Thank you very much. Hello. Welcome, everyone, to the H1 2023 results from Tribal Group. I will make a few initial opening comments, pass over to Diane, who will run through the numbers and then come back to me for various other comments, and then we will open for Q&A after that. Starting with perhaps just setting the scene to remind those of you less familiar who we are. We go under the tagline, "empowering the world of education," and we are 100% education-focused business, really separating into two businesses, a core software business and a separate Education Services business. And we provide student management systems, end-to-end student life cycle systems to universities. We are the market leader in the U.K. with something around 2/3 of the U.K. market at about a 25% market share in Australia.
We also have significant market shares in further education, both in New Zealand and in the U.K. A key KPI for us is around annual recurring revenue, ARR, and you will see GBP 52 million of our revenues are annually recurring. Our goal is to be a pure-play EdTech SaaS business with global reach. That is to transform from the mature technologies on which most customers depend currently to a true SaaS model, where we extend into new markets and can provide modern systems with greater student engagement, student experience to universities. Straight into our H1 numbers. There is really two areas to talk about. One is the core of the business, and the second specifically to talk about the Nanyang Technological University contract, of which many of you will be aware. Starting with the underlying business, we had good performance in the underlying business in H1.
We continue to execute our strategy around taking our existing customers into the cloud, offering student management systems as a service. We do that also with new customers. We won new customers during the half year. We were able then to drive our core ARR growth. That is the new growth in ARR by 6.3% in those six months to 30th of June. Our Education Services business also saw good growth coming out of COVID. There is a bounce back from COVID. The new management that has started there about a year ago, and the strategy we are executing on and the opportunities we see in the market have driven the growth in revenue. I should say, we have said over the course of the last couple of years that we will be considering or have been considering our strategic options regarding Education Services.
Another comment that we do continue actively to progress that. In terms of NTU, Nanyang Technological University in Singapore, we have previously announced that that contract was terminated in March 2023. We have now wound the project down. The consultants working on it have been redeployed to other contracts, and we are now in active discussions with NTU regarding the resolution. At the moment, the timeline to resolution is uncertain. What we do see, though, is limited reputational impact. I think it is fair to say that in the U.K. and in Australia, they look perhaps to their own markets. They are not necessarily looking at what happens in Singapore, and so we have continued to effectively sell SITS and to sell additional services into our existing customers. We had a provision in 2022, which we released in 2023, which covers the costs in 2023 regarding NTU.
I would comment that we do not have any provision in this year for any future litigation or related costs. Just a minute or two about why we as a company win. Why does Tribal win? Why does SITS win as a product? It is because Tribal is 100% devoted to the education sector. Our staff have often long tenure. They are very close to the customers. Many of them have worked within customers and vice versa for many years. We act as a trusted partner to our customers very much in terms of core values and building long-term relationships with customers. SITS as a product, despite being a mature product that has been around 20, 25 years, is still a hugely sticky customer.
There is a move over recent years for universities to want to buy from a more formal framework, and the framework that is emerging in the U.K. is called APUC, the Advanced Procurement for Universities and Colleges. Tribal SITS is the leading solution on the APUC framework, and it has a five year recurring framework. We were the leading one for the last five years, and we have now signed up again with APUC for another five years as the number 1 on the framework. To be number one is to come out of an assessment, an objective assessment organized by APUC, where they look at the strength, the depth of the solution being offered, the price, and they evaluate all those advancing themselves onto the framework, and they rank them accordingly.
Tribal for then the second set of five years is number one on that framework, which also gives us the advantage of being able to have contracts directly awarded to us should a customer wish, rather than having to go through a tender process. That is really important in terms of our ability to drive further SITS sales in the U.K. Also, they look at SITS as being a future-proofed solution as we move SITS into a more SaaS type of product. This slide talks to our solution sets to understand then what products that we take to market. It really splits between the top two sections which are around the solutions themselves, the bottom two sections, which are around the core student management systems, and then how we integrate between the two.
We have, in effect, four separate student management systems, SITS in the U.K., Australia, New Zealand and Malaysia into Canada, and Callista, which is a student management system in Australia, EBS, which is in further education, and MAYTAS, which is around apprenticeships. All of those we support and are modernizing and upselling into capability into our customer base, and we are then driving a strategy that takes those products into the Tribal Cloud as a service. Then in the top two areas, we build out products that are capabilities for the customers to adopt. In Tribal Experience, most customers will be looking at a student experience platform, often on Microsoft Dynamics, where we then have a significant presence with three products that we sell into customers wishing to build out this student experience platform. We also have a mobile application that we sell.
And on top of that, we have so-called Edge products that are the core capabilities that we are driving into the market, which are SaaS based, true next generation native cloud products, of which the most significant is Tribal Admissions, which we will come back to later. What we are also introducing to the market is the Edge platform. That is an integration layer that will simplify the integration into our student management systems for universities and allow then greater longevity of our solutions with the customers as they are able to build out their own composable campus around our core student management solutions. I talked about significant customer wins, and we have had a number this half year, in particular around the Tribal Cloud. This is taking a student management system and then offering it back to the customer as a service from the public cloud.
We have around about 30 customers already moving out to the cloud, and we have a steady flow of opportunities as more and more customers are wanting to move to the public cloud. We signed three the early part of this year, Royal Veterinary College, University of the Arts London, and the University of Wolverhampton. As I said, we have a number of other opportunities that we are working on as we move forward into H2. We also won a new SITS customer in half year, the London School of Science & Technology. I think what is significant about this opportunity is that it was a more complete solution that involved not only SITS, but our Edge products, such as I described in the last slide, sitting around that core SITS. So they took Dynamics, for example, and the mobile application sitting around the core of SITS.
We also sold in our other student management systems, EBS and MAYTAS, where we have successfully sold into county councils actually, where they are looking to administer their adult learning, and EBS and MAYTAS have proven to be good products for the county councils to do that. Tribal capability talks to the Edge products that we have successfully upsold into some of our existing customers, and Education Services, there are some of those contracts where we have either one or extended existing customers in our customer base. Education Services sees particular opportunities actually in the Middle East. With that, I will pass over to Diane to talk about the financial performance in half year.
Excellent. Thank you very much, Mark. Overall, our results have recovered since the prior year, and our underlying business performance remains strong. To start with a summary of our key financial metrics, revenue remains stable, up 1.5% to GBP 43.4 million. ARR has grown 2.8% in six months to GBP 51.9 million. The strong 6.3% growth in our core products, driven through cloud and foundation, offset by the expected decline in our non-core areas. Committed income or the backlog is down 4.1% to GBP 163.7 million, mainly due to the delivery of our large ES contract renewals, which we won last year in 2022.
Adjusted EBITDA has increased 21% to GBP 8.1 million, mostly due to a circa GBP 1 million net impact from the release of an onerous contract provision offset by the associated costs. One to note is that the definition of EBITDA has changed since the prior year. In line with FRC guidance, share-based payments are now included in trading EBITDA. All numbers have been shown on a like-for-like basis, and the full details are included in the results announcement. This increase in EBITDA flows through to a higher statutory profit before tax of GBP 5.9 million and a statutory basic earnings per share of 2.2p. My second slide shows the performance of our two business units, Student Information Systems and Education Services. SITS will be discussed in more detail later.
However, revenue has declined by GBP 1.9 million- GBP 33.7 million due to GBP 2.8 million of lower revenue from NTU. Operating margin has increased to 39.8%. However, underlying operating margin is at 36% given that net impact of the onerous contract provision release. On the ES side, we have seen the business continuing to grow strongly, with revenue growing 36.7%. School inspections are tracking well, in particular with a new contract to deliver inspections on behalf of the Sharjah Private Education Authority in U.A.E., and a new contract for the National Tutoring Programme in the U.K. Due to the margin mix of these contracts and investments for future growth, our margin percentage has decreased to 20.8%, which is more in line with traditional levels.
This means that our overall segment operating margin has increased 16.8% from GBP 13.2 million- GBP 15.4 million. The next slide moves on to cover SIS performance. Overall, as mentioned, revenues have declined due to NTU contract, especially within that professional services line. But the costs of the NTU contract, as Mark mentioned, have been offset with the release of the onerous contract provision, leaving that net GBP 1 million positive impact. As Mark said, please note due to the level of uncertainty, there has been no provision for any future NTU costs. So excluding the impact of that provision release, SIS margin would have been more in line with historic levels at circa 36%. So going through our standard SaaS metrics at the bottom left, they show a slight decline in both gross and net revenue retention.
GRR demonstrates that of the customer base as at December 2022, 8% of the recurring revenues have been lost through customer downgrades or cancellations. But then when you include upsells to that very same customer base, recurring revenues increased to give a net revenue retention of 99%. Underlying performance is still strong, as the decline is driven by 4.9 percentage points movement from NTU and the drop in an Australian Department of Education contract within other software and services. Moving to the table at the top, you can see that core revenues have been decreasing GBP 1.3 million due to that professional services decline of GBP 2.6 million due to NTU, offset by a strong growth in cloud and foundation software. Cloud has benefited from our five cloud migration sales in the previous year, for example, University of Reading.
Foundation software has increased with new sales across all of our product sets, in particular SIP sales last year to University of Plymouth, British University Vietnam, and Leeds Conservatoire. Other software and services continues to decline as expected, with reductions in our DoE contract and SchoolEdge churn. On the next slide, we look at SIS ARR in a bit more detail. Overall, ARR has grown 2.8% in six months, going to GBP 51.9 million. As a reminder, ARR is a forward-looking indicator of recurring SaaS revenues for the next 12 months. In the bottom left-hand chart, you can see a growth in our core areas. Core ARR has grown 13%, offset by declines in our other software and services products. Looking at more detail on the table at the top left, it shows stable revenues from foundation support and maintenance.
Foundation software increases 25%. The SIPs win that Mark mentioned in London School of Science & Technology, and also uplifts across the whole base. Cloud services grew 14.5%, mainly from three existing customer migrations. Mark said University of Wolverhampton, University of the Arts London, and the Royal Veterinary College. The growth in those core products is offset by that expected decline in our maintenance products, other software and services, and that has declined by 28.6%. GBP 1.5 million of ARR has been removed from that line due to the expected completion in June 2024 of that Australian Department of Education contract. There is one remaining large government contract left in other software and services, which has an associated GBP 1 million of ARR, and is expected to end in June 2025, and will therefore be removed from ARR in June 2024.
In summary, the continuing growth in core ARR, especially in the cloud, gives us a very solid foundation for future cross-sales to those existing customers. The next slide moves on to cash flow. Our net debt position has increased from GBP 3.4 million at the year-end to GBP 12.9 million as at June 2023. There is a negative impact of GBP 3.4 million from operating activities before tax, which has been impacted by three main factors. One, there is a traditional seasonality in half one, with a higher proportion of renewals taking place in the second half of the year. Two, there is a remaining cash drag from NTU. There were GBP 3.3 million of costs in half one, but no associated cash income. Finally, three, the working capital outflows from some of those ES contracts in the Middle East.
Tax payments and other items, which mainly include property leases, was GBP 1.3 million. Investment continues in our Edge products, albeit at a lower rate of GBP 4.6 million. At the half year, we had utilized a further GBP 7.6 million of our loan facility to manage those working capital constraints, and we had a total loan of GBP 40 million at the half year, which leaves us with a GBP 12.9 million net debt position. Overall, we have a GBP 70 million loan facility with HSBC and a further GBP 3 million accordion. Those loan facilities run until the end of 2024, but we are looking to agree terms with our bank this financial year. We also have a GBP 2 million overdraft facility in the U.K. and a 2 million Australian dollar facility.
We have sufficiently stress-tested our forecasts, and we've concluded that it's highly unlikely that the group will be in breach of any banking covenants, and therefore it doesn't have a significant impact on our ability to continue as a going concern. We do anticipate an improved cash position by year-end, although it will still be in a net debt position. My last slide is on product development. Our capitalized product development spend has decreased to GBP 4.6 million as we focus our efforts on our existing successful Edge product range and also completing Admissions, just to make sure we maximize our returns from our investments. In summary, financial show an underlying base of increasing recurring revenue streams from our core products, which will offset the impact of those declining legacy products, and it will help to improve our cash position over time.
I'll now hand back to Mark, who will talk more about our very first customer who's gone live with Admissions. Over to you, Mark.
Great. Thank you very much, Diane. Indeed, I do want to talk about our very first customer who's gone live with Admissions. Edith Cowan University is one of the 39 universities in Australia. It is a Callista customer, so that's our student management system that is the largest product for us in Australia. Edith Cowan is over on the west coast, just north of Perth. It has some 30,000, 31,000 students across three campuses. We've been working with the registrar and his team in ECU over the course of the last year, maybe 15 months or so, on preparing to go live as our first customer with Tribal Admissions.
The importance of Admissions to us is that it is a true next generation, standalone SaaS product that we're bringing to the market that doesn't sit around existing student management systems, but actually evolves to, over time, replace those student management systems. So it's truly the next generation. Admissions is a critical area for universities. Clearly, it's where the vast majority of their revenue derives from the students, but also it's an area where many universities are looking to improve their offering for two particular reasons. One of which is that many universities are seeing an increase in the number of applications coming in without necessarily an increase in the number of places. That's putting strain and additional cost onto their admissions teams.
The only way to scale to address that is by getting more and more employing more and more people, and that cost starts going up, but actually without any necessary increased revenue. It is simply about the increased number of applications. That is also a feature, particularly in the U.K., where there are many more applications coming in, and they also have an inability to scale. What we also see is that universities are looking more and more to international students to come in because the domestic students, particularly in the U.K., are not providing the profitability to the universities that they did years ago, largely because the GBP 9,250 student fee in a year has been fixed for many years. In real terms, that is going down.
They need to get international students coming in, and that brings around more challenges, particularly around visas and ensuring those students are who they say they are and the credits that they are seeking for prior studies are properly vetted and so on. That is all part of the space of dealing with admissions. So it becomes a more and more important part for universities. They also want to present a better student experience to those students. For most universities, which are not selective, most universities are non-selective, so they take as many students as they can, subject to a sort of minimum bar of academic achievement. Therefore, the way they present themselves to students, how quick they turn around an application can often be a driver for the revenue they achieve because they will get students in more quickly than competitors.
Having a really good admissions experience becomes more and more critical as we move forward, and our admissions product is addressing that within the market. ECU have worked with us to go live. They have gone live initially with post-graduate, and then over the coming year, they will roll it out then into undergraduate and then into their international cohort as well. I have literally just come back from Australia yesterday and spent time with our Callista customers. We have been talking to them further about admissions there.
There is a great deal of interest generated in it, so we feel that we are in a strong place now to start rolling out the admissions product. These things take time, because there are only certain windows that customers can roll them out. But the interest in a true SaaS admissions product is most definitely there in Australia and also within the U.K.
Overall, in terms of what drives our overall growth, we talk about it in terms of three pillars. One is about expanding the share of wallet, the spend of our existing customers. The other is about being able to expand into new markets with new products, and clearly admissions is one of those products, because admissions is a product that is standalone. Although ECU are a Callista customer and admissions is integrated into Callista, it will integrate into SITS in due course, and it will also integrate it to be a front end to competitor student management systems as well. That opens new addressable markets for us. Also over time, there are opportunities to expand our geographic reach. But at this point in time, we are focused really more on our own existing customer share of wallet.
And that means around the Tribal Cloud proposition. I talked to the three new customers this year and the pipeline that we have. When we look at our overall customer base, we think the majority of those customers will, over time, move into the cloud. That is the way the market is moving. More and more customers are convinced that they do not want the risk, the responsibility on upgrading their existing systems, managing it themselves, employing staff to be experts on SITS. What they want is to have it as a service in the public cloud managed by Tribal. With 30 customers already, we think there are 60, 70+ other customers who, over time, potentially will take the Tribal Cloud, which gives us an addressable market of GBP 20 million-GBP 25 million+ over the coming years. It is not all going to happen immediately.
This is a steady evolution of a strategy, but there is significant ARR to be derived from our existing customer base. Since 2017, every customer, bar one or two actually, takes our SITS product in the public cloud. Indeed, of those two who did not, one has subsequently moved into the public cloud with us. The other area is about upselling. There is still significant opportunity to upsell into our existing customer base. Small components that improve their SITS system that we can sell. But also we have introduced Tribal Premium Support.
That is, as we move from a more traditional support and maintenance model to a true customer success, we are able then to transition customers into an improved offering where we can help them derive greater benefit from their existing Tribal products in return for a premium support fee, and we see that as being a driver of some revenue.
We have proven or validated that in terms of our FE customer base. We introduced the premium support offering at the end of last year, and that has been successful, and we are now just starting to introduce it into our SITS space. Indeed, also in admissions, we see the ability to drive the admissions product into our existing base following the ECU go live as something that we will really begin to focus more and more on. Just in terms of summary outlook, we have growing ARR, and that is the key area of focus for us, driving ARR. Our overall development spend, we do see strong customer demand for the solutions. We have focused our Edge development. We have actually reduced the investment in Edge, having got past the peak, and are focusing very much on existing products.
Not at this point looking to build out additional products, but focusing on those existing products such as admissions. Now we have a strong business model as we have been through that transition from a more traditional support and maintenance perpetual license driving to subscription cloud-based SaaS products. Then in terms of outlook, clearly our focus is on the resolution of NTU, but the timing of that is at present uncertain. But we continue to make progress in the core business. Our trading outlook remains positive, and it is in line with board expectations.