local government vacancies. Although our market share remains strong, profitability in our core advertisingand search activities was significantly below the level we had anticipated atthe start of the period. As reported in our Interim Results, these factors laybehind our decision to record a goodwill impairment charge of £9m. We havereduced staff, strengthened our management team and realigned our coststructure. The trading performance in these areas has improved following theseactions and the level of new business wins has been encouraging. Our new recruitment process outsourcing activity has enjoyed early success,winning the London Boroughs Recruitment Partnership contract for responsehandling and process outsourcing for eight London boroughs and we have recentlybeen appointed as one of three providers to the Olympic Delivery Authority. Strategy review During the period, we undertook a review of the Group's core competencies, competitive strengths and market opportunities. The key elements of our future strategy will be: •a focus on our core public services markets of education, health, housing and regeneration, local government and central government; •development of more integrated service offerings to meet the requirements of our clients; •a target to increase the proportion of revenue from support and delivery to 60% of annual revenue by 2010; •focused investment in key areas to take advantage of emerging opportunities such as health commissioning; and •selective acquisitions that support the strategic development of the Group. People Our improved results are the direct outcome of the hard work of our 2,000employees and 1,000 associates. I would like to thank them all for theirdedication to our clients and their contribution to Tribal's success. Ensuring that we have high calibre people with business critical skills has beena key focus for the Group in the past nine months. We have made excellentprogress in attracting business development talent, particularly in education. Driving forward the leadership agenda is a cornerstone to delivering our futuregrowth plans. Virginia Rothwell joined the executive management team in November2007 as group HR director and we have established a senior leadership team whoare taking collaborative responsibility for delivering the Group's businessgrowth strategy. Prospects Tribal's new financial year began with approximately 40% of planned revenuealready committed (2006: 29%) and with total committed income of £124m (2006:£108m), an increase of 15%. Since the start of the year, trading conditions forthe Group have remained favourable and we have secured a number of importantcontract wins. The pipeline of opportunities is strong. We are making a significant investment in new products and services and instrengthening our management resources, particularly in our education business.We believe that these actions will enable us to achieve our medium-termfinancial goals of double digit increases in annual revenue and to delivering aprogressive improvement in operating margins. We continue to look selectively atstrategic acquisitions that will complement and enhance our offering. The Board believes Tribal is very well-placed to build on its improvedperformance and exploit the strong organic growth prospects that have beenidentified. We remain confident about the Group's future in 2008 and beyond. Peter J MartinChief Executive26 March 2008 Part I Consolidated income statementfor the nine months ended 31 December 2007 Before Other Nine Before Other other administrative months other administrative Year administrative expenses ended administrative expenses ended expenses and and 31 expenses and and 31 financial financial December financial financial March instruments instruments 2007 instruments instruments 2007 costs costs Total costs costs Total Note £'000 £'000 £'000 £'000 £'000 £'000 ContinuingoperationsTurnover 188,654 - 188,654 234,462 - 234,462Direct agency costs (35,355) - (35,355) (40,406) - (40,406) _______ _______ _______ _______ _______ _______ Revenue 2 153,299 - 153,299 194,056 - 194,056Cost of sales (92,266) - (92,266) (114,633) - (114,633) _______ _______ _______ _______ _______ _______Gross profit 61,033 - 61,033 79,423 - 79,423 Netadministrativeexpenses (49,371) - (49,371) (64,957) - (64,957)Otheradministrativeexpenses:Share optioncosts - (489) (489) - (4) (4)AmortisationofIFRS 3intangibles - (240) (240) - (320) (320)Goodwill 8 impairment - (9,000) (9,000) - (14,429) (14,429) Totaladministrativeexpenses (49,371) (9,729) (59,100) (64,957) (14,753) (79,710) _______ _______ _______ _______ _______ _______Operatingprofit/(loss) 11,662 (9,729) 1,933 14,466 (14,753) (287) Investmentrevenues 3 1,119 - 1,119 810 - 810Other gainsand losses 4 - (126) (126) - 291 291Finance costs 5 (1,699) (43) (1,742) (4,991) (164) (5,155) _______ _______ _______ _______ _______ _______ Profit/(loss)before tax 11,082 (9,898) 1,184 10,285 (14,626) (4,341)Tax (3,105) 103 (3,002) (2,855) 9 (2,846) _______ _______ _______ _______ _______ _______ Profit/(loss)for the periodfromcontinuingoperations 7,977 (9,795) (1,818) 7,430 (14,617) (7,187) DiscontinuedoperationsProfit/(loss)fromdiscontinuedoperations 37 27,217 27,254 1,834 (3,255) (1,421) _______ _______ _______ _______ _______ _______Profit/(loss)for the period 8,014 17,422 25,436 9,264 (17,872) (8,608) _______ _______ _______ _______ _______ _______ Attributableto:-Equity holdersof the parent 25,034 (9,379)Minorityinterest 402 771 _______ _______ 25,436 (8,608) _______ _______ Earnings pershare fromcontinuingoperationsBasic 7 8.9p (11.5)p (2.6)p 8.1p (17.9)p (9.8)pDiluted 7 8.9p (11.5)p (2.6)p 8.0p (17.8)p (9.8)p Fromcontinuing anddiscontinuedoperationsBasic 7 8.9p 20.6p 29.5p 10.4p (21.9)p (11.5)pDiluted 7 8.9p 20.6p 29.5p 10.3p (21.8)p (11.5)p Consolidated balance sheetat 31 December 2007 31 31 December March Note 2007 2007 £'000 £'000Non-current assetsGoodwill 8 186,991 192,099Other intangible assets 4,254 3,786Property, plant and equipment 7,363 45,056Investments 157 149Amounts recoverable on contracts - 11,833Deferred tax assets 1,389 772Derivative financial instruments 178 1,017 --- ----- 200,332 254,712 ------- -------Current assetsInventories 1,055 1,298Trade and other receivables 9 62,326 62,188Amounts recoverable on contracts 63 2,840Cash and cash equivalents 15,982 33,483Collateralised cash 192 949 79,618 100,758 ------ -------Total assets 279,950 355,470 ======= =======Current liabilitiesTrade and other payables 10 (67,418) (81,499)Tax liabilities (5,400) (2,742)Obligations under finance leases (3) (98)Bank loans and loan notes (876) (5,530)Provisions (577) (450)Shares to be issued - (489) (74,274) (90,808) -------- --------Net current assets 5,344 9,950 ----- ----- Non-current liabilitiesBank loans (22,098) (102,307)Pension liabilities (1,228) (1,436)Deferred tax liabilities (1,108) (2,358)Obligations under finance leases - (327) (24,434) (106,428) -------- --------- Total liabilities (98,708) (197,236) ======== ========= Net assets 181,242 158,234 ======= =======EquityShare capital 4,239 4,234Share premium account 74,750 74,633Other reserves 11 64,582 67,823Retained earnings 11 36,606 9,941 ------ ----- Equity attributable to equity 180,177 156,631holders of the parentMinority interest 1,065 1,603 ------ -----Total equity 181,242 158,234 ======= ======= Consolidated cash flow statementfor the nine months ended 31 December 2007 Nine months Year ended ended 31 31 December March Note 2007 2007 £'000 £'000 Net cash from operating activities 12 8,808 24,280 ===== ====== Investing activitiesInterest received 992 1,873Proceeds on disposal to minorities 159 2Disposal of subsidiary 36,251 -Proceeds on disposal of property, 113 213plant and equipmentPurchase of investments (8) -Purchases of property, plant and (2,579) (12,196)equipmentExpenditure on product development (1,657) (1,564)Acquisitions (deferred consideration and minority interests) (1,840) (556) _______ _______ Net cash inflow/(outflow) from investing activities 31,431 (12,228) ====== ======== Financing activitiesInterest paid (2,219) (7,905)Equity dividend paid (2,031) (2,685)Dividends to minorities (390) (95)Issue of shares 122 487Repayment of borrowings (53,974) (2,352)Repayments of obligations under finance lease (5) (83)New bank loans - 10,576Movements in collateralised cash 757 443Purchase of own shares - (105)Loan to third party - 535 _______ _______ Net cash used infinancing activities (57,740) (1,184) ======== ======= Net (decrease)/increasein cash and cash equivalents (17,501) 10,868 Cash and cash equivalentsat beginning of period 33,483 22,615 _______ _______ Cash and cash equivalentsat end of period 15,982 33,483 ====== ====== Consolidated statement of recognised income and expensefor the nine months ended 31 December 2007 Nine months Year ended ended 31 31 December March Note 2007 2007 £'000 £'000 Actuarial (loss)/gain on defined benefit plans (7) 436Transfer to cash flow hedge reserve (241) 1,194Deferred tax 67 (489) _______ _______ Net (expense)/income recognised directly to equity (181) 1,141Profit/(loss) for the period 25,436 (8,608) _______ _______ Total recognised income and expense for the period 25,255 (7,467) ====== ======== Attributable to:Equity holders of the parent 24,853 (8,238)Minority interest 402 771 _______ _______ 25,255 (7,467) ====== ======== Notes to the preliminary announcement 1. General information The basis of preparation of this audited preliminary announcement is set outbelow. The financial information in this announcement, which was approved by the Boardof Directors on 26 March 2008, does not constitute the Company's statutoryaccounts for the nine months ended 31 December 2007 or the year ended 31 March2007, but is derived from these accounts. Statutory accounts for the year ended 31 March 2007 have been delivered to theRegistrar of Companies and those for the nine months ended 31 December 2007 willbe delivered following the Company's annual general meeting. The auditors havereported on these accounts; their reports were unqualified and did not containstatements under S237 (2) or (3) of the Companies Act 1985. Whilst the financial information included in this preliminary announcement hasbeen completed in accordance with International Financial Reporting Standards(IFRSs), this announcement itself does not contain sufficient information tocomply with IFRSs. The financial information has been prepared on the historical cost basis,modified to include the revaluation of certain fixed assets and financialinstruments. Copies of the announcement can be obtained from the Company's registered officeat 87-91 Newman Street, London, W1T 3EY. It is intended that the full financial statements which comply with IFRSs willbe posted to shareholders on or around 23 April 2008 and will be available tomembers of the public at the registered office of the Company from that date andavailable on the Company's website: www.tribalgroup.co.uk 2. Business segments The Group is currently organised into three business segments - Consulting,Education and Support services. Principal activities are as follows:- Consulting - one of the largest consultancy businesses operating in the public sector providing a broad range of management consultancy services.Education - one of the largest providers of education services to the public sector including software, managed services, school inspection services, consultancy, e-learning, benchmarking, publishing and training.Support - support services businesses largely operating in theservices public sector providing a range of PR communications, resourcing and architectural design services. The Group previously included Mercury Health, a healthcare delivery businessas a separate segment - that operation was discontinued with effect from 20April 2007. As part of a business review, following the disposal of MercuryHealth, the Group has realigned its reporting structure, splitting out part ofits Consulting segment into a separate Support services segment. Accordingly,the business segment information for the year ended 31 March 2007 has beenrestated to show the current business segment structure. As a result, therehas been an adjustment to inter-segment sales. 2. Business segments (continued) Segment information about the businesses is presented below:- Nine months ended 31 December 2007 Consulting Education Support Eliminations Consolidated services 31 31 31 31 31 December December December December December 2007 2007 2007 2007 2007 £'000 £'000 £'000 £'000 £'000RevenueExternal sales 49,956 61,084 42,259 - 153,299Inter-segment sales 128 677 763 (1,568) - _______ _______ _______ _______ _______ Total revenue 50,084 61,761 43,022 (1,568) 153,299 ======== ======== ======= ======== ======= Segment operating profit 3,420 8,618 3,825 - 15,863 ====== ====== ====== ======== ======= Unallocatedcorporate expenses (4,201) _______Adjusted operatingprofit 11,662 Amortisation ofIFRS3 intangibles (240)Share option costs (489)Goodwill impairment (9,000) _______Operating profit 1,933Investment revenues 1,119Other gains andlosses (126)Finance costs (1,742) _______Profit before tax 1,184 Tax (3,002) Profit for theperiod fromdiscontinuedoperations 27,254 _______ Profit after taxanddiscontinuedoperations 25,436 ======= Included within the segmental revenue and profit for the period is £2.3m ofrevenue and £0.2m of profit from the trading of Mercury Health for the period upto the date of disposal. Notes to the preliminary announcement (continued) 2. Business segments (continued) Year ended 31 March 2007 Consulting Education Support Eliminations Consolidated services 31 31 31 31 31 March March March March March 2007 2007 2007 2007 2007 £'000 £'000 £'000 £'000 £'000RevenueExternal sales 62,681 78,193 53,182 - 194,056Inter-segment sales 359 507 1,735 (2,601) - _______ _______ _______ _______ ______Total revenue 63,040 78,700 54,917 (2,601) 194,056 ========= ====== ====== ======= ======= _______ _______Segment operating profit 2,952 14,102 3,845 - 20,899 Unallocated corporateexpenses (6,433) _______Adjusted operating profit 14,466 Amortisation of IFRS 3intangibles (320)Share option costs (4)Goodwillimpairment (14,429) _______Operating loss (287) Investment revenues 810Other gains and losses 291Finance costs (5,155) _______Loss before tax (4,341) Tax (2,846) Loss for the periodfrom discontinuedoperations (1,421) _______Loss after tax anddiscontinued operations (8,608) ======= Included within the segment loss for the period is £37.8m of revenue and £3.8mof segment operating profit for the trading of Mercury Health for the period.Notes to the preliminary announcement (continued) 3. Investment revenues Continuing operations Nine months Year ended ended 31 31 December March 2007 2007 £'000 £'000 Interest on bank deposits 448 805Other interest receivable 671 -Dividends from equity investments - 5 ______ ____ 1,119 810 ====== ==== 4. Other gains and losses Continuing operations Nine months Year ended ended 31 31 December March 2007 2007 £'000 £'000 Change in the fair value of derivativesclassified as held for trading 62 294Hedge ineffectiveness inthe cash flow hedges (188) (3) ______ ____ (126) 291 ======= ==== 5. Finance costs Continuing operations Nine months Year ended ended 31 31 December March 2007 2007 £'000 £'000 Finance chargesInterest on bank overdrafts and loans 1,666 4,894Interest on loan notes 30 66Interest on obligation under finance leases 1 1Net interest payable on retirementbenefit obligations 2 30 ______ ______Total borrowing costs 1,699 4,991 Financial instrumentsDiscounting charge fordeferred consideration 43 164 ______ ______ 1,742 5,155 ====== ===== Borrowing costs included in the cost of qualifying assets during the prior yeararose on the Mercury Health ISTC contract for which the related borrowings wereseparately identifiable and were capitalised at the average rate of 6.9% forthe year ended 31 March 2007. 6. Dividends Nine months Year ended ended 31 31 December March 2007 2007 £'000 £'000 Amounts recognised as distributions to equity holdersin the period: Final dividend for the year ended 31 March 2007of 2.42 pence(year ended 31 March 2006: 2.25 pence) per share 2,031 1,812 Interim dividend for the year ended 31 March2007: 1.05 pence per share - 880 ______ ______ 2,031 2,692 ====== =====Interim dividend for the nine months ended 31December 2007 of 1.15 pence 966 - ==== ==== Proposed final dividend for the nine months ended31 December 2007 of 1.8 pence(year ended 31 March 2007: 2.42 pence) per share 1,530 2,050 ====== ===== The interim dividend was approved by the Board on 21 November 2007. The dividendwas paid on 16 January 2008 to ordinary shareholders who were on the register on14 December 2007. The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in these financialstatements. On a pro rata annualised basis, the interim and final dividendtotalling 2.95p for the nine month period ended 31 December 2007 represents anincrease of 13%. 7. Earnings per share Earnings per share and diluted earnings per share are calculated by referenceto a weighted average number of ordinary shares calculated as follows: Nine months Year ended ended 31 31 December March 2007 2007 thousands thousands Weighted average number ofshares outstanding:Basic weighted averagenumber of shares in issue 84,741 81,889Employeeshare options 73 176Shares to be issued inrespect of deferred consideration - 410 ______ ______Weighted average number of sharesoutstanding for dilution 84,814 82,475 ======== =======calculations The adjusted basic and adjusted diluted earnings per share figures shown on theconsolidated income statement are included as the directors believe that theyprovide a better understanding of the underlying trading performance of theGroup. A reconciliation of how these figures are calculated is set out below: 7. Earnings per share (continued) Nine months ended Year ended 31 December 2007 31 March 2007 (Loss)/ (Loss)/ earnings earnings Earnings per share Earnings per shareFrom continuing operations £'000 pence £'000 penceBasic and adjusted basic(loss)/earnings per share:Loss and basic lossper share (2,220) (2.6)p (7,958) (9.8)pAdjustments:Goodwill impairment 9,000 10.6p 14,429 17.6pShare option costs 489 0.5p 4 -Amortisation of IFRS3 intangibles (net of tax) 173 0.2p 224 0.3pFinancial instruments netcharge/(credit) (net of tax) 133 0.2p (40) - ______ ______ ______ ______Adjusted earnings andadjustedbasic earnings per share 7,575 8.9p 6,659 8.1p ===== ======= ===== ==== Diluted and adjusteddiluted(loss)/earnings per share:Loss and diluted loss per share (2,220) (2.6)p (7,958) (9.8)pAdjustments:Goodwill impairment 9,000 10.6p 14,429 17.5pShare option costs 489 0.5p 4 -Amortisation of IFRS3 intangibles (net of tax) 173 0.2p 224 0.3pFinancial instruments netcharge/(credit) (net of tax) 133 0.2p (40) - ______ ______ ______ ______Adjusted earnings andadjusteddiluted earnings per share 7,575 8.9p 6,659 8.0p ====== ==== ===== ==== The loss of £2,220,000 (31 March 2007: £7,958,000) is arrived at after deductingthe minority interest charge of £402,000 (31 March 2007: £771,000) from the lossfor the period from continuing operations of £1,818,000 (31 March 2007:£7,187,000). 7. Earnings per share (continued) Nine months ended Year ended 31 December 2007 31 March 2007 (Loss)/ (Loss)/ earnings earnings Earnings per share Earnings per share For continuing anddiscontinued operations £'000 pence £'000 penceBasic and adjusted basicearnings/(loss) per share:Profit and basicearnings/(loss) per share 25,034 29.5p (9,379) (11.5)pAdjustments:Goodwill impairment 9,000 10.6p 14,429 17.6pAmortisation of IFRS3 intangibles (net of tax) 173 0.2p 224 0.3pShare option costs 489 0.5p 10 -Profit on disposalof Mercury Health (27,217) (32.1)p - -Mercury Health disposal costs - - 3,300 4.0pFinancial instrumentcharge/(credit) (net of tax) 133 0.2p (91) - ______ ______ ______ _____Adjusted earnings andadjusted basic earnings per share 7,612 8.9p 8,493 10.4p ====== ==== ====== =====Basic and adjusteddilutedearnings/(loss) pershare:Profit and basicearnings/(loss) per share 25,034 29.5p (9,379) (11.5)pAdjustments:Goodwill impairment 9,000 10.6p 14,429 17.5pAmortisation of IFRS3 intangibles (net of tax) 173 0.2p 224 0.3pShare option costs 489 0.5p 10 -Profit on disposal ofMercury Health (27,217) (32.1)p - -Mercury Health disposal costs - - 3,300 4.0pFinancial instrumentcharge/(credit) (net of tax) 133 0.2p (91) - ______ ______ ______ _____Adjusted earnings andadjusteddiluted earnings per share 7,612 8.9p 8,493 10.3p ====== ==== ====== ===== 8. Goodwill 31 31 December March 2007 2007 £'000 £'000CostAt beginning of period 234,230 234,094Additions - includingminority interests 4,183 274Disposal of subsidiary (168) -Revisions toprior periods (123) (138) At end of period 238,122 234,230 ======= ======= Accumulatedimpairment lossesAt beginning of period 42,131 27,702Impairment charge 9,000 14,429 ______ ______ At end of period 51,131 42,131 ====== ======= Net book valueAt end of period 186,991 192,099 ======== ======= At beginning of period 192,099 206,392 ======== ======= Additions to goodwill during the period relate mainly to the purchase of theremainder of the share capital in Sportsvine Holdings Limited. Revisions to prior years primarily relate to changes, both increases anddecreases, in estimates of the likely final settlement values under various earnout agreements, which are dependent on post acquisition performance. Goodwill acquired in a business combination is allocated, at acquisition, to thecash generating units that are expected to benefit from the businesscombination. The carrying amount of goodwill has been allocated as follows: 31 31 December March 2007 2007 £'000 £'000 Support services -Communications 17,677 17,677Property 21,265 21,272Resourcing 12,614 21,614 ______ ______ 51,556 60,563Consulting 65,176 64,994Education 70,259 66,374Mercury Health - 168 ______ ______ 186,991 192,099 ======== ======= The Group tests goodwill annually for impairment or more frequently if there areindications that goodwill might be impaired. 8. Goodwill (continued) The recoverable amounts of the cash generating units are determined from valuein use calculations. The key assumptions for the value in use calculations arethose regarding the discount rates, growth rates and expected changes to sellingprices and direct costs during the period. Management estimates discount ratesusing pre-tax rates that reflect current market assessments of the time value ofmoney and the risks specific to the cash generating units. The growth rates arebased on internal budgets in the short term and general market rates thereafter.Changes in selling prices and direct costs are based on past practices andexpectations of future changes in the market. The Group prepares cash flow forecasts derived from the most recent financialbudgets approved by management for the next two years and extrapolates cashflows for two further years at 4% and into perpetuity based on an estimatedgrowth rate of 2.5%. This rate does not exceed the average long-term growth ratefor the relevant markets. The rate used to discount the forecast cash flow is 9.4%. As reported at the time of our interim results, following the disappointingperformance of the resourcing business stream in the six months ended 30September 2007, due to a significant decline in local government and healthrecruitment spend and pressure on margins, a review of the goodwill carryingvalue resulted in an impairment charge of £9.0m. As the forecast recoverableamount now approximates to the carrying value, it follows that if future resultswere to fall below those assumed for the purposes of the value in usecalculations, a further impairment charge would arise. In this respect the Groupconsiders that the anticipated recovery in operating cash flows in the period toDecember 2008 is the most sensitive assumption. Management do not believe there to be any other cash generating units for whichthere is a "reasonably possible" change in the key assumptions that would resultin an impairment. 9. Trade and other receivables 31 31 December March 2007 2007 £'000 £'000 Amount receivable fromsale of services 46,424 49,068Allowance for doubtful debts (766) (705) ______ ______ 45,658 48,363Other receivables 400 725Prepayments and accrued income 16,268 13,100 ______ ______ 62,326 62,188 ======= ====== 10. Trade and other payables 31 31 December March 2007 2007 £'000 £'000 Trade payables 18,441 24,046Other taxation and social security 8,603 11,734Other payables 6,306 4,251Accruals and deferred income 31,114 41,468Deferred cash consideration 2,954 - ______ ______ 67,418 81,499 ====== ====== 11. Reserves Other Retained reserves earnings Total £'000 £'000 £'000 At 31 March 2007 67,823 9,941 77,764Profit for the period - 25,034 25,034Dividends paid - (2,031) (2,031)Net expense recogniseddirectly in equity (147) (34) (181)Goodwill impairment (3,235) 3,235 -Own shares disposed 183 - 183Credit in relation to sharebased payments 489 - 489Share option exercises - (70) (70)Transfers (531) 531 - _______ _______ _______At 31 December 2007 64,582 36,606 101,188 ====== ======= ======= The goodwill transfer of £3.2m is in accordance with section 131 of theCompanies Act 1985. 12. Notes to the cash flow statement 31 31 December March 2007 2007 £'000 £'000 Operating profit/(loss) fromcontinuing operations 1,933 (287)Depreciation of property,plant and equipment 2,296 5,356Amortisation of otherintangible assets 1,275 1,189Impairment of goodwill 9,000 14,429Net pension charge (215) (105)Gain on disposal of property,plant and equipment (92) (133)Gain on sale of investments (68) -Share based payments 489 10 Operating cash flows before _______ _______movements in working capital 14,618 20,459 Increase in receivables (5,519) (4,724)Decrease/(increase) in amountsrecoverable on contracts 256 (4,041)(Decrease)/increase in payables (437) 16,597Increase in inventories (26) (168)Increase in provisions 127 300 _______ _______ Net cash from operatingactivities before tax 9,019 28,423 Tax paid (211) (4,143) _______ _______ Net cash fromoperating activities 8,808 24,280 ======= ====== Net cash from operating activities before taxcan be analysed as follows: £'000 £'000 Continuing operations 11,151 18,149Discontinued operations (2,132) 10,274 _______ _______ 9,019 28,423 ======= ====== Part II Unaudited pro forma financial information The statutory accounts included in these financial statements cover a periodshorter than a full year due to the change in year end. Therefore we haveincluded below pro forma information to provide greater comparability. Basis of preparation The pro forma accounts are unaudited and do not constitute full statutoryaccounts within the meaning of section 240 of the Companies Act 1985. The unaudited pro forma information set out below comprises a consolidatedincome statement and consolidated cash flow for the 12 months ended 31 December2007 and the 12 months ended 31 December 2006. It is based on the consolidatedmanagement accounts of the Group after making adjustments consistent with yearend procedures. On 4 July 2007, a separate document was published on our websitesetting out unaudited abridged pro forma accounts for the 12 months ended 31December 2006 and the nine months ended 31 December 2006. The key issues and judgements are set out below: 1. Disposal of Mercury Health and its subsidiaries The sale of the Group's healthcare delivery business, Mercury Health, to Care UKwas completed on 20 April 2007. In the audited accounts for the year ended 31March 2007, Mercury Health was not classified as discontinued or held for resaleunder IFRS 5 "Non current assets held for sale and discontinued operations" asshareholder approval for the transaction had not been received at the balancesheet date. It follows that had accounts been prepared at 31 December 2006, theresults of Mercury Health would have been included as part of continuingoperations. As the unaudited pro forma accounts have been prepared to assist the user of thefinancial information to understand the impact of this transaction as well asthe change of year end, Mercury Health has been disclosed as a discontinuedoperation, as it will be in future financial reports. Accordingly its resultsfor the period are presented as single amounts in the consolidated incomestatement. 2. Goodwill impairment In the audited accounts for the year ended 31 March 2007, a goodwill impairmentcharge of £14.4m was made in respect of certain business streams that were beingclosed and other underperforming business units. The unaudited pro forma accounts have been prepared on the basis that hadaccounts been prepared to 31 December 2006, this impairment charge would havebeen made at that date rather than in the three months period to March 2007. In addition a further goodwill impairment charge of £9m has been made in respectof the Resourcing business stream in the nine months ended 31 December 2007. 3. Tax charge Over the last two years, Tribal has had the benefit of a low effective tax ratedue to HMRC agreement of various tax reliefs relating to prior periods. The year ended 31 March 2006 benefited from the inclusion of a prior year taxcredit of £1.5m in respect of tax relief obtained mainly for share option costsand certain management expenses relating to acquisition costs. This resultedfrom the agreement with HMRC of the 2002 and 2003 enquiries which were closed inOctober 2005. This prior year benefit therefore relates to the unaudited proforma period ended 31 December 2005 and so has been excluded from these proforma accounts. In the interim accounts for the half year ended 30 September 2006 a further taxcredit of £1.1m was taken following the closure of the enquiry into the 2004 taxcomputations. This benefit related to Mercury Health and as a result has beenincluded as part of the profit from discontinued operations. The further tax credits taken in the financial statements for the year ended 31March 2007 have been reflected in the three month period to 31 March 2007 asthey related to certain 2005 tax computations which were cleared without enquiryon 31 March 2007. The credit has therefore been included in the unaudited proforma period ended 31 December 2007. 4. Employee benefits Share option costs and holiday pay accruals are not calculated on a monthlybasis when preparing the management accounts. However an adjustment has beenmade for these items when preparing the unaudited pro forma accounts. Pension liabilities have not been formally calculated as at 31 December 2006;the pro forma accounts therefore reflect the pension liability disclosed in theaudited accounts to 31 March 2006. The effect of this on the income statementfor both periods is not considered to be material since all actuarial gains orlosses are recorded in the statement of recognised income and expense. Unaudited pro forma consolidated income statementfor the year ended 31 December 2007 Before Before other Other Year other Other Year administrative administrative ended administrative administrative ended expenses expenses 31 expenses expenses 31 and and December and and December exceptional financial 2007 exceptional financial 2006 costs instruments Total costs instruments Total NoteContinuing £'000 £'000 £'000 £'000 £'000 £'000operations Turnover 256,509 - 256,509 233,707 - 233,707Direct agencycosts (47,334) - (47,334) (39,428) - (39,428) _______ _______ _______ _______ _______ _______ Revenue (i) 209,175 - 209,175 194,279 - 194,279Cost of sales (122,769) - (122,769) (114,257) - (114,257) _______ _______ _______ _______ _______ _______Gross profit 86,406 - 86,406 80,022 - 80,022 Netadministrativeexpenses (68,688) - (68,688) (63,066) - (63,066)Otheradministrativeexpenses:Share optioncosts - (431) (431) - (192) (192)Amortisation ofIFRS 3 - (322) (322) - (316) (316)intangiblesGoodwillimpairment - (9,000) (9,000) - (14,429) (14,429) Totaladministrativeexpenses (68,688) (9,753) (78,441) (63,066) (14,937) (78,003) _______ _______ _______ _______ _______ _______Operating profit 17,718 (9,753) 7,965 16,956 (14,937) 2,019 Investmentrevenues 1,431 - 1,431 597 - 597Other gainsand losses - (30) (30) - 274 274Finance costs (3,336) (58) (3,394) (4,349) (236) (4,585) _______ _______ _______ _______ _______ _______ Profit/(loss)before tax 15,813 (9,841) 5,972 13,204 (14,899) (1,695)Tax (4,358) 100 (4,258) (3,950) 13 (3,937) _______ _______ _______ _______ _______ _______Profit/(loss)forthe year fromcontinuingoperations 11,455 (9,741) 1,714 9,254 (14,886) (5,632) Discontinued operationsProfit forthe year fromdiscontinuedoperations 571 23,917 24,488 1,814 39 1,853 _______ _______ _______ _______ _______ _______Profit/(loss)for the year 12,026 14,176 26,202 11,068 (14,847) (3,779) ====== ====== ====== ======= ======== ======== Attributableto:-Equity holdersof the parent 25,541 (4,407)Minorityinterest 661 628 _______ _______ 26,202 (3,779) ====== ======= Unaudited pro forma consolidated income statement (continued)for the year ended 31 December 2007 Before Other Before other administrative Year other Other Year administrative expenses ended administrative administrative ended expenses and 31 expenses expenses 31 and financial December and and December exceptional instruments 2007 exceptional financial 2006 Note costs Total costs instruments TotalFromcontinuingoperations £'000 £'000 £'000 £'000 £'000 £'000 Basic (ii) 12.7p (11.4)p 1.3p 10.7p (18.4)p (7.7)p Diluted (ii) 12.7p (11.4)p 1.3p 10.6p (18.3)p (7.7)p Fromcontinuinganddiscontinuedoperations Basic (ii) 13.4p 16.8p 30.2p 12.9p (18.4)p (5.5)p Diluted (ii) 13.4p 16.8p 30.2p 12.8p (18.3)p (5.5)p Unaudited pro forma consolidated cash flow statementfor the year ended 31 December 2007 Note 2007 2006 £'000 £'000 Net cash from operating activities (iii) 27,063 26,392 Investing activitiesInterest received 2,423 458Proceeds on disposal to minorities 160 1Disposal of subsidiary 36,251 -Proceeds on disposal of property,plant and equipment 298 28Purchase of investments (8) -Purchases of property,plant and equipment (4,620) (14,134)Expenditure on product development (2,336) (1,657)Acquisitions (2,178) (218) _______ _______Net cash inflow/(outflow) from investing activities 29,990 (15,522) ====== ========Financing activitiesInterest paid (4,543) (5,848)Equity dividend paid (2,911) (2,637)Dividends to minorities (485) -Issue of shares 116 549Repayment of borrowings (54,756) (1,918)Repayments of obligationsunder finance lease (28) (81)New bank loans 684 11,875Movements incollateralised cash 790 410Purchase of own shares - (430)Loan to third party - 535 ______ ______Net cash (used in)/fromfinancing activities (61,133) 2,455 ======== ===== Net (decrease)/ increasein cash and cash equivalents (4,080) 13,325 Cash and cash equivalentsat beginning of year 20,062 6,737 ______ ______Cash and cash equivalentsat end of year 15,982 20,062 ========== ====== (i) Business segments Segment information about the businesses is presented below:- Year ended 31 December 2007 Support Consulting Education services Eliminations Consolidated 31 31 31 31 31 December December December December December 2007 2007 2007 2007 2007 £'000 £'000 £'000 £'000 £'000RevenueExternal sales 69,299 82,947 56,929 - 209,175Inter-segment sales 109 942 1,473 (2,524) - _______ _______ _______ _______ _______Total revenue 69,408 83,889 58,402 (2,524) 209,175 ====== ======== ====== ======= ======= Segment operatingprofit 3,899 15,150 5,035 - 24,084 ===== ====== ===== ====== Unallocated corporateexpenses (6,366) _______Adjusted operating profit 17,718 Amortisation of IFRS 3 intangibles (322)Share option costs (431)Goodwill impairment (9,000) _______Operating profit 7,965Investment revenues 1,431Other gains and losses (30)Finance costs (3,394) _______Profit before tax 5,972 Tax (4,258) _______ Profit for the year from continuing operations 1,714 ======= (i) Business segments (continued) Year ended 31 December 2006 Support Consulting Education services Eliminations Consolidated 31 31 31 31 31 December December December December December 2006 2006 2006 2006 2006 £'000 £'000 £'000 £'000 £'000RevenueExternal sales 60,351 80,129 53,799 - 194,279Inter-segment sales 815 385 1,548 (2,748) - _______ _______ _______ _______ _______Total revenue 61,166 80,514 55,347 (2,748) 194,279 ====== ====== ====== ======= ======= Segment operating profit 4,567 13,570 5,209 - 23,346 ===== ====== ===== ====== ====== Unallocated corporateexpenses (6,390) _______Adjusted operating profit 16,956 Amortisation of IFRS 3 intangibles (316)Share option costs (192)Goodwill impairment (14,429) _______Operating profit 2,019Investment revenues 597Other gains and losses 274Finance costs (4,585) _______Loss before tax (1,695) Tax (3,937) _______Loss for the year from continuing operations (5,632) ======= (ii) Earnings per share Earnings per share and diluted earnings per share are calculated by reference toa weighted average number of ordinary shares calculated as follows: - Year Year ended ended 31 31 December December 2007 2006 thousands thousands Weighted average number ofshares outstanding:Basic weighted averagenumber of shares in issue 84,727 80,769Employee share options 68 232Shares to be issued in respectof deferred consideration - 397 ______ ______Weighted average number ofshares outstanding for dilution calculations 84,795 81,398 ====== ====== The adjusted basic and adjusted diluted earnings per share figures shown onthe consolidated income statement are included as the directors believe thatthey provide a better understanding of the underlying trading performance ofthe Group. A reconciliation of how these figures are calculated is set outbelow: Year Year ended ended 31 31 December December 2007 2006 Earnings Earnings Earnings (Loss)/ per share per share pence earningsFrom continuing £'000 £'000 penceoperations Basic and adjusted basicearnings/(loss) pershare: Profit/(loss) and basicearnings/(loss) per share 1,053 1.3p (6,260) (7.7p)Adjustments:Goodwill impairment 9,000 10.6p 14,429 17.9pShare option costs 431 0.5p 192 0.2pAmortisation of IFRS 3intangibles (net of tax) 255 0.3p 221 0.3pFinancial instrumentscharge (net of tax) 55 - 44 - Adjusted earnings andadjusted basicearnings per share 10,794 12.7p 8,626 10.7p ======= ====== ====== ===== Diluted and adjusteddiluted earnings/(loss)per share: Profit/(loss) and dilutedearnings/(loss) per share 1,053 1.3p (6,260) (7.7)pAdjustments:IAS 33 Adjustment* - - - 0.1pGoodwill impairment 9,000 10.6p 14,429 17.7pShare option costs 431 0.5p 192 0.2pAmortisation of IFRS 3intangibles (net of tax) 255 0.3p 221 0.3pFinancial instrumentscharge (net of tax) 55 - 44 - ______ ______ ______ ______Adjusted earnings andadjusted dilutedearnings per share 10,794 12.7p 8,626 10.6p ======= ===== ===== ===== The profit of £1,053,000 (2006: loss of £6,260,000) is arrived at afterdeducting the minority interest charge of £661,000 (2006: £628,000) from theprofit for the period from continuing operations of £1,714,000 (2006: loss£5,632,000). *IAS 33 requires presentation of diluted earnings per share when a company couldbe called upon to issue shares that would decrease the net profit or increasenet loss per share. For a loss making company, net loss per share would only beincreased by the exercise of out-of-money options. (ii) Earnings per share (continued) Year Year ended ended 31 31 December December 2007 2006 (Loss)/ Earnings Earnings Earnings earnings per share per shareFor continuing anddiscontinued operations £'000 pence £'000 penceBasic and adjusted basicearnings/(loss) pershare: Profit/(loss) and basicearnings/(loss) per share 25,541 30.2p (4,407) (5.5)pAdjustments:Goodwill impairment 9,000 10.6p 14,429 17.9pAmortisation of IFRS 3intangibles (net of tax) 255 0.3p 221 0.3pShare option costs 431 0.5p 192 0.2pProfit on disposalof Mercury Health (23,917) (28.2)p - -Financial instrumentcharge (net of tax) 55 - 5 - ______ ______ ______ ______Adjusted earnings andadjusted basic earningsper share 11,365 13.4p 10,440 12.9p ====== ===== ====== ===== Basic and adjusteddiluted earnings/(loss)per share: Profit/(loss) and basicearnings/(loss) per share 25,541 30.2p (4,407) (5.5)pAdjustments:IAS 33 adjustment - - - 0.1pGoodwill impairment 9,000 10.6p 14,429 17.7pAmortisation of IFRS 3intangibles (net of tax) 255 0.3p 221 0.3pShare option costs 431 0.5p 192 0.2pProfit on disposalof Mercury Health (23,917) (28.2)p - -Financial instrument charge (net of tax) 55 - 5 - ______ ______ ______ ______Adjusted earnings andadjusted diluted earnings per share 11,365 13.4p 10,440 12.8p ====== ===== ====== ====== (iii) Notes to the unaudited pro forma cash flow statement 2007 2006 £'000 £'000 Operating profit fromcontinuing operations 7,965 2,019Depreciation of property,plant and equipment 3,607 5,050Amortisation of otherintangible assets 1,751 883Impairment of goodwill 9,000 14,429Net pension charge (327) 7Gain on disposal ofproperty,plant and equipment (201) (24)Increase in fair value ofinvestment property - (20)Gain on sale ofinvestments (68) -Share based payments 437 192 _______ _______Operating cash flows before movements inworking capital 22,164 22,536 Increase in receivables (14,399) (3,077)Increase in payables 20,993 11,077Decrease in inventories 469 4(Increase)/decrease in amountsrecoverable on contracts (1,875) 809Increase in provisions 427 150 _______ _______ Net cash from operatingactivities before tax 27,779 31,499 Tax paid (716) (5,107) _______ _______ Net cash from operatingactivities 27,063 26,392 ====== ====== Net cash from operating activities before taxcan be analysed as follows: £'000 £'000 Continuing operations 25,240 21,060Discontinued operations 2,539 10,439 _______ _______ 27,779 31,499 ====== ====== This information is provided by RNS The company news service from the London Stock Exchange