- Legal proceedings looking likely after dispute over education contract
- Nanyang Technological University ended £17 million deal in January
- Tribal stock has plunged over the past year
Legal disputes are seldom good news for investors, they have a nasty habit of dragging on and overshadow everything else, but this is the prospect facing UK-listed education software firm Tribal (TRB:AIM).
Bristol-based Tribal has been handed a rough £6 million damages claim by the Singapore-based Nanyang Technological University, which in March purportedly terminated its circa £17 million eight-year contract with Tribal.
This is classified as an interim demand payment, with the full extent of the damage being assessed, so the legal bill could be even bigger, if proceedings go against the UK software company. Tribal has sought legal advice on the matter and intends to dispute NTU’s demand.
‘This announcement could be followed by a painful period of long-winded legal proceedings,’ said Megabuyte analyst Cameron Naylor.
BACKGROUND TO THE DISPUTE
Delays in the NTU project started to come to light in August 2022, with Tribal claiming creep in the scope of the project. Talks were held between the pair regarding additional revenues for Tribal, but no agreement was reached, and relations between the two organisations have gradually soured.
For context, Tribal is expected to generate £12.5 million of adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) on £84.2 million of revenues in the year to 31 December 2023, up 69% and flat respectively, according to Naylor.
As of December 2022, the company had net debt of £3.4 million and a £17 million loan facility, of which £6.3 million was utilised.
TRIBAL COULD BE A TAKEOVER TARGET
While there could be a painful period ahead, bringing the relationship to a close now feels like the best result to allow Tribal to focus on its other opportunities where it continues to make progress, but the unpleasantness has left Tribal’s share price in tatters, potentially leaving the company exposed to an opportunistic buyout, believes Megabuyte’s Naylor.
‘Could private equity or further/higher education trade buyers like Civica or Advanced sniff an opportunity,’ he pondered rhetorically having calculated that the stock is now trading on just 1.6-times annual recurring revenues.
Tribal shares seemed to sharply sell-off in early trade before staging a recovery, and at 10.30am, are trading roughly flat at 39.3p, according to London Stock Exchange data. However, that is a far cry from the 92p levels of less than a year ago.
