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Tribal profits soar after turnaround

TIP UPDATE: Profits jump at Tribal following last year's restructuring and there should be more to come as the order book for higher-margin business grows and debt is sharply reduced.
August 14, 2012
IC TIP: Buy at 87p

Tribal's higher-margin technology business, which provides student management systems and web portals, increased adjusted operating profits by 7 per cent to £4.7m and saw its order book surge from £55.9m to £80.8m. In sharp contrast, the low-margin UK-based service business, which includes Ofsted inspections, reported flat adjusted operating profits of £1.6m and a 16 per cent decline in the order book to £99.7m.

Tribal is also generating plenty of cash and an operating cash outflow of £0.9m in the first half of 2011 was turned around into a £4m inflow, reducing net debt from £16m at the start of the year to £13.2m. This prompted analysts at Canaccord Genuity to slash their year-end net debt forecasts from £14.6m to £10m.

On an underlying basis, first-half pre-tax profits rose from £2.8m to £3.6m as the cost of servicing debt fell sharply; reported results also benefited from a steep fall in one-off restructuring costs which impacted last year's numbers. Canaccord upgraded its full-year adjusted pre-tax profit estimate slightly to £9.8m, giving EPS of 7.9p (from £9.5m and 7.89p in 2011).

TRIBAL (TRB)

ORD PRICE:87pMARKET VALUE:£82m
TOUCH:86-87p12-MONTH HIGH:94pLOW: 40p
DIVIDEND YIELD:1.1%PE RATIO:14
NET ASSET VALUE:52p*NET DEBT:27%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201157.5-0.71-0.700.40
201257.02.762.200.40
% change-1-- -

Ex-div: 19 Sep

Payment: 21 Oct

*Includes intangible assets of £81m, or 86p a share