Final Results
|
Embargoed until 7.00 a.m. |
3 June 2013 |
GB GROUP PLC
("GBGroup", "GBG", the "Group" or the "Company")
Annual Results Announcement for the Year Ended 31 March 2013
GBGroup, the identity intelligence specialist, is pleased to announce its annual results for the year ended 31 March 2013.
Highlights
· Strong revenue growth and margin improvements resulted in profits ahead of market expectations
o 24% revenue growth to £39.4 million (2012: £31.8 million), with underlying organic revenue growth of 7% (2012: 11%)
o 51% increase in adjusted operating profits1 to £5.5 million (2012: £3.7 million)
o 40% increase in profit before tax to £3.5 million (2012: £2.5 million)
o 28% increase in adjusted basic earnings per share to 5.0p (2012: 3.9p)
· Strong balance sheet and good cash generation, resulting in cash balances of £6.3 million (2012: £4.8 million) after dividend payment (£1.5 million) and cost of investing activities (£3.0 million)
· A 9% increase to the proposed dividend for 2013 to 1.5 pence (2012: 1.375 pence)
· Enhanced identity intelligence capabilities through strategic acquisition of TMG.tv Limited and increased investment in Loqate, Inc.
· Five new countries added to the Group's international EIDV service, ID3global, including China and Argentina, increasing the number of countries covered to 20 (2012: 15) and the number of people GBGroup is able to verify globally from 0.7 billion to 2 billion
· Complete brand refresh post year end, including renaming of the divisions: DataAuthentication becomes Identity Proofing and DataSolutions becomes Identity Solutions
Note 1: adjusted operating profit means profits before share of results from associates, interest, tax, share based payment charges, amortisation of acquired intangibles, acquisition related costs and non-recurring acquisition integration costs.
Commenting, Richard Law, Chief Executive, said:
"Increasingly, commerce is being influenced by the online world and an ever more mobile population. Organisations now trade and interact with many more customers, over longer distances and in situations that are rarely face-to-face presenting new challenges for verifying and maintaining contact with customers. In the year ahead, we will continue to focus on making business easier and safer for our clients by investing in our international verification network (ID3global) and in widening our capabilities in other areas to strengthen our position in this significant global market.
"I am very pleased with the progress achieved by GBGroup over the last year. Our professional and talented team has performed excellently and continues to grow in skill and strength. This, taken together with the positive growth prospects for our markets, means we remain confident for the year ahead."
For further information, please contact:
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GB Group plc Richard Law, Chief Executive Dave Wilson, Finance Director
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01244 657333 |
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Peel Hunt LLP (Nominated Adviser and Broker) Richard Kauffer Daniel Harris
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020 7418 8900 |
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Newgate Threadneedle Caroline Evans-Jones Josh Royston Heather Armstrong
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020 7653 9850 |
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Website |
Notes to Editors
About GBGroup
The most profitable and successful organisations recognise the value of understanding the individual identity of their customers and employees. GBG combines this concept of identity with technology to create an environment of trust, so that organisations can employ people and connect, communicate and transact with consumers, safely and responsibly.
We call this Identity Intelligence.
GBG's Identity Intelligence solutions include:
Register & Verify - International software and services for quick and accurate customer registration; and the verification of identities of individuals & businesses remotely.
Cleanse & Engage - Innovative software and services which provide accurate and up-to-date identity information to deliver improved intelligent customer contact strategies.
Employ & Comply - Thorough background checks through online verification and authentication of individuals enabling organisations to safeguard, recruit and engage with confidence.
Trace & Investigate - Leading software and services which provide the most accurate and up-to-date picture of the UK's population, properties and businesses to quickly locate, investigate and contact the right individual, first time.
- Ends -
CHAIRMAN'S STATEMENT
The year has been a very successful one for GBGroup with strong growth in both revenue and profits across our core businesses, ahead of market expectations. In addition, we completed another strategic acquisition during the year, building out the Group's capabilities within its Identity Proofing services.
We successfully delivered on the challenging targets we set ourselves at the start of the year. This led to 24 per cent revenue growth and adjusted operating profit1 growth of 51 per cent giving adjusted earnings per share growth of 28 per cent. This result is testament to the quality of the Group's strategy and execution, its good leadership and highly engaged employees.
The successful progress of our strategy, combined with our solid financial performance is reflected in the value we have created for our shareholders, with total shareholder return in the year being considerably ahead of the FTSE Techmark (All Share) index over the same period.
Rebranding
Subsequent to the year end, in order to support growth plans and to present a new, progressive image across our domestic and international markets, the Group completed a brand refresh, updating our proposition, introducing a new website and repackaging our offerings. The overall presentation and visual standards of our communications will help unify the business around our identity offerings and simplify our propositions for customers and prospects. The renaming of our two business divisions as Identity Proofing (formerly DataAuthentication) and Identity Solutions (formerly DataSolutions) better represents their focus and will support their continued growth.
Dividend
We expect to continue our track record of dividend growth for shareholders, with the Board recommending a 9 per cent increase to the dividend for 2013 to 1.5 pence (2012: 1.375 pence). Subject to shareholder approval at the forthcoming Annual General Meeting, the final dividend will be paid on 9 August 2013.
Outlook
Our plans for the future are ambitious. We are confident of delivering revenue and profit growth across our target markets as we position the business for achieving our longer-term aspirations. The dynamics of the markets we operate in support our view that organisations will increasingly need online identity intelligence services with international capabilities. Our plans to improve the cross-selling of our products and services to existing clients and to expand in new sectors are starting to bear fruit. As an example, we have seen high revenue growth in the insurance sector over the last twelve months.
We have achieved a great deal during the past twelve months and I would like to extend my thanks to the leadership team and all of the Group's employees for their determination and commitment. I would also like to thank our clients for their continued support.
Note 1: adjusted operating profit means profits before share of results from associates, interest, tax, share based payment charges, amortisation of acquired intangibles, acquisition related costs and non-recurring acquisition integration costs.
D A Rasche
Chairman
CHIEF EXECUTIVE'S REVIEW
Overview
This has been a year of significant achievement for GBGroup. Our financial performance over the year was most encouraging, we made strong strategic progress which will help us to continue to grow in future periods and we enter the new financial year with optimism and confidence.
Revenue was ahead of the previous year by 24 per cent to £39.4 million (2012: £31.8 million) and adjusted operating profits were up by 51 per cent to £5.5 million (2012: £3.7 million). Cash flow was strong, resulting in cash balances of £6.3 million (2012: £4.8 million) after taking into account a dividend payment of £1.5 million and the cost of investing activities of £3.0 million.
The launch of new solutions for five additional countries, as well as the agreement of new data deals with international partners such as Equifax, has enabled the Identity Proofing business to improve its range of services. Furthermore, the acquisition of TMG.tv Limited ("TMG CRB") has enhanced our capability to access wider areas of the Identity Intelligence market.
The acquisitions completed in the year to March 2012 are now fully integrated and contributing positively to our performance.
Identity Proofing (formerly DataAuthentication)
Our Identity Proofing business saw its revenues increase by 20 per cent to £15.4 million (2012: £12.9 million) which includes a 6 per cent contribution from the effect of the acquisition of TMG CRB during the year. This revenue growth delivered increased profitability in the business with operating profits rising to £1.6 million (2012: £0.9 million).
The Identity Proofing business continues to benefit from the move towards electronic verification of individuals. In the UK domestic market we have seen particularly good growth in e-commerce and in the financial payment sector. We have also established new markets dealing with the safeguarding of children and vulnerable adults through our acquisition of TMG CRB, whose clients include The FA, Department for Education and The English Cricket Board.
Progress towards our key strategy of building an EIDV (electronic identity verification) service capable of verifying anyone, anywhere in the world, at any time, has been encouraging. We continue to believe that, international verification represents a significant future opportunity for the Group as online business expands cross border. During the year, revenue from international verification increased to £1.0 million (2012: £0.7 million). Five new country services, including China and Argentina, were added to our international EIDV service, ID3global. This has increased the number of people that we are able to verify globally from 0.7 billion to 2 billion and our international coverage, as a proportion of global GDP, has increased from 44 per cent to 55 per cent. New international clients using ID3global include Moneygram and Yapital who have chosen GBGroup over other providers due to the extensive global coverage and ease of integration into their systems.
Identity Solutions (formerly DataSolutions)
Our Identity Solutions business delivered positive results, increasing revenues by 26 per cent to £24.0 million (2012: £18.9 million) with operating profits up by 27 per cent to £3.6 million (2012: £2.8 million). These results include the full year benefit of the acquisitions of Capscan and Data Discoveries which were acquired part-way through the previous financial year. The Identity Solutions business contributes significantly to the Group's profits, with a major proportion of revenues secured via annually renewable licenses. Software products and related services are designed to help customers manage the growth in identity related information from their online commerce activities. Clients of the Identity Solutions business include Sainsbury's, Tesco, Barclays, Laura Ashley, HMRC and UK Borders Agency.
In the year ahead it is our aim to enhance our product offerings with more international data and capability to support an expected increase in cross border online business.
Acquisitions and Investments
At the time of acquisition in November 2012, TMG CRB was the UK's second largest Criminal Records Bureau (now referred to as the Disclosure and Barring Service - DBS) umbrella organisation. Since acquisition, TMG CRB has grown to become the UK's largest DBS operator and has augmented our expertise in the employment screening sector enabling us to provide integrated online employment screening solutions, encompassing ID verification, criminal record disclosures and entitlement to drive checks.
In addition, we increased our shareholding in the international addressing specialist, Loqate Inc. from 24 per cent to 27 per cent.
Outlook
Increasingly, commerce is being influenced by the online world and an ever more mobile population. Organisations now trade and interact with many more customers, over longer distances and in situations that are rarely face-to-face; presenting new challenges for verifying identity and maintaining contact with customers. In the year ahead we will continue to focus on making business easier and safer for our clients by investing in our international verification network (ID3global) and widening our capabilities in other areas to strengthen our position in this significant global market.
I am very pleased with the progress achieved by GBGroup over the last year. Our professional and talented team has performed excellently and continues to grow in skill and strength. This, taken together with the positive growth prospects in our markets, means we remain confident for the year ahead.
R A Law
Chief Executive
FINANCE DIRECTOR'S REPORT
The Group's Business
GBGroup is a leading identity intelligence business. It helps organisations recognise and verify all elements of an individual's identity at every interaction. Through the application of our proprietary technology, we enable organisations to connect, communicate and transact with people safely, responsibly and profitably.
The performance of the Group is reported by segment, reflecting the management responsibilities and economic characteristics of each division. The Group's two operating segments are as follows:
· Identity Proofing Division - which provides electronic ID Verification services for combating ID fraud, money laundering and under-age gambling as well as ID PeopleSafe services for employee authentication and screening.
· Identity Solutions Division - which provides ID Registration, ID Engagement and ID Trace & Investigate software and services that provide accurate and up-to-date customer information and facilitate better understanding, targeting and retention of profitable customers.
As a result of the Group's rebranding exercise, the operating segments have been renamed with DataSolutions now referred to as Identity Solutions and DataAuthentication now referred to as Identity Proofing. The change has been to the name of the segment only, with the results attributable to each division being unaffected.
Group Vision, Objectives and Strategy
The Group's vision is to be the recognised leader in the field of identity intelligence, a fundamental enabler of online business.
The Group's strategy is to create and maintain unique online products and services which provide additional value for clients and are of sufficient strength to enable the Group to create new markets and consistently win new business against its competition. The Group achieves this through its investment in people, business development opportunities and the application of innovation, quality and excellence in everything it does.
Group Overview
The Group uses adjusted figures as key performance measures in addition to those reported under adopted IFRS. Adjusted figures exclude certain non-operational or exceptional items which is consistent with prior year treatments. The Directors have defined these as costs of staff reorganisations, share-based payment costs, share of associate investment result, amortisation and impairment of acquisition-related intangible assets, costs of acquisitions and deferred and contingent fair value adjustments. Unless otherwise stated, profit and earnings figures referred to below are adjusted measures.
The following description of the Group's performance is complemented by the segmental analysis in note 4 to the accounts which show the contributions from the Identity Solutions and Identity Proofing segments. The full impact of our acquisition in the year will not be fully evident in our segments until 2014.
|
|
2013 |
|
Increase/ |
Increase/ |
|
|
£'000 |
£'000 |
£'000 |
% |
|
|
|
|
|
|
|
Revenue |
39,424 |
31,827 |
7,597 |
24% |
|
Adjusted operating profit |
5,522 |
3,669 |
1,853 |
51% |
|
Share based payments |
(488) |
(137) |
(351) |
(256%) |
|
Amortisation of acquired intangibles |
(889) |
(358) |
(531) |
(148%) |
|
Operating profit before exceptional items and associate result |
4,145 |
3,174 |
971 |
31% |
|
Exceptional items |
(409) |
(676) |
267 |
39% |
|
Share of associate investment result |
(146) |
24 |
(170) |
(708%) |
|
Net finance (costs)/income |
(84) |
(16) |
(68) |
(425%) |
|
Group profit before tax |
3,506 |
2,506 |
1,000 |
40% |
|
Total tax credit |
831 |
1,094 |
(263) |
(24%) |
|
Group profit for the year attributable to shareholders |
4,337 |
3,600 |
737 |
20% |
|
Adjusted earnings† |
5,438 |
3,653 |
1,785 |
49% |
|
Basic weighted average number of shares ('000) |
108,313 |
94,741 |
13,572 |
14% |
|
Adjusted basic earnings per share (p) † |
5.0 |
3.9 |
1.1 |
28% |
The Group's overall profile has changed through acquisitions concluded during both this year and in the previous year. These businesses have delivered strong performances in the 12-month period ended 31 March 2013 whilst being underpinned by solid organic growth.
Adjusted operating profit for the year increased by 51% to £5.5 million, reflecting:
· revenue growth of 24% to £39.4 million. This increase included organic growth of 7%; and
· an improvement in the adjusted operating profit margin which increased from 11.5% to 14.0%, notwithstanding continued investment for growth.
Adjusted basic earnings per share was up 28% to 5.0p (2012: 3.9p). Basic earnings per share was up 5.2% to 4.0p (2012: 3.8p). Group cash conversion was strong with net cash generated from operating activities of £5.9 million (2012: £3.6 million) compared to operating profit before depreciation, amortisation, share-based payments and exceptional items (Adjusted EBITDA) of £6.1 million (2012: £4.1 million).
The Group's balance sheet and financing ability remain strong, and although unutilised at the year end, the Group has a £7 million revolving credit facility, expiring in 2015.
†Adjusted earnings and adjusted EPS are both non-GAAP measures determined with reference to the adjusted operating profit less net finance costs. A reconciliation of these values is reported in note 13 to the accounts.
Adjusted EBITDA
Adjusted EBITDA was £6.1 million (2012: £4.1 million), consisting of adjusted operating profit of £5.5 million (2012: £3.7 million) and depreciation/amortisation of £0.6 million (2012: £0.4 million).
Exceptional Items
Exceptional costs of £0.4 million (2012: £0.7 million) were incurred by the Group in the year and have been detailed in note 7 to the accounts.
Net Finance Costs/Income
The Group has incurred net finance costs for the year of £84,000 (2012: £16,000). The increase in net finance costs was primarily due to borrowing costs associated with the revolving credit facility which remains available to the Group.
Acquired Intangibles Amortisation
The charge for the year of £0.9 million (2012: £0.4 million) represents the non-cash cost of amortising separately identifiable intangible assets including brands, trademarks, technology-based assets and customer relationships that were acquired through business combinations. The increased charge in the year is due to the fact that 2013 has a full year charge for acquisitions which took place part way through the prior year.
Taxation
The Group tax credit of £0.7 million (2012: £1.1 million credit) reflects the recognition of an increased deferred tax asset relating to capital allowances and tax losses. There was a negligible amount of current tax payable on the Group's profits in the year (2012: £negligible) principally as a result of the utilisation of available tax losses.
Dividend
The Board of Directors will propose a final ordinary dividend of 1.5 pence per share (2012: 1.375 pence per share), amounting to £1.6 million (2012: £1.5 million). The final ordinary dividend with respect to the year ended 31 March 2013, if approved, will be paid on 9 August 2013 to ordinary shareholders whose names were on the register on 23 July 2013.
Earnings per Share
The earnings per share analysis in this report and in note 13 cover three measures: adjusted basic earnings per share (adjusted operating profit less interest and a notional tax charge); basic earnings per share (after all adjustments); and diluted earnings per share (adjusting for dilutive effect of share options). Adjusted earnings (adjusted operating profit less interest) was £5.4 million (2012: £3.7 million) resulting in a 28% increase in adjusted earnings per share from 3.9p to 5.0p. The weighted average number of shares at 31 March 2013 increased to 108.3 million (2012: 94.7 million).
Cash Flows
Group operating activities generated £5.9 million of cash and cash equivalents (2012: £3.6 million) representing an increase of 64% and an Adjusted EBITDA to cash conversion ratio of 96% (2012: 88%). Operating cash flows continue to be healthy and the Group continually monitors its measures of cash generation and collection. Cash generated by operations before working capital movements increased by 67% to £5.6 million (2012: £3.4m). Group investing activities resulted in net outflows of £3.0 million (2012: £12.0 million) including £2.1 million (2012: £11.6 million) in respect of acquisitions/investments, £0.6 million (2012: £0.4 million) on plant and equipment purchases and £0.3 million on product development (2012: £0.0 million). Financing activities consumed £1.4 million (2012: £7.0 million generated) of net cash in the year following £1.5 million of dividends paid. The Group's overall cash and cash equivalents increased by £1.5 million (2012: £1.4 million decrease) in the year. Further detailed analysis of this movement is included in the Consolidated Cash flow Statement.
Acquisitions
During the year the Group made an acquisition of TMG.tv Limited an unlisted company based in the United Kingdom providing criminal record checking services to UK organisations. The initial cash consideration paid, net of cash acquired, was £1.7 million with a further £0.1 million being deferred and £0.75 million being contingent on the achievement of future revenue targets being met. Further information on these acquisitions can be found in note 30 to the accounts.
Deferred Income
Deferred income balances at the end of the year increased by 22% to £5.3 million (2012: £4.4 million). This balance principally consists of contracted licence revenues and profits that are payable up front but recognised as the Group's revenue recognition criteria are met. The increase has been driven by solid contracted sales which will deliver their revenues and profits in forthcoming years.
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 influenced by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing and new business linearity within a reporting period.
Net Assets
Group net assets at the end of 2013 were £27.6 million, an increase of £3.7 million on 2012 level of £23.9 million. This growth is driven by the increase in equity capital of £0.2 million combined with the total comprehensive income for the year of £4.3 million, less dividends paid of £1.5 million and after adjusting for share based payments and deferred tax on share based payments of £0.5 million and £0.2 million respectively.
Key Performance Indicators
The Board monitor 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 some of 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.
Financial
The Group uses the following primary measures to assess the performance of the Group and its propositions.
· Revenue
Revenue and revenue growth are used for internal performance analysis to assess progress against outlook statements in the market. 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.
· Adjusted Operating Profit
This is used by the Group for internal performance analysis and by investors to assess progress against outlook statements in the market.
· Adjusted EBITDA
This is used by the Group for internal performance analysis and by investors to assess progress against outlook statements in the market and cash generation.
· Earnings per Share
Earnings per share is calculated as basic earnings per share from continuing operations on both an adjusted and unadjusted basis.
· Cash
Cash and cash equivalent balances are used by the Group for internal performance analysis and by investors to assess progress against outlook statements.
· Deferred Income Balance
Deferred income, which is included in our Consolidated Balance Sheet, 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.
Non-Financial
· Underlying Identity Verifications
Management believe that transaction-based measures provide useful information regarding trends in client revenue derived from electronic ID Verification services and the extent to which clients have adopted the service. Underlying identity verifications is the total number of verifications on the Group's URU™ and ID3-Check™ systems and excludes one-off batch verifications.
· KYC Countries
Management believe the number of countries in which the Group has the capability to provide in-depth ID Verification for citizens up to a KYC ("Know Your Customer") level is an important measure of our capabilities and movement towards proving verification of 'Anyone, Anywhere in the World, Anytime'.
Performance against KPIs
A summary of the Group's progress in achieving its objectives, as measured against KPIs, is set out below.
|
|
|
|
|
Year ended 31 March |
|
|
||
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Growth |
|
|
|
23.9% |
|
31.4% |
|
|
|
Organic Revenue Growth |
|
|
|
7.2% |
|
11.3% |
|
|
|
Identity Proofing Revenue Growth |
|
|
|
20.0% |
|
28.1% |
|
|
|
Identity Solutions Revenue Growth |
|
|
|
26.5% |
|
33.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit |
|
|
|
5,522 |
|
3,669 |
|
|
|
Adjusted operating profit % |
|
|
|
14.0% |
|
11.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
6,125 |
|
4,064 |
|
|
|
Adjusted EBITDA% |
|
|
|
15.5% |
|
12.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic |
|
|
|
4.0p |
|
3.8p |
|
|
|
Earnings per share - adjusted basic |
|
|
|
5.0p |
|
3.9p |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (£'000) |
|
|
|
6,308 |
|
4,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income balances (£'000) |
|
|
|
5,322 |
|
4,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying identity verifications |
|
|
|
16,924,138 |
|
13,680,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
KYC Countries |
|
|
|
20 |
|
15 |
|
|
Principal Risks and Uncertainties
Management use a model to identify and assess the impact of risks to the business under four key headings - financial, strategic, operational and knowledge. For each risk, the likelihood and consequence are identified, management controls are confirmed and results reported. The corporate governance report in the Annual Report provides further detail more about the Group's risk management process. The significant risks and uncertainties faced by the Group are as set out below:
· Regulatory risk: legislation in all the markets we serve changes on a regular basis. Interpretation of existing laws can also change to create ever tightening standards, often requiring additional human and financial resources and the provision of new assets and systems. Whilst the Group is committed to respond positively to new regulation and legislation, changes could affect the pricing for, or adversely affect the revenue from, the services the Group offers.
· Competitive position: the Group operates in competitive markets and intensified competition could lead to pricing pressures, a reduction in the rate at which the Group adds new customers and to a decrease in the size of the Group's market share if clients choose to receive services from other providers.
· Non-supply by major supplier: the Group sources some of its data and infrastructure from third party suppliers and partners. The removal from the market by one or more of these third party suppliers or interruption in supply could quickly affect the Group's operations adversely and result in the loss of revenue or additional expenditure for the Group.
· Disaster recovery and business continuity: the Group has an understandable reliance on its place of business, IT systems and people. The loss of key components could affect the Group's operations and result in additional expenditure, whilst the established business continuity plan is effected following an incident.
· New product development: in order to maintain competitive advantage, the Group invests significant amounts of resources into product development. The development of all new technologies and products involves risk, including the product being more expensive, or taking longer to develop than originally planned, the market for the product is smaller than originally envisaged; or that the product fails to reach the production stage.
· Intellectual property risk: we generally protect our proprietary application software products and services by licensing rights to use the applications, rather than selling or licensing the computer source code. We rely on trademark, copyright, patent and other intellectual property laws to establish and protect our proprietary rights in these products and services. However, there is a risk that our proprietary rights could be challenged, limited, invalidated or circumvented.
In each case, there is an on-going process for identifying, evaluating and managing the principal risks of the Group.
Relationships
Other than our shareholders, the Group's performance and value are influenced by other stakeholders, principally our clients, suppliers, employees and our strategic partners. Relationships are managed both on an individual basis and via representative groups. The Group participates in industry groups which give a genuine access to clients, suppliers and decision makers in government and other regulatory bodies.
Treasury Policy and Financial Risk
The Group's treasury operation is managed within formally defined policies and reviewed by the Board. The Group finances its activities principally with cash and short-term deposits, but has the ability to draw down up to £7 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 maximising fixed interest rate returns whilst still providing the flexibility to fund on-going operations when required. It is not the Group's policy to engage in speculative activity or to use complex financial instruments.
Use of non-GAAP Measures in the Group Financial Statements
The Group has identified certain measures that it believes will assist in understanding the performance of the business. The measures are not defined under IFRS and therefore may not be directly comparable with other companies' adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance, however management considers them to be important comparatives and key measures used within the business for assessing performance.
The following are the key non-GAAP measures identified by the Group and used in the Group financial statements:
Organic growth
Organic growth is defined by the Group as year-on-year continuing revenue growth, excluding acquisitions, until the date of their anniversary.
Adjusted operating profit
Adjusted operating profit is defined as the profits before share of results from associates, interest, tax, share based payment charges, amortisation of acquired intangibles, acquisition related costs and non-recurring acquisition integration costs.
Adjusted earnings
Adjusted earnings represents adjusted operating profit less net finance costs.
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.
Commercial Agreement Change
In 2004, GBGroup took a decision to develop URU with BT plc, which has become one of the UK's leading Electronic Identity Verification Service. To facilitate this, GB and BT entered into two separate agreements.
Under a Technology and Supply Agreement, GBGroup licensed its technology and data access rights to BT. In the last financial year, GBGroup earned revenues of £3 million from this agreement. Under a separate Distribution Agreement, BT licensed GB as the sole distributor of URU in the UK.
GB has now developed ID3global, its international EIDV service to incorporate a UK service component which enables those businesses with a present or future need to verify overseas nationals using a single service.
URU will continue to be used by GBGroup and BT for customers with only a UK requirement now and in the future.
For customers served through ID3global, GBGroup will no longer pay BT a proportion of the revenue associated with the transaction but will no longer receive a royalty for the use of its technology. The net effect is that revenue associated with the Technology and Supply Agreement will reduce but at the same time, lower costs under the Distribution Agreement will be incurred and accordingly overall margins will increase.
D J Wilson
Group Finance Director
|
Consolidated Statement of Comprehensive Income |
|
Year ended 31 March 2013 |
|
|
|
|
|
|
|
|
|
2013 |
|
2012 |
|
|
|
£'000 |
|
£'000 |
|
|
Note |
|
|
|
|
|
|
|
|
|
Revenue |
3 |
39,424 |
|
31,827 |
|
|
|
|
|
|
|
Cost of sales |
|
(16,663) |
|
(14,521) |
|
|
|
|
|
|
Gross profit |
|
22,761 |
|
17,306 |
|
|
|
|
|
|
|
Operating expenses before amortisation of acquired intangibles, share-based payments and exceptional items |
|
(17,258) |
|
(13,637) |
|
|
|
|
|
|
|
Other operating income |
|
19 |
|
- |
|
|
|
|
|
|
|
Operating profit before amortisation of acquired intangibles, share-based payments, exceptional items and share of associate |
|
5,522 |
|
3,669 |
|
|
|
|
|
|
|
Amortisation of acquired intangibles |
9 |
(889) |
|
(358) |
|
|
|
|
|
|
|
Share-based payments charge |
|
(488) |
|
(137) |
|
|
|
|
|
|
|
Exceptional items |
5 |
(409) |
|
(676) |
|
|
|
|
|
|
|
Share of associate investment result |
10 |
(146) |
|
24 |
|
|
|
|
|
|
Group operating profit |
|
3,590 |
|
2,522 |
|
|
|
|
|
|
|
Finance revenue |
|
1 |
|
18 |
|
|
|
|
|
|
|
Finance costs |
|
(85) |
|
(34) |
|
|
|
|
|
|
Profit before tax |
|
3,506 |
|
2,506 |
|
|
|
|
|
|
|
Income tax credit |
|
831 |
|
1,094 |
|
|
|
|
|
|
|
Total comprehensive income for the year attributable to equity holders of the parent |
|
4,337 |
|
3,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
7 |
|
|
|
|
- basic earnings per share for the year |
|
4.0p |
|
3.8p |
|
|
|
|
|
|
|
- diluted earnings per share for the year |
|
3.8p |
|
3.7p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Changes in Equity Year ended 31 March 2013 |
|
|
|
||||||||||
|
|
|
||||||||||
|
|
|
|
Equity share capital |
|
Merger reserve |
|
Capital redemption reserve |
|
Retained earnings |
|
Total equity |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 April 2011 |
|
|
6,171 |
|
6,575 |
|
3 |
|
313 |
|
13,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
- |
|
- |
|
- |
|
3,600 |
|
3,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
|
- |
|
- |
|
- |
|
3,600 |
|
3,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of share capital |
|
|
8,424 |
|
- |
|
- |
|
- |
|
8,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issue costs |
|
|
(250) |
|
- |
|
- |
|
- |
|
(250) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments charge |
|
|
- |
|
- |
|
- |
|
137 |
|
137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity dividend |
|
|
- |
|
- |
|
- |
|
(1,100) |
|
(1,100) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2012 |
|
|
14,345 |
|
6,575 |
|
3 |
|
2,950 |
|
23,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
- |
|
- |
|
- |
|
4,337 |
|
4,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
|
- |
|
- |
|
- |
|
4,337 |
|
4,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of share capital |
|
|
203 |
|
- |
|
- |
|
- |
|
203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments charge |
|
|
- |
|
- |
|
- |
|
488 |
|
488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax on share options |
|
|
- |
|
- |
|
- |
|
203 |
|
203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity dividend |
|
|
- |
|
- |
|
- |
|
(1,487) |
|
(1,487) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2013 |
|
|
14,548 |
|
6,575 |
|
3 |
|
6,491 |
|
27,617 |
|
Company Statement of Changes in Equity Year ended 31 March 2013 |
|
|
|
||||||||||
|
|
|
||||||||||
|
|
|
|
Equity share capital |
|
Merger reserve |
|
Capital redemption reserve |
|
Retained earnings |
|
Total Equity |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 April 2011 |
|
|
6,171 |
|
6,575 |
|
3 |
|
2,612 |
|
15,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
- |
|
- |
|
- |
|
3,752 |
|
3,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
|
- |
|
- |
|
- |
|
3,752 |
|
3,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of share capital |
|
|
8,424 |
|
- |
|
- |
|
- |
|
8,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issue costs |
|
|
(250) |
|
- |
|
- |
|
- |
|
(250) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments charge |
|
|
- |
|
- |
|
- |
|
137 |
|
137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity dividend |
|
|
- |
|
- |
|
- |
|
(1,100) |
|
(1,100) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2012 |
|
|
14,345 |
|
6,575 |
|
3 |
|
5,401 |
|
26,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
- |
|
- |
|
- |
|
5,104 |
|
5,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
|
- |
|
- |
|
- |
|
5,104 |
|
5,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of share capital |
|
|
203 |
|
- |
|
- |
|
- |
|
203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments charge |
|
|
- |
|
- |
|
- |
|
488 |
|
488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax on share options |
|
|
- |
|
- |
|
- |
|
203 |
|
203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity dividend |
|
|
- |
|
- |
|
- |
|
(1,487) |
|
(1,487) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 March 2013 |
|
|
14,548 |
|
6,575 |
|
3 |
|
9,709 |
|
30,835 |
|
Consolidated Balance Sheet |
|
As at 31 March 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
2013 |
|
2012 |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Plant and equipment |
|
|
8 |
|
1,188 |
|
933 |
|
Intangible assets |
|
|
9 |
|
22,706 |
|
20,045 |
|
Investments accounted for using the equity method |
|
|
10 |
|
154 |
|
58 |
|
Deferred tax asset |
|
|
|
|
2,803 |
|
2,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,851 |
|
23,242 |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
|
|
10,749 |
|
10,630 |
|
Current tax |
|
|
|
|
82 |
|
- |
|
Cash and short-term deposits |
|
|
|
|
6,308 |
|
4,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,139 |
|
15,387 |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
|
|
43,990 |
|
38,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
|
|
Equity share capital |
|
|
11 |
|
14,548 |
|
14,345 |
Merger reserve |
|
|
|
|
6,575 |
|
6,575 |
|
Capital redemption reserve |
|
|
|
|
3 |
|
3 |
|
Retained earnings |
|
|
|
|
6,491 |
|
2,950 |
|
|
|
|
|
|
|
|
|
Total equity attributable to equity holders of the parent |
|
|
|
|
27,617 |
|
23,873 |
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
Provisions |
|
|
|
|
25 |
|
- |
Deferred/contingent consideration |
|
|
15 |
|
1,307 |
|
571 |
Deferred tax liability |
|
|
|
|
1,466 |
|
1,360 |
|
|
|
|
|
|
2,798 |
|
1,931 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
13,575 |
|
12,744 |
|
Current tax |
|
|
|
|
- |
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,575 |
|
12,825 |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
16,373 |
|
14,756 |
|
|
|
|
|
|
|
|
|
TOTAL EQUITY AND LIABILITIES |
|
|
|
|
43,990 |
|
38,629 |
Approved by the Board on 3 June 2013
R A Law- Director
D J Wilson - Director
Registered in England number 2415211
|
Company Balance Sheet |
|
As at 31 March 2013 |
|
|
|
|
Note |
|
2013 |
|
2012 |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Plant and equipment |
|
|
8 |
|
985 |
|
840 |
|
Intangible assets |
|
|
9 |
|
417 |
|
201 |
|
Investments |
|
|
|
|
31,116 |
|
26,961 |
|
Deferred tax asset |
|
|
|
|
2,803 |
|
2,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,321 |
|
30,208 |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
|
|
10,439 |
|
8,158 |
|
Current tax |
|
|
|
|
167 |
|
- |
|
Cash and short-term deposits |
|
|
|
|
4,773 |
|
2,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,379 |
|
10,529 |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
|
|
50,700 |
|
40,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
|
|
Equity share capital |
|
|
11 |
|
14,548 |
|
14,345 |
Merger reserve |
|
|
|
|
6,575 |
|
6,575 |
|
Capital redemption reserve |
|
|
|
|
3 |
|
3 |
|
Retained earnings |
|
|
|
|
9,709 |
|
5,401 |
|
|
|
|
|
|
|
|
|
Total equity attributable to equity holders of the parent |
|
|
|
|
30,835 |
|
26,324 |
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
Deferred/contingent consideration |
|
|
15 |
|
1,307 |
|
571 |
|
|
|
|
|
|
1,307 |
|
571 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
18,558 |
|
13,841 |
|
Current tax |
|
|
|
|
- |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,558 |
|
13,842 |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
19,865 |
|
14,413 |
|
|
|
|
|
|
|
|
|
TOTAL EQUITY AND LIABILITIES |
|
|
|
|
50,700 |
|
40,737 |
Approved by the Board on 3 June 2013
R A Law- Director
D J Wilson - Director
|
Consolidated Cash Flow Statement Year ended 31 March 2013 |
|
|
|
|
|
|
|
|
|
Note |
|
2013 |
|
2012 |
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
Group profit before tax |
|
|
3,506 |
|
2,506 |
|
|
|
|
|
|
|
|
Adjustments to reconcile Group profit before tax to net cash flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of associate investment result |
10 |
|
146 |
|
(24) |
|
Finance revenue |
|
|
(1) |
|
(18) |
|
Finance costs |
|
|
85 |
|
34 |
|
Depreciation of plant and equipment |
8 |
|
511 |
|
376 |
|
Amortisation/impairment of intangible fixed assets |
9 |
|
981 |
|
377 |
|
Profit on disposal of fixed assets |
|
|
(1) |
|
- |
|
Share-based payments |
12 |
|
488 |
|
137 |
|
Decrease/(increase) in trade and other receivables |
|
|
528 |
|
(2,299) |
|
(Decrease)/increase in trade and other payables |
|
|
(223) |
|
2,527 |
|
|
|
|
|
|
|
Cash generated from operations |
|
|
6,020 |
|
3,616 |
Income tax paid |
|
|
(101) |
|
(21) |
Net cash generated from operating activities |
|
|
5,919 |
|
3,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of subsidiaries, net of cash acquired |
14 |
|
(1,855) |
|
(11,581) |
|
Investment in associates |
10 |
|
(242) |
|
- |
|
Purchase of plant and equipment |
8 |
|
(571) |
|
(404) |
|
Proceeds from disposal of plant and equipment |
8 |
|
6 |
|
- |
|
Expenditure on product development |
9 |
|
(338) |
|
(19) |
|
Interest received |
|
|
1 |
|
18 |
|
|
|
|
|
|
|
Net cash flows used in investing activities |
|
|
(2,999) |
|
(11,986) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
(85) |
|
(34) |
|
Proceeds from issue of shares |
|
|
203 |
|
8,364 |
|
Share issue costs |
|
|
- |
|
(250) |
|
Dividends paid to equity shareholders |
|
|
(1,487) |
|
(1,100) |
|
|
|
|
|
|
|
Net cash flows used in financing activities |
|
|
(1,369) |
|
6,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
|
1,551 |
|
(1,411) |
|
Cash and cash equivalents at the beginning of the period |
|
|
4,757 |
|
6,168 |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period |
|
|
6,308 |
|
4,757 |
|
|
|
|
|
|
|
|
Company Cash Flow Statement Year ended 31 March 2013 |
|
|
|
|
|
|
|
|
|
Note |
|
2013 |
|
2012 |
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
Company profit before tax |
|
|
4,537 |
|
2,747 |
|
|
|
|
|
|
|
|
Adjustments to reconcile Company profit before tax to net cash flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance revenue |
|
|
(1) |
|
(18) |
|
Finance costs |
|
|
85 |
|
34 |
|
Depreciation of plant and equipment |
8 |
|
453 |
|
359 |
|
Amortisation/impairment of intangible fixed assets |
9 |
|
91 |
|
19 |
|
Profit on disposal of fixed assets |
|
|
(1) |
|
- |
|
Share-based payments |
12 |
|
488 |
|
137 |
|
Increase in trade and other receivables |
|
|
(2,281) |
|
(1,663) |
|
Increase in trade and other payables |
|
|
4,409 |
|
4,979 |
|
|
|
|
|
|
|
Cash generated from operations |
|
|
7,780 |
|
6,594 |
Income tax paid |
|
|
(101) |
|
(6) |
Net cash generated from operating activities |
|
|
7,679 |
|
6,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of subsidiary undertakings |
14 |
|
(3,019) |
|
(17,013) |
|
Investment in associates |
10 |
|
(152) |
|
|
|
Purchase of plant and equipment |
|
|
(437) |
|
(351) |
|
Proceeds from disposal of plant and equipment |
|
|
6 |
|
- |
|
Expenditure on product development |
|
|
(307) |
|
(19) |
|
Interest received |
|
|
1 |
|
18 |
|
|
|
|
|
|
|
Net cash flows used in investing activities |
|
|
(3,908) |
|
(17,365) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
(85) |
|
(34) |
|
Proceeds from issue of shares |
|
|
203 |
|
8,364 |
|
Share issue costs |
|
|
- |
|
(250) |
|
Dividends paid to equity shareholders |
|
|
(1,487) |
|
(1,100) |
|
|
|
|
|
|
|
Net cash flows used in financing activities |
|
|
(1,369) |
|
6,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease)/in cash and cash equivalents |
|
|
2,402 |
|
(3,797) |
|
Cash and cash equivalents at the beginning of the period |
|
|
2,371 |
|
6,168 |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period |
|
|
4,773 |
|
2,371 |
|
|
|
|
|
|
|
Notes to the Accounts
1. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRSs
The Group and Company financial statements of GB Group plc (the 'Company') for the year ended 31 March 2013 were authorised for issue by the Board of Directors on 3 June 2013 and the balance sheets were signed on the Board's behalf by R A Law and D J Wilson. GB Group plc is a public limited company incorporated and domiciled in England & Wales. The Company's ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange.
The Group and Company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to the financial statements of the Group and Company for the year ended 31 March 2013.
The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual Statement of Comprehensive Income and related notes.
2. ACCOUNTING POLICIES
Basis of Preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. 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 2013 and the Group and Company have applied the same policies throughout the year.
The Group and Company financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.
Basis of Consolidation
The Group financial statements consolidate the financial statements of GB Group plc and its subsidiary undertakings drawn up to 31 March each year.
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement. The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All intragroup balances and transactions, including unrealised profits arising from them, are eliminated.
The Company's Investments in Subsidiaries
In its separate financial statements the Company recognises its investments in subsidiaries at cost less any provision for impairment.
Interests in Associates
Associates are undertakings that are not subsidiaries or joint ventures over which the Group has significant influence and can participate in financial and operating policy decisions. Investments in associated undertakings are accounted for using the equity method. The Consolidated Statement of Comprehensive Income includes the Group's share of the profit after tax of the associated undertakings. Investments in associates include goodwill identified on acquisition and are carried in the Group balance sheet at cost plus post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in value.
Plant and Equipment
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
The carrying values of 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 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.
Leasing and Hire Purchase Commitments
Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the asset have passed to the Group, and hire purchase contracts, are capitalised in the Balance Sheet and are depreciated over their useful lives. The capital elements of future obligations under finance leases and hire purchase contracts are included as liabilities in the Balance Sheet. The interest elements of the rental obligations are charged in the Income Statement over the periods of the finance leases and hire purchase contracts and represent a constant proportion of the balance of capital repayments outstanding.
Rentals payable under operating leases are charged to the Statement of Comprehensive Income on a straight-line basis over the lease term.
Sublet income on operating leases is recognised on a straight-line basis over the lease term.
Business Combinations
GB Group has applied the business combinations exemption in IFRS 1. It has not restated business combinations that took place prior to the 1 April 2004 transition date.
Business combinations from 1 January 2010
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity.
Goodwill is initially measured at cost being the excess of the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer's previously held equity interest in the acquiree) over the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination. Assets acquired and liabilities assumed in transactions separate to the business combinations, such as the settlement of pre-existing relationships or post-acquisition remuneration arrangements are accounted for separately from the business combination in accordance with their nature and applicable IFRSs. Identifiable intangible assets, meeting either the contractual-legal or separability criterion are recognised separately from goodwill. Contingent liabilities representing a present obligation are recognised if the acquisition-date fair value can be measured reliably.
If the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer's previously held equity interest in the acquiree) is lower than the fair value of the assets, liabilities and contingent liabilities and the fair value of any pre-existing interest held in the business acquired, the difference is recognised in profit and loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units (or groups of cash generating units) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which goodwill is allocated shall represent the lowest level within the entity at which the goodwill is monitored for internal management purposes and not be larger than an operating segment before aggregation.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
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 fair value less costs to sell 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.
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.
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 cash-generating unit expected to benefit from the synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit, including the related goodwill. Where the recoverable amount of the cash-generating unit 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 cash-generating unit 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 cash-generating unit 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:
· Technology based assets 2-3 years
· Brands and trademarks 2-3 years
· Customer relationships 10 years
Trade and Other Receivables
Trade receivables, which generally have 30-60 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 uncollectible.
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.
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 borrowing cost.
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.
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').
The Group has taken advantage of the exemption in IFRS 1 in respect of equity settled awards so as to apply IFRS 2 only to those equity settled awards granted after 7 November 2002 that had not vested on or before 1 January 2005.
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 valuer 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 (see note 7).
Revenue Recognition
Revenue is measured at the fair value of the consideration received from the sale of software and rendering of services, net of value-added tax, rebates and discounts and after the elimination of inter-company transactions within the Group. Revenue is recognised as follows:
(a) Sale of software licences
Revenue in respect of software licences where the Group has no further obligations and the contract is non cancellable is recognised at the time of sale. Revenue in respect of software licences where there are further contractual obligations, in the form of additional services provided by the Group, such as software delivered online is recognised over the duration of the licence in line with when the costs are incurred and delivery obligations fulfilled.
(b) Rendering of services
Revenue from the rendering of services is recognised 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 Group is acting as an agent in a transaction and is not the primary obligor then revenue is reported net of amounts payable to the supplier.
(c) Interest income
Revenue is recognised as interest accrues using the effective interest 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.
(d) Rental income
Net rental income arising from the sub-let of properties under operating leases is reported as other operating income in the Statement of Comprehensive Income.
Operating Leases
Payments made under operating leases (net of any incentives received from the lessor) are charged to the Statement of Comprehensive Income on a straight-line basis over the period of the lease.
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.
Foreign Currencies
The Company's functional currency and presentation currency is pounds sterling. Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the Consolidated Statement of Comprehensive Income.
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.
New Accounting Standards and Interpretations Applied
The accounting policies adopted in the preparation of these financial statements are consistent with those followed in the preparation of the financial statements for the year ended 31 March 2012, except for the adoption of relevant new Standards and Interpretations noted below. Adoption of these Standards and Interpretations did not have any effect on the financial position or performance of the Group and the Company.
|
International Accounting Standards (IAS / IFRS) |
Adoption date |
|
|
IFRS 1 |
First-Time Adoption of International Financial Reporting Standards (Amendment) - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters |
1 July 2011 |
|
IFRS 7 |
Financial Instruments: Disclosures (Amendment) |
1 July 2011 |
|
IAS 12 |
Income Taxes (Amendment) - Deferred Taxes: Recovery of Underlying Assets |
1 January 2012 |
New Accounting Standards and Interpretations not Applied
During the year, the IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:
|
International Accounting Standards (IAS / IFRS) |
Effective date |
|
|
|
|
|
|
IAS 1 |
Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 |
1 July 2012 |
|
IFRS 1 |
Government Loans - Amendments to IFRS 1 |
1 January 2013 |
|
IFRS 7 |
Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7 |
1 January 2013 |
|
IFRS 10 |
Consolidated Financial Statements, |
1 January 2014 |
|
IAS 27 |
Separate Financial Statements |
1 January 2014 |
|
IFRS 11 |
Joint Arrangements |
1 January 2014 |
|
IAS 28 |
Investments in Associates and Joint Ventures |
1 January 2014 |
|
IFRS 12 |
Disclosure of Interests in Other Entities |
1 January 2014 |
|
IFRS 13 |
Fair Value Measurement |
1 January 2013 |
|
IAS 19 |
IAS 19 Employee Benefits (Revised) |
1 January 2013 |
|
IFRS 1 |
First-time Adoption of International Financial Reporting Standards - Repeated application of IFRS 1 |
1 January 2013 |
|
IFRS 1 |
First-time Adoption of International Financial Reporting Standards - Borrowing costs |
1 January 2013 |
|
IAS 1 |
Presentation of Financial Statements - Clarification of requirements for comparative information |
1 January 2013 |
|
IAS 16 |
Property, Plant and Equipment - Classification of servicing equipment |
1 January 2013 |
|
IAS 32 |
Financial Instruments: Presentation - Tax effects of distributions to holders of equity instruments |
1 January 2013 |
|
IAS 34 |
Interim Financial Reporting - Interim financial reporting and segment information for total assets and liabilities |
1 January 2013 |
|
IFRS 10 |
Investment Entities (Amendments) |
1 January 2014 |
|
IFRS 12 |
Investment Entities (Amendments) |
1 January 2014 |
|
IAS 27 |
Investment Entities (Amendments) |
1 January 2014 |
|
IAS 32 |
Offsetting Financial Assets and Financial Liabilities (Amendments) |
1 January 2014 |
|
IFRS 9 |
Financial Instruments |
1 January 2015 |
|
International Financial Reporting Interpretation Committee (IFRIC) |
Effective date
|
|
|
IFRIC 20 |
Stripping costs in the production of a surface mine |
1 January 2013 |
The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's or the Company's financial statements in the period of initial application.
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 and estimates, which have the most significant effect on the amounts recognised in the financial statements:
Impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy in the Annual Report and Accounts. 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, cash generating unit, 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 cash generating unit, 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 cash generating unit, 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. The 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 cash generating unit.
An analysis of the Group's goodwill and the assumptions used to test for impairment are set out in the Annual Report and Accounts.
Impairment of other assets
The Group reviews the carrying value of all assets for indications of impairment at each balance sheet date. If indicators of impairment exist the carrying value of the asset is subject to further testing to determine whether its carrying value exceeds its recoverable amount. The recoverable amount represents the higher of the asset's fair value less costs to sell and its value in use, which is determined by measuring the discounted cash flows arising from the asset (including ultimate realisation on disposal).
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. In estimating the amount of the deferred tax asset that may be recognised the management make judgements, based on current budgets and forecasts, about the amount of future taxable profits and the timing of when these will be realised. The carrying value of the recognised deferred tax asset at 31 March 2013 was £2,502,000 (2012: £2,206,000) and the unrecognised deferred tax asset at 31 March 2013 was £2,080,000 (2012: £3,173,000). Further details are contained in the Annual Report and Accounts.
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 12.
Valuation and asset lives of separately identifiable intangible assets
In determining the fair value of intangible assets arising on acquisition, Management are required to make judgements regarding the timing and amount of future cash flows applicable to the businesses being acquired, discounted using an appropriate discount rate.
Such judgements are based on current budgets and forecasts, extrapolated for an appropriate period taking into account growth rates and expected changes to selling prices and operating costs. 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 businesses being acquired.
Contingent/deferred consideration
Contingent consideration relating to acquisitions is included based on management estimates of the most likely outcome (Note 14). Under IFRS 3 subsequent re-measurement of contingent consideration is recognised in the Consolidated Statement of Comprehensive Income.
3. REVENUE
Revenue disclosed in the Consolidated Statement of Comprehensive Income is analysed as follows:
|
|
|
|
|
|
|
2013 |
|
2012 |
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
Sale of goods |
17,790 |
|
12,698 |
|
Rendering of services |
21,634 |
|
19,129 |
|
Revenue |
39,424 |
|
31,827 |
|
|
|
|
|
|
Finance revenue |
1 |
|
18 |
|
Total revenue |
39,425 |
|
31,845 |
4. SEGMENTAL INFORMATION
The Group's operating segments are internally reported to the Group's Chief Executive Officer based on two separable areas grouped into two operating segments: Identity Proofing Division- which provides ID Verification and ID PeopleSafe services and Identity Solutions Division - which provides ID Registration, ID Engagement and ID Tracing services. The Directors believe that the best measure of performance of those segments is operating profit before finance revenue and income tax as shown below.
As a result of the Group's rebranding exercise, the operating segments have been renamed with DataSolutions now referred to as Identity Solutions and DataAuthentication now referred to as Identity Proofing. The change has been to the name of the segment only, with the results attributable to each division being unaffected.
All revenues and all non-current assets are derived from UK operations. Segment results include items directly attributable to either Identity Proofing or Identity Solutions. Unallocated items for 2013 represent Group head office costs £504,000, share of associate investment £146,000, exceptional costs £409,000, Group finance income £1,000, Group finance costs £85,000, Group income tax credit £831,000 and share-based payments charge £488,000. Unallocated items for 2012 represent Group head office costs £435,000, share of associate investment £24,000, exceptional costs £676,000, Group finance income £18,000, Group finance costs £34,000, Group income tax credit £1,094,000 and share-based payments charge £137,000.
Information on segment assets and liabilities is not regularly provided to the Group's Chief Executive Officer and is therefore not disclosed below.
|
|
Identity Proofing |
|
Identity Solutions |
|
Unallocated |
|
2013 |
|
Year ended 31 March 2013
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Total revenue |
15,448 |
|
23,976 |
|
- |
|
39,424 |
|
Operating profit before depreciation and amortisation |
1,811 |
|
4,818 |
|
(913) |
|
5,716 |
|
Depreciation of plant and equipment |
(152) |
|
(359) |
|
- |
|
(511) |
|
Amortisation/impairment of intangible assets |
(108) |
|
(873) |
|
- |
|
(981) |
|
Operating profit before finance revenue and income tax |
1,551 |
|
3,586 |
|
(913) |
|
4,224 |
|
Share of associate investment |
|
|
|
|
(146) |
|
(146) |
|
Finance revenue |
|
|
|
|
1 |
|
1 |
|
Finance costs |
|
|
|
|
(85) |
|
(85) |
|
Share-based payments credit |
|
|
|
|
(488) |
|
(488) |
|
Income tax credit |
|
|
|
|
831 |
|
831 |
|
Profit for the year |
|
|
|
|
|
|
4,337 |
|
|
|
|
|
|
|
|
|
|
TMG, which was acquired during the year has been absorbed and is managed in the Group's Identity Proofing operating segment.
|
|||||||
|
|
Identity Proofing |
|
Identity Solutions |
|
Unallocated |
|
2012 |
|
Year ended 31 March 2012
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Total revenue |
12,869 |
|
18,958 |
|
- |
|
31,827 |
|
Operating profit before depreciation and amortisation |
1,039 |
|
3,460 |
|
(1,111) |
|
3,388 |
|
Depreciation of plant and equipment |
(84) |
|
(292) |
|
- |
|
(376) |
|
Amortisation/impairment of intangible assets |
(26 |
|
(351) |
|
|
|
(377) |
|
Operating profit before finance revenue and income tax |
929 |
|
2,817 |
|
(1,111) |
|
2,635 |
|
Share of associate investment |
|
|
|
|
24 |
|
24 |
|
Finance revenue |
|
|
|
|
18 |
|
18 |
|
Finance costs |
|
|
|
|
(34) |
|
(34) |
|
Share-based payments credit |
|
|
|
|
(137) |
|
(137) |
|
Income tax credit |
|
|
|
|
1,094 |
|
1,094 |
|
Profit for the year |
|
|
|
|
|
|
3,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The acquisitions made during the prior year were absorbed and are managed in the Group's operating segments and reported as follows:
· Data Discoveries and Capscan is reported within the Identity Solutions segment.
· Advanced Checking Services is reported within the Identity Proofing segment.
5. EXCEPTIONAL ITEMS
|
|
|
|
|
|
|
|
|
2013 |
|
2012 |
||
|
|
£'000 |
|
£'000 |
||
|
|
|
|
|
||
|
Adjustments to deferred consideration provisions (see note 14) |
(124) |
|
- |
||
|
Acquisition related costs (see note 14) |
278 |
|
530 |
||
|
Costs associated with staff reorganisations |
248 |
|
146 |
||
|
Other |
7 |
|
- |
||
|
|
409 |
|
676 |
||
|
6. DIVIDENDS PAID AND PROPOSED |
|
|
|
|
|
|
|
|
|
|
2013 £'000 |
|
2012 £'000 |
|
|
|
|
|
|
|
|
|
|
|
Declared and paid during the year |
|
|
|
|
|
|
|
|
|
Final dividend for 2012: 1.375p (2011: 1.275p) |
|
|
|
|
|
1,487 |
|
1,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed for approval at AGM (not recognised as a liability at 31 March) |
|
|
|
|
|
|
||
|
Final dividend for 2013: 1.5p (2012: 1.375p) |
|
|
|
|
|
1,630 |
|
1,484 |
|
|
|
|
|
|
|
|
|
|
|
7. 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.
|
|
|
2013 pence per share |
|
2013 £'000 |
|
2012 pence per share |
|
2012 £'000 |
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to equity holders of the parent |
|
4.0 |
|
4,337 |
|
3.8 |
|
3,600 |
|
|
|
|
|
|
|
|
|
|
Diluted
Diluted earnings per share amounts are 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.
|
|
|
2013 |
|
2012 |
|
|
|
No. |
|
No. |
|
|
|
|
|
|
|
Basic weighted average number of shares in issue |
|
108,313,878 |
|
94,741,029 |
|
Dilutive effect of share options |
|
5,694,226 |
|
2,767,829 |
|
Diluted weighted average number of shares in issue |
|
114,008,104 |
|
97,508,858 |
|
|
|
2013 pence per share |
|
2013 £'000 |
|
2012 pence per share |
|
2012 £'000 |
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to equity holders of the Company |
|
3.8 |
|
4,337 |
|
3.7 |
|
3,600 |
|
|
|
|
|
|
|
|
|
|
Adjusted
Adjusted earnings per share is defined as adjusted operating profit less net finance costs divided by the basic weighted average number of ordinary shares of the Company.
|
|
|
2013 pence per share |
|
2013 £'000 |
|
2012 pence per share |
|
2012 £'000 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit |
|
5.1 |
|
5,522 |
|
3.9 |
|
3,669 |
|
Less net finance costs |
|
(0.1) |
|
(84) |
|
- |
|
(16) |
|
Adjusted earnings |
|
5.0 |
|
5,438 |
|
3.9 |
|
3,653 |
|
|
|
|
|
|
|
|
|
|
8. PLANT AND EQUIPMENT
|
Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment |
|
|
|
|
|
|
|
|
£'000 |
|
Cost |
|
|
|
|
|
|
|
|
At 1 April 2011 |
|
|
|
|
|
|
3,155 |
|
Additions |
|
|
|
|
|
|
57 |
|
Acquired on acquisition |
|
|
|
|
|
|
404 |
|
At 31 March 2012 |
|
|
|
|
|
|
3,616 |
|
|
|
|
|
|
|
|
|
|
Acquired on acquisition |
|
|
|
|
|
|
200 |
|
Additions |
|
|
|
|
|
|
571 |
|
Disposals |
|
|
|
|
|
|
(19) |
|
At 31 March 2013 |
|
|
|
|
|
|
4,368 |
|
|
|
|
|
|
|
|
|
|
Depreciation and impairment |
|
|
|
|
|
|
|
|
At 1 April 2011 |
|
|
|
|
|
|
2,307 |
|
Provided during the year |
|
|
|
|
|
|
376 |
|
At 31 March 2012 |
|
|
|
|
|
|
2,683 |
|
|
|
|
|
|
|
|
|
|
Disposals |
|
|
|
|
|
|
(14) |
|
Provided during the year |
|
|
|
|
|
|
511 |
|
At 31 March 2013 |
|
|
|
|
|
|
3,180 |
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
At 31 March 2013 |
|
|
|
|
|
|
1,188 |
|
|
|
|
|
|
|
|
|
|
At 31 March 2012 |
|
|
|
|
|
|
933 |
|
|
|
|
|
|
|
|
|
|
At 1 April 2011 |
|
|
|
|
|
|
848 |
The net book value in respect of assets held under finance leases and hire purchase agreements is £nil (2012: £nil).
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£'000 |
|
Cost |
|
|
|
|
|
|
|
|
At 1 April 2011 |
|
|
|
|
|
|
3,155 |
|
Additions |
|
|
|
|
|
|
351 |
|
At 31 March 2012 |
|
|
|
|
|
|
3,506 |
|
|
|
|
|
|
|
|
|
|
Acquired on acquisition* |
|
|
|
|
|
|
166 |
|
Additions |
|
|
|
|
|
|
437 |
|
Disposals |
|
|
|
|
|
|
(19) |
|
At 31 March 2013 |
|
|
|
|
|
|
4,090 |
|
|
|
|
|
|
|
|
|
|
Depreciation and impairment |
|
|
|
|
|
|
|
|
At 1 April 2011 |
|
|
|
|
|
|
2,307 |
|
Provided during the year |
|
|
|
|
|
|
359 |
|
At 31 March 2012 |
|
|
|
|
|
|
2,666 |
|
|
|
|
|
|
|
|
|
|
Disposals |
|
|
|
|
|
|
(14) |
|
Provided during the year |
|
|
|
|
|
|
453 |
|
At 31 March 2013 |
|
|
|
|
|
|
3,105 |
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
At 31 March 2013 |
|
|
|
|
|
|
985 |
|
|
|
|
|
|
|
|
|
|
At 31 March 2012 |
|
|
|
|
|
|
840 |
|
|
|
|
|
|
|
|
|
|
At 1 April 2011 |
|
|
|
|
|
|
848 |
The net book value in respect of assets held under finance leases and hire purchase agreements is £nil (2012: £nil).
*On 1 August 2012 and 1 September 2012, the trade, assets and liabilities of Data Discoveries Limited and Capscan Limited respectively were transferred to the Company.
9. INTANGIBLE ASSETS
|
Group |
Customer relationships
£'000 |
|
Other acquisition intangibles £'000 |
|
Total acquisition intangibles £'000 |
|
Goodwill
£'000 |
|
Internally developed software £'000 |
|
Total
£'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
At 1 April 2011 |
- |
|
- |
|
- |
|
6,506 |
|
445 |
|
6,951 |
|
Additions - business combinations |
5,290 |
|
734 |
|
6,024 |
|
7,672 |
|
- |
|
13,696 |
|
Additions - product development |
- |
|
- |
|
- |
|
- |
|
19 |
|
19 |
|
At 31 March 2012 |
5,290 |
|
734 |
|
6,024 |
|
14,178 |
|
464 |
|
20,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions - business combinations |
1,068 |
|
407 |
|
1,475 |
|
1,829 |
|
- |
|
3,304 |
|
Additions - product development |
- |
|
- |
|
- |
|
- |
|
338 |
|
338 |
|
At 31 March 2013 |
6,358 |
|
1,141 |
|
7,499 |
|
16,007 |
|
802 |
|
24,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
At 1 April 2011 |
- |
|
- |
|
- |
|
- |
|
244 |
|
244 |
|
Amortisation during the year |
238 |
|
120 |
|
358 |
|
- |
|
19 |
|
377 |
|
At 31 March 2012 |
238 |
|
120 |
|
358 |
|
- |
|
263 |
|
621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charge |
- |
|
- |
|
- |
|
- |
|
69 |
|
69 |
|
Amortisation during the year |
574 |
|
315 |
|
889 |
|
- |
|
23 |
|
912 |
|
At 31 March 2013 |
812 |
|
435 |
|
1,247 |
|
- |
|
355 |
|
1,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2013 |
5,546 |
|
706 |
|
6,252 |
|
16,007 |
|
447 |
|
22,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2012 |
5,052 |
|
614 |
|
5,666 |
|
14,178 |
|
201 |
|
20,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 April 2011 |
- |
|
- |
|
- |
|
6,506 |
|
201 |
|
6,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The customer relationships intangible asset acquired through the acquisition of Capscan Parent Limited has a carrying value of £4,046,000 and a remaining amortisation period of 8.6 years. The customer relationships intangible asset acquired through the acquisition of TMG.tv Limited has a carrying value of £1,024,000 and a remaining amortisation period of 9.6 years.
Goodwill arose on the acquisition of GB Mailing Systems Limited, e-Ware Interactive Limited, Data Discoveries Holdings Limited, Advanced Checking Services Limited, Capscan Parent Limited and TMG.tv Limited. Under IFRS, goodwill is no longer amortised and is annually tested for impairment.
The impairment charge of £69,000 in the year represents a partial write-down on a piece of internally developed software where the expected value in use was lower than the carrying value of the asset.
|
Company |
|
Development costs £'000 |
|
|
|
|
|
Cost |
|
|
|
At 1 April 2011 |
|
445 |
|
Additions - product development |
|
19 |
|
At 31 March 2012 |
|
464 |
|
|
|
|
|
Additions - product development |
|
307 |
|
At 31 March 2013 |
|
771 |
|
|
|
|
|
|
|
|
|
Amortisation and impairment |
|
|
|
At 1 April 2011 |
|
244 |
|
Amortisation during the year |
|
19 |
|
At 31 March 2012 |
|
263 |
|
|
|
|
|
Impairment charge |
|
69 |
|
Amortisation during the year |
|
22 |
|
At 31 March 2013 |
|
354 |
|
|
|
|
|
Net book value |
|
|
|
At 31 March 2013 |
|
417 |
|
|
|
|
|
At 31 March 2012 |
|
201 |
|
|
|
|
|
At 1 April 2011 |
|
201 |
|
|
|
|
The impairment charge of £69,000 in the year represents a partial write-down on a piece of internally developed software where the expected value in use was lower than the carrying value of the asset.
10. INVESTMENTS IN ASSOCIATES
The Group has a 27.15% (2012: 24.41%) interest in Loqate Inc., a private company which develops international addressing solutions, based in the USA. The associated undertaking is accounted for in the consolidated accounts using the equity method.
The following table illustrates summarised financial information of the Group's investment in Loqate Inc:
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
At 1 April |
|
|
|
58 |
|
- |
|
Acquired on the acquisition of subsidiaries |
|
|
|
- |
|
34 |
|
Gain on dilution of investment |
|
|
|
- |
|
88 |
|
Additional Investment |
|
|
|
242 |
|
- |
|
Share of loss for the period |
|
|
|
(146) |
|
(64) |
|
At 31 March |
|
|
|
154 |
|
58 |
|
|
|
|
|
|
|
|
The Group's share of the results of its associate, which is unlisted, and its aggregate assets and liabilities, are as follows:
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
£'000 |
|
£'000 |
|
Share of balance sheet: |
|
|
|
|
|
|
|
Total assets |
|
|
|
180 |
|
63 |
|
Total liabilities |
|
|
|
(116) |
|
(5) |
|
|
|
|
|
64 |
|
58 |
|
|
|
|
|
|
|
|
|
Share of results: |
|
|
|
|
|
|
|
Revenue |
|
|
|
296 |
|
62 |
|
Loss after tax |
|
|
|
(146) |
|
(64) |
|
Gain on dilution of investment |
|
|
|
- |
|
88 |
|
Share of associate investment result |
|
|
|
(146) |
|
24 |
On 12 April 2013, the Group made an additional investment of £15,000 for 73,533 new shares in Loqate Inc.
|
11. |
EQUITY SHARE CAPITAL |
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
|
Authorised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,663,704 (2012: 147,663,704) ordinary shares of 2.5p each |
|
|
|
3,692 |
|
3,692 |
|
|
|
|
|
|
|
|
|
|
|
Issued |
|
|
|
|
|
|
|
|
Allotted, called up and fully paid |
|
|
|
2,713 |
|
2,699 |
|
|
Allotted, called up and awaiting payment |
|
|
|
4 |
|
- |
|
|
Share premium |
|
|
|
11,831 |
|
11,646 |
|
|
|
|
|
|
14,548 |
|
14,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
No. |
|
No. |
|
|
|
|
|
|
|
|
|
|
|
Number of shares in issue at 1 April |
|
|
|
107,956,494 |
|
86,213,881 |
|
|
Issued on exercise of share options |
|
|
|
734,435 |
|
1,591,670 |
|
|
Issued on acquisition of subsidiary |
|
|
|
- |
|
150,943 |
|
|
Issued on share placing |
|
|
|
- |
|
20,000,000 |
|
|
Number of shares in issue at 31 March |
|
|
|
108,690,929 |
|
107,956,494 |
During the year, the Company received or was due to receive £203,000 (2012: £8,364,000) on the issue of shares. The nominal value of these shares was £18,000 (2012: £544,000).
12. 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 when the Company's earnings per share growth is greater than the growth of the Retail Prices Index (RPI) over a 3 year period prior to the exercise 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 per cent. 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 per cent. 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.
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 GB Group shares can receive up to a multiple of their original investment in GB Group 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 3 years. Share Matching Plan options will only become exercisable to the extent they have vested in accordance with the Adjusted EPS target.
GB 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.
The charge recognised from equity-settled share-based payments in respect of employee services received during the year is £488,000 (2012: £137,000).
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.
|
|
2013 No. |
|
2013 WAEP |
|
2012 No. |
|
2012 WAEP |
|
|
|
|
|
|
|
|
|
|
Outstanding as at 1 April |
7,385,225 |
|
23.76p |
|
7,836,170 |
|
26.85p |
|
Granted during the year |
1,832,343 |
|
12.96p |
|
1,709,255 |
|
10.79p |
|
Forfeited during the year |
(2,000) |
|
32.50p |
|
(563,490) |
|
29.92p |
|
Cancelled during the year |
- |
|
- |
|
(5,040) |
|
27.60p |
|
Exercised during the year |
(734,435) |
|
27.66p2 |
|
(1,591,670) |
|
22.85p3 |
|
Expired during the year |
|
|
- |
|
- |
|
- |
|
Outstanding at 31 March1 |
8,481,133 |
|
24.55p |
|
7,385,225 |
|
23.76p |
|
|
|
|
|
|
|
|
|
|
Exercisable at 31 March |
3,302,498 |
|
28.64p |
|
3,013,200 |
|
30.73p |
1Included within this balance at 31 March 2012 are options over 5,000 shares that have not been recognised in accordance with IFRS 2 as the options were granted on or before 7 November 2002. These options have not been subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.
2The weighted average share price at the date of exercise for the options exercised is 84.95p
3The weighted average share price at the date of exercise for the options exercised is 55.03p
For the shares outstanding as at 31 March 2013, the weighted average remaining contractual life is 6.7 years (2012: 6.6 years).
The weighted average fair value of options granted during the year was 54.46p (2012: 33.45p). The range of exercise prices for options outstanding at the end of the year was 2.50p - 94.00p (2012: 2.50p - 43.00p).
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 2013 and 31 March 2012.
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
|
Dividend yield (%) |
|
1.6 - 2.0 |
|
2.9 |
|
Expected share price volatility (%) |
|
35 |
|
40 |
|
Risk-free interest rate (%) |
|
0.2 - 0.9 |
|
0.5 - 1.1 |
|
Lapse rate (%) |
|
5.0 |
|
5.0 |
|
Expected exercise behaviour |
|
See below |
|
See below |
|
Market-based condition adjustment (%) |
|
48.00 |
|
48.00 |
|
Expected life of option (years) |
|
3.0 |
|
2.4 - 3.0 |
|
Exercise price (p) |
|
2.50 - 94.00 |
|
2.50p - 43.00 |
|
Weighted average share price (p) |
|
77.95 |
|
43.00 |
Other than for Matching Scheme 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 20% per annum for each year they remain at or above 20% "in-the-money".
For Matching Scheme options, it is assumed that participants will chose to exercise at the earliest opportunity (i.e. vesting date) since the exercise price is 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.
The market-based condition adjustment takes into account the likelihood of achieving market conditions, and allows for the fact if a Section C option vests it does not always vest at 100%.
No other features of options granted were incorporated into the measurement of fair value.
13. RELATED PARTY TRANSACTIONS
During the year, the Group entered into transactions, in the ordinary course of business, with other related parties. Transactions entered into and trading balances outstanding at 31 March are as follows:
|
Group |
|
Sales to related parties |
|
Purchases from related parties |
|
Net amounts owed to related parties |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
|
Associates: |
|
|
|
|
|
|
|
|
2013 |
|
- |
|
107 |
|
54 |
|
|
2012 |
|
- |
|
27 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
Directors (see below): |
|
|
|
|
|
|
|
|
2013 |
|
- |
|
18 |
|
- |
|
|
2012 |
|
- |
|
20 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Sales to related parties |
|
Purchases from related parties |
|
Net amounts owed to related parties |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
Subsidiaries: |
|
|
|
|
|
|
|
2013 |
|
566 |
|
32 |
|
5,358 |
|
2012 |
|
616 |
|
29 |
|
3,213 |
|
|
|
|
|
|
|
|
|
Associates: |
|
|
|
|
|
|
|
2013 |
|
- |
|
95 |
|
54 |
|
2012 |
|
- |
|
27 |
|
- |
|
|
|
|
|
|
|
|
|
Directors (see below): |
|
|
|
|
|
|
|
2013 |
|
- |
|
18 |
|
- |
|
2012 |
|
- |
|
20 |
|
- |
The Chairman of the Company undertakes some general and operational consultancy for the business outside of his directorship remit through his consultancy business Rasche Consulting Limited.
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 2013, the Group has not made any provision for doubtful debts relating to amounts owed by related parties (2012: nil).
Compensation of key management personnel (including directors)
|
|
Group & Company |
|
|
|
|
2013 |
|
2012 |
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
Short-term employee benefits |
|
828 |
|
904 |
|
|
Post-employment benefits |
|
60 |
|
56 |
|
|
Fair value of share options awarded |
|
530 |
|
387 |
|
|
|
|
|
|
|
|
|
|
|
1,418 |
|
1,347 |
|
14. BUSINESS COMBINATIONS
Group
Acquisition of TMG.tv Limited
On 5 November 2012, the Company acquired 100% of the voting shares of TMG.tv Limited (TMG), an unlisted company based in the United Kingdom providing criminal record checking services to UK organisations. The Company acquired TMG to broaden its product portfolio in the Identity Proofing business and widen its ID PeopleSafe offering to the employment screening market. The Consolidated Statement of Comprehensive Income includes the results of TMG for the five month period from the acquisition date.
The fair value of the identifiable assets and liabilities of TMG as at the date of acquisition was:
|
|
|
Fair value recognised on acquisition £'000 |
|
|
|
|
|
Assets |
|
|
|
Brand and technology intellectual property |
|
360 |
|
Customer relationships |
|
1,068 |
|
Non-compete agreements |
|
47 |
|
Plant and equipment |
|
200 |
|
Trade and other receivables |
|
647 |
|
Cash |
|
1,164 |
|
Trade and other payables |
|
(1,025) |
|
Provisions |
|
(25) |
|
Deferred tax liabilities |
|
(386) |
|
Total identifiable net assets at fair value |
|
2,050 |
|
Goodwill arising on acquisition |
|
1,710 |
|
Total purchase consideration transferred |
|
3,760 |
|
|
|
|
|
Purchase consideration: |
|
|
|
Cash |
|
2,900 |
|
Deferred consideration |
|
110 |
|
Contingent consideration |
|
750 |
|
Total purchase consideration |
|
3,760 |
|
|
|
|
|
Analysis of cash flows on acquisition: |
|
|
|
Transaction costs of the acquisition (included in cash flows from operating activities) |
|
(169) |
|
Net cash acquired with the subsidiary (included in cash flows from investing activities) |
|
1,164 |
|
Cash paid |
|
(2,900) |
|
Net cash outflow |
|
(1,905) |
The fair value of the acquired receivables amounts to £647,000. The gross amount of receivables is £648,000. None of the receivables have been impaired and it is expected that the full contractual amounts can be collected.
The goodwill recognised above is attributed to intangible assets that cannot be individually separated and reliably measured from TMG due to their nature. These items include the expected value of synergies and an assembled workforce. None of the goodwill is expected to be deductible for income tax purposes.
The transaction costs of £169,000 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, TMG has contributed £763,000 of revenue and operating profits before exceptionals of £108,000 to the Group. If the combination had taken place at the beginning of the year, the Group profit before taxation for the period would have been £3,663,000 and revenue would have been £41,536,000. Prior to the completion of the acquisition, TMG.tv Limited was a combined business comprising a criminal record checking division and a non-CRB related creative communications agency. The acquisition was in respect of its criminal checking division, the non-CRB related activities having been transferred out prior to acquisition.
Contingent consideration on TMG acquisition
As part of the share sale and purchase agreement, a contingent consideration of up to a maximum of £750,000 has been agreed. There will be additional payments comprising of cash due to the previous owners of TMG. This payment is subject to certain future targets being met on revenues for the business for the period to 30 June 2014. At the acquisition date and as at 31 March 2013, the fair value of the contingent consideration was estimated at £750,000.
Other business combination adjustments
During the year ended 31 March 2013, additional consideration of £119,000 was made relating to the acquisition of Capscan Parent Limited, resulting in an increase in goodwill.
Exceptional items
The exceptional items associated with the costs of acquisitions within note 5 also include additional costs related to other acquisition related activities during the year.
Company
Acquisition of Data Discoveries Limited
On 1 August 2012, the Company acquired the trade, assets and liabilities of Data Discoveries Limited at book value. Details of the assets and liabilities that were transferred to the Company were as follows:
|
|
|
Fair value £'000 |
|
|
|
|
|
Assets |
|
|
|
Plant and equipment |
|
17 |
|
Trade and other receivables |
|
477 |
|
Cash |
|
268 |
|
Trade and other payables |
|
(545) |
|
Total net assets at fair value |
|
217 |
|
|
|
|
The Directors believe that the fair values of the assets and liabilities were equal to the book values.
Consideration for the transfer was equal to the book value of total net assets and was settled through intercompany accounts.
The fair value of the acquired receivables amounts to £477,000. The gross amount of receivables is £477,000. None of the receivables have been impaired and it is expected that the full contractual amounts can be collected.
Acquisition of Capscan Limited
On 1 September 2012, the Company acquired the trade, assets and liabilities of Capscan Limited at book value. Details of the assets and liabilities that were transferred to the Company were as follows:
|
|
|
Fair value £'000 |
|
|
|
|
|
Assets |
|
|
|
Plant and equipment |
|
149 |
|
Investments |
|
124 |
|
Trade and other receivables |
|
6,129 |
|
Cash |
|
1,485 |
|
Trade and other payables |
|
(2,509) |
|
Total net assets at fair value |
|
5,378 |
|
|
|
|
The Directors believe that the fair values of the assets and liabilities were equal to the book values.
Consideration for the transfer was equal to the book value of total net assets and was settled through intercompany accounts.
The fair value of the acquired receivables amounts to £6,129,000. The gross amount of receivables is £6,129,000. None of the receivables have been impaired and it is expected that the full contractual amounts can be collected.
15. DEFERRED/CONTINGENT CONSIDERATION
|
|
|
|
|
Group & Company |
||
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
At 1 April |
|
|
|
571 |
|
- |
|
Recognition on the acquisition of subsidiary undertakings |
|
|
|
860 |
|
571 |
|
Reversal of contingent consideration to the Income Statement |
|
|
|
(124) |
|
- |
|
At 31 March |
|
|
|
1,307 |
|
571 |
|
|
|
|
|
|
|
|
A contingent liability of £124,000 had been provided for at 31 March 2012 in respect of a provision for the fair value of contingent consideration on the acquisition of Advanced Checking Services Limited on 27 July 2011. A fair value adjustment to this contingent consideration has been made at 31 March 2013 reversing it to the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised) Business Combinations. This is included within exceptional items as per note 5.
16. POST BALANCE SHEET EVENTS
On 12 April 2013, the Group made a further investment of £15,000 in its associated undertaking Loqate Inc. This investment was for 73,533 of new shares as part of a wider rights issue that took place.
OTHER INFORMATION
i. The financial information set out herein does not constitute the company's statutory accounts for the years ended 31 March 2013 or 2012 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 2012. Statutory accounts for 2012 have been delivered to the Registrar of Companies, and those for 2013 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.
ii. The annual results announcement was approved by the Board of Directors of GB Group plc on 3 June 2013.
iii. The ex-dividend date is 10 July 2013; the record date is 12 July 2013; the payment date is 9 August 2013.
iv. The AGM will take place on 16 July 2013.
v. The 2013 interim results announcement is expected week commencing 25 November 2013.
vi. This report will also be available on the GB Group web site: www.gbgplc.com from 3 June 2013.
vii. The Company intends to dispatch to shareholders copies of the full annual report and accounts for the year to 31 March 2013 and to make it available on the Group's website (www.gbgplc.com) by 21 June 2013.
This information is provided by RNS
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