Tribal Group beats path lower after profit warning

Tribal Group has warned that profits for the current year will be "significantly below" expectations due to project delays and a lack of smaller contracts.

The fully listed company, which provides software to schools and universities and carries out Ofsted inspections, said its revenues had become more difficult to predict due to its increasing focus on larger clients.

As a result, house broker N+1Singer has reduced its EBIT forecasts by 48% for the current financial year and by 43% and 39% for the subsequent two years, citing increasing competition as a further factor.

Although chief executive Keith Evans announced his retirement in May and left in June he has yet to be replaced, though the process to replace him is "advancing well", and in his absence the group has failed to win enough medium-sized and smaller contracts to fill in the gaps.

After certain large customer programmes became delayed, Tribal has seen revenues deferred and been subject to higher project delivery costs.

"In light of these trading conditions, we now expect our revenues for the current year to be lower than the prior year, and we expect our operating profits to be significantly below our previous expectations," it said in a statement.

Despite the board of directors putting plans in place during the summer to drive sales and increase operating efficiency, Tribal said it had been hit by a "more difficult trading environment".

"We are strengthening our sales leadership, fundamentally reviewing of our sales priorities and processes, and better aligning our cost base with our ongoing activities."

The house broker has slashed its earnings forecasts on the assumption that the 6-13% reduction in its revenue forecasts is largely to do with margin-rich licence revenues.

"Extending customer programme timelines, not enough medium-sized and smaller opportunities due to historic focus on larger contracts and increasing competition are all contributory factors.

"Key to rebuilding investor confidence is the appointment of a new CEO and this process is said to be advancing well. We believe one of his or her key priorities should be on sharpening the group’s focus – product, target geographies, go-to-market etc. and to then ensure it has the optimal cost structure to support this strategy."

Shares in Tribal were down 36% to 78.8p by 0845 BST on Monday.