TIDMGBG
RNS Number : 6554X
GB Group PLC
28 November 2017
Embargoed until 7.00 28(th) November 2017
a.m.
GB GROUP PLC
("GBG", the "Group" or the "Company")
HALF YEAR RESULTS FOR SIX MONTHSED 30 SEPTEMBER 2017
International expansion and organic growth drive rise in
profitability
GB Group plc (AIM: GBG), the global identity data intelligence
specialist, announces its unaudited results for the six months
ended 30 September 2017.
Financial highlights
2017 2016 %change
Revenue GBP52.6m GBP37.5m +40%
Adjusted operating profits GBP10.4m GBP5.2m +101%
Adjusted basic earnings
per share(++) 6.1p 3.6p +69%
Profit after tax GBP2.4m GBP1.2m +98%
Deferred revenue balances GBP23.7m GBP15.5m +53%
Net assets GBP149.2m GBP82.8m +80%
Net cash/(debt) GBP4.1m GBP(4.0)m +201%
Operational highlights and outlook
New contract wins
and international -- International revenues increased
expansion drive by 36% to GBP15.9 million.
organic growth
------------------------
-- Growing global footprint and
strengthening international brand:
continued expansion throughout
APAC, USA and EMEA regions.
------------------------
-- New customer wins during the
period in the UK include NFU Mutual
and Sky and internationally, LEGO
and KBC Ireland.
------------------------ ------------------------------------------------
Acquisition integration
and performance -- Acquisition of PCA Predict positions
GBG as a leader of UK and international
address validation services.
-- PCA Predict delivering growth
opportunities.
Senior appointments
-- During the period two Executive
Team appointments were announced
adding strength to the Group's
focus on customers and innovation.
------------------------ ------------------------------------------------
Positive outlook -- Full year results (revenue and
profit) expected to be in line
with market consensus.
------------------------ ------------------------------------------------
Chris Clark, CEO, commented,
"I am very encouraged by the progress we have made since April
and by the fact that we are on track to meet market expectations
for the full year. The Group continues to perform well,
demonstrating the strength of our business and the capability of
our people globally. With the investments we have made in products,
data and technology, we are confident of making further strategic
progress in the second half of the financial year."
Notes:
Adjusted operating profit means profits before amortisation of
acquired intangibles, share-based payments, exceptional items,
interest and tax. This is a non-GAAP or Adjusted Performance
Measure (APM) and as this is used by the majority of our
stakeholders it is deemed a more appropriate KPI in use in the
business and in its external communications. See "Alternative
Performance Measures" in the Interim Consolidated Financial
Statements for further details.
Net cash/(debt) means cash and short-term deposits less
loans.
++ Adjusted earnings per share is defined as adjusted operating
profit less net finance costs and tax divided by the basic weighted
average number of ordinary shares of the Company.
For further information, please contact:
GBG
Chris Clark, CEO
Dave Wilson, CFO & COO 01244 657333
Peel Hunt LLP (Nominated Adviser
and Broker)
Nick Prowting
Edward Knight 020 7418 8900
Newgate Communications
Bob Huxford
Ed Treadwell 020 7653 9850
About GBG
GBG is a global specialist in Identity Data Intelligence. We
help organisations make decisions about the customers they serve
and the people they employ.
Through our fundamental belief that the digital economy relies
on everyone having access to data they can trust, GBG enables
companies and governments to fight fraud and cybercrime, to improve
the customer experience and help to protect the more vulnerable
people in our society.
Headquartered in Chester (UK) and with people in 17 countries,
GBG provides solutions to many of the world's biggest
organisations, from established brands like HSBC and Zurich
Insurance to disruptive newcomers such as Stripe and Plus500.
Find out more about how we use identity data intelligently at
www.gbgplc.com, following us on Twitter @gbgplc and visiting our
newsroom: www.gbgplc.com/newsroom
CHAIRMAN'S STATEMENT
GBG had a strong trading performance in the first six months of
the year demonstrating good organic growth and further improving
its position in the expanding global identity data intelligence
market.
Financial performance
Trading in the first half of the year has seen increases in both
revenue and profit and is in line with the pre-close trading update
issued in October.
Revenue grew by 40% year on year, of which 18% was organic.
Adjusted operating profits increased by 101% to GBP10.4 million
(2016: GBP5.2 million). As we highlighted in October's trading
update, the organic revenue growth includes GBP3.5m from the sale
of a perpetual licence to a leading European bank. This was payable
in full on signing and therefore was recognized in full under
GAAP.
Profits after tax were GBP2.4 million (2016: GBP1.2 million)
after taking account of GBP6.6 million of costs associated with the
amortisation of acquired intangibles, share-based payments and
exceptional items (2016: GBP3.4 million). Of these costs, GBP5.7
million (2016: GBP2.6 million) were non-cash items.
Our balance sheet is strong, with revenue deferred to future
periods up by GBP8.2 million to GBP23.7 million. Net assets
increased to GBP149.2 million (2016 GBP82.8 million) following the
acquisition of PCA Predict.
At a divisional level:
-- Fraud, Risk & Compliance made good progress with revenues
increasing by 35% to GBP32.1 million (2016: GBP23.8 million). This
division provides the Group's solutions spanning ID verification,
ID assurance, ID trace & investigate and employment
screening.
-- Location & Customer Intelligence also had a positive
first half performance and grew revenues by 50% to GBP20.6 million
(2016: GBP13.8 million). This division provides our solutions
across ID registration and ID engage.
Strategic progress
Products and developments
GBG remains well positioned to meet the growing demand for
identity data intelligence products. Over the last six months we
have developed additional product functionality and reach. This
includes enhancing both our ID verification and location
intelligence solutions, by adding more data and improving our
matching against international data sources.
GBG has always concentrated on data security and protecting
personal information. We continue to invest in these areas to
address the ever prevalent threat posed by cyber-crime and the
opportunities and challenges posed by new legislation (such as GDPR
- the new EU legislation relating to data protection).
Customers
We are pleased that, alongside a strong renewal stream from our
existing customer base, we continue to attract new, high quality
customers to our portfolio.
-- LEGO is now using GBG's location intelligence services across
global markets to more accurately locate customers and improve the
deliverability of its marketing campaigns.
-- KBC Ireland, a division of one of Europe's most recognisable
financial institutions, has recently launched a service that uses
our IDscan technology. This new service means that customers using
the mobile app can now open new bank accounts in just five
minutes.
-- GBG DecTech continues to make good progress in the EMEA and
APAC regions. New customers using our fraud solutions include:
HomeChoice, South Africa's leading retailer; Hong Kong Bank of East
Asia (HKBEA); and Hexindai, the Chinese consumer lending
marketplace.
Acquisitions
In May 2017, GBG acquired PCA Predict, a leading provider of UK
and international address validation services. The business has
integrated well into the Group and is already providing us with new
growth opportunities. This includes new business in the UK from NFU
Mutual and Sky; and internationally from a number of leading US
based fashion retailers. The combination of PCA and GBG's
technologies has helped to create the world's leading location
intelligence platform, equipped to handle high transaction volumes
and deliver extra capacity to customers at peak times.
In line with our strategy, we will continue to seek acquisitions
that will enable us to expand our capabilities, datasets and
geographic presence.
People
As always, my thanks go to all of our people across the Group
who have each made such an important contribution to these
results.
As GBG grows internationally, expanding the variety of products
available to a growing spectrum of customers, it becomes
increasingly important for GBG to improve its focus on customer
needs. This year we have continued to strengthen our talented
Executive Team with the creation of key roles centred around
improving customer insight, experience and operations. I would like
to welcome all our new colleagues to the Group.
Outlook
We have made a good start to the second half of the year and are
making positive progress in delivering on our strategic objectives
of organic and acquisitive growth. We are growing well both in the
UK and internationally and also have high visibility (over 70%) of
our full year revenues. With all of this in mind, the Board remains
confident of maintaining its momentum through the second half and
the outlook for the full year, in respect of revenue and profit
growth, is in line with consensus expectations.
David Rasche
Chairman
Adjusted operating profit means profits before amortisation of
acquired intangibles, share-based payments, exceptional items,
interest and tax. This is a non-GAAP or Adjusted Performance
Measure (APM) and as this is used by the majority of our
stakeholders it is deemed a more appropriate KPI in use in the
business and in its external communications. See "Alternative
Performance Measures" in the Interim Consolidated Financial
Statements for further details.
Interim Consolidated Statement of Comprehensive
Income
For the six months ended 30 September 2017
------------------------------------------------
Note Unaudited Unaudited Audited
6 months 6 months Year
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Revenue 6 52,626 37,512 87,486
Cost of sales (11,281) (8,631) (20,320)
------------- ------------- ----------
Gross profit 41,345 28,881 67,166
Operating expenses before
amortisation of acquired intangibles,
share-based payments and exceptional
items (30,917) (23,700) (50,178)
Other operating income - 18 18
------------- ------------- ----------
Operating profit before amortisation
of acquired intangibles, share-based
payments and exceptional items
(adjusted operating profit) 6 10,428 5,199 17,006
Amortisation of acquired intangibles 11 (3,802) (1,751) (4,022)
Share-based payments charge 12 (1,101) (659) (994)
Exceptional items 5 (1,741) (996) (1,410)
Group operating profit 3,784 1,793 10,580
Finance revenue 17 11 19
Finance costs (289) (244) (517)
Profit before tax 3,512 1,560 10,082
Income tax (expense)/credit 7 (1,077) (328) 668
------------- ------------- ----------
Profit for the period attributable
to equity holders of the parent 2,435 1,232 10,750
============= ============= ==========
Other comprehensive income:
Exchange differences on retranslation
of foreign operations (net
of tax)* (1,554) 2,564 3,685
------------- ------------- ----------
Total comprehensive income
for the period attributable
to equity holders of the parent 881 3,796 14,435
Earnings per share
- adjusted basic earnings
per share for the period 8 6.1p 3.6p 13.1p
- adjusted diluted earnings
per share for the period 8 6.0p 3.5p 12.8p
- basic earnings per share
for the period 8 1.6p 1.0p 8.2p
- diluted earnings per share
for the period 8 1.6p 0.9p 8.0p
* Upon a disposal of a foreign operation, this would
be recycled to the Income Statement
Interim Consolidated Statement of Changes in Equity
For the six months ended 30 September 2017
------------------------------------------------------------------------------------------
Note Foreign
Equity Capital currency
share Merger redemption translation Retained Total
capital reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2016 (audited) 27,208 6,575 3 412 22,203 56,401
--------- --------- ------------ ------------ ---------- --------
Profit for the period - - - - 1,232 1,232
Other comprehensive
income 2,564 - 2,564
--------- --------- ------------ ------------ ---------- --------
Total comprehensive
income for the period - - - 2,564 1,232 3,796
Issue of share capital 15 25,321 - - - - 25,321
Share issue costs 15 (750) - - - - (750)
Share-based payments
charge 12 - - - - 659 659
Tax on share options - - - - 103 103
Equity dividend 9 - - - - (2,775) (2,775)
--------- --------- ------------ ------------ ---------- --------
Balance at 30 September
2016 (unaudited) 51,779 6,575 3 2,976 21,422 82,755
Profit for the period - - - - 9,518 9,518
Other comprehensive
income - - - 1,121 - 1,121
--------- --------- ------------ ------------ ---------- --------
Total comprehensive
income for the period - - - 1,121 9,518 10,639
Issue of share capital 184 - - - - 184
Share-based payments
charge - - - - 335 335
Tax on share options - - - - 270 270
------------
Balance at 1 April
2017 (audited) 51,963 6,575 3 4,097 31,545 94,183
Profit for the period - - - - 2,435 2,435
Other comprehensive
income - - - (1,554) - (1,554)
--------- --------- ------------ ------------ ---------- --------
Total comprehensive
income for the period - - - (1,554) 2,435 881
Issue of share capital 15 58,255 - - - - 58,255
Share issue costs 15 (1,739) - - - - (1,739)
Share-based payments
charge 12 - - - - 1,101 1,101
Tax on share options - - - - 51 51
Equity dividend 9 - - - - (3,582) (3,582)
--------- --------- ------------ ------------ ---------- --------
Balance at 30 September
2017 (unaudited) 108,479 6,575 3 2,543 31,550 149,150
--------- --------- ------------ ------------ ---------- --------
Interim Consolidated Balance Sheet
As at 30 September 2017
-----------------------------------
Note Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Plant and equipment 10 4,216 2,796 2,856
Intangible assets 11 167,551 99,700 98,753
Deferred tax asset 4,190 3,014 4,044
175,957 105,510 105,653
------------- ------------- ---------
Current assets
Inventories 211 97 233
Trade and other receivables 28,951 21,746 30,569
Current tax - - 494
Cash and short-term deposits 17,923 11,654 17,618
------------- ------------- ---------
47,085 33,497 48,914
------------- ------------- ---------
TOTAL ASSETS 223,042 139,007 154,567
------------- ------------- ---------
EQUITY AND LIABILITIES
Capital and reserves
Equity share capital 108,479 51,779 51,963
Merger reserve 6,575 6,575 6,575
Capital redemption reserve 3 3 3
Foreign currency translation
reserve 2,543 2,976 4,097
Retained earnings 31,550 21,422 31,545
Total equity attributable to
equity holders of the parent 149,150 82,755 94,183
------------- ------------- ---------
Non-current liabilities
Loans 13 12,974 12,000 11,499
Contingent consideration 17 - 6,845 -
Deferred tax liability 9,431 4,860 4,441
------------- ------------- ---------
22,405 23,705 15,940
Current liabilities
Loans 13 850 3,701 886
Trade and other payables 42,111 28,328 36,401
Contingent consideration 17 7,929 - 7,122
Provisions 25 29 35
Current tax 572 489 -
51,487 32,547 44,444
------------- ------------- ---------
TOTAL LIABILITIES 73,892 56,252 60,384
------------- ------------- ---------
TOTAL EQUITY AND LIABILITIES 223,042 139,007 154,567
------------- ------------- ---------
Interim Consolidated Cash Flow Statement
For the six months ended 30 September 2017
--------------------------------------------------------------------------------
Note Unaudited Unaudited Audited
6 months 6 months Year
to to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Group profit before tax 3,512 1,560 10,082
Adjustments to reconcile Group
profit before tax to net cash
flows
Finance revenue (17) (11) (19)
Finance costs 289 246 517
Depreciation of plant and equipment 10 635 452 1,031
Amortisation of intangible
assets 11 4,200 2,095 4,719
Loss on disposal of plant and
equipment 36 2 2
Adjustments to contingent consideration 5 807 194 471
Share-based payments 12 1,101 659 994
(Decrease)/increase in provisions (10) (2) 4
Decrease/(increase) in inventories 22 - (78)
Decrease/(increase) in receivables 3,663 5,158 (3,690)
(Decrease)/increase in payables (3,725) (5,735) 2,272
Cash generated from operations 10,513 4,618 16,305
Income tax paid (611) (973) (2,193)
------------- ------------- ---------
Net cash generated from operating
activities 9,902 3,645 14,112
------------- ------------- ---------
Cash flows from/(used in) investing
activities
Acquisition of subsidiaries,
net of cash acquired 16 (62,903) (36,818) (36,840)
Purchase of plant and equipment 10 (588) (744) (1,437)
Purchase of software 11 (82) (211) (774)
Proceeds from disposal of plant
and equipment 96 4 5
Expenditure on product development 11 - (21) (21)
Interest received 17 11 19
Net cash flows used in investing
activities (63,460) (37,779) (39,048)
------------- ------------- ---------
Cash flows from/(used in) financing
activities
Finance costs paid (289) (246) (517)
Proceeds from issue of shares 15 58,255 25,321 25,505
Share issue costs 15 (1,739) (750) (750)
Proceeds from new borrowings 13 10,000 12,000 12,000
Repayment of borrowings 13 (8,430) (400) (3,838)
Dividends paid to equity shareholders 9 (3,582) (2,775) (2,775)
Net cash flows from financing
activities 54,215 33,150 29,625
------------- ------------- ---------
Net increase/(decrease) in
cash and cash equivalents 657 (984) 4,689
Effect of exchange rates on
cash and cash equivalents (352) 223 514
Cash and cash equivalents at
the beginning of the period 17,618 12,415 12,415
------------- ------------- ---------
Cash and cash equivalents at
the end of the period 17,923 11,654 17,618
------------- ------------- ---------
Notes to the Interim Report
----------------------------------------------------------------------------
1. CORPORATE INFORMATION
The interim condensed consolidated financial statements of GB
Group plc ('the Group') for the six months ended 30 September 2017
were authorised for issue in accordance with a resolution of the
directors on 28 November 2017. GB Group plc is a public limited
company incorporated in the United Kingdom whose shares are
publicly traded on the Alternative Investment Market (AIM) of the
London Stock Exchange.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
Basis of Preparation
These interim condensed consolidated financial statements for
the six months ended 30 September 2017 have been prepared in
accordance with IAS 34 'Interim Financial Reporting'. The annual
financial statements of the company are prepared in accordance with
IFRSs as adopted by the European Union.
The interim condensed consolidated financial statements are
presented in pounds Sterling and all values are rounded to the
nearest thousand (GBP'000) except when otherwise indicated.
After making appropriate enquiries, the directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. For
these reasons, the Board continues to adopt the going concern basis
in preparing the interim report.
The interim condensed consolidated financial statements do not
constitute statutory financial statements as defined in section 435
of the Companies Act 2006 and therefore do not include all the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's
annual financial statements as at 31 March 2017. The financial
information for the preceding year is based on the statutory
financial statements for the year ended 31 March 2017. These
financial statements, upon which the auditors issued an unqualified
opinion, have been delivered to the Registrar of Companies. These
financial statements did not require a statement under either
section 498(2) or section 498(3) of the Companies Act 2006.
Accounting Policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 31 March 2017. The IASB and
IFRIC have issued the following Standards and Interpretations with
an effective date after these financial statements:
International Accounting Standards (IAS/IFRS) Effective
date
IFRS Revenue from Contracts with Customers 1 January
15 2018
IFRS Financial Instruments 1 January
9 2018
IFRS Leases 1 January
16 2019
IFRS 15 'Revenue from Contracts with Customers' replaces IAS 18
'Revenue', IAS 11 'Construction Contracts' and related
interpretations. For the Group, transition to IFRS 15 will take
place on 1 April 2018. Half yearly and annual results in the
2018/19 financial year will be IFRS 15 compliant. The standard
requires entities to apportion revenue earned from contracts to
individual promises, or performance obligations, on a relative
standalone selling price basis, based upon a five-step revenue
recognition model where revenue is recognised at the point that
control of goods or services is transferred to the customer. Whilst
some further work is required to determine the impact on reported
revenue across all the lines of business, the Group is reviewing
and updating its revenue recognition policies in light of the
updated requirements in readiness for the transition. Based on the
initial findings of this process, management do not currently
anticipate that there will be a material change to the quantum and
timing of profitability. The new standard also introduces expanded
disclosure requirements and these are expected to change the nature
and extent of the group's disclosures about its revenue recognition
in future reports, when the new standard is adopted.
IFRS 9 'Financial Instruments' replaces IAS 39. The standard is
effective for the year ending 31 March 2019 and will impact the
classification and measurement of financial instruments and will
require certain additional disclosures. Whilst an assessment of the
new standard is ongoing, the changes to recognition and measurement
of financial instruments and changes to hedge accounting rules are
not currently considered likely to have any major impact on the
Group's current accounting treatment or hedging activities.
IFRS 16 'Leases' (effective for the year ending 31 March 2020)
will require most leases to be recognised on the balance sheet. The
new standard brings most leases on-balance sheet for lessees under
a single model, eliminating the distinction between operating and
finance leases. IFRS 16 supersedes IAS 17 'Leases' and related
interpretations. The Group has a number of operating lease
arrangements and will consider the financial impact of IFRS 16 in
due course but in broad terms the impact will be to recognise a
lease liability and corresponding asset for the Group's operating
lease commitments.
3. CYCLICALITY
Due to the cyclicality of our software renewal business, higher
renewals in the second half traditionally result in the Group's
performance being biased towards the second half of the year.
4. RISKS AND UNCERTAINTIES
Management identifies and assesses risks to the business using
an established control model. The Group has a number of exposures
which can be summarised as follows: regulatory risk resulting from
regulatory developments; changes in the Group's competitive
position; non-supply by a major supplier; disaster recovery,
business continuity and cyber risk; new product development; and
intellectual property risk. These risks and uncertainties facing
our business were reported in detail in the 2017 Annual Report and
Accounts and all of them are monitored closely by the Group.
The outcome of the recent UK referendum has caused uncertainty
in both the political and economic environments in which we
operate. Our business model means that we are comparatively
well-placed to manage the consequences of the result and of its
effect on the economic environment. However, there is the potential
for our costs to increase, for example, through any changes
required to our systems to reflect new taxes; regulatory risk to
increase as a result of any future divergence with the EU regime;
and supplier disruption to occur as a result of challenges in
suppliers' own organisations and supply chains. At this time, the
outcome of Brexit negotiations and post-Brexit arrangements remains
unclear and as such, like all companies, we continue to monitor the
situation and manage the practical implications as they occur.
Accounting Estimates
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported for assets and liabilities as at the balance sheet date
and amounts reported for revenues and expenses during the year.
However, the nature of estimation means that actual outcomes could
differ from those estimates. The main judgements and key sources of
estimation uncertainty applied in these interim consolidated
financial statements are detailed in the Group's annual financial
statements for the year ending 31 March 2017. Specific new
judgements and estimates which have had an impact on amounts
recognised in the financial statements the six months ended 30
September 2017 include the following:
Valuation and Asset Lives of Separately Identifiable Intangible
Assets
In determining the fair value of intangible assets arising on
acquisition, management are required to make judgements regarding
the timing and amount of future cash flows applicable to the
businesses being acquired, discounted using an appropriate discount
rate. Such judgements are based on current budgets and forecasts,
extrapolated for an appropriate period taking into account growth
rates and expected changes to selling prices and operating costs.
During the year, the Company acquired Postcode Anywhere (Holdings)
Limited and in valuing the separately identifiable intangible
assets made specific judgements as to the life of those assets. The
most significant of those were the estimated useful lives of the
customer relationship and technology IP assets of 10 and 5 years,
respectively. Judgements were made on these lives with reference to
both historical indicators within the acquired business such as
customer or technology lifecycles along with estimates of the
impact on such lives that convergence of technology and
relationships would have over time.
Contingent Consideration
Contingent consideration relating to acquisitions is included
based on management estimates of the most likely outcome (note 17).
Those judgements include the forecasting of a number of different
outcomes against the performance targets and estimating a
probability and risk of each outcome before arriving at a risk
weighted value of contingent consideration. Management's revision
of these estimates during the period resulted in an increased
contingent consideration liability being recognised.
5. EXCEPTIONAL ITEMS
Unaudited Unaudited Audited
6 months 6 months Year
to to to
30 Sept 30 Sept 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Adjustments to contingent consideration
(note 17) 807 194 471
Acquisition related costs 735 574 574
Costs associated with staff reorganisations 199 228 365
1,741 996 1,410
---------------- ---------- ----------
Fair value adjustments to contingent consideration in the period
to 30 September 2017 relate to the acquisition of IDscan and
include GBP421,000 relating to a contingent purchase price
adjustment along with a GBP386,000 charge relating to the partial
unwinding of the discounting relating to the contingent
consideration (note 17). This charge arises because contingent
consideration due to be paid at a future date is discounted for the
time value of money at the point of initial recognition and over
the passage of time, this discount unwinds within the Consolidated
Statement of Comprehensive Income. These are non-cash items.
Fair value adjustments to contingent consideration in the six
months to 30 September 2016 include a charge of GBP177,000 relating
to the partial unwind of the discount applied to the contingent
consideration arising on the acquisition of ID Scan Biometrics
Limited (note 17) and GBP17,000 relating to the unwind of the
remaining discounted amount in relation to the contingent
consideration that arose on the acquisition of DecTech Solutions
Pty Ltd (note 17).
Fair value adjustments to contingent consideration in the year
to 31 March 2017 include a GBP92,000 adjustment relating to the
contingent purchase price of IDscan (note 17) along with a
GBP546,000 charge relating to the partial unwinding of the
discounting relating to the contingent consideration of the
acquisition of IDscan (note 17) and GBP17,000 relating to the
unwind of the remaining discounted amount in relation to the
contingent consideration that arose on the acquisition of DecTech
Solutions Pty Ltd.
Transaction costs of GBP735,000 relate to the acquisition of PCA
(note 16). In prior periods, transaction costs of GBP513,000 were
incurred in relation to the acquisition of IDscan (note 16). Such
costs include those directly attributable to the transaction and
exclude operating or integration costs relating to an acquired
business, and due to the size and nature of these costs, management
consider that they would distort the Group's underlying business
performance.
Costs associated with staff reorganisations in both years relate
to exit costs of personnel leaving the business on an involuntary
basis due to reorganisations within our operating divisions. Due to
the nature of these costs, management deem them to be exceptional
in order to better reflect our underlying performance.
6. SEGMENTAL INFORMATION
The Group's operating segments are internally reported to the
Group's Chief Executive Officer as two operating segments: Fraud,
Risk & Compliance Division - which provides ID verification, ID
assurance, ID trace & investigate and employment screening and
Location & Customer Intelligence Division - which provides ID
registration and ID engage solutions. The measure of performance of
those segments that is reported to the Group's Chief Executive
Officer is adjusted operating profit before amortisation of
acquired intangibles as shown below.
Postcode Anywhere (Holdings) Limited ('PCA'), which was acquired
during the period, is reported within the Location & Customer
Intelligence division.
Segment results include items directly attributable to either
Fraud, Risk & Compliance or Location & Customer
Intelligence. Unallocated items for the six months to 30 September
2017 represent Group head office costs GBP707,000 (2016:
GBP377,000), exceptional items GBP1,741,000 (2016: GBP996,000),
Group finance income GBP17,000 (2016: GBP11,000), Group finance
costs GBP289,000 (2016: GBP244,000), Group income tax expense
GBP1,077,000 (2016: GBP328,000) and share-based payments charge
GBP1,101,000 (2016: GBP659,000). Unallocated items for the year
ended 31 March 2017 represent Group head office costs GBP675,000,
exceptional costs GBP1,410,000, Group finance income GBP19,000,
Group finance costs GBP517,000, Group income tax credit GBP668,000
and share-based payments charge GBP994,000.
As previously reported in the Annual Report and Accounts, in
order to reflect how the Group is presenting its lines of business
to its stakeholders going forward, the naming and structure of the
operating segments were amended with effect from 1 April 2017.
Going forward 'Identity Proofing' is now known as 'Fraud, Risk
& Compliance' and 'Identity Solutions' is known as 'Location
& Customer Intelligence'. Furthermore, the 'ID Trace &
Investigate' line of business has transferred into Fraud, Risk
& Compliance.
Total
Unaudited
Location 6 months
Fraud, & Customer to
Risk Intelligence Unallocated 30 September
& Compliance 2017
Six months ended 30 GBP'000 GBP'000 GBP'000 GBP'000
September 2017
Total revenue 32,055 20,571 - 52,626
--------------- --------------- -------------- --------------
Adjusted operating profit 7,693 3,442 (707) 10,428
Amortisation of acquired
intangibles (1,480) (2,322) - (3,802)
Share-based payments
charge - - (1,101) (1,101)
Exceptional items - - (1,741) (1,741)
--------------- --------------- -------------- --------------
Operating profit 6,213 1,120 (3,549) 3,784
Finance revenue 17
Finance costs (289)
Income tax expense (1,077)
--------------
Profit for the period 2,435
--------------
Total
Unaudited
Location 6 months
Fraud, & Customer to
Risk Intelligence Unallocated 30 September
& Compliance 2016
Six months ended 30 GBP'000 GBP'000 GBP'000 GBP'000
September 2016
Total revenue 23,754 13,758 - 37,512
--------------- --------------- -------------- --------------
Adjusted operating profit 4,412 1,164 (377) 5,199
Amortisation of acquired
intangibles (1,003) (748) - (1,751)
Share-based payments
charge - - (659) (659)
Exceptional items - - (996) (996)
Operating profit 3,409 416 (2,032) 1,793
Finance revenue 11
Finance costs (244)
Income tax expense (328)
--------------
Profit for the period 1,232
--------------
Total
Location Audited
Fraud, & Customer Year
Risk Intelligence Unallocated to 31
& Compliance March
2017
Year ended 31 March GBP'000 GBP'000 GBP'000 GBP'000
2017
Total revenue 54,814 32,672 - 87,486
--------------- --------------- -------------- ----------
Adjusted operating profit 12,923 4,758 (675) 17,006
Amortisation of acquired
intangibles (2,507) (1,515) - (4,022)
Share-based payments
charge - - (994) (994)
Exceptional items - - (1,410) (1,410)
Operating profit 10,416 3,243 (3,079) 10,580
Finance revenue 19
Finance costs (517)
Income tax credit 668
----------
Profit for the year 10,750
----------
7. TAXATION
The Group calculates the period income tax expense using a best
estimate of the tax rate that would be applicable to the expected
total earnings for the year ending 31 March 2018.
8. EARNINGS PER ORDINARY SHARE
Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the basic weighted
average number of ordinary shares in issue during the period.
Unaudited Unaudited Audited
6 months 6 months Year to
to 30 September to 30 September 31 March
2017 2016 2017
Pence Pence Pence
per per per
share GBP'000 share GBP'000 share GBP'000
Profit attributable
to equity holders
of the company 1.6 2,435 1.0 1,232 8.2 10,750
------- ---------- ------- ---------- ------- ----------
Diluted
Diluted earnings per share amounts are calculated by dividing
the profit for the period attributable to equity holders of the
company by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
30 Sept 30 Sept 31 March
2017 2016 2017
No. No. No.
Basic weighted average
number of shares in
issue 148,506,098 128,812,008 131,608,788
Dilutive effect of
share options 2,781,683 3,174,680 2,435,799
------------
Diluted weighted average
number of shares in
issue 151,287,781 131,986,688 134,044,587
------------ ------------ -------------
Unaudited Unaudited Audited
6 months 6 months Year to
to 30 September to 30 September 31 March
2017 2016 2017
Pence Pence Pence
per per per
share GBP'000 Share GBP'000 share GBP'000
Profit attributable
to equity holders
of the company 1.6 2,435 0.9 1,232 8.0 10,750
------- ---------- ------- ---------- ------- ----------
Adjusted
Adjusted earnings per share is defined as adjusted operating
profit less net finance costs and tax divided by the basic weighted
average number of ordinary shares of the Company.
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March 2017
2017 2016
Basic Diluted Basic Diluted Basic Diluted
pence pence pence pence pence pence
per per per per per per
share share GBP'000 share share GBP'000 share share GBP'000
Adjusted
operating
profit 7.0 6.9 10,428 4.0 3.9 5,199 12.9 12.7 17,006
Less net
finance
costs (0.2) (0.2) (272) (0.2) (0.2) (233) (0.3) (0.4) (498)
(Less)/add
tax (0.7) (0.7) (1,077) (0.2) (0.2) (328) 0.5 0.5 668
------ -------- ---------- ------ -------- ---------- ------- -------- ---------
Adjusted
earnings 6.1 6.0 9,079 3.6 3.5 4,638 13.1 12.8 17,176
------ -------- ---------- ------ -------- ---------- ------- -------- ---------
Adjusted operating profit means profits before amortisation of
acquired intangibles, share-based payment charges, exceptional
items, net finance costs and tax.
9. DIVIDS PAID AND PROPOSED
Unaudited Unaudited Audited
6 months 6 months Year
to 30 to 30 to
Sept Sept 31
2017 2016 March
2017
GBP'000 GBP'000 GBP'000
Declared and paid during the
period
Final dividend for 2017: 2.35p
per share (2016: 2.08p per share) 3,582 2,775 2,775
---------- ---------- --------
Proposed for approval at AGM
(not recognised as a liability
at 31 March 2017)
Final dividend for 2017: 2.35p
per share - - 3,566
---------- ---------- --------
10. PLANT AND EQUIPMENT
During the six months ended 30 September 2017, the Group
acquired plant and equipment with a cost of GBP588,000 (2016:
GBP744,000).
Land and buildings with a fair value of GBP1,251,000, and plant
and equipment with a fair value of GBP341,000, were acquired with
the acquisition of PCA (note 16).
Depreciation provided during the six months ended 30 September
2017 was GBP635,000 (2016: GBP452,000).
Assets with a net book value of GBP132,000 were disposed of
during the six months ended 30 September 2017 (2016: GBP6,000).
11. INTANGIBLE ASSETS
Group Other Total Internally
Customer acquisition acquisition Purchased developed
relationships intangibles intangibles Goodwill software software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April
2016 16,981 4,698 21,679 37,765 2,379 1,747 63,570
Additions
- business
combinations 3,917 5,872 9,789 34,853 9 - 44,651
Additions
- product
development - - - - - 21 21
Additions
- purchased
software - - - - 211 - 211
Foreign exchange
adjustments 638 259 897 2,129 - 2 3,028
--------------- ------------ ------------ ----------
At 30 September
2016 21,536 10,829 32,365 74,747 2,599 1,770 111,481
Additions
- business
combinations - - - 46 (2) - 44
Additions
- purchased
software - - - - 563 - 563
Disposals - - - - (1,275) - (1,275)
Reclassification - - - - 23 - 23
Foreign exchange
adjustments 240 99 339 805 - 1 1,145
--------------- ------------ ------------ ---------- ----------- ----------- ---------
At 31 March
2017 21,776 10,928 32,704 75,598 1,908 1,771 111,981
Additions
- business
combinations 24,865 6,102 30,967 43,376 - - 74,343
Additions
- purchased
software - - - - 82 - 82
Foreign exchange
adjustments (337) (138) (475) (1,123) - - (1,598)
--------------- ------------ ------------ ----------
At 30 September
2017 46,304 16,892 63,196 117,851 1,990 1,771 184,808
Amortisation
and impairment
At 1 April
2016 4,449 2,469 6,918 - 1,700 839 9,457
Amortisation
during the
period 965 786 1,751 - 159 185 2,095
Foreign exchange
adjustments 121 108 229 - - - 229
--------------- ------------ ------------ ---------- ----------- ----------- ---------
At 30 September
2016 5,535 3,363 8,898 - 1,859 1,024 11,781
Amortisation
during the
period 1,081 1,190 2,271 - 171 182 2,624
Disposals - - - (1,275) - (1,275)
Foreign exchange
adjustments 52 45 97 - - 1 98
--------------- ------------ ------------ ---------- ----------- ----------- ---------
At 31 March
2017 6,668 4,598 11,266 - 755 1,207 13,228
Amortisation
during the
period 2,114 1,688 3,802 - 222 176 4,200
Foreign exchange
adjustments (89) (82) (171) - - - (171)
--------------- ------------ ------------ ---------- ----------- ----------- ---------
At 30 September
2017 8,693 6,204 14,897 - 977 1,383 17,257
Net book value
At 30 September
2017 37,611 10,688 48,299 117,851 1,013 388 167,551
--------------- ------------ ------------ ---------- ----------- ----------- ---------
At 31 March
2017 15,108 6,330 21,438 75,598 1,153 564 98,753
--------------- ------------ ------------ ---------- ----------- ----------- ---------
At 30 September
2016 16,001 7,466 23,467 74,747 740 746 99,700
--------------- ------------ ------------ ---------- ----------- ----------- ---------
Goodwill arose on the acquisition of GB Mailing Systems Limited,
e-Ware Interactive Limited, Data Discoveries Holdings Limited,
Advanced Checking Services Limited, Capscan Parent Limited, TMG.tv
Limited, CRD (UK) Limited, DecTech Solutions Pty Ltd, CDMS Limited,
Loqate Inc., ID Scan Biometrics Limited and Postcode Anywhere
(Holdings) Limited. Under IFRS, goodwill is not amortised and is
tested annually for impairment.
Intangible assets categorised as 'other acquisition intangibles'
include asset such as non-compete clauses and software
technology.
During the year ending 31 March 2017, GBP23,000 of purchased
software assets (at net book value) were reclassified as intangible
assets (previously classified as tangible assets).
12. SHARE-BASED PAYMENTS
The Group operates Executive Share Option Schemes under which
executive directors, managers and staff of the Company are granted
options over shares.
During the six months ended 30 September 2017, the following
share options were granted to executive directors and staff.
Scheme Date No. of Exercise Fair value
options price
1 April
Compensatory options 2017 400,000 2.5p 283.90p-286.20p
1 April
Section A options 2017 10,238 293.0p 79.86p-87.99p
1 April
Section B options 2017 989,762 293.0p 79.86p-87.99p
19 July
Section B options 2017 50,000 345.0p 95.37p
GBG Sharesave scheme 15 August 451,250 272.0p-370.0p 70.38p-113.83p
- 3 year 2017
GBG Sharesave scheme 15 August
- 5 year 2017 140,743 272.0p 127.39p
The charge recognised from equity-settled share-based payments
in respect of employee services received during the period was
GBP1,101,000 (2016: GBP659,000).
13. LOANS
In April 2014, the Group secured an Australian dollar three year
term loan of AUS$10,000,000. The debt bears an interest rate of
+1.90% above the Australian Dollar bank bill interest swap rate
('BBSW'). During the year ending 31 March 2017, this term loan was
extended from its original maturity of April 2017 to November 2018.
Security on the debt is provided by way of an all asset debenture.
During the period, GBP430,000 (2016: GBP400,000) was repaid in
relation to the Australian dollar term loan.
The Group has a three year revolving credit facility agreement
expiring in November 2020 which is subject to a limit of
GBP50,000,000. The facility bears an initial interest rate of LIBOR
+1.50%. This interest rate is subject to an increase of 0.25%
should the business exceed certain leverage conditions. The
acquisition of PCA (note 16) was part funded through a
GBP10,000,000 draw down on the Group's existing borrowing
facilities, of which GBP8,000,000 was repaid in the six months to
30 September 2017.
30 Sept 30 Sept 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Opening bank loan 12,385 3,742 3,742
New borrowings 10,000 12,000 12,000
Repayment of borrowings (8,430) (400) (3,838)
Foreign currency translation
adjustment (131) 359 481
--------
Closing bank loan 13,824 15,701 12,385
-------- -------- ---------
Analysed as:
Amounts falling due
within 12 months 850 3,701 886
Amounts falling due
after one year 12,974 12,000 11,499
-------- -------- ---------
13,824 15,701 12,385
-------- -------- ---------
14. RELATED PARTY TRANSACTIONS
During the period, the Group entered into transactions, in the
ordinary course of business, with other related parties.
Transactions entered into and trading balances outstanding at 30
September are as follows:
Group Purchases Net amounts
Sales from owed
to related related by related
parties parties parties
GBP'000 GBP'000 GBP'000
Directors (see below):
30 September 2017 - - -
30 September 2016 - - -
31 March 2017 - 3 -
Other related parties
(see below):
30 September 2017 - - -
30 September 2016 23 - (14)
31 March 2017 55 - 7
The Chairman of the Company incurred some expenses via his
consultancy business Rasche Consulting Limited.
Richard Law, the Chief Executive of the Company in the year
ending 31 March 2017, is a director of Zuto Limited which is a
client of the Group. Transactions with Zuto Limited have been
reported under the heading of 'other related parties' in the table
above.
In prior periods, a Non-Executive Director of the Company was a
director of Avanti Communications Group Plc which is a client of
the Group. A Non-Executive Director of the Company is a Director of
Removal Stars Limited which is a client of the Group. Transactions
with these companies have been reported under the heading of 'other
related parties' in the table above.
Terms and conditions of transactions with related parties
Sales and balances between related parties are made at normal
market prices. Outstanding balances with entities other than
subsidiaries are unsecured, interest free and cash settlement is
expected within 30 days of invoice. Terms and conditions with
subsidiaries are the same, with the exception that balances are
placed on intercompany accounts with no specified credit period.
During the six months ended 30 September 2017, the Group has not
made any provision for doubtful debts relating to amounts owed by
related parties (2016: GBPnil).
Compensation of key management personnel (including
directors)
Unaudited Unaudited Audited
6 months 6 months Year
to to to
30 Sept 30 Sept 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Short-term employee
benefits 753 579 1,731
Post-employment benefits 31 16 31
Fair value of share
options awarded 1,980 393 393
2,764 988 2,155
---------- ---------- ----------
15. EQUITY SHARE CAPITAL
During the period 17,793,273 (2016: 10,296,940) ordinary shares
with a nominal value of 2.5p were issued for an aggregate cash
consideration of GBP58,255,000 (2016: GBP25,321,000). The cost
associated with the issue of shares was GBP1,739,000 (2016:
GBP750,000).
30 Sept 30 Sept 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Issued
Allotted, called up
and fully paid 3,812 3,355 3,368
Share premium 104,667 48,424 48,595
108,479 51,779 51,963
-------- -------- ---------
16. BUSINESS COMBINATIONS
Acquisitions in the Period Ended 30 September 2017
Acquisition of Postcode Anywhere (Holdings) Limited
On 11 May 2017, the Company acquired 100% of the voting shares
of Postcode Anywhere (Holdings) Limited ('PCA'), a provider of UK
and International address validation and data quality services, for
a total consideration of GBP73,852,423. The combination of the two
businesses represents a highly complementary capability alongside
GBG's existing ID registration solutions. The Consolidated
Statement of Comprehensive Income includes the results of PCA for
the five month period from the acquisition date.
The fair value of the identifiable assets and liabilities of PCA
as at the date of acquisition was:
Fair value
recognised
on acquisition
GBP'000
Assets
Technology intellectual property 5,733
Customer relationships 24,865
Non-compete agreements 369
Land and buildings 1,251
Plant and equipment 341
Deferred tax assets 379
Trade and other receivables 1,763
Cash 10,949
Trade and other payables (9,280)
Deferred tax liabilities (5,736)
----------------
Total identifiable net assets at fair value 30,634
Goodwill arising on acquisition 43,218
----------------
Total purchase consideration transferred 73,852
----------------
Purchase consideration:
Cash 73,852
Total purchase consideration 73,852
----------------
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included
in cash flows from operating activities) (735)
Net cash acquired with the subsidiary 10,949
Cash paid (73,852)
----------------
Acquisition of subsidiaries, net of cash
acquired (included in cash flows from investing
activities) (62,903)
Net cash outflow (63,638)
----------------
The fair value of the acquired trade receivables amounts to
GBP1,763,000. The gross amount of trade receivables is
GBP1,763,000. None of the trade receivables have been impaired and
it is expected that the full contractual amounts can be
collected.
The goodwill recognised above is attributed to intangible assets
that cannot be individually separated and reliably measured from
PCA due to their nature. These items include the capability for
synergies from bringing the businesses together, combining
propositions and capabilities that will help the business achieve
accelerated consolidated growth from both cross-sell and up-sell.
None of the goodwill is expected to be deductible for income tax
purposes.
The transaction costs of GBP735,000 associated with this
acquisition have been expensed and are included in exceptional
items in the Consolidated Statement of Comprehensive Income and are
part of operating cash flows in the Cash Flow Statement.
From the date of acquisition, PCA has contributed GBP6,599,000
of revenue and operating profits of GBP2,388,000 to the Group. If
the combination had taken place at the beginning of the period, the
Group revenue and adjusted operating profits would have been
GBP53,995,000 and GBP10,446,000, respectively.
Acquisitions in the Period Ended 30 September 2016
Acquisition of ID Scan Biometrics Limited
On 1 July 2016, the Company acquired 100% of the voting shares
of ID Scan Biometrics Limited ('IDscan'), a provider of software
that automates on-boarding of customers and employees by
simplifying the identity verification and data capture process.
IDscan helps authentication of documents including passports,
visas, ID cards, driving licenses, utility bills and work permits
while also capturing facial biometrics which provides proof that
those documents are not stolen. The combination represents a highly
complementary capability set alongside GBG's unique global Know
Your Customer, Anti-Money Laundering and fraud detection solutions.
For the period ending 30 September 2016, the Consolidated Statement
of Comprehensive Income includes the results of IDscan for the
three month period from the acquisition date.
The fair value of the identifiable assets and liabilities of
IDscan as at the date of acquisition was:
Fair value
recognised
on acquisition
GBP'000
Assets
Technology intellectual property 5,405
Customer relationships 3,917
Non-compete agreements 467
Plant and equipment 222
Purchased software 7
Inventory 155
Trade and other receivables 2,408
Cash 1,186
Trade and other payables (2,911)
Corporation tax liabilities (427)
Deferred tax liabilities (1,818)
----------------
Total identifiable net assets at fair value 8,611
Goodwill arising on acquisition 35,057
----------------
Total purchase consideration transferred 43,668
----------------
Purchase consideration:
Cash 37,000
Contingent consideration adjustment 6,668
Total purchase consideration 43,668
----------------
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included
in cash flows from operating activities) (513)
Net cash acquired with the subsidiary 1,186
Cash paid (37,000)
----------------
Acquisition of subsidiaries, net of cash
acquired (included in cash flows from investing
activities) (35,814)
Net cash outflow (36,327)
----------------
The fair value of the acquired trade receivables amounts to
GBP2,200,000. The gross amount of trade receivables is
GBP2,211,000. None of the trade receivables have been impaired and
it is expected that the full contractual amounts can be
collected.
The goodwill recognised above is attributed to intangible assets
that cannot be individually separated and reliably measured from
IDscan due to their nature. These items include the expected value
of synergies and an assembled workforce. None of the goodwill is
expected to be deductible for income tax purposes.
The transaction costs of GBP513,000 associated with this
acquisition have been expensed and are included in exceptional
items in the Consolidated Statement of Comprehensive Income and are
part of operating cash flows in the Cash Flow Statement.
From the date of acquisition to 30 September 2016, IDscan
contributed GBP1,758,000 of revenue and operating profits of
GBP504,000 to the Group. If the combination had taken place at the
beginning of the period ended 30 September 2016, the Group revenue
and operating profits would have been GBP39,540,000 and
GBP2,198,000, respectively.
The fair values reported in the Annual Report were provisional
due to the ongoing determination of the fair value of certain
assets. As a consequence of the finalisation of these values, the
identifiable net assets at fair value has reduced by GBP177,000
compared to that previously reported with a corresponding increase
in the amount of goodwill.
Contingent Consideration - IDscan
As part of the share sale and purchase agreement, a contingent
consideration amount of up to GBP8,000,000 has been agreed. This
payment is subject to certain future revenue and EBITDA targets
between 12 and 18 months from completion date. The obligation has
been classed as a liability in accordance with the provisions of
IAS 32.
At the acquisition date the discounted fair value of the
contingent consideration was estimated at GBP6,668,000 having been
determined from management's estimates of the range of outcomes and
their respective likelihoods. At 30 September 2017, the value of
the contingent consideration, after a contingent purchase price
adjustment and partial unwinding of the discounting, was
GBP7,929,000. Adjustments to the fair value of the contingent
consideration are made in the Consolidated Statement of
Comprehensive Income under IFRS 3 (Revised) Business
Combinations.
17. CONTINGENT CONSIDERATION
LIABILITIES Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Opening 7,122 1,050 1,050
Recognition on the acquisition
of subsidiary undertakings - 6,668 6,668
Fair value adjustment to contingent
consideration 421 - (92)
Settlement of consideration - (1,026) (1,026)
Unwinding of discount 386 194 563
Exchange differences on retranslation - (41) (41)
---------- ---------- ----------
Closing 7,929 6,845 7,122
---------- ---------- ----------
Analysed as:
Amounts falling due
within 12 months 7,929 - 7,122
Amounts falling due - 6,845 -
after one year
------ ------ ------
7,929 6,845 7,122
------ ------ ------
The closing balance at 30 September 2017 relates to provisions
for contingent consideration for IDscan.
The opening balance at 1 April 2016 represented contingent
consideration amounts relating to the acquisition of DecTech.
During the year ending 31 March 2017, a final payment of
AUS$2,000,000 (GBP1,026,000) was made to settle the outstanding
obligation on DecTech. The closing balance at 31 March 2017 relates
to provisions for contingent consideration for IDscan. Exchange
differences of GBP41,000 arose from the retranslation of DecTech
into pounds Sterling for consolidation purposes and are not part of
the fair value movement on the underlying contingent
consideration.
In prior periods, the fair value of contingent consideration was
estimated having been determined from management's estimates of the
range of outcomes to certain future revenue and EBITDA forecasts
for periods between 12 and 18 months from completion date and their
estimated respective likelihoods. The contractual cash flows were
therefore based on future trading activity, which is estimated
based on latest forecasts (Level 3 as defined by IFRS 13). In the
current period, management have assessed that it is highly likely
that the maximum contingent consideration amount will be
payable.
18. FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT
The objectives, policies and strategies pursued by the Group in
relation to financial instruments are described within the 2017
Annual Report. Set out below is an overview of financial
instruments, other than cash and short-term deposits, held by the
Group:
30 September 30 September 31 March 2017
2017 2016
Fair Fair Fair
Loans value Loans value Loans value
and profit and profit and profit
receivables or receivables or receivables or
loss loss loss
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets:
Trade and other
receivables 23,601 - 17,669 - 26,160 -
Total current 23,601 - 17,669 - 26,160 -
Total financial
assets 23,601 - 17,669 - 26,160 -
-------------- -------- -------------- -------- -------------- --------
Financial liabilities:
Loans 12,974 - 12,000 - 11,499 -
Contingent consideration - - - 6,845 - -
-------------- -------- -------------- -------- -------------- --------
Total non-current 12,974 - 12,000 6,845 11,499 -
Trade and other
payables 18,421 - 12,832 - 17,404 -
Loans 850 - 3,701 - 886 -
Contingent consideration - 7,929 - - - 7,122
-------------- -------- -------------- -------- -------------- --------
Total current 19,271 7,929 16,533 - 18,290 7,122
Total financial
liabilities 32,245 7,929 28,533 6,845 29,789 7,122
-------------- -------- -------------- -------- -------------- --------
Trade and other receivables exclude the value of any prepayments
or accrued income. Trade and other payables exclude the value of
deferred income. All financial assets and liabilities have a
carrying value that approximates to fair value. For trade and other
receivables, allowances are made within the book value for credit
risk. The Group does not have any derivative financial
instruments.
Contingent consideration
The fair value of contingent consideration is the present value
of expected future cash flows based on latest forecasts of future
performance.
Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Fair value within current liabilities:
Contingent consideration 7,929 - 7,122
---------- ---------- ----------
Fair value within non-current
liabilities:
Contingent consideration - 6,845 -
---------- ---------- ----------
Assets and liabilities for contingent consideration are Level 3
financial instruments under IFRS 13. The Group classifies fair
value measurement using a fair value hierarchy that reflects the
significance of inputs used in making measurements of fair value.
The fair value hierarchy has the following levels:
-- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3 - Inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
18. FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT
(continued)
For financial instruments that are recognised at the fair value
on a recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is significant
to the fair value measurement as a whole) at the end of each
reporting period.
Financial Liabilities
The Group has an Australian dollar three year term loan of
AUS$10,000,000 maturing in November 2018. The debt bears an
interest rate of +1.90% above the Australian Dollar bank bill
interest swap rate ('BBSW').
The Group has a 3 year revolving credit facility agreement
expiring in November 2018 with an option to extend by a further
year. The facility is subject to a limit of GBP50,000,000 and bears
an initial interest rate of LIBOR +1.50%.
The facilities are secured by way of an all asset debenture.
The Group is subject to a number of covenants in relation to its
borrowings which, if breached, would result in loan balances
becoming immediately repayable. These covenants specify certain
maximum limits in terms of the following:
-- Leverage
-- Interest cover
At 30 September 2017, 31 March 2017 and 30 September 2016 the
Group was not in breach of any bank covenants.
ALTERNATIVE PERFORMANCE MEASURES
Management assess the performance of the group using a variety
of alternative performance measures. In the discussion of the
Group's reported operating results, alternative performance
measures are presented to provide readers with additional financial
information that is regularly reviewed by management. However, this
additional information presented is not uniformly defined by all
companies including those in the Group's industry. Accordingly, it
may not be comparable with similarly titled measures and
disclosures by other companies. Additionally, certain information
presented is derived from amounts calculated in accordance with
IFRS but is not itself an expressly permitted GAAP measure. Such
measures are not defined under IFRS and are therefore termed
'non-GAAP' measures and should not be viewed in isolation or as an
alternative to the equivalent GAAP measure.
The Group's income statement and segmental analysis separately
identify trading results before certain items. The directors
believe that presentation of the Group's results in this way is
relevant to an understanding of the Group's financial performance,
as such items are identified by virtue of their size, nature or
incidence. This presentation is consistent with the way that
financial performance is measured by management and reported to the
Board and assists in providing a meaningful analysis of the trading
results of the Group. In determining whether an event or
transaction is presented separately, management considers
quantitative as well as qualitative factors such as the frequency
or predictability of occurrence. Examples of charges or credits
meeting the above definition and which have been presented
separately in the current and/or prior years include amortisation
of acquired intangibles, share-based payments charges, acquisition
related costs and business restructuring programmes. In the event
that other items meet the criteria, which are applied consistently
from year to year, they are also presented separately.
The following are the key non-GAAP measures used by the
Group:
Adjusted Operating Profit
Adjusted operating profit means profits before amortisation of
acquired intangibles, share-based payment charges, exceptional
items, net finance costs and tax. This is used throughout the Group
by management for internal performance analysis and to assess the
execution of our strategies. Management believe that it is both
useful and necessary to report these measures as they are used for
internal performance reporting, these measures are used in setting
director and management remuneration and they are useful in
connection with discussion with the investment analyst community
and debt rating agencies.
Organic Growth
Organic growth is defined by the Group as year-on-year
continuing revenue growth, excluding acquisitions, until the date
of their anniversary and represents performance on a comparable
basis. Whilst organic growth is neither intended to be a substitute
for reported growth, nor is it superior to reported growth, the
Group believes that these measures provide useful and necessary
information to investors and other interested parties.
Specifically, it provides additional information on the underlying
growth of the business, it is used for internal performance
analysis and it facilitates comparability of underlying growth with
other companies (although the term 'organic' is not a defined term
under IFRS and may not, therefore, be comparable with similarly
titled measures reported by other companies).
Net debt
Net debt means cash and short-term deposits less loans. Net debt
is a measure of the Group's net indebtedness that provides an
indicator of the overall balance sheet strength. It is also a
single measure that can be used to assess both the Group's cash
position and its indebtedness. The use of the term 'net debt' does
not necessarily mean that the cash included in the net debt
calculation is available to settle the liabilities included in this
measure. Net debt is considered to be an alternative performance
measure as it is not defined in IFRS.
Adjusted Earnings and Adjusted Earnings Per Share
Adjusted earnings represents adjusted operating profit less net
finance costs and tax and adjusted EPS represents adjusted earnings
divided by the weighted average number of shares in issue, and is
disclosed to indicate the underlying profitability of the
Group.
Independent Review Report to GB Group plc
Introduction
We have been engaged by the GB Group plc (the 'Company') to
review the condensed set of consolidated financial statements in
the half-yearly financial report for the 6 months ended 30
September 2017 which comprises Interim Consolidated Statement of
Comprehensive Income, Interim Consolidated Statement of Changes in
Equity, Interim Consolidated Balance Sheet, Interim Consolidated
Cash Flow Statement and the related explanatory notes 1 to 18. We
have read the other information contained in the half- yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of consolidated financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
International Accounting Standards 34 'Interim Financial Reporting'
as adopted by the European Union.
As disclosed in note 2, the annual financial statements of the
company are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of consolidated financial
statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standards 34
'Interim Financial Reporting' as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the 6
months ended 30 September 2017 is not prepared, in all material
respects, in accordance with International Accounting Standard 34
as adopted by the European Union.
Ernst & Young LLP
Manchester
28 November 2017
The maintenance and integrity of the GB Group plc web site is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial information since it was
initially presented on the web site.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BRBLTMBBTBPR
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