Tribal Group PLC - Report and Accounts 2008

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T R I B A L

Report and Accounts 2008

Tribal Group plcTribal Group plc87-91 Newman StreetLondonW1T 3EYT 020 7323 7100E [email protected]

www.tribalgroup.co.uk

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Our businessTribal provides consultancy, support and delivery services focused on improving the delivery of public services in the UK and internationally. Our broad offering combines anin-depth understanding of our chosen markets with professional expertise and a strong technology capability.

Our approachWe work in partnership with our clients to make a positive difference to the communities they serve and to ensure the best possible use of public funds.

Our services strategy

performance improvement

training and development

programme and project management

communications

information technology

people attraction, selection and retention

procurement and supply chain

built environment design and planning

Our markets education

health

central government

housing and regeneration

local government

international Designed by Kindred Agency. Produced by Accrue*.

The paper used for this report uses ECF (Elemental Chlorine Free) pulps supplied by manufacturers with environment-friendly and sustainable reforestation policies. The report has been printed using soya-based inks

and the printing process conforms to ISO 14001.

Tribal Group plc Report and Accounts 2008 01

Business review Governance > Financial statements >

ContentsBusiness review

Highlights 02

Financial summary 03

Chairman’s statement 04

Chief executive’s statement 06

Business review 18

Strategy

Our markets

Our people

Risk management

Key performance indicators

Financial review

Corporate responsibility

Governance

Board of directors 40

Directors’ report 41

Corporate governance 43

Remuneration report 46

Statement of directors’ responsibilities 51

Financial statements

Independent auditors’ report to the members of Tribal Group plc 52

Consolidated income statement 53

Consolidated balance sheet 54

Consolidated cash flow statement 55

Consolidated statement of recognised income and expense 56

Notes to the financial statements 57

Unaudited pro forma financial information 93

UK GAAP – company financial statements 99

Five year summary 107

Company information 108

Our visionAt their best, public services provide everyone with the opportunity to fulfil their potential.

In today’s complex world, efficient and effective public services depend on the collaborative effort of people working across the public, private and voluntary sectors.

Tribal’s distinctive offering combines professional, commercial and public service expertise. We work in partnership with our clients to help shape policy and improve the quality and value for money of public services.

Whether we are raising standards in schools and colleges, regenerating communities or improving hospitals, our focus is on delivering outcomes that enrich lives.

Stronger together.


02 Tribal Group plc Report and Accounts 2008

Highlights

Revenue1 increased by 12% to £234m, supported by acquisitions made during the year

Adjusted profit before tax2 up by 21% to £18.6m, aided by a significant fall in interest charges

Committed income up by 12% to £139m

Significant growth in sales pipeline to £297m

Strong balance sheet with net debt at £19.7m against facilities of £40m

Senior management team strengthened

Acquisitions successfully integrated

International development progressed

Award of new Ofsted contract

Commentary“The Group made further good progress during 2008. Profits and earnings increased significantly and we successfully implemented a number of key initiatives that will provide us with a stronger platform from which to grow and develop.

“Despite the challenges in the wider economy, our clients remain committed to transforming public services and working with partners to improve performance, reduce costs and effect change. Whilst the pressures on public sector spending are likely to increase, we are encouraged by our current levels of committed income and the strength of the sales pipeline and we believe that Tribal is well-positioned to make further progress in 2009.”

Peter Martin, Chief Executive



Financial summary Year Year Nine months ended ended ended 31 December 31 December 31 December 2008 20071 Change 20073

Revenue £234.0m £209.2m +12% £153.3m

Adjusted profit before tax2 £18.6m £15.4m +21% £10.6m

Profit before tax £18.0m £6.0m £1.2m

Adjusted earnings per share2 14.7p 12.2p +20% 8.4p

Earnings/(loss) per share 14.1p 1.3p (2.6)p

Dividend per share 4.35p 3.93p +11%

Operating cash flow4 £21.4m £22.4m

Operating profit to cash conversion 136% 137%

Notes:1. Following the change of year end in 2007, and in order to assist with analysis and comparison, we have included like-for-like comparisons based on the

unaudited pro forma results for the year ended 31 December 2007.2. The adjusted profit before tax and adjusted earnings per share exclude goodwill impairment of £nil (2007: £9.0m), intangible asset amortisation of

£0.6m (2007: £0.3m) and the financial instrument charge of £0.1m (2007: £0.1m) and, in the case of earnings per share, the related taxation of £0.2m (2007: £0.1m) and discontinued operations.

3. Statutory results for the nine months ended 31 December 2007.4. Operating cash flow is defined as net cash from operating activities less interest.

Case studies

Page 9 Keeping parents in the know

Page 11 A healthy partnership

Page 39 A break from the city

Page 14Learning to change lives

Page 13 Helping schools get VfM



Chairman’s statement

The Group had a successful year in 2008. We made further progress in our financial and operational performance and took a number of steps to strengthen Tribal’s position as a leading provider of consultancy, support and delivery services to the public sector in the UK and internationally.

PerformanceDuring the year, our revenue grew by 12% to £234.0m and adjusted operating profit rose by 14% to £19.8m. Adjusted profit before tax was up 21% to £18.6m and adjusted earnings per share increased by 20% to 14.7p. Our cash performance was excellent and we were particularly pleased to achieve an operating cash conversion of 136%.

Tribal’s financial performance has improved substantially over the past two years. We now have a strong balance sheet, low levels of debt and considerable headroom against our bank facilities, placing us in a good position to address both opportunities and challenges over the coming year.

DividendThe Board is recommending a final dividend of 2.65p per share, bringing the total dividend for the year ended 31 December 2008 to 4.35p per share. This represents an increase of 11% on a pro rata annualised basis. Subject to approval at Tribal’s 2009 Annual General Meeting (AGM), this dividend will be paid on 17 July 2009 to shareholders on the register at 19 June 2009.

StrategyThe next two years will be very challenging for the general economy and our expectation is that public sector spending will come under increasing pressure. The outcome of the general election, which will take place in the next 14 months, will also have an influence on the direction of public policy. However, Tribal operates in a public services industry that is now a substantial and permanent feature of the UK economy. Our core markets, such as education and health, will remain priorities for reform and improvement and the requirement for government to increase efficiency and identify cost savings will continue to create opportunities for our business.

Our priority for 2009 is to build further resilience into our business model by increasing the levels of committed income. We have taken steps to improve our business development processes, with the aim of improving account management, sales qualification and our contract win rate. The award in February 2009 of our new £75m Ofsted contract was a major step in achieving our objectives.



We are also looking to develop our business internationally. The acquisition of Tribal HELM was a significant step in expanding the Group’s international footprint. We are very encouraged by the strength of the international sales pipeline and expect it to be a key contributor to our future growth.

Risk managementDuring these more challenging times, it is even more important to have in place robust risk management systems and effective internal governance. In 2008, we undertook a formal review and analysis of our business and the market environment and have now assigned the management of our key risks to a small group of senior leaders. We have also revised our internal financial control systems to ensure authority and approvals are set at appropriate levels for the organisation. We have appointed a group risk manager to embed and monitor risk management across our business streams.

PeopleOur staff and associates are the key driver behind our good performance last year. Their hard work, loyalty and commitment ensure that we are able to deliver high levels of customer service. In 2008, we invested substantially in developing our people and reviewing our benefits package in order to ensure that we remain competitive in the marketplace and continue to attract high quality people.New initiatives for 2009 will include the launch of a fast track development programme for graduates with up to three years’ work experience.

Board of directorsThere were a number of changes to the composition of the Board during the year. As announced in March 2008, Henry Pitman, Tribal’s founder and former chief executive, stepped down from his non-executive role on the Board. At the end of November, Tim Stevenson OBE retired as a non-executive director following his appointment as Lord Lieutenant of Oxfordshire. David Thompson has taken on the role of senior independent director, in addition to his chairmanship of the Audit Committee. On 1 November 2008, Lady Katherine Innes Ker joined the Board as an independent non-executive director. She chairs the Remuneration Committee and has joined the Audit and Nomination Committees.

OutlookWe entered the current financial year in an encouraging position, with nearly 40% of our planned revenue for the year already contracted. Our sales pipeline has increased significantly over the past year and, at 1 January 2009, stood at £297m, an increase of more than 77% over the previous 12 months.

Despite the challenges in the wider economy, organisations in the public sector will continue to face significant pressure to reform the delivery of services, to achieve efficiency gains and to accelerate the identification of cost savings. Whilst the overall environment for public sector spending will become more difficult, Tribal remains well-positioned to support its clients in achieving their objectives and meeting their key organisational challenges. We therefore remain confident of our ability to make further progress during 2009.

17 March 2009

Strone MacphersonChairman

17 March 2009

“The requirement for government to increase efficiency and identify cost savings will continue to create opportunities for our business”



Chief executive’s statement

We are pleased to report a strong financial performance for the year ended 31 December 2008*. The Group’s revenue was up 12% at £234.0m (2007: £209.2m). Adjusted operating profit increased by 14% to £19.8m (2007: £17.3m) and the adjusted operating margin increased from 8.3% to 8.5%. Adjusted profit before tax was up 21% at £18.6m (2007: £15.4m) and the adjusted earnings per share increased by 20% to 14.7p (2007: 12.2p). The Board is proposing a final dividend of 2.65p per share, making a total of 4.35p per share for the year.

During 2008, the Group generated operating cash flows of £21.4m (2007: £22.4m), representing an operating cash conversion of 136% (2007: 137%). The strong cash generation supported the financing of acquisitions made during the period. Net debt at the year end was £19.7m against committed bank facilities of £40m that run until June 2012. Tribal recently increased its annual working capital facility to £6m, providing the Group with further headroom and financial flexibility.

The improvement in financial performance was achieved during a period of organisational development. The Group strengthened its senior management team, with the appointment of Andy Field as chief operating officer, Jonathan Garnett as chief executive of the education business and Matthew Swindells to lead the health business. We made a number of strategic acquisitions, restructured our education business to better align our operations with market opportunities and integrated our housing, regeneration and local government consulting practices. These changes will support our growth plans and enhance the strategic positioning of the Group in the UK and internationally.

General economic conditions remain very challenging and the Group anticipates further tightening in overall public sector spending in the UK, particularly following the next general election. However, key areas such as education and health will remain priorities for government and we believe that we are well-positioned to support reform and changes in the implementation and delivery of public policy. Our business is driven primarily by change and each of the three main political parties has emphasised the need for further reform and improvement in public services. Whilst we will not be immune to a more difficult environment for public sector finances, we expect to see continued demand from clients who are required to improve performance, enhance service quality, allocate resources more efficiently and achieve better value for money. Our market position is now well-established in our core areas of activity and our presence on key public sector procurement frameworks provides a steady stream of new business opportunities, while remaining a barrier to new market entrants.



In 2008, 92% of our revenue was generated from the UK public sector. Our principal markets were: education 38%, central government 20%, health 16%, housing and regeneration 9% and local government 9%. Our international business has developed during the year, particularly following the acquisition of HELM Corporation in June 2008, and we expect the percentage of revenue from overseas activities to increase significantly in 2009.

Our sales pipeline has strengthened over the past year and currently stands at close to £300m. Of the top 30 contract opportunities across the Group, nearly 75% by value relate to health or education projects, approximately 20% is represented by international tenders and less than 4% are capital related. Education

Unaudited Year pro forma ended year ended 31 December 31 December 2008 2007 £’000 £’000

Revenue 96,408 91,581

Operating profit 14,303 14,928

Operating profit margin 14.8% 16.3%

Our education business saw an increase in revenue of 5% to £96.4m (2007: £91.6m) during the year ended 31 December 2008. Operating profit was £14.3m (2007: £14.9m) and the operating margin was 14.8% (2007: 16.3%). The anticipated fall in operating margin during the year was a result of three principal factors: reduced contribution from higher margin activities, planned investment in new products and services and increased business development activity. These factors will continue to apply during 2009 and we therefore anticipate operating margins remaining at a broadly similar level to those achieved in 2008.

The education business provides a wide range of consulting, support and delivery services across the education, skills and training markets. Our services support key government policy initiatives to improve educational standards, increase quality and deliver better outcomes for learners. We deliver these services to education and learning providers through performance improvement programmes, high quality management systems and innovative learning content. Our offerings encompass early years, schools, further education (FE), higher education (HE), workplace and prison settings.

Government investment in education and learning remains strong, with school improvement, workforce training and skills development becoming increasingly important in the current economic and political climate. Our business is built on strong relationships with our client base and excellent customer service delivery. It is underpinned by recurring annual support and maintenance revenue for our software products and a range of long-term contracts.

We have seen good demand for our services during the period and have secured significant new contracts across the business. Our application of innovative technology to organisational efficiency, workforce development and improved learner engagement continues to provide us with a key differentiator both at home and, increasingly, overseas. We are also drawing on the Group’s broad range of expertise in related areas to offer our clients an enhanced and coherent set of solutions to address major social problems.

Note: * Following the change of year end, and

in order to assist with analysis and comparison, comparative data is based on the unaudited pro forma results for the year ended 31 December 2007, unless otherwise stated.



At the end of 2008, we appointed Jonathan Garnett as chief executive of our education business stream and implemented a restructuring of our operations into six areas in order to reduce costs, improve performance and maximise our opportunities for growth. The six new business groupings are as follows:

Science, technology, engineering and mathematics (STEM)In order to support the competitiveness of the UK economy, the Government has recognised the importance of increasing the availability and capability of STEM-literate individuals. We have been working closely with government to support the STEM agenda. During the year, our contract for the National Centre for Excellence in the Teaching of Mathematics was extended for an additional two years. We won an initial £3.4m contract to support the development of quality and expertise in the teaching of STEM subjects. We also provided expert consultancy on the development of a programme to tackle numeracy needs among adults.

Employability and skillsWe support the work of major employers such as McDonald’s, Royal Mail and Ford Motor Company in developing the skills of their workforce. We have continued to expand our client base with the award of a number of contracts to provide web-based learning services for organisations such as Sainsbury’s. We grew our business in employability, where we secured contracts with the Learning and Skills Council (LSC) worth up to £5.8m. Our work to deliver family literacy, language and numeracy programmes for the Learning and Skills Improvement Service (LSIS) was extended with contracts worth a further £1.4m. We continued to support the rehabilitation of offenders and we have been shortlisted by the LSC to extend our information, advice and guidance services to offenders and ex-offenders across three UK regions.

Education and training solutionsOur student and institution administration software products continue to perform well. We lead the market in the UK in FE, HE and work-based learning. The strength of our market position provides good opportunities to secure further contracts for our software and services, both in the UK and internationally. We are currently pursuing a number of opportunities in the Middle East and Australasia, where there are growth opportunities for selling an integrated solution of services and software. In FE, our Improvement Adviser Service contract with LSIS was awarded a two-year extension worth £3.6m per annum. Our FE and HE benchmarking products continue to develop market share in the UK and our long-term contract in New Zealand is providing a platform for expansion into other markets in Australasia.

Children’s servicesWe have continued to build our capacity in children’s services and to strengthen our market position. Around 70% of local authorities now use our software and we won over 40 new local authority clients during the year for our family and management information services software.

We were awarded several contracts to support the National Challenge programme, which aims to raise standards and educational outcomes in secondary schools.To date, these include a £1.4m core contract in Greater Manchester, and additional contracts in Sheffield and Hull. Tribal succeeded in winning a number of the first contracts under the new church school improvement framework and our Building Schools for the Future (BSF) team won contracts with five local authorities, as well as a place on the new Partnerships for Schools education framework.




Information and technology solutionsWe have seen strong demand for Tribal’s expertise in creating bespoke portals that enable our clients in education to improve operational efficiency and support key policy initiatives. We are currently exploring a number of opportunities to apply our innovative, technology-based solutions in the wider public sector. We built on our work supporting parenting initiatives for the Department for Children, Schools and Families (DCSF) and secured a £3.1m contract to provide an information system that will give parents online access to data on childcare and family service provision (see case study below). We also successfully secured a £2.1m extension to our contract with the workforce development agency Skills for Care to develop a placement matching system for social care students.

Keeping parents in the know While a vast amount of data which could be helpful to parents exists, it can be difficult to know where to find the most valuable and current information. Tribal is developing an online directory for the DCSF, which will provide parents with up-to-date, integrated national and regional data about childcare and family service provision.

We also recently pioneered e-learning tools as part of a social networking website which aims to support parents of teenagers. The website – www.gotateenager.org.uk – was developed for national charity Parentline Plus and is accessible through various channels, including mobile phones. The site attracted 41,000 unique visitors within the first six weeks of going live.

“We wanted to extend the reach and accessibility of our service and so we are pleased with the high volume of visits and the large amount of positive feedback we have received. We found Tribal to be very capable and responsive and a good working relationship has developed

through the process.”

Nikola Mann, New Media Manager, Parentline Plus




“We are increasingly working with our clients at a strategic level to address their key organisational challenges”

InspectionsTribal is the largest provider of school inspections in the UK and we continued to perform well in the final year of our existing contracts with Ofsted. In February 2009, we announced that we had been appointed for a new six-year contract to run inspections of schools and other educational establishments. The new contract is worth approximately £75m and will operate from September 2009. The growing overseas school improvement market also provides us with significant new opportunities and, during the year, we won a contract in Abu Dhabi to establish an inspections framework for private schools.

Consulting


Revenue 85,191 68,666



We have seen a significantly improved financial performance from our consulting business, with revenue increasing by 24% to £85.2m (2007: £68.7m) and operating profit up by 68% to £8.3m (2007: £4.9m). Operating margins rose to 9.7% (2007: 7.2%). The improvement in overall performance was supported by the acquisitions made during the year that contributed some £2.4m to operating profit.

The year was one of considerable change for the consulting business. We made a number of strategic acquisitions, which has enabled us to provide an enhanced offering in many areas of the business, and the acquisition of HELM Corporation in June 2008 has provided us with both a new service line and a significant international presence.

Much of our consulting work is focused on supporting and delivering change through programmes to improve performance, reduce costs and allocate resources better. While we can expect overall government spending to become tighter, the drive for reform and improved quality continues and we are increasingly working with our clients at a strategic level to address their key organisational challenges. The national significance of our work was recognised at the end of 2008 by the Management Consultancies Association, when one of our senior consultants won the Strategic Consultant of the Year Award.

HealthOur health business remains at the forefront of supporting change in the health service. It delivered a strong performance during the year and has continued to grow its core consulting activities, as well as successfully developing new service lines.

The Government has identified world class commissioning as crucial to driving productivity improvements in the public sector. During the period, we secured our first major contract under the Department of Health’s Framework for procuring External Support for Commissioners. The £4.8m contract was awarded by Ashton, Leigh and Wigan Primary Care Trust (PCT) with whom we have entered into an innovative, three-year partnership (see case study on page 11). We have a strong pipeline of other commissioning opportunities.



We are delivering national projects to ensure the provision of improved information for the planning and management of the NHS and health research. We have further expanded our role supporting the health service’s National Programme for IT, securing new and extended contracts worth more than £2m.

During the period, we acquired Westhill Consulting, a specialist provider of consultancy and clinical coding services, and in January 2009 we purchased Newchurch, a leading health strategy and change management consultancy. As a result of these acquisitions, Tribal is now able to offer comprehensive support to healthcare organisations in the UK and, increasingly, overseas.

A healthy partnershipImproving both the quality of healthcare and access to services is at the heart of Government plans to transform the NHS. However, health service leaders also need to ensure that their organisations are run as effectively and efficiently as possible. Tribal is at the leading edge of helping them meet these complex challenges.

Ashton, Leigh and Wigan Primary Care Trust (PCT) is responsible for improving the health of one of the most deprived parts of England through its allocation of an annual budget of £456m. Working as an integral part of the PCT, Tribal is using advanced tools and transformation teams to help the Trust identify and understand local health needs and plan and commission services to better meet those needs.

“Tribal has demonstrated its ability and skill in both influencing and challenging the organisation in

relation to the key priority areas. Tribal is a valued and dynamic partner, which both shares our core

values and has helped us to aspire to realise our potential.”

Hilary Heywood, Programme Director, Ashton, Leigh and Wigan Primary Care Trust



Chief executive’s statementHousing, regeneration and local governmentDuring the period, we transferred our local government consulting activity into an expanded housing, regeneration and local government practice. We also strengthened the business by making two strategic acquisitions. In February 2008, we acquired a master planning and urban design team in order to increase our capability in regeneration in the UK and internationally. In July, we purchased a specialist local government strategy consultancy, which has enhanced both our service offering and our presence in the market.

We are the market leader in social housing consultancy and we continue to play a prominent role in shaping the future funding and development of new social housing stock. While the limited availability of funding for new social housing has had some impact on the demand for our housing development support and treasury services, it has also created new opportunities for our governance, financial advisory and business planning teams.

The breadth and capability of our regeneration activity continued to develop during the year. However, the business is now facing more difficult trading conditions in certain areas and we have therefore initiated a programme to reduce costs and reshape a number of our services.

Our consultancy capability in local government has been transformed during the period and we now have one of the largest practices in the UK. Our ability to offer end-to-end solutions, from strategy through to implementation, has enabled us to address larger opportunities as local authorities increasingly focus on improving efficiency and delivering better value for money.

Central governmentTribal’s central government consulting practice continued to show significant growth in both revenue and operating profit during the year. Much of the growth was achieved through securing contracts to provide strategic support to major government programmes and improving our key account management. We have also seen the pipeline of new business opportunities grow significantly.

The practice has developed new service lines tailored specifically to address major central government issues, for example, support in prioritising programme portfolios. We have also focused on developing strategic relationships with key government departments such as the Home Office, Foreign and Commonwealth Office and the Ministry of Justice.

We secured contracts with the UK Border Agency to produce large, complex business cases and with the National Policing Improvement Agency to deliver efficiency programmes that enable officers to spend more time on frontline duties. We won a substantial three-year contract with the DCSF to deliver a national programme to schools across England and Wales supporting the more effective use of resources (see case study on page 13).



Helping schools get VfMSchools are under increasing pressure to demonstrate value for money and manage their resources effectively. Tribal manages a national programme, called Value for Money, which delivers tailored consultancy support to primary, secondary and special schools across England.

The consultancy visits focus on ideas that cut across all school management decisions, including strategic management and staffing issues, as well as helping make cost savings. The programme is funded by the Department for Children, Schools and Families and nine out of ten schools we have visited have said that they would recommend the programme to others.

“We found the whole exercise incredibly valuable. It’s a fabulous service that every school can benefit from.”

Maran White, Headteacher, Robert Le Kyng Primary, Swindon



Tribal HELMIn June 2008, Tribal acquired HELM Corporation, a leading consultancy business that provides financial and management consultancy services to the public sector in the UK and internationally. The acquisition represented a significant development in our strategy to expand our consulting service offering, increase our committed income and grow our international business. Around 60% of Tribal HELM’s revenue is generated outside the UK, typically from long-term projects that provide high levels of revenue visibility.

Post-acquisition, Tribal HELM has delivered a strong financial performance in line with our expectations. The practice was awarded new contracts to support international finance and public sector governance reform in Macedonia, Kosovo, Cambodia, the Philippines, Rwanda and Peru. These projects, which aim to improve the management of public funds, are supported by the World Bank, the European Commission, the UK Department for International Development and the Australian Government.

Tribal HELM’s pipeline includes major projects in Europe, Asia, Africa and South America, and its global footprint and strong relationships with major international donor organisations are opening up new opportunities for our education offering and other Tribal services.


Learning to change livesGood governance is fundamental to ensuring economic growth and sustainable development in emerging and developing countries. Tribal HELM has been working with the Bangladesh Government on the Managing at the Top 2 initiative for the past two years.

This innovative training programme, funded by the UK Department for International Development, is based on experiential learning and provides participants with the opportunity to design, develop and implement new policies and reforms. Through the programme, the traditional methods of learning at Sikder Abdul Malek High School were replaced with inclusive teaching and a participatory approach. This award-winning project turned a failing school of 300 pupils into a successful school with 650 pupils within 12 months.

“The project is creating a continuously growing, critical mass of senior officers who feel comfortable in handling change when they have the right skills and proper support. It is also helping with key improvements in governance that will benefit important areas such as poverty reduction.”

ASM Ali Kabir, Secretary, Ministry of Establishment, Government of Bangladesh



Support services


Revenue 54,277 51,997



Our support services businesses delivered a good performance for the year ended 31 December 2008, with revenue 4% higher at £54.3m (2007: £52.0m) and operating profit increasing by 20% to £4.9m (2007: £4.0m). Operating margins increased to 9.0% (2007: 7.8%).

Architectural designThe Group’s architectural design business performed well in the period and the order book and sales pipeline have continued to strengthen. We have the leading health architectural practice in Europe and have been appointed on three of the major UK health procurement frameworks: ProCure21 in England, Designed for Life in Wales and Frameworks Scotland.

In April, we were awarded the contract for the £300m HealthVision Swansea scheme, the largest hospital project to be procured through the Designed for Life framework. In January 2009, we won the first Frameworks Scotland hospital project, a £120m redevelopment of Dumfries and Galloway Royal Infirmary, where we will provide both architectural design and health planning consultancy for the scheme.

In education, we were confirmed as preferred bidder for the London Borough of Tower Hamlets BSF programme. We also won contracts with the Oxford Molecular Pathology Institute and a number of FE colleges. Notwithstanding these successes, the continuing uncertainty around the funding of capital projects in the FE sector has led to a decision to reduce our cost base in this area of the business.

We expanded our operation based in Cape Town, South Africa, which is now able to provide architectural design services to the public sector market in Africa as well as supporting our UK business. We are progressing a number of opportunities in southern Africa.

CommunicationsWe are the leading public sector communications consultancy in the UK. We are on all of the key Central Office of Information frameworks, enabling us to bid for marketing communications and related consultancy contracts across government.

During the year, we have enhanced our service offering to existing and potential clients through the acquisition of a leading advertising agency and a new strategic partnership with a digital agency. These initiatives now enable us to provide our clients with a comprehensive communications offering.

We have had some early successes for our new integrated proposition, including a PR and advertising campaign in the food and drink sector and a major contract with the Department for Innovation, University and Skills to promote the importance of science. The campaign, Science: So What? – So Everything, was



launched in January 2009 at an event hosted by the Prime Minister. We have also continued to grow our work in the education sector and we have leveraged Tribal’s wider health sector expertise to secure social marketing work on behalf of a range of primary care trusts.

ResourcingOur resourcing business performed well and increased its market share, in spite of a challenging market overall for public sector recruitment.

Many of our public sector clients are continuing to keep tight control of their recruitment budgets and to make increasing use of online processes. We have supported this transition to digital media and have also diversified successfully into new service lines and markets. Our new business performance has been strong during the period.

Despite the challenging conditions, we have continued to make progress in our core local government market. In the health market, the level of NHS recruitment has increased and we have benefited from the Group’s strong presence in this sector. We have also increased our market share in central government.

Our major wins in the period included contracts with the Association of Greater Manchester Authorities, the University of Oxford and the Highways Agency. Our recruitment process outsourcing offering won us work with the Department for Environment, Food and Rural Affairs, DVLA and two major London boroughs. In executive resourcing, we won several new contracts including the Royal College of Midwives, the Legal Services Board, the Big Lottery Fund and the ministries of Justice and Defence.

PeopleThe year saw considerable organisational change and business challenges for Tribal’s 2,300 staff and over 1,000 associates. The Group’s delivery of improved performance during 2008 is a testimony to the hard work and commitment from everyone across the Group. I would like to thank all of our staff and associates for their dedication to serving our clients and their loyalty to Tribal and our values.

We have continued to invest in the development of our organisation through a number of key initiatives. We have realigned our structures so that we have the right balance of skills and increased efficiency to enable us to better manage business challenges. We have provided more development activities including leadership programmes, business development skills workshops and professional development courses. These initiatives have supported both internal collaboration and a more customer focused approach.

We have continued to develop the senior leadership team with the appointment of a chief operating officer and overall leads for our education business and our health activities. We have also appointed an international development director to lead our overseas strategy and development.




ProspectsDuring the past year, we have reorganised our business, made a number of strategic acquisitions and strengthened our management in order to support our growth plans. Despite the challenging economic conditions generally, we continue to see opportunities to grow and develop our business. We started the new financial period with approximately 38% of planned revenue for the year already committed and total committed income of £139m. Our identified and qualified sales pipeline stood at £297m at the start of 2009, compared with £168m at the beginning of 2008.

In 2009, we are continuing to focus on improving our operational performance and increasing the level of committed income. We are making a significant investment in raising the quality and effectiveness of our business development processes and increasing the resources available to our international activities. In certain parts of the business, we are reducing our cost base and we anticipate that this programme will realise annualised cost savings of at least £4m. We expect that the costs of £0.7m associated with our new business initiatives and the £1m costs of our restructuring programme will be borne primarily in the first half of the year.

Since the start of 2009, we have made good progress in winning places on several key framework agreements and our committed income levels will increase significantly following the award of our new Ofsted contract. Despite a tighter environment in certain of our markets, our new business pipeline remains strong and the Board remains confident about the Group’s ability to make further progress in 2009 and beyond.

Peter J MartinChief Executive

17 March 2009

“Our sales pipeline stood at £297m at the start of 2009, compared with £168m at the beginning of 2008”



Q

Business reviewStrategy

How is Tribal organised?

The Group’s executive team reports to the main Board and comprises the chief executive, the group finance director, the group HR director and the chief operating officer. The team is responsible for developing and implementing Tribal’s strategic direction and for the overall financial and operational performance of the business.

Tribal operates through three business streams which report to the Group’s executive team: education, consulting and support services. The business streams are made up of a number of business units, each headed by a managing director who is responsible for the unit’s individual performance and its contribution to cross-Tribal collaboration and business development.

What does Tribal do?

We provide a range of consultancy, support and delivery services. Our education business is involved in a wide spectrum of activities, from high level policy work and programme management through to the provision of student administration and support systems, and the delivery of school inspections. Our work in this area is helping Tribal’s clients to meet the Government’s agenda for better skills, higher educational standards and improved efficiency. Our consulting business operates across government, helping our clients respond to the public service reform agenda, drive through change and deliver better value for money. In support services, we provide a specialist range of market-leading services that enable our public sector clients to meet their organisational challenges in areas such as facilities design, resourcing and communications.

Our principal markets in the UK are education, central government, health, housing and regeneration and local government. We are also actively increasing our presence internationally in both the developed and developing world.

What gives Tribal a competitive edge in the marketplace?

We believe that Tribal is able to offer a compelling set of capabilities in its chosen markets. We are public service specialists and our domain expertise and deep knowledge of our clients’ sphere of activities provides us with a real competitive advantage. We have a broad service proposition and a strong technology capability that we are increasingly looking to leverage across all of our key markets.

Tribal provides a range of consultancy, support and delivery services focused on improving the delivery of public services in the UK and internationally. In this section, we answer some key questions about the Group’s corporate strategy.

A

QA

QA



Q

All this means we are able to provide unique, integrated solutions which meet the complex challenges faced by public sector organisations. Tribal seeks to engage strategically with its clients and to address the key concerns of senior management. We are also characterised by a genuine commitment to partnership arrangements, working with our clients to identify and deliver the optimum solution to their issues, rather than proposing a standard or off the shelf option. This approach is supported by the feedback we receive from our clients.

What is Tribal’s high level strategy and what progress was made in 2008?

Our corporate mission is to be recognised by strategic decision makers as one of the leading providers of services in our chosen markets. In the UK, we will focus on our current markets where we see good opportunities to grow our market share. We will also be placing greater emphasis on developing our activities internationally.

The Group’s principal financial targets are to deliver significant growth in profits and earnings by increasing annual revenue and progressively raising our operating margins. We achieved these objectives in 2008. For at least the next two years, conditions in the wider economy are likely to remain very challenging and will inevitably have an impact on public sector spending. We are therefore looking to build further resilience into our business model through securing larger, longer-term contracts that increase our future revenue visibility. In order to support this objective, we are investing significant sums in improving our business development and bid management processes.

We will also be investing in specific areas to take advantage of emerging opportunities. In 2008, we established a new health commissioning business that has already consolidated its position as one of the market leaders. We also made a number of acquisitions during 2008. However, whilst we remain interested in businesses that strengthen or complement our existing offering, we expect the pace of acquisition activity to slow in 2009.

We believe that there is a real opportunity to export our skills and capabilities overseas. In 2008, we acquired Tribal HELM, which gives us a strong footprint in the developing world. We have also developed a clear strategy for the developed world that will centre on the Middle East and Commonwealth countries.

Driving collaboration across the Group remains a major priority. In order to achieve our objective of increased revenue visibility through winning larger contracts, we need to harness the breadth of capability that exists across the Group and to build on and leverage our excellent client relationships. In order to support collaboration, we have implemented a series of initiatives to facilitate co-operation between different areas of the Group.

Over the past year, we have also taken a number of steps to strengthen our management and operating structures. We have made several senior appointments at Group and business stream level, and reshaped parts of the business so that they are better aligned with our markets.

We believe that we have a strategy and an organisation that is now well-positioned to meet the challenges of the next two years and capable of making progress in its chosen markets.

A



Business reviewOur markets

The markets in which Tribal operates are substantial. In July 2008, the Department for Business Enterprise and Regulatory Reform published a review which placed a value on the UK public services industry of £79bn. The Office of Government Commerce estimates the UK public sector consultancy spend to be £2.8bn. In international consultancy markets, where Tribal HELM is active, the World Bank spends $1.5bn a year on public sector reform in the developing world and, in 2008, it was the largest funder of education programmes, spending around £6bn in 88 countries. We therefore believe that there are significant opportunities for us to grow our market share.

In the UK, our core markets have benefited from significant increases in spending in recent years and, while general economic conditions have deteriorated markedly, each of the three main political parties has stated that Tribal’s key markets of education and health will remain public spending priorities.

The Group anticipates further tightening in overall public spending, particularly following the next general election. However, Tribal’s business is driven primarily by change, and we expect public sector reform to remain a government priority and for there to be continuing demand for services which support improvements in performance and service quality, reduce costs and deliver better value for money.

Tribal’s deep understanding of its chosen markets, our broad service offering and technology capability enable us to address the complex social problems faced by senior public service leaders and their organisations.

In 2008, 92% of our revenue was from the UK public sector. Our principal markets were: education 38%, central government 20%, health 16%, housing and regeneration 9% and local government 9%.

Our international business has developed significantly during the year, particularly following the acquisition of HELM Corporation in June 2008, and we expect the percentage revenue from overseas activities to increase significantly in 2009.

EducationThe Government is focused on ensuring that the UK workforce has the right skills to compete in the global economy. The overall aim is to raise standards in education, with a particular focus on early intervention to address the underachievement which has undermined the UK’s international competitive advantage. The Government has also recognised the importance to the economy of people who are skilled in science, technology, engineering and mathematics (STEM).

The key areas where education policy and practice have not yet delivered sufficient improvement are increasingly under the spotlight for intervention and investment.

Tribal operates in the public services industry and provides a wide range of services which improve the delivery of public services in the UK and internationally.

Market proportions

Education 38%

Central government 20%

Health 16%

Housing and regeneration 9%

Local government 9%

International 4%

Private 4%



The performance measures for secondary schools include raising the proportion of pupils achieving higher grades at GCSE and narrowing the gap between the highest achieving and the lowest. Schools that are underperforming are targeted through school improvement initiatives such as the City and National Challenge programmes. Inspection remains an important driver for improvement and Ofsted is considering extending its outsourced inspection regime in England and Wales to include early years settings.

Building Schools for the Future is the Government’s capital investment programme to rebuild or upgrade schools. The Academies and Trust schools programmes enable the creation of all-ability state schools that are established and managed by sponsors with funding from the Government. All of these programmes have been accelerated over the past year, as the Government seeks to overcome previous delays in the procurement process.

FE is being restructured, with the transfer of responsibility for services for 14-19 year olds from the LSC to local authorities in 2010. The need for effective student and institution administration systems across FE, vocational training and the wider education sector is increasingly important. The market drivers are the need to demonstrate a more efficient use of resources, the demand for a more personalised learning experience and more complex timetabling.

Tribal’s education business is aligned with these key policy initiatives and our depth of sector expertise enables us to provide integrated solutions to meet the complex needs of our clients.

Central governmentThere is a broad consensus in government that it should contract externally for specialist expertise and support. While the use of outsourcing remains under close scrutiny, the substantial reductions in staff headcount across government mean that departments and agencies are continuing to draw on the private sector’s expertise and capability.

In addition, as part of its policy focus on increasing quality and efficiency in the public sector, the UK Government is increasingly identifying opportunities for its agencies to move from delivering services to commissioning them from other providers.

The key drivers for many of our central government clients are the requirement to cut costs and deliver better value for money, the acquisition of major ICT systems and the need to improve the efficiency of back office and service delivery functions. In addition, individual agencies and organisations require support for their organisational efficiency programmes, such as changes in working practices that enable staff to focus on areas which are priorities for service users.

Whilst we anticipate the sector will scrutinise the need for external support very closely over the coming year, Tribal offers the expertise and flexibility required by central government departments to successfully deliver their complex portfolios and public service agreement targets.



Business reviewOur marketsHealthHealth remains a key spending priority for the UK Government, with positive growth in NHS funding anticipated for the next two years.

There is a renewed drive to improve productivity and investment is being channelled into initiatives which are expected to transform the NHS by improving quality and reducing cost. Lord Darzi’s Next Stage Review, published in June 2008, championed the better use of information in the NHS to improve quality and efficiency through initiatives such as the National Programme for IT and the use of electronic patient records. In July 2008, the informatics review endorsed the role of ICT as an enabler of service improvement.

As well as treating people when they are sick, the NHS has an increasing role in helping people stay healthy and the wellness policy agenda also encourages employers to make the link between the health and wellbeing of their workforce and productivity levels.

Around 80% of the NHS budget is devolved to primary care trusts (PCTs). The Government’s World Class Commissioning initiative is changing the delivery model for PCTs, with a shift from PCTs as providers of primary care to commissioners. Over the past year, all PCTs have been reviewed and many will need support to meet the world class commissioning standards and deliver better value for money. Tribal is well-positioned to meet these needs through our market-leading commissioning service and information and analytics teams.

Drawing on the network of procurement frameworks, government and the NHS are increasingly looking for suppliers, such as Tribal, that have a multi-disciplinary offer as well as considerable domain expertise.

Housing and regenerationThe structure of the housing market has changed significantly over the past year. Two new government bodies have been created, the Homes and Communities Agency (HCA) and the Tenant Services Authority.

The HCA, established on 1 December 2008, is the new national housing and regeneration agency for England. It is the biggest regeneration and development agency in Europe and its vision is to create the opportunity for people to have homes they can afford in places where they want to live. In December 2008, the HCA announced plans for the Single Conversation initiative, which aims to establish a dialogue about housing and regeneration with local authorities in order to generate new strategies and approaches to local delivery.

The Government’s plans to build affordable new homes have been significantly impacted by the limited finance available to housing associations and private sector developers. The regeneration market has also been impacted by the economic downturn. The reduced availability of traditional bank finance has seen a number of major regeneration schemes slow down or fundamentally refocus. The Government has responded by introducing extra public sector funding and piloting new delivery models that aim to share more of the development risk.

Tribal is the market leader in social housing consultancy and we are reshaping our regeneration services in response to changes in the market.



Local governmentThe key challenge for local government is to address the ever-increasing expectations of its customers whilst income streams are declining and there is a tightening of central government funding. Local authorities are responding by managing performance more closely, redesigning their organisations and services to better meet customer needs and achieving greater value for money through their procurement processes.

Social care services are under intense pressure, with a substantial increase in demand for services, particularly within adult social care, as well as concerns over the quality of services in high risk areas such as child protection and safeguarding. Adult social care is also undergoing a major transformation programme as a result of the shift towards the personalisation of care.

The government policy of reorganising public bodies is also having an impact on the local government market. New unitary authorities are being created and, in some areas, councils and PCTs are merging. Local government is also taking on significant new responsibilities. For example, it will take over responsibility for commissioning all services for 14-19 year-olds from the LSC in 2010.

Local government is also seeking to work more effectively with its partners. This approach is reinforced by the new performance management regime, Comprehensive Area Assessment, which focuses on the delivery of tangible improvements in experience and outcomes for local communities.

The local government sector requires support in meeting these challenges and delivering effective change within its organisations. Tribal’s expertise and well-established relationships in the sector provide us with the insight and capability to support our local government clients during this period of change.

International The global economic crisis has impacted governments across the world. However, whilst overseas governments are currently reviewing their public spending plans, three key areas continue to receive substantial investment: education, health and infrastructure.

The priorities in the education sector in developed markets are focused on ensuring best value for money through process and administrative reorganisation and quality benchmarking and improvement. In transitional markets, there is also a demand for policy development and increasing use of technology.

In healthcare, process and administrative change is needed to reduce waiting lists and increase functionality in IT, such as patient records. There is also a demand to develop educational programmes to raise public awareness, for example, in order to address chronic illnesses.

Many countries also have significant infrastructure investment plans which are being driven by the need to invest money in the economy and create jobs.

The continued commitments to education, healthcare and infrastructure by overseas governments in Tribal’s key target markets all provide significant opportunities. Our expertise in education, health and the built environment, together with Tribal HELM’s global footprint in aid-funded markets, mean that Tribal is well-positioned to support overseas governments seeking high value, effective solutions which will contribute towards national goals and recovery.



Business reviewOur people

We have always recognised that our people are our key strategic asset. We are a professional services company with a reputation for success founded on the talent of its people. It is therefore critical that our staff and associates are nurtured, developed and managed in a way that continues to enhance our professional, business development, commercial and international expertise in order to protect and strengthen Tribal’s competitive position.

Tribal’s people all have something in common – a strong commitment to improving public services and ensuring the best possible use of public funds. They choose to work for us because they want to be part of a business that has a positive impact on the lives of communities in the UK and overseas. Our culture is one that seeks to harness the public sector ethos of service with our high levels of professionalism and commercial and financial rigour.

Our five corporate values underpin everything we do and how we relate to colleagues and clients. They are:

passionate about improvement stronger together inspiring people unleashing talent prepared to be different.

Building and developing our capabilityA critical area of focus has been to drive a greater sense of the Tribal ethos and brand throughout the company. We have extended our senior leadership team to over 40 members, who work together to address business opportunities and challenges. Broadening the skills and outlook of the team reduces risk and spreads the mantle of leadership across a broader management spectrum. In turn, it also helps to build our cadre of rounded leaders, thereby also playing a part in our leadership succession planning. This approach recognises that, for skilled professionals, development is often about the opportunity to tackle new challenges and to be given exposure to new business areas, rather than attending traditional training courses.

The opportunity to contribute to Tribal’s approach to business opportunities and challenges is not limited to our senior team. Throughout the organisation, cross-business secondments, virtual project teams, mentoring and talent development programmes have been put in place, and a robust succession planning process has been established. Additionally, in 2008, we implemented a programme to increase the proportion of employees with personalised development plans, which has resulted in nearly 50% of employees now benefiting

“Our people choose to work for us because they want to be part of a business that has a positive impact on the lives of communities”



from formal development programmes. We have also created a comprehensive electronic library of training resources which includes management best practice and toolkits. In September, we launched a new programme, Good to Great, with the aim of enabling our people to take a more focused, strategic and corporate-wide view of our clients’ needs. Over 100 employees have already been involved in a series of business workshops, which concentrate on developing strategic selling skills, account management and sales and bid governance capabilities. The workshops are practical, utilising real client accounts and bid opportunities as the vehicles for learning.

Engaging peopleAt Tribal, we know there is more to engaging people than providing development opportunities, training and career paths. We also believe that engagement is about more than remuneration and benefits packages. For us, real engagement comes from creating a close connection with employees that releases discretionary effort: we want to create a loyalty to the company that makes people want to ‘go the extra mile’, rather than one-way communication from the top of the organisation. In 2008, we began a new programme which enables people at all levels to find out more about the strategic direction of the company and participate in sessions that shape the future direction and focus of their business unit or their community of professional practice.

As an organisation, we believe that we benefit from a culture of open communication, where executives are easily accessible. This is exemplified by our chief executive personally taking part in dialogue with staff across the Group and leading and encouraging a programme of informal office visits by senior executives and members of Tribal’s Board.

We are continually working to improve the practical channels of communication and, in 2008, further developed our intranet and knowledge management platforms.

Recognising and rewarding our peopleTribal recognises and celebrates exceptional effort and commitment through our annual employee awards, which are shaped around our business goals and corporate values.

To help us attract, motivate and retain the best people, we are reviewing our approach to reward and recognition. In 2008, we commenced a comprehensive review of all aspects of reward, and began to implement a number of changes to ensure we are positioned appropriately in the marketplace, whilst delivering value for our stakeholders. Whilst we plan to complete this first wave of changes in 2009, it is our expectation that our reward offering will remain an area of focus for future years, in order to ensure Tribal’s competitiveness.

Our people are demonstrating their clear commitment to the company by their increased participation in our re-launched Group Save As You Earn (SAYE) scheme, which saw participation nearly double in 2008.



Business reviewRisk management

Risk is an accepted part of doing business. The challenge for any business is to identify the principal risks and to develop and monitor appropriate controls. A successful risk management process balances risks and rewards and relies on a sound judgement of their likelihood and consequences.

Risk managementThe Board has overall responsibility for risk management and internal control within the context of achieving the Group’s objectives.

The Board establishes the overall risk framework and the risk management process is embedded within the Group by:

setting strategic direction including targets reviewing and approving annual plans and budgets for the Group and each

business stream regularly reviewing and monitoring the Group’s performance in relation to risk

through monthly Board reports.

To ensure that risk is robustly managed throughout Tribal, a group risk management framework operates as part of the annual business planning and performance management process. This requires each business unit to:

identify and assess all significant risks facing their business prioritise risk actively manage by detailing the steps to avoid or to mitigate risk review and report risk.

The Group maintains a risk framework which contains the key risks faced by the Group, including their impact and likelihood, as well as the controls and procedures implemented to mitigate the risks. In April 2008, the Group carried out a fundamental reappraisal of its key risks, facilitated by an external expert consultant.

The executive directors provide the central leadership to ensure our strategy is effectively communicated throughout the organisation. This is achieved through regular meetings of the senior leadership team, annual strategic planning meetings with individual business units and by clear guidance within the annual budget and three-year planning instructions issued to all business units. The senior management of each business unit is specifically responsible for the management of risk within their operating business. In addition, ‘risk owners’ have been identified from amongst the Group’s senior management to take the leadership role in managing certain risks. We believe the key to success is a combination of strong central direction and accomplished management talent within our businesses. Our businesses are expert in understanding customer requirements and market opportunities and adapting their plans to achieve the best possible performance.



Business stream performance is reviewed through regular meetings, enabling risks or other issues to be efficiently addressed and appropriate actions to be taken. During 2008, the position of group risk manager was created. Risks are also assessed and monitored at a Group level at the regular meetings of the Board.

The principal risks that the Group manages are as follows:

1. Changes in government policy and spending The combination of a sharp slowdown in the UK economy and the

unprecedented government measures taken in response to the financial crisis and to stave off the threat of deflation is bound to increase pressure on the UK public finances.

Given the significance of public sector contracts to Tribal, any cut in relevant public spending or a change in policy away from using independent private sector providers in advising the public sector and delivering services may have an adverse effect on the results of the Group. Tribal has consciously made an effort to protect itself against this risk by establishing a balanced portfolio of services and, in this respect, we have some advantage over certain of our competitors. In the year ended 31 December 2008, no customer accounted for more than 6% of our revenue.

2. Increased competition Tribal operates in very competitive markets, some with low barriers to entry.

With retrenchment in the private sector, competition for available opportunities in the public sector environment will increase. The Group is focusing on maintaining leading positions in its chosen markets and on improving its service offerings and quality control.

3. Contract win rate We face a number of risks if we fail to optimise our bid win rate. This is of

particular importance given the complex and involved procurement cycles for many major public sector contracts. In 2008, the Group engaged in a major professionalisation programme. This has included the development of a sales and bid governance policy, with the objective of better qualification of contract opportunities and more focused management of the bidding and contract winning processes. These have risk assessments built into them.

4. Financial risks Balance sheet gearing is the key financial risk. The current and forecast debt level

is very carefully monitored and controlled, to ensure it remains acceptable.

Other financial risks are covered in the Financial review section.



The Board uses a range of performance measures to monitor and manage the business. Each business unit has established its own performance measures specific to its business lines.

However, there are a number of KPIs which are applied across the Group. These Group KPIs fall into two categories: financial metrics that measure past performance and operational measures that allow us to manage the business in the future.

On these pages, we set out each KPI and our achievement against the targets in the year ended 31 December 2008.

Business reviewKey performance indicators (KPIs)

Target

Target

Target

Performance

Performance

Performance

KPI definition and target: Like-for-like annual growth in organic revenue of a blended rate of at least 10%.

Performance in 2008: 4%

Status: Not met

Assessment: Organic revenues for the year ended 31 December 2008 increased by 4%. Whilst the weak current economic climate and the UK’s fiscal position will slow growth, we remain confident that a 10% annual revenue growth is sustainable in the medium-term.

KPI definition and target: Employed staff labour costs (and not our pool of associate staff ) as a percentage of revenue. The medium-term target is 45%.


Status: Achieved

Assessment: For the year ended 31 December 2008 labour costs as a percentage of gross revenue were 45%, in line with our target.

Organic revenue growth

Labour costs as a percentage of gross revenue

KPI definition and target: EBITA as a percentage of revenue. The medium-term target is over 10%.

Performance in 2008: 8.5%

Status: Not met

Assessment: We achieved an increase in the operating margin from 8.3% to 8.5% for the year ended 31 December 2008 when compared with the 12 month period to 31 December 2007.

Adjusted operating profit margin*

4%

10%

45%

45%

10%

8.5%



Note:* The adjusted operating profit margin

and operating cash conversion are stated in accordance with the definitions given on pages 31 and 32.

Target

Target

Target

Performance

Performance

Performance

KPI definition and target: This measures our ability to turn our operating profit into cash by dividing EBITA into cash flow from operating activities. Our sustainable target is 90%.


Status: Achieved

Assessment: We remain a cash generative business and maintain a strong focus on effective working capital management.

KPI definition and target: This measures the contracted work in hand as a proportion of budgeted revenue at the start of the financial year. Our medium-term target is 60%.


Status: On track

Assessment: Committed revenue was 38% at 31 December 2008 compared to 39% at 31 December 2007 due to certain longer term contracts coming up for renewal in the first quarter of 2009.

We expect to increase the visibility of revenue by securing larger, long-term contracts.

Adjusted operating cash conversion*

Committed revenue

Staff turnover

KPI definition and target: Staff turnover measures our ability to retain staff. Our medium-term target was no more than 13%.


Status: Not met

Assessment: Staff turnover has increased from 17% to 20%. This calculation includes staff who leave as a result of contracts coming to an end. To be more meaningful, we have decided to redefine the KPI to cover voluntary staff turnover only. For the year ended 31 December 2008 this was 15.5% and our target going forward is a maximum of 16.5%.

90%

136%

60%

13%

20%

38%



Tribal had a successful trading year in 2008, with adjusted profit before tax and adjusted earnings per share both increasing by over 20% compared to the pro forma 12 months ended 31 December 2007.

We have also delivered another excellent operating cash performance enabling us to complete a number of acquisitions in the year from cash reserves and borrowings. A rising order book and pipeline, plus a healthy balance sheet, provide a sound financial platform for the Group.

In order to provide a more meaningful analysis, all comparisons are made against the pro forma 12 month period to 31 December 2007.

RevenueRevenue increased by 12% to £234.0m (2007: £209.2m). Organic revenue growth (excluding acquisitions) was 4.2%. Adjusting for the reduction in pass through agency revenue in our consulting business, the underlying increase is 5.4%.

ProfitAdjusted EBITA increased by 15% to £19.8m (2007: £17.3m). The Group’s operating margins improved from 8.3% to 8.5%. Our target margin remains over 10% in the medium-term.

Following the year end change in 2007, the Group’s trading has become more evenly balanced with revenue and profit split 48% / 52% between the first and second halves of 2008.

Business reviewFinancial review

Group trading summary

2008 2007 Increase £’000 £’000

Revenue 233,990 209,175 12% Operating profit 19,267 7,965 Amortisation of IFRS 3 intangibles 556 322 Goodwill impairment - 9,000 Adjusted EBITA 19,823 17,287 15% Net finance costs (1,315) (1,993) Exclude financial instruments charge 138 88

Adjusted profit before tax 18,646 15,382 21%

Adjusted effective tax rate* 26.8% 28.3% Adjusted diluted earnings per share* 14.7p 12.2p 20%

Revenue £m

H1 FY

Dec 06 Dec 07 Dec 08

Adjusted EBITA £m

H1 FY


19.8

9.5

17.3

8.6

16.8

10.3

234

113

209

104

194

102



Share option chargesWe have reviewed the presentation of adjusted earnings and no longer adjust for share option charges in our adjusted profit measure. Prior period figures have been amended accordingly. This disclosure treatment brings our reporting in line with our peer group. The charge, which has been deducted in arriving at adjusted EBITA, has increased from £0.4m to £0.9m following the issue of new share options under the LTIP and SAYE schemes during the year.

Goodwill impairmentFollowing the detailed annual impairment tests, goodwill has not been further written down at 31 December 2008 (2007: £9m). The growth assumptions made in assessing the goodwill carrying value reflect our more cautious view of the current economic environment.

Group finance costs

Net finance costs for the year reduced by 38% to £1.2m (2007: £1.9m), before financial instrument charges of £0.1m (2007: £0.1m), reflecting the full year effect of the reduction in Group net debt following the disposal of Mercury Health in April 2007.

Discounting of deferred consideration is a notional charge and mainly relates to the deferred consideration for the purchase of the remaining minority interest in Sportsvine (settled in the year) and the acquisition of RSe Consulting, due to be settled in cash by April 2009.

The financial instrument charge in 2008 is mainly due to the elements of the interest rate swaps that were not designated as cash flow hedges. The movement in the fair value of this portion of the instrument is recognised through income and expense. We increased our debt during 2008 to complete our acquisitions and the full £25m interest rate swap is now re-designated as a hedge. Whilst this credit/(charge) could potentially be volatile in line with movements in UK interest rates, the volatility will not be reflected in the cash flows of the Group, which are determined by the underlying interest rate of the swap. The volatility introduced to the income statement as a result of these instruments is not considered to be representative of the underlying performance of the business, and has therefore been excluded when calculating adjusted earnings.

The interest rate swaps have saved the Group £0.3m in interest payments during the year ended 31 December 2008 (nine months ended 31 December 2007: £0.2m).

2008£’000

2007£’000

Decrease

Investment revenues (586) (1,431)

Finance costs 1,763 3,336

Net finance costs 1,177 1,905 38%

Discounting of deferred consideration 72 58

1,249 1,963

Financial instruments 66 30

1,315 1,993 34%

Note:* Before goodwill impairment, amortisation

of IFRS 3 intangibles and financial instrument charges.

“A rising order book and pipeline, plus a healthy balance sheet, provide a sound financial platform for the Group”



TaxThe Group adopts a proactive approach to managing its tax bill. Due to prior year tax provisions no longer being required, our effective tax rate based on our adjusted profit before tax for continuing operations is 27% (2007: 28%). The ongoing tax charge on current year profits is likely to be in line or slightly above the standard rate of 28% reflecting disallowed expenses and non-qualifying depreciation.

Earnings per shareThe basic earnings per share were 14.1p (2007: 1.3p). The adjusted diluted earnings per share before goodwill impairment, intangible asset amortisation and financial instrument charges, which signals the underlying performance of the Group, has increased by 20% from 12.2p to 14.7p.

AcquisitionsThe principal acquisition during the year was the purchase in June of 72% of the HELM Corporation (now Tribal HELM) for a total consideration of £16.7m which was funded by £13.3m of debt and £3.4m of new consideration shares. Tribal HELM is a leading consultancy business providing financial and management consultancy services to the public sector in the UK and internationally. The acquisition represents an important step in Tribal’s strategy of growing its business internationally, developing its UK consultancy offering and increasing the levels of committed income. Post-acquisition trading has been in line with our expectations.

We completed a further four small acquisitions during the year, the master planning and urban design team from Llewelyn Davies Yeang, RSe Consulting, Mustoes and Westhill Consulting, for a combined consideration of £7.9m, which was satisfied by debt. In addition, we settled the deferred consideration for the minority interest in Sportsvine, as well as increasing our majority holdings in Avail Consulting and Tribal TGC.

The combined acquisitions contributed £15.5m to revenue and £2.6m to operating profit.

Shareholder returns and dividendsThe profit for the year ended 31 December 2008 was £14.4m (2007: £26.2m including the profit on disposal of Mercury Health of £24.5m).

The Board continues to adopt a progressive dividend policy and has proposed a final dividend of 2.65p which, together with the interim dividend of 1.7p, gives a total dividend of 4.35p (2007: annualised dividend of 3.93p). The dividend is covered 3.4 times by adjusted earnings per share.

Retained earnings for the period to equity holders increased by £9.3m.

Cash managementCash conversion for the year was an excellent 136% (2007: 137%). This is defined as net cash from operating activities from continuing operations before tax (excluding restricted cash, see note 21) divided by adjusted EBITA.

Operating cash flow, defined as net cash from continuing operating activities less interest, was £21.4m (2007: £22.4m).

The Group generated free cash flow of £16.3m in the year (2007: £18.4m).




The Group’s cash flow for the year to 31 December is shown below:

Tax paid was £3.3m (2007: £0.7m). Cash tax is below the equivalent tax charge reflecting HMRC repayments for group relief relating to the Mercury Health disposal and, in 2007, tax refunds relating to over payments in previous periods.

Capital expenditure in the year ended 31 December 2008 was £3.3m (2007: £4.2m), comprising mainly leasehold improvements and maintaining IT infrastructure, representing 1.4% of revenue (2007: 2.0%). We strive to ensure that our capital expenditure programme is broadly neutral with the corresponding depreciation charge in the year.

Dividends paid of £4.4m represent an untypical payment pattern following the year end change in 2007. The 2008 total is made up of the cost of the interim and final dividends for the nine months ended 31 December 2007, the interim dividend for the year ended 31 December 2008, together with dividends paid to minority shareholders in certain subsidiaries.

Net debtGroup net debt increased from £6.8m at 31 December 2007 to £19.7m at 31 December 2008 as shown below:

Net cash from operating activities before tax £m

H1 FY

2008 2007 £’000 £’000

Net cash from continuing operating activities before tax 25,649 25,240Net interest (928) (2,120)Tax (3,346) (716)

Operating cash flow 21,375 22,404Net cash from discontinued activities - 2,539Capital expenditure (net) (3,259) (4,170)Expenditure on product development (1,851) (2,336)

Free cash flow 16,265 18,437Disposal of Mercury Health - 36,251Acquisitions and deferred consideration (24,630) (2,178)Dividends paid (4,396) (3,396)Financing 10,671 (53,194)

Decrease in cash and cash equivalents in year (2,090) (4,080)

2008 2007 £’000 £’000

Cash at bank and in hand 13,892 15,982Collaterised cash - 192

Gross cash 13,892 16,174

Short term loans (662) (876)Syndicated bank facility (net of bank arrangement fees) (32,894) (22,098)Finance leases - (3)

Gross debt (33,556) (22,977)

Net debt (19,664) (6,803)

Gearing 10% 4%

Interest cover 16.8 9.1

25.623.425.2

17.321.1

17.4


Operating cash flow £m

H1 FY

21.420.722.4

15.5

10.610.7




Included within cash at bank and in hand is restricted cash of £2.0m (2007: £3.2m). This represents pass-through funds restricted in use by the relevant commercial terms of specific trading contracts entered into and can be drawn down with 24 hours notice.

The Group has available a £40m senior debt banking facility until 2012. Under the terms of the facility, £40m is available under a fully fluctuating revolving credit facility, which can in part be transferred into a performance bond facility as required.

The Group also has a £6m working capital overdraft facility which will be reviewed in February 2010.

Our gearing (net debt to equity ratio) at 31 December 2008 was 10% (2007: 4%). Committed revenueThe total forward order book of the Group as at 31 December 2008 was up 12% at £139m (2007: £124m). Over 38% of planned revenue for 2009 was committed at 31 December 2008. Our medium-term target is to start the financial year with over 60% of revenue committed.

Financial risks and treasury management The main financial risks faced by the Group relate to the availability of funds to meet business needs, credit risk arising from customer defaults and fluctuations in interest rates. These risks are managed as described below.

Funding The Group finances its operations by a combination of cash reserves from retained profits, bank borrowings and leases. Our policy is to maintain sufficient headroom in undrawn committed bank facilities and banking covenants. The Group is currently funded by a £40m senior debt banking facility until 2012 with two major UK banks, HBOS and HSBC.

Treasury management is led by the group finance team and operates within policies and procedures reviewed and approved by the Board. Liquidity matters are discussed in more detail in the going concern section of the Corporate governance report.


Committed revenue by segment

Education 57%

Consulting 27%

Support services 16%



Credit risk The objective is to reduce the risk of bad debts arising from non-payment from our customers. This risk is tightly managed across the Group led by the group finance team. We incurred no material bad debts (less than 0.1% of revenue) during the year due to the strong relationships with our predominantly public sector customers. However, due to the sharp slowdown in the UK economy we have significantly increased our allowance for doubtful debts. Debtor days outstanding at 31 December 2008 were 48 days (2007: 47 days).

Interest rate risk Forward rate agreements and interest rate swaps are used to achieve the desired mix of fixed and floating rate debt. At the year end, the Group held a fixed interest rate swap of £25m which is a designated hedge. Under the terms of this arrangement the Group pays 4.99% and receives six month LIBOR until its expiry date on 30 September 2010.

The Group has also entered into a one-year basis rate swap over £25m which exchanges six month LIBOR with one month LIBOR less 33bps until September 2009. The impact of this instrument is to reduce the effective rate of the fixed interest rate swap from 4.99% to 4.66% for the 12 months ending 30 September 2009.

“The total forward order book of the Group was up by 12% at £139m (2007: £124m)”



During 2008, Tribal carried out a comprehensive review of its approach to corporate responsibility, particularly addressing the strategic context of this agenda. We have developed a detailed implementation plan which spans the next eighteen months, providing focus, guidance and inspiration for the daily practice of sustainable activities.

In developing the plan, our approach has been to consult senior leaders within the business and evaluate the best practice in responsible behaviour across the company. This has enabled us to establish practical objectives which we aim to achieve in the medium-term. Our leaders are actively committed to the successful delivery of the sustainability implementation plan, which will make a positive difference to our business and the wider community.

As a result of our consultation and planning activities, we have decided to focus our efforts on corporate sustainability. Through our commitment to sustainability, we can make a demonstrable contribution to social, economic and environmental sustainability, both nationally and internationally. We will report on our performance using four new focal points: marketplace, workplace, community and environment.

In 2009, we will deliver a strategic framework, a sustainable procurement policy and a revised environmental policy. Tribal will take a measured approach to embedding the principles of sustainable development into its daily work through the support of our leadership and continuous employee engagement.

The emphasis from the end of the next financial year will be on setting targets for our activities in this context. We will aim to meet objectives every year, so that we can demonstrate that our impact on society is positive.

MarketplaceTribal currently uses a balanced scorecard across the business. This reports on a number of key performance indicators in four areas: customers, people, processes and finance. There are also formal client relationship and quality measures in place. We are able to monitor performance in relation to both key internal and external stakeholders.

We have set up a number of initiatives, from thought leadership to process re-engineering projects, in order to ensure continuous improvement in customer satisfaction and service standards, and also to facilitate cross-Tribal collaboration.

Over the next year, we intend to continue to make a positive difference to our clients and to position ourselves as a market leader in the professional services industry. We see the role of market leadership as requiring the promotion of good governance and good sustainable practice, both within Tribal and our supply chain and, more generally, in the competitive marketplace.

Business reviewCorporate responsibility

“Through our commitment to sustainability, we can make a demonstrable contribution to social, economic and environmental sustainability, both nationally and internationally”



WorkplaceIn 2008, we continued our significant investment in skills training and management development programmes. We also focused on ensuring our employees have personalised development plans. Through these plans, nearly half of our staff benefited from formal development opportunities, ranging from corporate programmes such as Unleashing Talent and Managers into Leaders, through to local, continuous professional development activities. An electronic library of training resources is also available, including management best practice and toolkits. This level of focus and investment will continue to increase in 2009.

Tribal recognises that health and safety (H&S) is an integral part of good business practice and it is our duty to safeguard the wellbeing of all employees at work. We have a continuous programme of audits and fire risk assessments for all offices. There are trained H&S representatives at each of our sites, who carry out monthly housekeeping audits and are responsible for communicating and acting on any health and safety issues. Car users are offered driver awareness training. Tribal’s H&S policy was reviewed and updated in June and November 2008, in line with legislation and company changes. The H&S Committee meets quarterly to review policy and procedures and any other issues arising. Tribal strives to ensure fairness, diversity, tolerance and health in the workplace, and we will be strengthening our commitments to them in the next year. We have also undertaken a full review of reward and recognition, the results of which will be evaluated early in 2009.

Tribal is a member of Business in the Community (BITC), the key membership organisation for businesses that seek to make a positive impact on society. One of our strategic directors leads part of BITC’s Health and Wellbeing initiative, which seeks to promote the benefits of a healthy workforce to UK boardrooms. We are delighted with this representation and will be seeking to implement the relevant guidelines in 2009.

Community The Tribal Foundation has historically supported sustainable skills development programmes in Africa and Asia. However, from 2008, part of the Foundation’s funds has been made available to support charities nominated by Tribal staff, including those which operate in the UK.

Through our staff payroll giving scheme, employees can make a regular donation and, as with all money raised by staff for the Foundation, Tribal Group matches these donations. See page 38 for more information on the Foundation.

Many of our business units promote local volunteering initiatives and, in some cases, have contributed significant amounts of time and money to charitable organisations. In the next year, we will implement a process to enable us to capture and report on all of the good work that Tribal people do in the community.

EnvironmentAs a professional services organisation, Tribal has a limited environmental impact. However, we recognise our responsibility for preserving the environment.

Our review of corporate responsibility and sustainability has identified the environment as a key focus for us in the coming years. We will commit to curtailing inefficient and wasteful practice, where possible, and conduct daily business activities with the environment in mind.



We recently asked the Carbon Trust to perform an energy survey across four of our sites and to review the approach we took in calculating our carbon emissions. We were pleased with the outcome of the efficiency review and, in 2009, we will start producing a detailed analysis of our carbon emissions. We have also signed up to Business in the Community’s May Day pledge, a public commitment to taking action on climate change.

As our core client base is the UK public sector, it is important to Tribal to support the sector’s sustainable development goals. We will ensure that we set targets for reducing our carbon emissions and will aim to increase the proportion of office waste that is recycled. We will also focus on purchasing sustainable office supplies in 2009.

FTSE4GoodTribal Group is a member of the FTSE4Good Index Series, the index for companies which meet globally recognised corporate responsibility standards.

The Tribal FoundationThe Foundation supports projects in the UK and developing world which reflect Tribal’s expertise in areas such as education and health. Through both financial support and sharing our skills and knowledge, we aim to make a positive difference in communities all over the world. The Foundation is a registered charity and is funded by staff fundraising initiatives, our payroll giving scheme and donations from the Group’s profits.

Our partnerOur development partner is Skillshare International, a Non-Governmental Organisation with over 30 years experience in managing sustainable development programmes in Africa and Asia. Working with Skillshare enables us to have a much greater impact, as the Foundation’s support attracts significant match funding from other organisations. In total, the Foundation has donated £193,000 to projects supported by Skillshare, which has generated around a further £1m in additional funding from the Department for International Development and the European Union. Our partnership also ensures our support is effectively targeted and sustainable, as continuing support is provided by Skillshare’s development workers in the field.

Our projectsWe are currently supporting nine Skillshare projects in Africa and India, including a programme working with survivors of gender-based violence in Swaziland and an initiative which aims to improve food supply and provide sustainable livelihoods for disadvantaged communities in Kenya.

Over the past year, we have increased our focus on UK-based charities and supported a number of projects which have been nominated by Tribal staff. These include Country Holidays for Inner City Kids (CHICKS), which provides respite breaks to disadvantaged children and the Children’s Legal Centre, which supplies legal advice and representation to children, their carers and professionals throughout the UK (see case study on page 39).

Business reviewCorporate responsibility



Staff involvementPerhaps the Foundation’s greatest resource is the skills, expertise and enthusiasm of our staff and their desire to make a difference on a more personal level.

Tribal employees have shared their expertise in IT and information management and provide continuing support through secondments to Lesotho, Botswana and Swaziland. In October 2008, we raised a total of £80,000 through Tribal’s company-wide Foundation Fortnight campaign.

In January 2009, our group finance director, Simon Lawton, visited Tribal Foundation projects in Kenya and Uganda and we are planning a major fundraising campaign in 2009.

A break from the city CHICKS provides respite breaks for disadvantaged children, giving them the opportunity to have some positive time away in an environment that is safe, supportive and caring.

The Foundation supported Marshmallow camp in September 2008, which enabled 16 children who would not otherwise have had a holiday to spend a week at CHICKS’ Moorland Retreat in Dartmoor.

One of the children who attended the camp was 15-year old Erica, who cares for her disabled and bedbound mother and has recently been subject to bullying at school. Erica said:

“I love it. It has been one of the best times of my life. I’m so glad I had the opportunity to come.”


Board of directors

< Business review Governance Financial statements >

Strone MacphersonAge 60Non-Executive ChairmanStrone Macpherson joined the Board of Tribal Group in March 2004 and is chairman of the Nomination Committee. He is currently, inter-alia, chairman of Close Brothers Group plc, chairman of British Empire Securities and General Trust plc, chairman of JP Morgan Smaller Companies Investment Trust plc, chairman of the Audit Committee of Kleinwort Benson Private Bank and treasurer of the King’s Fund.

Peter J MartinAge 51Chief ExecutivePeter Martin joined the Board of Tribal Group in June 2001 as group development director, and was chief executive of Mercury Health, Tribal’s healthcare delivery business, from April 2004 until its sale in April 2007. He was appointed chief executive of Tribal Group on 4 June 2007. Peter was formerly a founding partner of corporate finance firm, Anvil Partners, and prior to that a director of the corporate finance division of Kleinwort Benson Limited. He is a non-executive director of WIN plc.

Simon M Lawton FCAAge 48Group Finance DirectorSimon Lawton joined Tribal Group as group finance director in March 2000. He was formerly director of finance at Securicor Electronics Limited, a subsidiary of Securicor Group plc, and before that, finance director of Dawes Group Limited. Simon originally qualified as a chartered accountant at KPMG in 1986 where he became a senior manager in audit and advisory services.

David G F ThompsonAge 54Non-Executive DirectorDavid Thompson joined the Board of Tribal Group in March 2004 and is chairman of the Audit Committee and the senior independent director. He is chairman of Marstons plc, which he joined in 1977, and a non-executive director of Caledonia Investments plc and Persimmon plc, where he is senior independent director and chairman of the Audit Committee.

Lady Katherine Innes KerAge 48 Non-Executive DirectorLady Katherine Innes Ker joined the Board of Tribal Group in November 2008 and is chairman of the Remuneration Committee. She is a non-executive director of Taylor Wimpey plc and chairs their Corporate Responsibility Committee. She is also non-executive chairman of Shed Media Group plc.


Directors’ reportThe directors present their annual report on the affairs of the Group, together with audited consolidated financial statements and independent auditors’ report for the year ended 31 December 2008.

Principal activitiesTribal Group plc is a holding company with a number of trading subsidiaries.

The principal activities of the Group are the provision of a broad range of consultancy, professional support and delivery services. The majority of our customers are in the public sector in the UK and, increasingly, overseas. Our key markets are education and learning, health, housing and regeneration, local and regional government, and central government. The review of the year’s operations, key risks and future developments are contained in the Chairman’s statement, the Chief executive’s statement, the Business review and the Corporate governance statement. The Group’s policy with regards to financial instruments and the risk to the Group is discussed on page 34 in the Financial risks and treasury management section of the Business review.

Our services are delivered through our education, consulting and support services business streams.

Business reviewA detailed review of the Group’s performance is provided in the section headed Business review on pages 18 to 39.

ResultsThe results of the Group are shown on page 53 and show a group profit from continuing operations before amortisation and impairment for the year ended 31 December 2008 of £19.8m (nine months ended 31 December 2007: £11.2m). Profit before tax was £18.0m (nine months ended 31 December 2007: £1.2m) and profit for the period was £14.4m (nine months ended 31 December 2007: £25.4m). The adjusted diluted earnings per share were 14.7p (nine months ended 31 December 2007: 8.4p) (see note 14) and the diluted earnings per share for continuing and discontinued operations were 15.5p (nine months ended 31 December 2007: 29.5p).

Post balance sheet eventsOn 27 January 2009, the Group acquired Newchurch Limited, a leading health consulting business in the UK, for a total consideration of up to £10.5m (see note 39).

Proposed dividendThe directors recommend a final dividend of 2.65p per share which, together with the interim dividend of 1.7p paid on 24 October 2008, makes a total of 4.35p for the year ended 31 December 2008 (nine months ended 31 December 2007: 2.95p).

If approved by shareholders, the final dividend will be paid on 17 July 2009 to shareholders on the register on 19 June 2009.

Capital structureDetails of the authorised and issued share capital, together with details of the movements in the Company’s issued share capital during the period, are shown in note 28. The Company has one class of ordinary shares which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company.

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The directors are not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.

Details on employee share schemes are set out in note 27.

No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.

With regard to the appointment and replacement of directors, the Company is governed by its Articles of Association, the Combined Code, the Companies Acts and related legislation. The Articles themselves may be amended by special resolution of the shareholders. The powers of directors are described in the Main Board Terms of Reference, copies of which are available on request from the company secretary, and the Corporate governance statement on pages 43 to 45.

Under its Articles of Association and the Companies Acts, the Company has authority to issue 33,525,811 ordinary shares.

DirectorsThe directors of the Company are listed on page 40.

Directors’ interestsThe Board of directors’ interests in shares in the Company are detailed on page 50.

Directors’ indemnitiesThe Company has made qualifying third party indemnity provisions for the benefit of its directors which were made during the year and remain in force at the date of this report.

Directors’ share optionsDetails of directors’ share options are provided in the directors’ Remuneration report on page 49.

Research and developmentThe Group continues to invest in research and development. This has resulted in a number of new products being launched recently which are expected to contribute to the growth of the business.

Employment policiesWe are a people business. We seek to attract, develop and retain high calibre staff and, as a consequence, our customers can be assured that the service they receive is among the best available. The Group’s commitment to its people is discussed in the section of the Business review on pages 24 and 25 headed Our people.




Directors’ reportThe Group is an equal opportunities employer and bases all decisions on individual ability regardless of race, religion, gender, sexual orientation, age or disability.

Applications for employment by disabled persons will always be fully considered, having regard to their particular aptitudes and abilities. Should any employee become disabled, every practical effort is made to provide continued employment. Depending on their skills and abilities, they enjoy the same career prospects and scope for realising their potential as other employees. Appropriate training is arranged for disabled persons, including retraining for alternative work for employees who become disabled, to promote their career development within the organisation.

Supplier payment policyThe Group does not follow any specified code or standard on payment practice. However, it is the Group’s policy to negotiate terms with its suppliers and to ensure that they are aware of the terms of payment when business is agreed. It is the Group’s policy to make prompt payment to those suppliers meeting their obligations. The Group’s trade creditors at 31 December 2008 represented approximately 35 days (2007: 43 days).

Charitable and political donationsDuring the year the Group made charitable donations of £75,877 (nine months ended 31 December 2007: £51,322). The Group made no political donations during the year (nine months ended 31 December 2007: £nil).

Substantial shareholdingsAt 17 March 2009, the following voting interests (other than directors) in the ordinary share capital of the Company, disclosable under the Financial Services Authority’s Disclosure and Transparency Rules (which replaced Part VI of the Companies Act 1985, with effect from 20 January 2007), had been notified to the directors:

Ordinary shares of 5p each %

Caledonia Investments plc 10,336,232 11.45Henry John Pitman 3,191,871 3.53Hermes Specialist UK Focus Fund 19,160,580 21.22Hermes UK Smaller Companies Fund 2,697,803 2.99

Acquisition of the company’s own sharesAt the end of the year, the directors had authority, under the shareholders’ resolution of 30 May 2008, to purchase through the market 8,477,375 of the Company’s ordinary shares at prices per ordinary share ranging between 5p and an amount equal to 105% of the average of the middle market quotations of the Company’s ordinary shares for the five days preceding the day of purchase. This authority expires at the conclusion of the AGM in 2009.

Special business at the AGMA separate document accompanying the annual report and accounts for the year ended 31 December 2008 contains the notice convening the AGM and an explanation of the special business to be conducted at that meeting.

Audit informationIn the case of each of the persons who are directors of the Company at the date when this report was approved:

so far as each of the directors is aware, there is no relevant audit information of which the Company’s auditors are unaware; and ■

each of the directors has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to ■

establish that the Company’s auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s234ZA of the Companies Act 1985.

AuditorsThe auditors changed their name to Deloitte LLP on 1 December 2008 and have signed their audit report in that name.

A resolution for the re-appointment of Deloitte LLP as auditors of the Company is to be proposed at the forthcoming AGM.

On behalf of the Board

Richard H CollinsCompany Secretary

17 March 2009

87-91 Newman Street London, W1T 3EY Registered in England and Wales: number 4128850



Corporate governanceIntroductionTribal Group plc is committed to achieving high standards of corporate governance, integrity and business ethics. The Group supports the principles of corporate governance contained in the Combined Code on Corporate Governance that was issued in 2006 by the Financial Reporting Council (“the Code”) which is the version of the Combined Code applicable to the Group in the year under review. The Code was further updated in June 2008 for accounting periods beginning on or after 29 June 2008 (“the 2008 Code”).

The remainder of this report sets out how the Group applied the Code during the year under review.

Compliance with the Code of Best PracticeThe Group has complied throughout the year under review with the provisions set out in the Code and has voluntarily complied with the 2008 Code since its introduction.

Board of directorsThe Board comprises five directors: Katherine Innes Ker, Simon Lawton, Strone Macpherson (non-executive chairman), Peter Martin and David Thompson. The terms and conditions of all directors are available for inspection on request from the company secretary and will be available for inspection at the forthcoming AGM. The directors’ profiles are set out on page 40.

On 26 March 2008 Henry Pitman resigned as a non-executive director. On 30 November 2008 Tim Stevenson retired as a non-executive director.

IndependenceThe Board believes that the non-executive directors, including the chairman, are independent as defined by the Code. The senior independent non-executive director (SID) is David Thompson.

David Thompson is also an independent non-executive director of Caledonia Investments plc which is a significant shareholder in the Group. This connection between the Group and one of its current shareholders does not affect the director’s objectivity, particularly as he is independent of executive decision-making processes at both companies. All of the non-executive directors bring a wide range of experience to the Board including building large and mid-cap public company businesses, hands-on operational CVs and strategy development and implementation. The non-executive directors meet at least once a year without the executive directors present.

The chairman, Strone Macpherson, has other significant time commitments, as indicated in his profile on page 40. Overall, these have not changed materially during the year and they do not affect his ability to devote sufficient time to the Company’s activities.

The chairman of the Board is chairman of the Nomination Committee and Katherine Innes Ker is chairman of the Remuneration Committee. David Thompson is chairman of the Audit Committee and has the relevant experience to chair this Committee as required by the Combined Code.

All directors are appointed by the Board as a whole following recommendations from the Nomination Committee. The independent non-executive directors and the chairman were initially appointed for a three-year term. None of the executive directors has a service contract with a notice period greater than 12 months. Details of all payments to directors are included in the Remuneration report on pages 46 to 50.

Each director is required to submit himself/herself for re-election at least every three years. New directors are subject to election at the first opportunity following appointment. The chairman and Simon Lawton were re-elected at the 2007 AGM and David Thompson at the 2008 AGM, each having confirmed that they were able to allocate sufficient time to meet the expectations of their roles. Katherine Innes Ker and Peter Martin will be seeking re-election at the 2009 AGM.

The Board exercises full and effective control over the Group. The Board maintains a formal schedule of matters reserved for the Board’s decision, and its responsibilities include strategy and management of performance, acquisitions, capital expenditure and safeguarding the Group’s assets. The actual results of the Group and a summary of operating company performance are reported to all members of the Board. Executive members of the Board meet formally with business stream management on a monthly basis to review business performance and to discuss operational and strategic issues. Key points from these meetings are discussed at Group board meetings.

There are procedures in place to deal with directors’ conflicts of interest and they have operated effectively in the year under review.

A procedure exists for the Board of directors, in the furtherance of their duties, to take independent professional advice if necessary, at the Company’s expense. All directors have access to the advice and services of the company secretary who is responsible to the Board for ensuring that all rules, regulations and agreed procedures are observed. Richard Collins, an experienced public company secretary and a qualified solicitor, was appointed in November 2004.

On appointment, and throughout their tenure, directors receive appropriate training and presentations.

The roles of the chairman and chief executive are separate and clearly defined. The chairman is primarily responsible for the running of the Board and the chief executive for the running of the Group. Information is provided to the Board on a timely basis. In advance of each board meeting, directors receive a board pack including detailed monthly management accounts, any proposed acquisitions, a corporate governance update and major capital expenditure requests.

A performance evaluation of the Board, its committees and its individual directors was conducted in 2008 and focused on a number of areas, including those concerned with best practice based on the principles of good governance. The evaluation was conducted internally by the chairman through a detailed questionnaire. The performance of the group finance director was appraised by the chief executive and the chief executive was appraised by the chairman. The executive and non-executive directors, led by the senior independent director, assessed the performance of the chairman. The non-executive directors’ performance was reviewed by the chairman, taking into account the views of the other directors.

Board committeesThe Board has established three committees to deal with matters in accordance with written terms of reference. They are an Audit Committee, a Nomination Committee and a Remuneration Committee. The chairmen of the Board committees will be available to answer questions at the 2009 AGM.



Corporate governanceTerms of reference for the Audit, Nomination and Remuneration Committees can be found on the Company’s website, www.tribalgroup.co.uk, are available on request from the company secretary and will be available for inspection at the forthcoming AGM.

Audit CommitteeThe Audit Committee meets at least twice each year. The Committee is chaired by David Thompson. Katherine Innes Ker is also a member. The chairman and group finance director attend all meetings at the invitation of the Committee. The Committee monitors the effectiveness of internal financial controls and considers matters relating to accounting, financial reporting, accounting policies, business risks and the external audit. To do this, it receives and considers written and oral reports from company officers, the group finance director and the external auditors. Procedures to correct weaknesses identified in these reports are put in place by the group finance director and reviewed at subsequent meetings. The Audit Committee holds discussions with the auditors at least once a year without the group finance director present. In 2007, the Audit Committee decided that the Group had reached a size and complexity that would obtain value from having an internal audit function and the Company established a formal risk management/internal audit function.

In order to safeguard auditor objectivity and independence, the Committee keeps these transparency issues under review and also reviews the cost effectiveness of the external auditors and the nature of the non-audit services provided by them. The Committee has taken all of these factors into account in reaching its decision to recommend to the Board that the auditors be re-appointed.

The Group has a formal policy for the use of auditors for non-audit work and, along with other professional advisers, the auditors have been used during the period on non-audit work. The Committee consider these engagements to be appropriate due to the auditors’ familiarity with the Company’s business.

Nomination CommitteeThe Nomination Committee is chaired by Strone Macpherson and the members comprise David Thompson, Katherine Innes Ker and the chief executive. The Committee deals with appointments to the Board, monitors potential conflicts of interest and reviews annually the independence of the non-executive directors. The Committee is responsible for proposing candidates for appointment to the Board having regard to the balance and structure of the Board. Suitable candidates for non-executive roles are, where necessary, identified by use of external recruitment consultancies, and the Committee would expect to use a similar process in the future, when a new appointment to the Board is being made.

Remuneration CommitteeThe Remuneration Committee is chaired by Katherine Innes Ker. David Thompson and Strone Macpherson are also members.

The Committee meets at least twice a year and on behalf of the Board sets the remuneration packages for the directors, including basic salary, bonuses and other incentivisation compensation payments and awards. The Committee ratifies policy and framework proposals made by executive directors in respect of the remuneration for senior executives within the Group. The Committee is assisted by the company secretary and group HR director and takes advice as appropriate from external advisers. The Remuneration report is set out on pages 46 to 50.

Attendance at Board and Committee meetings for the year ended 31 December 2008

Board/Committee name Board* Audit Nomination Remuneration Role

Number of meetings in period 10 2 2 5

Number of meetings attended by members:

Strone Macpherson1 10 2 2 5 Chairman of Board and Nomination Committee

Peter Martin 10 n/a 2 n/a Chief executive

Simon Lawton1 10 2 2 n/a Executive group finance director

Henry Pitman2 2 n/a 1 1 Non-executive director

Tim Stevenson3 9 2 2 4 Non-executive director, chairman of Remuneration Committee

David Thompson 10 2 2 3 Non-executive director, chairman of Audit Committee

Katherine Innes Ker4 2 0 0 2 Non-executive director, chairman of Remuneration Committee

* Note: excludes unscheduled or purely administrative meetings1 Strone Macpherson and Simon Lawton are not members of the Audit Committee, but are invited to attend.2 Henry Pitman resigned as a non-executive director on 26 March 2008.3 Tim Stevenson retired as a non-executive director on 30 November 2008.4 Katherine Innes Ker was appointed a non-executive director on 1 November 2008.

Maintenance of a sound system of internal controlThe directors undertake a periodic review of the effectiveness of the Group’s system of internal controls using a common strategic risk framework.

The Group’s assessment includes a review of the major financial and non-financial risks to the business and the corresponding internal controls. The output is continuously reviewed by the executive directors to enhance further the internal control and risk management culture of the Group throughout its subsidiaries. Clear responsibilities have been allocated for key risk areas such as acquisitions, human resources, treasury, capital expenditure, insurance and information technology. Other risks fall within the scope of the Audit, Remuneration and Nomination Committees as appropriate. No potential issues warranting disclosure in the accounts have been identified.



The executive directors will review these action plans on a regular basis to ensure that the Board’s plans for improvement are being implemented and that the outputs of the strategic risk assessments remain relevant to the Group. A review will be carried out and an action plan prepared for all new acquisitions as part of the integration process. The action plans and their ongoing review form a process for identifying, evaluating and managing risks faced by the Group. Such a process has been in place for the year under review and up to the date of approval of the audited financial statements and conforms to the requirements of the Turnbull guidance.

Review of effectiveness of internal controlThe directors are responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives. In establishing and reviewing the system of internal control, the directors have regard to the materiality of relevant risks, the likelihood of a loss being incurred and the costs of control. It follows that the system of internal control can only provide reasonable and not absolute assurance against the risk of material misstatement or loss.

In addition to the process of assessment of internal control and the monitoring of the effectiveness of internal financial control by the Audit Committee, explained above, the process used by the Board to review the effectiveness of the system of internal controls includes the following:

Control environmentThe directors are committed to maintaining a control-conscious culture across the Group whilst allowing the business streams sufficient autonomy to manage and develop their businesses. This is communicated to all employees by way of regular management briefings, training and mentoring. An organisational structure is in place within which the business can be planned, controlled and monitored. This structure includes appropriate written delegation of authority, physical controls and procedures such as authorisation limits and segregation of duties. The business stream chief executives and managing directors regularly review their responsibilities and compliance with the Group’s policies and procedures. The Group operates a quarterly letter of representation reporting framework for operating companies’ chief executives/managing directors and finance directors/controllers to assess and report on the adequacy of internal financial controls and completeness and accuracy of the management accounts.

Financial reportingThere is a comprehensive system of financial reporting to the Board based on an annual budget prepared in line with the Group’s strategic plan and formally adopted by the Board, rolling forecasts and monthly reporting of financial and operating results. Budgets and three-year plans are prepared at the individual business unit level and summarised at business stream and group level. Key operational performance indicators including weekly cash flow forecasts and daily cash balances, are continuously monitored by the executive and business stream directors.

Group procedures manualResponsibility levels are communicated throughout the Group as part of the Group procedures manual, which sets out delegation of authority and authorisation levels and other control procedures, together with accounting and reporting procedures. The manual is updated regularly and has been during the year under review to take account of new accounting standards, performance criteria, operational effectiveness, investment returns and other regulatory requirements. All senior finance professionals are provided with training and guidance to ensure that the current and future needs of the Group are met.

Shareholder relationsThe chief executive and group finance director are the Group’s principal spokesmen with investors, analysts, fund managers, the press and other interested parties. Access is available to the chairman and/or the senior independent director and other non-executive directors if this is required. The chairman has met with principal shareholders in the period under review. The full Board is kept informed about shareholder relations and in particular the senior independent director is kept informed of the views of major shareholders. This is done by a combination of reports to the Board on meetings held and feedback to the Board from the Group’s financial advisers. The Group holds briefing meetings with analysts and institutional shareholders, usually following the half year and final results announcements, to ensure that the investing community receives a balanced and complete view of the Group’s performance and the issues faced by the business. On 31 January 2008 the Group held an education business briefing for analysts and institutional investors.

The Group reports formally to all shareholders twice a year when its half year and full year results are announced. The AGM is attended by all directors, and private investors are encouraged to participate in the meeting.

These results and all other Stock Exchange announcement information are available on the Group’s website www.tribalgroup.co.uk. We are aware that a growing number of shareholders are taking advantage of improvements in technology and accessing the wealth of information on corporate websites. Recent changes in legislation and the necessary authority having been passed at our 2007 AGM mean that we are able to offer electronic copies of the report and accounts, Notice of AGM and other documents addressed to shareholders.

Going concernThe Group’s business activities together with the factors likely to affect its future development, performance and position are set out in the Business review on pages 18 to 29. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial review on pages 30 to 35. In addition, note 38 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk.

As highlighted in note 24, the Group has considerable financial resources in that it maintains sizeable cash balances, has a credit facility of £40m (of which £33.2m was drawn down at 31 December 2008), which is not due for renewal until June 2012, and has an overdraft facility of £6m, which is renewable annually in February. Net debt was £19.7m at 31 December 2008. Although the current economic conditions create some uncertainty in terms of the maintenance of current public sector spending levels, the Group also has a number of long-term contracts with a number of customers across different geographic areas, significant levels of committed income and a strong pipeline of new opportunities. The Group’s forecasts and projections, which allow for reasonably possible changes in trading performance, show that the Group will be cash generative across the forecast period. As a consequence, the directors believe that the Group is well-placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.



Remuneration reportIntroductionThe remuneration report has been prepared in accordance with the Directors’ Remuneration Report Regulations 2002 (the “Regulations”). The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied the Principles of Good Governance relating to directors’ remuneration. As required by the Regulations, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved.

The Regulations require the auditors to report to the Company’s members on the ‘auditable part’ of the remuneration report. The report has therefore been divided into separate sections for audited and unaudited information.

Information not subject to audit

Remuneration Committee – composition and terms of referenceFor the period 1 January 2008 to 30 November 2008 the Remuneration Committee comprised two independent non-executive directors and the non-executive chairman: Tim Stevenson (Chairman), David Thompson and Strone Macpherson. With effect from 1 November 2008 Katherine Innes Ker replaced Tim Stevenson as an independent non-executive director and Chairman of the Committee. The Committee operates in accordance with written terms of reference, which are determined by the Board and take account of best practice and the requirements of the Combined Code. The terms of reference will be available at the AGM and are available on our website www.tribalgroup.co.uk or on request from the company secretary.

Advisers to the Remuneration CommitteeDuring the period under review, the Committee commissioned and received advice on remuneration matters from Hewitt New Bridge Street. The Committee also receives input from the group HR director, who is supported by the group reward specialist.

Remuneration policyThe key objective of the Group’s policy on executive directors’ remuneration is that the overall package should be sufficiently competitive to attract, retain and motivate high quality executives to achieve the Group’s business objectives and reward them for enhancing shareholder value.

The package consists of basic salary, benefits, share options, performance related bonuses and pension contributions. In line with the Group’s growth strategy, a significant proportion of the package is based on performance and dependent upon the achievement of growth in adjusted diluted earnings per share. For certain long term incentive share option plan awards made to executive directors in May 2007, the performance measures relate to the Company’s share price performance, and the recipients are required to hold a substantial personal shareholding.

The Group has a range of share incentive plans in place to provide the necessary mechanisms for employees and executive directors to participate in the long term success of the Group.

The Committee believes that the schemes align the interests of key employees, as well as all staff generally, with those of shareholders.

Non-executive directorsThe fees for non-executive directors are determined by the Board and, on the basis of a benchmarking report from independent remuneration advisers, were reviewed and increased in December 2008 (this being their first increase since 2004). They do not participate in any bonus scheme, share option scheme, pension scheme or receive any other benefits. However, Henry Pitman (who was a non-executive director from June 2007 until March 2008) continued to participate in a sharesave contract which commenced while he was an executive director.

Executive directorsA summary of each element of the executive directors’ remuneration is set out below.

Basic salaries and benefitsBasic salaries and benefits are determined by reference to market levels for similar jobs in comparable companies and sectors based on independent surveys. Salaries are reviewed annually and when an individual changes position or responsibility. For 2009, the Committee has accepted the executive directors’ proposal that there should be no increase in their basic salaries, which accordingly will remain for 2009 at their 2008 levels of £300,000 for Peter Martin and £200,000 for Simon Lawton. The total basic salaries received during the period under review are set out in the directors’ Remuneration report on page 49.

Benefits (normally a car allowance, pension, permanent health cover, private medical insurance and a death in service benefit of four times salary) are set at a comparable level with those granted to executives at a similar level in like companies and sectors.

Performance related bonusesBonus entitlement is a contractual calculation referred to in each director’s service agreement and is based primarily on the growth in the Group’s adjusted diluted earnings per share but, in all cases, is subject to the overriding discretion of the Remuneration Committee. The terms are reviewed and determined annually. The threshold earnings per share target is adjusted each year by the Committee to set a suitably challenging initial target, with incremental stretching targets above the threshold figure. Bonus payments are made if the threshold target is exceeded. For both directors, there is also an element of the total bonus that is dependent upon performance measured against personal targets. For the period under review, the total contractual bonus was subject to a fixed maximum of 75% of the individual’s basic salary. Bonus payments do not form part of salary for pension purposes.

The Committee decided in the period under review, in the light of external benchmarking and independent advice, that for 2009 this potential variable element of the executive directors’ remuneration should increase, and accordingly Peter Martin’s and Simon Lawton’s respective maximum bonus potentials will be revised to 100% and 80% of their basic salaries respectively. The Committee will continue to apply stretching performance targets, reflecting the Company’s short and medium term objectives. The bonus potential for the executive directors will again be measured primarily on earnings per share performance. However, for the remaining metrics there is a move away from qualitative measures to quantitative.



In addition to any contractual bonus entitlement, the Committee has the discretion to make ad hoc bonus payments, on such terms and subject to such performance or other targets as it sees fit. Typically, an ad hoc bonus payment could be made to reflect exceptional performance. No ad hoc bonus payments have been made in respect of the period under review.

Bonus payments relating to the period under review are detailed in the directors’ Remuneration report on page 49. In this period, Peter Martin and Simon Lawton earned contractual bonuses of £221,000 and £140,000 respectively. Of this overall contractual bonus, the element relating to earnings per share performance over the period was the substantial part of the payment. The balance of the bonus potential earned related to a mixture of financial and non-financial personal targets. The Committee has measured performance against those criteria for each executive director and has determined that certain of these were met in full and some in part.

Executive directors’ service contractsIt is Group policy to fix notice periods for executive directors for a period of no more than 12 months. The Committee believes that the entitlement of directors to the security of 12 months notice of termination of employment is in line with practice in comparable companies and sectors.

Copies of each director’s service agreement will be available for inspection at the AGM.

The Committee aims always to deal fairly with cases of termination, whilst attempting to limit compensation. The service agreements make allowance for specific amounts of compensation that may become payable in the event of early termination of contracts in order to enable the Committee to respond appropriately to particular circumstances.

Details of service agreements and notice periods are as follows:

Notice period Notice period Name Effective date Expiry/retirement for company for directorsof director of contract date (months) (months)

P J Martin 25.06.2001 Ongoing 12 12S M Lawton 08.02.2001 Ongoing 12 12

Non-executive directors’ contractsNon-executive directors have a three-month notice period and no compensation or other benefits are payable. Details of their agreements and notice periods are as follows:

Notice period Notice period Name Effective date Expiry/retirement for company for directorsof director of contract date (months) (months)

P S S Macpherson 03.09.2007 2010 AGM 3 3T E P Stevenson 03.09.2007 Retired 30.11.2008 n/a n/aD G F Thompson 03.09.2007 2011 AGM 3 3H J Pitman 04.06.2007 Resigned 26.03.2008 n/a n/aK C M Innes Ker 01.11.2008 2009 AGM 3 3

Current share incentive schemesThe Group currently operates five share incentive schemes: two employee share option schemes (‘option schemes’), a long term incentive plan (‘LTIP’), a savings related share option scheme (‘SAYE’) and a share incentive plan (‘SIP’). The option and LTIP schemes were established to provide a continuing incentive for executive directors and selected key employees.

1. Option schemes There are two employee share option schemes: the Tribal Group plc Employee Share Option Scheme (‘the PLC scheme’) and the Tribal Holdings Limited

Employee Share Option Scheme (‘the Limited scheme’). The Limited scheme was used to grant options prior to admission on AIM. Options can no longer be granted under the Limited scheme, and no options were granted under the PLC scheme during the period under review.

At the discretion of the Committee, grants are normally made under the option schemes on an annual basis. Such grants are subject to scheme limits, and in particular there is a cap of £30,000 on the market value of tax approved options. Both the option schemes contain HMRC approved and unapproved parts.

The exercise of options granted under the option schemes is conditional on the annual growth in adjusted diluted earnings per share exceeding the rise in the retail prices index (‘RPI’) +8% compound over the two-year period from grant. Options commence vesting after the publication of results at an equal amount (1/24th) over a further two-year period. Options are exercisable in one tranche between four and ten years from the later of the date of grant and the results announcement date.

2. LTIP The plan was designed to provide an incentive for selected executive directors and senior key employees. Two changes to the plan were effected in

2003 following approval at that year’s AGM. The total length of the award period was reduced from five years to four years, and participants are able to acquire free loyalty shares.



Remuneration report Awards from 19 September 2003 to date under the LTIP comprise of two elements:

a. a nil cost option over ordinary shares, referred to as ‘performance shares’, which participants will be able to acquire on a fully vested basis at the end of a three-year performance period, subject to satisfying the performance targets. The performance target is linked to the growth in adjusted diluted earnings per share exceeding the annual growth in the RPI over the three-year period from grant. For awards granted to 31 March 2005, vesting will be on a straight line basis with 0% if the annual adjusted diluted earnings per share growth is less than RPI +10% compound, up to 100% if the annual adjusted diluted earnings per share growth is equal to RPI +20% compound or more; for awards granted after 31 March 2005 the growth rates are RPI +4% and RPI +12% respectively. Under the LTIP scheme rules, alternative or additional performance targets may be applied. The Committee uses this power if it considers this appropriate, and in May 2007 made exceptional circumstances awards to Peter Martin and Simon Lawton that have a different performance measure based on an increase in the Company’s share price over a three-year period. These share price-based LTIP awards also required the recipient to acquire and maintain a significant personal shareholding in the Company (shares to the value at the time of award of £175,000 and £75,000 for Peter Martin and Simon Lawton respectively); and

b. a nil cost option over additional ordinary shares, referred to as ‘loyalty shares’, which participants will be able to acquire at the end of a holding period of one year, subject to remaining in employment.

The number of loyalty shares that can be awarded to any participant will be 25% of the number of performance shares which vest in favour of each participant at the end of the performance period.

The Committee has decided not to use loyalty shares for future LTIP awards to executive directors.

In the period under review LTIP awards were made to the executive directors, as detailed in the note on page 49.

3. SAYE The Group’s HMRC approved SAYE scheme is open to all employees and directors who have been in continuous service for such minimum period as

is determined by the Committee. Eligible employees may save up to £250 per month under a fixed term SAYE contract and then apply the savings to buy shares in the Company. The option price for grants prior to 2005 was set at 20% below the market value at the date of grant. However there was no discounted option price for the SAYE contracts entered into in January 2005, January 2006 and September 2007. Participation may be scaled back if there is pressure on available shares for use by the scheme.

For the December 2008 SAYE contract, the option price was set at 20% below the market value at the date of grant. In addition, 5 year and 7 year savings terms were introduced alongside the existing 3 year savings term. Due to high levels of interest participation was scaled back. In the light of continuing pressures on available shares the Committee has decided that there may be limited or no future SAYE contracts.

4. SIP At the 2005 AGM the Company proposed and shareholders approved the establishment of a new all-employee Share Incentive Plan (SIP).

The SIP is HMRC approved. It currently provides all employees with the opportunity to acquire “partnership shares” in a tax-efficient manner.

Performance graphThe following graph compares the value of an investment of £100 in Tribal Group plc shares with an investment in the FTSE All Share Index and the FTSE Support Services Index over five years from 31 December 2003 to 31 December 2008.

The Committee believes that this comparison provides a clear picture of how the Company has performed relative to both a wide range of companies in the UK and also a specific group of companies in the same sector.

£160

£140

£120

£100

£80

£60

£40

£20

£0

Tribal FTSE All Share FTSE Support Services

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08



A £100 investment in Tribal shares on 31 December 2003 would be worth £23 compared to £100 for an investment in the FTSE All Share Index or £88 for an investment in the FTSE Support Services Index as at 31 December 2008.

Information subject to audit

Directors’ remunerationThe remuneration of individual directors was as follows:

Nine months Year ended ended Performance 31 December 31 December Salary related Pension 2008 2007 or fees bonus Benefits cost Total Total £’000 £’000 £’000 £’000 £’000 £’000

Non-executive chairman P S S Macpherson 101 – – – 101 75

Executive directors H J Pitman – – – – – 365P J Martin 294 221 10 35 560 495S M Lawton 197 140 10 24 371 295

Non-executive directors S M Forbes – – – – – 10H J Pitman 6 – – – 6 14T E P Stevenson 32 – – – 32 26D G F Thompson 36 – – – 36 26K C M Innes Ker 7 – – – 7 –

Aggregate emoluments 673 361 20 59 1,113 1,306

During the period under review, Peter Martin served as a non-executive director of WIN plc. The Board has agreed that he should be allowed to retain the director’s fees paid to him by WIN plc, which during the year were £22,000.

The interests of directors in share options were as follows:

At At Exercise Date from 31 December 31 December price which Expiry 2007 Granted Lapsed Exercised 2008 £ exercisable date

P J Martin PLC scheme 40,000 – – – 40,000 £2.83 30.06.2003 26.06.2011LTIP 77,940 – – – 77,940 £nil 30.06.2008 30.09.2009SAYE scheme 2,422 – – – 2,422 £1.93 01.03.2009 01.09.2009LTIP 100,267 – – – 100,267 £nil 30.06.2009 30.09.2010LTIP 455,296 – – – 455,296 £nil 01.05.2010 01.11.2011SAYE scheme 2,990 – – – 2,990 £1.58 01.10.2010 01.04.2011LTIP – 278,127 – – 278,127 £nil 31.03.2011 30.09.2012 S M Lawton Limited scheme 18,744 – – – 18,744 £1.33 30.06.2003 23.01.2011PLC scheme 45,444 – – – 45,444 £1.65 30.06.2003 07.02.2011LTIP 77,940 – – – 77,940 £nil 30.06.2008 30.09.2009LTIP 90,241 – – – 90,241 £nil 30.06.2009 30.09.2010LTIP 314,566 – – – 314,566 £nil 01.05.2010 01.11.2011LTIP – 185,418 – – 185,418 £nil 31.03.2011 30.09.2012

There have been no variations to the terms and conditions or performance criteria for share options during the financial year.

LTIP awards were granted during the period to Peter Martin and Simon Lawton. The market value of Tribal Group plc shares at the date of grant was 134.83p.

Options granted under the SAYE schemes are not subject to performance criteria. The performance criteria, as detailed on page 47, have been met for the Limited Scheme and the PLC scheme, as far as these awards relate to Peter Martin and Simon Lawton.

The market value of the Company’s shares at the 31 December 2008 was 78p. The highest market value during the period was 145p and the lowest market value 66p.



Remuneration reportDirectors’ interest in shares of Tribal Group plcThe directors who held office at the end of the financial period had the following interests in the shares of the Company:

Interest at Interest at end of period start of period

P J Martin 505,062 505,062S M Lawton 712,4212 712,4211

P S S Macpherson 50,0003 50,0003

D G F Thompson 217,5004 217,5004

1 Of these, 20,000 ordinary shares were held by his wife.2 Of these, 111,697 shares are held by his wife and 300,000 shares are held by a family trust.3 Of these, 25,000 ordinary shares are held by members of his family.4 Of these, 17,500 ordinary shares are held by members of his family.

Directors’ retirement benefitsAll of the executive directors’ pension arrangements are of the defined contribution type. No pension arrangements are provided for non-executive directors.

During the period the Company made employer contributions of 12% of basic salary into the Company’s defined contribution scheme or an equivalent personal pension plan.

ApprovalThis report was approved by the Board of directors on 17 March 2009 and signed on its behalf by:

Lady Katherine Innes KerChairman, Remuneration Committee



Statement of directors’ responsibilitiesThe directors are responsible for preparing the annual report, directors’ remuneration report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. The directors are required by the IAS Regulation to prepare the group financial statements under International Financial Reporting Standards (IFRS) as adopted by the European Union. The group financial statements are also required by law to be properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation.

International Accounting Standard 1 requires that IFRS financial statements present fairly for each financial year the company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework for the preparation and presentation of financial statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. However, directors are also required to:

properly select and apply accounting policies ■

present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information ■

provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of ■

particular transactions, other events and conditions on the entity’s financial position and financial performance.

The directors have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The parent company financial statements are required by law to give a true and fair view of the state of affairs of the company. In preparing these financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently ■

make judgements and estimates that are reasonable and prudent ■

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial ■

statements.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the parent company financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:

the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, ■

financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole

the management report, which is incorporated into the directors’ report, includes a fair review of the development and performance of the business ■

and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board

vv

Peter J Martin Simon M LawtonChief Executive Group Finance Director

17 March 2009


< Business review < Governance Financial statements

Independent auditors’ report to the members of Tribal Group plcWe have audited the Group financial statements of Tribal Group plc for the year ended 31 December 2008 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of recognised income and expense and the related notes 1 to 41. These Group financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the directors’ remuneration report that is described as having been audited.

We have reported separately on the parent company financial statements of Tribal Group plc for the year ended 31 December 2008.

This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the annual report, the directors’ remuneration report and the Group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union are set out in the statement of directors’ responsibilities.

Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Group financial statements give a true and fair view, whether the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation and whether the part of the directors’ remuneration report described as having been audited has been properly prepared in accordance with the Companies Act 1985. We also report to you whether, in our opinion, the information given in the directors’ report is consistent with the Group financial statements. The information given in the directors’ report includes that specific information presented in the business review that is cross referenced from the business review section of the directors’ report. In addition, we report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.

We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board’s statement on internal control covers all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures.

We read the other information contained in the annual report as described in the contents section and consider whether it is consistent with the audited Group financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any further information outside the annual report.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial statements and the part of the directors’ remuneration report to be audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the Group financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Group financial statements and the part of the directors’ remuneration report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Group financial statements and the part of the directors’ remuneration report to be audited.

OpinionIn our opinion:

the Group financial statements give a true and fair view, in accordance with IFRS as adopted by the European Union, of the state of the Group’s ■

affairs as at 31 December 2008 and of its profit for the year then ended

the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation ■

the part of the directors’ remuneration report described as having been audited has been properly prepared in accordance with the Companies ■

Act 1985

the information given in the directors’ report is consistent with the Group financial statements. ■

Deloitte LLPChartered Accountants and Registered Auditors Bristol, United Kingdom

17 March 2009

These are the audited financial statements for the year ended 31 December 2008. An audit does not provide assurance on the maintenance and integrity of this website, including the controls used to achieve this, and whether any changes may have occurred to the financial statements since they were first published. These matters are the responsibility of our directors. No control procedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.



Consolidated income statementfor the year ended 31 December 2008

Before other Other Before other Other administrative administrative Year administrative administrative Nine months expenses and expenses and ended expenses and expenses and ended financial financial 31 December financial financial 31 December instruments instruments 2008 instruments instruments 2007 costs costs Total costs costs Total Note £’000 £’000 £’000 £’000 £’000 £’000

Continuing operationsTurnover 294,192 – 294,192 188,654 – 188,654Direct agency costs (60,202) – (60,202) (35,355) – (35,355)

Revenue 3 233,990 – 233,990 153,299 – 153,299Cost of sales (140,320) – (140,320) (92,266) – (92,266)

Gross profit 93,670 – 93,670 61,033 – 61,033

Net administrative expenses (73,847) – (73,847) (49,860) – (49,860)

Other administrative expenses:Amortisation of IFRS 3 intangibles 16 – (556) (556) – (240) (240)Goodwill impairment 15 – – – – (9,000) (9,000)

Total administrative expenses (73,847) (556) (74,403) (49,860) (9,240) (59,100)

Operating profit 19,823 (556) 19,267 11,173 (9,240) 1,933Investment revenues 8 586 – 586 1,119 – 1,119Other gains and losses 9 – (66) (66) – (126) (126)Finance costs 10 (1,763) (72) (1,835) (1,699) (43) (1,742)

Profit before tax 18,646 (694) 17,952 10,593 (9,409) 1,184Tax 11 (5,005) 195 (4,810) (3,105) 103 (3,002)

Profit for the period from continuing operations 13,641 (499) 13,142 7,488 (9,306) (1,818)

Discontinued operationsProfit from discontinued operations 13 – 1,211 1,211 37 27,217 27,254

Profit for the period 13,641 712 14,353 7,525 17,911 25,436

Attributable to:Equity holders of the parent 31 13,443 25,034Minority interest 32 910 402

14,353 25,436

Earnings per share from continuing operationsBasic 14 14.7p (0.6)p 14.1p 8.4p (11.0)p (2.6)pDiluted 14 14.7p (0.6)p 14.1p 8.4p (11.0)p (2.6)pFrom continuing and discontinued operationsBasic 14 14.7p 0.8p 15.5p 8.4p 21.1p 29.5pDiluted 14 14.7p 0.8p 15.5p 8.4p 21.1p 29.5p



31 December 31 December 2008 2007 Note £’000 £’000

Non-current assetsGoodwill 15 209,765 186,991Other intangible assets 16 7,740 4,254Property, plant and equipment 17 9,103 7,363Investments 18 7 157Deferred tax assets 26 2,149 1,389Derivative financial instruments 22 – 178

228,764 200,332

Current assetsInventories 19 801 1,055Trade and other receivables 20 66,190 62,326Amounts recoverable on contracts 6 63Cash and cash equivalents 21 13,892 15,982Collateralised cash – 192

80,889 79,618

Total assets 309,653 279,950

Current liabilitiesTrade and other payables 23 (68,456) (67,418)Tax liabilities (7,234) (5,400)Obligations under finance leases – (3)Bank loans and loan notes 24 (662) (876)Provisions 25 (655) (577)Derivative financial instruments 22 (188) –

(77,195) (74,274)

Net current assets 3,694 5,344

Non-current liabilitiesBank loans 24 (32,894) (22,098)Pension liabilities 34 (1,425) (1,228)Deferred tax liabilities 26 (1,927) (1,108)Derivative financial instruments 22 (809) –

(37,055) (24,434)

Total liabilities (114,250) (98,708)

Net assets 195,403 181,242

EquityShare capital 28 4,394 4,239Share premium account 29 78,749 74,750Other reserves 30 64,486 64,582Retained earnings 31 45,945 36,606

Equity attributable to equity holders of the parent 193,574 180,177Minority interest 32 1,829 1,065

Total equity 195,403 181,242

Notes 1 to 41 form part of these financial statements.

These financial statements were approved by the Board of directors and authorised for issue on 17 March 2009 and were signed on its behalf by:

vv

Peter J Martin Simon M LawtonDirector Director

Consolidated balance sheetat 31 December 2008



Year Nine months ended ended 31 December 31 December 2008 2007 Note £’000 £’000

Net cash from operating activities 35 22,303 8,808

Investing activities Interest received 586 992Proceeds on disposal to minorities – 159Disposal of subsidiary 225 36,251Proceeds on disposal of property, plant and equipment 53 113Disposal/(purchase) of investments 320 (8)Purchases of property, plant and equipment (3,632) (2,579)Expenditure on product development (1,851) (1,657)Acquisitions and deferred consideration (24,855) (1,840)

Net cash (outflow)/inflow from investing activities (29,154) 31,431

Financing activities Interest paid (1,514) (2,219)Equity dividend paid (3,957) (2,031)Dividends to minorities (439) (390)Issue of shares (9) 122Repayment of borrowings – (53,974)Repayments of obligations under finance lease (3) (5)New bank loans 10,491 –Movements in collateralised cash 192 757

Net cash from/(used in) financing activities 4,761 (57,740)

Net decrease in cash and cash equivalents (2,090) (17,501)Cash and cash equivalents at beginning of period 15,982 33,483

Cash and cash equivalents at end of period 13,892 15,982


Consolidated cash flow statementfor the year ended 31 December 2008



Consolidated statement of recognised income and expensefor the year ended 31 December 2008

Year Nine months ended ended 31 December 31 December 2008 2007 Note £’000 £’000

Actuarial loss on defined benefit plans 34 (408) (7)Transfer to cash flow hedge reserve (1,109) (241)Deferred tax 26 423 67

Net expense recognised directly to equity (1,094) (181)Profit for the period 14,353 25,436

Total recognised income and expense for the period 13,259 25,255

Attributable to: Equity holders of the parent 12,349 24,853Minority interest 910 402

13,259 25,255




Notes to the financial statements1. Accounting policies

Basis for accounting The financial statements on pages 53 to 92 have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted for use in the European Union and therefore the group financial statements comply with Article 4 of the EU IAS Regulation.

The financial information has been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments.

Adoption of new and revised standardsIn the current year, two Interpretations issued by the International Financial Reporting Interpretations Committee are effective for the current period. These are: IFRIC 11 ‘IFRS 2 – Group and Treasury Share Transactions’ and IFRIC 14 ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’. The adoption of these Interpretations has not led to any changes in the Group’s accounting policies.

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 1 (amended)/IAS 27 (amended) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

IFRS 2 (amended) Share-based Payment – Vesting Conditions and Cancellations

IFRS 3 (revised 2008) Business Combinations

IFRS 8 Operating Segments

IAS 1 (revised 2007) Presentation of Financial Statements

IAS 23 (revised 2007) Borrowing Costs

IAS 27 (revised 2008) Consolidated and Separate Financial Statements

IAS 32 (amended)/IAS 1 (amended) Puttable Financial Instruments and Obligations Arising on Liquidation

IFRIC 12 Service Concession Arrangements

IFRIC 15 Agreements for the Construction of Real Estate

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

Improvement to IFRSs (May 2008)

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group except for:

additional segment disclosures when IFRS 8 comes into effect for periods commencing on or after 1 January 2009; ■

treatment of acquisition of subsidiaries when IFRS 3 comes into effect for business combinations for which the acquisition date is on or after the ■

beginning of the first annual period beginning on or after 1 July 2009.

Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of the investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All intra group transactions, balances, income and expenses are eliminated on consolidation.

Revenue and turnover recognitionTurnover comprises the gross amounts billed to clients in respect of commission-based income together with the total of other fees earned. Revenue comprises commission and fees earned in respect of turnover and is measured at the fair value of the consideration derived from the provision of goods and services to third party customers in the normal course of business. Turnover and revenue are stated exclusive of VAT, sales tax and trade discounts. The particular recognition policies applied are:

Consultancy – on performance of the contracted services; ■

Courses, training and software support and maintenance services – over the provision of the related services; ■

Product sales – on delivery of the related goods; ■

Permanent recruitment – on performance over the search and selection period; ■

Temporary recruitment – when the recruit joins the organisation; and ■

Recruitment advertising – when the advertisement is placed. ■



1. Accounting policies (continued)

Direct agency costs comprise media payments and production costs in respect of commission based income. Cost of sales includes the direct expenditure incurred in providing the goods and services described above, including the cost of associates and the salary costs of employed fee earners. Administrative expenses include the salary cost of non-fee earners.

Interest is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Business combinationsThe acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholdings are stated at the minority’s proportion of the fair values of the assets and liabilities recognised subsequently, any losses applicable to the minority interest in excess of the minority interest are allocated against the interest of the parent.

On acquisition of the minority shareholdings, any excess of consideration paid over the carrying value of the minority interest is recognised as goodwill.

The profit or loss on the disposal or closure of a previously acquired business includes the attributable amount of any purchased goodwill relating to that business not previously charged through the profit and loss account.

The results and cash flow relating to a business are included in the consolidated income statement and the consolidated cash flow statement from the date of acquisition or up to the date of disposal.

GoodwillGoodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary.

Goodwill is recognised as an asset and reviewed for impairment at least annually.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where the amount of purchase consideration is contingent on one or more future events, the cost of acquisition includes a reasonable estimate of the fair value of amounts expected to be payable in the future. The cost of acquisition is adjusted when revised deferred consideration estimates are made, with consequential adjustments continuing to be made to goodwill until the ultimate deferred consideration is known.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit and loss on disposal.

Goodwill arising on acquisition before the date of transition to IFRSs has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date.

Impairment of tangible and intangible assets excluding goodwillAt each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment (if any). An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of fair value less costs to sell and the value in use. The estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Notes to the financial statements




Business systemsIn accordance with IAS 38, the Group’s business systems are treated as an intangible asset. Costs included are those directly attributable to the design, construction and testing of new systems (including major enhancements) from the point of inception to the point of satisfactory completion, namely where the probable future economic benefits arising from the investment could be assessed with reasonable certainty at the time the costs are incurred. Maintenance and minor modifications are expensed against the income statement as incurred.

Internally generated intangible assets – research and development costsExpenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally generated intangible asset arising from the Group’s product development is recognised only if all of the following conditions are met:

an asset is created that can be identified; ■

it is probable that the asset created will generate future economic benefits; and ■

the development costs of the asset can be measured reliably. ■

Internally generated intangible assets are amortised on a straight-line basis over their useful lives. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Property, plant and equipmentProperty, plant and equipment are stated at cost, net of depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost of each asset, other than properties in the course of construction, by equal installments over their estimated useful economic lives as follows:

Freehold – over 50 years

Leasehold – life of the lease

Fixtures, fittings and other equipment – 15 to 33%

Assets held under finance lease are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

LeasesAssets acquired under finance leases are capitalised at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The outstanding future lease obligations are shown in the balance sheet as a finance lease obligation. The finance charges are allocated over the period of the lease in proportion to the capital amount outstanding and are charged directly against income.

Operating lease rentals are charged against income on a straight line basis over the period of the lease.

Benefits received and receivable as an incentive to enter into an operating lease are spread on a straight-line basis over the lease term.

Borrowing costsBorrowing costs directly attributable to the construction of qualifying assets and long-term contract costs are capitalised as part of the cost of those assets. The commencement of capitalisation begins when both finance costs and expenditures for the asset are being incurred and activities that are necessary to get the assets ready for use are in progress. Capitalisation ceases when substantially all the activities that are necessary to get the asset ready for use are complete. All other borrowing costs are recognised in income or expense in the period in which they are incurred.

Investment propertiesInvestment property, which is property held to earn rentals and/or capital appreciation, is stated at its fair value at the balance sheet date. Gains or losses arising from changes to the fair value of investment property are included in income or expense for the period in which they arise.

InvestmentsInvestments are initially measured at cost, including transaction costs. Investments are classified as either held-for-trading or available-for-sale. They are measured at subsequent reporting dates at cost where they relate to unquoted equity investments where fair value cannot be reliably measured and at fair value otherwise.

InventoriesInventories are stated at the lower of cost and net realisable value. Cost comprises materials, direct labour and a share of production overheads appropriate to the relevant stage of production. Net realisable value is based on estimated selling price less all further costs to completion and all relevant marketing, selling and distribution costs.

Contract costsLong-term contracts balances represent costs incurred on specific contracts, net of amounts transferred to cost of sales in respect of work recorded as revenue, less foreseeable losses and payments on account not matched with revenue. Contract work in progress is recognised as revenue by reference to the value of work carried out to date.

Profits are recognised on long-term contracts where the final outcome can be assessed with reasonable certainty. In calculating this, the percentage of completion method is used to calculate the profit based upon the proportion of costs incurred to the total estimated costs. Cost includes direct staff, outlays and an appropriate proportion of overheads. Full provision is made for all known losses immediately such losses are forecast on each contract.



Notes to the financial statements1. Accounting policies (continued)

Amounts recoverable on contracts are valued at the proportion of the anticipated net sales value of the work done to date, including uncertified amounts where the directors have satisfied themselves that entitlement has been established less billed on account. Advance payments are included in creditors to the extent that they exceed the related work in progress.

Exceptional itemsExceptional items are material items which derive from events or transactions that fall within the ordinary activities of the Group and which individually or, if of a similar type, in aggregate, need to be disclosed by virtue of their size of incidence if the financial statements are to give a true and fair view.

Retirement benefit costsThe Group operates various defined contribution pension schemes that are established in accordance with employment terms set by the subsidiary undertakings. The assets of these schemes are held separately from those of the Group in independently administered funds. The amount charged against profits represents the contributions payable to the scheme in respect of the accounting period.

As a consequence of certain acquisitions a small number of employees participate in various defined benefit schemes. The expected cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur in the statement of recognised income and expense.

Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits vest.

The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

Government grantsGovernment grants are recognised over the periods necessary to match them with the related costs and are deducted in reporting the related expense.

ProvisionsProvisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Operating profitOperating profit is stated before investment revenues and finance costs.

Share-based paymentsThe Group has applied the requirements of IFRS 2 ‘Share-based Payment’ to all grants of equity instruments after 7 November 2002 that were unvested as of 1 April 2005. The Group issues equity-settled share-based payments to certain employees. Equity settled share based payments are measured at fair value at the date of grant. This is expensed on a straight-line basis over the vesting periods of the instruments based on the Group’s estimate of the number of shares that will vest.

Fair value is measured by use of a stochastic model which produces similar results to Black-Scholes model but is also able to value the options subject to market based performance conditions. There is no effective liability in relation to national insurance on share options at the year end as the Company has obtained tax indemnities from employees in relation to employers’ national insurance.

TaxThe tax expense represents the sum of the tax currently payable and deferred tax.

Current tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying values of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax in the income statement is charged or credited, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.




Financial instrumentsFinancial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial assetsInvestments are recognised and derecognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned and are initially measured at fair value, plus transaction costs, except for those financial assets classified through profit or loss, which are initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

For fair value hedges the change in the fair value of the hedging instrument and hedged item as well as any ineffectiveness arising in cash flow hedges are disclosed with other gains and losses.

The Group does not currently hold any held-to-maturity investments or available for sale financial assets.

Effective interest methodThe effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of a financial asset, or, where appropriate, a shorter period.

Interest is recognised on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL.

Financial liabilitiesFinancial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

Other financial liabilitiesOther financial liabilities including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Financial assets/liabilities at FVTPLFinancial assets/liabilities are classified as at FVTPL where the financial asset/liability is either held for trading or it is designated as at FVTPL.

A financial asset/liability is classified as held for trading if:

it has been acquired/incurred principally for the purpose of selling/disposal in the near future; or ■

it is part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit- ■

taking; or

it is a derivative that is not designated and effective as a hedging instrument. ■

A financial asset/liability other than a financial asset/liability held for trading may be designated as a FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or ■

the financial asset/liability forms part of a group of financial assets or liabilities or both, which is managed and its performance is evaluated on a ■

fair value basis, in accordance with the Group’s documented risk management or investment strategy, and the information about the Group is provided internally on that basis; or

it forms a part of a contract containing one or more embedded derivatives, and IAS 39 ‘Financial Instruments: Recognition and Measurement’ ■

permits the entire combined contract (asset or liability) to be designated at FVTPL.

Financial assets/liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned/paid on the financial asset/liability. Fair value is determined in the manner described in note 38.

Loans and receivablesTrade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.



Notes to the financial statements1. Accounting policies (continued)

Impairment of financial assetsFinancial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments as well as observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised through profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.

Cash, cash equivalents and collateralised cashCash comprises cash in hand and deposits repayable on demand, less overdrafts payable on demand. These instruments are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

Collateralised cash comprises funds reserved for financial guarantee contracts and are carried at fair value.

Derecognition of financial assetsThe Group derecognises a financial asset only when the contractual rights to the cash flows from the assets expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities and equityFinancial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issued costs.

Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

Shares to be issuedIn accordance with IAS 32 ‘Financial Instruments: Disclosure and Presentation’, shares to be issued are recognised as a financial liability as they relate to obligations to settle acquisition related deferred consideration in Tribal Group plc shares. The number of shares to be issued will vary depending upon the share price at the date of settlement.

Derivative financial instrumentsThe Group’s activities expose it primarily to the financial risks of changes in interest rates. The Group uses interest rate swap contracts to manage this exposure.

The use of financial derivatives is governed by the Group’s policies approved by the Board, which provides written principles on the use of financial derivatives. Further details of derivative financial instruments are disclosed in note 38 to the financial statements.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Hedge accountingThe Group designates certain hedging instruments as cash flow hedges. At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in the cash flows of the hedging item.

Note 38 sets out the details of the fair values of the derivative instruments used for hedging purposes. Movements in the hedging reserve in equity are also detailed in note 30.




Cash flow hedgeThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the ‘other gains and losses’ line of the income statement.

Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss, in the same line of the income statement as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.

2. Critical accounting judgements

In the process of applying the Group’s accounting policies, which are described in note 1, management have made the following judgements that have the most significant effect on the amounts recognised in the financial statements.

GoodwillThe carrying value of goodwill at the year end is £209.8m (2007: £187.0m). An annual impairment review is required under IFRS 3 ‘Business Combinations’ involving judgement of the future cash flows for cash generating units. The Group prepares such cash flow forecasts derived from the most recent budgets approved by management for the next two years. Further details of the other assumptions used are given in note 15.

Revenue recognitionThe Group’s revenue recognition policies are disclosed in note 1. In some cases, judgement is required in order to determine the appropriate level of income to recognise where delivery of services is performed over time or where the basis of delivery may vary from the contractually agreed terms.

TaxThere are a number of tax related risks associated with computations still open to enquiry and certain issues arising from the operation and sale of the Group’s healthcare business. Judgement is required to determine the level of provision held against these risks.

3. Revenue

An analysis of the Group’s revenue is as follows:

Year Nine months ended ended 31 December 31 December 2008 2007 £’000 £’000

Continuing operationsSales of services 233,990 153,299Investment revenues 586 1,119

Total revenue 234,576 154,418

Sales of goods are not material and are therefore not shown separately.

4. 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, benchmarking, e-learning publishing and training.

Support services – support services businesses largely operating in the public sector providing a range of PR, advertising and communications, resourcing and architectural design services.

From 1 January 2008, the Group transferred certain business units between its business segments to realign with its revised reporting structure. Accordingly, the business segment information for the nine months ended 31 December 2007 has been restated to reflect the transfers. As a result, there has been an adjustment to inter-segment sales. The impact of these transfers is not material.



4. Business segments (continued)

Year ended 31 December 2008 Support Consulting Education services Eliminations Consolidated 31 December 31 December 31 December 31 December 31 December 2008 2008 2008 2008 2008 £’000 £’000 £’000 £’000 £’000

RevenueExternal sales 84,805 95,798 53,387 – 233,990Inter-segment sales 386 610 890 (1,886) –

Total revenue 85,191 96,408 54,277 (1,886) 233,990

Segment operating profit 8,250 14,303 4,861 – 27,414

Unallocated corporate expenses (7,591)

Adjusted operating profit 19,823Amortisation of IFRS 3 intangibles (556)

Operating profit 19,267Investment revenues 586Other gains and losses (66)Finance costs (1,835)

Profit before tax 17,952Tax (4,810)Profit for the year from discontinued operations 1,211

Profit after tax and discontinued operations 14,353

Inter-segment sales are charged at prevailing market prices.

Balance sheet information Support Consulting Education services Unallocated Consolidated 31 December 31 December 31 December 31 December 31 December 2008 2008 2008 2008 2008 £’000 £’000 £’000 £’000 £’000

AssetsSegment assets 120,929 94,973 69,582 24,169 309,653

Liabilities Segment liabilities 21,554 30,396 22,441 39,859 114,250

Other segment information Capital additions 20,669 2,467 2,365 1,959 27,460Depreciation, amortisation and impairment 1,072 2,553 891 577 5,093




4. Business segments (continued)

Nine months ended 31 December 2007 Support Consulting Education services Eliminations Consolidated 31 December 31 December 31 December 31 December 31 December 2007 2007 2007 2007 2007 £’000 £’000 £’000 £’000 £’000

RevenueExternal sales 48,865 66,608 37,826 – 153,299Inter-segment sales 178 904 792 (1,874) –

Total revenue 49,043 67,512 38,618 (1,874) 153,299



Adjusted operating profit 11,173Amortisation of IFRS 3 intangibles (240)Goodwill impairment (9,000)

Operating profit 1,933Investment revenues 1,119Other gains and losses (126)Finance costs (1,742)

Profit before tax 1,184Tax (3,002)Profit for the period from discontinued operations 27,254

Profit after tax and discontinued operations 25,436

Inter-segment sales are charged at prevailing market prices.

Balance sheet information Support Consulting Education services Unallocated Consolidated 31 December 31 December 31 December 31 December 31 December 2007 2007 2007 2007 2007 £’000 £’000 £’000 £’000 £’000

AssetsSegment assets 88,833 95,717 73,035 22,365 279,950

Liabilities Segment liabilities 14,810 30,397 18,818 34,683 98,708

Other segment information Capital additions 799 5,825 284 1,209 8,117Depreciation, amortisation and impairment 518 1,857 9,663 533 12,571

The Group’s operations are primarily undertaken in the United Kingdom. The Group has a subsidiary in South Africa together with branch operations in New Zealand and South Africa. These operations represent less than 10% of the revenue and net assets of the Group and hence, no secondary business segment by geography is presented.



5. Profit for the period


Profit for the period is stated after charging/(crediting):Depreciation and other amounts written off property, plant and equipment: Owned 3,149 2,293 Leased – 3Staff costs (see note 7) 104,888 72,504Amortisation of acquired IFRS 3 intangible assets 556 240Amortisation of business systems 254 99Goodwill impairment – 9,000Cost of inventories recognised as an expense 947 494Write down of inventories recognised as an expense 47 54Impairment loss recognised on trade receivables 663 467Research and development expenditure 79 296Amortisation of development costs 1,134 936Grant income received (2,978) (1,624)

The analysis of auditors’ remuneration is as follows:


Fees payable to the Company’s auditors for the audit of the company’s annual report 96 93Fees payable to the Company’s auditors and their associates for the other services to the Group: – the audit of the Company’s subsidiaries pursuant to legislation 171 161 – the review of interim results 26 25

Total audit fees 293 279

– tax services 115 122 – corporate finance services 170 – – other services 23 –

Total non-audit fees 308 122

Total auditors’ remuneration 601 401

Fees payable to Deloitte and their associates for non-audit services to the Company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis.

Included within tax services payable to the auditors are tax compliance fees of £92,000 (nine months ended 31 December 2007: £68,000), tax advisory fees of £17,000 (nine months ended 31 December 2007: £46,000) and VAT advice of £6,000 (nine months ended 31 December 2007: £8,000).

Corporate finance services include fees as reporting accountants of £170,000 (nine months ended 31 December 2007: £nil), of which £95,000 (nine months ended 31 December 2007: £nil) has been capitalised as part of the cost of acquisitions (see page 44 for Group policy on use of auditors for non-audit work).




6. Remuneration of directors


Directors’ emoluments 1,113 1,306

Included within directors’ emoluments are pension costs of £59,000 (nine months ended 31 December 2007: £46,000) in respect of payments made to two (nine months ended 31 December 2007: three) directors’ individual defined contribution pension schemes.

Disclosures on directors’ remuneration, share options, long-term incentive schemes, and pension contributions are contained in the ‘Directors’ remuneration’ section within the audited part of the Remuneration report and form part of these audited financial statements.

7. Staff numbers and costs

The average number of persons employed by the Group (including executive directors) during the period was as follows:

Continuing operations Year Nine months ended ended 31 December 31 December 2008 2007 No. No.

Selling, operations and marketing 1,752 1,670Finance and administration 319 337

2,071 2,007

The aggregate payroll costs of these persons were as follows:

Continuing operations Year Nine months ended ended 31 December 31 December 2008 2007 £’000 £’000

Wages and salaries 89,045 61,404Social security costs 9,745 6,927Pension costs 5,247 3,684Share option costs 851 489

104,888 72,504

8. Investment revenues


Interest on bank deposits 373 448Other interest receivable 213 671

586 1,119



9. Other gains and losses


Change in the fair value of derivatives which are classified as held for trading 109 62Hedge ineffectiveness in the cash flow hedges (175) (188)

(66) (126)

No other gains or losses have been recognised in respect of loans and receivables, other than as disclosed in note 8 and impairment losses recognised/reversed in respect of trade receivables (see note 5 and 20).

10. Finance costs


Finance charges Interest on bank overdrafts and loans 1,717 1,666Interest on loan notes 29 30Interest on obligation under finance leases – 1Net interest payable on retirement benefit obligations 17 2

Total borrowing costs 1,763 1,699

Financial instruments Discounting charge for deferred consideration 72 43

1,835 1,742

11. Tax


Current tax UK corporation tax 5,975 3,358 Adjustments in respect of prior periods (632) (517)

5,343 2,841Deferred tax Current year (533) 161

Tax charge on profits 4,810 3,002

The charge for the period can be reconciled to the profit per the income statement as follows: Profit before tax 17,952 1,184

Tax charge at standard rate of 28.5% (2007: 30%) 5,116 355 Effects of: Intangible amortisation and impairment – 2,726 Expenses not deductible for tax purposes 250 291 Adjustments in respect of prior periods (632) (517) Share-based payments and discounting charges 76 147

Tax expense for the period 4,810 3,002

In addition to the amount charged to the income statement, a deferred tax credit of £423,000 (nine months ended 31 December 2007: £67,000) has been taken directly to equity (see Consolidated statement of recognised income and expense on page 56).




12. Dividends


Amounts recognised as distributions to equity holders in the period: Interim dividend for the nine months ended 31 December 2007 of 1.15 pence per share 966 – Final dividend for the nine months ended 31 December 2007 of 1.8 pence (year ended 31 March 2007: 2.42 pence) per share 1,511 2,031Interim dividend for the year ended 31 December 2008 of 1.7 pence per share 1,480 –

3,957 2,031

Proposed final dividend for the year ended 31 December 2008 of 2.65 pence (nine months ended 31 December 2007: 1.8 pence) per share 2,425 1,530

The interim dividend for 2008 was approved by the Board on 19 August 2008 and was paid on 24 October 2008 to ordinary shareholders who were on the register on 26 September 2008.

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

13. Discontinued operations

The Group disposed of its healthcare delivery business, Mercury Health, to Care UK on 20 April 2007 at a profit of £27m; its results are presented in the consolidated income statement as discontinued operations.

As indicated in note 2, various tax issues have been, or remain, open in respect of the sale of the Group’s healthcare business. In the year ended 31 December 2008, we report a profit of £1.2m in the consolidated income statement, which relates to the release of tax provisions arising from the closure of the March 2006 computations by HMRC, a proportion of our claim for additional group relief surrendered by Mercury Health at no cost to Tribal, and the release of other related provisions which are no longer required.

In March 2009, we received a notification from Care UK that it may challenge the basis on which the corporation tax group relief claim for the year ended 31 March 2007 was made. The directors have made adequate provision for this when determining the reported result from the discontinued operations.

14. Earnings per share

Earnings per share and diluted earnings per share are calculated by reference to a weighted average number of ordinary shares calculated as follows:

Year Nine months ended ended 31 December 31 December 2008 2007 thousands thousands

Weighted average number of shares outstanding: Basic weighted average number of shares in issue 86,358 84,741Employee share options 101 73

Weighted average number of shares outstanding for dilution calculations 86,459 84,814



14. Earnings per share (continued)

The adjusted basic and adjusted diluted earnings per share figures shown on the Consolidated income statement on page 53 are included as the directors believe that they provide a better understanding of the underlying trading performance of the Group. A reconciliation of how these figures are calculated is set out below:

Year ended Nine months ended 31 December 2008 31 December 2007From continuing operations Earnings (Loss)/ Earnings Earnings per share Earnings per share £’000 pence £’000 pence

Basic and adjusted basic earnings/(loss) per share:Profit/(loss) and basic earnings/(loss) per share 12,232 14.1p (2,220) (2.6)pAdjustments:Goodwill impairment – – 9,000 10.6pAmortisation of IFRS 3 intangibles (net of tax) 400 0.5p 173 0.2pFinancial instruments net charge (net of tax) 99 0.1p 133 0.2p

Adjusted earnings and adjusted basic earnings per share 12,731 14.7p 7,086 8.4p

Diluted and adjusted diluted earnings/(loss) per share: Profit/(loss) and diluted earnings/(loss) per share 12,232 14.1p (2,220) (2.6)pAdjustments:Goodwill impairment – – 9,000 10.6pAmortisation of IFRS 3 intangibles (net of tax) 400 0.5p 173 0.2pFinancial instruments net charge (net of tax) 99 0.1p 133 0.2p

Adjusted earnings and adjusted diluted earnings per share 12,731 14.7p 7,086 8.4p

The profit of £12,232,000 (nine months ended 31 December 2007: loss £2,220,000) is arrived after deducting the minority interest charge of £910,000 (nine months ended 31 December 2007: £402,000) from the profit for the period from continuing operations of £13,142,000 (nine months ended 31 December 2007: loss £1,818,000).

Year ended Nine months ended 31 December 2008 31 December 2007From continuing and discontinued operations Earnings Earnings Earnings per share Earnings per share £’000 pence £’000 pence

Basic and adjusted basic earnings per share:Profit and basic earnings per share 13,443 15.5p 25,034 29.5pAdjustments: Goodwill impairment – – 9,000 10.6pAmortisation of IFRS 3 intangibles (net of tax) 400 0.5p 173 0.2pProfit from discontinued operations (1,211) (1.4)p (27,217) (32.1)pFinancial instrument net charge (net of tax) 99 0.1p 133 0.2p

Adjusted earnings and adjusted basic earnings per share 12,731 14.7p 7,123 8.4p

Diluted and adjusted diluted earnings per share:Profit and diluted earnings per share 13,443 15.5p 25,034 29.5pAdjustments: Goodwill impairment – – 9,000 10.6pAmortisation of IFRS 3 intangibles (net of tax) 400 0.5p 173 0.2pProfit from discontinued operations (1,211) (1.4)p (27,217) (32.1)pFinancial instrument net charge (net of tax) 99 0.1p 133 0.2p

Adjusted earnings and adjusted diluted earnings per share 12,731 14.7p 7,123 8.4p




15. Goodwill

31 December 31 December 2008 2007 £’000 £’000

CostAt beginning of period 238,122 234,230Additions – including minority interests 22,079 4,183Disposal of subsidiary (225) (168)Revisions to prior periods 920 (123)

At end of period 260,896 238,122

Accumulated impairment lossesAt beginning of period 51,131 42,131Impairment charge – 9,000

At end of period 51,131 51,131

Net book valueAt end of period 209,765 186,991

At beginning of period 186,991 192,099

Additions to goodwill during the period relates to the acquisitions of HELM Corporation, the master planning and urban design team from Llewelyn Davies Yeang, RSe Consulting, Mustoes and Westhill Consulting and the purchase of minority interests (see note 36).

Revisions to prior periods relate to a change in estimate of the deferred consideration paid on the acquisition of the remainder of the share capital in Sportsvine Holdings Limited.

Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from the business combination. The carrying amount of goodwill has been allocated as follows:


Support services – Communications 19,168 17,677 Architectural design 17,636 17,606 Resourcing 12,614 12,614

49,418 47,897Consulting 88,665 68,835Education 71,682 70,259

209,765 186,991

The carrying amount of goodwill by business stream as at 31 December 2007 has been restated due to the Group transferring certain business units between its business segments.

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The assumptions made reflect a more cautious view in the current economic climate. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on internal budgets in the short-term and general market rates thereafter. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

The Group has conducted a sensitivity analyses on the impairment of each CGU’s value. As noted below, current forecasts assume growth in all CGUs. The directors do not consider negative growth to be “reasonably possible”. However, if there were to be low levels of negative growth, this may have an impact on the carrying value of goodwill for certain CGUs.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next two years and extrapolates cash flows for two further years at 4% and into perpetuity based on an estimated growth rate of 2.5%. This rate does not exceed the average long-term growth rate for the relevant markets.

The rate used to discount the forecast cash flow is 7.62%.



16. Other intangible assets

Business Development Business combinations costs systems Total £’000 £’000 £’000 £’000

CostAt 1 April 2007 2,204 4,134 547 6,885Additions – 838 905 1,743Disposals – (18) – (18)

At 1 January 2008 2,204 4,954 1,452 8,610Additions – 1,031 753 1,784Acquired on acquisition of subsidiaries 3,651 – – 3,651Disposals – (457) – (457)

At 31 December 2008 5,855 5,528 2,205 13,588

Amortisation At 1 April 2007 958 1,895 246 3,099Charge for the period 240 936 99 1,275Disposals – (18) – (18)

At 1 January 2008 1,198 2,813 345 4,356Charge for the year 556 1,134 254 1,944Disposals – (452) – (452)

At 31 December 2008 1,754 3,495 599 5,848

Carrying amountAt 31 December 2008 4,101 2,033 1,606 7,740

At 31 December 2007 1,006 2,141 1,107 4,254

At 31 March 2007 1,246 2,239 301 3,786

In accordance with IFRS 3, the intangible assets acquired on business combinations comprise software maintenance revenue, trading relationships, intellectual property and contract pipeline. They are amortised over their estimated useful lives, which on average is five years.

The amortisation period for development costs incurred on the Group’s software development and product development is two to three years based on the expected life cycle of the product.

The Group’s corporate business systems software is amortised over an average five years from the date it first comes into use.




17. Property, plant and equipment

Fixtures, fittings Assets in the Investment Freehold Leasehold and other course of property buildings buildings equipment construction Total £’000 £’000 £’000 £’000 £’000 £’000

Cost or valuationAt 1 April 2007 200 – 41,500 20,060 16 61,776Additions – – 371 1,820 – 2,191Disposals – – (36,815) (5,978) (16) (42,809)

At 1 January 2008 200 – 5,056 15,902 – 21,158Additions – – 1,238 2,359 – 3,597Acquired on acquisition of subsidiaries – 1,263 – 177 – 1,440Disposals – – (804) (4,656) – (5,460)

At 31 December 2008 200 1,263 5,490 13,782 – 20,735

Depreciation At 1 April 2007 – – 3,614 13,106 – 16,720Charge for the period – – 460 1,836 – 2,296Disposals – – (2,017) (3,204) – (5,221)

At 1 January 2008 – – 2,057 11,738 – 13,795Charge for the year – 16 555 2,578 – 3,149Disposals – – (702) (4,610) – (5,312)

At 31 December 2008 – 16 1,910 9,706 – 11,632

Net book valueAt 31 December 2008 200 1,247 3,580 4,076 – 9,103

At 31 December 2007 200 – 2,999 4,164 – 7,363

At 31 March 2007 200 – 37,886 6,954 16 45,056

The fair value of the Group’s investment property at 31 December 2008 has been arrived at on the basis of a valuation carried out at that date by Bernard Marcus, independent valuers not connected with the Group. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

The property rental income earned by the Group from its investment property, all of which is leased out under operating leases, amounted to £9,000 (nine months ended 31 December 2007: £7,000). Direct operating expenses arising on the investment property in the period amounted to £9,000 (nine months ended 31 December 2007: £4,000).

18. Investments

Available for sale investments carried at fair value: 31 December 31 December 2008 2007 £’000 £’000

Cost At beginning of period 157 149Additions – 8Disposals (150) –

At end of period 7 157

The directors have considered the value of the above investments and are satisfied that the aggregate value of the investments is not less than their carrying value. The results of associates are excluded as they are not material to the results of the Group.



19. Inventories


Work in progress 121 176Finished goods and goods for resale 680 879

801 1,055

20. Trade and other receivables


Amount receivable from sale of services 50,924 46,424Allowance for doubtful debts (1,196) (766)

49,728 45,658Other receivables 954 400Prepayments and accrued income 15,508 16,268

66,190 62,326

The Group’s principal financial assets are cash and cash equivalents and trade and other receivables which represent the Group’s maximum exposure to credit risk in relation to financial assets.

The Group’s credit risk is primarily related to its trade receivables. The credit risk on liquid funds and derivative financial instruments is limited because the counter-parties are banks with high credit ratings assigned by international credit rating agencies.

Trade receivablesThe average credit terms on sale of services is 30 days. In certain cases interest is charged on trade receivables after the first 30 days from the date of invoice. In these cases a surcharge of 4% is made on the outstanding balances.

The Group sells the majority of its services to the public sector and as such there is a very low incidence of default. All overdue debts are assessed on an individual basis and a provision for irrecoverable amounts is determined by reference to specific circumstances and past default experience. As a precaution and as a result of the sharp slowdown in the UK economy we have significantly increased our allowance for doubtful debts.

Included in the Group’s trade receivable balance are debtors with a carrying amount of £18.2m (2007: £17.3m) which are past due at the reporting date and which have not been impaired as there has not been a significant change in the credit quality and the Group believes that the amounts are still recoverable. The Group does not hold any collateral over these balances.

The average age of these receivables is 48 days (2007: 47 days).

Ageing of past due but not impaired receivables:


30-60 days 12,393 10,31960-90 days 3,819 3,57790-120 days 690 1,573120+ days 1,345 1,807

Total 18,247 17,276

Movement in the allowance for doubtful debts:


Balance at the beginning of the period 766 705Amounts written off during the period (194) (237)Amounts recovered during the period (39) (169)Recognised in the income statement 663 467

Balance at end of period 1,196 766




20. Trade and other receivables (continued)

In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date the credit was initially granted up to the reporting date. The Group’s credit risk is relatively low because a high proportion of trade or other receivables have sovereign or close to sovereign credit rating. Accordingly the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

Ageing of impaired trade receivables:


30-60 days 69 1460-90 days 71 1690-120 days 199 195120+ days 857 541

Total 1,196 766

The directors consider that the carrying amount of trade and other receivables approximates their fair value.

21. Cash and cash equivalents

Cash and cash equivalents of £13.9m (2007: £16.0m) comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.

Of the above balance, £2.0m (2007: £3.2m) represents funds restricted in use by the relevant commercial terms of certain trading contracts.

22. Derivative financial instruments


Non-current assetsInterest rate swaps that are designated and effective as hedging instruments carried at fair value – 160Financial assets carried at fair value through profit or loss (FVTPL) – 18

– 178


Current liabilitiesFinancial liabilities carried at fair value through profit or loss (FVTPL) 188 –


Non-current liabilitiesInterest rate swaps that are designated and effective as hedging instruments carried at fair value 809 –

The fall in LIBOR rates to under 3% has had a significant impact on the value of the interest rate swaps which are fixed at a higher rate.

Further details of derivative financial instruments are provided in note 38.



23. Trade and other payables


Trade payables 19,832 18,441Other taxation and social security 6,183 8,603Other payables 3,947 6,306Accruals and deferred income 37,368 31,114Deferred cash consideration 1,126 2,954

68,456 67,418

The average credit period taken for trade purchases is 35 days (2007: 43 days).

For most suppliers no interest is charged on the trade payables for the first 30 days from the date of invoice. Thereafter interest is charged on the outstanding balances at various interest rates. The Group has financial risk management policies in place to ensure that all payables are paid within a reasonable timeframe.

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

24. Bank loans and loan notes


Bank loans 32,894 22,098Loan notes 662 876

33,556 22,974

Maturity of bank loans and loan notes:


Bank loans and loan notes can be analysed as falling due: On demand or within one year 662 876In the third to fifth years inclusive 32,894 22,098

33,556 22,974

The bank arrangements are all denominated in UK sterling.

Floating Floating Fixed rate rate Total Fixed rate rate Total 31 December 31 December 31 December 31 December 31 December 31 December 2008 2008 2008 2007 2007 2007 £’000 £’000 £’000 £’000 £’000 £’000

Bank loans 25,000 7,894 32,894 22,098 – 22,098Loan notes – 662 662 – 876 876

Total 25,000 8,556 33,556 22,098 876 22,974




24. Bank loans and loan notes (continued)

The weighted average interest rates paid were as follows:

31 December 31 December 2008 2007

Bank loans 6.2% 7.0%Loan notes 3.7% 4.6% The weighted average fixed rate is 5.7% (2007: 5.7%) and the weighted average period for which interest rates on fixed rate liabilities are taking into account the interest rate swap fixed is two years (2007: three years). There are £6.8m (2007: £17.5m) undrawn committed borrowing facilities, which all expire in three to five years. The Group also has cash balances of £13.9m (2007: £16.0m) (see note 21), giving net debt at the year end of £19.7m (2007: £6.8m). In addition, at the year end there was a £3m undrawn overdraft facility giving underlying headroom of £23.3m (2007: £36.2m).

The directors estimate the fair value of the Group’s borrowings as follows:


Bank loans 33,891 21,920Loan notes 662 876

34,553 22,796

A £40m bank loan is available under a revolving facility until 14 June 2012. The interest rate is reset for a period of one, three or six months at LIBOR plus a variable margin determined by covenant calculations. The rate is managed through interest rate swaps. At 31 December 2008, the amount drawn down (net of bank arrangement fees) was £32.9m. The loan is secured by way of a fixed and floating charge over the assets of the Group.

The interest rates on the outstanding loan notes are at market rates determined by each separate agreement, with typical interest rates being one percent below base rate. Repayment terms vary between one and five years, but all are redeemable for cash at the request of the loan note holders and are therefore recorded as current liabilities.

Interest bearing loan notes are normally issued as part of the purchase consideration or deferred consideration on the new business or minority interest acquired. All outstanding loan notes are redeemable on demand for cash at par on or before 31 October 2010 at the option of the loan note holder.

25. Provisions

Litigation provision


At beginning of period 577 450Additional provision in year 103 –Reclassification from accruals – 157Utilisation of provision (25) (30)

At end of period 655 577

Provisions represent an estimate of the cost of settling potential litigation claims. These claims are expected to be resolved within one year and are therefore shown within current liabilities. However, it is possible that these claims may take longer to resolve, or the Group may not be promptly notified that the claim has been dropped. The claim may be settled at amounts higher or lower than that provided depending on the outcome of commercial or legal arguments. The provision made is management’s best estimate of the Group’s liability based on past experience, commercial judgement and legal advice. There is no expected reimbursement for any economic outflow that may be required. Further details are contained in note 37.



26. Deferred tax

The amounts provided for deferred taxation and the amounts for which credit has been taken are set out below:


Deferred tax assets Retirement benefit schemes 399 344Holiday pay accrual 57 15Depreciation in excess of capital allowances 1,050 749Other timing differences 343 281Share-based payments 163 –Derivative financial instruments 137 –

2,149 1,389

Deferred tax liabilities Intangible assets 1,730 738Fair value adjustment on investment property 34 34Leasehold property not qualifying for tax allowances 163 163Derivative financial instruments – 173

1,927 1,108

The directors are of the opinion, based on currently available forecasts, that these timing differences will reverse in the near future and when they do there will be sufficient taxable profits. Accordingly, the directors believe that it is more likely than not that the deferred tax assets will be recoverable.

The movement in deferred tax assets and liabilities during the year was as follows:

Temporary differences on Retirement Derivative Other non-current Holiday pay benefit financial temporary assets accrual schemes instruments differences Total £’000 £’000 £’000 £’000 £’000 £’000

At 1 January 2008 (186) 15 344 (173) 281 281Credited/(charged) to income statement 487 42 (58) – 62 533Items taken directly to equity – – 113 310 – 423Acquisition of subsidiaries (1,015) – – – – (1,015)

At 31 December 2008 (714) 57 399 137 343 222

The movement in deferred tax assets and liabilities during the previous period was as follows:

Temporary differences on Retirement Derivative Other non-current Holiday pay benefit financial temporary assets accrual schemes instruments differences Total £’000 £’000 £’000 £’000 £’000 £’000

At 1 April 2007 (1,985) 253 431 (373) 88 (1,586)(Charged)/credited to income statement (75) (218) (61) – 193 (161)Items taken directly to equity – – (26) 93 – 67Disposal of subsidiary 1,874 (20) – 107 – 1,961

At 31 December 2007 (186) 15 344 (173) 281 281




27. Share-based payments

The Group recognised the following expenses for continuing operations related to equity-settled share-based payment transactions:


LTIP 794 411SAYE 57 78

851 489

Employee Share Option Scheme (ESOS)Options granted under the ESOS prior to 17 July 2003 have an award period of four years. The options are granted at market value. The extent to which an award vests is measured by reference to the growth in the Group’s adjusted diluted earnings per share over two financial years. Options granted since 17 July 2003 have an award period of three years and vest based on the growth in the adjusted diluted earnings per share over a three year period. The performance criteria for these schemes have either not been met or are unlikely to be met and therefore no expense has been recognised in either the current or prior period.

LTIPAwards made to eligible employees under the LTIP are nil cost options with an award period of four years. There are two types of LTIP awards. Generally the extent to which an award vests is measured by reference to the growth of the Group’s adjusted diluted earnings per share over the performance period of three financial years. However, the extent to which two awards granted on 1 May 2007 and 20 June 2008 vest is measured by reference to the market performance of the Group’s share price following the announcement of the Group’s results for the years ending 31 December 2009 and 31 December 2010 respectively.

SAYEThe SAYE scheme provides for a purchase price equal to mid market value at date of grant. For grants prior to January 2005, a discount to market value of 20% was applied. All schemes prior to 2008 are three year saving schemes. The 2008 SAYE scheme was granted at a discount to market value of 20% and was available as a three, five or seven year scheme.

Acquired schemesThe acquired schemes relate to share option schemes existing when the Group acquired certain businesses. These option schemes have rolled into Tribal options and have no performance criteria.

Options outstanding during the year are as follows:

ESOS LTIP SAYE Acquired schemes Weighted Weighted Weighted Weighted Number of average Number of average Number of average Number of average options exercise options exercise options exercise options exercise thousands price thousands price thousands price thousands price

Outstanding at 1 January 2008 1,430 £2.50 2,780 £nil 910 £1.61 196 £1.47Exercised during the year – – – – (1) £1.44 – –Granted during the year – – 1,340 £nil 458 £1.08 – –Lapsed during the year (186) £2.08 (135) £nil (513) £1.51 – –

Outstanding at 31 December 2008 1,244 £2.56 3,985 £nil 854 £1.39 196 £1.47

Exercisable at 31 December 2008 1,244 £2.56 189 £nil – – 196 £1.47

Weighted average remaining contractual life (years) 3.6 5.6 3.1 3.0

Weighted average share price at date of exercise – – £1.30 –

Share options outstanding at the year end have a range of exercise prices; ESOS: £1.33 - £3.62, LTIP £nil, SAYE: £1.08 - £1.93 and Acquired schemes: £0.22 - £2.45.



Notes to the financial statements27. Share-based payments (continued)

For the year ended 31 December 2008, the Group has used a stochastic valuation model in order to incorporate a discount factor into the fair value to reflect the market based performance condition of one of the LTIP grants. To be consistent, the stochastic model has also been used to value the other LTIP awards and the SAYE option, although the Black Scholes model that the Group used prior to 1 April 2007 would have produced similar results. The following table sets out the information about how the fair value of the grant is calculated for each of the schemes:

LTIP LTIP LTIP SAYE SAYE 31 December 31 December 31 December 31 December 31 December 2008 2007 2007 2008 2007

Date of grant June 2008 May 2007 September 2007 October 2008 August 2007Share price £1.31 £1.59 £1.59 £1.02 £1.58Exercise price £nil £nil £nil £1.08 £1.58Expected dividend yield 3.01% 2.08% 2.40% 4.17% 2.44%Risk free interest rate 5.38% 5.46% 5.11% 4.04%-4.49% 5.28%Expected volatility 35.5% 36.1% 37.1% 34.4%-35.5% 36.5%Term (years) 3.2 3.6 3.6 3.4-7.4 3.4

The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Expected volatility was determined by calculating the historical volatility of the Group’s share price over the term commensurate with the expected term immediately prior to the date of grant (i.e. 3.2 years for the LTIP award).

For SAYE valuations, the model reflects the fact that the options are exercisable only for a short period of six months following their vesting. The 2007 SAYE scheme is a three year scheme. For 2008 SAYE options were issued for three, five and seven years and the expected life reflects a further three months being the mid point between the vesting and expiry dates.

The following options over shares have not been recognised in accordance with IFRS 2 as the options were granted on or before 7 November 2002. These options have not been subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.

ESOS LTIP Acquired schemes 31 December 31 December 31 December 31 December 31 December 31 December 2008 2007 2008 2007 2008 2007 thousands thousands thousands thousands thousands thousands

Options granted before7 November 2002 696 845 16 40 73 73

28. Share capital


Authorised125,000,000 (2007: 125,000,000) ordinary shares of 5p each 6,250 6,250

31 December 31 December 31 December 31 December 2008 2008 2007 2007 number £’000 number £’000

Allotted, called up and fully paidAt beginning of the period 84,773,759 4,239 84,683,270 4,234Issued as consideration for acquisitions 3,105,491 155 – –Share option exercises 1,315 – 90,489 5

At end of the period 87,880,565 4,394 84,773,759 4,239

The Company has one class of ordinary shares which carries no right to fixed income.

During the year, 1,315 ordinary 5p shares with an aggregate nominal value of £66 were issued under share option schemes for a total consideration of £1,894.



29. Share premium


At beginning of the period 74,750 74,633Premium on share issues (net of expenses) 3,999 117

At end of the period 78,749 74,750

30. Other reserves

Own Share-based Capital Merger share payment Hedging reserve reserve reserve reserve reserve Total £’000 £’000 £’000 £’000 £’000 £’000

At 1 April 2007 9,545 58,786 (1,773) 424 841 67,823Transfer re goodwill impairment (see note 31) – (3,235) – – – (3,235)Net expense recognised directly in equity in the period – – – – (147) (147)Own shares disposed – – 183 – – 183Credit in relation to share-based payment charge – – – 489 – 489Transfers (see note 31) – – – (282) (249) (531)

At 31 December 2007 9,545 55,551 (1,590) 631 445 64,582Net expense recognised directly to equity in the year – – – – (799) (799)Credit in relation to share-based payment charge – – – 851 – 851Transfers (see note 31) – – – (148) – (148)

At 31 December 2008 9,545 55,551 (1,590) 1,334 (354) 64,486

The capital reserve of £9.5m (2007: £9.5m) resulted from a share exchange when Tribal Group plc was listed in February 2001.

The merger reserve of £55.6m (2007: £55.6m) relates to the premium arising on shares issued subject to the provisions of section 131 of the Companies Act 1985, net of cumulative goodwill impairment of £10.2m (2007: £10.2m) in respect of related acquisitions now deemed to be impaired.

The own share reserve of £1.6m (2007: £1.6m) represents the cost of 813,484 shares (2007: 813,484) in Tribal Group plc held by the Employee Share Ownership Trust to satisfy certain options under the Group’s share option schemes and during the nine months ended 31 December 2007 shares to satisfy bonus arrangements of certain employees. In the period ended 31 December 2007, 31,192 shares (£61,000) were disposed of on exercise of options and 69,408 shares (£122,000) were used to satisfy bonus arrangements.

The share-based payment reserve represents the liability arising from the application of IFRS 2.

The hedging reserve represents movements relating to cash flow hedges net of deferred tax at 28%.

31. Retained earnings


At beginning of the period 36,606 9,941Profit for the period 13,443 25,034Dividends (3,957) (2,031)Net expense recognised directly in equity (295) (34)Transfer goodwill impairment to merger reserve (see note 30) – 3,235Share option exercises – (70)Transfers (see note 30) 148 531




32. Minority interest


At beginning of the period 1,065 1,603Profit for the period 910 402Dividends (439) (390)New minorities 884 64Sale to minorities – 27Purchase of minorities (591) (641)


33. Capital and other commitments

There are capital commitments at 31 December 2008 of £nil (2007: £48,000).


The Group as lesseeMinimum lease payments under operating leases recognised as an expense in the period 5,011 3,500

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:


Within one year 461 328In the second to fifth years inclusive 14,646 2,512After five years 2,943 10,977

18,050 13,817

Operating lease payments mainly represent rentals payable by the Group for certain of its office properties. Leases are negotiated for an average term of five years and rentals are fixed for an average of three years.

34. Retirement benefit schemes

The Group operates a number of defined contribution and defined benefit pension schemes within individual subsidiaries and contributes to certain employees’ personal pension plans. The pension cost charge for the year ended 31 December 2008 was £5,247,000 (nine months ended 31 December 2007: £3,684,000), of which £5,029,000 (nine months ended 31 December 2007: £3,539,000) related to defined contribution schemes and £218,000 (nine months ended 31 December 2007: £145,000) to defined benefit schemes.

Contributions amounting to £647,000 (2007: £499,000) were payable to the funds at the year end and are included in current liabilities.

Defined benefit schemesOne of the Group’s subsidiary undertakings, Tribal Technology Limited, participates in the TfL Pension Fund (formerly LRT pension fund), which is a defined benefit arrangement. The last full actuarial valuation of this scheme was carried out by a qualified independent actuary as at 31 March 2006.

The Tribal Technology section of the TfL Pension Fund had four active members at the year end. Employer contributions amounting to £195,000 were paid in the year ended 31 December 2008. These accounting figures have been calculated using the valuation as at 31 March 2006, updated to 31 December 2008 by a qualified actuary independent of the scheme’s sponsoring employer.

Another of the Group’s subsidiary undertakings, SDP Regeneration Services 2 Limited, participates in the London Pensions Fund Authority Pension Fund (‘the LPFA Pension Fund’), which is a defined benefit arrangement. The accounting figures have been calculated using the last full actuarial valuation of this scheme, carried out by a different qualified independent actuary as at 31 March 2007, updated on an approximate basis to 31 December 2008.




34. Retirement benefit schemes (continued)

The SDP Regeneration Services 2 Limited section of the LPFA Pension Fund had 15 active members, 23 deferred pensioners and 3 pensioners at the year end. Employer contributions amounting to £234,000 were paid in the year ended 31 December 2008.

The assets of the funds have been taken at market value and the actuarial assumptions used to calculate scheme liabilities under IAS 19 ‘Employee Benefits’ are:

31 December 31 December 31 March 2008 2007 2007 % % %

Inflation 2.90 3.50 3.25Salary increases 3.90 4.90 4.60Rate of discount 6.30 5.90 5.45Pension in payment increases 2.90 3.30 3.25

The expected long-term return on cash is equal to bank base rates at the balance sheet date. The expected return on bonds is determined by reference to corporate bond yields at the balance sheet date. The long-term expected return on equities is based on the rate of return on gilts with an allowance for out-performance.

The fair value of the assets in the scheme, the present value of the defined obligations in the scheme and the expected long term rate of return at each balance sheet date were as follows:

TfL Pension Fund: 31 December 31 December 31 December 31 December 2008 2008 2007 2007 % £’000 % £’000

Equities 7.20 237 7.70 198Bonds 6.30 267 5.90 208

Total fair value of scheme assets 504 406Present value of defined obligations (645) (582)

Deficit in the scheme (141) (176)Related deferred tax asset 39 49

Net pension liability (102) (127)

The mortality assumptions adopted at 31 December 2008 imply the following life expectations:

Males Females

Retiring at age 62 in 2008 24.8 years 27.7 yearsRetiring at age 62 in 2028 25.9 years 28.8 years

LPFA Pension Fund:

31 December 31 December 31 December 31 December 2008 2008 2007 2007 % £’000 % £’000

Equities 6.90 1,647 7.50 2,108Target return portfolio 5.50 296 6.20 651Alternative assets 6.00 715 6.60 517Cash 4.00 221 4.70 99

Total fair value of scheme assets 2,879 3,375Present value of defined obligations (4,163) (4,427)

Deficit in the scheme (1,284) (1,052)Related deferred tax asset 360 295

Net pension liability (924) (757)




The mortality assumptions used by the scheme actuaries are based on the PFA92 and PMA92 tables, projected to calendar year 2033 for non-pensioners and 2017 for pensioners. Based on these assumptions, average future life expectations at age 65 are summarised below:

Males Females

Current pensioners 19.6 years 22.5 yearsFuture pensioners 20.7 years 23.6 years

The scheme actuaries have added an additional mortality loading of approximately 3.5% has been applied to the non-pensioners liabilities and 1.7% to the pensioner liabilities to reflect the particular experience of the fund.

However we have made an additional adjustment to the liabilities to reflect a further strengthening of the mortality tables from medium to long cohort.

Reconciliation of opening and closing balances of the fair value of scheme assets:

TfL LPFA TfL LPFA 31 December 31 December 31 December 31 December 2008 2008 2007 2007 £’000 £’000 £’000 £’000

Fair value of scheme assets at beginning of period 406 3,375 345 3,559Expected return on assets 35 244 18 199Actuarial loss (130) (959) – (654)Contributions by employer 195 234 47 313Contributions by scheme participants 7 57 5 35Benefits paid (9) (72) (9) (77)

Fair value of scheme assets at end of period 504 2,879 406 3,375

Reconciliation of opening and closing balances of the present value of the defined benefit obligations:


Defined benefit obligation at beginning of period 582 4,427 606 4,734Current service cost 31 131 29 114Interest cost 35 261 25 194Contributions by scheme participants 7 57 5 35Actuarial gain (1) (680) (74) (573)Past service cost – 39 – –Benefits paid (9) (72) (9) (77)

Defined benefit obligation at end of period 645 4,163 582 4,427

The contribution rate for 2008 was 25.5% of pensionable earnings for the TfL Pension Fund and 16.2% for the LPFA Pension Fund.

Additional contributions of £184,000 were paid into the TfL Pension Fund during the year and additional lump sum payments will be made over the next three years into the LPFA Pension Fund to address the deficits in the schemes.

Analysis of amounts recognised in the consolidated income statement:


Current service cost 31 131 29 114Past service cost – 39 – –

Recognised in arriving at operating profit 31 170 29 114

Other finance costs Interest on pension scheme liabilities 35 261 25 194Expected return on pension scheme assets (35) (244) (18) (199)

Net finance charge/(income) – 17 7 (5)

Total charge to income statement 31 187 36 109





Analysis of actuarial (loss)/gain in the consolidated statement of recognised income and expense:


Actual return less expected return on pension scheme assets (130) (959) – (654)Experience gains and losses arising on the scheme liabilities (8) 680 (10) 573Changes in assumptions underlying the present value of scheme liabilities 9 – 84 –

Total actuarial (loss)/gain recognised in the consolidated statement of recognised income and expense (129) (279) 74 (81)

Cumulative actuarial loss recognised in the consolidated statement of recognised income and expense since 1 April 2004 is £468,000 (2007: £60,000).

Changes in the deficit are analysed as follows: TfL LPFA Total TfL LPFA Total 31 December 31 December 31 December 31 December 31 December 31 December 2008 2008 2008 2007 2007 2007 £’000 £’000 £’000 £’000 £’000 £’000

At beginning of the period (176) (1,052) (1,228) (261) (1,175) (1,436)Movement in the year: Current employer service cost (31) (131) (162) (29) (114) (143)Past service cost – (39) (39) – – –Employer contributions 195 234 429 47 313 360Actuarial (loss)/gain (129) (279) (408) 74 (81) (7)Net finance (charge)/income – (17) (17) (7) 5 (2)

At end of the period (141) (1,284) (1,425) (176) (1,052) (1,228)

The history of experience adjustments is as follows:

TfL Pension Fund: 31 December 31 December 31 March 31 March 31 March 2008 2007 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Present value of defined benefit obligations (645) (582) (606) (591) (1,142)Fair value of scheme assets 504 406 345 266 965

Deficit in the scheme (141) (176) (261) (325) (177)

Experience adjustments arising on scheme assets:Amount (130) – (2) (7) 42Percentage of the scheme assets (26%) – 0% (3%) 4%Experience adjustments arising on scheme liabilities:Amount (8) (10) 3 (8) 7Percentage of the present value of the scheme liabilities (1%) (2%) 0% (1%) 1%

LPFA Pension Fund: 31 December 31 December 31 March 31 March 31 March 2008 2007 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Present value of defined benefit obligations (4,163) (4,427) (4,734) (4,697) (3,573)Fair value of scheme assets 2,879 3,375 3,559 3,045 2,380

Deficit in the scheme (1,284) (1,052) (1,175) (1,652) (1,193)

Experience adjustments arising on scheme assets: Amount (959) (654) 30 388 –Percentage of the scheme assets (33%) (19%) 1% 13% –Experience adjustments arising on scheme liabilities: Amount 12 573 1 (1) –Percentage of the present value of the scheme liabilities 0% 13% 0% 0% –

No assets are invested in the Group’s own financial instruments, properties or other assets used by the Group.



35. Notes to the cash flow statement


Operating profit from continuing operations 19,267 1,933Depreciation of property, plant and equipment 3,149 2,296Amortisation of other intangible assets 1,944 1,275Impairment of goodwill – 9,000Net pension charge (212) (215)Loss/(gain) on disposal of property, plant and equipment 96 (92)Gain on sale of investments (304) (68)Share-based payments 851 489

Operating cash flows before movements in working capital 24,791 14,618Decrease in amounts recoverable on contracts 57 256Decrease/(increase) in inventories 426 (26)Decrease/(increase) in receivables 684 (5,519)Decrease in payables (387) (437)Increase in provisions 78 127

Net cash from operating activities before tax 25,649 9,019Tax paid (3,346) (211)

Net cash from operating activities 22,303 8,808

Net cash from operating activities before tax can be analysed as follows:

£’000 £’000

Continuing operations (excluding restricted cash) 26,936 11,016(Decrease)/increase in restricted cash (1,287) 135

25,649 11,151Discontinued operations – (2,132)

25,649 9,019

Tax paid of £3.3m (nine months ended 31 December 2007: £0.2m) is net of a repayment of £1.5m (nine months ended 31 December 2007: £nil) in respect of discontinued operations.




36. Acquisitions

(a) On 13 June 2008 the Group acquired 72% of the HELM Corporation for a total consideration of £16.7m satisfied by £13.3m in cash and £3.4m by way of 2,507,582 new Tribal shares. The number of Tribal shares issued was determined by the average mid-market price for the eight days preceding 12 June 2008, being the last practicable date before completion. The transaction has been accounted for in accordance with IFRS 3 ‘Business Combinations’.

Net assets acquired were:

Fair value Book value adjustments Fair value £’000 £’000 £’000

Intangible assets – 2,784 2,784Property, plant and equipment 1,515 (180) 1,335Investments 30 – 30Debtors 2,935 (60) 2,875Cash 2,167 – 2,167Creditors (3,071) (224) (3,295)Deferred tax – (780) (780)

Book/fair value of net assets 3,576 1,540 5,116

Net assets acquired 4,290Goodwill 12,807

Total consideration 17,097

Satisfied by: Shares 3,368Cash 11,752Cash for cash 1,564

Purchase consideration 16,684Directly attributable costs 413


The provisional fair value adjustments represent changes to bring the accounting policies in line with those of the Group.

In accordance with the sale and purchase agreement, the net assets acquired represent 100% of the cash balance of £2,167,000 and 72% of the fair values of the remaining net assets.

Intangible assets were recognised primarily in respect of customer contracts and relationships. Goodwill arising on acquisition is attributable to the underlying profitability of the company, expected profitability arising from new business, anticipated future operating synergies arising from assimilation into the Group and the value attributed to the skilled workforce which does not meet the criteria for recognition as a separate intangible asset.

In the year ended 31 December 2008, the acquisition contributed £9.5m to revenue and £1.7m to operating profit.

(b) The Group also made the following smaller acquisitions in the year:

(i) on 14 February 2008, the Group acquired the trade and assets of Llewelyn Davies Yeang, a master planning and urban design business which has formed part of our Housing, Regeneration and Local Government consulting practice

(ii) on 2 July 2008, the Group acquired RSe Consulting, a leading public sector strategy consultancy

(iii) on 19 September 2008, the Group acquired Mustoes, an independent advertising agency which enhances our PR and communication offering within Support services

(iv) on 24 November 2008, the Group acquired Westhill Consulting, a leading information-focussed health strategy, coding and analytics company.



36. Acquisitions (continued)

The total consideration for these acquisitions was £8.9m. There is a deferred consideration element of £1m payable in 2009. £7.9m has been satisfied in cash.

All transactions have been accounted for in accordance with IFRS 3 ‘Business Combinations’.



Intangible assets – 867 867Property, plant and equipment 156 (51) 105Debtors 2,555 (121) 2,434Cash 1,655 – 1,655Creditors (1,992) (253) (2,245)Deferred tax – (235) (235)

Book/fair value of net assets 2,374 207 2,581



Satisfied by: Cash 7,932Deferred consideration 1,000



The provisional fair value adjustments represent changes to bring the accounting policies in line with those of the Group.


In the year ended 31 December 2008, these acquisitions contributed £6.0m to revenue and £0.9m to operating profit.

If the acquisitions had been completed on the first day of the financial year, group revenues for the period would have been £244.6m and group profit attributable to equity holders of the parent would have been £14.8m.

(c) During the period the Group also increased its majority holding in Avail Consulting and Tribal TGC through the purchase of minority interests, creating goodwill of £2.3m.

37. Contingent liabilities

The Group has received notification of a number of potential litigation claims. In all cases, the claims are being investigated by our lawyers and are being robustly contested as to both liability and quantum. The principal claim is for breach of contract relating to the design of a new college.

A provision of £655,000 (2007: £577,000) has been made for defending these claims, where appropriate (see note 25).

A cross guarantee exists between group companies in respect of bank facilities totalling £20,766,670 (2007: £6,359,000)




38. Financial instruments

Capital risk managementThe Group manages its capital to ensure the entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 24, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 28 to 31.

Gearing ratioThe Board assesses risk management throughout the Group. As part of this assessment the Board considers the cost of capital and the risks associated with each class of capital. In the past, the Group has operated with a highly geared balance sheet, due in part to its historical acquisition strategy and also its investment of £25m in establishing its Mercury Health business. Following the sale of Mercury Health in April 2007, the Group has substantially reduced its gearing. Following the year end, Newchurch has been acquired as detailed in note 39. This has increased gearing marginally, the Group expects to maintain the current level of gearing going forward.

The gearing ratio at the end of the period is as follows:


Debt (33,556) (22,974)Obligations under finance leases – (3) Cash and cash equivalents 13,892 15,982Collateralised cash – 192

Net debt (19,664) (6,803)

Equity 193,574 180,177Net debt to equity ratio 10.2% 3.8%

Debt is defined as long-term and short-term borrowings, as detailed in note 24. Equity includes all capital and reserves of the Group attributable to equity holders of the parent.

Significant accounting policiesDetails of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

Categories of financial instruments 31 December 31 December 2008 2007 £’000 £’000

Financial assets Derivative instruments in designated hedge accounting relationships – 178Loans and receivables (including cash and cash equivalents):

Cash 13,892 15,982Trade receivables 49,728 45,658

63,620 61,818

Financial liabilitiesDerivative instruments in designated hedge accounting relationships 997 –At amortised cost:

Trade payables 19,832 18,441Bank loans and loan notes 33,556 22,974Finance lease obligations – 3

54,385 41,418



Notes to the financial statements38. Financial instruments (continued)

Financial risk management objectivesTreasury management is led by the group finance team who are responsible for managing the Group’s exposure to financial risk. It operates within a defined set of policies and procedures reviewed and approved by the Board. This includes both foreign exchange risk and interest rate risk.

The Group’s exposure to interest rate fluctuations on its interest bearing assets and liabilities is selectively managed, using interest rate swaps. This is an ongoing risk and the Board will continue with this policy.

The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Market riskThe Group operates mainly within the UK, therefore its market risk exposure is limited to changes in interest rates. There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk.

Foreign currency risk managementThe Group undertakes certain transactions denominated in foreign currencies. Here, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters and as the Group exposure increases through international expansion, the Group will utilise forward foreign exchange contracts. As at 31 December 2008, no such financial instruments were in place.

Interest rate sensitivity analysisThe sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the balance sheet date was outstanding for the whole year. A 1.0% increase or decrease is used when reporting interest rate risk internally to the Board and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 1.0% higher/lower and all other variables were held constant, the Group’s profit for the year ended 31 December 2008 would increase/decrease by £49,000 (nine months ended 31 December 2007: increase/decrease by £115,000). This increase/decrease is mainly attributable to the Group’s cash balances which attract a variable rate of interest and reflects the fact that interest rates on borrowings are fixed by the interest rate swap.

The Group’s sensitivity to interest rates has decreased during the current period mainly due to a higher proportion of the Group’s debt being hedged by interest rate swaps.

Interest rate swap contractsUnder interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates, and is disclosed below. The average interest rate is based on the outstanding balances at the end of the period.

The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding at the reporting date:

Average contract Notional fixed interest rate principal amount Fair value 31 December 31 December 31 December 31 December 31 December 31 December 2008 2007 2008 2007 2008 2007 % % £’000 £’000 £’000 £’000

2 to 5 years 4.99 4.99 25,000 25,000 (809) 178

The Group holds a £25m interest rate swap which settles on a six monthly basis. The floating rate on the interest rate swap is six months LIBOR. The Group will settle the difference between the fixed and floating interest rate on a net basis. Of the above £25m (2007: £22.5m) were designated as cash flow hedges.

The Group has also entered into a £25m basis rate swap which exchanges one month LIBOR less 33bps for six months LIBOR. The contract covers the period 30 September 2008 to 30 September 2009 and has the effect of reducing the rate in the interest rate swap from 4.99% to 4.66% for the period. This financial instrument has not been designated as a cash flow hedge. At 31 December 2008 the instrument had a fair value of £188,000 due to the bank.

Credit risk managementThe Group’s principal financial assets are cash and cash equivalents and trade and other receivables. The Group’s credit risk is relatively low because a high proportion of trade and other receivables have a sovereign or close to sovereign rating.

Liquidity risk managementThe Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows. The Group has access to financing facilities, the total unused amount is theoretically £6.8m at the balance sheet date. In addition at the year end, there was a £3m undrawn overdraft facility. Following the acquisition of Newchurch as detailed in note 39, this balance has fallen to £4.5m. The Group expects to meet its other obligations from operating cash flows. The Group also had significant cash balances at 31 December 2008 of £13.9m (2007: £16.0m) as detailed in note 21. Net debt at the year end was £19.7m (2007: £6.8m) giving underlying headroom at the balance sheet date of £23.3m (2007: £36.2m).



39. Post balance sheet events

On 27 January 2009, the Group acquired Newchurch Limited, a leading health consulting business in the UK, for a total consideration of up to £10.5m.

The total consideration is made up as follows:

– initial consideration of £3.0m in cash and £2.0m by way of 2,418,073 new Tribal shares. The number of Tribal shares issued was determined by the average mid-market price for the 14 days preceding 16 January 2009 being the last practicable date before the offer became unconditional.

– further consideration of £2.5m in cash and £0.5m in new Tribal shares is expected to be paid on or before 31 March 2009 upon confirmation of Newchurch’s profits for the year ended 31 December 2008.

– deferred consideration of up to £2.5m is payable by way of cash or Tribal loan notes after HMRC confirmation of the tax treatment of Newchurch tax losses.

The transaction will be accounted for in accordance with IFRS 3 ‘Business Combinations’.



Intangible assets – 722 722Property, plant and equipment 59 – 59Debtors 682 (20) 662Cash 746 – 746Creditors (511) – (511)Deferred tax – (202) (202)

Book/fair value of net assets 976 500 1,476



Satisfied by: Shares 2,500Cash 2,250Deferred consideration 2,500Cash for cash 725



Deferred consideration does not include up to £2.5m payable in respect of HMRC confirmation of the tax treatment of the Newchurch tax losses. The provisional fair value adjustments represent changes to bring the accounting policies in line with those of the Group.




40. Related party disclosures

Save as is described in this note, no material contract or arrangement has been entered into during the year, nor subsisted at 31 December 2008 in which a director had a material interest.

Remuneration of key management personnelThe remuneration of the directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 ‘Related Party Disclosures’.


Short-term employee benefits 1,113 1,306Share-based payment 223 185

1,336 1,491

41. Principal subsidiary undertakings

The principal subsidiary undertakings at 31 December 2008 are shown below. All subsidiary undertakings are registered in the United Kingdom and prepare accounts to 31 December each year.

Principal activity Holding

Avail Consulting Limited Management consultancy, IT services and solutions 64%Kindred Agency Limited Public relations consultancy 100%Nightingale Architects Limited* Architectural design 100%Tribal Consulting Limited Management consultancy services to local government 100%Tribal HELM Corporation Limited Management and financial consultancy services 72%Tribal Education Limited Education consultancy, training and Ofsted inspections 100%Tribal Holdings Limited Holding company 100%Tribal Resourcing Limited Recruitment advertising in the public sector 99%Tribal TGC Limited Management consultancy, learning and training 93%

* All investments are held by Tribal Group plc other than those marked, which are held by intermediate holding companies.

The proportion of voting rights held is equivalent to the equity shareholdings.

Full details of related undertakings will be attached to the relevant company’s Annual Return to be filed with the Registrar of Companies.




Unaudited pro forma financial informationThe comparative 2007 statutory accounts included in these financial statements cover a period shorter than a full year due to the change in year end. Therefore we have included below pro forma information to provide greater comparability.

Basis of preparationThe pro forma accounts are unaudited and do not constitute full statutory accounts within the meaning of section 240 of the Companies Act 1985.

The unaudited pro forma information set out below comprises a consolidated income statement and consolidated cash flow for the year ended 31 December 2007. It is based on the consolidated management accounts of the Group after making adjustments consistent with year end procedures.

The key issues and judgements are set out below:

1. Goodwill impairment

In the audited accounts for the year ended 31 March 2007, a goodwill impairment charge of £14.4m was made in respect of certain business streams that were being closed and other underperforming business units.

In addition, a further goodwill impairment charge of £9m was made in respect of the resourcing business stream in the nine months ended 31 December 2007.

2. Tax charge

Over the two years to 31 March 2007, Tribal has had the benefit of a low effective tax rate due to HMRC agreement of various tax reliefs relating to prior periods.

The tax credits taken in the financial statements for the year ended 31 March 2007 have been reflected in the three month period to 31 March 2007 as they related to certain 2005 tax computations which were cleared without enquiry on 31 March 2007. The credit has therefore been included in the unaudited pro forma year ended 31 December 2007.

3. Employee benefits

Share option costs and holiday pay accruals were not calculated on a monthly basis when preparing the management accounts. However an adjustment has been made for these items when preparing the unaudited pro forma accounts.

Pension liabilities have not been formally calculated as at 1 January 2007; the pro forma accounts therefore reflect the opening pension liability as disclosed in the audited accounts to 31 March 2006. The effect of this on the income statement for the periods is not considered to be material since all actuarial gains or losses are recorded in the statement of recognised income and expense.



Unaudited pro forma consolidated incomestatementfor the year ended 31 December 2007

Before other Other Year administrative administrative ended expenses and expenses and 31 December exceptional financial 2007 costs instruments Total Note £’000 £’000 £’000

Continuing operationsTurnover 256,509 – 256,509Direct agency costs (47,334) – (47,334)

Revenue (i) 209,175 – 209,175Cost of sales (122,769) – (122,769)

Gross profit 86,406 – 86,406

Net administrative expenses (69,119) – (69,119)

Other administrative expenses: Amortisation of IFRS 3 intangibles – (322) (322)Goodwill impairment – (9,000) (9,000)

Total administrative expenses (69,119) (9,322) (78,441)

Operating profit (i) 17,287 (9,322) 7,965Investment revenues 1,431 – 1,431Other gains and losses – (30) (30)Finance costs (3,336) (58) (3,394)

Profit before tax 15,382 (9,410) 5,972Tax (4,358) 100 (4,258)

Profit for the year from continuing operations 11,024 (9,310) 1,714

Discontinued operations Profit for the year from discontinued operations 571 23,917 24,488

Profit for the year 11,595 14,607 26,202

Attributable to:Equity holders of the parent 25,541 Minority interest 661

26,202

From continuing operations Basic (ii) 12.2p (10.9)p 1.3pDiluted (ii) 12.2p (10.9)p 1.3pFrom continuing and discontinued operationsBasic (ii) 12.9p 17.3p 30.2pDiluted (ii) 12.9p 17.3p 30.2p



Unaudited pro forma consolidated cash flowstatementfor the year ended 31 December 2007

2007 Note £’000

Net cash from operating activities (iii) 27,063

Investing activities Interest received 2,423Proceeds on disposal to minorities 160Disposal of subsidiary 36,251Proceeds on disposal of property, plant and equipment 298Purchase of investments (8)Purchases of property, plant and equipment (4,620)Expenditure on product development (2,336)Acquisitions (2,178)

Net cash inflow from investing activities 29,990

Financing activities Interest paid (4,543)Equity dividend paid (2,911)Dividends to minorities (485)Issue of shares 116Repayment of borrowings (54,756)Repayments of obligations under finance lease (28)New bank loans 684Movements in collateralised cash 790

Net cash used in financing activities (61,133)

Net decrease in cash and cash equivalents (4,080)Cash and cash equivalents at beginning of year 20,062

Cash and cash equivalents at end of year 15,982



(i) Business segments

Segment information about the businesses is presented below:

Year ended 31 December 2007

Support Consulting Education services Eliminations Consolidated 31 December 31 December 31 December 31 December 31 December 2007 2007 2007 2007 2007 £’000 £’000 £’000 £’000 £’000

RevenueExternal sales 68,447 90,394 50,334 – 209,175Inter-segment sales 219 1,187 1,663 (3,069) –

Total revenue 68,666 91,581 51,997 (3,069) 209,175



Adjusted operating profit 17,287Amortisation of IFRS 3 intangibles (322)Goodwill impairment (9,000)

Operating profit 7,965Investment revenues 1,431Other gains and losses (30)Finance costs (3,394)

Profit before tax 5,972Tax (4,258)

Profit for the year from continuing operations 1,714

(ii) Earnings per share

Earnings per share and diluted earnings per share are calculated by reference to a weighted average number of ordinary shares calculated as follows:

Year ended 31 December

2007 thousands

Weighted average number of shares outstanding:Basic weighted average number of shares in issue 84,727Employee share options 68

Weighted average number of shares outstanding for dilution calculations 84,795

Notes to unaudited pro forma financial information



(ii) Earnings per share (continued)

The adjusted basic and adjusted diluted earnings per share figures shown on the Unaudited pro forma consolidated income statement on page 94 are included as the directors believe that they provide a better understanding of the underlying trading performance of the Group. A reconciliation of how these figures are calculated is set out below:

Year ended 31 December 2007 EarningsFrom continuing operations Earnings per share £’000 pence

Basic and adjusted basic earnings per share:Profit and basic earnings per share 1,053 1.3pAdjustments: Goodwill impairment 9,000 10.6pAmortisation of IFRS 3 intangibles (net of tax) 255 0.3pFinancial instruments charge (net of tax) 55 –

Adjusted earnings and adjusted basic earnings per share 10,363 12.2p

Diluted and adjusted diluted earnings per share: Profit and diluted earnings per share 1,053 1.3pAdjustments:Goodwill impairment 9,000 10.6pAmortisation of IFRS 3 intangibles (net of tax) 255 0.3pFinancial instruments charge (net of tax) 55 –

Adjusted earnings and adjusted diluted earnings per share 10,363 12.2p

Year ended 31 December 2007 EarningsFrom continuing and discontinued operations Earnings per share £’000 pence

Basic and adjusted basic earnings per share:Profit and basic earnings per share 25,541 30.2pAdjustments:Goodwill impairment 9,000 10.6pAmortisation of IFRS 3 intangibles (net of tax) 255 0.3pProfit on disposal of Mercury Health (23,917) (28.2)pFinancial instrument charge (net of tax) 55 –

Adjusted earnings and adjusted basic earnings per share 10,934 12.9p

Diluted and adjusted diluted earnings per share:Profit and diluted earnings per share 25,541 30.2pAdjustments:Goodwill impairment 9,000 10.6pAmortisation of IFRS 3 intangibles (net of tax) 255 0.3pProfit on disposal of Mercury Health (23,917) (28.2)pFinancial instrument charge (net of tax) 55 –

Adjusted earnings and adjusted diluted earnings per share 10,934 12.9p



Notes to unaudited pro forma financial information(iii) Notes to the pro forma cash flow statement

2007 £’000

Operating profit from continuing operations 7,965Depreciation of property, plant and equipment 3,607Amortisation of other intangible assets 1,751Impairment of goodwill 9,000Net pension charge (327)Gain on disposal of property, plant and equipment (201)Gain on sale of investments (68)Share-based payments 437

Operating cash flows before movements in working capital 22,164Increase in receivables (14,399)Increase in payables 20,993Decrease in inventories 469Increase in amounts recoverable on contracts (1,875)Increase in provisions 427

Net cash from operating activities before tax 27,779Tax paid (716)

Net cash from operating activities 27,063

Net cash from operating activities before tax can be analysed as follows:

£’000

Continuing operations (excluding restricted cash) 23,651Increase in restricted cash 1,589

25,240 Discontinued operations 2,539

27,779



UK GAAP – company financial statements Independent auditors’ report to the members ofTribal Group plcWe have audited the parent company financial statements of Tribal Group plc for the year ended 31 December 2008 which comprise the balance sheet and the related notes 1 to 8. These parent Company financial statements have been prepared under the accounting policies set out therein.

We have reported separately on the Group financial statements of Tribal Group plc for year ended 31 December 2008 and on the information in the Directors’ Remuneration Report that is described as having being audited.

This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report, the Directors’ Remuneration Report and the parent Company financial statements in accordance with applicable law and United Kingdom Accounting Standards (UK GAAP) are set out in the Statement of directors’ responsibilities. Our responsibility is to audit the parent Company financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the parent Company financial statements give a true and fair view and whether the parent Company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether, in our opinion, the Directors’ Report is consistent with the parent Company financial statements. The information given in the Directors’ Report includes that specific information presented in the business review that is cross referenced from the business review section of the Directors’ Report. In addition, we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.

We read the other information contained in the Annual Report as described in the contents section and consider whether it is consistent with the audited parent Company financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the parent Company financial statements. Our responsibilities do not extend to any further information outside the Annual Report.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the parent Company financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the parent Company financial statements and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the parent Company financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the parent Company financial statements.

OpinionIn our opinion:

the parent Company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, ■

of the state of the company’s affairs as at 31 December 2008;

the parent Company financial statements have been properly prepared in accordance with the Companies Act 1985; and ■

the information given in the Directors’ Report is consistent with the parent Company financial statements. ■

Deloitte LLPChartered Accountants and Registered Auditors Bristol, United Kingdom

17 March 2009

These are the audited financial statements for the year ended 31 December 2008. An audit does not provide assurance on the maintenance and integrity of this website, including the controls used to achieve this, and whether any changes may have occurred to the financial statements since they were first published. These matters are the responsibility of our directors. No control procedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.



Company balance sheet at 31 December 2008

31 December 31 December 2008 2007 Note £’000 £’000

Fixed assetsInvestments 2 253,626 262,148

Current assetsDebtors: amounts falling due within one year 3 1,546 1,428 Cash at bank and in hand 74 265

1,620 1,693 Creditors: amounts falling due within one year 4 (47,008) (64,493)

Net current liabilities (45,388) (62,800)

Total assets less current liabilities 208,238 199,348Creditors: amounts falling due after more than one year 5 (33,703) (22,098)Provisions for liabilities and charges 6 – (116)

Net assets 174,535 177,134

Capital and reservesCalled up share capital 7 4,394 4,239Share premium account 8 78,749 74,750Merger reserve 8 59,946 59,946Hedging reserve 8 (354) 445Own share reserve 8 (1,590) (1,590)Share-based payment reserve 8 1,334 631Profit and loss account 8 32,056 38,713

Equity shareholders’ funds 174,535 177,134


These financial statements were approved by the Board of directors on 17 March 2009 and were signed on its behalf by:

vv

Peter J Martin Simon M LawtonDirector Director



Notes to the company balance sheet 1. Accounting policies

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the parent Company financial statements.

Basis of preparationThe financial information has been prepared on the historical cost basis, modified to include the revaluation of certain fixed assets and in accordance with applicable United Kingdom law and accounting standards.

In the Company’s balance sheet, the investment in Tribal Holdings Limited is stated at the nominal value of the shares issued in consideration for that company. As required by sections 131 and 133 of the Companies Act 1985, no premium has been recorded on the shares issued as consideration.

Under section 230(4) of the Companies Act 1985, the Company is exempt from the requirement to present its own profit and loss account. The loss for the Company amounted to £2,700,000 (nine months ended 31 December 2007: profit £18,217,000).

The auditors’ remuneration for audit services to the Company was £94,000 (nine months ended 31 December 2007: £91,000).

InvestmentsInvestments held as fixed assets are shown at cost less provision for any impairment.

TaxationCurrent tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.

In accordance with FRS 19 ‘Deferred Tax’, deferred taxation is provided in full on timing differences which represent an asset or liability at the balance sheet date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax is not provided on timing differences arising on unremitted earnings of subsidiaries, associates and joint ventures where there is no commitment to remit these earnings. Deferred tax assets and liabilities are not discounted.

A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Cash flow statementThe results, assets and liabilities of the Company are included in the consolidated financial statements of Tribal Group plc. Consequently, the Company has taken advantage of the exemption from preparing a cash flow statement under the terms of FRS 1 (revised) ‘Cash flow statements’.

Derivative financial instruments and hedging activitiesChanges in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss.

Share-based paymentsThe Company has no employees and hence there is no charge to the company profit and loss account. The cost for options granted to the Company’s subsidiaries’ employees represents additional capital contributions by the Company in its subsidiaries. An additional investment in subsidiaries has been recorded with a corresponding increase in shareholders’ equity. The additional capital contribution is based on the grant date fair value of the options issued, allocated over the underlying grant’s vesting period.

Directors’ remunerationDetailed disclosures of directors’ individual remuneration and share options are given in the audited part of the Remuneration report on pages 49 to 50 and should be regarded as an integral part of this note. The Company has no employees.



Notes to the company balance sheet2. Fixed asset investments

Shares in subsidiary Long undertakings term loans Total £’000 £’000 £’000

CostAt 1 April 2007 87,862 166,154 254,016Additions 9,538 – 9,538Disposals (1,332) – (1,332)Impairment (10,338) – (10,338)Fair value adjustment 6 – 6Capital contribution relating to share-based payments 207 – 207Movement in long term loans – 10,051 10,051

At 1 January 2008 85,943 176,205 262,148Additions 80,896 – 80,896Disposals (8,174) – (8,174)Transfer from group companies 385 – 385Impairment (35) – (35)Fair value adjustment (11) – (11)Capital contribution relating to share-based payments 703 – 703Movement in long term loans – (82,286) (82,286)

At 31 December 2008 159,707 93,919 253,626

The directors have considered the value of the above investments and are satisfied that the aggregate value of each investment is not less than its carrying value.

In the period ended 31 December 2007 and the year ended 31 December 2008, the Group carried out a significant restructuring of its businesses to reduce the number of legal entities that were trading. As part of this process a number of subsidiaries became dormant and had their reserves paid up by way of dividend. To the extent that the dividends reduced the net assets of these dormant companies below the carrying cost of the related investment, an impairment of the carrying value of those investments in the parent company accounts was recorded. In addition, in the period ended 31 December 2007, the carrying value of Tribal Resourcing was impaired by £7m as a direct consequence of the Group’s annual goodwill impairment review.

Additions in the year ended 31 December 2008 comprise £60m increase in share capital of Tribal Consulting, £17.1m in respect of the acquisition of Tribal HELM Corporation and £3.8m in respect of the purchase of minorities.

A listing of principal subsidiaries is included in note 41 to the Group financial statements.

Fair value adjustments relate to revision of the estimates of deferred consideration payable net of the appropriate discounting charges.

3. Debtors


Amounts owed by group undertakings 1,352 1,250Fair value of interest rate swaps – 178Deferred taxation (note 6) 194 –

1,546 1,428

4. Creditors: amounts falling due within one year


Loan notes 662 876Amounts owed to group undertakings 45,708 60,347Deferred cash consideration 155 2,954Accruals 295 316Fair value of interest rate swaps 188 –

47,008 64,493



5. Creditors: amounts falling due after more than one year


Bank loan 32,894 22,098Fair value of interest rate swaps 809 –

33,703 22,098

Maturity of bank and loan notes:


Bank and loan notes can be analysed as falling due: In one year or less, or on demand 662 876Between two and five years 32,894 22,098

33,556 22,974

The bank loan (which has primary security) is at market rates of interest and is secured by way of a fixed and floating charge over the assets of the Company and its subsidiary undertakings. The interest rates on the other loans are a mixture of fixed and floating and are also at market rates. Repayment terms vary between one and five years. For further details see note 24 to the Group financial statements.

6. Provision for liabilities and charges


Deferred taxation At start of period 116 210Items taken directly to equity (310) (94)

At end of period (194) 116

A deferred taxation asset of £194,000 has arisen on the fair value of interest rate swaps at 31 December 2008 (see note 3). Provisions for deferred taxation consist of the following amounts:


Derivative financial instruments – 116



Notes to the company balance sheet7. Called up share capital


Authorised125,000,000 ordinary shares of 5p each (2007: 125,000,000) 6,250 6,250

31 December 31 December 31 December 31 December 2008 2008 2007 2007 number £’000 number £’000

Allotted, called up and fully paidAt beginning of the period 84,773,759 4,239 84,683,270 4,234Issued as consideration for acquisitions 3,105,491 155 – –Share option exercises 1,315 – 90,489 5

At end of the period 87,880,565 4,394 84,773,759 4,239

Allotment of sharesBetween 1 January 2008 and 31 December 2008, new ordinary shares of 5p each in the Company were issued as follows:

Value Value/proceeds Number of shares £’000 Price per share £’000 Purpose of issue

1,315 – £1.44 2 SAYE exercises



7. Called up share capital (continued)

Details of options in respect of shares outstanding at 31 December 2008 are as follows:

Employee share option schemes: Number Price Date from which outstanding payable exercisable

Limited scheme 56,232 £1.33 30.06.2003 88,608 £1.65 30.06.2003

144,840

PLC scheme 35,808 £2.50 30.06.2003 57,100 £2.83 30.06.2003 137,281 £3.10 30.06.2004 320,810 £2.46 30.06.2005 118,714 £2.29 30.06.2005 190,672 £3.26 30.06.2006 47,462 £3.62 30.06.2006 41,785 £3.45 30.06.2007 149,641 £1.96 30.06.2007

1,099,273

LTIP 8,064 £nil 31.03.2006 8,130 £nil 31.03.2005 17,265 £nil 31.03.2007 155,880 £nil 30.06.2008 474,602 £nil 30.06.2009 769,862 £nil 01.05.2010 1,211,728 £nil 31.03.2010 1,339,860 £nil 31.03.2011

3,985,391

Acquired schemes 6,668 £1.16 14.01.2003 25,693 £1.90 27.03.2004 40,866 £2.45 28.02.2005 50,122 £2.31 24.01.2006 72,636 £0.22 29.03.2004

195,985

Savings related option scheme: SAYE 178,637 £1.93 01.03.2009 223,192 £1.58 01.10.2010 267,357 £1.08 01.12.2011 110,656 £1.08 01.12.2013 74,170 £1.08 01.12.2015

854,012

Total Tribal Group plc share option schemes 6,279,501



Notes to the company balance sheet8. Share premium and reserves

Share Share-based premium Merger Hedging Own share payment Profit and account reserve reserve reserve reserve loss account £’000 £’000 £’000 £’000 £’000 £’000

At beginning of the period 74,750 59,946 445 (1,590) 631 38,713Loss for the period – – – – – (2,700)Dividends – – – – – (3,957)Fair value movement on cash flow hedges – – (799) – – –Premium on share issues (net of expenses) 3,999 – – – – –Movement in relation to share-based payments – – – – 703 –

At end of the period 78,749 59,946 (354) (1,590) 1,334 32,056

The merger reserve of £59.9m (2007: £59.9m) relates to the premium arising on shares issued subject to the provisions of section 131 of the Companies Act 1985.

The own share reserve of £1.6m (2007: £1.6m) represents the cost of 813,484 (2007: 813,484) shares in Tribal Group plc held by the Employee Share Ownership Trust to satisfy certain options under the Group’s share option schemes.



Five year summarySummarised consolidated Group income statement

Year Nine months Year Year Year ended ended ended ended ended 31 December 31 December 31 March 31 March 31 March 2008 2007 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Revenue 233,990 153,299 194,056 200,244 179,508

Profit before interest, amortisation and impairment on goodwill and intangibles and exceptional items 19,823 11,173 14,462 22,156 22,500Amortisation and impairment on goodwill and intangibles (556) (9,240) (14,749) (316) (6,987)Interest (1,315) (749) (4,054) (4,803) (4,472)Taxation (4,810) (3,002) (2,846) (5,595) (5,815)Minority interests (910) (402) (771) (274) (303)Dividends (3,957) (2,031) (2,692) (2,362) (2,150)

Retained profit/(loss) 8,275 (4,251) (10,650) 8,806 2,773

Adjusted diluted earnings per share 14.7p 8.4p 8.0p 14.9p 15.0p

Dividend per ordinary share 4.35p 2.95p 3.47p 3.3p 3.0p

Summarised consolidated Group balance sheet

Intangible assets 217,505 191,245 195,885 209,647 208,726Other non-current assets 11,259 9,087 58,827 50,218 14,151Current assets 80,889 79,618 100,758 86,590 93,752Current liabilities (77,195) (74,274) (90,808) (84,424) (74,834)Non-current liabilities (37,055) (24,434) (106,428) (99,958) (80,383)

Net assets 195,403 181,242 158,234 162,073 161,412

The amounts disclosed above are for continuing operations only.



Company informationTribal Group plc87–91 Newman StreetLondon W1T 3EY

T: 020 7323 7100E: [email protected]

Company secretaryRichard H Collins

Registered office87-91 Newman StreetLondon W1T 3EY

Stockbroker and joint financial adviserRBS Hoare Govett Limited250 BishopsgateLondon EC2M 4AA

Joint financial adviserN M Rothschild & Sons LimitedNew CourtSt Swithin’s LaneLondon EC4P 4DU

Principal bankersBank of Scotland plcPO Box 20821 Prince StreetBristol BS99 7JG

AuditorsDeloitte LLP3 RivergateTemple QuayBristol BS1 6GD

SolicitorsOsborne Clarke2 Temple Back EastTemple QuayBristol BS1 6EG

RegistrarsCapita RegistrarsPO Box 1269HuddersfieldHD1 9UT

Company’s registered number4128850

Place of incorporationRegistered in England and Wales

Our businessTribal provides consultancy, support and delivery services focused on improving the delivery of public services in the UK and internationally. Our broad offering combines anin-depth understanding of our chosen markets with professional expertise and a strong technology capability.

Our approachWe work in partnership with our clients to make a positive difference to the communities they serve and to ensure the best possible use of public funds.

Our services strategy

performance improvement

training and development

programme and project management

communications

information technology

people attraction, selection and retention

procurement and supply chain

built environment design and planning

Our markets education

health

central government

housing and regeneration

local government

international Designed by Kindred Agency. Produced by Accrue*.

The paper used for this report uses ECF (Elemental Chlorine Free) pulps supplied by manufacturers with environment-friendly and sustainable reforestation policies. The report has been printed using soya-based inks

and the printing process conforms to ISO 14001.

TR

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T R I B A L

Report and Accounts 2008

Tribal Group plcTribal Group plc87-91 Newman StreetLondonW1T 3EYT 020 7323 7100E [email protected]

www.tribalgroup.co.uk

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Rep

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