Tribal is best known for carrying out more than 30,000 inspections a year on behalf of the UK schools and education inspector, Ofsted, but it is far more than a clipboard-wielding snoop. A reorganisation over the past two years has seen it exit barely profitable operations and refocus as a software and technology provider with a growing international reach.
- Reorganised to focus on growth opportunities
- International business is growing
- Management targets double EPS in three years
- Exposed to UK education spending
- Risk of contracts slipping
The company still does most of its work in the UK, and the bulk of that is still in education, but recent contract wins have expanded it into Australasia, the Middle East and the US, diversifying the business and creating footholds for growth overseas.
A key example of how the company can use its expertise abroad is its contract win with the Department of Education for New South Wales, Australia. This A$40m (£26m) contract will be delivered over the next three years, with Tribal providing student management systems and web portals for colleges and schools throughout the state. The contract should then contribute recurring revenues.
Tribal's bosses began refocusing on software and technology-led services two years ago and accelerated the process last year with the sale of two divisions. This cut some debt and allowed management to concentrate on the education, learning and training markets, served through two divisions - technology and services. With the exceptional costs relating to the reorganisation mostly taken in 2011 and a cost-cutting programme likely to deliver £5.3m a year in savings, Tribal's results for 2012 should show the new group's potential (see table). New contract wins have added to Tribal's order book, which totalled £193m at the end of May.
TRIBAL (TRB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 89p | MARKET VALUE: | £83m | |
| TOUCH: | 87-89p | 12-MONTH LOW: | 94p | LOW: 40p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 49p | NET DEBT: | 35% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 194 | -17.8 | -23.9 | 4.6 |
| 2010 | 104 | -0.4 | -0.5 | 2.5 |
| 2011 | 108 | 3.7 | 3.5 | 1.0 |
| 2012* | 113 | 9.5 | 7.8 | 1.1 |
| 2013* | 119 | 10.0 | 9.1 | 1.4 |
| % change | +5 | +5 | +17 | +27 |
Normal market size: 3,000 Matched bargain trading Beta: 0.3 *WH Ireland estimates (profits & earnings not comparable with historic figures) | ||||
Tribal is now generating decent amounts of cash, which is being ploughed back into the business. Management reckons this will allow Tribal to double its EPS over the next three years. Through spending on proprietary products, Tribal raises barriers to entry against competitors and makes it harder for clients to find alternative service suppliers.
Tribal still relies on the UK's education industry, where spending power is under intense pressure, for around 80 per cent of its revenues. At least it has strong positions to defend. It is the number one provider of student management systems to UK universities, further education colleges and larger learning providers and number two provider of children's' services systems to local authorities.
The services business is Ofsted's number one supplier of inspections, but also provides benchmarking services to universities, delivery of electronic communications and portals and careers services in the UK and beyond. For example, its inspections business has won a £6m, three-year contract in Abu Dhabi and is active in the US, where it collaborates with analytics software giant SAS to develop software for educational programmes in Tennessee.
