Tribal Group Reports Mixed Results in FY24 Amid Transition to SaaS Model
Why we think this is neutral
Tribal Group's FY24 results present a mixed picture. On the positive side, the company saw a 6.0% increase in group revenue to £90.0m and a 17.8% rise in Adjusted EBITDA to £16.7m. The core Student Information Systems (SIS) business performed well with 7.2% revenue growth. Additionally, the company significantly improved its financial position, reducing net debt to £3.2m from £7.2m and achieving a free cash inflow of £7.3m compared to a previous outflow. However, these positives are balanced by several challenges. Statutory profit before tax decreased to £5.9m from £6.6m, and the Etio business (formerly Education Services) saw only marginal growth with a significant decrease in operating margin. The company also faces headwinds in its key markets, with challenging conditions in the Higher Education sectors. The transition to a SaaS business model, while strategic, presents execution risks. New customer wins were lower than in previous years, indicating potential market challenges. While the company expects performance in line with Board expectations for FY25, the multiple indicators of challenging market conditions and economic uncertainty suggest caution. The balance of growth in core business against market headwinds and transition risks leads to a neutral outlook.
Key Points
- Group revenue up 6.0% to £90.0m
- Adjusted EBITDA increased 17.8% to £16.7m
- Net debt reduced to £3.2m from £7.2m
- Statutory profit before tax down to £5.9m from £6.6m
- Core SIS revenue grew 7.2%, Etio revenue up only 1.3%
- Annual Recurring Revenue (ARR) increased 6.5% to £57.0m
- Free cash inflow improved to £7.3m from £(1.4)m outflow
- New customer wins lower than in prior years
- Headwinds reported in Higher Education sectors
- Transition to SaaS model ongoing with associated risks and opportunities
Summary
Tribal Group plc reported mixed results for FY24 as it continues its transition to a SaaS business model. Group revenue increased 6.0% to £90.0m, with core Student Information Systems (SIS) revenue growing 7.2% to £72.7m. Adjusted EBITDA rose 17.8% to £16.7m, and the company significantly improved its financial position with net debt reducing to £3.2m from £7.2m. However, statutory profit before tax decreased to £5.9m from £6.6m, and the Etio business saw only marginal growth with a significant decrease in operating margin. The company faces headwinds in key Higher Education markets and reported lower new customer wins than in previous years. Looking ahead, Tribal expects performance in line with Board expectations for FY25, but acknowledges challenging conditions in its key markets. The transition to a SaaS model presents both opportunities and execution risks. No broker targets were provided for comparison.