Final Results

RNS Number : 5150A

GB Group PLC

08 June 2016

Embargoed until 7.00 a.m.

8 June 2016

GB GROUP PLC

("GBG", the "Group" or the "Company")

Annual Results for the Year Ended 31 March 2016

GBG (AIM: GBG), the global specialist in identity data intelligence, is pleased to announce its annual results for the year ended 31 March 2016.

Financial Highlights

· Strong performance and revenue growth resulted in profits ahead of market expectations

o Revenue growth of 28% to £73.4 million (2015: £57.3 million), with organic revenue growth^‡ of 16% (2015: 15%)

o 24% increase in adjusted^† operating profits to £13.4 million (2015: £10.8 million)

o 34% increase in adjusted^†† basic earnings per share to 10.6p (2015: 7.9p)

o 57% increase in profit before tax (after exceptional costs) to £9.3 million (2015: £5.9 million)

· Solid balance sheet and strong cash generation, resulting in cash balances at 31 March 2016 of £12.4 million (2015: £15.8 million), following payments of £14.5 million during the year for the cash purchase of Loqate, the settlement of earn outs on prior acquisitions and the payment of a £2.3 million dividend to shareholders

· A progressive 12.4% increase to the proposed dividend for 2016 to 2.08 pence per share (2015: 1.85 pence)

Operational Highlights

· Loqate, which became part of the Group in April 2015, reached profitability earlier than anticipated and finished the year ahead of management expectations

· Development of CitizenSafe^®, GBG's public identity verification service as part of the UK government's GOV.UK Verify platform

· Strong growth in international revenues, increasing to 26% of Group revenues (2015: 19%), reflecting success in expanding our operations outside the UK

· Growing levels of new business from major blue chip organisations including British Airways and HSBC

· Deferred revenue balances increased to £13.8 million (2015: £9.9 million), giving strong visibility for the year ahead

Commenting, Richard Law, Chief Executive, said: "GBG has had another strong year achieving record revenues and delivering profitability ahead of market expectations. This is testament to the hard work, dedication and talent of our excellent team.

This was achieved whilst simultaneously increasing our operating expenditure on the development of new products, expanding our international operations and strengthening our management team. As a result we enter the new financial year with strong momentum and excellent prospects and I'm pleased to report that trading since the start of the year is in line with the Board's expectations."

Notes:

^† Adjusted operating profit means profits before amortisation of acquired intangibles, share-based payment charges, exceptional items, share of results from associates, net finance costs and tax.

^†† Adjusted earnings per share is determined with reference to the adjusted operating profit less net finance costs and tax.

^‡ Adjusting for constant currency.

For further information, please contact:

GBG Richard Law, Chief Executive Dave Wilson, Group Finance Director & Operations Director	+44 (0) 1244 657333
Peel Hunt LLP (Nominated Adviser and Broker) Richard Kauffer	+44 (0)20 7418 8900
Newgate (Financial PR Adviser) Bob Huxford, Andrew Jones, Ed Treadwell	+44 (0)20 7680 6550
Website	www.gbgplc.com

About GBG

GBG is a global specialist in Identity Data Intelligence. We help organisations make decisions about the customers they serve and the people they employ.

Through our fundamental belief that the digital economy relies on everyone having access to data they can trust, GBG enables companies and governments to fight fraud and cybercrime, to improve the customer experience and help to protect the more vulnerable people in our society.

Headquartered in Chester (UK) and operating on 21 locations in 13 countries, GBG provides solutions to many of the world's biggest organisations, from established brands like Nike and Harrods to disruptive newcomers such as TaskRabbit and Stripe.

Find out more about how we use identity intelligently by visiting www.gbgplc.com, following us on Twitter @gbgplc and reading our blog: www.gbgplc.com/uk/blog

About GBG's solutions

We provide a number of business solutions aimed at informing decisions about customers or employees in key areas:

Employing people - we provide thorough background checks through the online verification of individuals and validation of key documents such as a driver's licence, enabling organisations to safeguard, recruit and engage with confidence.

Registering identities - GBG solutions facilitate the registration of identity data, such as name and address, contact information and social network IDs, quickly and with minimum impact on the customer experience.

Verifying identities - we provide more innovative ways of confirming identity than simply relying on credit data. Our solutions check the identities of more than 4 billion people worldwide and also verify citizens of the world's largest economies to the rigorous standards set by the world's financial regulators.

Building relationships - we work collaboratively with clients to make sure they use the data their customers share with them to create personalised customer journeys for each individual, responding to every interaction in real time.

Fighting fraud - our fraud prevention solutions not only check new customer details in real time as they register but monitor and detect application and transaction fraud on an ongoing basis.

Locating people - voted 'Most Innovative Online Product' at the 2015 UK Retail Fraud Awards, GBG technology confirms and locates the people our clients need to connect with. It saves valuable time and resource and ensures that good customers don't incur the cost of inefficient processes.

GBG is listed on the London Stock Exchange (GBG). For more information visit www.gbgplc.com

Chairman's Statement

I am extremely pleased with GBG's performance again this year. Revenues and profits continued to show strong growth with the Group delivering adjusted operating profits† ahead of market expectations. This was achieved on top of the additional investment of £3.4 million during the year on increasing the scale and reach of our international operations, strengthening the senior management team and further developing our extensive product range.

Revenues increased by 28% to £73.4 million (2015: £57.3 million), of which just over half (16%) was organic growth^‡. Even more pleasing was the translation of this strong top line performance to the adjusted operating profit line with a 24% increase to £13.4 million (2015: £10.8 million) and an increase in adjusted earnings per share of 34% to 10.6 pence (2015: 7.9 pence).

This performance was a direct result of the continuing hard work, passion and dedication of the GBG team in delivering our strategy and I would like to offer my sincere thanks to them on behalf of the Board and shareholders.

Dividend

The Board has recommended a 12.4% increase in the dividend to 2.08 pence (2015: 1.85 pence), continuing our progressive dividend growth which we regard as an important component of our shareholder return. The dividend is subject to approval at the forthcoming Annual General Meeting to be held on 26 July 2016. Upon approval, the dividend will be paid on 26 August 2016. GBG will, once again, offer eligible shareholders the choice to reinvest their dividends back into GBG shares by way of the Dividend Reinvestment Plan.

Outlook

The growing market for identity data intelligence solutions continues to present strong opportunity for our products and I am confident that GBG's clear leadership in this area will fuel further growth. We have invested heavily in talent and technology during the year and are well positioned for the many opportunities being generated worldwide by the need for identity data intelligence.

We are naturally disappointed that Richard Law has indicated his desire to step down as Chief Executive once a suitable successor has been found but fully understand and support his family-based reasons. Our excellent management team is ensuring that the business continues to thrive whilst we find the best possible successor. The continued success and excellent long-term prospects for GBG should enable us to attract the highest calibre of talent to take the Group to even greater future success.

D A Rasche

Chairman

ᶧAdjusted operating profit means profits before amortisation of acquired intangibles, share-based payment charges, exceptional items, share of results from associates, net finance costs and tax.

^‡ Adjusting for constant currency.

Chief Executive's Review

Overview

GBG has delivered another strong financial performance this year and we continue to extend our leadership of the identity data intelligence market in the UK and globally. This is a direct result of the hard work and talent of the GBG team and I am very grateful for their continued effort and commitment.

During the year we increased our operating expenditure on developing new products, expanding our international operations and strengthening our management team. We also established a presence in the USA through the successful acquisition of Loqate based in San Francisco. These investments, coupled with growing markets both in the UK and globally, have enabled us to start the new year well and I consider we have good growth prospects in the year ahead.

Financial Performance

GBG's financial performance has continued to improve with revenues increasing by 28% to £73.4 million (2015: £57.3 million). Organic revenue growth was 16% with the balance primarily from the acquisition of Loqate in April 2015.

As a result of this growth, we reported a 24% increase in adjusted operating profit to £13.4 million (2015: £10.8 million), ahead of market expectations.

Deferred revenue in the balance sheet (in respect of amounts already invoiced under annual or multi-year contracts, but which will be recognised in future periods) increased by £3.9 million to £13.8 million, giving strong revenue visibility for the financial year ahead.

The company continues to be highly cash generative and cash balances at 31 March 2016 were £12.4 million (2015: £15.8 million) following payments of £14.5 million for the cash purchase of Loqate, the settlement of earn outs on prior acquisitions and the payment of dividends to shareholders. Net cash balances were £8.7 million (2015: £11.4 million).

As a result of the above, GBG is well positioned to pursue its strategy of continued growth in the year ahead.

The Global Identity Data Intelligence Market

Consumers and citizens are increasingly moving to transacting in real time across international borders. New business models, for instance in the sharing economy, are disrupting the way things are done and the world's governments are moving towards making access to their services as easy and convenient as that for online banking.

These changes benefit us all but at the same time bring with them new risks of fraud, identity theft and cybercrime. GBG's Identity Data Intelligence services constantly analyse many terabytes of information and provide specific intelligence to organisations in over 70 countries enabling them to address these issues and comply with legislation without detracting from the customer experience.

We estimate GBG's addressable market globally to be of the order of £7 billion and we continue to attract new opportunities across the world with both existing and new clients. An illustration of this is the strengthening of our relationship with HSBC who, this year, implemented our GBG Instinct solution for application fraud in its 25^th country. The bank's use of our software across territories as diverse as Asia Pacific, Europe, the Middle East, and Central & South America, highlights the growing importance of having a consistent global approach to combatting fraud and identity theft.

Identity Proofing (IDP)

Our IDP business, which provides Electronic Identity Verification, fraud prevention and employee screening solutions, saw revenues increase by 32% to £33.2 million (2015: £25.2 million). Adjusted operating profit was up by 54% to £6.6 million (2015: £4.3 million).

GBG ID3global Identity Verification service continues to be implemented on a worldwide scale. This service can now provide identity verification solutions across 53 countries, up from 35 last year, offering coverage for 59% of the world's population or 4.35 billion people.

GBG's fraud prevention products, Instinct and Predator, were installed into 47 countries at the year end with customers such as Barclays, HSBC, Ping An Puhui (China's largest consumer lender) and Maybank (Malaysia's largest bank). The growth in fraud internationally in the financial services sector continued to drive strong demand during the year and we achieved our first solution sale in South America with HSBC.

In addition, we developed our CitizenSafe® identity assurance service as a certified provider on the UK Government's GOV.UK Verify platform and we are currently deploying this service working with Government Data Services, part of the Cabinet Office.

Identity Solutions (IDS)

Our IDS business, which provides identity-based registration, tracing and customer engagement solutions, made good progress, increasing its revenues by 25% to £40.2 million (2015: £32.1 million) and increasing adjusted operating profit by 9% to £7.7 million (2015: £7.1 million).

The IDS business units performed well with high levels of client satisfaction, demonstrated not only by the growth in revenues from our existing client base but also by the successful cross-sell of additional identity data intelligence solutions into new areas. I am encouraged by the increasing number of IDS clients buying more than one GBG product.

New customers for IDS include British Airways and JP Boden.

Acquisitions

Our track record in identifying, executing and successfully integrating acquisitions continued during the year with the addition of US-based Loqate in April 2015.

Loqate further strengthened our identity data intelligence credentials in the US and has integrated and performed very well since acquisition, exceeding our initial expectations of profitability. The US team has successfully integrated with our existing teams and this allows us to apply Loqate's technology not only into our existing territories but to take our other products into North America. Loqate's key distribution partners, Oracle and IBM, are performing very well and we have recently launched our own self-serve service, Everything Location (www.everythinglocation.com), utilising Loqate's technology.

Current Trading & Outlook

We started our year with strong momentum and excellent prospects and I'm pleased to report that trading since the start of the year has continued in line with the Board's expectations.

Given that this will be my last statement as CEO of GBG I wanted to extend my thanks to the GBG team past and present who collectively have grown the business into a very substantial company from its small beginnings.

I am very proud of all of that we have achieved and am very confident of further profitable and sustainable growth in the year ahead and beyond.

R A Law

Chief Executive

Strategic Report and Finance Review

Principal Activities and Business Review

GB Group plc ('GBG') and subsidiaries' (together 'the Group') principal activity is the provision of identity data intelligence services. GBG helps organisations recognise and verify all elements of an individual's identity at key interactions in their business processes. Through the application of our proprietary technology, our vision is to inform business decisions between people and organisations globally.

The performance of the Group is reported by segment, reflecting how we run the business and the economic characteristics of each 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, ID Employ & Comply services for employee authentication and screening and ID Fraud & Risk Management services.

· Identity Solutions Division - which provides ID Registration, ID Engage 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.

Between them, the divisions have six complementary offerings:

· ID Verification, which provides the ability to verify consumers' identities remotely, without the physical presentation of documentation, in order to combat ID fraud, money laundering and restrict access to under-age content, purchases and gambling.

· ID Employ & Comply, which provides background checks through online verification and authentication of individuals enabling organisations to safeguard, recruit and engage with confidence.

· ID Fraud & Risk Management, which provides fraud detection, risk management and customer on-boarding solutions.

· ID Registration, which includes software and services for quick and accurate customer registration and validation of records.

· ID Engage, which provides database services so our clients can better understand, target and retain their customers and offers accurate and up-to-date identity information for their contact strategies.

· ID Trace & Investigate, which provides the largest and most accurate picture of the UK's population and properties in order to locate and contact the right individual, first time.

The Group results are set out in the Consolidated Statement of Comprehensive Income and are explained in the Strategic Report and Finance Review. A review of the Group's business and future development is contained in the Chairman's Statement, Chief Executive's Review and the Strategic Report and Finance Review.

Group Vision and Strategy

The Group's vision is to be the leader in identity data intelligence, informing business decisions between people and organisations globally.

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 and product development opportunities and the application of innovation, quality and excellence in everything it does.

Review of the Business

The Group uses adjusted figures as key performance measures in addition to those reported under adopted IFRS as they better reflect the underlying performance of the business. Adjusted figures exclude certain non-operational or exceptional items which is consistent with prior year treatments. Adjusted measures are marked as such when used.

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 overall impact of our acquisitions in the year will not be fully evident in our segments until 2017.

	2016	2015	Change	Change
	£'000	£'000	£'000	%

Revenue	73,401	57,283	16,118	28%
Adjusted operating profit	13,428	10,790	2,638	24%
Share-based payments	(1,245)	(971)	(274)	(28%)
Amortisation of acquired intangibles	(2,501)	(1,986)	(515)	(26%)
Operating profit before exceptional items and associate result	9,682	7,833	1,849	24%
Exceptional items	(94)	(1,629)	1,535	94%
Share of associate investment result	-	(10)	10	100%
Net finance costs	(270)	(266)	(4)	(2%)
Group profit before tax	9,318	5,928	3,390	57%
Total tax charge	(178)	(1,127)	949	84%
Group profit for the year attributable to shareholders	9,140	4,801	4,339	90%
Adjusted earnings¹	12,980	9,397	3,583	38%
Basic weighted average number of shares ('000)	122,744	119,144	3,600	3%
Adjusted basic earnings per share (pence) ¹	10.6	7.9	2.7	34%

¹ Adjusted earnings and adjusted Earnings Per Share ('EPS') are both non-GAAP measures determined with reference to the adjusted operating profit less net finance costs and tax. A reconciliation of these values is reported later in this statement as well as in note 7 to the accounts.

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 2016 whilst being underpinned by solid organic revenue growth of 15%.

Adjusted operating profit for the year increased by 24% to £13.4 million, reflecting:

· Revenue growth of 28% to £73.4 million. This increase included organic growth of 15%.

· A slight reduction in the adjusted operating profit margin which decreased from 18.8% to 18.3%, notwithstanding significant continued investment for growth made over the course of the year.

Adjusted basic earnings per share improved by 34% to 10.6p (2015: 7.9p). Basic earnings per share increased by 85% to 7.4p (2015: 4.0p). Group cash conversion was strong with net cash generated from operating activities of £13.1 million (2015: £11.3 million) compared to operating profit before depreciation, amortisation, share of associate investment result, share-based payments and exceptional items (Adjusted EBITDA) of £14.8 million (2015: £11.8 million).

The Group's balance sheet and financing ability remain strong.

Adjusted EBITDA

Adjusted EBITDA was £14.8 million (2015: £11.8 million), consisting of adjusted operating profit of £13.4 million (2015: £10.8 million) and depreciation/amortisation of £1.4 million (2015: £1.0 million).

Exceptional Items

Exceptional costs of £0.1 million (2015: £1.6 million) were incurred by the Group in the year and have been detailed in note 5 to the accounts.

Net Finance Costs/Income

The Group has incurred net finance costs for the year of £270,000 (2015: £266,000).

Acquired Intangibles Amortisation

The charge for the year of £2.5 million (2015: £2.0 million) represents the non-cash cost of amortising separately identifiable intangible assets including technology-based assets and customer relationships that were acquired through business combinations. The increased charge in the year is due to the fact that 2016 has a full year charge for acquisitions which took place part way through the prior year along with the impact of the acquisition during the current year.

Taxation

The Group tax charge of £0.2 million (2015: £1.1 million) reflects permanent differences arising in the year, partially offset by the recognition of previously unrecognised deferred tax assets relating to share options. There was £309,000 of current tax payable on the Group's profits in the year (2015: £532,000).

Dividend

The Board of Directors will propose a final ordinary dividend of 2.08 pence per share (2015: 1.85 pence per share), amounting to £2.6 million (2015: £2.2 million). The final ordinary dividend with respect to the year ended 31 March 2016, if approved, will be paid on 26 August 2016 to ordinary shareholders whose names were on the register on 22 July 2016. The Group continues to operate a Dividend Reinvestment Plan allowing eligible shareholders to reinvest their dividends into GBG shares.

Earnings per Share

The earnings per share analysis in this report and in note 7 cover four measures: adjusted basic earnings per share (adjusted operating profit less net finance costs and tax); adjusted diluted earnings per share (adjusted operating profit less net finance costs and tax adjusting for the dilutive effect of share options); basic earnings per share (after all adjustments); and diluted earnings per share (adjusting for the dilutive effect of share options). Adjusted earnings (adjusted operating profit less net finance costs and tax) was £13.0 million (2015: £9.4 million) resulting in a 34% increase in adjusted earnings per share from 7.9p to 10.6p. The weighted average number of shares at 31 March 2016 increased to 122.7 million (2015: 119.1 million).

Cash Flows

Group operating activities before tax payments generated £13.4 million of cash and cash equivalents (2015: £11.7 million) representing an increase of 15% and an adjusted EBITDA to cash conversion ratio of 91% (2015: 99%). Operating cash flows continue to be healthy and the Group continually monitors its measures of cash generation and collection. Net cash generated by operating activities before working capital movements increased by 39% to £14.3 million (2015: £10.3 million). Group investing activities resulted in net outflows of £14.0 million (2015: £20.7 million) including £12.3 million (2015: £18.7 million) in respect of acquisitions/investments, £1.1 million (2015: £2.0 million) on plant and equipment and software purchases and £0.6 million on product development (2015: £0.1 million). Financing activities used £2.5 million (2015: £13.4 million generated) of net cash in the year and included £2.3 million of dividends paid (2015: £2.0 million). The Group's overall cash and cash equivalents decreased by £3.4 million (2015: £3.9 million increase) in the year. Further detailed analysis of this movement is included in the Consolidated Cash Flow Statement.

Acquisitions

During the year the Group acquired additional shares in Loqate Inc., an unlisted company based in the USA taking its shareholding to 100%. The total cash consideration paid, net of cash acquired, was £8.0 million and all contingent consideration adjustments were settled prior to the end of the year. Further information on these acquisitions and the contingent consideration can be found in notes 15 and 16 to the accounts.

Deferred Income

Deferred income balances at the end of the year increased by 39% to £13.8 million (2015: £9.9 million). This balance principally consists of contracted licence revenues and profits that are payable up front but recognised over time as the Group's revenue recognition criteria are met. The increase has been driven by continued strong contracted sales growth which will deliver their revenues and profits in future 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 2016 were £56.4 million, an increase of £10.3 million on the 2015 level of £46.1 million. This growth is driven by the increase in equity capital of £0.8 million combined with the total comprehensive income for the year of £10.2 million, less dividends paid of £2.3 million and after adjusting for share-based payments and deferred tax on share-based payments of £1.2 million and £0.3 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 the principal Key Performance Indicators ('KPI's) 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.

The Group uses the following primary measures to assess the performance of the Group and its propositions.

Financial

· Revenue

Revenue and revenue growth are used for internal performance analysis to assess the execution of our strategies. Organic growth is also measured, although the term 'organic' is not a defined term under IFRS and may not, therefore, be comparable with similarly titled measures reported by other companies. Organic growth is defined by the Group as year-on-year continuing revenue growth, excluding acquisitions, until the date of their anniversary and will be reported at each reporting interval.

· Adjusted Operating Profit

This is used by the Group for internal performance analysis to assess the execution of our strategies.

· Adjusted EBITDA

This is used by the Group for internal performance analysis to assess the execution of our strategies.

· 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.

· International revenue as a percentage of total revenue

This is an important internal measure for the Group to assess progress towards expanding our international operations.

Non-Financial

· Employee Engagement

Employee engagement is a key focus area for the business in order to retain and grow what we believe is some of the best talent in our industry.

· Countries with an Active Customer Presence

This is an important internal measure for the Group to assess progress towards expanding our international operations.

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
	2016	2015

Revenue growth	28.1%	36.9%
Organic revenue growth	14.8%	15.0%
Identity Proofing revenue growth	31.9%	66.5%
Identity Solutions revenue growth	25.1%	20.2%

Adjusted operating profit (£'000)	13,428	10,790
Adjusted operating profit %	18.3%	18.8%

Adjusted EBITDA (£'000)	14,776	11,844
Adjusted EBITDA %	20.1%	20.7%

Earnings per share - basic	7.4p	4.0p
Earnings per share - adjusted basic	10.6p	7.9p

Cash (£'000)	12,415	15,778

Deferred income balances (£'000)	13,752	9,906

International revenue as a percentage of total revenue	26.4%	19.3%

Employee engagement	>80%	>80%

Countries with an active customer presence	70	60

Principal Risks and Uncertainties

The Board considers risk assessment and control to be fundamental to achieving its corporate objectives, and has put in place an ongoing process for identifying, evaluating and managing the significant risks faced by the Group and the effectiveness of related controls. This process is reviewed every six months by the Audit Committee, which reports its findings to the Board.

Key elements of the risk management process:

• The Group's internal controls team meets at least once every six months to assess risks, review and monitor controls and identify new risks;

• the Group's Internal Controls Co-ordinator, whose function is to chair the Group's internal control team meetings, collates and presents the results of the Group risk reviews to the Audit Committee. He also regularly monitors and assesses the Group's risk management functions and reports directly to the CEO on matters of internal control and risk assessment; and

• the Audit Committee monitors, through the reports provided by the internal controls team, the controls which are in force and any perceived gaps in the control environment. The Audit Committee also considers and determines relevant action in respect of any control issues raised by the Internal Controls Co-ordinator or the external auditor.

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 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, business continuity & cyber risk: 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. Furthermore, the threat of unauthorised or malicious attacks on our IT systems is an ongoing risk for the Group, the nature of which is constantly evolving and becoming increasingly sophisticated.

· 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 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, short-term deposits and borrowings but has the ability to draw down up to £50 million of further funding from a revolving credit facility that is in place. Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group's operating activities. Surplus funds of the Group are invested through the use of short-term deposits, with the objective of reasonable interest rate returns whilst still providing the flexibility to fund ongoing operations when required. It is not the Group's policy to engage in speculative activity or to use complex financial instruments.

The Group is exposed to a variety of financial risks including: market risk (including foreign currency risk and cash flow interest rate risk), credit risk and liquidity risk which are described in note 12 to the accounts.

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 Strategic Report and 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 means profits before amortisation of acquired intangibles, share-based payment charges, exceptional items, share of results from associates, net finance costs and tax.

Adjusted Earnings

Adjusted earnings represents adjusted operating profit less net finance costs and tax.

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.

Approved by the Board on 8 June 2016.

D J Wilson - Director

Consolidated Statement of Comprehensive Income

Year ended 31 March 2016


		2016	2015
		£'000	£'000
	Note

Revenue		73,401	57,283

Cost of sales		(17,606)	(16,448)

Gross profit		55,795	40,835

Operating expenses before amortisation of acquired intangibles, share-based payments and exceptional items		(42,481)	(30,079)

Other operating income		114	34

Operating profit before amortisation of acquired intangibles, share-based payments, exceptional items and share of associate investment result (adjusted operating profit)		13,428	10,790

Amortisation of acquired intangibles	9	(2,501)	(1,986)

Share-based payments charge	13	(1,245)	(971)

Exceptional items	5	(94)	(1,629)

Share of associate investment result		-	(10)

Group operating profit		9,588	6,194

Finance revenue		12	25

Finance costs		(282)	(291)

Profit before tax		9,318	5,928

Income tax expense	6	(178)	(1,127)

Profit for the year attributable to equity holders of the parent		9,140	4,801



Other comprehensive income:

Exchange differences on retranslation of foreign operations (net of tax)*		1,096	(684)

Total comprehensive income for the year attributable to equity holders of the parent		10,236	4,117


Earnings per share	7
- adjusted basic earnings per share for the year		10.6p	7.9p

- adjusted diluted earnings per share for the year		10.3p	7.5p

- basic earnings per share for the year		7.4p	4.0p

- diluted earnings per share for the year		7.2p	3.9p


* Upon a disposal of a foreign operation, this would be recycled to the Income Statement

Consolidated Statement of Changes in Equity

Year ended 31 March 2016

	Note	Equity share capital	Merger reserve	Capital redemption reserve	Foreign currency translation reserve	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000

Balance at 1 April 2014		14,964	6,575	3	-	9,291	30,833

Profit for the period		-	-	-	-	4,801	4,801
Other comprehensive income		-	-	-	(684)	-	(684)

Total comprehensive income for the period		-	-	-	(684)	4,801	4,117

Issue of share capital	10	11,784	-	-	-	-	11,784

Share issue costs	10	(330)	-	-	-	-	(330)

Share-based payments charge	13	-	-	-	-	971	971

Deferred tax on share options		-	-	-	-	714	714

Equity dividend		-	-	-	-	(1,955)	(1,955)

Balance at 31 March 2015		26,418	6,575	3	(684)	13,822	46,134

Profit for the period		-	-	-	-	9,140	9,140

Other comprehensive income		-	-	-	1,096	-	1,096


Total comprehensive income for the period		-	-	-	1,096	9,140	10,236

Issue of share capital	10	790	-	-	-	-	790

Share-based payments charge	13	-	-	-	-	1,245	1,245

Deferred tax on share options		-	-	-	-	273	273

Equity dividend		-	-	-	-	(2,277)	(2,277)

Balance at 31 March 2016		27,208	6,575	3	412	22,203	56,401

Company Statement of Changes in Equity

Year ended 31 March 2016



	Note	Equity share capital	Merger reserve	Capital redemption reserve	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000

Balance at 1 April 2014		14,964	6,575	3	12,925	34,467

Profit for the period		-	-	-	5,676	5,676

Total comprehensive income for the period		-	-	-	5,676	5,676

Issue of share capital	10	11,784	-	-	-	11,784

Share issue costs	10	(330)	-	-	-	(330)

Share-based payments charge	13	-	-	-	971	971

Deferred tax on share options		-	-	-	714	714

Equity dividend		-	-	-	(1,955)	(1,955)

Balance at 31 March 2015		26,418	6,575	3	18,331	51,327

Profit for the period		-	-	-	8,317	8,317

Total comprehensive income for the period		-	-	-	8,317	8,317

Issue of share capital	10	790	-	-	-	790

Share-based payments charge	13	-	-	-	1,245	1,245

Deferred tax on share options		-	-	-	273	273

Equity dividend		-	-	-	(2,277)	(2,277)

Balance at 31 March 2016		27,208	6,575	3	25,889	59,675

Consolidated Balance Sheet

As at 31 March 2016


	Note	2016	2015
		£'000	£'000

ASSETS

Non-current assets

Plant and equipment	8	2,234	2,829
Intangible assets	9	54,113	45,296
Deferred tax asset	6	3,017	3,113

		59,364	51,238

Current assets

Trade and other receivables		23,774	17,408
Cash and short-term deposits		12,415	15,778

		36,189	33,186

TOTAL ASSETS		95,553	84,424


EQUITY AND LIABILITIES

Capital and reserves

Equity share capital	10	27,208	26,418
Merger reserve		6,575	6,575
Capital redemption reserve		3	3
Foreign currency translation reserve		412	(684)
Retained earnings		22,203	13,822

Total equity attributable to equity holders of the parent		56,401	46,134

Non-current liabilities

Loans	11	3,160	3,643
Contingent consideration	16	-	895
Deferred tax liability	6	3,433	2,968
		6,593	7,506

Current liabilities

Loans	11	582	746
Trade and other payables		30,543	23,984
Contingent consideration	16	1,050	5,733
Provisions		31	48
Current tax		353	273

		32,559	30,784

TOTAL LIABILITIES		39,152	38,290

TOTAL EQUITY AND LIABILITIES		95,553	84,424

Approved by the Board on 8 June 2016

R A Law - Director

D J Wilson - Director

Registered in England number 2415211

	Company Balance Sheet
	As at 31 March 2016


		Note	2016	2015
			£'000	£'000

ASSETS

Non-current assets

Plant and equipment		8	2,012	2,588
Intangible assets		9	1,595	478
Investments			60,428	48,321
Deferred tax asset		6	2,588	1,585

			66,623	52,972

Current assets

Trade and other receivables			18,836	13,577
Current tax			87	-
Cash and short-term deposits			9,663	13,845

			28,586	27,422

TOTAL ASSETS			95,209	80,394


EQUITY AND LIABILITIES

Capital and reserves

Equity share capital		10	27,208	26,418
Merger reserve			6,575	6,575
Capital redemption reserve			3	3
Retained earnings			25,889	18,331

Total equity attributable to equity holders of the parent			59,675	51,327


Current liabilities

Trade and other payables			35,503	28,075
Contingent consideration		16	-	934
Provisions			31	48
Current tax			-	10

			35,534	29,067

TOTAL LIABILITIES			35,534	29,067

TOTAL EQUITY AND LIABILITIES			95,209	80,394

Approved by the Board on 8 June 2016

R A Law - Director

D J Wilson - Director

Registered in England number 2415211

Consolidated Cash Flow Statement

Year ended 31 March 2016


	Note	2016	2015
		£'000	£'000

Group profit before tax		9,318	5,928

Adjustments to reconcile Group profit before tax to net cash flows

Share of associate investment result		-	10
Finance revenue		(12)	(25)
Finance costs		282	291
Depreciation of plant and equipment	8	1,071	873
Amortisation of intangible assets	9	2,778	2,167
Loss on disposal of plant and equipment		-	55
Fair value adjustment on contingent consideration	16	78	403
Fair value gain on revaluation of associate investment	15	(247)	-
Share-based payments	13	1,245	971
Decrease in provisions		(17)	(267)
Increase in trade and other receivables		(981)	(2,852)
(Decrease)/increase in trade and other payables		(118)	4,130

Cash generated from operations		13,397	11,684
Income tax paid		(248)	(337)
Net cash generated from operating activities		13,149	11,347


Cash flows from/(used in) investing activities

Acquisition of subsidiaries, net of cash acquired	15	(12,263)	(18,672)
Purchase of plant and equipment	8	(712)	(1,961)
Purchase of software	9	(426)	-
Proceeds from disposal of plant and equipment	8	-	13
Expenditure on product development	9	(624)	(63)
Interest received		12	25

Net cash flows used in investing activities		(14,013)	(20,658)


Cash flows from/(used in) financing activities

Finance costs paid		(282)	(291)
Proceeds from issue of shares	10	790	11,284
Share issue costs	10	-	(330)
Proceeds from new borrowings	11	-	5,487
Repayment of borrowings	11	(752)	(781)
Dividends paid to equity shareholders		(2,277)	(1,955)

Net cash flows from financing activities		(2,521)	13,414


Net (decrease)/increase in cash and cash equivalents		(3,385)	4,103
Effect of exchange rates on cash and cash equivalents		22	(171)
Cash and cash equivalents at the beginning of the period		15,778	11,846

Cash and cash equivalents at the end of the period		12,415	15,778

Company Cash Flow Statement

Year ended 31 March 2016


	Note	2016	2015
		£'000	£'000

Company profit before tax		8,825	6,924

Adjustments to reconcile Company profit before tax to net cash flows

Finance revenue		(7)	(16)
Finance costs		118	75
Depreciation of plant and equipment	8	1,020	771
Amortisation of intangible assets	9	273	175
Loss on disposal of plant and equipment		-	55
Fair value adjustment on contingent consideration	16	(111)	(206)
Share-based payments	13	1,245	971
Decrease in provisions		(17)	(267)
Increase in trade and other receivables		(5,259)	(1,249)
Increase in trade and other payables		7,428	3,247

Cash generated from operations		13,515	10,480
Income tax paid		(242)	(60)
Net cash generated from operating activities		13,273	10,420


Cash flows from/(used in) investing activities

Acquisition of subsidiary undertakings	15	(14,183)	(5,857)
Investment in subsidiary undertakings		-	(9,122)
Purchase of plant and equipment	8	(624)	(1,909)
Purchase of software	9	(426)	-
Proceeds from disposal of plant and equipment	8	-	13
Expenditure on product development	9	(624)	(63)
Interest received		7	16

Net cash flows used in investing activities		(15,850)	(16,922)


Cash flows from/(used in) financing activities

Finance costs paid		(118)	(75)
Proceeds from issue of shares	10	790	11,284
Share issue costs	10	-	(330)
Dividends paid to equity shareholders		(2,277)	(1,955)

Net cash flows from financing activities		(1,605)	8,924


Net (decrease)/increase in cash and cash equivalents		(4,182)	2,422
Cash and cash equivalents at the beginning of the period		13,845	11,423

Cash and cash equivalents at the end of the period		9,663	13,845

Notes

1. CORPORATE INFORMATION

GB Group plc ('the Company'), its subsidiaries and associates (together 'the Group') provide identity data intelligence products and services helping organisations recognise and verify all elements of an individual's identity at key interactions in their business processes. The nature of the Group's operations and its principal activities are set out in the Strategic Report and Finance Review.

The Company is a public limited company incorporated in the United Kingdom and is listed on the London Stock Exchange with its ordinary shares traded on the Alternative Investment Market. The address of its registered office is The Foundation, Herons Way, Chester Business Park, Chester, CH4 9GB.

The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 March 2016 or 2015 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 2016. Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 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.

The Company's financial statements are included in the consolidated financial statements of GB Group plc. As permitted by section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented.

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. The financial statements have been prepared under the historical cost convention, modified in respect of the revaluation of financial assets and liabilities at fair value. A summary of the significant accounting policies is set out below.

The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 31 March 2016 and the Group and Company have applied the same policies throughout the year.

The Group and Company financial statements are presented in pounds Sterling and all values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.

Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 March each year.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

· power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

· exposure, or rights, to variable returns from its involvement with the investee; and

· the ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

· the contractual arrangement with the other vote holders of the investee;

· rights arising from other contractual arrangements; and

· the Group's voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of Other Comprehensive Income ('OCI') are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

Business Combinations

The Group uses the acquisition method of accounting to account for business combinations of entities not under common control. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with the changes in fair value recognised in the statement of profit or loss. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity.

The Group applies IFRS 3: Business Combinations and as a consequence of the acquisition of the remaining 73.3% of shares in Loqate, the area of the standard applicable to business combinations achieved in stages became relevant to the Group. If the business combination is achieved in stages, the acquisition date fair value of the Group's previously held investment in the acquiree is remeasured to fair value at the acquisition date with any resultant gain or loss recognised through profit or loss.

Foreign Currencies

The Group's consolidated financial statements are presented in pounds Sterling, which is also the parent company's functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and on disposal of a foreign operation, the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method.

Transactions and Balances

Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group's net investment of a foreign operation. These are recognised in Other Comprehensive Income ('OCI') until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively).

Group Companies

On consolidation, the assets and liabilities of foreign operations are translated into pounds Sterling at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at average exchange rates for the period. The exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognised in profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.

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 de-recognition 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.

Impairment of Assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash generating unit's ('CGU's) fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the Statement of Comprehensive Income in those expense categories consistent with the function of the impaired asset.

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 CGU expected to benefit from the synergies. Impairment is determined by assessing the recoverable amount of the CGU, including the related goodwill. Where the recoverable amount of the CGU is less than the carrying amount, including goodwill, an impairment loss is recognised in the Statement of Comprehensive Income. The carrying amount of goodwill allocated to a CGU is taken into account when determining the gain or loss on disposal of the unit, or an operation within it. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained.

Research and Development Costs

Research costs are expensed as incurred. An intangible asset arising from development expenditure on an individual project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the availability to measure reliably the expenditure during the development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure capitalised is amortised on a straight line basis over 2 to 4 years.

Acquired Intangibles

Separately identifiable intangible assets such as patent fees, licence fees, trademarks and customer lists and relationships are capitalised on the balance sheet only when the value can be measured reliably, or the intangible asset is purchased as part of the acquisition of a business. Such intangible assets are amortised over their useful economic lives on a straight-line basis.

Separately identified intangible assets acquired in a business combination are initially recognised at their fair value. Intangible assets are subsequently stated at fair value or cost less accumulated amortisation and any accumulated impairment losses. Amortisation is recognised in the Consolidated Statement of Comprehensive Income on a straight-line basis over the estimated useful life of the asset. The carrying value of intangible assets is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

Estimated useful lives typically applied are as follows:

Technology based assets - 2 to 3 years

Brands and trademarks - 2 to 3 years

Customer relationships - 10 years

Acquired Computer Software Licences

Acquired computer software licences comprise of computer software licences purchased from third parties, and also the cost of internally developed software. Acquired computer software licences are initially capitalised at cost, which includes the purchase price (net of any discounts and rebates) and other directly attributable cost of preparing the asset for its intended use. Direct expenditure including employee costs, which enhances or extends the performance of computer software beyond its specifications and which can be reliably measured, is added to the original cost of the software.

Costs associated with maintaining the computer software are recognised as an expense when incurred. Computer software licences are subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line method over their estimated useful lives of 3 to 5 years.

The amortisation period and amortisation method of intangible assets other than goodwill are reviewed at least at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise.

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 or loss after tax of the associated undertakings. Investments in associates include goodwill identified on acquisition and are carried in the Consolidated 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.

Trade and Other Receivables

Trade receivables, which generally have 14 to 60 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectable amounts. A provision is made against a trade receivable only when there is objective evidence that the Group may not be able to recover the entire amount due under the original terms of the invoice. The carrying amount of the receivable is reduced through the use of a provision for doubtful debts account. Impaired debts are derecognised when they are assessed as uncollectable.

Cash and Short-Term Deposits

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity date of three months or less.

For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of any outstanding bank overdrafts.

Borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate ('EIR') method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.

Trade and Other Payables

Trade and other payables are initially recognised at their fair value and subsequently recorded using the effective interest method.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Pensions

The Group does not have a contributory pension scheme. Payments are made to individual private defined contribution pension arrangements. Contributions are charged in the Statement of Comprehensive Income as they become payable.

Revenue Recognition

Revenue is 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.

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.

Exceptional Items

The Group presents as exceptional items on the face of the Statement of Comprehensive Income those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.

Dividends

Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders.

Share-Based Payment Transactions

Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions').

Equity-Settled Transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value is determined by an external valuation specialist using a binomial model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of GB Group plc ('market conditions') and non-vesting conditions, if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ('the vesting date'). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The Statement of Comprehensive Income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting conditions were satisfied, provided that all other vesting conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised over the remainder of the new vesting period for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it was granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected in the computation of earnings per share (note 7).

Leases

Assets funded through finance leases and similar hire purchase contracts are capitalised as property, plant and equipment, where the Group assumes substantially all of the risks and rewards of ownership. Upon initial recognition, the leased asset is measured at the lower of its fair value and the present value of the minimum lease payments. Future instalments under such leases, net of financing costs, are included within interest-bearing loans and borrowings. Rental payments are apportioned between the finance element, which is included in finance costs, and the capital element which reduces the outstanding obligation for future instalments so as to give a constant charge on the outstanding obligation.

All other leases are accounted for as operating leases and the rental charges are charged to the Group Statement of Comprehensive Income on a straight-line basis over the life of the lease.

Lease incentives are primarily rent-free periods. Lease incentives are amortised over the lease term against the relevant rental expense.

Taxes

Current Tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, by the reporting date, in the countries where the Group operates and generates taxable income.

Deferred Income Tax

Deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities included in the financial statements and the amounts used for tax purposes that will result in an obligation to pay more, or a right to pay less or to receive more tax, with the following exceptions:

· No provision is made where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction which is not a business combination that at the time of the transaction affect neither accounting nor taxable profit.

· No provision is made for deferred tax that would arise on all taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, where the timing of the reversal of temporary differences can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

· Deferred tax assets are recognised only to the extent that the directors consider that it is probable that there will be suitable taxable profits from which the future reversal of the underlying temporary differences and unused tax losses and credits can be deducted.

· Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

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 2015, 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

IAS 19	Defined Benefit Plans: Employee Contributions - Amendments to IAS 19	1 February 2015
Various	Annual Improvements to IFRS - 2010-2012 Cycle	1 February 2015
Various	Annual Improvements to IFRS - 2011-2013 Cycle	1 January 2015
IFRS 10 and IAS 28	Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28	1 January 2016
IFRS 10, IFRS 12 and IAS 28	Investment Entities: Applying the Consolidation Exception -Amendments to IFRS 10, IFRS 12 and IAS 28	1 January 2016
IFRS 11	Accounting for Acquisitions of Interests in Joint Operations - Amendments to IFRS 11	1 January 2016
IFRS 14	Regulatory Deferral Accounts	1 January 2016
IAS 1	Disclosure Initiative - Amendments to IAS 1	1 January 2016
IAS 16 and IAS 38	Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38	1 January 2016
IAS 27	Equity Method in Separate Financial Statements - Amendments to IAS 27	1 January 2016
Various	Annual Improvements to IFRS - 2012-2014 Cycle	1 January 2016

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

IFRS 15	Revenue from Contracts with Customers	1 January 2018
IFRS 9	Financial Instruments	1 January 2018
IFRS 16	Leases	1 January 2019

IFRS 15 'Revenue from Contracts with Customers' (effective for the year ending 31 March 2019) replaces IAS 18 'Revenue', IAS 11 'Construction Contracts' and related interpretations. The standard introduces a single, five-step revenue recognition model that is based upon the principle that revenue is recognised at the point that control of goods or services is transferred to the customer. The standard also updates revenue disclosure requirements. Whilst an assessment of this new standard is ongoing, the Group does not currently expect its adoption to have a material impact on the Group's financial performance or position.

IFRS 9 'Financial Instruments' replaces IAS 39. The standard is effective for the year ending 31 March 2019 and will impact the classification and measurement of financial instruments and will require certain additional disclosures. Whilst an assessment of the new standard is ongoing, the changes to recognition and measurement of financial instruments and changes to hedge accounting rules are not currently considered likely to have any major impact on the Group's current accounting treatment or hedging activities.

IFRS 16 Leases (effective for the year ending 31 March 2020) will require all leases to be recognised on the balance sheet. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. IFRS 16 supersedes IAS 17 'Leases' and related interpretations. The Group has a number of operating lease arrangements and will consider the financial impact of IFRS 16 in due course but in broad terms the impact will be to recognise a lease liability and corresponding asset for the operating lease commitments of the Group.

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. Determining whether goodwill is impaired requires an estimation of the value in use and/or the estimated recoverable amount of the asset derived from the business, or part of the business, CGU, to which the goodwill has been allocated. The value in use calculation requires an estimate of the present value of future cash flows expected to arise from the CGU, by applying an appropriate discount rate to the timing and amount of future cash flows.

Management are required to make judgements regarding the timing and amount of future cash flows applicable to the 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. Management estimate the appropriate discount rate using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the business or the individual CGU.

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, 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 2016 was £3,017,000 (2015: £3,113,000) and the unrecognised deferred tax asset at 31 March 2016 was £5,152,000 (2015: £5,351,000). Further details are contained in note 6.

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 13.

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 consideration

Contingent consideration relating to acquisitions is included based on management estimates of the most likely outcome (note 16). Those judgements include the forecasting of a number of different outcomes against the performance targets and estimating a probability and risk of each outcome before arriving at a risk weighted value of contingent consideration.

Development costs and internally generated software

The Group capitalises development costs for a project in accordance with its policy. Careful judgement by management is applied when deciding whether the recognition requirements for development costs have been met and once management have satisfied themselves that policy criteria are met the development costs are carried as assets and amortised over the estimated revenue generating life of each asset. At 31 March 2016 the carrying value of the internally generated software assets was £908,000 (2015: £478,000) and the amount of research and development costs expensed were £5,719,000 (2015: £3,298,000).

3. REVENUE

Revenue disclosed in the Consolidated Statement of Comprehensive Income is analysed as follows:


	2016	2015
	£'000	£'000

Sale of goods	31,661	24,721
Rendering of services	41,740	32,562
Revenue	73,401	57,283

Finance revenue	12	25
Total revenue	73,413	57,308

4. SEGMENTAL INFORMATION

The Group's operating segments are internally reported to the Group's Chief Executive Officer as two operating segments: Identity Proofing Division - which provides ID Verification, ID Employ & Comply and ID Fraud and Risk Management services and Identity Solutions Division - which provides ID Registration, ID Engage and ID Trace & Investigate services. The measure of performance of those segments that is reported to the Group's Chief Executive Officer is adjusted operating profit before amortisation of acquired intangibles as shown below.

Segment results include items directly attributable to either Identity Proofing or Identity Solutions. Unallocated items for 2016 represent Group head office costs £886,000, exceptional costs £94,000, Group finance income £12,000, Group finance costs £282,000, Group income tax charge £178,000 and share-based payments charge £1,245,000. Unallocated items for 2015 represent Group head office costs £591,000, share of associate investment result £10,000, exceptional costs £1,629,000, Group finance income £25,000, Group finance costs £291,000, Group income tax charge £1,127,000 and share-based payments charge £971,000.

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	2016
Year ended 31 March 2016	£'000	£'000	£'000	£'000
Total revenue	33,213	40,188	-	73,401
Adjusted operating profit	6,629	7,685	(886)	13,428
Amortisation of acquired intangibles	(1,042)	(1,459)	-	(2,501)
Share-based payments charge	-	-	(1,245)	(1,245)
Exceptional items	-	-	(94)	(94)
Operating profit	5,587	6,226	(2,225)	9,588
Finance revenue			12	12
Finance costs			(282)	(282)
Income tax charge			(178)	(178)
Profit for the year				9,140

Loqate, which was acquired during the period, is reported within the Identity Solutions operating segment.

	Identity Proofing	Identity Solutions	Unallocated	2015
Year ended 31 March 2015	£'000	£'000	£'000	£'000
Total revenue	25,167	32,116	-	57,283
Adjusted operating profit	4,304	7,077	(591)	10,790
Amortisation of acquired intangibles	(1,097)	(889)	-	(1,986)
Share-based payments charge	-	-	(971)	(971)
Exceptional items	-	-	(1,629)	(1,629)
Share of associate investment result	-	-	(10)	(10)
Operating profit	3,207	6,188	(3,201)	6,194
Finance revenue			25	25
Finance costs			(291)	(291)
Income tax charge			(1,127)	(1,127)
Profit for the year				4,801

DecTech Solutions Pty Ltd and CDMS Limited, which were acquired during the year, were absorbed and are managed in the Group's Identity Proofing and Identity Solutions operating segments, respectively.

Geographical Information

	Revenues from external customers		Non-current assets
	2016	2015	2016	2015
	£'000	£'000	£'000	£'000

United Kingdom	54,045	46,210	36,461	28,370
United States of America	4,940	-	90	-
Australia	1,192	859	19,796	19,755
Others	13,224	10,214	-	-
Total	73,401	57,283	56,347	48,125

The geographical revenue information above is based on the location of the customer.

Non-current assets for this purpose consist of plant and equipment and intangible assets.

5. EXCEPTIONAL ITEMS


	2016	2015
	£'000	£'000

Fair value adjustments to contingent consideration (note 16)	78	403
Fair value gain on revaluation of investment in associate	(247)	-
Acquisition related costs (note 15)	119	452
Costs associated with staff reorganisations	178	331
Provision for dilapidation obligations on the relocation of the Group head office	-	138
Costs associated with the relocation of the Group head office	(34)	305
	94	1,629

Fair value adjustments to contingent consideration in the year to 31 March 2016 include a £177,000 adjustment relating to a contingent purchase price adjustment relating to Loqate (note 16) along with a £255,000 charge relating to the partial unwinding of the discounting relating to the contingent consideration of the acquisition of DecTech Solutions Pty Ltd and CDMS Limited (note 16). This charge arises because contingent consideration due to be paid at a future date is discounted for the time value of money at the point of initial recognition and over the passage of time, this discount unwinds within the Consolidated Statement of Comprehensive Income. These are non-cash items.

An exceptional fair value gain of £247,000 has been recognised as a consequence of the Group revaluing its previously held equity stake in Loqate at the date of its acquisition of the remaining 73.3% of shares in accordance with IFRS 3. This is a non-cash item.

6. TAXATION

a) Tax on profit on ordinary activities
The tax charge in the Consolidated Statement of Comprehensive Income for the year is as follows:
	2016	2015
	£'000	£'000
Current income tax
UK corporation tax on profit for the year	145	10
Amounts overprovided in previous years	(404)	-
Foreign tax	568	522
	309	532
Deferred tax
Origination and reversal of temporary differences	(220)	612
Prior year items	-	(102)
Impact of change in tax rates	89	85
	(131)	595

Tax charge in the Statement of Comprehensive Income	178	1,127
b) Reconciliation of the total tax charge

The profit before tax multiplied by the standard rate of corporation tax in the UK would result in a tax charge (2015: charge) as explained below:

	2016	2015
	£'000	£'000

Consolidated profit before tax	9,318	5,928

Consolidated profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 20% (2015: 21%)	1,864	1,245

Effect of:
Permanent differences	(924)	307
Rate changes	89	85
Utilisation of unrecognised losses	-	(110)
Prior year items	(357)	(102)
Research and development tax relief	(329)	-
Recognition of unrecognised deferred tax assets	(197)	(366)
Effect of higher taxes on overseas earnings	32	68
Total tax charge reported in the Statement of Comprehensive Income	178	1,127

The Group is entitled to current year tax relief of £1,212,000 (2015: £647,000), calculated at a tax rate of 20% (2015: 21%), in relation to the statutory deduction available on share options exercised in the year.

c) Tax losses

The Group has carried forward trading losses at 31 March 2016 of £18,259,000 (2015: £18,418,000). To the extent that these losses are available for offset against future trading profits of the Group, it is expected that the future effective tax rate would be below the standard rate. There were also capital losses carried forward at 31 March 2016 of £2,257,000 (2015: £2,257,000), which should be available for offset against future capital gains of the Group to the extent that they arise.

d) Deferred tax - Group Deferred tax asset The recognised and unrecognised potential deferred tax asset of the Group is as follows:
Recognised				Unrecognised
	2016	2015	2016		2015
	£'000	£'000	£'000		£'000

Decelerated capital allowances	1,200	1,565	1,032		1,333
Share options	1,460	991	-		-
Other temporary differences	357	336	33		36
Capital losses	-	-	406		451
Trading losses	-	221	3,681		3,531

	3,017	3,113	5,152		5,351

The movement on the deferred tax asset of the Group is as follows:
	2016	2015
	£'000	£'000

Opening balance	3,113	2,127
Acquired on acquisition	-	1,274
Foreign currency adjustments	17	(20)
Origination and reversal of temporary differences	4	(155)
Impact of change in tax rates	(117)	(113)

	3,017	3,113

The deferred tax asset has been recognised to the extent it is anticipated to be recoverable out of future taxable profits based on profit forecasts for the foreseeable future. The utilisation of the unrecognised deferred tax asset in future periods will reduce the future tax rate below the standard rate.

The Group has unrecognised deductible temporary differences of £24,107,000 (2015: £24,500,000) and unrecognised capital losses of £2,257,000 (2015: £2,257,000).

Deferred tax liability

The deferred tax liability of the Group is as follows:
	2016	2015
	£'000	£'000

Intangible assets	3,433	2,968

	3,433	2,968
The movement on the deferred tax liability of the Group is as follows:
	2016	2015
	£'000	£'000

Opening balance	2,968	1,251
Acquisition of intangibles in subsidiaries	929	2,183
Foreign currency adjustments	63	(79)
Origination and reversal of temporary differences	(527)	(387)

	3,433	2,968

e) Deferred tax - Company Deferred tax asset The recognised and unrecognised potential deferred tax asset of the Company is as follows:
Recognised				Unrecognised
	2016	2015	2016		2015
	£'000	£'000	£'000		£'000

Decelerated capital allowances	1,128	373	1,032		-
Share options	1,460	991	-		-
Other temporary differences	-	-	33		36
Capital losses	-	-	406		451
Trading losses	-	221	2,946		-

	2,588	1,585	4,417		487

The movement on the deferred tax asset of the Company is as follows:
	2016	2015
	£'000	£'000

Opening balance	1,585	2,127
Acquired on acquisition	1,093	-
Origination and reversal of temporary differences	27	(429)
Impact of change in tax rates	(117)	(113)

	2,588	1,585

The Company has unrecognised deductible temporary differences of £22,216,000 (2015: £180,000) and unrecognised capital losses of £2,257,000 (2015: £2,257,000).

f) Change in corporation tax rate

UK legislation was substantively enacted in July 2013 to reduce the main rate of corporation tax from 21% to 20% from 1 April 2015, resulting in an effective rate for the year ended 31 March 2016 of 20%. As legislated in Finance (No 2) Act 2015, which was substantively enacted on 26 October 2015, the UK corporation tax rate will reduce further to 19% from 1 April 2017 and to 18% from 1 April 2020. The reductions in rate from 20% to 19% and then to 18% have been used in the calculation of the UK's deferred tax assets and liabilities as at 31 March 2016.

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.

	2016 pence per share	2016 £'000	2015 pence per share	2015 £'000

Profit attributable to equity holders of the Company	7.4	9,140	4.0	4,801

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.

	2016	2015
	No.	No.

Basic weighted average number of shares in issue	122,744,412	119,144,442
Dilutive effect of share options	3,770,597	5,395,880
Diluted weighted average number of shares in issue	126,515,009	124,540,322

	2016 pence per share	2016 £'000	2015 pence per share	2015 £'000

Profit attributable to equity holders of the Company	7.2	9,140	3.9	4,801

Adjusted

Adjusted earnings per share is defined as adjusted operating profit less net finance costs and tax divided by the basic weighted average number of ordinary shares of the Company. In prior periods the Group reported adjusted earnings per share on a pre-tax basis and the comparative numbers below have been restated to take into account the change to a post-tax basis.

	Basic 2016 pence per share	Diluted 2016 pence per share	2016 £'000	Basic 2015 pence per share	Diluted 2015 pence per share	2015 £'000

Adjusted operating profit	10.9	10.6	13,428	9.1	8.6	10,790
Less net finance costs	(0.2)	(0.2)	(270)	(0.3)	(0.2)	(266)
Less tax	(0.1)	(0.1)	(178)	(0.9)	(0.9)	(1,127)
Adjusted earnings	10.6	10.3	12,980	7.9	7.5	9,397

8. PLANT AND EQUIPMENT

Group
							Plant and equipment
							£'000
Cost
At 1 April 2014							5,270
Acquired on acquisition							295
Additions							1,961
Disposals							(577)
Foreign currency adjustment							(18)
At 31 March 2015							6,931

Acquired on acquisition							72
Additions							712
Reclassification							(1,953)
Foreign currency adjustment							23
At 31 March 2016							5,785

Depreciation and impairment
At 1 April 2014							3,751
Disposals							(509)
Provided during the year							873
Foreign currency adjustment							(13)
At 31 March 2015							4,102

Provided during the year							1,071
Reclassification							(1,636)
Foreign currency adjustment							14
At 31 March 2016							3,551

Net book value
At 31 March 2016							2,234
At 31 March 2015							2,829
At 1 April 2014							1,519

The net book value in respect of assets held under finance leases and hire purchase agreements is £nil (2015: £114,000).

Company
							£'000
Cost
At 1 April 2014							5,113
Acquired on acquisition*							1
Additions							1,909
Disposals							(577)
At 31 March 2015							6,446

Acquired on acquisition**							137
Additions							624
Reclassification							(1,953)
At 31 March 2016							5,254

Depreciation and impairment
At 1 April 2014							3,596
Disposals							(509)
Provided during the year							771
At 31 March 2015							3,858

Provided during the year							1,020
Reclassification							(1,636)
At 31 March 2016							3,242

Net book value
At 31 March 2016							2,012
At 31 March 2015							2,588
At 1 April 2014							1,517

During the period £317,000 of purchased software assets (at net book value) were reclassified as intangible assets.

The net book value in respect of assets held under finance leases and hire purchase agreements is £nil (2015: £nil).

* On 1 October 2014, the trade, assets and liabilities of Advanced Checking Services Limited were transferred to the Company.

**On 1 April 2015, the trade, assets and liabilities of CDMS Limited were transferred to the Company.

9. INTANGIBLE ASSETS

Group	Customer relationships £'000	Other acquisition intangibles £'000	Total acquisition intangibles £'000	Goodwill £'000	Purchased software £'000	Internally developed software £'000	Total £'000
Cost
At 1 April 2014	7,237	1,311	8,548	16,542	-	1,041	26,131
Foreign currency adjustment	(273)	(107)	(380)	(921)	-	-	(1,301)
Additions - business combinations	7,875	2,582	10,457	14,884	-	-	25,341
Additions - product development	-	-	-	-	-	63	63
At 31 March 2015	14,839	3,786	18,625	30,505	-	1,104	50,234

Foreign currency adjustment	230	93	323	758	-	1	1,082
Additions - business combinations	1,912	819	2,731	6,502	-	18	9,251
Additions - product development	-	-	-	-	-	624	624
Additions - purchased software	-	-	-	-	426	-	426
Reclassification	-	-	-	-	1,953	-	1,953
At 31 March 2016	16,981	4,698	21,679	37,765	2,379	1,747	63,570

Amortisation and impairment
At 1 April 2014	1,514	843	2,357	-	-	445	2,802
Foreign currency adjustment	(17)	(14)	(31)	-	-	-	(31)
Amortisation during the year	1,257	729	1,986	-	-	181	2,167
At 31 March 2015	2,754	1,558	4,312	-	-	626	4,938

Foreign currency adjustment	56	49	105	-	-	-	105
Amortisation during the year	1,639	862	2,501	-	64	213	2,778
Reclassification	-	-	-	-	1,636	-	1,636
At 31 March 2016	4,449	2,469	6,918	-	1,700	839	9,457

Net book value
At 31 March 2016	12,532	2,229	14,761	37,765	679	908	54,113
At 31 March 2015	12,085	2,228	14,313	30,505	-	478	45,296
At 1 April 2014	5,723	468	6,191	16,542	-	596	23,329

The customer relationships intangible asset acquired through the acquisition of Capscan Parent Limited has a carrying value of £2,632,000 and a remaining amortisation period of 5.6 years. The customer relationships intangible asset acquired through the acquisition of TMG.tv Limited has a carrying value of £703,000 and a remaining amortisation period of 6.6 years. The customer relationships intangible asset acquired through the acquisition of CRD (UK) Limited has a carrying value of £637,000 and a remaining amortisation period of 7.25 years. The customer relationships intangible asset acquired through the acquisition of DecTech Solutions Pty Ltd has a carrying value of £3,352,000 and a remaining amortisation period of 8.1 years. The customer relationships intangible asset acquired through the acquisition of CDMS Limited has a carrying value of £3,101,000 and a remaining amortisation period of 8.6 years. The customer relationships intangible asset acquired through the acquisition of Loqate Inc. has a carrying value of £1,802,000 and a remaining amortisation period of 9.1 years. Intangible assets categorised as 'other acquisition intangibles' include assets such as non-compete clauses and software technology.

Goodwill arose on the acquisition of GB Mailing Systems Limited, e-Ware Interactive Limited, Data Discoveries Holdings Limited, Advanced Checking Services Limited (ACS), Capscan Parent Limited, TMG.tv Limited, CRD (UK) Limited, DecTech Solutions Pty Ltd, CDMS Limited and Loqate Inc.. Under IFRS, goodwill is not amortised and is annually tested for impairment.

During the period £317,000 of purchased software assets (at net book value) were reclassified as intangible assets (previously classified as tangible assets).

Company	Purchased software	Development costs	Total
	£'000	£'000	£'000
Cost
At 1 April 2014	-	997	997
Acquired on acquisition *	-	32	32
Additions - product development	-	63	63
At 31 March 2015	-	1,092	1,092

Acquired on acquisition **	23	-	23
Additions - product development	-	624	624
Additions - purchased software	426	-	426
Reclassification	1,953	-	1,953
At 31 March 2016	2,402	1,716	4,118

Amortisation and impairment
At 1 April 2014	-	439	439
Amortisation during the year	-	175	175
At 31 March 2015	-	614	614

Reclassification	1,636	-	1,636
Amortisation during the year	64	209	273
At 31 March 2016	1,700	823	2,523

Net book value
At 31 March 2016	702	893	1,595
At 31 March 2015	-	478	478
At 1 April 2014	-	558	558

* On 1 October 2014, the trade, assets and liabilities of Advanced Checking Services Limited were transferred to the Company.

** On 1 April 2015, the trade, assets and liabilities of CDMS Limited were transferred to the Company.

During the period £317,000 of purchased software assets (at net book value) were reclassified as intangible assets (previously classified as tangible assets).

10.	EQUITY SHARE CAPITAL
		2016	2015
		£'000	£'000
	Authorised
	147,663,704 (2015: 147,663,704) ordinary shares of 2.5p each	3,692	3,692

	Issued
	Allotted, called up and fully paid	3,097	3,018
	Share premium	24,111	23,400
		27,208	26,418

		2016	2015
		No.	No.

	Number of shares in issue at 1 April	120,735,364	110,149,466
	Issued on placing	-	8,343,284
	Issued on exercise of share options	3,151,026	2,242,614
	Number of shares in issue at 31 March	123,886,390	120,735,364

During the year 3,151,026 (2015: 10,585,898) ordinary shares with a nominal value of 2.5p were issued for an aggregate cash consideration of £790,000 (2015: £11,284,000). In addition to this, in 2015 the Company issued shares with a fair value of £500,000 as part of the consideration for the acquisition of CDMS Limited. The cost associated with the issue of shares in the year was £nil (2015: £330,000).

11. LOANS

In April 2014, the Group secured an Australian dollar three year term loan of AUS$10 million. The debt bears an interest rate of +1.90% above the Australian Dollar bank bill interest swap rate ('BBSW') and matures in April 2017. Security on the debt is provided by way of an all asset debenture.

	Group
	2016	2015
	£'000	£'000

Opening bank loan	4,389	-
New borrowings	-	5,487
Repayment of borrowings	(752)	(781)
Foreign currency translation adjustment	105	(317)
Closing bank loan	3,742	4,389

Analysed as:
Amounts falling due within 12 months	582	746
Amounts falling due after one year	3,160	3,643
	3,742	4,389

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Group's activities expose it to a variety of financial risks including: market risk (including foreign currency risk and cash flow interest rate risk), credit risk, liquidity risk and capital management. The Group's overall risk management programme considers the unpredictability of financial markets and seeks to reduce potential adverse effects on the Group's financial performance. The Group does not currently use derivative financial instruments to hedge foreign exchange exposures.

Credit risk

Credit risk is managed on a Group basis except for credit risk relating to accounts receivable balances which each entity is responsible for managing. Credit risk arises from cash and cash equivalents, as well as credit exposures from outstanding customer receivables. Management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. For those sales considered higher risk, the Group operates a policy of cash in advance of delivery. The Group regularly monitors its exposure to bad debts in order to minimise exposure. Credit risk from cash and cash equivalents is managed via banking with well-established banks with a strong credit rating.

Foreign currency risk

The Group's foreign currency exposure arises from:

· Transactions (sales/purchases) denominated in foreign currencies;

· Monetary items (mainly cash receivables and borrowings) denominated in foreign currencies; and

· Investments in foreign operations, whose net assets are exposed to foreign currency translation.

The Group has currency exposure on its investment in a foreign operation in Australia and partially offsets its exposure to fluctuations on the translation into sterling by holding net borrowings in Australian Dollars. In terms of sensitivities, the effect on equity of a 10% increase in the Australian Dollar and Sterling exchange rate would be an increase of £155,000. The effect on equity of a 10% decrease in the Australian Dollar and Sterling exchange rate net of the effect of the net investment hedge in the foreign operation would be a decrease of £189,000.

The Group has currency exposure on its investment in a foreign operation in the United States of America. In terms of sensitivities, the effect on equity of a 10% increase in the US Dollar and Sterling exchange rate would be an increase of £38,000. The effect on equity of a 10% decrease in the Australian Dollar and Sterling exchange rate would be a decrease of £46,000.

The exposure to transactional foreign exchange risk within each company is monitored and managed at both an entity and a Group level.

Cash flow interest rate risk

The Group has financial assets and liabilities which are exposed to changes in market interest rates. Changes in interest rates impact primarily on deposits and loans by changing their future cash flows (variable rate). Management does not currently have a formal policy of determining how much of the Group's exposure should be at fixed or variable rates and the Group does not use hedging instruments to minimise its exposure. However, at the time of taking new loans or borrowings management uses its judgement to determine whether it believes that a fixed or variable rate would be more favourable for the Group over the expected period until maturity. In terms of sensitivities, the effect on profit before taxation of an increase/decrease in the basis points on floating rate borrowings of 25 basis points would be £17,000.

Liquidity risk

Cash flow forecasting is performed on a Group basis by the monitoring of rolling forecasts of the Group's liquidity requirements to ensure that it has sufficient cash to meet operational needs and surplus funds are placed on deposit and available at very short notice. The maturity date of the Group's loan is disclosed in note 11.

Capital management

The Group manages its capital structure in order to safeguard the going concern of the Group and maximise shareholder value. The capital structure of the Group consists of debt, which includes loans disclosed in note 11, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings.

The Group may maintain or adjust its capital structure by adjusting the amount of dividend paid to shareholders, returning capital to shareholders, issuing new shares or selling assets to reduce debt.

In order to achieve this overall objective, the Group's capital management, amongst other things, aims to ensure that it meets financial covenants attached to borrowings. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any borrowings in the current period.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2016 and 2015.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments and includes contractual interest payments:

Year ended 31 March 2016	On demand	Less than 12 months	1 to 5 years	Total
	£'000	£'000	£'000	£'000

Loans	-	-	3,895	3,895
Contingent consideration	-	1,068	-	1,068
Provisions	-	31	-	31
Trade and other payables	5,572	11,219	-	16,791
	5,572	12,318	3,895	21,785

Year ended 31 March 2015	On demand	Less than 12 months	1 to 5 years	Total
	£'000	£'000	£'000	£'000

Loans	-	-	4,721	4,721
Contingent consideration	-	5,879	1,027	6,906
Provisions	-	48	-	48
Trade and other payables	2,538	11,540	-	14,078
	2,538	17,467	5,748	25,753

The 2015 comparatives have been restated to include contractual interest payments, affecting only the 1 to 5 years analysis of loans.

Use of Financial Instruments

A summary of the Group's use of financial instruments is set out in the Strategic Report and Finance Review.

Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the Group at 31 March:

	2016		2015
	Loans and receivables	Fair value profit or loss	Loans and receivables	Fair value profit or loss
	£'000	£'000	£'000	£'000

Financial assets:
Trade and other receivables	19,768	-	15,592	-
Total current	19,768	-	15,592	-

Total	19,768	-	15,592	-

Financial liabilities:
Loans	3,160	-	3,643	-
Contingent consideration	-	-	-	895
Total non-current	3,160	-	3,643	895

Trade and other payables	16,791	-	14,078	-
Loans	582	-	746	-
Contingent consideration	-	1,050	-	5,733
Total current	17,373	1,050	14,824	5,733

Total	20,533	1,050	18,467	6,628

All financial assets and liabilities have a carrying value that approximates to fair value. For trade and other receivables, allowances are made within the book value for credit risk.

The Group does not have any derivative financial instruments.

Contingent consideration

The fair value of contingent consideration is the present value of expected future cash flows based on the latest forecasts of future performance.

	31 March 2016	31 March 2015
	£'000	£'000

Fair value within current liabilities:
Contingent consideration	1,050	5,733

Fair value within non-current liabilities:
Contingent consideration	-	895

Liabilities for contingent consideration are Level 3 financial instruments under IFRS 13. The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of inputs used in making measurements of fair value. The fair value hierarchy has the following levels:

· Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;

· Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

· Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

For financial instruments that are recognised at the fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Financial Liabilities

The Group has an Australian dollar three year term loan of AUS$10 million. The debt bears an interest rate of +1.90% above the Australian Dollar bank bill interest swap rate ('BBSW').

The Group has an undrawn 3 year revolving credit facility agreement expiring in November 2020 which is subject to a limit of £50 million. The facility bears an initial interest rate of LIBOR +1.50%.

The facilities are secured by way of an all asset debenture.

The Group is subject to a number of covenants in relation to its borrowings which, if breached, would result in loan balances becoming immediately repayable. These covenants specify certain maximum limits in terms of the following:

· Leverage

· Interest cover

At 31 March 2016 and 31 March 2015 the Group was not in breach of any bank covenants.

13. 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

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 GBG shares can receive up to a multiple of their original investment in GBG shares, calculated on a pre-tax basis. Any matching is conditional upon achieving pre-determined Adjusted EPS growth targets set by the Remuneration Committee for the following 3 years. Share Matching Plan options will only become exercisable to the extent they have vested in accordance with the Adjusted EPS target.

GBG Sharesave Scheme

The Group has a savings-related share option plan, under which employees save on a monthly basis, over a three or five year period, towards the purchase of shares at a fixed price determined when the option is granted. This price is usually set at a 20 per cent. 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 £1,245,000 (2015: £971,000).

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.

	2016 No.	2016 WAEP	2015 No.	2015 WAEP

Outstanding as at 1 April	6,724,777	26.93p	8,128,123	24.91p
Granted during the year	1,561,245	87.73p	907,489	11.12p
Forfeited during the year	(13,298)	114.73p	(47,732)	59.23p
Cancelled during the year	(15,674)	127.43p	(890)	76.80p
Exercised during the year	(3,151,026)	25.07p¹	(2,242,613)	12.66p²
Expired during the year	(88,000)	35.68p	(19,600)	19.47p
Outstanding at 31 March	5,018,024	46.28p	6,724,777	26.93p

Exercisable at 31 March	1,318,453	38.96p	2,722,038	29.64p

¹ The weighted average share price at the date of exercise for the options exercised is 217.51p

² The weighted average share price at the date of exercise for the options exercised is 156.57p

For the shares outstanding as at 31 March 2016, the weighted average remaining contractual life is 5.9 years (2015: 6.1 years).

The weighted average fair value of options granted during the year was 133.46p (2015: 143.32p). The range of exercise prices for options outstanding at the end of the year was 2.50p - 272.25p (2015: 2.50p - 159.00p).

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 2016 and 31 March 2015.

	2016	2015

Dividend yield (%)	0.7 - 0.9	1.0
Expected share price volatility (%)	20 - 25	30
Risk-free interest rate (%)	0.9 -1.3	1.2 -1.9
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 - 5.0	3.0
Exercise price (p)	2.50 - 272.25	2.50 - 159.00
Weighted average share price (p)	217.51	156.17

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 choose to exercise at the earliest opportunity (i.e. vesting date) since the exercise price is a nominal amount and is therefore not expected to influence the timing of a participant's decision to exercise the options.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.

The market-based condition adjustment takes into account the likelihood of achieving market conditions, and allows for the fact that, 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.

14. 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/(by) related parties
	£'000	£'000	£'000

Associates:
2016	-	-	-
2015	-	150	-

Directors (see below):
2016	-	1	-
2015	-	33	8

Other related parties (see below):
2016	33	-	(5)
2015	55	-	(5)

Company	Sales to related parties	Purchases from related parties	Net amounts owed to/(by) related parties
	£'000	£'000	£'000

Subsidiaries:
2016	915	714	10,276
2015	709	128	7,443

Associates:
2016	-	-	-
2015	-	150	-

Directors (see below):
2016	-	1	-
2015	-	33	8

Other related parties (see below):
2016	33	-	(5)
2015	55	-	(5)

The Chairman of the Company incurred some expenses via his consultancy business Rasche Consulting Limited.

The Chief Executive of the Company is a director of Zuto Limited which is a client of the Group. Transactions with them have been reported under the heading of 'other related parties' in the table above.

A Non-Executive Director of the Company is a director of Avanti Communications Group PLC which is a client of the Group. Transactions with them have been reported under the heading of 'other related parties' in the table above.

Terms and conditions of transactions with related parties

Sales and balances between related parties are made at normal market prices. Outstanding balances with entities other than subsidiaries are unsecured, interest free and cash settlement is expected within 30 days of invoice. Terms and conditions 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 2016, the Group has not made any provision for doubtful debts relating to amounts owed by related parties (2015: £nil).

Compensation of key management personnel (including directors)

Group & Company

	2016	2015
	£'000	£'000

Short-term employee benefits	1,520	1,412
Post-employment benefits	24	22
Fair value of share options awarded	929	769

	2,473	2,203

15. BUSINESS COMBINATIONS

Acquisitions in the year ended 31 March 2016

Group

Acquisition of Loqate Inc.

On 27 April 2015, the Group acquired additional shares in Loqate Inc. ('Loqate') taking its shareholding to 100% of the voting shares. Loqate is an unlisted company based in the United States of America and is a leading provider of global location intelligence data and technology. The Company acquired Loqate to bring together all the data that sits behind its address and identity verification solutions into one common global platform - making for a seamless integration of registration, on-boarding and identity checking processes. It will also further support GBG's expansion by allowing access to the North American market through Loqate's significant partnerships with some of the world's largest software companies. The Consolidated Statement of Comprehensive Income includes the results of Loqate for the eleven month period from the acquisition date.

The fair value of the identifiable assets and liabilities of Loqate as at the date of acquisition was:

		Fair value recognised on acquisition £'000
Assets
Technology intellectual property		756
Customer relationships		1,912
Non-compete agreements		63
Plant and equipment		72
Internally developed software		18
Trade and other receivables		1,106
Cash		667
Trade and other payables		(2,559)
Deferred tax liabilities		(929)
Total identifiable net assets at fair value		1,106
Goodwill arising on acquisition		6,502
Total purchase consideration transferred		7,608

Purchase consideration:
Cash		8,641
Value of original equity stake		247
Contingent consideration adjustment		(1,280)
Total purchase consideration		7,608

Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included in cash flows from operating activities)		(108)
Net cash acquired with the subsidiary (included in cash flows from investing activities)		667
Cash paid		(8,641)
Net cash outflow		(8,082)

The fair value of the acquired trade receivables amounts to £627,000. The gross amount of trade receivables is £694,000. None of the trade receivables have been impaired and it is expected that the full contractual amounts can be collected.

The goodwill recognised above is attributed to intangible assets that cannot be individually separated and reliably measured from Loqate 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 £108,000 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, Loqate has contributed £4,140,000 of revenue and operating profits of £296,000 to the Group. If the combination had taken place at the beginning of the year, the Group revenue and operating profits would have been £73,672,000 and £9,335,000 respectively.

The fair values reported in the Interim Report were provisional due to the complexity of the determination of the fair value of certain assets and subsequent completion accounts adjustments to the purchase consideration. As a consequence, the identifiable net assets has reduced by £217,000 compared to that previously reported along with a reduction in the cash consideration of £338,000 and an overall corresponding reduction of £121,000 in the amount of goodwill.

Contingent consideration - Loqate

As part of the share sale and purchase agreement, a purchase price adjustment mechanism was agreed which at the acquisition date had a fair value of a purchase price reduction of £1.28 million having been determined from management's estimates of the ranges and their respective likelihoods. The contingent consideration adjustment was determined and settled with the sellers before the year end resulting in a repayment of £1,457,000. The difference was recognised as an exceptional gain item in the Consolidated Statement of Comprehensive Income (note 5).

Other business combination adjustments - DecTech

During the year ended 31 March 2016, final settlement of AU$9.5 million (£4.7 million) was made relating to the first tranche of the contingent consideration on the acquisition of DecTech resulting in a reduction in the contingent consideration liability on the balance sheet. At 31 March 2016, the value of the second tranche of contingent consideration after partial unwinding of the discounting was AU$1.97 million (£1.05 million). Adjustments to the fair value of the contingent consideration are made in the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised) Business Combinations (note 5).

Other business combination adjustments - CDMS

During the year ended 31 March 2016, final settlement of £1.0 million was made relating to the contingent consideration on the acquisition of CDMS resulting in a reduction in the contingent consideration liability on the balance sheet. Adjustments to the fair value of the contingent consideration for the unwinding of discounting was made in the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised) Business Combinations (note 5).

Company

Acquisition of CDMS Limited

On 1 April 2015, the Company acquired the trade, assets and liabilities of CDMS 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		137
Intangible assets - purchased software		23
Deferred tax assets		1,093
Trade and other receivables		2,196
Cash		1,197
Trade and other payables		(1,824)
Total net assets at fair value		2,822

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 £2,196,000. The gross amount of receivables is £2,266,000. None of the receivables have been impaired and it is expected that the full contractual amounts can be collected.

Acquisitions in the year ended 31 March 2015

Group

Acquisition of DecTech Solutions Pty Ltd

On 9 May 2014, the Group acquired 100% of the voting shares of DecTech Solutions Pty Ltd ('DecTech'), an unlisted company based in Australia providing fraud detection, credit risk management and customer management solutions. The Group acquired DecTech to enhance its ability to serve its clients globally by augmenting and broadening its product suite with highly complementary technology that is in demand in both established and developing markets. The Consolidated Statement of Comprehensive Income includes the results of DecTech for the eleven month period from the acquisition date.

The fair value of the identifiable assets and liabilities of DecTech as at the date of acquisition was:

		Fair value recognised on acquisition £'000
Assets
Technology intellectual property		1,592
Customer relationships		4,262
Non-compete agreements		101
Plant and equipment		68
Deferred tax assets		181
Trade and other receivables		957
Cash		628
Trade and other payables		(1,219)
Deferred tax liabilities		(1,279)
Total identifiable net assets at fair value		5,291
Goodwill arising on acquisition		14,382
Total purchase consideration transferred		19,673

Purchase consideration:
Cash		14,212
Contingent consideration		5,461
Total purchase consideration		19,673

Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included in cash flows from operating activities)		(73)
Net cash acquired with the subsidiary (included in cash flows from investing activities)		628
Cash paid		(14,212)
Net cash outflow		(13,657)

The fair value of the acquired receivables amounts to £957,000. The gross amount of receivables is £977,000. 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 DecTech 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 £73,000 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, DecTech has contributed £6 million of revenue and adjusted operating profits of £1.5 million to the Group. If the combination had taken place at the beginning of the year, the Group revenue and adjusted operating profits would have been £57.5 million and £10.6 million respectively.

The fair values reported in the Interim Report were provisional due to the complexity of the determination of the fair value and tax basis of certain intangible assets. As a consequence of the finalisation of these values, the identifiable net assets at fair value has reduced by £198,000 compared to that previously reported with a corresponding increase in the amount of goodwill.

Contingent consideration

As part of the share sale and purchase agreement, a contingent cash consideration of up to a maximum of AUS$11.5 million has been agreed. These payments are subject to certain future revenue and profit targets being met. At the acquisition date the discounted fair value of the contingent consideration was estimated at AUS$10.0 million having been determined from management's estimates of the ranges of profit forecasts and their respective likelihoods. At 31 March 2015, the value of the contingent consideration after partial unwinding of the discounting was AUS$11.1 million. Adjustments to the fair value of the contingent consideration are made in the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised) Business Combinations (note 5).

During the year ended 31 March 2016, final settlement of AU$9.5 million was made relating to the first tranche of the contingent consideration on the acquisition of DecTech resulting in a reduction in the contingent consideration liability on the balance sheet.

Acquisition of CDMS Limited

On 1 November 2014, the Company acquired 100% of the voting shares of CDMS Limited ('CDMS'), an unlisted company based in the UK that aggregates customer transactional data and delivers anti-fraud and marketing related services to both the private and public sectors in the UK. The Company acquired CDMS to strengthen GBG's Identity Intelligence offerings with a unique data asset, add a technology portfolio that complements GBG's existing solutions and bring with it recurring revenues with blue chip customers. The Consolidated Statement of Comprehensive Income includes the results of CDMS for the five month period from the acquisition date.

The fair value of the identifiable assets and liabilities of CDMS as at the date of acquisition was:

		Fair value recognised on acquisition £'000
Assets
Technology intellectual property		890
Customer relationships		3,613
Plant and equipment		227
Deferred tax assets		1,093
Trade and other receivables		1,704
Cash		767
Trade and other payables		(1,146)
Deferred tax liabilities		(904)
Total identifiable net assets at fair value		6,244
Goodwill arising on acquisition		502
Total purchase consideration transferred		6,746

Purchase consideration:
Cash		5,356
Fair value of shares issued (343,284 shares at £1.4565)		500
Contingent consideration		890
Total purchase consideration		6,746

Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included in cash flows from operating activities)		(258)
Net cash acquired with the subsidiary (included in cash flows from investing activities)		767
Cash paid		(5,356)
Net cash outflow		(4,847)

The fair value of the acquired receivables amounts to £1,704,000. The gross amount of receivables is £1,756,000. 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 CDMS 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 £258,000 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, CDMS has contributed £3.1 million of revenue and adjusted operating profits of £0.4 million to the Group. The business had been loss-making prior to acquisition and if the combination had taken place at the beginning of the year, the Group revenue and adjusted operating profits would have been £59.4 million and £9.8 million respectively.

Contingent consideration

As part of the share sale and purchase agreement, a contingent consideration amount of up to a maximum of £1 million has been agreed. This payment, which will be settled by way of an issue of shares, is subject to certain future contract and revenue targets being met by the anniversary of the acquisition date. The number of shares to be issued to satisfy the payment will be calculated by reference to the five business day volume-weighted average price of GBG shares prior to the date of issue. The obligation has been classified as a liability in accordance with the provisions of IAS 32.

At the acquisition date the discounted fair value of the contingent consideration was estimated at £890,000 having been determined from management's estimates of the ranges of outcomes and their respective likelihoods. At 31 March 2015, the value of the contingent consideration after partial unwinding of the discounting was £934,000. Adjustments to the fair value of the contingent consideration are made in the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised) Business Combinations (note 5).

Other business combination adjustments

During the year ended 31 March 2015, final settlement of £500,000 was made relating to the contingent consideration on the acquisition of TMG.tv Limited resulting in a reduction in the contingent consideration liability on the balance sheet. At 31 March 2014 this liability was included within non-current liabilities. A downwards fair value adjustment of £250,000 was made to this contingent consideration during the year reversing it to the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised) Business Combinations (note 5).

Company

Acquisition of Advanced Checking Services Limited

On 1 October 2014, the Company acquired the trade, assets and liabilities of Advanced Checking Services 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		1
Intangible assets		32
Trade and other receivables		174
Cash		17
Trade and other payables		(147)
Total net assets at fair value		77

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 £174,000. The gross amount of receivables is £180,000. None of the receivables have been impaired and it is expected that the full contractual amounts can be collected.

16. CONTINGENT CONSIDERATION

ASSETS


Group and Company	2016	2015
	£'000	£'000

At 1 April	-	-
Recognition on the acquisition of subsidiary undertakings	1,280	-
Fair value adjustment to contingent consideration	177	-
Settlement of consideration	(1,457)	-
At 31 March	-	-

LIABILITIES


Group	2016	2015
	£'000	£'000

At 1 April	6,628	750
Recognition on the acquisition of subsidiary undertakings	-	6,351
Reversal of contingent consideration to the Income Statement	-	(250)
Settlement of consideration	(5,745)	(500)
Unwinding of discount	255	653
Exchange differences on retranslation	(88)	(376)
At 31 March	1,050	6,628

Analysed as:
Amounts falling due within 12 months	1,050	5,733
Amounts falling due after one year	-	895
At 31 March	1,050	6,628

The opening balance at 1 April 2015 represented contingent consideration amounts relating to the acquisition of CDMS and DecTech. During the year a final payment of £1,000,000 was made to settle the outstanding obligation on CDMS and a payment of £4,745,000 for the first tranche on DecTech. The closing balance at 31 March 2016 relates to provisions for contingent consideration for DecTech. Exchange differences of £88,000 arose from the retranslation of DecTech into pounds Sterling for consolidation purposes and are not part of the fair value movement on the underlying contingent consideration.


Company	2016	2015
	£'000	£'000

At 1 April	934	750
Recognition on the acquisition of subsidiary undertakings	-	890
Reversal of contingent consideration to the Income Statement	-	(250)
Settlement of consideration	(1,000)	(500)
Unwinding of discount	66	44
At 31 March	-	934

Analysed as:
Amounts falling due within 12 months	-	934
Amounts falling due after one year	-	-
At 31 March	-	934

The closing balance at 31 March 2015 relates to provisions for contingent consideration for CDMS.

Other Information

Other Information

i. The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 March 2016 or 2015 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 2016. Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 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 8 June 2016.

iii. The ex-dividend date is 21 July 2016; the record date is 22 July 2016; the payment date is 26 August 2016.

iv. In respect of this year's dividend, the Group will offer a Dividend Reinvestment Plan allowing eligible shareholders to reinvest their dividends into GB Group shares.

v. The AGM will take place on 26 July 2016.

vi. The 2016 interim results announcement is expected week commencing 28 November 2016.

vii. This report will also be available on the GB Group web site www.gbgplc.com from 8 June 2016.

viii. The Company intends to dispatch to shareholders copies of the full annual report and accounts for the year to 31 March 2016 and to make it available on the Group's website (www.gbgplc.com) by 1 July 2016.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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Friday, 10th May 2024

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Final Results

Chairman's Statement

Chief Executive's Review

Strategic Report and Finance Review

Principal Activities and Business Review

Group Vision and Strategy

Review of the Business

Key Performance Indicators

Performance against KPIs

Principal Risks and Uncertainties

Relationships

Treasury Policy and Financial Risk

Use of non-GAAP Measures in the Group Financial Statements

Revenue

Gross profit

Group operating profit

Profit before tax

Earnings per share

Balance at 1 April 2014

Balance at 31 March 2015

Balance at 31 March 2016

Current assets

TOTAL ASSETS

EQUITY AND LIABILITIES

Capital and reserves

Merger reserve

Total equity attributable to equity holders of the parent

Non-current liabilities

Loans

Contingent consideration

Deferred tax liability

Current liabilities

TOTAL LIABILITIES

TOTAL EQUITY AND LIABILITIES

Current assets

TOTAL ASSETS

EQUITY AND LIABILITIES

Capital and reserves

Merger reserve

Total equity attributable to equity holders of the parent

Current liabilities

TOTAL LIABILITIES

TOTAL EQUITY AND LIABILITIES

Cash generated from operations

Income tax paid

Net cash generated from operating activities

Cash flows from/(used in) investing activities

Net cash flows used in investing activities

Cash flows from/(used in) financing activities

Net cash flows from financing activities

Cash and cash equivalents at the end of the period

Cash generated from operations

Income tax paid

Net cash generated from operating activities

Cash flows from/(used in) investing activities

Net cash flows used in investing activities

Cash flows from/(used in) financing activities

Net cash flows from financing activities

Cash and cash equivalents at the end of the period

Notes

Share-Based Payment Transactions

41,740

32,562

Recognised

Unrecognised

Recognised

Unrecognised

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