TIDMGBG
RNS Number : 4961R
GB Group PLC
30 June 2020
.
Embargoed until 7.00 a.m 30 June 2020
GB GROUP PLC
("GBG", "Group" or the "Company")
Annual Results for the Year Ended 31 March 2020
Successful year of growth and delivery against strategic
objectives
GB Group plc (AIM: GBG), the global identity data intelligence
specialist, announces its annual results for the year ended 31
March 2020.
Financial highlights
2020 2019 % change
Revenue GBP199.1m GBP143.5m 38.7%
Adjusted operating profit
(1) GBP47.9m GBP32.0m 49.7%
Adjusted basic earnings
per share (1) 21.8p 18.2p 19.8%
Profit before tax GBP20.6m GBP14.7m 40.0%
Deferred income balance GBP38.4m GBP36.6m 4.9%
Net assets GBP344.9m GBP321.5m 7.3%
Net (debt)/cash (1) GBP(35.0)m GBP(66.3)m -
Dividend per share - 2.99p -
2020 2019 Total Growth 2020 Organic 2019 Revenue Organic
Revenue (CCY) (1) Revenue
Growth (CCY)
(1)
Total revenue GBP199.1m GBP143.5m 38.7% GBP158.3m GBP143.0m 10.7%
Adjusted GBP47.9m GBP32.0m 49.7% - - -
operating
profit (1)
Strategic and operational highlights
Strong revenue and profit performance:
-- Good growth from all geographies and GBG's three core
solutions (Location, Identity and Fraud)
-- International revenues now 56% of the business
-- IDology is performing well and delivering on acquisition objectives
Continued investment in data, products and technology:
-- Increasing breadth and depth of data in chosen markets
-- Enhancement of product portfolio through internal development and partnerships
-- Enhanced our capabilities in artificial intelligence,
multi-modal authentication and validation methods
-- Significant progress in the shift to a globally capable, cloud-based operational model
Covid-19: early and decisive action:
-- Focused on protecting team members, supporting our customers and positioning for the future
-- Prompt actions taken early to maintain our organisational
capacity whilst reducing discretionary spending
-- Assisted by a strong balance sheet with available bank draw
down facilities, good liquidity and a high proportion of annual
recurring licence revenue
Current trading:
-- We are witnessing varying levels of impact depending on
customer vertical, product solution and geography with positive and
negative effects
-- To date customer churn, solvency and bad debt are at normal levels
-- Continuing to win new business though some sales cycles are lengthening
Outlook:
-- It is not yet possible to understand the ongoing impact of Covid-19 on the business
-- Dividend and guidance currently suspended
-- Long-term market drivers remain favourable and should be
enhanced by accelerated digitalisation of customers' businesses
-- Our strong balance sheet, leading technology and diversified
customer base leaves GBG well-positioned for long-term success
Chris Clark, CEO, commented:
"I am extremely proud of our performance in the last 12 months,
which saw profit and revenues exceed market expectations. This was
driven by GBG's international expansion and innovative product
offerings. Although it is hard to predict the full impact of
Covid-19, we remain well-positioned to support our customers
through the current environment and in the longer term.
None of this would be possible without the incredible
hardworking team at GBG. I want to pay tribute to the dedication of
my colleagues through this challenging period. I am confident GBG
is approaching the future from a position of strength ."
Notes:
(1) These measures are defined within note 37 to the Annual
Report.
Ends -
For further information, please contact:
GBG
Chris Clark, CEO
Dave Wilson, CFO & COO 01244 657333
Pe el Hunt LLP (Nominated Adviser and
Broker)
Edward Knight
Nick Prowting
Ed Allsopp 020 7418 8900
Tulchan 020 7353 4200
James Macey White GBG@tulchangroup.com
Matt Low
Deborah Roney
Website www.gbgplc.com/investors
Presentation and webcast
Chris Clark, Chief Executive, and David Wilson, Chief Financial
Officer & Chief Operating Officer will be hosting an analyst
webcast presentation at 9.00 a.m. on 30 June 2020.
Shortly following the presentation, an archived webcast will be
available on the Investors page of GBG's website.
About GBG
GBG offers a range of solutions that help organisations quickly
validate and verify the identity and location of their
customers.
Our market-leading technology, data and expertise help our
customers improve digital access, deliver a seamless experience and
establish trust so that they can transact quickly, safely and
securely with their customers online.
Headquartered in the UK and with over 1,000 team members across
16 countries, we work with 20,000 customers in over 70 countries.
Some of the world's best-known businesses rely on GBG to provide
digital services and keep the economy moving, from US e-commerce
giants to Asia's biggest banks and European household brands.
To find out more about how we help our customers establish trust
with their customers, visit www.gbgplc.com and follow us on
LinkedIn and Twitter @gbgplc.
Chairman's Statement
The past year has been a strong one for GBG. We have delivered
on our strategic objectives, achieved record levels of revenue and
profit and earned our best-ever levels of engagement for both team
members and customers. The impact of Covid-19 means, however, that
we have little time to celebrate our past success. Instead, we are
focussing all our attention and skills on supporting our team
members and customers during this demanding and uncertain time. We
are taking actions to make sure our business remains strong
throughout this period and we are confident that we will emerge
from this crisis in a position to deliver against our long-term
growth strategy.
Covid-19 Pandemic
On behalf of the Board, I want to say how grateful I am to our
team members across the world for their commitment and dedication
during the Covid-19 pandemic. While working remotely, they have
maintained high levels of service to our customers as well as
supporting the well-being of their families and colleagues. It is a
credit to them and the senior management team that we have been
able to operate so effectively in light of these challenging
conditions, putting us in a strong position to maintain the
prospects of the Group. I am justly proud of all their efforts.
The Chief Executive's report covers in more detail the steps and
actions that GBG has taken to carry out its business continuity
plans, ensuring the safety and well-being of our team members and
supporting our customers. The Board has been holding virtual
meetings on a weekly basis, where we have received updates from the
Executive Directors on a range of matters relating to Covid-19.
This is a very effective forum to make sure that we can continue to
meet our obligations to all of our stakeholders. It has also given
us the opportunity to identify and consider any potential
challenges and opportunities at an early stage.
We are keenly aware of the challenges posed by the impact of
Covid-19 on the global markets we operate in, as well as society at
large. While it is still too early to assess the full impact of the
pandemic, I am pleased with the pace of actions we have taken to
mitigate the effects of the pandemic on our team members, customers
and the business.
Financial performance
GBG's financial performance in the year was again ahead of
market expectations. Revenues increased by 38.7 % to GBP199.1
million (2019: GBP143.5 million), with organic revenue growth at
constant currency (1) of 10.7%. Adjusted operating profit (1)
increased by 49.7% to GBP47.9 million (2019: GBP32.0 million) and
adjusted earnings per share (1) rose 19.8%% to 21.8 pence (2019:
18.2 pence).
We generated good levels of cash in the year which contributed
to a significant improvement in our net debt position, down to
GBP35.0 million from GBP66.3m in FY19. We enter FY21 in a robust
financial position with a strong balance sheet, a cash generative
business model and access to liquidity.
Achievements and strategic outlook
During the year we remained focused on the continued strategic
development of our three core solutions: Location, Identity and
Fraud. We have been effective in engaging with existing and
potential customers, as well as responding to market trends and
developments, while maintaining our long-standing commitment to
innovation.
GBG is committed to building market-leading products that meet
the evolving needs and requirements of our customers, helping them
to operate securely and compliantly, at the same time as providing
a high quality and seamless customer experience.
We have also continued to embrace new concepts, combining the
best ideas from the markets we serve. This includes enhancing our
capabilities in artificial intelligence, multi-modal authentication
and validation methods including biometrics, voice and images. The
increasing breadth, depth and scope of data in our products means
we can offer our customers unique access to the most accurate
information, enabling them to make more intelligent, commercial and
risk-based decisions. In turn, this helps them to increase their
revenues and improve operational efficiency.
Following its acquisition in 2019, IDology has integrated well
into the Group, contributing significantly to our strategy to
enhance our product capability and to expand geographically. It
also further demonstrates our ability to identify, acquire and
integrate businesses that are complementary to our growth strategy
and that will increase GBG's value.
We also welcomed Natalie Gammon to the Board in November 2019.
She brings a wealth of relevant experience and we look forward to
the input and insights she will bring.
At the half year, I indicated that The Information
Commissioner's Office, the data industry regulator in the UK, had
announced in November 2018 that it was conducting audits on a
number of companies to understand the use of data in their
services. We were included in this review and we are continuing to
work with the Commissioner to continue to improve privacy
compliance. We will keep the market informed of any material
developments.
AGM and Dividend
In light of current and anticipated Covid-19 public health
guidelines, GBG is asking shareholders to comply with certain
unprecedented but urgent measures for this year's AGM. These
measures, which follow current best practice, are being taken to
safeguard the safety and well-being of shareholders and other
participants and to make the AGM as safe as possible.
As the UK Government has imposed measures restricting public
gatherings, anyone seeking to attend the meeting in person (beyond
the two persons designated by the Board as being necessary to form
a quorum) will be refused entry to the AGM. Shareholders wishing to
vote on any of the matters of business at the AGM are strongly
encouraged to submit their votes in advance by proxy. Further
details and instructions will be detailed in the AGM notice issued
to shareholders.
As indicated in our April 2020 trading and Covid-19 update, the
Board does not intend to declare a final dividend in respect of
financial year 2020. We have already taken steps to reduce costs
and preserve liquidity, including a Group-wide pay freeze, halting
all-but-essential recruitment and deferring Executive Directors'
bonuses. This extra prudent step will help to both preserve
short-term liquidity and provide GBG with additional financial
flexibility to support and invest as we come out of the
pandemic.
The year overall and outlook
FY2020 has been another successful year in terms of delivering
on our strategic priorities and further growth of the Group. Whilst
we are pleased at how GBG has responded to the immediate challenges
presented by Covid-19, it still remains unclear how it will affect
GBG in the coming months as each customer, sector and geography are
impacted in different ways. However, consumers are carrying out
more transactions online and organisations are responding to this
by accelerating their plans to offer seamless, quick and secure
digital services. These are healthy indications that we could see
an increasing demand for our services in the medium-term. We look
forward to playing our part in supporting businesses as economies
recover from the effects of the pandemic.
We remain confident in the longer-term prospects of the Group,
thanks to a combination of a well-established growth strategy, a
strong balance sheet, significant market opportunity, diversified
sectors and customer base and world-class products.
On behalf of the Board, I would like to thank Chris Clark, his
Executive Team and all of our team members for their hard work in
achieving the result for 2020. I am very grateful for their
commitment and dedication during this difficult time. I would also
like thank our shareholders and customers for their continued
support.
David Rasche
Chairman
(1) These measures are defined within note 37 to the Annual
Report
Chief Executive's Review
As you might imagine, our current focus and attention is on
Covid-19. That said, I think it is important to acknowledge how
strongly GBG performed in the year ending March 2020. We delivered
record revenue and profit, ahead of market expectations, while also
making strong progress against our key strategic objectives. This
has strengthened GBG and gives us the confidence to face the
challenges and embrace the opportunities ahead. Before addressing
aspects of our performance, achievements and strategic progress in
2020, I will cover the actions we have taken in response to the
Covid-19 pandemic.
Covid-19
The Covid-19 crisis had a limited financial impact on FY20, as
it escalated towards the end of our financial year. As we said in
our Covid-19 update in April 2020, our priorities have been to
protect our team members and to support their health and
well-being; to look after our customers; and to make our business
secure, both financially and operationally. We took a number of
swift actions, including:
-- Achieving a smooth transition to full remote working for all
of our global teams within a few days of local lockdowns being
announced. Although our team members are already used to working
from outside of the office, we have taken extra steps to enhance
the way we engage with them and support them through the challenges
of a sustained time in isolation.
-- We took prudent and decisive action early in the process to
preserve liquidity and reduce discretionary costs. This included an
immediate Group-wide pay freeze, as well as pausing all
non-essential recruitment. We are carefully assessing project spend
and are restricting it to those areas critical to the long-term
success of GBG. We have also deferred the payment of the accrued
bonus for GBG's Executive Directors and we will not declare a final
dividend in respect of the 2020 financial year.
-- We formed a Covid Team in mid-March, drawn from the Group's
senior management. The team met daily to assess the range of issues
impacting GBG. They scoped and rapidly put in place a plan of
action, assigning activities and responsibilities. The team
continues to meet regularly each week to monitor progress and to
consider whether to adapt and/or flex the plan of action in light
of ongoing developments.
-- Within the first week of being established, the Covid Team
received daily statistics on usage volumes of all of our services
together with updates on network service availability. This data
has been provided throughout the period to identify trends and to
support our activities.
-- We have held a virtual Board meeting each week. The Board's
regular agenda covers: team members; customers; financial health;
operations; governance; and opportunities.
Although the impact of Covid-19 on GBG has not been as marked as
with many other organisations, the full effect on the business is
still unfolding. We are seeing different levels of impact depending
on the customer vertical, product solution and geography.
In addition to the steps we have taken to reduce discretionary
costs, we have been mindful also of our wider obligations to do the
right thing to support our team members, customers and other
stakeholders. We want to make sure that we are all well-placed to
deal with whatever lies ahead as the world adapts to the impact of
Covid-19. With that in mind, we will continue to invest in areas
that support this longer-term objective.
Overview
The strong financial performance in 2020 means GBG continues to
have the capability and resources to make important investments
across the Group to support further growth. We are committed to
developing and launching additional world-class products, improving
how we take these products to market and recruiting and developing
the very best people.
Market drivers
With over 30 years' market experience, as well as a suite of
products that are truly innovative and global, we help our
customers to benefit and succeed in the digital economy by
interacting safely and securely with their consumers.
Our growth has been achieved by delivering innovative digital
solutions to businesses around the world, helping them provide a
frictionless customer experience, reduce online fraud and meet
increasingly stringent compliance regulations. This is driven
by:
-- Continuing growth in e-commerce, particularly in mobile
-- Increasing levels of fraud and data breaches
-- A continued rise in the cost and complexity of local
compliance requirements for a number of sectors we serve
globally
-- Consumers expecting simple, fast and safe online journeys
While it is too early to draw definitive conclusions on the
impact of Covid-19, initial observations indicate that many of
these drivers might well accelerate. For example, before Covid-19,
many organisations had not yet fully digitalised their systems.
Now, we are seeing customers speeding up the digitalisation of
their offerings. We are helping them to address the opportunities
and threats posed by the pandemic to make things easier, faster and
more convenient for their customers and to protect and/or reinvent
their business models. We are an essential partner on this journey,
helping our customers establish trust in their digital
operations.
Strategic focus areas
Our strategic focus is on expanding internationally through
three complementary but, in most cases today, distinct solutions
that underpin all our propositions: Location, Identity and Fraud.
Each solution contributed to the strong performance in the period.
We are pleased to see that revenues from our international
operations continue to form a major part of our growth - up from
45% to 56% of our total business.
In the current rapidly changing environment, our sector, product
and geographical diversification lets us align our developments and
resources with evolving customer demand and market trends. We
continue to invest and strengthen the capabilities and skills of
our teams to meet the growing needs of our customers around the
world, especially as their own consumers are speeding up the pace
at which they access services using mobile and online technologies.
We are committed to supporting our customers as they develop their
solutions to meet the demands being made of them, while also making
sure that these developments are safe and secure, protecting their
consumers from fraud and meeting regulatory requirements.
Corporate transactions
IDology has performed strongly. It has now met a key objective
of the acquisition - to help us to secure our goal of providing
leading identity data intelligence solutions globally by increasing
the scope and coverage of one of our core propositions in North
America, a key geography.
We are also making significant progress in our strategic
objective to have a business of scale for all of our solution areas
of Location, Identity and Fraud in our key regions.
Our financial position at the year-end, together with the steps
we have taken to conserve our cash resources and protect access to
debt financing, means that we continue to have the means and
ability to consider acquisitions and investments when they arise.
This gives us the option to increase the pace of our go to market
initiatives and/or broaden our geographic reach and product
capabilities.
Scale through technology
This year, under the stewardship of a new global technology
leadership team, we have significantly advanced the technology and
cyber defences underpinning our customer propositions and
operations. We made it a strategic priority to shift to a globally
capable, cloud-based operational model. We have begun to realise
key platform capabilities that will deliver the scale, agility and
compliance requirements demanded by our international customer
base.
Growth: new business and international expansion
We have seen a good performance across all of our solution areas
and geographies in terms of: winning new logos; additional business
from existing customers; and customer retention. This includes:
-- Location solution : Loqate secured a number of new customers
in the year across Europe and USA. This included Adidas and Wish,
together with John Lewis Partnership and GNC, which we secured in
the first half of FY20. In addition, it secured a five-year
contract with IBM towards year-end that both extended and expanded
our existing relationship, worth a minimum of $13.5million.
-- Identity solution : new business wins supported double-digit
growth across all our main geographies. This included a deal with
Rank Group in the UK to install our technology across their UK
casino estate. Other new business wins in the year include PayPal,
Adyen and Sky in addition to William Hill Group, announced at the
half year.
-- Fraud solution : in addition to building on our successes in
the Asia Pacific region, we also saw encouraging growth in the year
in EMEA. This was supported by new agreements in the second half of
the year with First Abu Dhabi Bank and Volkswagen Payments S.A.,
along with an extension of our relationship with Arval, a
subsidiary of BNP Paribas Fortis, to provide our Fraud solutions
across another three European countries.
-- Upsell and Cross-sell: we continue to see growth from
existing customers increasing their use and number of services they
take from GBG. Examples include Flexi Group in Australia now taking
all our Identity and Fraud services in Australia and Domestic and
General taking our Location and Identity services in the UK.
Team Members
Our global team now has over 1,000 people working in 16
countries. I want to thank each of them for their dedication and
professionalism over the last 12 months and through the very recent
period in particular. They have delivered against the key
priorities we set and we have entered our new financial year in
good shape as a result.
I was also very pleased that our employee engagement survey,
completed in March 2020, recorded its best result. We saw an
improvement on last year's high score and an even higher response
rate. We continue to have more than 90% of the global team who
would recommend GBG as a great place to work.
Current trading, guidance and outlook
Our operational performance in FY20, along with the recent
actions we have taken to conserve cash, have helped place us in as
optimal a position as we could hope, to withstand the impacts of
the pandemic.
Given the global impact of Covid-19, we have been encouraged by
some countercyclical opportunities. These have, to a certain
extent, helped soften the impact of reduced underlying activity in
some parts of our business in the first quarter of FY21 trading.
Although it is still early in the pandemic, customer churn and
levels of insolvency are at normal levels although we have started
to see some customers taking more time to settle their invoices .
There has been little impact on our suppliers. We have continued to
win new business, although sales cycles are, understandably,
lengthening.
It is not possible to predict how long the effects of the
disruption caused by the pandemic will last. While the Group has a
high level of annual recurring licence revenue, which provides good
visibility, the full impact on volume-based sales are harder to
predict. This means we do not yet have sufficient visibility to
provide guidance for the year ending 31 March 2021.
Despite what is happening to global economies, our drivers for
growth remain the same and in some cases are more important as
businesses have needed to adapt to new norms. We have confidence
that the Group is well-positioned to face what might be ahead of
us, thanks to a combination of our market-leading solutions, a
diversified customer base and revenues not being reliant on a
single customer or sector. Fundamentally, I believe that our
long-term prospects in a post-Covid-19 environment remain as
attractive as before.
Chris Clark
Chief Executive Officer
Finance Review
Principal Activities and Business Review
The principal activity of GB Group plc ('GBG') and its
subsidiaries (together 'the Group') is the provision of identity
data intelligence services. GBG helps organisations simply, safely
and securely transact with their customers. Through the application
of our proprietary technology, our vision is to be the leader in
identity data intelligence, informing business decisions between
people and organisations globally.
The performance of the Group is reported by segment, reflecting
how we run the business and the economic characteristics of each
segment. 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 2019. Going forward 'Fraud, Risk & Compliance' has been
separated into two new segments - 'Identity' and 'Fraud'. The
'Location & Customer Intelligence' segment has been renamed as
'Location'.
The Group results are set out in the Consolidated Statement of
Comprehensive Income and explained in this Finance Review. A review
of the Group's business and future development is contained in the
Chairman's Statement, the Chief Executive's Statement and this
Finance Review.
Covid-19
Management has taken decisive action to reduce discretionary
costs and preserve liquidity during the uncertainty during this
period. These actions included an immediate Group-wide pay freeze
and a pausing of all non-essential recruitment. Project spend is
being carefully assessed and restricted to those areas critical to
the long-term success of GBG. Executive Directors' bonus payments
accrued for the year to 31 March 2020 have been deferred and as
stated below, there will be no final dividend for 2020. An optional
GBP10.0 million loan repayment that was planned for March 2020 was
not made until May 2020 to ensure that the directors had been able
to better assess the impact Covid-19 was likely to have on future
cashflows.
Review of the Business
The Group uses adjusted figures as key performance indicators in
addition to those reported under IFRS, as adopted by the European
Union and IFRIC. Adjusted figures exclude certain non-operational
or exceptional items, which is consistent with prior year
treatments. Adjusted measures are marked as such when used and are
explained in note 37.
2020 2019 Change Change
GBP'000 GBP'000 GBP'000 %
Revenue 199,101 143, 504 55,597 38.7
-------------------------------------- --------- --------- -------- -------
Adjusted operating profit 47,945 32,031 15,914 49.7
-------------------------------------- --------- --------- -------- -------
Adjusted operating profit/revenue 24.1% 22.3% 1.8% 7.9
-------------------------------------- --------- --------- -------- -------
Share-based payments charge (4,541) (2,287) (2,254) 98.6
-------------------------------------- --------- --------- -------- -------
Amortisation of acquired intangibles (19,008) (10,316) (8,692) 84.3
-------------------------------------- --------- --------- -------- -------
Operating profit before exceptional
items 24,396 19,428 4,968 25.6
-------------------------------------- --------- --------- -------- -------
Exceptional items (1,552) (4,003) 2,451 61.2
-------------------------------------- --------- --------- -------- -------
Operating profit 22,844 15,425 7,419 48.1
-------------------------------------- --------- --------- -------- -------
Net finance costs (2,218) (689) (1,529) 221.9
-------------------------------------- --------- --------- -------- -------
Profit before tax 20,626 14,736 5,890 40.0
-------------------------------------- --------- --------- -------- -------
Total tax charge (3,562) (2,583) (979) 37.9
-------------------------------------- --------- --------- -------- -------
Profit for the year 17,064 12,153 4,911 40.4
-------------------------------------- --------- --------- -------- -------
Dividend per share Nil 2.99 n/a n/a
-------------------------------------- --------- --------- -------- -------
Adjusted earnings 42,165 28,759 13,406 46.6
Basic weighted average number
of shares ('000) 193,631 158,052 35,579 22.5
-------------------------------------- --------- --------- -------- -------
Basic earnings per share (pence) 8.8 7.7 1.1 14.3
-------------------------------------- --------- --------- -------- -------
Adjusted basic earnings per share
(pence) 21.8 18.2 3.6 19.8
-------------------------------------- --------- --------- -------- -------
Following the significant acquisitions over the past couple of
years, the focus during the current year was to ensure these
acquisitions were successfully integrated into the Group, as well
as continued investment in the existing businesses to drive
sustainable organic growth. Both the newly acquired businesses
delivered profitable growth during the year.
This period of integration has been successful and meant that
when the Covid-19 outbreak occurred, the business as a whole was
able to adapt quickly to minimise the impact on operations. The
profitable growth and continued high cash generation during the
year means that the Group's balance sheet and financing ability
remain strong, underpinning the Group's ability to navigate
successfully through the uncertainty caused by Covid-19.
Adjusted operating profit for the year increased by 49.7 per
cent to GBP47.9 million, reflecting:
-- Revenue growth of 38.7 per cent to GBP199.1 million. This
increase included organic growth of 10.7 per cent on a constant
currency basis (10.3 per cent on a reported basis).
-- The adjusted operating profit margin increased from 22.3 per
cent to 24.1 per cent, notwithstanding significant continued
investment for growth made over the course of the year.
Adjusted EBITDA
Adjusted EBITDA was GBP51.7 million (2019: GBP34.1 million),
consisting of adjusted operating profit of GBP47.9 million (2019:
GBP32.0 million), depreciation (including right-of-use assets) of
GBP3.6 million (2019: GBP1.5 million) and amortisation of purchased
software and internally developed software of GBP0.2 million (2019:
GBP0.5 million). Adjusted EBITDA has increased by GBP2.1 million
due to the adoption of IFRS 16 as rent expenses previously within
operating costs are now split between depreciation and interest and
therefore not part of the EBITDA calculation.
Amortisation of Acquired Intangibles
The charge for the year of GBP19.0 million (2019: GBP10.3
million) represents the non-cash cost of amortising separately
identifiable intangible assets including technology-based assets
and customer relationships that were acquired through business
combinations. The increased charge in the year is due to the full
year impact of the acquisitions of VIX Verify and IDology in the
prior year. As IDology, which is the largest acquisition the Group
has made, completed towards the end of the prior year, this
accounted for GBP9.0 million of the current year increase.
Exceptional Items
Exceptional costs of GBP1.6 million (2019: GBP4.0 million) were
incurred by the Group in the year and have been detailed in note 7
to the accounts. The principal reason for the decrease compared to
prior year is that GBP3.7 million was incurred on acquisition
related costs last year, compared to less than GBP0.1 million in
the current year. GBP0.9 million of the charge relates to an
increase in contingent consideration in relation to IDology, as
detailed in the tax section below.
Net Finance Costs
The Group has incurred net finance costs for the year of GBP2.2
million (2019: GBP0.7 million), the increase being interest on the
new long-term loan which was taken out in February 2019. Also
included within net finance costs is GBP0.2 million for interest on
lease liabilities following the adoption of IFRS 16 in the
year.
Taxation
The total tax charge of GBP3.6 million (2019: GBP2.6 million)
includes GBP4.8 million of current tax payable on the Group's
profits in the year (2019: GBP4.6 million) . Included within the
total tax charge is a credit of GBP0.8 million related to the
increase in the deferred tax asset for pre-acquisition losses
within IDology. The benefit of this asset is payable to the former
shareholders of IDology and so there is a corresponding cost within
exceptional items to reflect the increase in the contingent
consideration liability.
Dividend
As communicated in the Pre-Close Trading Update on 22 April
2020, following the Covid-19 outbreak, the directors do not intend
to declare a final dividend in respect of the 2020 financial year.
This prudent step helps both preserve short term liquidity and also
provides additional financial flexibility to support and invest in
the business as we come out of the Covid-19 pandemic.
Earnings per Share
The earnings per share analysis in note 13 cover four
measures:
-- basic earnings per share (profit attributable to equity holders);
-- diluted earnings per share (adjusting for the dilutive effect of share options);
-- adjusted basic earnings per share (adjusted operating profit
less net finance costs and tax); and
-- adjusted diluted earnings per share (adjusted operating
profit less net finance costs and tax adjusting for the dilutive
effect of share options).
Basic earnings per share increased by 14.3 per cent from 7.7
pence to 8.8 pence reflecting the higher operating profit although
offset by higher number of shares in issue. Adjusted earnings
(adjusted operating profit less net finance costs and tax) was
GBP42.2 million (2019: GBP28.8 million) resulting in a 19.8 per
cent increase in adjusted basic earnings per share from 18.2 pence
to 21.8 pence.
The basic weighted average number of shares at 31 March 2020
increased to 193.6 million (2019: 158.1 million), primarily due to
the placing of 39.0 million shares to part fund the IDology
acquisition in February 2019.
Cash Flows
Group operating activities before tax payments and exceptional
items generated GBP49.3 million of cash and cash equivalents (2019:
GBP31.6 million) representing Adjusted EBITDA to cash conversion
ratio of 95.2 per cent (2019: 92.7 per cent). Operating cash flows
continued to be strong and the Group continually monitors its
measures of cash generation and collection, especially during the
Covid-19 outbreak to assess the recoverability of receivables.
The cash generated from operations enabled debt repayments of
GBP24.9 million to be made during the year, with leverage reducing
to 0.68 from 1.94 in 2019. Further detailed analysis of this
movement is included in the Consolidated Cash Flow Statement.
Post year-end a further loan repayment of GBP10.0 million has
been made.
Acquisitions
As detailed in note 36, contingent consideration of GBP5.2
million in respect of the deferred tax losses in IDology was
recognised as a measurement period adjustment. During the current
year the liability increased by GBP0.8 million due to the CARES Act
permitting the losses to be carried back to periods when the tax
rate was higher. A further increase of GBP0.1 million to the
liability was recognised due to movements in exchange rates.
A payment due in relation to the IDology acquisition, completed
in February 2019, was made during the current financial year. This
payment of GBP86,000 based on the final working capital position
was included within the contingent consideration liability at 31
March 2019 at a value of GBP79,000. The variance was due to
exchange rate fluctuations between the acquisition date and the
final payment date.
Deferred Income
Deferred income at the end of the year increased by 4.9 per cent
to GBP38.4 million (2019: GBP36.6 million). This balance
principally consists of contracted licence revenues and profits
that are payable up front but recognised over time as the Group's
revenue recognition criteria are met. The timing of invoicing for
multi-year contracts within the Asia Pacific business meant that
their deferred revenue balance decreased by 48%. Excluding Asia
Pacific in both periods the deferred balance increased by 8.5 per
cent.
The deferred income balance does not represent the total
contract value of any future unbilled annual or multi-year,
non-cancellable agreements as the Group more typically invoices
customers in annual or quarterly instalments. Deferred income is
determined by several factors, including seasonality, the
compounding effects of renewals, invoice duration, invoice timing
and new business linearity within a reporting period.
Treasury Policy and Financial Risk
The Group's treasury operation is managed within formally
defined policies and reviewed by the Board. The Treasury Policy was
updated during the year and this review also led to the
establishment of a Treasury Committee. The Treasury Committee meets
on a regular basis to review cash flow forecasts, covenant
compliance, exposure to interest rate and foreign currency
movements and make recommendations to the Board based on these
reviews.
The Group finances its activities principally with cash,
short-term deposits and borrowings but has the ability to draw down
up to GBP47.5 million of further funding from a revolving credit
facility that is in place. Other financial assets and liabilities,
such as trade receivables and trade payables, arise directly from
the Group's operating activities. Surplus funds of the Group are
invested through the use of short-term deposits, with the objective
of reasonable interest rate returns while still providing the
flexibility to fund ongoing operations when required. It is not the
Group's policy to engage in speculative activity or to use complex
financial instruments.
The Group is exposed to a variety of financial risks including:
market risk (including foreign currency risk and cash flow interest
rate risk), credit risk and liquidity risk which are described in
note 27 to the accounts.
Approved by the Board on 30 June 2020.
Dave Wilson
CFO & COO
Key Performance Indicators
The Board monitors the Group's progress against its strategic
objectives and the financial performance of the Group's operations
on a regular basis. Performance is assessed against the strategy
and budgets using financial and non-financial measures.
The following details the principal Key Performance Indicators
('KPIs') used by the Group, giving the basis of calculation and the
source of the underlying data. A summary of performance against
these KPIs is given below. Non-Statutory measures are defined
within note 37.
The Group uses the following primary measures to assess the
performance of the Group and its propositions.
Financial
-- Revenue and Organic Revenue Growth at Constant Currency
Revenue and revenue growth are used for internal performance
analysis to assess the execution of our strategies. Organic growth
is also measured, 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. Organic growth is
defined by the Group as year-on-year continuing revenue growth,
excluding acquisitions (until the date of their anniversary) and
will be reported at each reporting interval. Organic growth is
measured on a constant currency basis to remove the impact of
changes in exchange rates.
-- Adjusted Operating Profit
This is used for internal performance analysis and to assess the
execution of our strategies. Management believe that this adjusted
measure is a more appropriate metric to understand the underlying
performance of the Group.
-- Adjusted EBITDA
This is used for internal performance analysis to assess the
execution of our strategies. Management believe that this adjusted
measure is a more appropriate metric to understand the underlying
performance of the Group.
-- Earnings per Share
Earnings per share is calculated as basic earnings per share
from continuing operations on both an adjusted and unadjusted
basis.
-- Earnings per Share growth
This is calculated as the growth in year on year earnings per
share on both an adjusted and unadjusted basis.
-- Net Debt/Cash
This is calculated as cash and cash equivalent balances less
outstanding external loans. Unamortised loan arrangement fees are
netted against the loan balance in the financial statements but are
excluded from the calculation of net cash/debt.
-- Cash Conversion
This is calculated as cash generated from operations in the
Consolidated Cash Flow Statement, adjusted to exclude cash payments
for exceptional items, as a percentage of Adjusted EBITDA.
-- Deferred Income
Deferred income, which is included in our Consolidated Balance
Sheet within Trade and Other Payables, is the amount of invoiced
business in excess of the amount recognised as revenue. This is an
important internal measure for the business and represents the
amount that we will record as revenue in our Consolidated Statement
of Comprehensive Income in future periods. Trends may vary as
business conditions change.
-- International Revenue as a Percentage of Total Revenue
This is an important internal measure for the Group to assess
progress towards expanding our international operations.
Non-Financial
-- Employee Engagement
Employee engagement is a key focus area for the business in
order to retain and grow what we believe is some of the best talent
in our industry. This is measured twice a year through a group-wide
employee survey conducted through an external provider
Performance against KPIs
A summary of the Group's progress in achieving its objectives,
as measured against KPIs, is set out below. Non-Statutory measures
are defined within note 37.
Year ended 31 March
2020 2019
Revenue Growth 38.7% 19.9%
------------------------------------------ ---------- ----------
Organic Revenue Growth at Constant
Currency 10.7% 9.3%
------------------------------------------ ---------- ----------
Organic Revenue Growth 10.3% 8.7%
------------------------------------------ ---------- ----------
Fraud Organic Growth at Constant
Currency 24.3% 15.8%
------------------------------------------ ---------- ----------
Identity Organic Growth at Constant
Currency 11.5% 5.4%
------------------------------------------ ---------- ----------
Location Organic Growth at Constant
Currency 6.8% 13.6%
------------------------------------------ ---------- ----------
Adjusted Operating Profit (GBP'000) 47,945 32,031
------------------------------------------ ---------- ----------
Adjusted Operating Profit % 24.1% 22.3%
------------------------------------------ ---------- ----------
Adjusted EBITDA (GBP'000) 51,739 34,080
------------------------------------------ ---------- ----------
Adjusted EBITDA % 26.0% 23.7%
------------------------------------------ ---------- ----------
Earnings per Share - Basic 8.8p 7.7p
------------------------------------------ ---------- ----------
Earnings per Share - Adjusted
Basic 21.8p 18.2p
------------------------------------------ ---------- ----------
Earnings per Share Growth -
Basic 14.3% 8.5%
------------------------------------------ ---------- ----------
Earnings per Share Growth -
Adjusted basic 19.8% 18.9%
------------------------------------------ ---------- ----------
Net (Debt)/Cash (GBP'000) (35,001) (66,252)
------------------------------------------ ---------- ----------
Cash Conversion % 95.2% 92.7%
------------------------------------------ ---------- ----------
Deferred Income (GBP'000) 38,414 36,637
------------------------------------------ ---------- ----------
International Revenue as a Percentage
of Total Revenue 55.9% 44.7%
------------------------------------------ ---------- ----------
Employee Engagement > 90% > 90%
------------------------------------------ ---------- ----------
Consolidated Statement of Comprehensive Income
Year ended 31 March 2020
-----------------------------------------------
Note 2020 2019
GBP'000 GBP'000
Revenue 3 199,101 143,504
Cost of sales (54,914) (36,060)
Gross profit 144,187 107,444
Operating expenses before amortisation of acquired
intangibles, equity-settled share-based payments
and exceptional items (96,242) (75,413)
Operating profit before amortisation of acquired
intangibles, equity-settled share-based payments
and exceptional items (adjusted operating profit) 47,945 32,031
Amortisation of acquired intangibles 16 (19,008) (10,316)
Equity-settled share-based payments charge 29 (4,541) (2,287)
Exceptional items 7 (1,552) (4,003)
Group operating profit 22,844 15,425
3,
Finance revenue 9 143 31
Finance costs 10 (2,361) (720)
-------- --------
Profit before tax 20,626 14,736
Income tax charge 11 (3,562) (2,583)
-------- --------
Profit for the year attributable to equity holders
of the parent 17,064 12,153
-------- --------
Other comprehensive income:
Exchange differences on retranslation of foreign
operations (net of tax)(1) 6,756 (3,702)
-------- --------
Total comprehensive income for the year attributable
to equity holders of the parent 23,820 8,451
-------- --------
Earnings per share 13
- basic earnings per share for the year 8.8p 7.7 p
- diluted earnings per share for the year 8.7p 7.6 p
- adjusted basic earnings per share for the year 21.8p 18.2 p
- adjusted diluted earnings per share for the
year 21.4p 17.9p
(1) Upon disposal of a foreign operation, the
element associated to the disposed foreign operation
will be recycled to the Income Statement
Consolidated Statement of Changes in Equity
Year ended 31 March 2020
--------------------------------------------
Foreign
Equity Capital currency
share Share Merger redemption translation Retained Total
Note capital premium reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2018 3,817 104,814 6,575 3 891 40,594 156,694
-------- ------- -------- ----------- ----------- -------------- -------
Profit for the
period - - - - - 12,153 12,153
Other comprehensive
income - - - - (3,702) - (3,702)
Total comprehensive
income for the
period - - - - (3,702) 12,153 8,451
Issue of share
capital 21 1,004 159,609 - - - - 160,613
Share issue costs 21 - (3,274) - - - - (3,274)
Share-based
payments
charge 29 - - - - - 2,287 2,287
Tax on share
options - - - - - 738 738
Equity dividend 12 - - - - - (4,049) (4,049)
-------- ------- -------- ----------- ----------- -------------- -------
Balance at 31 March
2019 (as reported) 4,821 261,149 6,575 3 (2,811) 51,723 321,460
-------- ------- -------- ----------- ----------- -------------- -------
Impact of
measurement
period adjustments 2.3 - - - - 8 - 8
Balance at 31 March
2019 (as restated
prior
to IFRS 16
adoption) 4,821 261,149 6,575 3 (2,803) 51,723 321,468
IFRS 16 transition
adjustment 2.4 - - - - - (446) (446)
-------- ------- -------- ----------- ----------- -------------- -------
Balance at 31 March
2019 (after IFRS
16
adoption) 4,821 261,149 6,575 3 (2,803) 51,277 321,022
Profit for the
period - - - - - 17,064 17,064
Other comprehensive
income - - - - 6,756 - 6,756
-------- ------- -------- ----------- ----------- -------------- -------
Total comprehensive
income for the
period - - - - 6,756 17,064 23,820
Issue of share
capital 21 34 499 - - - - 533
Share-based
payments
charge 29 - - - - - 4,541 4,541
Tax on share
options - - - - - 779 779
Equity dividend 12 - - - - - (5,761) (5,761)
-------- ------- -------- ----------- ----------- -------------- -------
Balance at 31 March
2020 4,855 261,648 6,575 3 3,953 67,900 344,934
-------- ------- -------- ----------- ----------- -------------- -------
Company Statement of Changes in Equity
Year ended 31 March 2020
---------------------------------------
Equity Capital
share Share Merger redemption Other Retained Total
Note capital premium reserve reserve reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2018 3,817 104,814 6,575 3 4,543 38,737 158,489
-------- --------
Profit for the
period - - - - - 7,275 7,275
-------- -------- --------- ----------- ---------- ---------- --------
Total comprehensive
income for the
period - - - - - 7,275 7,275
Issue of share
capital 21 1,004 159,609 - - - - 160,613
Share issue costs 21 - (3,274) - - - - (3,274)
Share-based payments
charge 29 - - - - - 2,287 2,287
Tax on share options - - - - - 738 738
Equity dividend 12 - - - - - (4,049) (4,049)
-------- -------- --------- ----------- ---------- ---------- --------
Balance at 31 March
2019 (as reported) 4,821 261,149 6,575 3 4,543 44,988 322,079
-------- -------- --------- ----------- ---------- ---------- --------
IFRS 16 transition
adjustment 2.4 - - - - - (253) (253)
-------- -------- --------- ----------- ---------- ---------- --------
Balance at 31 March
2019 (after IFRS 16
adoption) 4,821 261,149 6,575 3 4,543 44,735 321,826
Profit for the
period - - - - - 23,271 23,271
-------- -------- --------- ----------- ---------- ---------- --------
Total comprehensive
income for the
period - - - - - 23,271 23,271
Issue of share
capital 21 34 499 - - - - 533
Hive-up adjustment 16 - - - - (54) - (54)
Share-based payments
charge 29 - - - - - 4,541 4,541
Tax on share options - - - - - 779 779
Equity dividend 12 - - - - - (5,761) (5,761)
-------- -------- --------- ----------- ---------- ---------- --------
Balance at 31 March
2020 4,855 261,648 6,575 3 4,489 67,565 345,135
-------- -------- --------- ----------- ---------- ---------- --------
Consolidated Balance Sheet
As at 31 March 2020
---------------------------
Restated
(1)
Note 2020 2019
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 14 4,653 4,815
Right-of-use assets 15 4,767 -
Intangible assets 16 414,505 425,646
Deferred tax asset 11 6,294 8,222
430,219 438,683
------- --------
Current assets
Inventories 128 341
Trade and other receivables 19 66,554 54,992
Current tax 1,803 -
Cash and short-term deposits 20 27,499 21,189
------- --------
95,984 76,522
Total assets 526,203 515,205
------- --------
Equity and liabilities
Capital and reserves
Equity share capital 21 4,855 4,821
Share premium 21 261,648 261,149
Merger reserve 31 6,575 6,575
Capital redemption reserve 31 3 3
Foreign currency translation reserve 31 3,953 (2,803)
Retained earnings 31 67,900 51,723
Total equity attributable to equity
holders of the parent 344,934 321,468
------- --------
Non-current liabilities
Loans 22 62,139 85,447
Lease liabilities 23 3,713 -
Provisions 25 1,016 528
Deferred revenue 787 1,184
Deferred tax liability 11 27,155 29,548
------- --------
94,810 116,707
------- --------
Current liabilities
Loans 22 - 1,441
Lease liabilities 23 2,012 -
Trade and other payables 24 40,641 33,508
Deferred revenue 37,627 35,453
Contingent consideration 36 6,179 5,287
Current tax - 1,341
86,459 77,030
------- --------
Total liabilities 181,269 193,737
------- --------
Total equity and liabilities 526,203 515,205
------- --------
Approved by the Board on 30 June 2020
C G Clark - Director
D J Wilson - Director
Registered in England number 2415211
(1) Refer to note 2.3
Company Balance Sheet
As at 31 March 2020
----------------------
Restated
(1)
Note 2020 2019
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 14 3,447 3,803
Right-of-use assets 15 2,098 -
Intangible assets 16 133,289 139,139
Investments 18 303,483 303,476
Deferred tax asset 11 3,867 3,094
446,184 449,512
------- --------
Current assets
Inventories 124 338
Trade and other receivables 19 41,290 35,899
Current tax 1,212 -
Cash and short-term deposits 20 15,031 7,791
------- --------
57,657 44,028
------- --------
Total assets 503,841 493,540
------- --------
Equity and liabilities
Capital and reserves
Equity share capital 21 4,855 4,821
Share premium 21 261,648 261,149
Merger reserve 31 6,575 6,575
Capital redemption reserve 31 3 3
Other reserves 31 4,489 4,543
Retained earnings 31 67,565 44,988
Total equity attributable to equity
holders of the parent 345,135 322,079
------- --------
Non-current liabilities
External loans 22 62,139 85,447
Intercompany loans 22 4,156 -
Lease liabilities 23 1,978 -
Deferred revenue 467 863
Provisions 25 843 395
Deferred tax 11 4,474 5,020
74,057 91,725
------- --------
Current liabilities
Trade and other payables 24 47,747 46,464
Deferred revenue 30,019 27,193
Lease liabilities 23 704 -
Contingent consideration 36 6,179 5,287
Current tax - 792
84,649 79,736
------- --------
Total liabilities 158,706 171,461
------- --------
Total equity and liabilities 503,841 493,540
------- --------
During the year the Company made a profit of GBP23,271,000
(2019: GBP7,275,000).
Approved by the Board on 30 June 2020
C G Clark - Director
D J Wilson - Director
Registered in England number 2415211
(1) Refer to note 2.3
Consolidated Cash Flow Statement
Year ended 31 March 2020
---------------------------------
Note 2020 2019
GBP'000 GBP'000
Group profit before tax 20,626 14,736
Adjustments to reconcile Group profit before
tax to net cash flows
Finance revenue 9 (143) (31)
Finance costs 10 2,361 720
Depreciation of plant and equipment 14 1,760 1,544
Depreciation of right-of-use assets 15 1,850 -
Amortisation of intangible assets 16 19,192 10,821
Loss on disposal of plant and equipment and
intangible assets 260 46
Fair value adjustment on contingent consideration 36 971 -
Share-based payments 29 4,541 2,287
Increase/(decrease) in provisions 25 - (25)
Decrease in inventories 213 58
Increase in trade and other receivables (5,725) (9,904)
Increase in trade and other payables 2,592 7,527
-------- ---------
Cash generated from operations 48,498 27,779
Income tax paid (6,386) (2,930)
-------- ---------
Net cash generated from operating activities 42,112 24,849
-------- ---------
Cash flows from/(used in) investing activities
Acquisition of subsidiaries, net of cash acquired 36 (86) (255,107)
Purchase of plant and equipment 14 (1,199) (1,453)
Purchase of software 16 (140) (172)
Proceeds from disposal of property, plant and
equipment 5 6
Interest received 9 143 31
Net cash flows used in investing activities (1,277) (256,695)
-------- ---------
Cash flows (used in)/from financing activities
Finance costs paid 10 (1,911) (720)
Proceeds from issue of shares 21 490 160,613
Share issue costs 21 - (3,274)
Proceeds from new borrowings 22 - 110,447
Repayment of borrowings 22 (24,914) (32,807)
Repayment of lease liabilities 23 (2,043) -
Dividends paid to equity shareholders 12 (5,761) (4,049)
Net cash flows (used in)/from financing activities (34,139) 230,210
-------- ---------
Net increase/(decrease) in cash and cash equivalents 6,696 (1,636)
Effect of exchange rates on cash and cash equivalents (386) 72
Cash and cash equivalents at the beginning
of the period 21,189 22,753
-------- ---------
Cash and cash equivalents at the end of the
period 20 27,499 21,189
-------- ---------
Company Cash Flow Statement
Year ended 31 March 2020
----------------------------
Note 2020 2019
GBP'000 GBP'000
Company profit before tax 24,659 9,078
Adjustments to reconcile Company profit before
tax to net cash flows
Finance costs 2,200 642
Depreciation of plant and equipment 14 1,214 1,125
Depreciation of right-of-use assets 15 675 -
Amortisation of intangible assets 16 5,720 6,116
Loss on disposal of plant and equipment 256 47
Fair value adjustment on contingent consideration 36 971 -
Dividends received recognised within income
statement (16,604) -
Share-based payments 29 4,271 2,287
Decrease in inventories 214 61
Decrease in provisions 25 - (25)
Increase in trade and other receivables (4,325) (4,548)
Increase in trade and other payables 3,069 4,074
-------- ---------
Cash generated from operations 22,320 18,857
Income tax paid (3,678) (1,674)
-------- ---------
Net cash generated from operating activities 18,642 17,183
-------- ---------
Cash flows used in investing activities
Acquisition of subsidiary undertakings 36 (86) (256,348)
Dividends received 16,604 2,464
Purchase of plant and equipment 14 (452) (1,214)
Purchase of software 16 (140) (167)
Proceeds from disposal of plant and equipment 3 -
Net cash flows from/(used in) investing activities 15,929 (255,265)
-------- ---------
Cash flows (used in)/from financing activities
Finance costs paid (1,884) (642)
Proceeds from issue of shares 21 490 160,613
Share issue costs 21 - (3,274)
Proceeds from new borrowings 22 4,156 110,447
Repayment of borrowings 22 (23,500) (32,000)
Repayment of lease liabilities 23 (832) -
Dividends paid to equity shareholders 12 (5,761) (4,049)
Net cash flows (used in)/from financing activities (27,331) 231,095
-------- ---------
Net increase/(decrease) in cash and cash equivalents 7,240 (6,987)
Cash and cash equivalents at the beginning
of the period 7,791 14,778
-------- ---------
Cash and cash equivalents at the end of the
period 20 15,031 7,791
-------- ---------
Notes to the Accounts
1. Corporate Information
GB Group plc ('the Company') and its subsidiaries (together 'the
Group') provide identity data intelligence products and services
helping organisations recognise and verify all elements of an
individual's identity at key interactions in their business
processes. The nature of the Group's operations and its principal
activities are set out in the Business Model.
The Company is a public company limited by shares incorporated
in the United Kingdom and is listed on the London Stock Exchange
with its ordinary shares traded on the Alternative Investment
Market. The company registration number is 2415211. The address of
its registered office is The Foundation, Herons Way, Chester
Business Park, Chester, CH4 9GB. A list of the investments in
subsidiaries, including the name, country of incorporation,
registered office address and proportion of ownership interest is
given in note 18.
These consolidated financial statements have been approved for
issue by the Board of Directors on 30 June 2020.
The Company's financial statements are included in the
consolidated financial statements of GB Group plc. As permitted by
section 408 of the Companies Act 2006, the profit and loss account
of the Company is not presented.
The financial information set out herein does not constitute the
Company's statutory accounts for the years ended 31 March 2020 or
2019 but is derived from those accounts. The financial information
has been prepared using accounting policies consistent with those
set out in the annual report and accounts for the year ended 31
March 2020. Statutory accounts for 2019 have been delivered to the
Registrar of Companies, and those for 2020 will be delivered in due
course. The auditors have reported on those accounts; their report
was unqualified, did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report, and did not contain any statements under
Section 498(2) or (3) of the Companies Act 2006.
2. Accounting Policies
2.1 Basis of Preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRS's) as adopted by
the European Union and IFRIC interpretations and with those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS. The financial statements have been prepared under the
historical cost convention, modified in respect of the revaluation
of financial assets and liabilities at fair value. A summary of the
significant accounting policies is set out below.
The accounting policies that follow set out those policies that
apply in preparing the financial statements for the year ended 31
March 2020 and the Group and Company have applied the same policies
throughout the year.
2.2 Going Concern
The assessment of going concern relies heavily on the ability to
forecast future cashflows over the going concern assessment period
which covered through to 30 September 2021. Although GBG has a
robust budgeting and forecasting process, the current economic
uncertainty caused by the Covid-19 pandemic means that additional
sensitivities and analysis have been applied to test the going
concern assumption under a range of downside and stress test
scenarios. The following steps have been undertaken to allow the
Directors to conclude on the appropriateness of the going concern
assumption:
a) Understand what could cause GBG not to be a going concern
b) Consider the current customer and sector position, liquidity
status and availability of additional funding if required
c) Board review and challenge the base case forecast produced by
management including comparison against external data sources
available and potential downside scenarios
d) Perform reverse stress tests to assess under what
circumstances going concern would become a risk - and assess the
likelihood of whether they could occur
e) Examine what mitigating actions would be taken in the event
of these stress test scenarios
f) Conclude upon the going concern assumption
a) Understand what could cause GBG not to be a going concern
The potential scenarios which could lead to GBG not being a
going concern are considered to be:
-- Not having sufficient cash to meet our liabilities as they
fall due and therefore not being able to provide services to our
customers, pay our employees or meet financing obligations.
-- A non-remedied breach of the financial covenants within the
Group Revolving Credit Facility (RCF) agreement (detailed in note
22). Under the terms of the agreement this would lead to the
outstanding balance becoming due for immediate repayment. These
covenants are:
o Leverage - consolidated net borrowings (outstanding loans less
current cash balance) as a multiple of adjusted consolidated EBITDA
for the last 12 months, assessed quarterly in arrears, must not
exceed 3.00:1.00
o Interest cover - adjusted consolidated EBITDA as a multiple of
consolidated net finance charges, for the last 12 months , assessed
quarterly in arrears, must not fall below 4.00:1.00
b) Consider the current customer and sector position, liquidity
status and availability of additional funding if required
In assessing the impact of Covid-19 it is important to consider
the rate of growth prior to the pandemic so that the percentage
impact can be put in context. Organic growth at constant currency
in the current year to 31 March 2020 was 10.7%, and was 11.5% in
the year to 31 March 2019. Analyst consensus prior to Covid-19
showed expected organic growth in the year to 31 March 2021 of
10.9%.
GBG does not have a high customer concentration risk with no
individual customer generating more than 2% of Group revenue. The
Group's customers operate in a range of different sectors which
reduces the risk of a downturn in any particular sector. The
financial services sector accounts for the largest percentage of
customers, particularly within the Fraud and Identity segments, and
there has not been a downturn in demand for these services since
the pandemic began.
2. Accounting Policies continued
GBG does have exposure to customers in sectors that have had a
more direct impact from Covid-19 such as Travel & Leisure,
Employment Agencies & Training and Sporting Activities. However
these sectors in total account for less than 6% of Group revenue
and as noted above there are no single customers across the Group
that are a material credit risk on their own.
As a global company GBG operates in different countries and
therefore is less exposed if particular countries recover from
Covid-19 at different rates or suffer second waves of the pandemic.
The breakdown of our revenue by country is shown in note 4.
There are also macro dynamics supporting the increased use of
GBG products and services, both in general and within the context
of the Covid-19 pandemic, such as:
-- continued compliance requirements globally
-- the ongoing existence of fraud globally, with Covid-19 giving fraudsters new opportunities, leading to increased cyber security risks and therefore demand for GBG anti-fraud solutions
-- continued digitisation and rise of online versus physical
transactions in both consumer and business to business
settings;
-- speed and quality of customer onboarding being a key
differentiator, which is enhanced through the use of GBG's
software
GBG is not reliant upon any one supplier to provide critical
services either to support the services we provide to our customers
or to our internal infrastructure. For these critical services,
such as the provision of data, contingency plans exist in the event
of supplier failure to be able to move to an alternative supplier
with minimal disruption to customers or the wider business.
Liquidity
31 March 31 March
2020 2019 Variance
GBP'000 GBP'000 GBP'000
Operating cashflow before tax and
exceptional items (note 37) 49,279 31,582 17,697
Adjusted EBITDA (note 37) 51,739 34,080 17,659
--------- --------- ---------
Cash conversion % 95.2% 92.7% 2.5%
Cash 27,499 21,189 6,310
Loans (excluding unamortised loan
fees) (62,500) (87,441) 24,941
--------- --------- ---------
Net Debt (35,001) (66,252) 31,251
Leverage 0.68 1.94 1.26
At 31 March 2020 the net debt position of the Group was GBP35.0
million, a decrease of GBP31.3 million since 31 March 2019. On 26
May 2020 the Company repaid GBP10.0m of the outstanding revolving
credit facility liability. At 31 May 2020 the net debt position had
improved to GBP20.5m.
During the year to 31 March 2020, GBG remained highly cash
generative with an EBITDA to operating cash ratio of 95.2%.
The RCF has a maximum level of GBP110 million and therefore
there is committed available headroom of GBP47.5 million which
could be drawn down for working capital purposes if required. There
are no mandatory debt repayments on the RCF required to be made
until February 2022 when the agreement expires and the full
outstanding balance is due.
c) Board review and challenge the base case forecast produced by
management including comparison against external data sources
available and potential downside scenarios
Uncertainty around the scale, timing and impact of the
coronavirus pandemic means it is impossible to give meaningful
guidance for profits in the year ahead. Management have used the
internal and external information available in addition to their
industry knowledge to produce the base case forecast.
This base case forecast focuses on the impact of a potential
decline in revenue against the year to 31 March 2020, as this is
the component of the income statement that management has the least
control over. The decline in revenue would result in a decrease in
cost of sales and therefore in order to keep generating cash the
remaining gross margin needs to be sufficient to cover the overhead
base.
Management notes that analyst forecasts published after the
Covid-19 outbreak estimate a decline in GBG revenue of between 7.6%
and 12.8% in the year to 31 March 2021 compared to the prior year,
with the consensus position being a decline of 10.3% which would be
GBP175 million on a constant currency basis. While this is what we
assumed, this is not a forecast, just an assumption for going
concern.
The overhead base is the component of the income statement
management has most control over with the majority of being people
related costs. The base case forecast takes account of the cash
preservation measures already taken which include cancellation of
the dividend, recruitment frozen for all but essential hires,
group-wide pay freeze, deferral of Executive Director bonuses for
the year to 31 March 2020 and savings in travel. These measures
will save cash of approximately GBP22m in the year to 31 March
2021, with GBP15m of these being operating cost savings (all
excluding the dividend). No further reductions in operating
expenditure are factored into this base case forecast.
Although a number of external economic forecasts suggest a
return to overall GDP growth by Spring 2021 across each of the key
territories GBG operates in, for prudence it has been assumed that
the revenue position in the base case forecast at 31 March 2021
will remain throughout the year to 31 March 2022 (i.e. that year
will see flat revenue). This provides robustness in the forecast in
the event of a significant second wave of the pandemic.
This base case forecast showed continued significant headroom in
the covenant compliance tests and sufficient liquidity to maintain
operations. The base case forecast model was then adjusted to
reflect a range of possible downside scenarios across different
sectors and geographies, and under each of these the covenant
compliance and liquidity position did not result in any risk to
going concern.
Relative to the base case forecast produced by management there
have not been any adverse variances in the overall trading
performance since the year-end.
2. Accounting Policies continued
d) Perform reverse stress tests to assess under what
circumstances going concern would become a risk - and assess the
likelihood of whether they could occur
The base case forecast model was then further adjusted to
establish at what point a covenant breach would occur without
further mitigating actions. A covenant breach would occur before
the available cash resources of the Group are fully exhausted and
therefore the focus of the reverse stress test was on covenant
compliance. In making this assessment it was assumed that
management had reduced operating expenses by 20% which is the level
that is considered possible without causing significant disruption
to business operations. These savings would primarily be linked to
people costs, net of any related redundancy costs.
With a 20% operating expenses saving introduced in Q3 of FY21 it
would take a revenue decline of 42% for a covenant breach to occur
(33% without any operating expenses savings). This breach would be
as at 30 June 2021 although even at this point it would only take a
net debt improvement of GBP400,000 or
EBITDA increase of GBP130,000 to remedy this breach. With the
assumption of revenue being flat during the year to 31 March 2022
the breach would be remedied by 30 September 2021.
Based on the current trading performance and through reference
to external market data a decline of anywhere near 42% is
considered by the Directors to be highly unlikely. If this became
even a remote possibility then deeper cost cutting measures would
be implemented well in advance of a covenant breach as well as
consideration of a range of other mitigation actions detailed in
the next section.
e) Look at what mitigating actions could be taken in the event
of these reverse stress test scenarios
In the very unlikely event of the reverse stress test case
scenario above a breach of covenants would occur on 30 June 2021
unless further mitigation steps were taken. Detailed below are the
principal steps that would be taken (prior to the breach taking
place) to avoid such a breach occurring:
-- Make deeper cuts to overheads, primarily within the sales
function if the market opportunities had declined to this extent.
It would only take a reduction of 0.1% of overheads (based on the
31 March 2020 level) to increase EBITDA to remedy a covenant breach
of GBP130,000.
-- Request a delay to UK Corporation Tax, Employment Tax or
Sales Tax payments under the HMRC 'Time to Pay' scheme. This would
be in addition to the deferral of VAT payments announced by the UK
Government on 20 March 2020. This announcement has meant that VAT
which would have been due by the Group between 20 March 2020 and 30
June 2020 is not due until 31 March 2021. In the year to 31 March
2020 Corporation Tax payments averaged GBP900,000 per quarter,
Employment Tax payments (including employee taxes) were
approximately GBP1.2 million per month and Sales Tax payments were
GBP2.5 million per quarter.
-- Draw down on the GBP30 million Accordion facility within the
Group's banking agreement. This facility is subject to credit
approval from the syndicate banks.
-- Request a covenant waiver or covenant reset from our bank
syndicate. Even under this stress test scenario the forecast is
that the Group would only be in breach for one quarter (quarter
ending 30 June 2021) before returning to covenant compliance the
following quarter. The business would still be EBITDA positive at
this point and the directors have a reasonable expectation of
achieving a temporary covenant waiver from the banks if needed.
-- Raise cash through an equity placing. Under its Articles of
Association GBG has the right to raise cash through an equity
placing up to 10% of its market valuation at the date of the
placing. Even factoring in a discount being applied to the share
price, on the basis that the level of extra cash needed to remedy a
breach at 30 June 2021 would be GBP400,000, the Directors are
confident that funding well in excess of this level could be
raised.
-- Disposal of part of the business.
f) Conclude upon the going concern assumption
Following consideration of the base case forecast and reverse
stress test scenario, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future. Therefore, the Directors
consider it appropriate to adopt the going concern basis of
accounting in preparing the consolidated financial statements.
2.3 Prior Year Measurement Period Adjustment
Under IFRS 3 Business Combinations there is a measurement period
of no longer than twelve months in which to finalise the valuation
of the acquired assets and liabilities. During the measurement
period, the acquirer shall retrospectively adjust the provisional
amounts recognised at the acquisition date to reflect new
information obtained about facts and circumstances that existed as
of the acquisition date and, if known, would have affected the
measurement of the amounts recognised as of that date. During the
measurement period, the acquirer shall also recognise additional
assets or liabilities if new information is obtained about facts
and circumstances that existed as of the acquisition date and, if
known, would have resulted in the recognition of those assets and
liabilities as of that date.
In the year to 31 March 2019 GBG completed two acquisitions, the
measurement periods for which ended during the year to 31 March
2020.
No further adjustments were identified to the provisional fair
values in respect of the acquisition of VIX Verify Pty Limited.
In respect of the acquisition of IDology Inc. adjustments to the
provisional fair values were made during the measurement period, as
set out in note 35.
2. Accounting Policies continued
The impact of the measurement period adjustments have been
applied retrospectively, meaning that the results and financial
position for the year to 31 March 2019 have been restated as
follows:
Impact on the statement of financial position of the Group as at
1 April 2019:
Impact of Including
As previously measurement measurement
reported period adjustments period adjustments
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 4,815 - 4,815
Intangible assets 420,137 5,509 425,646
Investments 411 (411) -
Deferred tax assets 8,222 - 8,222
Current assets 76,404 118 76,522
-------------- -------------------- --------------------
Total assets 509,989 5,216 515,205
Equity
Share capital and share premium 265,970 - 265,970
Other reserves 6,578 - 6,578
Foreign currency translation reserve (2,811) 8 (2,803)
Retained earnings 51,723 - 51,723
-------------- --------------------
Total equity 321,460 8 321,468
Liabilities
Interest-bearing loans and borrowings 86,888 - 86,888
Trade payables and other liabilities 70,145 - 70,145
Contingent consideration 79 5,208 5,287
Provisions 528 - 528
Current tax 1,341 - 1,341
Deferred tax 29,548 - 29,548
-------------- -------------------- --------------------
Total liabilities 188,529 5,208 193,737
-------------- -------------------- --------------------
Impact on the statement of financial position of the Company as
at 1 April 2019:
Impact of Including
As previously measurement measurement
reported period adjustments period adjustments
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 3,803 - 3,803
Intangible assets 139,139 - 139,139
Investments 298,268 5,208 303,476
Deferred tax assets 3,094 - 3,094
Current assets 44,028 - 44,028
-------------------------- -------------------- --------------------
Total assets 488,332 5,208 493,540
Equity
Share capital and share premium 265,970 - 265,970
Other reserves 11,121 - 11,121
Retained earnings 44,988 - 44,988
-------------------------- --------------------
Total equity 322,079 - 322,079
Liabilities
Interest-bearing loans and borrowings 85,447 - 85,447
Trade payables and other liabilities 74,520 - 74,520
Contingent consideration 79 5,208 5,287
Provisions 395 - 395
Current tax 792 - 792
Deferred tax 5,020 - 5,020
-------------------------- -------------------- --------------------
Total liabilities 166,253 5,208 171,461
-------------------------- -------------------- --------------------
2. Accounting Policies continued
2.4 Changes to accounting policies
The following new IFRS standards relevant to the Group and
Company have been adopting in these financial statements:
(i) IFRS 16 Leases: The Group and Company has adopted IFRS 16
'Leases' with a date of initial application of 1 April 2019. IFRS
16 'Leases' replaces IAS 17 'Leases', IFRIC 4 Determining whether
an Arrangement contains a Lease, SIC-15 Operating Leases-
Incentives and SIC-27 Evaluating the substance of transactions
involving the Legal Form of a Lease. The standard sets out the
principles for the recognition, measurement, presentation and
disclosures of leases and requires lessees to account for most
leases under a single on-balance sheet model.
The Group and Company has adopted IFRS 16 using the modified
retrospective method of adoption with the date of initial
application of 1 April 2019. Under this method, the standard is
applied retrospectively with the cumulative effect of initially
applying the standard recognised in retained earnings at the date
of initial application. Comparatives are not restated under this
method of adoption. The lease liability is calculated at the
present value of remaining future payments using the related
incremental borrowing rates at 1 April 2019. The right-of-use asset
is calculated from the lease commencement date, as if IFRS 16 had
always been applied using the incremental borrowing rates at 1
April 2019. The Group and Company also elected to use transition
expedient allowing the standard to be applied only to contracts
that were previously identified as leases applying IAS 17 and IFRIC
4 at the date of initial application. The Group and Company also
elected to use the recognition exemptions for lease contracts that,
at the commencement date, have a lease term of 12 months or less
and do not contain a purchase option ('short-term leases'), and
lease contracts for which underlying asset is of low value ('low
value assets').
The effect of adoption of IFRS 16 on the Group and Company is as
follows:
Impact on the statement of financial position of the Group as at
1 April 2019:
Impact of Including
adoption adoption
As previously of IFRS of IFRS
reported 16 16
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 4,815 - 4,815
Right-of-use assets - 5,166 5,166
Intangible assets 420,137 - 420,137
Investments 411 - 411
Deferred tax assets 8,222 326 8,548
Current assets 76,404 - 76,404
-------------- ---------- ----------
Total assets 509,989 5,492 515,481
Equity
Share capital and share premium 265,970 - 265,970
Other reserves 3,767 - 3,767
Retained earnings 51,723 (446) 51,277
-------------- ----------
Total equity 321,460 (446) 321,014
Liabilities
Interest-bearing loans and borrowings 86,888 - 86,888
Lease liabilities - 6,076 6,076
Trade payables and other liabilities 70,224 (327) 69,897
Provisions 528 - 528
Current tax 1,341 - 1,341
Deferred tax 29,548 189 29,737
-------------- ---------- ----------
Total liabilities 188,529 5,938 194,467
-------------- ---------- ----------
The impact of IFRS 16 on adoption has changed since reported at
September 2019 to incorporate a revised valuation of lease assets
and liabilities due to an updated assessment on the valuation of
lease incentives and dilapidations.
2. Accounting Policies continued
Impact on the statement of financial position of the Company as
at 1 April 2019:
Impact of Including
adoption adoption
As previously of IFRS of IFRS
reported 16 16
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 3,803 - 3,803
Right-of-use assets - 2,773 2,773
Intangible assets 139,139 - 139,139
Investments 298,268 - 298,268
Deferred tax assets 3,094 60 3,154
Current assets 44,028 - 44,028
-------------------------- ---------- ----------
Total assets 488,332 2,833 491,165
Equity
Share capital and share premium 265,970 - 265,970
Other reserves 11,121 - 11,121
Retained earnings 44,988 (253) 44,735
-------------------------- ----------
Total equity 322,079 (253) 321,826
Liabilities
Interest-bearing loans and borrowings 85,447 - 85,447
Lease liabilities - 3,406 3,406
Trade payables and other liabilities 74,599 (320) 74,279
Provisions 395 - 395
Current tax 792 - 792
Deferred tax 5,020 - 5,020
-------------------------- ---------- ----------
Total liabilities 166,253 3,086 169,339
-------------------------- ---------- ----------
Summary of new accounting policies
Set out below are the new accounting policies of the Group,
which are consistent with the Company, upon adoption of IFRS
16:
Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e. the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made on or before the
commencement date less any lease incentives received. Unless the
Group is reasonably certain to obtain ownership of the leased asset
at the end of the lease term, the recognised right-of-use assets
are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right-of-use assets are
subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees.
The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group and payments
of penalties for terminating a lease, if the lease term reflects
the Group exercising the option to terminate. The variable lease
payments that do not depend on an index or a rate are recognised as
expense in the period on which the event or condition that triggers
the payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to
leases of office equipment that are considered of low value (i.e.
below GBP5,000). Lease payments on short-term leases and leases of
low-value assets are recognised as an expense on a straight-line
basis over the lease term.
Significant judgement in determining the lease term of contracts
with renewal options
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
2. Accounting Policies continued
Amounts recognised in the statement of financial position and in
the consolidated statement of comprehensive income
Set out below, are the carrying amounts of the Group's
right-of-use assets and lease liabilities and the movements during
the year:
Right-of-use assets Lease liabilities
------------------------------------- ------------------
Property Other equipment Total Total
GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2019 5,150 16 5,166 6,076
Additions 1,837 - 1,837 1,878
Disposals (115) - (115) (299)
Depreciation expense (1,840) (10) (1,850) -
Interest expense - - - 245
Payments - - - (2,043)
Foreign currency adjustment (272) 1 (271) (132)
--------- ---------------- -------- ------------------
As at 31 March 2020 4,760 7 4,767 5,725
--------- ---------------- -------- ------------------
The lease liabilities as at 1 April 2019 can be reconciled to
the operating lease commitments as of 31 March 2019 as follows:
Group Company
GBP'000 GBP'000
Operating lease commitments as at 31 March
2019 5,307 2,450
Less: discounting of future lease commitments (361) (149)
-------- --------
Discounted operating lease commitments at
1 April 2019 4,946 2,301
Less: Commitments relating to leases of low
value assets (6) (1)
Add: Payments in optional extension periods
not recognised as at 31 March 2019 1,136 1,106
Lease liabilities as at 1 April 2019 6,076 3,406
Weighted average incremental borrowing rate
as at 1 April 2019 4.01% 3.47%
(ii) IFRIC 23 ' Uncertainty over Income Tax Treatments': the
IASB issued IFRIC 23 'Uncertainty over Income Tax Treatments' which
is effective for financial years beginning on or after 1 January
2019 and is intended to clarify when and how to apply the
recognition and measurement requirements of IAS 12 'Income Taxes'
when there is uncertainty over income tax treatments.
(iii) Amendment to IFRS 9 'Prepayment Features with Negative
Compensation' : the amendments are intended to clarify how IFRS 9
'Financial Instruments' classifies particular prepayable financial
assets. In addition, the amendment intended to clarify an aspect of
accounting for modification of financial liabilities. The
amendments are to be applied retrospectively for fiscal years
beginning on or after 1 January 2019.
(iv) Amendment to IAS 19 'Plan Amendment, Curtailment or
Settlement' : the amendments are intended to clarify the accounting
treatment around plans in order to provide more relevant
information for decision making. An entity applies the amendments
to plan amendments, curtailments or settlements occurring on or
after the beginning of the first annual reporting period that
begins on or after 1 January 2019.
Apart from IFRS 16, none of these pronouncements has had any
impact for amounts recognised in these financial statements.
2.5 Significant accounting policies
The Group and Company financial statements are presented in
pounds Sterling and all values are rounded to the nearest thousand
pounds (GBP'000) except where otherwise indicated.
Basis of Consolidation
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 31 March each
year.
Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only
if, the Group has:
-- power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
-- exposure, or rights, to variable returns from its involvement with the investee; and
-- the ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- the contractual arrangement with the other vote holders of the investee;
-- rights arising from other contractual arrangements; and
-- the Group's voting rights and potential voting rights.
2. Accounting Policies continued
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary.
Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the
consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of Other Comprehensive Income
('OCI') are attributed to the equity holders of the parent of the
Group and to the non-controlling interests, even if this results in
the non-controlling interests having a deficit balance. When
necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with the
Group's accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on
consolidation.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises
the related assets (including goodwill), liabilities,
non-controlling interest and other components of equity while any
resultant gain or loss is recognised in profit or loss. Any
investment retained is recognised at fair value.
Business Combinations
The Group uses the acquisition method of accounting to account
for business combinations of entities not under common control. The
consideration transferred for the acquisition of a subsidiary is
the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement.
Acquisition-related costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair
values at the acquisition date.
Any contingent consideration to be transferred by the acquirer
is recognised at fair value at the acquisition date. Contingent
consideration classified as a financial liability within the scope
of IFRS 9 'Financial Instruments: Recognition and Measurement' is
measured at fair value with the changes in fair value recognised in
the statement of profit or loss.
If a business combination is achieved in stages, the acquisition
date fair value of the Group's previously held investment in the
acquiree is remeasured to fair value at the acquisition date with
any resultant gain or loss recognised through profit or loss.
Group Companies
On consolidation, the assets and liabilities of foreign
operations are translated into pounds Sterling at the rate of
exchange prevailing at the reporting date and their statements of
profit or loss are translated at average exchange rates for the
period. The exchange differences arising on translation for
consolidation are recognised in OCI. On disposal of a foreign
operation, the component of OCI relating to that particular foreign
operation is recognised in profit or loss.
Any goodwill arising on the acquisition of a foreign operation
and any fair value adjustments to the carrying amounts of assets
and liabilities arising on the acquisition are treated as assets
and liabilities of the foreign operation and translated at the spot
rate of exchange at the reporting date.
Foreign Currencies
The Group's consolidated financial statements are presented in
pounds Sterling, which is also the parent company's functional
currency. For each entity the Group determines the functional
currency and items included in the financial statements of each
entity are measured using that functional currency. The Group uses
the direct method of consolidation and on disposal of a foreign
operation, the gain or loss that is reclassified to profit or loss
reflects the amount that arises from using this method.
Transactions and Balances
Transactions in foreign currencies are initially recorded by the
Group's entities at their respective functional currency spot rates
at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency spot rates of
exchange at the reporting date. Differences arising on settlement
or translation of monetary items are recognised in profit or loss
with the exception of monetary items that are designated as part of
the hedge of the Group's net investment of a foreign operation.
These are recognised in OCI until the net investment is disposed
of, at which time, the cumulative amount is reclassified to profit
or loss. Tax charges and credits attributable to exchange
differences on those monetary items are also recorded in OCI.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates at
the dates of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. The
gain or loss arising on translation of non-monetary items measured
at fair value is treated in line with the recognition of the gain
or loss
on the change in fair value of the item (i.e. translation
differences on items whose fair value gain or loss is recognised in
OCI or profit or loss are also recognised in OCI or profit or loss,
respectively).
Impairment of Assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset's recoverable amount. An
asset's recoverable amount is the higher of an asset's or cash
generating unit's ('CGU's) fair value less costs of disposal and
its value in use and is determined for an individual asset, unless
the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where
the carrying amount of an asset exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable
amount. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. Impairment losses of
continuing operations are recognised in the Statement of
Comprehensive Income in those expense categories consistent with
the function of the impaired asset.
2. Accounting Policies continued
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such indication exists,
the recoverable amount is estimated. A previously recognised
impairment loss is reversed only on assets other than goodwill if
there has been a change in the estimates used to determine the
asset's recoverable amount since the last impairment loss was
recognised. If that is the case, the carrying amount of the asset
is increased to its recoverable amount. That increased amount
cannot exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in profit or
loss. After such a reversal the depreciation charge is adjusted in
future periods to allocate the asset's revised carrying amount,
less any residual value, on a systematic basis over its remaining
useful life.
Investment in Subsidiaries
Investments in subsidiaries are held at cost, less provision for
impairment.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any impairment in value. Depreciation is
calculated to write off cost less estimated residual value based on
prices prevailing at the balance sheet date on a straight-line
basis over the estimated useful life of each asset as follows:
Plant and equipment - over 3 to 10 years
Freehold buildings - over 50 years
Freehold land is not depreciated.
The carrying values of property, plant and equipment are
reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. If any such
indication exists and where the carrying values exceed the
estimated recoverable amount, the assets are written down to their
recoverable amount.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
derecognition of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount of the item) is
included in the Statement of Comprehensive Income in the year the
item is derecognised.
Residual values and estimated remaining lives are reviewed
annually.
Intangible Assets
Goodwill
Goodwill on acquisition is initially measured at cost, being the
excess of the cost of the business combination over the Group's
interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities. Following initial
recognition, goodwill is measured at cost less any accumulated
impairment losses. Goodwill already carried in the balance sheet at
1 April 2004 or relating to acquisitions after that date is not
amortised. Goodwill is reviewed for impairment, annually or more
frequently if events or changes in circumstances indicate that the
carrying value may be impaired.
For the purpose of impairment testing, goodwill is allocated to
the CGU expected to benefit from the synergies. Impairment is
determined by assessing the recoverable amount of the CGU,
including the related goodwill. Where the recoverable amount of the
CGU is less than the carrying amount, including goodwill, an
impairment loss is recognised in the Statement of Comprehensive
Income. The carrying amount of goodwill allocated to a CGU is taken
into account when determining the gain or loss on disposal of the
unit, or an operation within it. Goodwill disposed of in this
circumstance is measured on the basis of the relative values of the
operation disposed of and the portion of the CGU retained.
Research and Development Costs
Research costs are expensed as incurred. An intangible asset
arising from development expenditure on an individual project is
recognised only when the Group can demonstrate the technical
feasibility of completing the intangible asset so that it will be
available for use or sale, its intention to complete and its
ability to use or sell the asset, how the asset will generate
future economic benefits, the availability of resources to complete
and the availability to measure reliably the expenditure during the
development. Following the initial recognition of the development
expenditure, the cost model is applied requiring the asset to be
carried at cost less any accumulated amortisation and accumulated
impairment losses. Any expenditure capitalised is amortised on a
straight-line basis over 2 to 4 years.
Acquired Intangibles
Separately identifiable intangible assets such as patent fees,
licence fees, trademarks and customer lists and relationships are
capitalised on the balance sheet only when the value can be
measured reliably, or the intangible asset is purchased as part of
the acquisition of a business. Such intangible assets are amortised
over their useful economic lives on a straight-line basis.
Separately identified intangible assets acquired in a business
combination are initially recognised at their fair value.
Intangible assets are subsequently stated at fair value or cost
less accumulated amortisation and any accumulated impairment
losses. Amortisation is recognised in the Consolidated Statement
of
Comprehensive Income on a straight-line basis over the estimated
useful life of the asset. The carrying value of intangible assets
is reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable.
Estimated useful lives typically applied are as follows:
Software technology assets - over 2 to 5 years
Brands and trademarks - over 2 to 3 years
Non-compete agreements - over 3 to 5 years
Customer relationships - over 10 years
2. Accounting Policies continued
Acquired Computer Software Licences
Acquired computer software licences comprise computer software
licences purchased from third parties, and also the cost of
internally developed software. Acquired computer software licences
are initially capitalised at cost, which includes the purchase
price (net of any discounts and rebates) and other directly
attributable costs of preparing the asset for its intended use.
Direct expenditure including employee costs, which enhances or
extends the performance of computer software beyond its
specifications and which can be reliably measured, is added to the
original cost of the software.
Costs associated with maintaining the computer software are
recognised as an expense when incurred. Computer software licences
are subsequently carried at cost less accumulated amortisation and
accumulated impairment losses. These costs are amortised to profit
or loss using the straight-line method over their estimated useful
lives of 3 to 5 years.
The amortisation period and amortisation method of intangible
assets other than goodwill are reviewed at least at each balance
sheet date. The effects of any revision are recognised in profit or
loss when the changes arise.
Inventories
Inventories are valued at the lower of cost or net realisable
value (net selling price less further costs to completion), after
making due allowance for obsolete and slow moving items. Cost is
determined by the first in first out ('FIFO') cost method.
Financial Assets
Initial recognition and measurement
Financial assets are classified at initial recognition and
subsequently as measured at amortised cost, fair value through
other comprehensive income (OCI), and fair value through profit or
loss.
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing them.
With the exception of trade receivables that do not contain a
significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs. Trade
receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient are
measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at
amortised cost or fair value through OCI, it needs to give rise to
cash flows that are 'solely payments of principal and interest
(SPPI)' on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument
level.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both.
Subsequent measurement
For purposes of subsequent measurement, financial assets are
classified in four categories:
-- Financial assets at amortised cost (debt instruments)
-- Financial assets designated at fair value through OCI with no
recycling of cumulative gains and losses upon derecognition (equity
instruments)
-- Financial assets at fair value through OCI with recycling of
cumulative gains and losses (debt instruments)
-- Financial assets at fair value through profit or loss
The Group only has financial assets falling into the first two
categories above and as such has only included the policy for these
two below.
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group
measures financial assets at amortised cost if both of the
following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows
And
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when
the asset is derecognised, modified or impaired.
The Group's financial assets at amortised cost includes trade
receivables.
Financial assets designated at fair value through OCI (equity
instruments)
Upon initial recognition, the Group can elect to classify
irrevocably its equity investments as equity instruments designated
at fair value through OCI when they meet the definition of equity
under IAS 32 'Financial Instruments: Presentation' and are not held
for trading. The classification is determined on an
instrument-by-instrument basis.
Gains and losses on these financial assets are never recycled to
profit or loss. Dividends are recognised as other income in the
statement of profit or loss when the right of payment has been
established, except when the Group benefits from such proceeds as a
recovery of part of the cost of the financial asset, in which case,
such gains are recorded in OCI. Equity instruments designated at
fair value through OCI are not subject to impairment
assessment.
The Group elected to classify irrevocably its non-listed equity
investments under this category.
2. Accounting Policies continued
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised (i.e. removed from the Group's consolidated statement
of financial position) when:
-- The rights to receive cash flows from the asset have
expired
Or
-- The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset
Impairment of financial assets
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected
cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual
terms.
ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next
12-months (a 12-month ECL). For those credit exposures for which
there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Group applies a
simplified approach in calculating ECLs. Therefore, the Group does
not track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date. The Group
has established a provision matrix that is based on its historical
credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.
The Group recognises loss allowances for expected credit losses
(ECL) on financial assets measured at amortised cost. Loss
allowances for trade receivables are always measured at an amount
equal to lifetime ECL. ECL are a probability-weighted estimate of
credit losses. An assessment of ECL is calculated using a provision
matrix model to estimate the loss rates to be applied to each trade
receivable category. ECL are discounted at the effective interest
rate of the financial asset. Loss allowances for financial assets
measured at amortised cost are deducted from the gross carrying
amount of the assets. The gross carrying amount of a financial
asset is written off (either partially or in full) to the extent
that there is no realistic prospect of recovery.
The Group considers a financial asset in default when
contractual payments are 90 days past due. However, in certain
cases, the Group may also consider a financial asset to be in
default when internal or external information indicates that the
Group is unlikely to receive the outstanding contractual amounts in
full before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows.
In the current year an additional management overlay to the ECL
calculation has been applied as detailed in note 27.
Trade and Other Receivables
Trade receivables, which generally have 14 to 60 day terms, are
recognised and carried at original invoice amount less an allowance
for any uncollectable amounts. A provision is made against a trade
receivable only when there is objective evidence that the Group may
not be able to recover the entire amount due under the original
terms of the invoice. The carrying amount of the receivable is
reduced through the use of a provision for doubtful debts account.
Impaired debts are derecognised when they are assessed as
uncollectable.
Cash and Short-Term Deposits
Cash and short-term deposits in the balance sheet comprise cash
at bank and in hand and short-term deposits with an original
maturity date of three months or less.
For the purpose of the cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above,
net of any outstanding bank overdrafts.
Borrowings
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the effective
interest rate ('EIR') method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised as well as
through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included as finance costs
in the statement of profit or loss.
Trade and Other Payables
Trade and other payables are initially recognised at fair value
and subsequently recorded at amortised cost using the EIR
method.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where the
Group expects some or all of a provision to be reimbursed, for
example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is
presented in the Statement of Comprehensive Income net of
any reimbursement. If the effect of the time value of money is
material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the
risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognised
as a finance cost.
2. Accounting Policies continued
Dilapidation provisions
A dilapidation provision is recognised when there is an
obligation to restore property to its original state at the end of
the leasehold period. The provision is estimated as the cost of
restoration at the balance sheet date, with the corresponding entry
recognised in property plant and equipment. Depreciation is charged
in line with the remaining leasehold period.
Pensions
The Group does not have a contributory pension scheme. Payments
are made to individual private defined contribution pension
arrangements. Contributions are charged in the Statement of
Comprehensive Income as they become payable.
Revenue Recognition
Revenue is stated net of value-added tax, rebates and discounts
and after the elimination of intercompany transactions within the
Group. The Group operates a number of different businesses offering
a range of products and services and accordingly applies a variety
of methods for revenue recognition, based on the principles set out
in IFRS 15.
Revenue is recognised to represent the transfer of promised
services to customers in a way that reflects the consideration
expected to be received in return. Consideration from contracts
with customers is allocated to the performance obligations
identified based on their standalone selling price and is
recognised when those performance obligations are satisfied and the
control of goods or services is transferred to the customer, either
over time or at a point in time.
In determining the amount of revenue and profits to record, and
related balance sheet items (such as contract assets, contract
liabilities, accrued income and deferred income) to recognise in
the period, management is required to form a number of judgements
and assumptions. These may include an assessment of the costs the
Group incurs to deliver the contractual commitments and whether
such costs should be expensed as incurred or capitalised. These
judgements are inherently subjective and may cover future events
such as the achievement of contractual milestones. Please see
Judgements - Revenue Recognition below for further detail.
a) Software licences
Revenue from software licences is recognised when control is
considered to have passed to the customer. Control can pass either
at a point in time or over time depending on the performance
obligations under the contract as further described below.
Web-service hosted software solutions
The performance obligation is to provide the customer a right to
access the software throughout the licence period for which revenue
is recognised over the licence period.
On-premise installation or data disk - Location segment
The performance obligations can include the provision of a
software licence, data sets, updates to those data sets during the
licence period and support and maintenance. There are instances
where customers are provided a data set to use with their own
software rather than the Group's.
The Group's software has no standalone value to the customer
without the data as there is nothing to apply the algorithms to.
The data file cannot be accessed outside of the software so has no
standalone value (unless under the circumstance where it has been
licenced for use on the
customer's system). As a result, the software and the data are
considered one performance obligation as the customer cannot
benefit from one without the other.
Customers are given a right-to-use the software and data as it
exists at the point in time the licence is granted, for which
revenue is recognised at the point in time the customer can first
use and benefit from it.
A proportion of the transaction price is allocated to the
provision of data updates and support and maintenance, which are
considered separate performance obligations. This is either based
on the stand-alone selling price for those services or, where the
Group does not have a history of stand-alone selling prices for a
particular software licence, a cost plus mark-up approach is
applied.
Data disk - Fraud segment
The performance obligations can include the licence to use
specific data sets, updates to those data sets during the licence
period and support and maintenance.
The performance obligations over the period of the licence are
satisfied by the provision of disk files to the customer in the
same format on a monthly basis to ensure that the customer has
access to the most relevant information throughout the contract
period. This meets the series guidance under IFRS 15 paragraph 22:
"a promise to transfer to the customer a series of distinct goods
or services that are substantially the same and that have the same
pattern of transfer". Accordingly, the revenue for the full licence
period is recognised over the contractual term.
b) Transactional
A number of GBG SaaS solutions provide for the provision of
transactional identity data intelligence services with customer
paying only for the number of searches they perform. The
performance obligation is to provide this identity check and
revenue in respect of those solutions is recognised based on usage.
Customers are either invoiced in arrears for searches performed or
make a prepayment giving them the right to a specific number of
searches.
Where customers make a prepayment, which entitles them to
perform a specific number of transactions over an agreed contract
period, once this period has expired any unused transactions are
forfeited. Based on a review of historic forfeitures an estimate is
made of the expected percentage of transactions that will remain
unused over their contracted life. This percentage is applied such
that revenue for expected forfeitures is recognised at in
proportion to the pattern of transactions performed by the
customer.
2. Accounting Policies continued
c) Rendering of services
Revenue from the rendering of services is recognised over time
by reference to the stage of completion. Stage of completion of the
specific transaction is assessed on the basis of the actual
services provided as a proportion of the total services to be
provided. Where the services consist of the delivery of support and
maintenance on software licence agreements, it is generally
considered to be a separate performance obligation and revenue is
recognised on a straight-line basis over the term of the support
period.
d) Contract assets and contract liabilities
Costs to obtain a contract in the Group typically include sales
commissions and under IFRS 15 certain costs such as these are
deferred as Contract Assets and are amortised on a systematic basis
consistent with the pattern of transfer of the goods or services to
which the asset relates. As a practical expedient, these costs are
expensed if the amortisation period to which they relate is one
year or less.
Where the Group completes performance obligations under a
contract with a customer in advance of invoicing the customer, the
value of the accrued revenue is initially recognised as a contract
asset.
Any contract assets are disclosed within the trade and other
receivables in the Consolidated Balance Sheet.
Where the Group receives a short-term prepayment or advance of
consideration prior to completion of performance obligations under
a contract with a customer, the value of the advance consideration
received is initially recognised as a contract liability in
liabilities. Revenue is subsequently recognised as the performance
obligations are completed over the period of the contract (i.e. as
control is passed to the customer). Contract liabilities are
presented in deferred income within trade and other payables in the
Consolidated Balance Sheet.
e) Principal versus agent
The Group has arrangements with some of its customers whereby it
needs to determine if it acts as a principal or an agent as more
than one party is involved in providing the goods and services to
the customer.
The Group is an agent if its role is to arrange for another
entity to provide the goods or services. Factors considered in
making this assessment are most notably the discretion the Group
has in establishing the price for the specified good or service,
whether the Group has inventory risk and whether the Group is bears
the responsibility for fulfilling the promise to deliver the
service or good. Where the Group is acting as an agent revenue is
recorded at a net amount reflecting the margin earned.
The Group acts as a principal if it controls a promised good or
service before transferring that good or service to the customer.
Where the Group is acting as a principal, revenue is recorded on a
gross basis.
This assessment of control requires some judgement in particular
in relation to certain service contracts. An example is the
provision of certain employment screening services where the Group
may be assessed to be agent or principal dependent upon the facts
and circumstances of the arrangement and the nature of the services
being delivered.
f) Contract modifications
Although infrequent, contracts may be modified for changes in
contract terms or requirements. These modifications and amendments
to contracts are always undertaken via an agreed formal process.
Contract modifications exist when the amendment either creates new
or changes the existing enforceable rights and obligations. The
effect of a contract modification on the transaction price and the
Group's measure of progress for the performance obligation to which
it relates, is recognised as an adjustment to revenue in one of the
following ways:
a. Prospectively as an additional separate contract;
b. Prospectively as a termination of the existing contract and creation of a new contract;
c. As part of the original contract using a cumulative catch up; or
d. As a combination of b) and c).
For contracts for which the Group has decided there is a series
of distinct goods and services that are substantially the same and
have the same pattern of transfer where revenue is recognised over
time, the modification will always be treated under either a) or
b). However, d) may arise when a contract has a part termination
and a modification of the remaining performance obligations.
The facts and circumstances of any contract modification are
considered individually as the types of modifications will vary
contract by contract and may result in different accounting
outcomes.
g) Interest income
Revenue is recognised as interest accrues using the effective
interest rate method. The effective interest rate is the rate that
exactly discounts estimated future cash receipts through the
expected life of the financial instrument to its net carrying
amount.
h) Presentation and disclosure requirements
The Group has disaggregated revenue recognised from contracts
into contract type (Licences, Transaction and Services) as
management believe this best depicts how the nature, amount, timing
and uncertainty of the Group's revenue and cash flows are affected
by economic factors. The Group has also disclosed information about
the relationship between the disclosure of disaggregated revenue
and revenue information disclosed for each reportable segment.
Refer to note 4 for the disclosure on disaggregated revenue.
Operating Profit
Operating profit is profits after amortisation of acquired
intangibles, equity-settled share-based payments and exceptional
items but before finance revenue, finance costs and tax.
2. Accounting Policies continued
Exceptional Items
The Group presents as exceptional items on the face of the
Statement of Comprehensive Income those material items of income
and expense which, because of the nature and expected infrequency
of the events giving rise to them, merit separate presentation to
allow shareholders to understand better the elements of financial
performance in the year, so as to facilitate comparison with prior
periods and to assess better trends in financial performance.
Dividends
Dividend distribution to the Company's shareholders is
recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders.
Share-based Payment Transactions
Employees (including Directors) of the Group receive
remuneration in the form of share-based payment transactions,
whereby employees render services in exchange for shares or rights
over shares ('equity-settled transactions').
Equity-settled Transactions
The cost of equity-settled transactions with employees is
measured by reference to the fair value at the date on which they
are granted. The fair value is determined by an external valuation
specialist using a binomial model. In valuing equity-settled
transactions, no account is taken of any performance conditions,
other than conditions linked to the price of the shares of GB Group
plc ('market conditions') and non-vesting conditions, if
applicable.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled to
the award ('the vesting date'). The cumulative expense recognised
for equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and the Group's best estimate of the number of equity
instruments that will ultimately vest. The Statement of
Comprehensive Income charge or credit for a period represents the
movement in cumulative expense recognised as at the beginning and
end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market or
non-vesting condition, which are treated as vesting irrespective of
whether or not the market or non-vesting conditions were satisfied,
provided that all other vesting conditions are satisfied.
Where the terms of an equity-settled award are modified, as a
minimum, an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised over the remainder
of the new vesting period for any modification which increases the
total fair value of the share-based payment arrangement, or is
otherwise beneficial to the employee as measured at the date of
modification.
Where an equity-settled award is cancelled, it is treated as if
it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award, and designated as
a replacement award on the date that it was granted, the cancelled
and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected in the
computation of earnings per share (note 13).
Finance Costs
Finance costs consist of interest and other costs that are
incurred in connection with the borrowing of funds. Finance costs
are expensed in the period in which they are incurred.
Finance costs also include the amortisation of bank loan
arrangement fees, interest on long-service award liabilities and
interest on lease liabilities.
Taxes
Current Tax
Current income tax assets and liabilities for the current and
prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or
substantively enacted, by the reporting date, in the countries
where the Group operates and generates taxable income.
Deferred Income Tax
Deferred tax is recognised in respect of all temporary
differences between the carrying amounts of assets and liabilities
included in the financial statements and the amounts used for tax
purposes that will result in an obligation to pay more, or a right
to pay less or to receive more tax, with the following
exceptions:
-- No provision is made where the deferred tax liability arises
from the initial recognition of goodwill or of an asset or
liability in a transaction which is not a business combination that
at the time of the transaction affect neither accounting nor
taxable profit.
-- No provision is made for deferred tax that would arise on all
taxable temporary differences associated with investments in
subsidiaries and interests in joint ventures, where the timing of
the reversal of temporary differences can be controlled and it is
probable that the temporary difference will not reverse in the
foreseeable future.
-- Deferred tax assets are recognised only to the extent that
the Directors consider that it is probable that there will be
suitable taxable profits from which the future reversal of the
underlying temporary differences and unused tax losses and credits
can be deducted.
-- Deferred tax is measured on an undiscounted basis at the tax
rates that are expected to apply in the periods in which the asset
is realised or liability settled, based on tax rates and laws
enacted or substantively enacted at the balance sheet date
New Accounting Standards and Interpretations not applied
The IASB and IFRIC have issued the following Standards and
Interpretations with an effective and adoption date after the date
of these financial statements:
International Accounting Standards (IAS/IFRS) Effective
date
IFRS 3 Definition of a business - Amendments to IFRS 1 January
3 2020
IFRS 9 & Interest Rate Benchmark Reform - Amendments to 1 January
7 IAS 39 IFRS 9, IAS 39 and IFRS 7 2020
IAS 1, IAS Definition of Material - Amendments to IAS 1, 1 January
8 IAS 8 2020
2. Accounting Policies continued
2.6 Judgements and Key Sources of Estimation Uncertainty
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 the amounts reported for revenues and expenses during the year.
However, the nature of estimation means that actual outcomes could
differ from those estimates.
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the financial
statements:
Estimates
Impairment of Goodwill
The Group tests annually whether goodwill has suffered any
impairment in accordance with the accounting policy stated earlier
in note 2.5. Determining whether goodwill is impaired requires an
estimation of the value in use and/or the estimated recoverable
amount of the asset derived from the business, or part of the
business, CGU, to which the goodwill has been allocated. The value
in use calculation requires an estimate of the present value of
future cash flows expected to arise from the CGU, by applying an
appropriate discount rate to the timing and amount of future cash
flows.
Management are required to make judgements regarding the timing
and amount of future cash flows applicable to the CGU, based on
current budgets and forecasts, and extrapolated for an appropriate
period taking into account growth rates and expected changes to
sales and operating costs. In making these estimates management
have reflected the uncertainty due to Covid-19 by assessing the
sensitivity of the assets to a wider range of changes in the key
inputs to consider if an impairment would arise within these
ranges.
Management estimate the appropriate discount rate using pre-tax
rates that reflect current market assessments of the time value of
money and the risks specific to the business or the individual
CGU.
An analysis of the Group's goodwill and the assumptions used to
test for impairment are set out in note 17.
Impairment of Investments in Subsidiary Undertakings
The Group tests for impairment of investments where there are
indicators that the carrying value exceeds the recoverable
value.
In order to perform this assessment, management are required to
make estimates regarding the timing and amount of future cash flows
applicable to the subsidiary, based on current budgets and
forecasts, and extrapolated for an appropriate period taking into
account growth rates and expected changes to sales and operating
costs. Management estimate the appropriate discount rate using
pre-tax rates that reflect current market assessments of the time
value of money and the risks specific to the business.
Share-based Payments
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments
at the date at which they are granted. Judgement is required in
determining the most appropriate valuation model for a grant of
equity instruments, depending on the terms and conditions of the
grant. Management are also required to use judgement in determining
the most appropriate inputs to the valuation model including
expected life of the option, volatility and dividend yield. The
assumptions and models used are disclosed in note 29.
Provisions
The Group provides for the costs of restoring property to its
original state at the end of the leasehold period on right-of-use
assets. Management are required to estimate these costs using
market information regarding the costs to restore at the balance
sheet date.
Allowance for Impairment Losses on Credit Exposures
The Group apply the IFRS 9 simplified lifetime expected credit
loss approach in calculating expected credit losses (ECL). Under
this method ECL provisions are determined using a combination of
historical experience and forward-looking information based on
management judgement. The Covid-19 pandemic has introduced
unprecedented economic uncertainty which increases the likelihood
of a higher level of ECL, but there is no historical comparative
evidence to draw upon to build the impact of this pandemic into the
normal ECL model used.
The Group has responded by calculating an additional level of
provision to overlay the normal ECL calculation. This overlay has
been based on management estimates taking into account an analysis
of trade receivables broken down into customer sectors, using
internal and external forecasts to assess the sectors which are
likely to see the biggest impact of the pandemic, and comparing
cash receipts received post year-end for customers in these sectors
against historical averages. The impact of the overlay is detailed
in note 27.
Judgements
Revenue Recognition
For contracts with multiple components to be delivered,
management may have to apply judgement to consider whether those
promised goods and services are (i) distinct - to be accounted for
as separate performance obligations; (ii) not distinct - to be
combined with other promised goods or services until a bundle is
identified that is distinct or (iii) part of a series of distinct
goods and services that are substantially the same and have the
same pattern of transfer to the customer.
At contract inception the total transaction price is determined,
and the Group allocates this to the identified performance
obligations in proportion to their relative stand-alone selling
prices and recognises revenue when (or as) those performance
obligations are satisfied. Because of the bespoke nature of some
solutions, judgement is sometimes required to determine and
estimate an appropriate standalone selling price.
2. Accounting Policies continued
Deferred Tax Assets
The amount of the deferred tax asset included in the balance
sheet of the Group is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. A deferred tax asset is recognised
when it has become probable that future taxable profit will allow
the deferred tax asset to be recovered. Recognition, therefore,
involves management judgement regarding the prudent forecasting of
future taxable profits of the business including considering
appropriate levels of risk. At the balance sheet date, management
has forecast that the Group would generate future taxable profits
against which certain decelerated tax losses, tax losses and other
temporary differences could be relieved. Within that forecast,
management considered the total amount of tax losses available
across the Group and the relative restrictions in place for loss
streaming and made a judgement not to recognise deferred tax assets
on losses of GBP15,084,000 (2019: GBP16,367,000). The total amount
of deferred tax assets that management had forecast as available at
the year-end based on these forecasts and estimates was lower than
the previous year due to the element related to IDology
transferring to a current tax asset. The carrying value of the
recognised deferred tax asset at 31 March 2020 was GBP6,294,000
(2019: GBP8,222,000) and the unrecognised deferred tax asset at 31
March 2020 was GBP5,123,000 (2019: GBP3,166,000). Further details
are contained in note 11.
3. Revenue
Revenue disclosed in the Consolidated Statement of Comprehensive
Income is analysed as follows:
2020 2019
GBP'000 GBP'000
Licence 71,543 75,002
Transactional 112,079 56,191
Services 15,479 12,311
Revenue 199,101 143,504
-------- --------
Finance revenue 143 31
-------- --------
Total revenue 199,244 143,535
-------- --------
Significant changes in contract balances
Contract assets predominantly relate to software licence
services, where revenue recognition for on premise arrangements
occurs as the solution is transferred to the customer, whereas the
invoicing pattern is often annually over the contract period.
Contract assets recognised during the year totalled GBP6.0m (2019:
GBP3.1 m). The contract asset balance for work completed but not
invoiced on satisfaction of a performance obligation, unwinds over
the contract term. Contract assets are transferred to receivables
when the right to consideration becomes unconditional, or
conditional over the passage of time.
Revenue recognised in the year of GBP35.4m (2019: GBP28.3m) was
included in the opening contract liability. Cash received in
advance not recognised as revenue in the year was GBP30.4m (2019:
GBP33.4m).
4. Segmental Information
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 2019. Going forward 'Fraud, Risk & Compliance' has been
separated into two new segments - 'Identity' and 'Fraud'. The
'Location & Customer Intelligence' segment has been renamed as
'Location'. Accordingly, the comparative segmental reporting has
been represented.
The Group's operating segments are internally reported to the
Group's Chief Executive Officer as three operating segments:
Location, Identity and Fraud. Included within 'Unallocated' is the
revenue and profit of the marketing services business (previously
within Location & Customer Intelligence), as well as group
operating costs such as compliance, finance, legal, people team,
information security, directors' remuneration and PLC costs.
The measure of performance of those segments that is reported to
the Group's Chief Executive Officer is adjusted operating profit,
being profits before amortisation of acquired intangibles,
equity-settled share-based payments, exceptional items, net finance
costs and tax, as shown below.
Information on segment assets and liabilities is not regularly
provided to the Group's Chief Executive Officer and is therefore
not disclosed below.
Fraud Identity Location Unallocated Total
Year ended 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2020
Licence 33,563 7,135 30,845 - 71,543
Transactional - 95,489 16,590 - 112,079
Services 1,943 2,784 2,356 8,396 15,479
-------- --------- --------- ------------ ---------
Total revenue 35,506 105,408 49,791 8,396 199,101
-------- --------- --------- ------------ ---------
Adjusted operating profit 13,444 33,626 14,552 (13,677) 47,945
Amortisation of acquired
intangibles (477) (14,171) (3,999) (361) (19,008)
Share-based payments
charge - - - (4,541) (4,541)
Exceptional items - - - (1,552) (1,552)
-------- --------- --------- ------------ ---------
Operating profit 12,967 19,455 10,553 (20,131) 22,844
Finance revenue 143 143
Finance costs (2,361) (2,361)
Income tax expense (3,562) (3,562)
---------
Profit for the year 17,064
---------
(Represented) (Represented) (Represented) (Represented) (Represented)
Fraud Identity Location Unallocated Total
Year ended 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2019
Licence 27,644 12,137 35,221 - 75,002
Transactional - 45,459 10,732 - 56,191
Services 1, 490 633 320 9,868 12,311
-------------- -------------- -------------- -------------- --------------
Total revenue 29, 134 58,229 46,273 9,868 143,504
-------------- -------------- -------------- -------------- --------------
Adjusted operating profit 9,029 15,219 16,683 (8,900) 32,031
Amortisation of acquired (4,37
intangibles (792) 2) (4,662) (490) (10,316)
Share-based payments
charge - - - (2,287) (2,287)
Exceptional items - - - (4,003) (4,003)
-------------- -------------- -------------- -------------- --------------
Operating profit 8,237 10,847 12,021 (15,680) 15,425
Finance revenue 31 31
Finance costs (720) (720)
Income tax expense (2,583) (2,583)
--------------
Profit for the period 12,153
--------------
Geographical information
Revenues from external Non-current assets
customers
Restated(1)
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 87,814 79,368 126,945 138,157
United States of America 52,386 20,525 259,558 252,461
Australia 19,063 10,241 37,374 39,789
Others 39,838 33,370 48 54
------------ ----------- -------- ------------
199,101 143,504 423,925 430,461
------------ ----------- -------- ------------
(1) Refer to note 2.3
The geographical revenue information above is based on the
location of the customer.
Non-current assets for this purpose consist of plant and
equipment and intangible assets and excludes the deferred tax
asset.
5. Operating Profit
This is stated after charging/(crediting): 2020 2019
GBP'000 GBP'000
Research and development costs recognised as an operating
expense 16,821 10,370
Other Technology related costs recognised as an operating
expense 13,043 13,284
-------- --------
Total Technology related costs recognised as an operating
expense 29,864 23,654
Depreciation of property, plant and equipment (note
14) 1,760 1,544
Depreciation of right-of-use assets (note 15) 1,850 -
Expense relating to short term leases 447 -
Expense relating to low value leases 5 -
Expected credit losses of trade receivables (note
27) 2,532 852
Amortisation of intangible assets (note 16) 19,192 10,821
Foreign exchange loss/(gain) 69 (35)
6. Auditor's Remuneration
2020 2019
GBP'000 GBP'000
Audit of the financial statements (1) 262 266
-------- --------
Other fees to auditor - other assurance services 72 25
- tax compliance services - 2
- tax advisory services 10 21
344 314
-------- --------
(1) GBP 159,000 (2019: GBP136,000) of this relates
to the Company.
7. Exceptional Items
2020 2019
GBP'000 GBP'000
Acquisition related costs 26 3,747
Costs associated with team member reorganisations 555 256
Fair value adjustments to contingent consideration 829 -
(note 36)
Foreign exchange movement on contingent consideration 142 -
(note 36)
1,552 4,003
-------- --------
Acquisition related costs of GBP26,000 (2019: GBP3,747,000)
include legal and professional advisor costs directly attributable
to the transactions and exclude operating or integration costs
relating to an acquired business. In the current year these costs
related to final costs in relation to the acquisition of IDology
Inc. in the prior year in addition to costs relating to potential
acquisitions that were either aborted or are not complete at the
date of these financial statements. Due to the size and nature of
these costs, management consider that they would distort the
Group's underlying business performance. In the prior year these
costs included GBP449,000 in relation to VIX Verify and
GBP2,391,000 in relation to IDology Inc.
Costs associated with team member reorganisations relate to exit
costs of personnel leaving the business on an involuntary basis,
either as a result of integrating acquisitions or 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. Exit costs outside of
these circumstances are treated as an operating expense.
As detailed in note 36, under the terms of the IDology Inc
acquisition the sellers are entitled to the benefit of the tax
losses of the business at the date of the acquisition as and when
GBG utilises them to reduce cash tax payments. On acquisition GBG
recognised a Deferred Tax Asset (DTA) in relation to these losses
which were expected to be utilised in future years and so the
valuation of the DTA was based on the prevailing federal tax rate
of 21%. An equivalent contingent consideration liability reflects
that the benefit of this DTA is due to the sellers.
On 27 March 2020 the Coronavirus Aid, Relief, and Economic
Security (CARES) Act was passed by Congress and signed into law by
President Trump. This Act includes the entitlement for tax losses
to now be carried back for up to five years. As the tax rate in the
United States in the period 2014-2018 was 35% the value of these
losses has increased. GBG has recorded an increase in the value of
the DTA related to this new law with the benefit recognised within
the income tax charge in the income statement (the DTA was then
reclassified to a current tax asset as a cash refund is now
available). The increase in the liability to the sellers has been
recognised as an exceptional item as it arose outside of the 12
month hindsight period permitted for adjustments to the acquisition
accounting.
The contingent liability related to these tax losses is based on
the US Dollar value of the losses. As a result the liability was
retranslated at the balance sheet date with a loss of GBP142,000
being treated as an exceptional item.
The tax impact of the exceptional costs was GBP969,000 (2019:
GBP77,000). The largest element of this is the increase in the
deferred tax asset of GBP829,000 related to the IDology tax
losses.
8. Staff Costs and Directors' Emoluments
Group Company
a) Staff Costs 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Wages and salaries 55,320 45,935 33,000 31,392
Social security costs 6,590 5,318 4,469 4,352
Other pension costs 2,473 2,007 1,668 1,486
-------- -------- -------- --------
64,383 53,260 39,137 37,230
-------- -------- -------- --------
Included in wages and salaries is a total charge of share-based
payments of GBP4,541,000 (2019: GBP2,287,000) which arises from
transactions accounted for as equity-settled share-based payment
transactions.
The average monthly number of employees during the year within
each category was as follows:
Group Company
2020 2019 2020 2019
No. No. No. No.
Technology 395 356 226 227
General and administration 120 108 97 42
Sales and marketing 507 420 364 388
------ ----- ----- -----
1,022 884 687 657
------ ----- ----- -----
b) Directors' Emoluments 2020 2019
GBP'000 GBP'000
Wages and salaries 1,513 1,438
Pension 74 72
Bonuses 1,449 1,318
-------- --------
3,036 2,828
-------- --------
Aggregate gains made by Directors on the exercise
of options 5,936 2,467
-------- --------
The remuneration for the highest paid Director was as
follows:
2020 2019
GBP'000 GBP'000
Wages and salaries 607 589
Bonus 723 608
-------- --------
1,330 1,197
-------- --------
The highest paid Director has reached the maximum level
permitted for a personal pension plan and receives a direct payment
in lieu of his pension entitlement, which was GBP90,353 (2019:
GBP84,000). The number of share options granted during the year for
the highest paid Director was 206,136 (2019: 128,853) and the
number of share options exercised during the year was 200,000
(2019: 200,000).
9. Finance Revenue
2020 2019
GBP'000 GBP'000
Bank interest receivable 143 31
-------- --------
143 31
-------- --------
10. Finance Costs
2020 2019
GBP'000 GBP'000
Bank interest payable 1,911 613
Interest on long service award 13 9
Amortisation of bank loan fees 192 98
Lease liability interest 245 -
-------- --------
2,361 720
-------- --------
11. Taxation
a) Tax on Profit
The tax charge in the Consolidated Statement of Comprehensive
Income for the year is as follows:
2020 2019
GBP'000 GBP'000
Current income tax
UK corporation tax on profit for the year 2,760 2,765
Amounts underprovided/(overprovided) in previous
years 120 (292)
Foreign tax 1,903 2,158
4,783 4,631
Deferred tax
Origination and reversal of temporary differences (2,625) (1,868)
Amounts underprovided in previous years 876 26
Impact of change in tax rates 528 (206)
(1,221) (2,048)
Tax charge in the Statement of Comprehensive Income 3,562 2,583
-------- --------
b) Reconciliation of the Total Tax Charge
The profit before tax multiplied by the standard rate of corporation
tax in the UK would result in a tax charge as explained below:
2020 2019
GBP'000 GBP'000
Consolidated profit before tax 20,626 14,736
-------- --------
Consolidated profit before tax multiplied by the
standard rate of corporation tax in
the UK of 19% (2019: 19%) 3,919 2,800
Effect of:
Permanent differences 347 1,094
Non-taxable income (489) (11)
Rate changes (1,283) (120)
Utilisation of losses (14) -
Prior year items 996 (266)
Research and development tax relief (880) (492)
Patent Box relief (545) (460)
Share option relief 9 (67)
Recognition of unrecognised deferred tax assets - (698)
Effect of higher taxes on overseas earnings 1,502 803
Total tax charge reported in the Statement of Comprehensive
Income 3,562 2,583
-------- --------
The Group is entitled to current year tax relief of GBP811,398 (2019:
GBP1,023,000), calculated at a tax rate of 19% (2019: 19%), in relation
to the statutory deduction available on share options exercised in
the year.
11. Taxation (continued)
c) Deferred Tax - Group
Deferred Tax Asset
The recognised and unrecognised potential deferred tax asset of the
Group is as follows:
Recognised Unrecognised
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Decelerated capital allowances 1,259 1,283 - -
Share options 1,848 1,627 - -
Long service award 233 234 - -
Accrued bonuses 522 728 - -
Provision for bad debt 368 205 - -
Other temporary differences 1,420 497 - -
Leases 429 - - -
Capital losses - - 429 384
Trading losses 215 3,648 2,866 2,782
----------------------------------------------- ------------------------------------------------- -------- --------
6,294 8,222 3,295 3,166
----------------------------------------------- ------------------------------------------------- -------- --------
The movement on the deferred tax asset of the Group is as follows:
2020 2019
GBP'000 GBP'000
Opening balance - as reported 8,222 4,453
IFRS 16 transition adjustment 326 -
-------- --------
Opening balance - restated 8,548 4,453
Acquired on acquisition - 3,955
Foreign currency adjustments 11 (73)
Origination and reversal of temporary differences (2,265) 24
Impact of change in tax rates - (137)
6,294 8,222
-------- --------
The deferred tax asset has been recognised to the extent it is
anticipated to be recoverable out of future taxable profits based
on profit forecasts for the foreseeable future. The utilisation of
the unrecognised deferred tax asset in future periods will reduce
the future tax rate below the standard rate. The Group has
unrecognised deductible temporary differences of
GBP15,084,000(2019: GBP16,367,000) and unrecognised capital losses
of GBP 2,257,000 (2019: GBP2,257,000).
Deferred Tax Liability
The deferred tax liability of the Group is as follows:
2020 2019
GBP'000 GBP'000
Intangible assets 26,553 29,378
Land and buildings 186 108
Leases 277 -
Accelerated capital allowances 139 62
27,155 29,548
------------------------------------------- --------
The movement on the deferred tax liability of the Group is as follows:
2020 2019
GBP'000 GBP'000
Opening balance 29,548 8,260
IFRS 16 transition adjustment 189 -
------------------------------------------- --------
Opening balance - restated 29,737 8,260
Acquisition of intangibles in subsidiaries - 23,913
Foreign currency adjustments 713 (359)
Origination and reversal of temporary differences (3,823) (1,923)
Impact of change in tax rates 528 (343)
27,155 29,548
------------------------------------------- --------
11. Taxation (continued)
d) Deferred Tax - Company
Deferred Tax Asset
The recognised and unrecognised potential deferred tax asset of the
Company is as follows:
Recognised Unrecognised
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Decelerated capital allowances 1,259 1,283 - -
Share options 1,839 1,627 - -
Long service award 105 100 - -
Provision for bad debt 308 84 - -
Other temporary differences 310 - - -
Leases 46 - - -
Capital losses - - 429 384
Trading losses - - 2,866 2,782
--------------------------------------------------------- ------------------------------------------- ------------- --------
3,867 3,094 3,295 3,166
--------------------------------------------------------- ------------------------------------------- ------------- --------
The movement on the deferred tax asset of the Company is as follows:
2020 2019
GBP'000 GBP'000
Opening balance - as reported 3,094 3,404
IFRS 16 transition adjustment 59 -
-------- --------
Opening balance - restated 3,153 3,404
Origination and reversal of temporary differences 714 (310)
3,867 3,094
-------- --------
The deferred tax asset has been recognised to the extent it is
anticipated to be recoverable out of future taxable profits based
on profit forecasts for the foreseeable future. The utilisation of
the unrecognised deferred tax asset in future periods will reduce
the future tax rate below the standard rate. The Company has
unrecognised deductible temporary differences of GBP15,084,000
(2019: GBP16,367,000) and unrecognised capital losses of GBP
2,257,000 (2019: GBP2,257,000).
Deferred Tax Liability
The deferred tax liability of the Company is as follows:
2020 2019
GBP'000 GBP'000
Intangible assets 4,362 4,912
Land and buildings 112 108
4,474 5,020
-------- --------
The movement on the deferred tax liability of the Company is as
follows:
2020 2019
GBP'000 GBP'000
Opening balance 5,020 6,319
Origination and reversal of temporary differences (1,014) (1,179)
Impact of change in tax rates 468 (120)
4,474 5,020
-------- --------
e) Tax Losses
The Group has carried forward trading losses at 31 March 2020 of
GBP15,591,000 (2019: GBP30,561,000). To the extent that these
losses are available for offset against future trading profits of
the Group, it is expected that the future effective tax rate would
be below the standard rate. There were also capital losses carried
forward at 31 March 2020 of GBP2,257,000 (2019: GBP2,257,000),
which should be available for offset against future capital gains
of the Group to the extent that they arise.
f) Change in corporation tax rate
A reduction in the UK corporation tax rate to 17% (from 19%)
with effect from 1 April 2020 was enacted in the Finance Act 2016.
The deferred tax assets and liabilities as at 31 March 2019 were
based on this rate.
In the UK Budget on 11 March 2020 it was announced that the rate
would remain at 19%, with this change substantively enacted on 17
March 2020. The deferred tax assets and liabilities at 31 March
2020 are therefore based on the 19% rate.
12. Dividends Paid and Proposed
2020 2019
GBP'000 GBP'000
Declared and paid during the year
Final dividend for 2019 (paid in
2020): 2.99p (2018 (paid in 2019):
2.65p) 5,782 4,049
--------- ---------
Proposed for approval at AGM (not recognised
as a liability at 31 March)
Final dividend for 2020: 0p (2019:
2.99p) - 5,766
--------- ---------
GBP21,000 was received during the year relating to a refund for
dividends not claimed from previous years. The total net cash
impact of dividends during the year was therefore GBP5,761,000.
13. 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 year.
2020 2020 2019 2019
pence GBP'000 pence GBP'000
per per
share share
Profit attributable to equity holders
of the Company 8.8 17,064 7.7 12,153
------- --------- ------- ---------
Diluted
Diluted earnings per share is calculated by dividing the profit
for the year attributable to ordinary equity holders by the
weighted average number of ordinary shares outstanding during the
year 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.
2020 2019
No. No.
Basic weighted average number of
shares in issue 193,630,621 158,051,687
Dilutive effect of share options 3,144,641 2,754,605
Diluted weighted average number
of shares in issue 196,775,262 160,806,292
------------ ------------
2020 2020 2019 2019
pence GBP'000 pence GBP'000
per per
share share
Profit attributable to equity holders
of the Company 8.7 17,064 7.6 12,153
------- --------- ------- ---------
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.
Basic Diluted Basic Diluted
2020 2020 2019 2019
2020 pence pence 2019 pence pence
GBP'000 per share per GBP'000 per per
share share share
Adjusted operating
profit 47,945 24.8 24.4 32,031 20.3 19.9
Less net finance
costs (2,218) (1.1) (1.1) (689) (0.4) (0.4)
Less tax (3,562) (1.9) (1.9) (2,583) (1.7) (1.6)
---------- ---------- -------
Adjusted earnings 42,165 21.8 21.4 28,759 18.2 17.9
---------- ----------- -------- ---------- ------- --------
14. Property, Plant and Equipment
Group
Land and Plant
buildings and equipment Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 2018 1,251 6,943 8,194
Acquired on acquisition - 231 231
Additions - 1,453 1,453
Disposals - (51) (51)
Foreign currency adjustment - (35) (35)
At 31 March 2019 1,251 8,541 9,792
---------- ----------------------- -------
Additions - 1,653 1,653
Disposals - (881) (881)
Foreign currency adjustment - (94) (94)
---------- ----------------------- -------
At 31 March 2020 1,251 9,219 10,470
---------- ----------------------- -------
Depreciation and impairment
At 1 April 2018 20 3,474 3,494
Provided during the year 22 1,522 1,544
Disposals - (46) (46)
Foreign currency adjustment - (15) (15)
At 31 March 2019 42 4,935 4,977
---------- ----------------------- -------
Provided during the year 19 1,741 1,760
Disposals - (875) (875)
Foreign currency adjustment - (45) (45)
---------- ----------------------- -------
At 31 March 2020 61 5,756 5,817
---------- ----------------------- -------
Net book value
At 31 March 2020 1,190 3,463 4,653
At 31 March 2019 1,209 3,606 4,815
At 1 April 2018 1,231 3,469 4,700
---------- ----------------------- -------
Company
Land and Plant and
buildings equipment Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 2018 1,233 4,927 6,160
Additions - 1,214 1,214
Disposals - (2) (2)
----------- ----------- ----------------
At 31 March 2019 1,233 6,139 7,372
Additions - 858 858
Disposals - (872) (872)
----------- ----------- ----------------
At 31 March 2020 1,233 6,125 7,358
----------- ----------- ----------------
Depreciation and impairment
At 1 April 2018 2 2,444 2,446
Provided during the year 22 1,103 1,125
Disposals - (2) (2)
At 31 March 2019 24 3,545 3,569
Provided during the year 19 1,195 1,214
Disposals - (872) (872)
----------- ----------- ----------------
At 31 March 2020 43 3,868 3,911
----------- ----------- ----------------
Net book value
At 31 March 2020 1,190 2,257 3,447
----------- ----------- ----------------
At 31 March 2019 1,209 2,594 3,803
----------- ----------- ----------------
At 1 April 2018 1,231 2,483 3,714
----------- ----------- ----------------
15. Right-of-use assets
Group
Right of
use assets Total
GBP'000 GBP'000
Cost
At 31 March 2019 - -
Adoption of IFRS 16 (see note 2.4) 8,840 8,840
Additions 1,837 1,837
Disposals (295) (295)
Foreign currency adjustment (265) (265)
----------- -----------------
At 31 March 2020 10,117 10,117
----------- -----------------
Depreciation and impairment
At 31 March 2019 - -
Adoption of IFRS 16 (see note 2.4) 3,674 3,674
Provided during the year 1,850 1,850
Disposals (180) (180)
Foreign currency adjustment 6 6
At 31 March 2020 5,350 5,350
----------- -----------------
Net book value
At 31 March 2020 4,767 4,767
----------- -----------------
At 31 March 2019 - -
----------- -----------------
At 1 April 2018 - -
----------- -----------------
Company
Right of
use assets Total
GBP'000 GBP'000
Cost
At 31 March 2019 - -
Adoption of IFRS 16 (see note 2.4) 4,691 4,691
Additions - -
Disposals - -
----------- ---------------------
At 31 March 2020 4,691 4,691
----------- ---------------------
Depreciation and impairment
At 31 March 2019 - -
Adoption of IFRS 16 (see note 2.4) 1,918 1,918
Provided during the year 675 675
----------- ---------------------
At 31 March 2020 2,593 2,593
----------- ---------------------
Net book value
At 31 March 2020 2,098 2,098
----------- ---------------------
At 31 March 2019 - -
----------- ---------------------
At 1 April 2018 - -
----------- ---------------------
Further detail regarding the impact of the transition to IFRS 16
has been given in note 2.4 of the financial statements.
The underlying class of assets and their net book values are
leasehold property (Group GBP4,760,000, Company GBP2,093,000) and
equipment (Group GBP7,000, Company GBP5,000).
16. Intangible Assets
Group Total Internally
Customer Software Non-complete acquired Purchased developed
relationships technology clauses intangibles Goodwill software software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April
2018 45,926 15,673 1,066 62,665 116,497 2,118 1,771 183,051
Foreign
currency
adjustment (1,078) (249) (79) (1,406) (2,625) 30 - (4,001)
Additions
- business
combinations 73,212 17,224 4,391 94,827 178,651 - - 273,478
Additions
- purchased
software - - - - - 172 - 172
Disposals - - - - - (67) - (67)
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 - as
reported 118,060 32,648 5,378 156,086 292,523 2,253 1,771 452,633
Additions
-
measurement
period (1) - - - - 5,509 - - 5,509
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 - as
restated 118,060 32,648 5,378 156,086 298,032 2,253 1,771 458,142
Foreign
currency
adjustment 2,075 527 194 2,796 5,230 1 - 8,027
Additions
- purchased
software - - - - - 183 - 183
Disposals - - (695) (695) - (259) (559) (1,513)
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2020 120,135 33,175 4,877 158,187 303,262 2,178 1,212 464,839
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
Amortisation
and
impairment
At 1 April
2018 10,869 7,257 614 18,740 - 1,195 1,712 21,647
Foreign
currency
adjustment 22 29 2 53 - (5) - 48
Amortisation
during the
year 5,779 4,105 432 10,316 - 468 37 10,821
Disposals - - - - - (20) - (20)
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 16,670 11,391 1,048 29,109 - 1,638 1,749 32,496
Foreign
currency
adjustment (77) (43) 18 (102) - 2 - (100)
Amortisation
during the
year 12,231 5,723 1,054 19,008 - 162 22 19,192
Disposals - - (695) (695) - - (559) (1,254)
------------------
At 31 March
2020 28,824 17,071 1,425 47,320 - 1,802 1,212 50,334
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
Net book
value
At 31 March
2020 91,311 16,104 3,452 110,867 303,262 376 - 414,505
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 -
restated
(1) 101,390 21,257 4,330 126,977 298,032 615 22 425,646
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 - as
reported 101,390 21,257 4,330 126,977 292,523 615 22 420,137
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 1 April
2018 35,057 8,416 452 43,925 116,497 923 59 161,404
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
(1) See note 2.3
16. Intangible Assets continued
Acquisition Carrying Remaining
Value Amortisation
of Customer Period
Relationship
GBP'000 Years
Data Discoveries Holdings
Limited 47 1.25
Advanced Checking Services 26 1.33
Capscan Parent Limited 746 1.58
TMG.tv Limited 276 2.58
CRD (UK) Limited 286 3.58
DecTech Solutions Pty
Ltd 1,564 4.08
CDMS Limited 1,656 4.58
Loqate Inc 1,165 5.08
ID Scan Biometrics
Limited 2,448 6.25
Postcode Anywhere (Holdings)
Limited 17,613 7.08
VIX Verify Global Pty
Limited 5,620 8.50
IDology Inc 59,864 8.83
--------------
91,311
Goodwill arose on the acquisition of GB Mailing Systems Limited,
e-Ware Interactive Limited, Data Discoveries Holdings Limited,
Advanced Checking Services Limited ('ACS'), Capscan Parent Limited,
TMG.tv Limited, CRD (UK) Limited, DecTech Solutions Pty Ltd, CDMS
Limited, Loqate Inc., ID Scan Biometrics Limited, Postcode Anywhere
(Holdings) Limited, VIX Verify Global Pty Limited and IDology Inc.
Under IFRS, goodwill is not amortised and is tested annually for
impairment (note 16).
16. Intangible Assets continued
Company Total Internally
Customer Software Non-complete acquired Purchased developed
relationships technology clauses intangibles Goodwill software software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2018 26,078 7,818 461 34,357 78,154 2,098 2,353 116,962
Additions -
purchased
software - - - - - 167 - 167
Transfer from
investments(1) - - - - 31,961 - - 31,961
Disposals - - - - - (67) - (67)
At 31 March
2019 26,078 7,818 461 34,357 110,115 2,198 2,353 149,023
Additions -
product
development - - - - - 183 - 183
Hive-up
adjustment(2) (54) - - (54) - - - (54)
Disposals - - (194) (194) - (259) (559) (1,012)
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
At 31 March
2020 26,024 7,818 267 34,109 110,115 2,122 1,794 148,140
Amortisation
and impairment
At 1 April 2018 207 96 10 313 - 1,170 2,305 3,788
Amortisation
during the year 2,776 2,599 279 5,654 - 425 37 6,116
Disposals - - - - - (20) - (20)
At 31 March
2019 2,983 2,695 289 5,967 - 1,575 2,342 9,884
Reclassification 102 (102) - - - - - -
Amortisation
during the year 2,878 2,498 162 5,538 - 171 11 5,720
Disposals - - (194) (194) - - (559) (753)
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
At 31 March
2020 5,963 5,091 257 11,311 - 1,746 1,794 14,851
Net book value
At 31 March
2020 20,061 2,727 10 22,798 110,115 376 - 133,289
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
At 31 March
2019 23,095 5,123 172 28,390 110,115 623 11 139,139
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
At 1 April 2018 25,871 7,722 451 34,044 78,154 928 48 113,174
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
(1) A transfer between investments and goodwill has been made as
the directors consider that this better reflects the nature of the
non-current assets following hive-ups that occurred in previous
years.
(2) This is a correction to the opening acquired cost in respect
of the hive-up of IDScan Biometrics Limited in the year to 31 March
2018. The other side to this entry is within 'Other Reserves'
within equity.
Acquisition Carrying
Value Remaining
of Customer Amortisation
Relationship Period
GBP'000 Years
ID Scan Biometrics
Limited 2,448 6.25
Postcode Anywhere (Holdings)
Limited 17,613 7.08
--------------
20,061
Goodwill arose on the acquisition of ID Scan Biometrics Limited
and Postcode Anywhere (Holdings) Limited. Under IFRS, goodwill is
not amortised and is tested annually for impairment (note 17).
17. Impairment Testing of Goodwill
Goodwill acquired through business combinations has been
allocated for impairment testing purposes to seven CGUs as
follows:
-- Fraud Unit (represented by the Fraud operating segment excluding the CAFs Unit)
-- Identity Unit (represented by the Identity operating segment
excluding the IDology Unit and the VIX Verify Unit)
-- Location Unit (represented by the Location operating segment excluding the Loqate Unit)
-- CAFs Unit (part of the Fraud operating segment)
-- Loqate Unit (part of the Location operating segment)
-- VIX Verify Unit (part of the Identity operating segment)
-- IDology Unit (part of the Identity operating segment)
-- e-Ware Interactive Unit (included in Other operating segment)
-- Transactis Unit (included in Other operating segment)
Where there are no indicators of impairment on the goodwill
arising through business combinations made during the year they are
tested for impairment no later than at the end of the year.
Carrying Amount of Goodwill 2020 2019
Allocated to CGUs
GBP'000 GBP'000
Fraud Unit 3,040 3,040
Identity Unit 37,586 37,586
Location Unit 53,992 53,992
CAFS Unit 12,922 14,261
Loqate Unit 7,731 7,393
VIX Verify Unit 14,171 15,639
IDology Unit 173,239 160,031
e-Ware Interactive Unit 79 79
Transactis Unit 502 502
-------- --------
303,262 292,523
-------- --------
Key Assumptions Used in Value in Use Calculations
The Group prepares cash flow forecasts using budgets and
forecasts approved by the Directors covering a five-year period and
an appropriate extrapolation of cash flows beyond this using a
long-term average growth rate. The long-term average growth rate is
not greater than the average long-term retail growth rate in the
territory where the CGU is based (UK - 1.8%; USA - 1.8%; Australia
- 2.5%).
The key assumptions for value in use calculations are those
regarding the forecast cash flows, discount rates and growth rates.
The Directors estimate discount rates using pre-tax rates that
reflect current market assessments of the time value of money and
the risks specific to the individual CGU. Growth rates reflect
long-term growth rate prospects for the economy in which the CGU
operates.
2020 2019
Pre-tax Growth Pre-tax Growth
WACC rate WACC rate
(in perpetuity) (in perpetuity)
% % % %
Fraud Unit 10.7% 1.8% 10.4% 1.8%
Identity Unit 10.7% 1.8% 10.4% 1.8%
Location Unit 10.7% 1.8% 10.4% 1.8%
CAFs Unit 14.3% 2.5% 15.1% 2.8%
Loqate Unit 12.8% 1.8% 11.3% 1.8%
VIX Verify Unit 14.3% 2.5% - -
Idology Unit 12.8% 1.8% - -
e-Ware Interactive Unit 10.7% - 10.4% -
Transactis Unit 10.7% - 10.4% -
In the case of the Fraud CGU, the annual impairment review as at
31 March 2020 indicated that the recoverable amount exceeded the
carrying value of the CGU by GBP67,869,000. The sensitivities which
result in the recoverable amount equalling the carrying value can
be summarised as follows:
-- a reduction of 96% in the forecast profit margins; and
-- any absolute increase in the pre-tax weighted average cost of
capital would have GBPnil impact on headroom.
In the case of the Identity CGU, the annual impairment review as
at 31 March 2020 indicated that the recoverable amount exceeded the
carrying value of the CGU by GBP90,251,000. The sensitivities,
which result in the recoverable amount equalling the carrying
value, can be summarised as follows:
-- an absolute increase of 23.2% in the pre-tax weighted average
cost of capital from 10.7% to 33.9%; or
-- a reduction of 71% in the forecast profit margins.
In the case of the Location CGU, the annual impairment review as
at 31 March 2020 indicated that the recoverable amount exceeded the
carrying value of the CGU by GBP138,799,000. The sensitivities
which result in the recoverable amount equalling the carrying value
can be summarised as follows:
-- an absolute increase of 28.4% in the pre-tax weighted average
cost of capital from 10.7% to 39.1%; or
-- a reduction of 72% in the forecast profit margins.
17. Impairment Testing of Goodwill continued
In the case of CAFs CGU, the annual impairment review as at 31
March 2020 indicated that the recoverable amount exceeded the
carrying value of the CGU by GBP23,013,000. The sensitivities which
result in the recoverable amount equalling the carrying value can
be summarised as follows:
-- an absolute increase of 19.0% in the pre-tax weighted average
cost of capital from 14.3% to 33.3%; or
-- a reduction of 64% in the forecast profit margins.
In the case of Loqate CGU, the annual impairment review as at 31
March 2020 indicated that the recoverable amount exceeded the
carrying value of the CGU by GBP26,379,000. The sensitivities which
result in the recoverable amount equalling the carrying value can
be summarised as follows:
-- an absolute increase of 65.4% in the pre-tax weighted average
cost of capital from 12.8% to 78.2%; or
-- a reduction of 77% in the forecast profit margins.
In the case of the VIX Verify CGU, the annual impairment review
as at 31 March 2020 indicated that the recoverable amount exceeded
the carrying value of the CGU by GBP7,498,000. The sensitivities
which result in the recoverable amount equalling the carrying value
can be summarised as follows:
-- an absolute increase of 6.9% in the pre-tax weighted average
cost of capital from 14.3% to 21.2%; or
-- a reduction of 35% in the forecast profit margins.
In the case of the IDology CGU, the annual impairment review as
at 31 March 2020 indicated that the recoverable amount exceeded the
carrying value of the CGU by GBP81,374,000. The sensitivities,
which result in the recoverable amount equalling the carrying
value, can be summarised as follows:
-- an absolute increase of 5.2% in the pre-tax weighted average
cost of capital from 12.8% to 18.0%; or
-- a reduction of 32% in the forecast profit margins.
In the case of the e-Ware Interactive CGU, the annual impairment
review as at 31 March 2020 indicated that the recoverable amount
exceeded the carrying value by GBP20,000 (2018: GBP165,000). In
assessing the future recoverable amounts, forecast cash flows are
assumed for the current contract value only on the basis that the
recoverable amount is associated with only a single remaining
customer attributable to that acquisition. Since the value in use
of the e-Ware Interactive CGU is based on a single client, its loss
or a significant reduction in its cash flow would cause the
carrying value of the unit to exceed its recoverable amount.
-- a reduction of 20% in the forecast profit margins, and
-- any absolute increase in the pre-tax weighted average cost of
capital would have GBPnil impact on headroom.
In the case of the Transactis CGU, the annual impairment review
as at 31 March 2020 indicated that the recoverable amount exceeded
the carrying value of the CGU by GBP1,792,000. The sensitivities,
which result in the recoverable amount equalling the carrying
value, can be summarised as follows:
-- an absolute increase of 52.6% in the pre-tax weighted average
cost of capital from 10.7% to 63.3%; or
-- a reduction of 45% in the forecast profit margins.
Based on the impairment reviews performed no impairment has been
identified.
18. Investments
Company 2020 2019
GBP'000 GBP'000
Cost
At 1 April 305,940 76,310
Acquisition of subsidiary undertakings 7 235,744
Capital investment in subsidiary undertaking - 20,639
Transfer to goodwill and intangibles (1) - (31,961)
--------- ---------
At 31 March - as reported 300,732
Acquisition of subsidiary undertakings (measurement
period adjustment) (2) - 5,208
At 31 March - as restated 305,947 305,940
--------- ---------
Provision for impairment
At 1 April 2,464 -
Charge for the year (3) - 2,464
--------- ---------
At 31 March 2,464 2,464
--------- ---------
Net book value
At 31 March 303,483 303,476
--------- ---------
(1) A transfer between investments and goodwill has been made as
the directors consider that this better reflects the nature of the
non-current assets following hive-ups that occurred in previous
years .
(2) Refer to note 2.3
(3) The impairment charge for the year of GBP2,464,000 was
following a dividend from Loqate Inc. which was recognised in the
Company income statement.
Refer to note 2.3 for details of the measurement period
adjustment impacting the Group.
18. Investments continued
The Company accounts for its investments in subsidiaries using
the cost model. The Company holds 100% of the ordinary share
capital of all investments as follows:
Proportion
of voting
rights Country
Name of company and shares of incorporation Registered office address
held
Capscan Parent Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Capscan Limited (1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Data Discoveries Holdings 100% United The Foundation, Herons Way, Chester
Limited Kingdom Business Park, Chester CH4 9GB
Data Discoveries Limited 100% United The Foundation, Herons Way, Chester
(1) Kingdom Business Park, Chester CH4 9GB
Managed Analytics Limited 100% United The Foundation, Herons Way, Chester
(1) Kingdom Business Park, Chester CH4 9GB
Fastrac Limited (1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
e-Ware Interactive Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
GB Information Management 100% United The Foundation, Herons Way, Chester
Limited Kingdom Business Park, Chester CH4 9GB
GB Datacare Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
GB Mailing Systems Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Citizensafe Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
TelMe.com Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Farebase Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
TMG.tv Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
CRD (UK) Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Postcode Anywhere (Holdings) 100% United The Foundation, Herons Way, Chester
Limited Kingdom Business Park, Chester CH4 9GB
Postcode Anywhere (Europe) 100% United The Foundation, Herons Way, Chester
Limited Kingdom Business Park, Chester CH4 9GB
Postcode Anywhere (North 100% United The Foundation, Herons Way, Chester
America) Limited Kingdom Business Park, Chester CH4 9GB
PCA Predict Inc. 100% United National Registered Agents Inc.,
States 106 Greentree Drive, Suite 101,
Dover DE 19904
GBG (Australia) Holding 100% Australia Co Sec Consulting Pty Ltd, 59 Gipps
Pty Ltd Street, Collingwood, VIC 3066
GBG (Australia) Pty 100% Australia Co Sec Consulting Pty Ltd, 59 Gipps
Ltd (1) Street, Collingwood, VIC 3066
VIX Verify Global Pty 100% Australia Level 3, 20 Bond Street, Sydney
Ltd(1) NSW 2000
GBG (Malaysia) Sdn Bhd(1) 100% Malaysia Level 7 Menara Millenium, Jalan
Damanlela Pusat Bandar, Damansara
Heights, 50490 Kuala Lumpur, Wilayah
Persekutuan
GBG DecTech Solutions 100% Spain 08002-Barcelona, Edifici The Triangle,
S.L(1) 4th Floor, Placa de Catalunya, Barcelona,
Spain
Room 1714, Building 4, China Investment
Center, No.9 Guangan Road, Fengtai
(1) 100% China District, Beijing, China
Loqate Inc. 100% United 805 Veterans Blvd Ste 305, Redwood
States City CA 94063
Loqate Limited (1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
IDology Inc. 100% United 2018 Powers Ferry Rd, Atlanta, GA
States 30339, USA
ID Scan Biometrics Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
IDscan Research Bilisim 100% Turkey Mersin Universitesi Çiftlikköy
Teknolojileri Sanayi Kampüsü, Teknopark İdari
Ve Ticaret Limited Sirketi Bina No: 106 Yeni ehir - Mersin
UAB IDscan Biometrics 100% Lithuania Kauno m. Kauno m. I. Kanto g. 18-4B
R&D Lithuania
Safer Clubbing At Night 100% United The Foundation, Herons Way, Chester
Network (Scan Net) Ltd Kingdom Business Park, Chester CH4 9GB
Transactis Limited (1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Inkfish Limited(1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
VIX Verify Pty Ltd(1) 100% Australia Co Sec Consulting Pty Ltd, 58 Gipps
Street, Collingwood, Victoria 3066,
Australia
GreenID Limited(1) 100% New Zealand Moore Stephens Markhams Wellington
Limited, Level 11 Sovereign House,
34-42 Manners Street, Wellington
6011, New Zealand
Mastersoft Group Pty 100% Australia Co Sec Consulting Pty Ltd, 58 Gipps
Ltd(1) Street, Collingwood, Victoria 3066,
Australia
Mastersoft (New Zealand) 100% New Zealand Moore Stephens Markhams Wellington
Ltd(1) Limited, Level 11 Sovereign House,
34-42 Manners Street, Wellington
6011, New Zealand
DataSan Pty Ltd(1) 100% Australia Co Sec Consulting Pty Ltd, 58 Gipps
Street, Collingwood, Victoria 3066,
Australia
VIX Verify International 100% Australia Co Sec Consulting Pty Ltd, 58 Gipps
Pty Ltd(1) Street, Collingwood, Victoria 3066,
Australia
VIX Verify Singapore 100% Singapore C/O S.S. Corporate Management Pte.
Pte Ltd(1) Ltd, 138 Cecil Street, #12-01A Cecil
Court, 069538 Singapore
VIX Verify SA (Pty) 100% South Africa C/O Eversheds Sutherland, 3rd Floor,
Ltd(1) 54, Melrose Boulevard, Melrose Arch,
Melrose North, 2196, Johannesburg,
South Africa
PT Fraud Solutions Indonesia 100% Indonesia Satrio Tower, Lt .16, Jl.Prof.Dr.
(1) Satrio, Blok C4 No 5 RT. 7/RW.2
Kel. Kunnigan Timur, Kec. Setiabudi
Jakarta Selatan- 12950
The Company accounts for its non-listed equity investments as
financial assets designated at fair value through OCI. The Company
holds the following non-listed equity investment:
Proportion
of voting
rights Country
Name of company and shares of incorporation Registered office address
held
Payfone Inc. (1, 2) 0.32% United 215 Park Avenue South New York, NY
States 10003 United States
(1) held indirectly.
(2) held at zero value following measurement period adjustment
detailed in note 2.3.
19. Trade and Other Receivables
Group Company
Restated(1)
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 52,496 46,114 36,993 31,586
Prepayments 7,855 5,731 3,847 3,788
Accrued income 6,203 3,147 450 525
--------- ------------ --------- ---------
66,554 54,992 41,290 35,899
--------- ------------ --------- ---------
(1) See note 2.3
20. Cash
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 27,499 21,189 15,031 7,791
Cash at bank and in hand earns interest at floating rates based
on daily bank deposit rates.
21. Equity Share Capital
2020 2019
GBP'000 GBP'000
Authorised
194,193,861 (2019: 192,850,117) ordinary
shares of 2.5p each 4,855 4,821
----------- -----------
Issued
Allotted, called up and fully paid 4,855 4,821
Share premium 261,648 261,149
----------- -----------
266,503 265,970
----------- -----------
2020 2019
No. No.
Number of shares in issue at 1 April 192,850,117 152,668,698
Issued on placing - 39,024,390
Issued in relation to intangible
asset acquisition 7,352 -
Issued on exercise of share options 1,336,392 1,157,029
----------- -----------
Number of shares in issue at 31 March 194,193,861 192,850,117
----------- -----------
2020 2019
Share Share Share Share
Capital Premium Total Capital Premium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
1 April 4,821 261,149 265,970 3,817 104,814 108,631
Consideration received
on share placing - - - 976 159,367 160,343
Share issue costs - - - - (3,274) (3,274)
Fair value of assets
received on acquisition
of intangible asset - 43 43 - - -
Consideration received
on exercise of share
options 34 456 490 28 242 270
-------- -------- ------- -------- -------- -------
Number of shares in
issue at 31 March 4,855 261,648 266,503 4,821 261,149 265,970
-------- -------- ------- -------- -------- -------
During the year to 31 March 2020, 7,352 shares were issued as
final consideration in relation to the purchase of an intangible
asset. The fair value of the asset was GBP43,000.
22. Loans
Bank 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'). This term loan was extended during the prior year from
its original maturity of April 2017 to November 2019. This loan was
repaid in full during the current financial year.
In October 2018, the Group drew down GBP10,000,000 from its
existing revolving credit facility agreement in order to part fund
the acquisition of VIX Verify. This drawdown took the borrowing on
that facility to GBP17,000,000 at that date.
In February 2019, the Group refinanced its existing revolving
facility and the total facility was increased to GBP110,000,000,
with a further GBP30,000,000 accordion option. The facility now
expires in February 2022. The existing liability of GBP17,000,000
was repaid at the point of the refinancing with a simultaneous
drawdown of GBP101,000,000 (net increase of GBP84,000,000), which
was used to part fund the IDology acquisition. A further repayment
of GBP15,000,000 was made in March 2019.
During the current financial year there have been no further
drawdowns on this facility. Repayments totalling GBP23,500,000 have
been made during the year.
The debt 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.
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Opening bank loan 86,888 9,248 85,447 7,000
New borrowings (net of arrangement
fee) - 110,447 - 110,447
Repayment of borrowings (24,914) (32,804) (23,500) (32,000)
Amortisation of loan fees 192 - 192 -
Foreign currency translation
adjustment (27) (3) - -
Closing bank loan 62,139 86,888 62,139 85,447
----------------------- --------- ------------- ---------
Analysed as:
Amounts falling due within 12 - 1,441 - -
months
Amounts falling due after one
year 62,139 85,447 62,139 85,447
62,139 86,888 62,139 85,447
----------------------- --------- ------------- ---------
Analysed as:
Bank loans 62,500 87,441 62,500 86,000
Unamortised loan fees (361) (553) (361) (553)
62,139 86,888 62,139 85,447
------- ------- ------- -------
Intercompany loans
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Opening intercompany loan - - - -
New borrowings - - 4,156 -
Repayment of borrowings - - - -
Foreign currency translation - - - -
adjustment
Closing intercompany loan - - 4,156 -
------------------------- --------- --------------- ---------
Analysed as:
Amounts falling due within 12 - - - -
months
Amounts falling due after one - - 4,156 -
year
- - 4,156 -
------------------------- --------- --------------- ---------
Interest is charged on intercompany loans at a rate of 3.5% per
annum. The loans are unsecured, and repayable within 2 years.
23. Lease liabilities
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
At 1 April - - - -
On transition to IFRS 16 6,076 - 3,407 -
Additions 1,878 - - -
Disposals (299) - - -
Accretion of interest 245 - 107 -
Payments (2,043) - (832) -
Foreign currency adjustment (132) - - -
At 31 March 5,725 - 2,682 -
--------- ------------------- ----------------- ---------
Analysed as:
Amounts falling due within
12 months 2,012 - 704 -
Amounts falling due after one
year 3,713 - 1,978 -
5,725 - 2,682 -
--------- ------------------- ----------------- ---------
Amounts recognised in the Balance Sheet and in the Statement of
Changes in Equity have been disclosed within note 2.4.
24. Trade and Other Payables
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 10,403 8,687 6,670 3,842
Amounts owed to subsidiary undertakings - - 20,622 23,952
Other taxes and social security
costs 5,299 3,375 4,751 2,888
Accruals 24,939 21,446 15,704 15,782
40,641 33,508 47,747 46,464
--------- --------- --------- ---------
25. Provisions
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Provisions can be analysed as
follows:
Dilapidation provision (see
below) 465 - 421 -
Long service award (see note
26) 551 528 422 395
1,016 528 843 395
--------- --------- --------- ---------
Dilapidation provision
At 1 April - 25 - 25
Utilised during the year - (25) - (25)
Provided in year 465 - 421 -
Closing balance 465 - 421 -
--------- --------- --------- ---------
This provision relates to the estimated cost of restoration work
required upon termination of leasehold property agreements. The
estimated level of provision required was reassessed during the
year which has led to the recognition of additional provisions
being recognised.
26. Long Service Award
The Group provides long service awards, providing employees with
a benefit after they attain a set period of service with the Group,
for example 10 or 20 years. For these benefits, IAS 19 requires a
liability to be held on the Group's balance sheet.
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 528 - 395 -
Past service cost - 349 - 261
Service cost 100 102 74 76
Benefits taken (21) - (21) -
Actuarial (gain)/loss during
the year (69) 68 (36) 51
Net interest charge 13 9 10 7
--------- --------- --------- ---------
At 31 March 551 528 422 395
--------- --------- --------- ---------
The following table lists the inputs to the valuation of the
long service award for the years ended 31 March 2020 and 31 March
2019.
2020 2019
-------------------------------------------- ------- -------
Discount rate (%) 2.2 2.4
Salary increases (%) 3.0 3.5
Employee turnover (% probability of leaving
depending on age) 2 - 20% 2 - 20%
--------------------------------------------- ------- -------
27. Financial Instruments and Risk Management
The Group's activities expose it to a variety of financial risks
including: market risk (including foreign currency risk and cash
flow interest rate risk), credit risk, liquidity risk and capital
management. The Group's overall risk management programme considers
the unpredictability of financial markets and seeks to reduce
potential adverse effects on the Group's financial performance. The
Group does not currently use derivative financial instruments to
hedge foreign exchange exposures.
Credit Risk
Credit risk is managed on a Group basis except for credit risk
relating to accounts receivable balances which each entity is
responsible for managing. Credit risk arises from cash and cash
equivalents, as well as credit exposures from outstanding customer
receivables. Management assesses the credit quality of the
customer, taking into account its financial position, past
experience and other factors. For those sales considered higher
risk, the Group operates a policy of cash in advance of delivery.
The Group regularly monitors its exposure to bad debts in order to
minimise exposure. Credit risk from cash and cash equivalents is
managed via banking with well-established banks with a strong
credit rating.
Covid-19 Assessment
The single largest impact on the Group's credit risk profile is
the emergence of the Covid-19 pandemic. The implications of the
Covid-19 pandemic are wide spread and the duration and impact of
the pandemic is unknown. Given the uncertainty and evolving nature
of the pandemic, it is has not been possible to fully reflect the
anticipated economic impacts in the underlying assumptions in a
mechanistic approach. The Group has responded by calculating an
additional level of provision to overlay the normal ECL
calculation. This overlay has been based on management judgement
taking into account an analysis of trade receivables broken down
into customer sectors, using internal and external forecasts to
assess the sectors which are likely to see the biggest impact of
the pandemic, and comparing cash receipts received post year-end
for customers in these sectors against historical averages.
The maximum exposure to credit risk at the reporting dates is
the carrying value of each class of financial assets as disclosed
below:
Year ended 31 March 2020 Group Company
Restated
(1)
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 56,561 48,241 40,712 33,319
Allowance for unrecoverable
amounts (4,065) (2,127) (3,719) (1,733)
52,496 46,114 36,993 31,586
--------- --------- --------- ---------
(1) See note 2.3
27. Financial instruments and risk management (continued)
Expected credit loss allowance for trade receivables
The Group applies the IFRS 9 simplified approach to measuring
expected credit loses which uses a lifetime expected loss allowance
for all trade receivables and contract assets. To measure the
expected credit losses, trade receivables have been grouped based
on shared credit risk characteristics and days past due. The
provision rates are based on days past due, historical information
relating to counterparty default rates and external credit ratings
where available. The following table provides an analysis of the
Group's credit risk exposure on trade receivables using a provision
matrix to measure expected credit losses.
Group - 31 March
2020 Trade receivables
------------------------------------------------------------
Days past due
------------------------------------------------------------
< 30 31 - 61 - > 90
Current days 60 days 90 days days Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross carrying
amount 31,638 11,073 4,151 2,610 7,089 56,561
Expected credit
loss 921 286 221 239 2,398 4,065
Company - 31
March 2020 Trade receivables
------------------------------------------------------------
Days past due
------------------------------------------------------------
< 30 31 - 61 - > 90
Current days 60 days 90 days days Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross carrying
amount 21,283 8,690 3,323 1,774 5,642 40,712
Expected credit
loss 875 265 192 188 2,199 3,719
Group - 31 March
2019 Trade receivables
------------------------------------------------------------
Days past due
------------------------------------------------------------
> 90
< 30 31 - 61 - days
Current days 60 days 90 days (1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross carrying
amount 28,724 9,336 4,171 1,597 4,413 48,241
Expected credit
loss (restated
(1) 658 115 277 13 1,064 2,127
Company - 31
March 2019 Trade receivables
------------------------------------------------------------
Days past due
------------------------------------------------------------
< 30 31 - 61 - > 90
Current days 60 days 90 days days Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross carrying
amount 20,240 6,796 1,600 1,435 3,248 33,319
Expected credit
loss 574 35 167 7 950 1,733
Set out below is the movement in the allowance for expected
credit losses of trade receivables:
Year ended 31 March 2020 Group Company
Restated
(1)
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2,127 1,344 1,733 1,165
Acquired on acquisition (1) - 78 - -
Increase in provision 2,208 852 2,158 704
Covid-19 provision 731 - 608 -
Write-offs (600) (151) (525) (136)
Release (407) - (255) -
Foreign exchange 6 4 - -
4,065 2,127 3,719 1,733
------------------- --------- -------- --------
(1) See note 2.3
The amount disclosed in note 5, relates to the increase in
provision, Covid-19 provision and the amount released in the
year.
27. Financial instruments and risk management (continued)
Foreign Currency Risk
The Group's foreign currency exposure arises from:
-- Transactions (sales/purchases) denominated in foreign currencies;
-- Monetary items (mainly cash receivables and borrowings)
denominated in foreign currencies; and
-- Investments in foreign operations, whose net assets are
exposed to foreign currency translation.
The Group has currency exposure on its investment in a foreign
operation in Australia and partially offsets its exposure to
fluctuations on the translation into Sterling by holding net
borrowings in Australian Dollars. In terms of sensitivities, the
effect on equity of a 10% increase in the Australian Dollar and
Sterling exchange rate would be an increase of GBP5,324,000 (2019:
GBP3,555,000 increase). The effect on equity of a 10% decrease in
the Australian Dollar and Sterling exchange rate net of the effect
of the net commercial investment hedge in
the foreign operation would be a decrease of GBP4,356,000 (2019: GBP2,908,000 decrease).
The Group has currency exposure on its investment in a foreign
operations in the United States of America. In terms of
sensitivities, the effect on equity of a 10% increase in the US
Dollar and Sterling exchange rate would be an increase of
GBP1,084,000 (2019: GBP1,109,000 increase). The effect on equity of
a 10% decrease in the US Dollar and Sterling exchange rate would be
a decrease of GBP887,000 (2019: GBP907,000 decrease).
The exposure to transactional foreign exchange risk within each
company is monitored and managed at both an entity and a Group
level. The following table demonstrates the sensitivity of the
Group's foreign currency exposure on the net monetary position at
31 March 2019:
Foreign Currency Exposure USD Rate EUR Rate AUD Rate MYR Rate
Change in rate +10% +10% +10% +10%
Effect on profit before GBP(125)
tax (GBP000s) GBP(519) GBP(12) GBP(439)
Change in rate -10% -10% -10% -10%
Effect on profit before
tax (GBP000s) GBP655 GBP37 GBP538 152
The Group's exposure to foreign currency changes for all other
currencies is not material.
Cash Flow Interest Rate Risk
The Group has financial assets and liabilities, which are
exposed to changes in market interest rates. Changes in interest
rates impact primarily on deposits and loans by changing their
future cash flows (variable rate). Management does not currently
have a formal policy of determining how much of the Group's
exposure should be at fixed or variable rates and the Group does
not use hedging instruments to minimise its exposure. However, at
the time of taking new loans or borrowings, management uses its
judgement to determine whether it believes that a fixed or variable
rate would be more favourable for the Group over the expected
period until maturity. In terms of sensitivities, the effect on
profit before taxation of an increase/decrease in the basis points
on floating rate borrowings of 25 basis points would be GBP110,000
(2019: GBP110,000).
Liquidity Risk
Cash flow forecasting is performed on a Group basis by the
monitoring of rolling forecasts of the Group's liquidity
requirements to ensure that it has sufficient cash to meet
operational needs and surplus funds are placed on deposit and
available at very short notice. The maturity date of the Group's
loans are disclosed in note 22.
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted payments
and includes contractual interest payments:
Year ended 31 March 2020 On Less than 1 to 5
demand 12 months years Total
GBP'000 GBP'000 GBP'000 GBP'000
Loans (note 22) - - 62,139 62,139
Contingent consideration (note
36) - 6,179 - 6,179
Lease liabilities (note 23) - 2,012 3,713 5,725
Trade and other payables (note
24) 10,403 30,238 - 40,641
10,403 38,429 65,852 114,684
--------- ----------- --------- ----------
Year ended 31 March 2019 On Less than 1 to 5
demand 12 months Years Total
GBP'000 GBP'000 GBP'000 GBP'000
Loans (note 22) - 1,441 85,447 86,888
Contingent consideration (note
36) - restated (1) - 5,208 - 5,208
Trade and other payables (note
24) 8,687 24,503 - 33,190
8,687 31,152 85,447 125,286
-------- ----------- --------- ----------
(1) See note 2.3
27. Financial instruments and risk management (continued)
Capital Management
The Group manages its capital structure in order to safeguard
the going concern of the Group and maximise shareholder value. The
capital structure of the Group consists of debt, which includes
loans disclosed in note 22, cash and cash equivalents and equity
attributable to equity holders of the Company, comprising issued
capital, reserves and retained earnings.
The Group may maintain or adjust its capital structure by
adjusting the amount of dividend paid to shareholders, returning
capital to shareholders, issuing new shares or selling assets to
reduce debt.
In order to achieve this overall objective, the Group's capital
management, amongst other things, aims to ensure that it meets
financial covenants attached to borrowings. Breaches in meeting the
financial covenants would permit the bank to immediately call loans
and borrowings. There have been no breaches in the financial
covenants of any borrowings in the current period.
No changes were made in the objectives, policies or processes
for managing capital during the years ended 31 March 2020 and 31
March 2019.
Financial instruments: Classification and Measurement
Set out below is an overview of financial instruments, other
than cash and short-term deposits, held by the Group at 31
March:
Restated(1)
2020 2019
Loans Fair value Loans Fair
and receivables profit and receivables value
or loss profit
or loss
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets:
Trade and other receivables 52,496 - 46,114 -
----------------- ----------- ----------------- ---------
Total current 52,496 - 46,114 -
Total 52,496 - 46,114 -
----------------- ----------- ----------------- ---------
Financial liabilities:
Lease liabilities 3,713 - - -
Loans 62,139 - 85,447 -
----------------- ----------- ----------------- ---------
Total non-current 65,852 - 85,447 -
Trade and other payables 40,641 - 33,508 -
Lease liabilities 2,012 - - -
Loans - - 1,441 -
Contingent consideration
- restated (1) - 6,179 - 5,287
----------------- ----------- ----------------- ---------
Total current 42,653 6,179 34,949 5,287
Total 108,505 6,179 120,396 5,287
----------------- ----------- ----------------- ---------
(1) Refer to note 2.3
All financial assets and liabilities have a carrying value that
approximates to fair value. The Group does not have any derivative
financial instruments.
Financial Assets
Trade and other receivables exclude the value of any prepayments
or accrued income. Trade and other payables exclude the value of
deferred income.
Cash at bank and in hand earns interest at floating rates based
on daily bank deposit rates. Trade receivables are non-interest
bearing and are generally on 14 to 60 day terms.
Financial Liabilities
The Group has a three year revolving credit facility agreement
expiring in February 2022 which is subject to a limit of
GBP110,000,000. The facility 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 31 March 2020 and 31 March 2019, the Group was not in breach
of any bank covenants.
27. Financial instruments and risk management (continued)
Financial liabilities: interest bearing loans and borrowings
Interest Maturity 2020 2019
rate
% GBP'000 GBP'000
--------------------------------- ---------- ---------- -------- --------
Financial liabilities
Current interest bearing loans
and borrowings
AUD$10,000,000 secured bank
loan BBSW+1.9 Nov 2019 - 1,441
Total current interest-bearing
loans and borrowings - 1,441
Non-current interest bearing
loans and borrowings
GBP110,000,000 revolving credit LIBOR +
facility 1.5 Feb 2022 62,139 85,447
-------- --------
Total non-current interest
bearing loans and borrowings - 85,447
Total interest bearing loans
and borrowing 62,139 86,888
-------- --------
Fair values of financial assets and liabilities
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).
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.
Level Level Level Total
1 2 3
At 31 March 2020 Valuation Technique GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------------------- --------- --------- -------- --------
Financial liability at fair
value through profit and
loss
Present value
of expected
Contingent consideration future cash
(note 36) flow - - 6,179 6,179
Level Level Level Total
1 2 3
At 31 March 2019 (restated) Valuation Technique GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------------------- --------- --------- -------- --------
Financial liability at fair
value through profit and
loss
Present value
of expected
Contingent consideration future cash
restated (note 2.3) flow - - 5,287 5,287
28. Changes in liabilities arising from financing activities
Foreign 31
1 April 2019 Transition Cash exchange Other New March
(as reported) to IFRS 16 flows movement movement leases 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current
liabilities
Interest
bearing
loans 1,441 - (1,414) (27) - - -
Lease
liabilities - 352 (2,043) 26 2,841 836 2,012
Non-current
liabilities
Interest
bearing
loans 85,447 - (23,500) - 192 - 62,139
Lease
liabilities - 5,724 - (158) (2,895) 1,042 3,713
Total
liabilities
arising from
financing
activities 86,888 6,076 (26,957) (159) 138 1,878 67,864
-------------- ----------- -------------------- --------- --------- -------- --------
Other movement in interest bearing loans represents amortisation
on loan fees.
Other movement in lease liabilities includes interest and the
reclassification of non-current lease liabilities to current lease
liabilities.
1 April Cash Foreign Other New 31 March
2018 flows exchange movement leases 2019
movement
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current liabilities
Interest bearing
loans 797 - 3 641 - 1,441
Non-current liabilities
Interest bearing
loans 8,451 77,637 - (641) - 85,447
Total liabilities
arising from financing
activities 9,248 77,637 3 - - 86,888
-------- -------- ---------- ---------- -------- ---------
Other movement represents the reclassification of non-current
interest bearing loans to current interest bearing loans.
29. Share-based Payments
Group and Company
The Group operates Executive Share Option Schemes under which
Executive Directors, managers and staff of the Company are granted
options over shares.
Executive Share Option Scheme
Options are granted to Executive Directors and employees on the
basis of their performance. Options are granted at the full market
value of the Company's shares at the time of grant and are
exercisable between three and ten years from the date of grant. The
options vest on the third anniversary of the grant subject to the
Company's earnings per share ('EPS') growth being greater than the
growth of the Retail Prices Index ('RPI') over a three-year period
prior to the vesting date. There are no cash settlement
alternatives.
Executive Share Option Scheme (Section C Scheme)
Options are granted to Executive Directors and employees on the
basis of their performance. Options are granted at the full market
value of the Company's shares at the time of grant and are
exercisable between three and ten years from the date of grant. The
percentage of an option that will vest and be capable of exercise
will depend on the performance of the Company. A minimum of 50% of
the options will vest when the Total Shareholder Return ('TSR')
performance of the Company, as compared to the TSR of the FTSE
Computer Services Sub-Sector over a three-year period, matches or
exceeds the median company. The percentage of shares subject to an
option in respect of which that option becomes capable of exercise
will then increase on a sliding scale so that the option will
become exercisable in full if top quartile performance is
achieved.
Executive Share Option Scheme (Section D Scheme)
Options are granted to Executive Directors and employees on the
basis of their performance. Options are granted at the full market
value of the Company's shares at the time of grant and are
exercisable between three and ten years from the date of grant. The
vesting of awards under the Section D Scheme is subject to the
achievement of a normalised EPS growth at an annual compound rate
of 20% over the performance period. The base year for the purposes
of the EPS target will be the financial year of the Company ended
immediately prior to the grant of the award. The performance period
will be the three financial years following the base year. Section
D Scheme options will only become exercisable to the extent they
have vested in accordance with the EPS target.
29. Share-based Payments continued
Share Matching Plan
In the year ended 31 March 2012, the Remuneration Committee
introduced the Share Matching Plan. Participants who invest a
proportion of their annual cash bonus in GBG shares can receive up
to a multiple of their original investment in GBG shares,
calculated on a pre-tax basis. Any matching is conditional upon
achieving pre-determined Adjusted EPS growth targets set by the
Remuneration Committee for the following three years. Share
Matching Plan options will only become exercisable to the extent
they have vested in accordance with the Adjusted EPS target.
Compensatory Options
In the year ended 31 March 2018, the Remuneration Committee
granted Compensatory Options to the Chief Executive of the Company,
as compensation for lost earnings and shares from his previous
employer. The Compensatory Options vest in equal tranches over a
period of 12 and 24 months, on each anniversary of the date of
grant, provided he still holds the position of CEO of GBG on the
respective dates. The Compensatory Options are valid for a period
of 12 months from the vesting date.
GBG Sharesave Scheme
The Group has a savings-related share option plan, under which
employees save on a monthly basis, over a three or five year
period, towards the purchase of shares at a fixed price determined
when the option is granted. This price is usually set at a 20%
discount to the market price at the time of grant. The option must
be exercised within six months of maturity of the savings contract,
otherwise it lapses.
Performance Share Plan (PSP)
The Group operates a PSP for all employees, but it is intended
that awards are made to senior management staff below the executive
director level. The plan was approved at the 2018 AGM. Awards are
subject to a three-year EPS performance condition. Employees can be
granted awards of nil cost options with an aggregate value on date
of grant of up to 100% of base salary. The awards are subject to
malus and clawback.
The charge recognised from equity-settled share-based payments
in respect of employee services received during the year is
GBP4,541,000 (2019: GBP2,287,000). Of this amount GBP4,271,000
(2019: GBP2,287,000) related to the Company.
The following table illustrates the number and weighted average
exercise prices ('WAEP') of, and movements in, share options during
the year.
2020 2020 2019 2019
No. WAEP No. WAEP
Outstanding as at 1 April 4,626,400 147.84p 4,997,800 148.39p
Granted during the year 1,807,066 150.95p 1,069,965 227.43p
Forfeited during the year (78,046) 301.55p (270,320) 201.84p
Cancelled during the year (13,541) 333.57p (11,461) 272.00p
Exercised during the year (1,336,392) 36.56p(1) (1,157,029) 52.94p(2)
Expired during the year - - (2,555) 163.00p
Outstanding at 31 March 5,005,487 175.77p 4,626,400 147.84p
----------- ---------------- ----------- ---------
Exercisable at 31 March 10,000 275.00p 2,601,043 76.15p
----------- ---------------- ----------- ---------
(1) The weighted average share price at the date of exercise for
the options exercised was 598.45p
(2) The weighted average share price at the date of exercise for
the options exercised was 518.97p
For the shares outstanding as at 31 March 2020, the weighted
average remaining contractual life is 5.4 years (2019: 4.7
years).
The weighted average fair value of options granted during the
year was 417.31p (2019: 440.40p). The range of exercise prices for
options outstanding at the end of the year was 2.5p - 544.0p (2019:
2.8p - 481.0p).
The fair value of equity-settled share options granted is
estimated as at the date of grant using a binomial model, taking
into account the terms and conditions upon which the options were
granted. The following table lists the inputs to the model for the
years ended 31 March 2020 and 31 March 2019.
2020 2019
------------------------------------ ----------- ---------
Dividend yield (%) 0.5 - 0.8 0.5 - 0.6
Expected share price volatility (%) 30 - 35 35
Risk-free interest rate (%) 0.2 - 1.1 0.7 - 1.1
Lapse rate (%) 5.0 - 10.0 5.0
Expected exercise behaviour See below See below
Expected life of option (years) 2.3 - 5.2 2.3 - 6.5
Exercise price (p) 2.5 - 544.0 2.50 -
462.0
Weighted average share price (p) 598.45 518.97
------------------------------------- ----------- ---------
Other than the Matching Scheme, LTIP and SAYE options, it is
assumed that 50% of options will be exercised by participants as
soon as they are 20% or more "in-the-money" (i.e. 120% of the
exercise price) and the remaining 50% of options will be exercised
gradually at the rate of 10% per annum each year they remain at or
above the 20% "in-the-money".
29. Share-based Payments continued
For the Matching Scheme, LTIP and SAYE options, it is assumes
these are exercised at the earliest opportunity in full (i.e.
Vesting Date) since the exercise price is a nominal amount and is
therefore not expected to influence the timing of a participant's
decision to exercise the options.
The expected volatility reflects the assumption that the
historical volatility is indicative of future trends, which may not
necessarily be the actual outcome.
30. Profit Attributable to Members of the Parent Company
The parent company's profit for the financial year ended 31
March 2020 was GBP 23,271,000 (2019: GBP7,275,000). As permitted by
Section 408 of CA 2006, the profit and loss account of the parent
company is not presented.
31. Description of Reserves
Equity Share Capital
The balance classified as share capital includes the nominal
value on issue of the Company's equity share capital, comprising
2.5p ordinary shares.
Share Premium
The balance classified as share premium includes the excess
proceeds over the nominal amount received on the issue of the
Company's equity share capital. Costs associated with the issue of
new share capital have been offset against this balance.
Merger Reserve
The balance on the merger reserve represents the fair value of
the consideration given in excess of the nominal value of the
ordinary shares issued in the acquisition of GB Mailing Systems by
the issue of shares.
Capital Redemption Reserve
The balance classified as capital redemption reserve includes
the nominal value of own shares purchased back by the Company and
subsequently cancelled.
Other Reserve
The balance represents the profit from the date of acquisition
to the date of hive-up into the Company of ID Scan Biometrics
Limited and Postcode Anywhere (Holdings) Limited, offset by
amortisation of the identified intangibles and unwinding of the
associated deferred tax liabilities.
32. Related Party Transactions
Transactions entered into and trading balances outstanding at 31
March are as follows:
Group
There were no transactions entered into, or outstanding at 31
March 2020 or 31 March 2019.
Company Invoices Net amounts
Invoices from related owed to/(by)
to related parties related
parties parties
GBP'000 GBP'000 GBP'000
Subsidiaries:
2020 19,418 8,435 23,347
2019 2,360 3,130 21,983
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 for
transactions with subsidiaries are the same, with the exception
that balances are placed on intercompany accounts with no specified
credit period. During the year ended 31 March 2020, the Group has
not made any provision for doubtful debts relating to amounts owed
by related parties (2019: GBPnil).
Compensation of Key Management Personnel
(including Directors)
Group and Company
2020 2019
GBP'000 GBP'000
Short-term employee benefits 2,962 3,290
Post-employment benefits 74 72
Fair value of share options awarded 2,416 1,826
5,452 5,188
--------- ---------
33. Contingent liability
The Information Commissioner's Office, the data industry
regulator in the UK, announced in November 2018 that it was
conducting audits on a number of companies to understand the use of
data in their services. GBG was included in this review and is
working with the Commissioner to continue to improve its privacy
compliance. We will keep the market informed of any material
developments.
34. Subsequent events
On 26 May 2020 the Company repaid GBP10.0m of the outstanding
revolving credit facility liability.
35. Business Combinations
There were no new business combinations within the year ended 31
March 2020.
Under IFRS 3 'Business Combinations' there is a measurement
period of no longer than twelve months in which to finalise the
valuation of the acquired assets and liabilities. During the
measurement period, the acquirer shall retrospectively adjust the
provisional amounts recognised at the acquisition date to reflect
new information obtained about facts and circumstances that existed
as of the acquisition date and, if known, would have affected the
measurement of the amounts recognised as of that date. During the
measurement period, the acquirer shall also recognise additional
assets or liabilities if new information is obtained about facts
and circumstances that existed as of the acquisition date and, if
known, would have resulted in the recognition of those assets and
liabilities as of that date.
In the year to 31 March 2019 GBG completed two acquisitions, the
measurement periods for which ended during the year to 31 March
2020.
No further adjustments were identified to the provisional fair
values in respect of the acquisition of VIX Verify Pty Limited.
In respect of the acquisition of IDology Inc. adjustments to the
provisional fair values were made during the measurement period, as
set out in the table below:
Provisional
fair value Adjustments Final fair
recognised during measurement value recognised
on acquisition period on acquisition
GBP'000 GBP'000 GBP'000
Assets
Technology intellectual property 16,076 - 16,076
Customer relationships 65,976 - 65,976
Non-compete agreements 4,360 - 4,360
Investments(1) 419 (419) -
Plant and equipment 152 - 152
Deferred tax asset 3,955 - 3,955
Trade and other receivables(2) 4,436 118 4,554
Cash 1,033 - 1,033
Trade and other payables (1,993) - (1,993)
Corporation tax liability (81) - (81)
Deferred tax liabilities (21,733) - (21,733)
---------------- -------------------- ------------------
Total identifiable net assets
at fair value 72,600 (301) 72,299
Goodwill arising on acquisition 163,143 5,509 168,652
---------------- -------------------- ------------------
Total purchase consideration
transferred 235,743 5,208 240,951
---------------- -------------------- ------------------
Purchase consideration:
Cash 235,664 - 235,664
Deferred consideration(3) 79 5,208 5,287
Total purchase consideration 235,743 5,208 240,951
---------------- -------------------- ------------------
(1) The adjustment to the investment balance relates to a
non-listed equity investment where there is uncertainty over the
recoverability of the investment balance.
(2) The adjustment to trade and other receivables is an increase
in the carrying value following cash receipts against receivables
that had been impaired in the provisional fair values.
(3) Under the terms of the acquisition agreement the sellers are
entitled to the benefit of the tax losses of the business at the
date of the acquisition as and when GBG utilises them to reduce
cash tax payments. Following assessment of the period over which
these losses are expected to be utilised, the liability to the
sellers has been recognised as contingent consideration.
The impact of the measurement period adjustments have been
applied retrospectively, meaning that the results and financial
position for the year to 31 March 2019 have been restated as
detailed in note 2.3.
35. Business Combinations continued
Acquisitions in the Year Ended 31 March 2019
Group
Acquisition of IDology Inc.
On 13 February 2019, the Group acquired 100% of the voting
shares of IDology Inc. ('IDology'), a US-based provider of identity
verification and fraud prevention services, for a total
consideration of GBP240,951,000. The acquisition of IDology
provides a strong foothold for Identity Verification and Fraud
Prevention in North America, a key growth region for the Group. The
Consolidated Statement of Comprehensive Income includes the results
of IDology for the two month period from the acquisition date.
The provisional and final fair values are detailed at the start
of this note.
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included
in cash flows from operating activities) (2,391)
Net cash acquired with the subsidiary 1,033
Cash paid (235,664)
----------
Acquisition of subsidiaries, net of cash acquired
(included in cash flows from investing activities) (234,631)
Net cash outflow (237,022)
----------
The fair value of the acquired trade receivables amounts to
GBP2,772,000. The gross amount of trade receivables is GBP2,928,000
with a provision of GBP156,000 (adjusted to GBP38,000 during the
measurement window).
The goodwill recognised above is attributed to intangible assets
that cannot be individually separated and reliably measured from
IDology 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 GBP2,391,000 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, IDology has contributed
GBP4,284,000 of revenue and operating profits of GBP1,890,000 to
the Group. If the combination had taken place at the beginning of
the period, the Group revenue and operating profits would have been
GBP173,212,000 and GBP28,529,000, respectively.
Acquisition of VIX Verify Pty Limited
On 23 October 2018, the Group acquired 100% of the voting shares
of VIX Verify Pty Limited ('VIX Verify'), an Australian provider of
identity verification and location intelligence software, for a
total consideration of GBP20,639,000. The acquisition of VIX Verify
brings additional scale to the Group's identity verification and
location intelligence solutions in Australia and New Zealand, two
markets where the Group currently provides fraud detection
solutions to customers. The Consolidated Statement of Comprehensive
Income includes the results of VIX Verify for the six month period
from the acquisition date.
The provisional fair value of the identifiable assets and
liabilities of VIX Verify as at the date of acquisition was:
Provisional
fair value
recognised
on acquisition
GBP'000
Assets
Technology intellectual property 1,148
Customer relationships 7,236
Non-compete agreements 31
Plant and equipment 79
Trade and other receivables 2,565
Cash 208
Trade and other payables (3,956)
Deferred tax liabilities (2,180)
----------------
Total identifiable net assets at fair value 5,131
Goodwill arising on acquisition 15,508
----------------
Total purchase consideration transferred 20,639
----------------
Purchase consideration:
Cash 20,639
Total purchase consideration 20,639
----------------
35. Business Combinations continued
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included
in cash flows from operating activities) (449)
Net cash acquired with the subsidiary 208
Cash paid (20,639)
-----------
Acquisition of subsidiaries, net of cash acquired
(included in cash flows from investing activities) (20,431)
Net cash outflow (20,880)
-----------
The fair value of the acquired trade receivables amounts to
GBP965,000. The gross amount of trade receivables is GBP1,004,000
with a provision of GBP39,000.
The goodwill recognised above is attributed to intangible assets
that cannot be individually separated and reliably measured from
VIX Verify 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 GBP449,000 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, VIX Verify has contributed
GBP7,672,000 of revenue and operating profits of GBP1,333,000 to
the Group. If the combination had taken place at the beginning of
the period, the Group revenue and operating profits would have been
GBP153,555,000 and GBP17,171,000, respectively.
36. Contingent Consideration
Restated
(1)
Group and Company 2020 2019
GBP'000 GBP'000
At 1 April 5,287 45
Recognition on the acquisition of
subsidiary undertakings (2) 829 79
Recognition on the acquisition of subsidiary undertakings
- measurement period adjustment - 5,208
Foreign exchange - realised 7 -
Foreign exchange - unrealised (2) 142 -
Settlement of consideration (86) (45)
At 31 March 6,179 5,287
------- --------
Analysed as:
Amounts falling due within 12 months 6,179 5,287
Amounts falling due after one year - -
At 31 March 6,179 5,287
------- -------
(1) See note 2.3
(2) Included in Consolidated Cash Flow Statement within fair
value adjustment on contingent consideration line totalling
GBP971,000.
The amount recognised on acquisition of subsidiary undertakings
in the year to 31 March 2020 is in respect of IDology as detailed
within note 7.
The contingent consideration at 31 March 2020 is in respect to
the pre-acquisition tax losses within IDology Inc. As and when GBG
receives a cash benefit from these losses, either through a
reduction in tax payments or through a tax refund, an amount equal
to this cash benefit is due to the sellers.
37. 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:
Organic Growth
Organic growth is defined by the Group as year-on-year
continuing revenue growth, excluding acquisitions which are
included only after the first anniversary following their
purchase.
Constant Currency
Constant currency means that non-Pound Sterling revenue in the
comparative period is translated at the same exchange rate applied
to the current year non-Sterling revenue. This therefore eliminates
the impact of fluctuations in exchange rates on underlying
performance.
2020 2019 Growth
GBP'000 GBP'000 %
Group revenue 199,101 143,504 38.6%
Revenue from acquisitions
up to their first anniversary (40,807) - (28.3%)
--------- -------- --------
Organic revenue 158,294 143,504 10.3%
Constant currency adjustment - (500) 0.4%
--------- -------- --------
Organic revenue at constant
currency 158,294 143,004 10.7%
Adjusted Operating Profit
Adjusted operating profit means operating profit before
amortisation of acquired intangibles, share-based payment charges
and exceptional items.
2020 2019
GBP'000 GBP'000
Operating profit 22,844 15,425
Amortisation of acquired intangibles 19,008 10,316
Share-based payment charges 4,541 2,287
Exceptional items 1,552 4,003
Adjusted Operating Profit 47,945 32,031
Adjusted EBITDA
Adjusted EBITDA means Adjusted Operating Profit before
depreciation and amortisation of non-acquired intangibles.
2020 2019
GBP'000 GBP'000
Adjusted Operating Profit 47,945 32,031
Depreciation of property, plant
and equipment 1,760 1,544
Depreciation of right-of-use assets 1,850 -
Amortisation of non-acquired intangibles 184 505
Adjusted EBITDA 51,739 34,080
Adjusted Earnings
Adjusted earnings represents Adjusted Operating Profit less net
finance costs and income tax charges . Refer to note 13 for
calculation.
Adjusted Earnings Per Share ('Adjusted EPS')
Adjusted EPS represents adjusted earnings divided by a weighted
average number of shares in issue, and is disclosed to indicate the
underlying profitability of the Group. Refer to note 13 for
calculation.
37. Alternative Performance Measures (continued)
Earnings per Share growth
This is calculated as the growth in year on year earnings per
share on both an adjusted and unadjusted basis.
Net Debt/Cash
This is calculated as cash and cash equivalent balances less
outstanding external loans. Unamortised loan arrangement fees are
netted against the loan balance in the financial statements but are
excluded from the calculation of net cash/debt.
2020 2019
GBP'000 GBP'000
Cash and cash equivalents 27,499 21,189
Loans on balance sheet 62,139 86,888
Unamortised loan arrangement fees 361 553
--------- ---------
External Loans 62,500 87,441
Net (Debt)/Cash (35,001) (66,252)
Cash Conversion %
This is calculated as cash generated from operations in the
Consolidated Cash Flow Statement, adjusted to exclude cash payments
for exceptional items, as a percentage of Adjusted EBITDA
2020 2019
GBP'000 GBP'000
Cash generated from operations before tax payments
(from Consolidated Cash Flow Statement) 48,498 27,779
Total exceptional items 1,552 4,003
Non-cash exceptional items (771) (200)
Cash generated from operations before tax payments
and exceptional items paid 49,279 31,582
Adjusted EBITDA 51,739 34,080
Cash Conversion % 95.2% 92.7%
.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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