Half Yearly Report

RNS Number : 7691X

GB Group PLC

24 November 2014

 



Embargoed until 7.00 a.m.

24 November 2014

GB GROUP PLC

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

Half Yearly Report

GBGroup, the identity intelligence specialist, announces its unaudited results for the six months ended 30 September 2014.

Highlights - Financial

·      Strong trading performance for the six months to 30 September:

o  Revenue growth of 28% to £23.2 million (2013: £18.1 million)

o  Both divisions, Identity Proofing and Identity Solutions, contributing to revenue growth

o  Adjusted operating profits increased by 47% to £3.8 million (2013: £2.6 million)

o  43% increase in profit after tax to £1.7 million (2013: £1.2 million)

o  Adjusted basic earnings per share of 3.1p (2013: 2.3p)

·      Group has cash balances of £13.6 million (2013: £6.0 million) - with net cash balances of £8.6 million (2013: £6.0 million).

·      13% increase in overall organic revenue growth.

Highlights - Operational

·     Acquisition of DecTech in May and Transactis post-period end in October.

·      Further strong growth in our international services.

·      International verification capabilities extended and enhanced - GBG can now provide verification services on over          4 billion citizens globally.

·      IDS product range upgrades successfully launched in October.

Richard Law, CEO, commented, "We have made strong progress against our strategy throughout the first half of the year and expect this positive momentum to continue through to the year end and beyond.  With the added capabilities, markets and clients bought to the Group by the acquisitions of DecTech and Transactis, we are confident of our continued growth and for the prospects of the Group which we feel are very positive."

For further information, please contact:

GB Group plc Richard Law, Chief Executive Dave Wilson, Group Finance and Operations Director	01244 657333
Peel Hunt LLP (Nominated Adviser and Broker) Richard Kauffer Daniel Harris	020 7418 8900
Newgate Threadneedle Caroline Forde Josh Royston Heather Armstrong	020 7653 9850
Website	www.gbgplc.com

About GBGroup

The most profitable and successful organisations recognise the value of understanding the individual identity of their customers and employees. GBG combines this concept of identity with technology to create an environment of trust, so that organisations can employ people and connect, communicate and transact with consumers, safely and responsibly.

We call this Identity Intelligence.

GBG's solutions include:

Register & Verify  -  International software and services for quick and accurate customer registration; and the verification of identities of individuals & businesses remotely.

Cleanse & Engage - Innovative software and services which provide accurate and up-to-date identity information to deliver improved intelligent customer contact strategies.

Employ & Comply - Thorough background checks through online verification and authentication of individuals enabling organisations to safeguard, recruit and engage with confidence.

Trace & Investigate - Leading software and services which provide the most accurate and up-to-date picture of the UK's population, properties and businesses to quickly locate, investigate and contact the right individual, first time.

GB Group is listed on the London Stock Exchange (GBG). For more information, please visit GB Group's website: www.gbgplc.com 

CHAIRMAN'S STATEMENT

I am pleased to report that GBGroup has delivered another strong performance in the first half of the year.  The acquisitions of DecTech in May and Transactis in October have expanded our product portfolio and given the Group access to new clients and new international markets.  Together they are expected to add approximately 20% to GBG's revenues in the year.  We have invested in new products building on our successful identity intelligence capabilities and positioned ourselves well to capitalise on opportunities arising from our increasing international reach.

Results

The Group's performance in the half year is in line with the guidance given in the trading update statement issued by the Company on 20 October 2014.  Group revenues increased by 28% to £23.2 million (2013: £18.1 million) and adjusted operating profits increased by 47% to £3.8 million (2013: £2.6 million).  From the date of its acquisition, DecTech has generated £2.6 million of revenue and contributed £0.8 million of adjusted operating profits to the Group.  Overall organic growth in the first half has been strong with revenues higher by 13%.

The Group continues to be highly cash generative with operating cash flow before working capital movements increasing by 37% to £3.8 million (2013: £2.8 million).  At 30 September 2014, the Group had cash balances of £13.6 million (2013: £6.0 million).

Net profit was 43% higher than the previous year at £1.7 million (2013: £1.2 million).

Identity Proofing (IDP)

The Identity Proofing business, which provides our global fraud, risk, compliance, people checking and ID verification solutions, continues to make good strategic progress helped by the acquisition of DecTech and the roll out of ID3global.  Revenues grew by 59% to £11.3 million (2013: £7.1 million) with organic growth being 21%.

The addition of DecTech to the business means that IDP's client base spans more than 40 countries worldwide with a client presence in every developed continent.

ID3global was launched in September 2013 and unifies our UK and international electronic identity verification solutions through a single portal or API which can verify the details of over 4 billion citizens globally. This service is now used by the majority of GBG's ID verification clients and its predecessor URU services are due to be retired during the second half of this financial year.

Developments in the ID3global service during the year have included: sourcing enhanced data for China, Australia, Singapore and New Zealand; increasing our capabilities into South America with the addition of data from Chile; and the addition of new sources of data for anti-money laundering (AML) and watch list monitoring requirements.

Identity Solutions (IDS)

The Identity Solutions business, which provides domestic and international registration, tracing and engagement solutions also had a good first half financial performance with organic revenues growing 8% to £11.9 million (2013: £11.0 million).

IDS increased its investment in sales and marketing in the first half to capitalise on significant product range upgrades which were successfully launched this October.   These new releases were across the whole portfolio of IDS' products and services, and included upgrades to its tracing, marketing and customer registration applications.  These will support IDS' continued organic growth. 

The Transactis business, acquired in October, becomes part of the IDS business and will result in a significant increase in revenue for IDS in the second half.

Acquisitions
DecTech, which provides fraud detection and prevention solutions, has performed well and is being successfully integrated into the Group.  The release in the first half of a new version of Predator (its anti-fraud transactional monitoring software) with improved functionality has come from collaboration across the Group. 

In October, the Group acquired Transactis (CDMS Limited) for an initial consideration of £5 million. This business, which aggregates customer transactional data on approximately 40 million consumers, supplies anti-fraud and marketing related services to both public and private sector UK organisations.  A further £1.0m of consideration in shares will be deferred for a period of 12 months following completion, contingent on certain performance conditions being met.  The acquisition of Transactis further strengthens GBG's identity intelligence credentials by bringing with it a valuable data asset and technology that is complementary to our own existing products.

Outlook
The Board is encouraged by the prospects for the Group. Our products and services are market leading and address real global issues for our clients.  Looking ahead, the Group has had a good start to the second half of the year.  Consequently, the Board remains confident about delivering significant year-on-year revenue and profit growth.

Our leadership team and employees, new as well as long term, have achieved a great deal in the first half and I would like to record the Board's thanks to them all.

Interim Consolidated Statement of Comprehensive Income

For the six months ended 30 September 2014

	Note		Unaudited 6 months to 30 September		Unaudited 6 months to 30 September			Audited Year to 31 March
			2014		2013			2014
			£'000		£'000			£'000
Revenue			23,232		18,138			41,835
Cost of sales			(6,809)		(6,519)			(14,473)
Gross profit			16,423		11,619			27,362
Operating expenses before amortisation of acquired intangibles, share-based payments and exceptional items			(12,695)		(9,087)			(20,243)
Other operating income			22		22			45
Operating profit before amortisation of acquired intangibles, share-based payments, exceptional items and share of associate investment result (adjusted operating profit)			3,750		2,554			7,164
Amortisation of acquired intangibles	11		(968)		(542)			(1,110)
Share-based payments charge	13		(443)		(338)			(747)
Exceptional items	5		(809)		(152)			(1,080)
Share of associate investment result	12		(10)		(155)			(159)
Group operating profit			1,520		1,367			4,068
Finance revenue			13		2			6
Finance costs			(145)		(42)			(85)
Profit before tax			1,388		1,327			3,989
Income tax credit/(expense)	7		323		(133)			(474)
Profit for the period attributable to equity holders of the parent			1,711		1,194			3,515
Other comprehensive income:
Exchange differences on retranslation of foreign operations (net of tax)*			(203)		-			-
Total comprehensive income for the period attributable to equity holders of the parent			1,508		1,194			3,515
Earnings per share
- adjusted basic earnings per share for the period	8		3.1p		2.3p			6.5p
- basic earnings per share for the period	8		1.5p		1.1p			3.2p
- diluted earnings per share for the period	8		1.4p		1.0p			3.0p
* Upon a disposal of a foreign operation, this would be recycled to the Income Statement

Interim Consolidated Statement of Changes in Equity                For the six months ended 30 September 2014

	Note		Equity share capital		Merger reserve		Capital redemption reserve		Foreign currency translation reserve		Retained earnings			Total shareholders equity
			£'000		£'000		£'000		£'000		£'000			£'000
Balance at 1 April 2013 (audited)			14,548		6,575		3		-		6,491			27,617
Profit for the period			-		-		-		-		1,194			1,194
Total comprehensive income for the period			-		-		-		-		1,194			1,194
Issue of share capital	16		359		-		-		-		-			359
Share-based payments charge	13		-		-		-		-		338			338
Deferred tax on share options			-		-		-		-		2			2
Equity dividend	9		-		-		-		-		(1,632)			(1,632)
Balance at 30 September 2013 (unaudited)			14,907		6,575		3		-		6,393			27,878
Profit for the period			-		-		-		-		2,321			2,321
Total comprehensive income for the period			-		-		-		-		2,321			2,321
Issue of share capital			57		-		-		-		-			57
Deferred tax on share options			-		-		-		-		409			409
Share-based payments charge			-		-		-		-		168			168
Balance at 1 April 2014 (audited)			14,964		6,575		3		-		9,291			30,833
Profit for the period			-		-		-		-		1,711			1,711
Other comprehensive income			-		-		-		(203)		-			(203)
Total comprehensive income for the period			-		-		-		(203)		1,711			1,508
Issue of share capital	16		11,224		-		-		-		-			11,224
Share issue costs	16		(330)		-		-		-		-			(330)
Share-based payments charge	13		-		-		-		-		443			443
Deferred tax on share options			-		-		-		-		491			491
Equity dividend	9		-		-		-		-		(1,955)			(1,955)
Balance at 30 September 2014 (unaudited)			25,858		6,575		3		(203)		9,981			42,214

Interim Consolidated Balance Sheet

As at 30 September 2014

	Note		Unaudited As at 30 September		Unaudited As at 30 September		Audited As at 31 March
			2014		2013		2014
			£'000		£'000		£'000
ASSETS
Non-current assets
Property, plant and equipment	10		2,630		1,258		1,519
Intangible assets	11		43,380		24,020		23,329
Investments accounted for using the equity method	12		-		14		10
Deferred tax asset			2,952		2,454		2,127
			48,962		27,746		26,985
Current assets
Trade and other receivables			12,092		8,723		11,929
Cash and short-term deposits			13,604		5,958		11,846
			25,696		14,681		23,775
TOTAL ASSETS			74,658		42,427		50,760
EQUITY AND LIABILITIES
Capital and reserves
Equity share capital			25,858		14,907		14,964
Merger reserve			6,575		6,575		6,575
Capital redemption reserve			3		3		3
Foreign currency translation reserve			(203)		-		-
Retained earnings			9,981		6,393		9,291
Total equity attributable to equity holders of the parent			42,214		27,878		30,833
Non-current liabilities
Loans	14		4,221		-		-
Provisions			33		25		65
Contingent consideration	18		886		750		750
Deferred tax liability			3,146		1,411		1,251
			8,286		2,186		2,066
Current liabilities
Loans	14		785		-		-
Trade and other payables			17,875		12,290		17,551
Contingent consideration	18		4,749		-		-
Provisions			388		-		250
Current tax			361		73		60
			24,158		12,363		17,861
TOTAL LIABILITIES			32,444		14,549		19,927
TOTAL EQUITY AND LIABILITIES			74,658		42,427		50,760

Interim Consolidated Cash Flow Statement                                                                      For the six months ended 30 September 2014

	Note		Unaudited 6 months to 30 September 2014		Unaudited 6 months to 30 September 2013		Audited Year to 31 March 2014
			£'000		£'000		£'000
Group profit before tax			1,388		1,327		3,989
Adjustments to reconcile Group profit before tax to net cash flows
Share of associate investment result	12		10		155		159
Finance revenue			(13)		(2)		(6)
Finance costs			145		42		85
Depreciation of plant and equipment	10		339		282		594
Amortisation/impairment of intangible assets	11		1,057		558		1,200
Loss/(profit) on disposal of fixed assets			57		-		(3)
Fair value adjustment on contingent consideration	5		268		-		-
Share-based payments	13		443		338		747
Increase in provisions			106		-		290
Decrease/(increase) in receivables			804		2,103		(1,103)
(Decrease)/increase in payables			(1,094)		(1,950)		3,403
Cash generated from operations			3,511		2,853		9,355
Income tax received			-		82		65
Net cash generated from operating activities			3,511		2,935		9,420
Cash flows used in investing activities
Acquisition of subsidiaries, net of cash acquired	17		(14,084)		(1,428)		(1,428)
Investment in associates	12		-		(15)		(15)
Purchase of property, plant and equipment	10		(1,451)		(342)		(916)
Proceeds from disposal of plant and equipment			11		7		11
Expenditure on product development	11		(42)		(194)		(239)
Interest received			13		2		6
Net cash flows used in investing activities			(15,553)		(1,970)		(2,581)
Cash flows from/(used in) financing activities
Finance costs			(145)		(42)		(85)
Proceeds from issue of shares	16		11,224		359		416
Share issue costs	16		(330)		-		-
Proceeds from new borrowings	14		5,487		-		-
Repayment of borrowings	14		(401)		-		-
Dividends paid to equity shareholders	9		(1,955)		(1,632)		(1,632)
Net cash flows from/(used in) financing activities			13,880		(1,315)		(1,301)
Net increase/(decrease) in cash and cash equivalents			1,838		(350)		5,538
Effect of exchange rates on cash and cash equivalents			(80)		-		-
Cash and cash equivalents at the beginning of period			11,846		6,308		6,308
Cash and cash equivalents at the end of period			13,604		5,958		11,846

Notes to the Interim Report

1.  CORPORATE INFORMATION

The interim condensed consolidated financial statements of GB Group plc ('the Group') for the six months ended 30 September 2014 were authorised for issue in accordance with a resolution of the directors on 24 November 2014.  GB Group plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded on the Alternative Investment Market (AIM) of the London Stock Exchange.

2.  BASIS OF PREPARATION AND ACCOUNTING POLICIES

Basis of Preparation

These interim condensed consolidated financial statements for the six months ended 30 September 2014 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

After making appropriate enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, the Board continues to adopt the going concern basis in preparing the interim report.

The interim condensed consolidated financial statements do not constitute statutory accounts as defined in section 435 of the Companies Act 2006 and therefore do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 March 2014.  The financial information for the preceding year is based on the statutory accounts for the year ended 31 March 2014.  These accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies.  These accounts did not require a statement under either section 498(2), or section 498(3) of the Companies Act 2006.

Accounting Policies

As a consequence of the acquisition in May 2014 of DecTech Solutions Pty Ltd, a company based in Australia, the effects of changes in currency exchange rates have a greater relevance to the Group.  The Group applies IAS 21: The Effects of Changes in Foreign Exchange Rates. Transactions and balances in foreign currencies are translated into Sterling at the rate ruling on the date of the transaction.  Foreign currency balances are translated into Sterling at the period end exchange rates.  Exchange gains and losses on such balances are taken to the Consolidated Statement of Comprehensive Income.

The Group's foreign operations (including subsidiaries and associates) based outside the UK may have different functional currencies.  The functional currency of an operation is the currency of the primary economy to which it is exposed.

Prior to consolidation (or equity accounting) the assets and liabilities of non-Sterling operations are translated at the closing rate and items of income, expense and other comprehensive income are translated into Sterling at the rate on the date of the transactions.  Exchange differences arising on the translation of foreign operations are included in foreign currency translation reserves within equity.  These are transferred to the Consolidated Statement of Comprehensive Income when the Group loses control, joint control or significant influence over the foreign operation or on partial disposal of the operation.

The other accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2014, except for the adoption of 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.

Notes to the Interim Report

International Accounting Standards (IAS / IFRS)		Adoption date
IFRS 10	Consolidated Financial Statements	1 January 2014
IFRS 10	Investment Entities (Amendments)	1 January 2014
IFRS 11	Joint Arrangements	1 January 2014
IFRS 12	Investment Entities (Amendments)	1 January 2014
IFRS 12	Disclosure of Interests in Other Entities	1 January 2014
IAS 27	Investment Entities (Amendments)	1 January 2014
IAS 27	Separate Financial Statements	1 January 2014
IAS 28	Investments in Associates and Joint Ventures	1 January 2014
IAS 32	Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32	1 January 2014
IAS 36	Recoverable Amount Disclosures for Non-Financial Assets - Amendments to IAS 36	1 January 2014
IAS 39	Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39	1 January 2014
International Financial Reporting Interpretation Committee (IFRIC)		Adoption date
IFRIC 21	Levies	1 January 2014

3.  CYCLICALITY

Due to the cyclicality of our software renewal business, higher renewals in the second half traditionally result in the Group's performance being biased towards the second half of the year.

4.  RISKS & UNCERTAINTIES

Management identifies and assesses risks to the business using an established control model.  The Group has a number of exposures which can be summarised as follows: regulatory risk resulting from regulatory developments; changes in the Group's competitive position; non-supply by a major supplier; disaster recovery and business continuity; new product development; and intellectual property risk.  These risks and uncertainties facing our business were reported in detail in the 2014 Annual Report and Accounts and all of them are monitored closely by the Group.  Following the acquisition of DecTech Solutions Pty Ltd, based in Australia, which was partially funded through new borrowings, the Group has an increased exposure to currency translation and transaction risks as well as interest rate risk and these risks are monitored closely by the Group.

5.  EXCEPTIONAL ITEMS

		Unaudited 6 months to 30 Sept 2014		Unaudited 6 months to 30 Sept 2013		Audited Year to 31 March 2014
		£'000		£'000		£'000
Fair value adjustments to contingent consideration provisions		18		(37)		(37)
Acquisition related costs		248		85		752
Costs associated with staff reorganisations		119		104		115
Provision for dilapidation obligations on the relocation of the Group head office		138		-		250
Costs associated with the relocation of Group head office		286		-		-
		809		152		1,080

Fair value adjustments to contingent consideration liabilities in the six months to 30 September 2014 include a £250,000 downwards adjustment relating to the final settlement of contingent consideration relating to TMG.tv Limited (Note 17) along with a £268,000 charge relating to the partial unwinding of discounting relating to the contingent consideration on the acquisition of DecTech Solutions Pty Ltd (Note 18).  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 although it is a non-cash item.            

Notes to the Interim Report

6.  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 and ID Employ & Comply services and Identity Solutions Division - which provides ID Registration, ID Engagement 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 the six months to 30 September 2014 represent Group head office costs £357,000 (2013: £401,000), share of associate investment result £10,000 (2013: £155,000), exceptional items £809,000 (2013: £152,000), Group finance income £13,000 (2013: £2,000), Group finance costs £145,000 (2013: £42,000), Group income tax credit £323,000 (2013: £133,000 charge) and share-based payments charge £443,000 (2013: £338,000).  Unallocated items for the year ended 31 March 2014 represent Group head office costs £564,000, share of associate investment result £159,000, exceptional costs £1,080,000, Group finance income £6,000, Group finance costs £85,000, Group income tax charge £474,000 and share-based payments charge £747,000.

Information on segment assets and liabilities is not regularly provided to the Group's Chief Executive Officer and is therefore not disclosed below.

DecTech, which was acquired during the period, is reported within the Identity Proofing Division.

	Identity Proofing		Identity Solutions		Unallocated		Total Unaudited 6 months to 30 September 2014
Six months ended 30 September 2014	£'000		£'000		£'000		£'000
Total revenue	11,346		11,886		-		23,232
Adjusted operating profit	2,049		2,058		(357)		3,750
Amortisation of acquired intangibles	(605)		(363)		-		(968)
Share-based payments charge	-		-		(443)		(443)
Exceptional items	-		-		(809)		(809)
Share of associate investment result	-		-		(10)		(10)
Operating profit	1,444		1,695		(1,619)		1,520
Finance revenue							13
Finance costs							(145)
Income tax credit							323
Profit for the year							1,711

	Identity Proofing		Identity Solutions		Unallocated		Total Unaudited 6 months to 30 September 2013
Six months ended 30 September 2013	£'000		£'000		£'000		£'000
Total revenue	7,118		11,020		-		18,138
Adjusted operating profit	1,012		1,943		(401)		2,554
Amortisation of acquired intangibles	(174)		(368)		-		(542)
Share-based payments charge	-		-		(338)		(338)
Exceptional items	-		-		(152)		(152)
Share of associate investment result	-		-		(155)		(155)
Operating profit	838		1,575		(1,046)		1,367
Finance revenue							2
Finance costs							(42)
Income tax charge							(133)
Profit for the year							1,194

Notes to the Interim Report

6.  SEGMENTAL INFORMATION (continued)

	Identity Proofing		Identity Solutions		Unallocated		Total Audited Year  to 31 March 2014
Year ended 31 March 2014	£'000		£'000		£'000		£'000
Total revenue	15,118		26,717		-		41,835
Adjusted operating profit	1,594		6,134		(564)		7,164
Amortisation of acquired intangibles	(378)		(732)		-		(1,110)
Share-based payments charge	-		-		(747)		(747)
Exceptional items	-		-		(1,080)		(1,080)
Share of associate investment result	-		-		(159)		(159)
Operating profit	1,216		5,402		(2,550)		4,068
Finance revenue					6		6
Finance costs					(85)		(85)
Income tax charge					(474)		(474)
Profit for the year							3,515

7.  TAXATION

Taxation on profit on ordinary activities

		Unaudited 6 months to 30 Sept 2014		Unaudited 6 months to 30 Sept 2013		Audited Year to 31 March 2014
		£'000		£'000		£'000
Current income tax:
UK corporation tax on profit		18		56		60
Foreign tax		233		-		-
		251		56		60
Deferred tax:
Origination and reversal of temporary differences		(574)		123		300
Impact of change in tax rates		-		(46)		114
		(574)		77		414
Tax (credit)/expense in the Statement of Comprehensive Income		(323)		133		474

Notes to the Interim Report 8.  EARNINGS PER ORDINARY SHARE

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the basic weighted average number of ordinary shares in issue during the period.

Unaudited 6 months to 30 September 2014

Unaudited 6 months to 30 September 2013

Audited Year to 31 March 2014

pence per share

£'000

pence per share

£'000

pence per share

£'000

Profit attributable to equity holders of the parent

1.5

1,711

1.1

1,194

3.2

3,515

Diluted

Diluted earnings per share amounts are calculated by dividing the profit for the period attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Unaudited 6 months to 30 September 2014

Unaudited 6 months to 30 September 2013

Audited Year to 31 March 2014

pence per share

£'000

pence per share

£'000

pence per share

£'000

Profit attributable to equity holders of the parent

1.4

1,711

1.0

1,194

3.0

3,515

		30 Sept 2014		30 Sept 2013			31 March 2014
		No.		No.			No.
Basic weighted average number of shares in issue		117,676,223		109,207,975				109,631,288
Dilutive effect of share options		5,491,132		5,970,955				6,115,575
Diluted weighted average number of shares in issue		123,167,355		115,178,930				115,746,863

Adjusted

Adjusted earnings per share is defined as adjusted operating profit less net finance costs divided by the basic weighted average number of ordinary shares of the Company.

		Unaudited 6 months to 30 September 2014				Unaudited 6 months to 30 September 2013				Audited Year to 31 March 2014
		pence per share		£'000		pence per share		£'000		pence per share		£'000
Adjusted operating profit		3.2		3,750		2.3		2,554		6.5		7,164
Less net finance costs		(0.1)		(132)		-		(40)		(0.0)		(79)
Adjusted earnings		3.1		3,618		2.3		2,514		6.5		7,085

Adjusted operating profit means profits before amortisation of acquired intangibles, share-based payments, exceptional items, share of associate investment result, interest and tax.

Notes to the Interim Report

9.  DIVIDENDS PAID AND PROPOSED

		Unaudited 6 months to 30 Sept 2014		Unaudited 6 months to 30 Sept 2013		Audited Year to 31 March 2014
		£'000		£'000		£'000
Declared and paid during the period
Final dividend for 2014: 1.65p per share (2013: 1.5p per share)		1,955		1,632		1,632
Proposed for approval at AGM (not recognised as a liability at 31 March 2014)
Final dividend for 2014: 1.65p per share		-		-		1,954

10.  PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 September 2014, the Group acquired property, plant and equipment with a cost of £1,451,000 (2013: £342,000).

Property, plant and equipment with a fair value of £68,000 was acquired with the acquisition of DecTech Solutions Pty Ltd (see note 17).

Depreciation provided during the six months ended 30 September 2014 was £339,000 (2013: £282,000).

Disposals with a net book value of £69,000 were made in the six months ended 30 September 2014 (2013: £7,000).

Notes to the Interim Report

11.  INTANGIBLE ASSETS

Group	Customer relationships £'000		Other acquisition intangibles £'000		Total acquisition intangibles £'000		Goodwill £'000		Internally developed software £'000		Total £'000
Cost
At 1 April 2013	6,358		1,141		7,499		16,007		802		24,308
Additions - business combinations	879		170		1,049		629		-		1,678
Additions - product development	-		-		-		-		194		194
At 30 September 2013	7,237		1,311		8,548		16,636		996		26,180
Additions - business combinations	-		-		-		(94)		-		(94)
Additions - product development	-		-		-		-		45		45
At 31 March 2014	7,237		1,311		8,548		16,542		1,041		26,131
Additions - business combinations	5,059		2,162		7,221		14,184		-		21,405
Additions - product development	-		-		-		-		42		42
Foreign exchange adjustments	(82)		(35)		(117)		(231)		-		(348)
At 30 September 2014	12,214		3,438		15,652		30,495		1,083		47,230
Amortisation and impairment
At 1 April 2013	812		435		1,247		-		355		1,602
Amortisation during the period	344		198		542		-		16		558
At 30 September 2013	1,156		633		1,789		-		371		2,160
Amortisation during the period	358		210		568		-		74		642
At 31 March 2014	1,514		843		2,357		-		445		2,802
Foreign exchange adjustments	(5)		(4)		(9)		-		-		(9)
Amortisation during the period	574		394		968		-		89		1,057
At 30 September 2014	2,083		1,233		3,316		-		534		3,850
Net book value
At 30 September 2014	10,131		2,205		12,336		30,495		549		43,380
At 31 March 2014	5,723		468		6,191		16,542		596		23,329
At 30 September 2013	6,080		679		6,759		16,636		625		24,020

Goodwill arose on the acquisition of GB Mailing Systems Limited, e-Ware Interactive Limited, Data Discoveries Holdings Limited, Advanced Checking Services Limited, Capscan Parent Limited, TMG.tv Limited, CRD (UK) Limited and DecTech Solutions Pty Ltd.  Under IFRS, goodwill is no longer amortised and is annually tested for impairment.

Notes to the Interim Report

12.  INVESTMENTS IN ASSOCIATES

The Group has a 26.72% interest in Loqate Inc., a private company based in the USA which develops international addressing solutions, geocoding solutions and location based services which are used in the Group's portfolio of products and services.  The associated undertaking is accounted for using the equity method.  The relative holding in Loqate decreased overall in the period as a result of the overall shares in issue increasing as a consequence of the issue of additional shares upon the exercise of executive share options.

The following table illustrates summarised financial information of the Group's investment in Loqate Inc.:

		30 Sept 2014		30 Sept 2013		31 March 2014
		£'000		£'000		£'000
Opening investment value		10		154		154
Additional investment in the associate		-		15		15
Share of loss for the period		(10)		(155)		(159)
Closing investment value		-		14		10

13.  SHARE-BASED PAYMENTS

The Group operates Executive Share Option Schemes under which executive directors, managers and staff of the Company are granted options over shares.

During the six months ended 30 September 2014, the following share options were granted to executive directors, managers and staff of the Company.

Scheme		Date		No. of options		Exercise price
Executive Share Matching Plan		2 May 2014		766,923		2.5p

The charge recognised from equity-settled share-based payments in respect of employee services received during the period was £443,000 (2013: £338,000).

14.  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').  Security on the debt is provided by way of an all asset debenture.

		30 Sept 2014		30 Sept 2013		31 March 2014
		£'000		£'000		£'000
Opening bank loan		-		-		-
New borrowings		5,487		-		-
Repayment of borrowings		(401)
Foreign currency translation adjustment		(80)		-		-
Closing bank loan		5,006		-		-
Analysed as:
Amounts falling due within 12 months		785		-		-
Amounts falling after one year		4,221		-		-
		5,006		-		-

Notes to the Interim Report

15.  RELATED PARTY TRANSACTIONS

During the period, the Group entered into transactions, in the ordinary course of business, with related parties.  Transactions entered into and trading balances outstanding at 30 September are as follows:

Group		Sales to related parties		Purchases from related parties		Net amounts owed to related parties
		£'000		£'000		£'000
Associates:
30 September 2014		-		41		(7)
30 September 2013		-		52		-
31 March 2014		-		60		-
Directors (see below):
30 September 2014		-		-		-
30 September 2013		-		13		10
31 March 2014		-		30		-
Other related parties (see below):
30 September 2014		23		-		(5)
30 September 2013		29		-		-
31 March 2014		26		-		(4)

The Chairman of the Company undertakes some general and operational consultancy for the business outside of his directorship remit through his consultancy business Rasche Consulting Limited.

The Chief Executive of the Company is a director of Car Loan 4U 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.

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 30 September 2014, the Group has not made any provision for doubtful debts relating to amounts owed by related parties (2013: nil).

Compensation of key management personnel (including directors)

		Unaudited 6 months to 30 Sept 2014		Unaudited 6 months to 30 Sept 2013		Audited Year to 31 March 2014
		£'000		£'000		£'000
Short-term employee benefits		420		307		1,092
Post-employment benefits		43		34		72
Share-based payments		634		333		336
		1,097		674		1,500

16.  SHARE CAPITAL

During the period 10,041,614 (2013: 1,234,057) ordinary shares with a nominal value of 2.5p were issued for an aggregate cash consideration of £11,224,000 (2013: £359,000).  The cost associated with the issue of shares was £330,000 (2013: £nil).

Notes to the Interim Report

17.  BUSINESS COMBINATIONS

Acquisition of DecTech Solutions Pty Ltd

On 9 May 2014, the Company 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 Company 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 five 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		2,031
Customer relationships		5,059
Non-compete agreements		131
Plant and equipment		68
Trade and other receivables		957
Cash		628
Trade and other payables		(1,219)
Deferred tax liabilities		(2,166)
Total identifiable net assets at fair value		5,489
Goodwill arising on acquisition		14,184
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)		(117)
Net cash acquired with the subsidiary (included in cash flows from investing activities)		628
Cash paid		(14,212)
Net cash outflow		(13,701)

The fair value of the acquired receivables amounts to £957,000.  The gross amount of receivables is £957,000.  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 £117,000 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 £2,568,000 of revenue and adjusted operating profits of £833,000 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 £23,482,000 and £3,597,000 respectively.

Notes to the Interim Report

17.  BUSINESS COMBINATIONS (continued)

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 30 September 2014, the value of the contingent consideration after partial unwinding of the discounting was AUS$10.4 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

During the six months ended 30 September 2014, final settlement of £500,000 was made relating to the contingent consideration on the acquisition of TMG.tv Limited resulting in 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 six months ended 30 September 2014 reversing it to the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised) Business Combinations (Note 5).

18.  CONTINGENT CONSIDERATION

	30 Sept 2014		30 Sept 2013		31 March 2014
	£'000		£'000		£'000
Opening	750		1,307		1,307
Recognition on the acquisition of subsidiary undertakings	5,461		-		-
Reversal of contingent consideration to the Income Statement	(250)		-		-
Settlement of consideration	(500)		(557)		(557)
Unwinding of discount	268		-		-
Exchange differences on retranslation	(94)		-		-
Closing	5,635		750		750

Analysed as:
Amounts falling due within 12 months		4,749		-		-
Amounts falling after one year		886		750		750
		5,635		750		750

Notes to the Interim Report

19.  FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT

The objectives, policies and strategies pursued by the Group in relation to financial instruments are described within the 2014 Annual Report.  Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the Group at 30 September 2014:

			Loans and Receivables		Fair value profit or loss
			£'000		£'000
Financial assets:
Trade and other receivables			12,092		-
Total current			12,092		-
Total			12,092		-
Financial liabilities:
Loans			4,221		-
Contingent consideration			-		886
Total non-current			4,221		886
Trade and other payables			17,875
Loans			785
Contingent consideration			-		4,749
Total current			18,660		4,749
Total			22,881		5,635

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

The Group does not have any derivative financial instruments.

Contingent consideration

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

	30 Sept 2014		30 Sept 2013		31 March 2014
	£'000		£'000		£'000
Fair value within current liabilities:
Contingent consideration	4,749		-		-
Fair value within non-current liabilities:
Contingent consideration	886		750		750

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.

Notes to the Interim Report

20.  POST BALANCE SHEET EVENTS

Acquisition of CDMS Limited

On 31 October 2014, the Group acquired the entire share capital of CDMS Limited.  The acquisition is for an initial consideration of £5.0 million, comprising cash of £4.5 million with the balance in shares.

As part of the share sale and purchase agreement, a further amount of up to £1 million in shares has been agreed which is payable subject to certain performance conditions being met.

As the completion accounts are yet to be finalised, no information has been disclosed at this time on the fair value of assets and liabilities acquired and goodwill arising.

Independent Review Report to GB Group plc

Introduction

We have been engaged by the GB Group plc (the "Company") to review the condensed set of financial statements in the half-yearly financial report for the 6 months ended 30 September 2014 which comprises Interim Consolidated Statement of Comprehensive Income, Interim Consolidated Statement of Changes in Equity, Interim Consolidated Balance Sheet, Interim Consolidated Cash Flow Statement and the related explanatory notes 1 to 20.  We have read the other information contained in the half- yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with International Accounting Standards 34, "Interim Financial Reporting," as adopted by the European Union.

As disclosed in note 2, the annual financial statements of the company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of consolidated financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standards 34, "Interim Financial Reporting," as adopted by the European Union. 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly financial report for the 6 months ended 30 September 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.

Ernst & Young LLP

Manchester

24 November 2014

 

END

 

 

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