Tribal margins hit by tough software implementation

Education software and services provider Tribal Group (LON: TRB) continues to add to its annualised recurring revenues through additional deployments of its cloud-based software. Short-term profitability is being held back by a difficult implementation, but the longer-term outlook is positive.  

The main part of the business is student information systems (SIS), which provide higher and further education establishments with the ability to manage and engage with students. This generates revenues from licence fees, implementation and support. An increasing amount of revenues are coming from cloud-based software. This division already has a large market share in the UK and is seeking to expand in Asia. Education services is the smaller part of the business, and it provides quality assurance and benchmarking services to the education sector.

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In the six months to June 2022, revenues were 8% higher at £42.4m. Annualised recurring revenues are running at £53.7m. New product launches and the problems with the contract with Nanyang Technology University (NTU) in Singapore hampered group margins. Underlying pre-tax profit fell from £7.9m to £5.7m. That figure excludes £1.27m of restructuring and transformation costs.

There was a cash outflow from operations due to the timing of implementations, although cash generation is always better in the second half. The amortisation charge was £1m, while capitalised development costs were £5.59m.

The growth in SIS revenues was mainly due to the newer software, plus related implementation revenues. The NTU implementation is much larger and broader than normal implementations and it will continue to hamper margins into next year.

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Education services improved its interim revenues from £6.8m to £6.9m and there was an improvement in margins due to the contract mix and remote delivery.


House broker Singer forecasts an improvement in revenues from £81.1m to £85m this year, but a decline in pre-tax profit from £14m to £13m with higher margins expected in the second half. Net debt of £1.4m is forecast for the end of the year as cash generated from operations is ploughed into software development. A dividend of 1.3p a share is forecast.

The move to cloud-based software and expansion in Asia provides long-term potential for Tribal, although it will take time to show through in profit.  The share price has fallen 5.5p to 81.5p, which means that the 2022 prospective multiple is 16.   

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