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GB Group PLC  -  GBG   

Annual Results for the Year Ended 31 March 2017

Released 07:00 06-Jun-2017

RNS Number : 1989H
GB Group PLC
06 June 2017
 

 


6 June 2017

 

GB GROUP PLC

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

 

Annual Results for the Year Ended 31 March 2017

 

GBG (AIM: GBG), the identity data intelligence specialist, is pleased to announce its annual results for the year ended 31 March 2017.

 

Financial Highlights

·      Revenue growth of 19.2% to £87.5 million (2016: £73.4 million), including organic revenue growth of 12%.

·      26.6% increase in adjusted operating profits to £17.0 million (2016: £13.4 million).

·      23.6% increase in adjusted†† basic earnings per share to 13.1p (2016: 10.6p) and a 10.8% increase in basic earnings per share to 8.2p.

·      8.2% increase in profit before tax (after exceptional costs) to £10.1 million (2016: £9.3 million).

·      Solid balance sheet and strong cash generation, resulting in cash balances at 31 March 2017 of £17.6 million (2016: £12.4 million)¥.

·      A progressive 13.0% increase to the proposed dividend for 2017 to 2.35 pence per share (2016: 2.08 pence).

 

Operational Highlights

·      IDscan, which was fully acquired in July 2016, has immediately become accretive for the Group and provides a strong pipeline of growth for the Identity Proofing operating segment.

·      Loqate continues to perform well as a fully integrated part of the Identity Solutions operating segment, also contributing to Group profitability.

·      Strong growth in international revenues, increasing to 31.1% of total revenues (2016: 26.4%).

·      Growing global footprint and strengthening international brand; clients including Citibank and DBS (Development Bank of Singapore) expanded throughout Asia Pacific and BNP Paribas into Europe and South Africa.

·      New business wins with blue chips including Saxo Bank A/S and Lufthansa.

·      Strong visibility for year ahead; deferred revenue balances increased to £19.0 million (2016: £13.8 million). Highly visible revenues are again over 70%.

·      Strengthened Board post year end with appointment of Nick Brown as Group Managing Director.

·      Significant acquisition of PCA Predict completed post year end, positioning GBG as a leader of UK and international address validation and data quality services.

 

Commenting, Chris Clark, Chief Executive, said: "We have made a positive start to the year, with trading in line with management expectations. We have also completed a successful acquisition and I am excited about the opportunities this brings.

 

"As this is my first statement as CEO I wanted to thank the GBG team for making me feel so welcome.  I am committed to continuing to invest in our people, customers, products and services to provide another positive year for all our stakeholders. I am confident in the direction we are heading as a Group and I am looking forward to the year ahead."

 

Notes:

 

   After adjusting for revenue in the year ending 31 March 2016 relating to the recovery of start-up costs from the Gov.uk/verify service

 

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

 

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

 

¥   Following cash payments of £35.8 million (net of cash acquired) for the purchase of ID Scan Biometrics ("IDscan"), the payment of £1.0 million contingent consideration for DecTech Solutions and the payment of a £2.8 million dividend to shareholders.


- Ends -

 

For further information, please contact:

 

GBG

Chris Clark, CEO

Dave Wilson, Group Finance Director & Operations Director

 

01244 657333

Peel Hunt LLP (Nominated Adviser and Broker)

Richard Kauffer

 

020 7418 8900

Newgate

Bob Huxford

Ed Treadwell

 

020 7653 9850

 

 

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 with people in 17 countries, GBG provides solutions to many of the world's biggest organisations, from established brands like HSBC and Zurich Insurance to disruptive newcomers such as Xpress Money and Stripe.

 

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

 

 



 

Chairman's Statement

 

 

It gives me great pleasure to report on another year of strong progress for GBG. Revenue has continued to show year-on-year growth and profit was in line with the Board's expectations demonstrating our strength as a Group.

 

We continue to follow our clearly defined strategy to the year 2020 by investing in innovative products, complementary acquisitions and our people. I believe our approach has put us in a stronger position than ever to address future opportunities. It has been a year of transition for GBG leading up to the retirement of Richard Law and the appointment of Chris Clark as our new CEO. I would like to thank Richard for his very successful tenure and I look forward to working with Chris and the rest of the senior management team as we continue to deliver on our strategy.

 

Performance

Revenues increased by 19.2% to £87.5 million (2016: £73.4 million), including like-for-like organic growth of 12%. Adjusted operating profit saw a 26.6% increase to £17.0 million (2016: £13.4 million) with an increase in adjusted earnings per share of 23.6% to 13.1 pence (2016: 10.6 pence).  Basic earnings per share increased by 10.8% to 8.2 pence.  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 £5.2 million to £19.0 million. This, added to our other highly visible revenue streams, means that we go into another year with around three quarters of our revenue secured.

 

GBG continues to be cash generative with cash balances at 31 March 2017 of £17.6 million (2016: £12.4 million).  Net cash balances were £5.2 million (2016: £8.7 million).

 

Our acquisitions have contributed positively to the Group result with our international growth being led by: DecTech in Asia Pacific through a number of new business wins in China; and Loqate in the USA through its major international IT partners.  IDscan is settling in well and the prospects offered by its technology (with its artificial intelligence capabilities) provides an exciting future dynamic for the business.

 

Dividend

In line with our progressive dividend commitment, the Board is recommending a final dividend of 2.35 pence per share and subject to shareholder approval at the Annual General Meeting in July it will be paid on 25 August 2017. If accepted, this proposal will represent a ninth year of growth in dividends.

 

People

Our performance is testament to our team's commitment, professionalism and desire to succeed. At a leadership level the Board has been strengthened with the appointment in April 2017 of Nick Brown as Group Managing Director. Nick joined GBG in 2007, and having been a member of the Group's Executive Team since this time, brings with him significant experience and expertise.

 

As set out in our strategy, we are creating an environment where every team member is aware of our business plans, understands how they can have a personal impact on GBG's success and is recognised and rewarded for their contribution. The very high percentage of our teams who would recommend GBG as a place to work puts us very much in the top quartile of people engagement scores and shows our positive progress in building a world class team of high calibre talent.

 

Outlook

The market for identity data intelligence solutions continues to grow as does our capability, especially after the acquisitions of IDscan and PCA Predict. We have forged stronger relationships with existing customers and have continued to win significant new business in all territories. Our product portfolio has grown and we remain committed to developing our people and building a unique culture.

 

With Chris Clark in place as our new CEO, and as a result of the investments we've made, I believe we can respond even more effectively to the opportunities in the market, create further growth and build on our successes.

 

 

D A Rasche

Chairman

                                                                                                                                       

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

 

   After adjusting for revenue in the year ending 31 March 2016 relating to the recovery of start-up costs from the Gov.uk/verify service

Chief Executive's Statement

 

 

I am pleased to be able to present this Annual Report to shareholders, my first as CEO.

 

After two months in the role I have been able to meet with many of GBG's key stakeholders and customers. Throughout all of these meetings I have been struck by the consistent high regard in which the business is held as a leader in the rapidly growing identity data intelligence market. In no small part this is thanks to my predecessor, Richard Law. I would like to thank him for leading and developing such a strong company.

 

Since I started as CEO in April 2017, I have taken the time to get to know GBG's customers, team members and products. I have seen a strong business made up of talented and committed people throughout the organisation. They are led by an excellent executive leadership team with whom I will work closely over the coming months to further develop the Group's strategic priorities. I believe our key strengths are: our global reach and access to a wide breadth of global data; our product and technology leadership; and our people. This gives us a very strong platform upon which to build a successful future.

 

Overview of our business and the market

I am pleased to report another strong financial performance. Last year, the team talked about the growing market for identity data intelligence solutions and the opportunities this presented. The results show that GBG has turned this potential into growth and made good progress in its markets, both in the UK and globally.

 

I am confident that the year ahead offers more opportunities.  GBG can capitalise on these thanks to a combination of a clear strategy, strong leadership, solid customer relationships, new acquisitions, new products and investment in our people. GBG also remains focused on developing its international business model, with international revenues now representing 31% of Group revenue. 

 

Whilst there are many opportunities in our markets there are also a few challenges. Our CitizenSafe® identity assurance service, a certified provider on the UK Government's GOV.UK Verify platform, entered its second year of operation this year. Whilst we are clearly disappointed at the slow growth in this area, it remains a key area of competence for GBG, has offered valuable experience in working with government projects and provides significant potential opportunities, without affecting the overall growth of our other businesses. In addition, changes in regulation, including the upcoming EU GDPR (General Data Protection Regulation), mean that businesses will need to find new ways to manage and protect the data they hold presenting GBG with additional opportunities.

 

Technology advances are already paving the way for potential growth as biometrics and artificial intelligence build on traditional reference data sets. We are ideally positioned to capitalise on this and are strengthening our R&D capabilities to respond to these ever evolving markets, to take advantage of the opportunities presented and, at the same time, to help our customers feel more confident in the data they use and the decisions they make.

 

Growth: new business and international expansion

Throughout the course of the year, GBG has continued to win new customers and strengthen existing relationships.

 

We have seen our existing product ranges taken up by new customers such as Saxo Bank A/S who signed a long-term agreement with GBG to deploy a multi-product offering combining GBG's identity verification, address look-up and decision support technology. We have also seen new applications for GBG products with IDscan's technology deployed by Lufthansa to speed up passenger check-in and by Santander to speed up the process of document verification in its UK branches.  

 

We have also renewed contracts with some significant GBG customers including Bet365 and Plus500 who have now added GBG Matchcode360 to their existing product portfolio in addition to GBG ID3global.

 

Internationally we have achieved important further expansion for the Group with CitiBank and DBS (Development Bank of Singapore) in the Asia-Pacific region and BNP Paribas signing new contracts in Europe and South Africa. Each of these contracts reflects GBG's growing global footprint and strengthening international brand. 

 

Acquisitions

Last year, my predecessor talked about building on our track record of identifying, executing and successfully integrating acquisitions. We have continued to build on this throughout the financial year and post year end.

 

In June 2016 GBG acquired IDscan Biometrics Ltd, a high-growth company and market-leader in providing the technology to automate and improve document and biometric identity verification. The technology is currently used by a wide variety of organisations across sectors including banking, retail, and event security management. IDscan has traded well since joining GBG with a number of significant new customer wins. Its technology, which incorporates artificial intelligence capability, is being integrated into GBG's other products and services and there is a healthy and growing pipeline of high quality opportunities for these propositions.

 

In May 2017 we announced the acquisition of Postcode Anywhere (Holdings) Limited ("PCA Predict"). PCA Predict is a leading provider of UK and international address validation services. The combination represents a highly complementary capability set alongside GBG's existing solutions and will position GBG as a leader of UK and international address validation and data quality services. This opens up immediate upsell opportunities, is easily scalable and gives GBG access to an addressable market of over $1bn.

 

New products

We continue to strive to create leading products across our portfolio. Every area of our business has seen good progress against this core objective.

 

IDscan, for example, was granted a patent for its facial recognition system, Visage. This presents a unique way of verifying the facial component of a passport or ID card. Document forgery is a sophisticated business but with this new technology the team at IDscan will be able to extend protection to our customers by recognising known fraudsters.

 

We launched social affinity data into our GBG Matchcode360 proposition; this enhances the profile of a consumer based on their social media behaviour. We are also building expertise around the world so that GBG Matchcode360 can improve the speed and quality of our global location intelligence.

 

Alongside these developments, we have added new countries to our GBG ID3global identity verification service and enhanced the data available for countries we already support. GBG Instinct used for application fraud detection and previously a Windows-based application, is now fully web-enabled.

 

People

We have also continued to invest in our team through the priorities set out in the GBG People Plan.  Across the business we now have over 750 people across 17 countries globally. 

 

GBG is rightly proud of having excellent people engagement scores and we believe this has a fundamentally positive effect on the services we provide to our customers. Our strong execution is all down to our people and for this reason we continue to invest in our teams, ensuring that we can attract key talent to the business and that our existing team members have the skills and tools to assist the business as it scales. Examples of this include the introduction of a best-in-class e-learning platform, our global intranet for information sharing and collaboration, promoting job rotation internationally, and investment in in-house talent attraction.

 

Current Trading & Outlook

We have made a positive start to the year, with trading in line with management expectations. We have also successfully completed an acquisition and I am excited about the opportunities this brings.

 

As this is my first statement as CEO I want to thank the GBG team for making me feel so welcome. I am committed to continuing to invest in our people, customers, products and services to provide another positive year for all our stakeholders. I am confident in the direction we are heading as a Group and I am looking forward to the year ahead.

 

 

Chris Clark

Chief Executive

 



 

Finance Review

 

Principal Activities and Business Review

The principal activity of GB Group plc ('GBG') and its subsidiaries (together 'the Group') is the provision of identity data intelligence services. GBG helps organisations 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 segment.  The Group's two operating segments were as follows:

 

·      Identity Proofing - 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 - which provides ID Registration, ID Engage and ID Trace & Investigate software and services that provide accurate and up-to-date consumer information and facilitate better understanding, targeting and retention of profitable consumers.

 

In order to reflect how the Group will present its lines of business to its stakeholders going forward, the naming and structure of the operating segments will be amended with effect from 1 April 2017.  Going forward 'Identity Proofing' will become known as 'Fraud, Risk & Compliance' and 'Identity Solutions' will become known as 'Customer & Location Intelligence'.  Furthermore, the 'ID Trace & Investigate' line of business will transfer into Fraud, Risk & Compliance.  At the next reporting date, operating segments will be presented in the new structure with comparatives restated to allow appropriate comparisons to be made.

 

Between them, the segments have six complementary lines of business:

 

·      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 consumer on-boarding solutions.

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

·      ID Engage, which provides database services so our customers can better understand, target and retain their consumers 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 this Finance Review.  A review of the Group's business and future development is contained in the Chairman's Statement, Chief Executive's Statement and the 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 customers 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 shows the contributions from the Identity Proofing and Identity Solutions segments.  The overall impact of our acquisitions in the year will not be fully evident in our segments until 2018.

 


2017


2016

Change

Change


£'000

£'000

£'000

%






Revenue

87,486

73,401

14,085

19%

Adjusted operating profit

17,006

13,428

3,578

27%

Share-based payments

(994)

(1,245)

251

20%

Amortisation of acquired intangibles

(4,022)

(2,501)

(1,521)

(61)%

Operating profit before exceptional items

11,990

9,682

2,308

24%

Exceptional items

(1,410)

(94)

(1,316)

(1,400)%

Net finance costs

(498)

(270)

(228)

(84)%

Group profit before tax

10,082

9,318

764

8%

Total tax credit/(charge)

668

(178)

846

475%

Group profit for the year attributable to shareholders

10,750

9,140

1,610

18%

Adjusted earnings1

17,176

12,980

4,196

32%

Basic weighted average number of shares ('000)

131,609

122,744

8,865

7%

Adjusted basic earnings per share (pence) 1

13.1

10.6

2.5

24%

                                             

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.

 

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 2017 while being underpinned by solid organic revenue growth of 10 per cent.

 

Adjusted operating profit for the year increased by 27 per cent to £17.0 million, reflecting:

 

·      Revenue growth of 19 per cent to £87.5 million. This increase included organic growth of 10 per cent.

·      The adjusted operating profit margin increased from 18 per cent to 19 per cent, notwithstanding significant continued investment for growth made over the course of the year.

 

Adjusted basic earnings per share improved by 24 per cent to 13.1 pence (2016: 10.6 pence).  Basic earnings per share increased by 11 per cent to 8.2 pence (2016: 7.4 pence).  Group cash conversion was strong with net cash generated from operating activities of £14.1 million (2016: £13.1 million) compared to operating profit before depreciation, amortisation, share-based payments and exceptional items (Adjusted EBITDA) of £18.7 million (2016: £14.8 million).

 

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

 

Adjusted EBITDA

Adjusted EBITDA was £18.7 million (2016: £14.8 million), consisting of adjusted operating profit of £17.0 million (2016: £13.4 million), depreciation of £1.0 million (2016: £1.1 million) and amortisation of purchased software and internally developed software of £0.7 million (2016: £0.3 million).

 

Exceptional Items

Exceptional costs of £1.4 million (2016: £0.1 million) were incurred by the Group in the year and have been detailed in note 7 to the accounts.

 

Net Finance Costs

The Group has incurred net finance costs for the year of £498,000 (2016: £270,000).

 

Acquired Intangibles Amortisation

The charge for the year of £4.0 million (2016: £2.5 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 impact of the acquisition during the current year.

 

Taxation

The Group tax credit of £0.7 million (2016: £0.2 million charge) reflects permanent differences arising in the year and the recognition of previously unrecognised deferred tax assets.  There was £2,185,000 of current tax payable on the Group's profits in the year (2016: £309,000).

 

Dividend

The Board of Directors will propose a final ordinary dividend of 2.35 pence per share (2016: 2.08 pence per share), amounting to £3.6 million (2016: £2.8 million).  The final ordinary dividend with respect to the year ended 31 March 2017, if approved, will be paid on 25 August 2017 to ordinary shareholders whose names were on the register on 21 July 2017.   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 13 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 £17.2 million (2016: £13.0 million) resulting in a 24 per cent increase in adjusted basic earnings per share from 10.6 pence to 13.1 pence. Basic earnings per share increased by 11 per cent from 7.4 pence to 8.2 pence.  The weighted average number of shares at 31 March 2017 increased to 131.6 million (2016: 122.7 million).

 

Cash Flows

Group operating activities before tax payments generated £16.3 million of cash and cash equivalents (2016: £13.4 million) representing an increase of 22 per cent and an adjusted EBITDA to cash conversion ratio of 87 per cent (2016: 91 per cent).  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 9 per cent to £15.6 million (2016: £14.3 million).  Group investing activities resulted in net outflows of £39.0 million (2016: £14.0 million) including £36.8 million (2016: £12.3 million) in respect of acquisitions/investments, £2.2 million (2016: £1.1 million) on plant and equipment and software purchases and £21,000 on product development (2016: £0.6 million).  Financing activities generated £29.6 million (2016: £2.5 million used) of net cash in the year and included £2.8 million of dividends paid (2016: £2.3 million).   The Group's overall cash and cash equivalents increased by £5.2 million (2016: £3.4 million decrease) in the year.  Further detailed analysis of this movement is included in the Consolidated Cash Flow Statement.

 

Acquisitions

During the year the Group acquired ID Scan Biometrics Limited, an unlisted company based in the UK.  The total cash consideration paid, net of cash acquired, was £35.8 million. This acquisition was part-funded by the issue of 9.1 million shares as part of a placing.  As part of the share sale and purchase agreement, a contingent consideration amount of up to £8.0 million has been agreed. This payment is subject to certain future revenue and EBITDA targets between 12 and 18 months from completion date. In addition to this payment, a total of £1.0 million of contingent consideration was paid out in the year relating to DecTech Solutions Pty Ltd. Further information on these acquisitions and the contingent consideration can be found in notes 31 and 32 to the accounts.

 

Deferred Income

Deferred income balances at the end of the year increased by 38 per cent to £19.0 million (2016: £13.8 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 2017 were £94.2 million, an increase of £37.8 million on the 2016 level of £56.4 million.  This growth is driven by the increase in equity capital of £24.8 million combined with the total comprehensive income for the year of £14.4 million, less dividends paid of £2.8 million and after adjusting for share-based payments and tax on share-based payments of £1.0 million and £0.4 million, respectively.

 

Relationships

Other than our shareholders, the Group's performance and value are influenced by other stakeholders, principally our customers, 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 customers, 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 while still providing the flexibility to fund ongoing operations when required.  It is not the Group's policy to engage in speculative activity or to use complex financial instruments.

 

The Group is exposed to a variety of financial risks including: market risk (including foreign currency risk and cash flow interest rate risk), credit risk and liquidity risk which are described in note 25 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, net finance costs and tax.

 

Adjusted EBITDA

Adjusted EBITDA means operating profit before depreciation, amortisation, share-based payment charges, exceptional items, 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 6 June 2017.

 

 

 

D J Wilson

Group Finance and Operations Director

 

                       

 



 

Consolidated Statement of Comprehensive Income

Year ended 31 March 2017

 

 







Note

2017


2016



£'000


£'000











Revenue

3

87,486


73,401






Cost of sales


(20,320)


(17,606)






Gross profit


67,166


55,795






Operating expenses before amortisation of acquired intangibles, share-based payments and exceptional items


(50,178)


(42,481)






Other operating income


18


114






Operating profit before amortisation of acquired intangibles, share-based payments and exceptional items (adjusted operating profit)


 

17,006

 


 

13,428

 






Amortisation of acquired intangibles

15

(4,022)


(2,501)






Share-based payments charge

27

(994)


(1,245)






Exceptional items

7

(1,410)


(94)











Group operating profit


10,580


9,588






Finance revenue

9

19


12






Finance costs

10

(517)


(282)






Profit before tax


10,082


9,318






Income tax credit/(charge)

11

668


(178)






Profit for the year attributable to equity holders of the parent


10,750


9,140
















Other comprehensive income:










Exchange differences on retranslation of foreign operations (net of tax)1


3,685


1,096






Total comprehensive income for the year attributable to equity holders of the parent


14,435


10,236






 





Earnings per share

 

13




     - adjusted basic earnings per share for the year


13.1p


10.6p






     - adjusted diluted earnings per share for the year


12.8p


10.3p






     - basic earnings per share for the year


8.2p


7.4p






     - diluted earnings per share for the year


8.0p


7.2p











1 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 2017

 


 

 

 

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 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

21


790


-


-


-


-



790
















Share-based payments charge

27


-


-


-


-


1,245



1,245
















Tax on share options



-


-


-


-


273



273
















Equity dividend

12


-


-


-


-


(2,277)



(2,277)
















Balance at 31 March 2016



27,208


6,575


3


412


22,203



56,401

 















Profit for the period



-


-


-


-


10,750



10,750
















Other comprehensive income



-


-


-


3,685


-



3,685































Total comprehensive income for the period



-


-


-


3,685


10,750



14,435
















Issue of share capital

21


25,505


-


-


-


-



25,505
















Share issue costs

21


(750)


-


-


-


-



(750)
















Share-based payments charge

27


-


-


-


-


994



994
















Tax on share options



-


-


-


-


373



373
















Equity dividend

12


-


-


-


-


(2,775)



(2,775)
















Balance at 31 March 2017



51,963


6,575


3


4,097


         31,545



94,183

 

 

 



 

Company Statement of Changes in Equity

Year ended 31 March 2017

 

 

 

 


 


 

 

Note


Equity

share

capital


 

Merger reserve


Capital redemption reserve


 

Retained earnings


 

Total

equity




£'000


£'000


£'000


£'000


£'000













Balance at 1 April 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

21


790


-


-


-


790













Share-based payments charge

27


-


-


-


1,245


1,245













Tax on share options



-


-


-


273


273













Equity dividend

12


-


-


-


(2,277)


(2,277)













Balance at 31 March 2016



27,208


6,575


3


25,889


59,675













Profit for the period



-


-


-


10,717


10,717













Total comprehensive income for the period



-


-


-


10,717


10,717













Issue of share capital

21


25,505


-


-


-


25,505













Share issue costs

21


(750)


-


-


-


(750)













Share-based payments charge

27


-


-


-


994


994













Tax on share options



-


-


-


373


373













Equity dividend

12


-


-


-


(2,775)


(2,775)













Balance at 31 March 2017



51,963


6,575


3


35,198


93,739



 

Consolidated Balance Sheet

As at 31 March 2017

 












Note


2017


2016






£'000


£'000









Assets
















Non-current assets
















Plant and equipment



14


2,856


2,234

Intangible assets



15


98,753


54,113

Deferred tax asset



11


4,044


3,017














105,653


59,364









Current assets
















Inventories





233


-

Trade and other receivables



19


30,569


23,774

Current tax





494


-

Cash and short-term deposits



20


17,618


12,415














                    48,914


36,189









Total assets





154,567


95,553

















Equity and liabilities
















Capital and reserves
















Equity share capital



21


51,963


27,208

Merger reserve





6,575


6,575

Capital redemption reserve





3


3

Foreign currency translation reserve





4,097


412

Retained earnings





31,545


22,203









Total equity attributable to equity holders of the parent





94,183


56,401









Non-current liabilities








 








Loans



22


11,499


3,160

Deferred tax liability



11


4,441


3,433

 





15,940


6,593

 








Current liabilities
















Loans



22


886


582

Trade and other payables



23


36,401


30,543

Contingent consideration



32


7,122


1,050

Provisions



24


35


31

Current tax





-


353














44,444


32,559









Total liabilities





60,384


39,152

 








Total equity and liabilities





                154,567


95,553

                                                                                               

 

 

 

Approved by the Board on 6 June 2017

 

 

C G Clark - Director

D J Wilson - Director

 

Registered in England number 2415211

 

Company Balance Sheet

 

 

As at 31 March 2017

 

 









 

 









 

 




Note


2017


2016

 

 






£'000


£'000

 

 









 

 

Assets








 

 









 

 

Non-current assets








 

 









 

 

Plant and equipment



14


1,975


2,012

 

 

Intangible assets



15


1,701


1,595

 

 

Investments



17


104,096


60,428

 

 

Deferred tax asset



11


2,996


2,588

 

 









 

 






110,768


66,623

 

 









 

 

Current assets








 

 









 

 

Trade and other receivables



19


21,846


18,836

 

 

Current tax





614


87

 

 

Cash and short-term deposits



20


11,011


9,663

 

 









 

 






33,471


28,586

 

 









 

 

Total assets





144,239


95,209

 

 









 

 









 

 

Equity and liabilities








 

 









 

 

Capital and reserves








 

 









 

 

Equity share capital



21


51,963


27,208

 

 

Merger reserve





6,575


6,575

 

 

Capital redemption reserve





3


3

 

 

Retained earnings





35,198


25,889

 

 









 

 

Total equity attributable to equity holders of the parent





93,739


59,675

 

 

 

 








 

Non-current liabilities







 







Loans



     22


                   9,000


                      -

 






                      -

 

 








 

 

Current liabilities








 

 









 

 

Trade and other payables



23


34,343


35,503

 

 

Contingent consideration



32


7,122


-

 

 

Provisions



24


35


31

 

 









 

 






41,500


35,534

 

 









 

 

Total liabilities





50,500


35,534

 

 

 








 

 

Total equity and liabilities





               144,239


95,209

 

 

                                                                                               

During the year the Company made a profit £10,717,000 (2016: £8,317,000).

 

 

Approved by the Board on 6 June 2017

 

C G Clark - Director

D J Wilson - Director

 

Registered in England number 2415211

Consolidated Cash Flow Statement

Year ended 31 March 2017

 








Note


2017


2016




£'000


£'000







Group profit before tax



10,082


9,318







Adjustments to reconcile Group profit before tax to net cash flows












Finance revenue

9


(19)


(12)

Finance costs

10


517


282

Depreciation of plant and equipment

14


1,031


1,071

Amortisation of intangible assets

15


4,719


2,778

Loss on disposal of plant and equipment



2


-

Fair value adjustment on contingent consideration

32


471


78

Fair value gain on revaluation of associate investment

31


-


(247)

Share-based payments

27


994


1,245

Increase/(decrease) in provisions

24


4


(17)

Increase in inventories



(78)


-

Increase in trade and other receivables



(3,690)


(981)

Increase/(decrease) in trade and other payables



2,272


(118)

 






Cash generated from operations



16,305


13,397

Income tax paid



(2,193)


(248)

Net cash generated from operating activities



14,112


13,149







 






Cash flows from/(used in) investing activities












Acquisition of subsidiaries, net of cash acquired

31


(36,840)


(12,263)

Purchase of plant and equipment

14


(1,437)


(712)

Purchase of software

15


(774)


(426)

Proceeds from disposal of plant and equipment



5


-

Expenditure on product development

15


(21)


(624)

Interest received

9


19


12







Net cash flows used in investing activities



(39,048)


(14,013)













Cash flows from/(used in) financing activities












Finance costs paid

10


(517)


(282)

Proceeds from issue of shares

21


25,505


790

Share issue costs

21


(750)


-

Proceeds from new borrowings

22


12,000


-

Repayment of borrowings

22


(3,838)


(752)

Dividends paid to equity shareholders

12


(2,775)


(2,277)







Net cash flows from/(used in) financing activities



29,625


(2,521)







 






Net increase/(decrease) in cash and cash equivalents



4,689


(3,385)

Effect of exchange rates on cash and cash equivalents



514


22

Cash and cash equivalents at the beginning of the period



12,415


15,778







Cash and cash equivalents at the end of the period

20


17,618


12,415







 

 

 



 

Company Cash Flow Statement

Year ended 31 March 2017

 








Note


2017


2016




£'000


£'000







Company profit before tax



10,831


8,825







Adjustments to reconcile Company profit before tax to net cash flows












Finance revenue



(12)


(7)

Finance costs



365


118

Depreciation of plant and equipment

14


784


1,020

Amortisation of intangible assets

15


689


273

Loss on disposal of plant and equipment



1


-

Fair value adjustment on contingent consideration

32


454


(111)

Share-based payments

27


994


1,245

Increase/(decrease) in provisions

24


4


(17)

Increase in trade and other receivables



(3,010)


(5,259)

(Decrease)/increase in trade and other payables



(1,160)


7,428

 






Cash generated from operations



9,940


13,515

Income tax paid



(676)


(242)

Net cash generated from operating activities



9,264


13,273







 






Cash flows from/(used in) investing activities












Acquisition of subsidiary undertakings

31


(37,000)


(14,183)

Purchase of plant and equipment

14


(748)


(624)

Purchase of software

15


(774)


(426)

Expenditure on product development

15


(21)


(624)

Interest received



12


7







Net cash flows used in investing activities



(38,531)


(15,850)













Cash flows from/(used in) financing activities












Finance costs paid



(365)


(118)

Proceeds from issue of shares

21


25,505


790

Share issue costs

21


(750)


-

Proceeds from new borrowings



12,000


-

Repayment of borrowings



(3,000)


-

Dividends paid to equity shareholders

12


(2,775)


(2,277)







Net cash flows from/(used in) financing activities



30,615


(1,605)







 






Net increase/(decrease) in cash and cash equivalents



1,348


(4,182)

Cash and cash equivalents at the beginning of the period



9,663


13,845







Cash and cash equivalents at the end of the period

20


11,011


9,663







 

 

 

 



Notes to the Accounts

 

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 Finance Review.

 

The Company is a public company limited by shares incorporated in the United Kingdom and is listed on the London Stock Exchange with its ordinary shares traded on the Alternative Investment Market.  The company registration number is 2415211. The address of its registered office is The Foundation, Herons Way, Chester Business Park, Chester, CH4 9GB.  A list of the investments in subsidiaries, including the name, country of incorporation, registered office address and proportion of ownership interest is given in note 17.

 

The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 March 2017 or 2016 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 2017.  Statutory accounts for 2016 have been delivered to the Registrar of Companies, and those for 2017 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 2017 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 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 derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Statement of Comprehensive Income in the year the item is derecognised.

 

Residual values and estimated remaining lives are reviewed annually.

 



 

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              - over 2 to 4 years

Brands and trademarks                 - over 2 to 3 years

Customer relationships                 - over 10 years

 

Acquired Computer Software Licences

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

 

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

 

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

 

 



 

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.

 

Inventories

Inventories are valued at the lower of cost or net realisable value (net selling price less further costs to completion), after making due allowance for obsolete and slow moving items. Cost is determined by the first in first out ('FIFO') cost method.

 

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.

 

(c) Interest Income

Revenue is recognised as interest accrues using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to its net carrying amount.

 

 (d) Rental Income

Net rental income arising from the sub-let of properties under operating leases is reported as other operating income in the Statement of Comprehensive Income.



 

 

Exceptional Items

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

 

Dividends

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

 
Share-based Payment Transactions

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

 

Equity-settled Transactions

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

 

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

 

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

 

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

 

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

 

The dilutive effect of outstanding options is reflected in the computation of earnings per share (note 13).

 

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 Consolidated 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 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 and adoption date after the date of these financial statements:

 

International Accounting Standards (IAS/IFRS)

Effective date




IAS 7

Disclosure Initiative - Amendments to IAS 7

           1 January 2017

IAS 12

Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12

           1 January 2017

IFRS 12

Disclosure of Interests in Other Entities - Clarification of the scope of the disclosure requirements in IFRS 12

           1 January 2017

IFRS 15

Revenue from Contracts with Customers

1 January 2018

IFRS 9

Financial Instruments

1 January 2018

IFRS 2

Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2

1 January 2018

IFRS 9

Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4

1 January 2018

IAS 40

Transfers of Investment Property (Amendments to IAS 40)

1 January 2018

IFRIC 22

Foreign Currency Transactions and Advance Consideration

1 January 2018

Various

Annual Improvements to IFRS - 2014-2016 Cycle

1 January 2018

IFRS 16

Leases

1 January 2019

IAS 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

 

TBC

 

IFRS 15 'Revenue from Contracts with Customers' replaces IAS 18 'Revenue', IAS 11 'Construction Contracts' and related interpretations. For the Group, transition to IFRS 15 will take place on 1 April 2018. Half yearly and annual results in the 2018/19 financial year will be IFRS 15 compliant.  The standard requires entities to apportion revenue earned from contracts to individual promises, or performance obligations, on a relative standalone selling price basis, based upon a five-step revenue recognition model where revenue is recognised at the point that control of goods or services is transferred to the customer. The standard also updates revenue disclosure requirements. Management have undertaken reviews of the revenue recognition treatments for each of the Group's lines of business and made initial assessments of the relative impact that the new standard would have to the existing policies and practices within the Group.  Whilst the review and implementation planning of this new standard is ongoing, the preliminary conclusions are such that management remain of the belief that the adoption of IFRS 15 will not 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. While 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 set out in note 26.

 



 

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 CGU, based on current budgets and forecasts, and extrapolated for an appropriate period taking into account growth rates and expected changes to sales and operating costs.  Management estimate the appropriate discount rate using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the business or the individual CGU.

 

An analysis of the Group's goodwill and the assumptions used to test for impairment are set out in note 16.

 

Deferred Tax Assets

The amount of the deferred tax asset included in the balance sheet of the Group is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.  A deferred tax asset is recognised when it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Recognition, therefore, involves management judgement regarding the prudent forecasting of future taxable profits of the business including considering appropriate levels of risk.  At the balance sheet date, management has forecast that the Group would generate future taxable profits against which certain decelerated tax losses, tax losses and other temporary differences could be relieved. The total amount of deferred tax assets that management had forecast as available at the year-end based on these forecasts and estimates was higher than the previous year and as a result the Group has increased the total value of the deferred tax asset being recognised. The carrying value of the recognised deferred tax asset at 31 March 2017 was £4,044,000 (2016: £3,017,000) and the unrecognised deferred tax asset at 31 March 2017 was £3,217,000 (2016: £5,152,000).  Further details are contained in note 11.

 

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 27.

 

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.  An example of these judgements is that during the year, the Company acquired ID Scan Biometrics Limited and in valuing the separately identifiable intangible assets made specific judgements as to the life of those assets.  The most significant of those were the estimated useful lives of the customer relationship and technology IP assets of 10 and 4 years, respectively.  Judgements were made on these lives with reference to both historical indicators within the acquired business such as customer or technology lifecycles along with estimates of the impact on such lives that convergence of technology and relationships would have over time.

 

Contingent Consideration

Contingent consideration relating to acquisitions is included based on management estimates of the most likely outcome (note 32). 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 2017, the carrying value of the internally generated software assets was £564,000 (2016: £908,000) and the amount of research and development costs expensed was £7,849,000 (2016: £5,719,000).



 

 

3.  Revenue

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






2017


2016


£'000


£'000





Sale of goods

42,132


31,661

Rendering of services

45,354


41,740

Revenue

87,486


73,401





Finance revenue

19


12

Total revenue

87,505


73,413

 

4.  Segmental Information

The Group's operating segments are internally reported to the Group's Chief Executive Officer as two operating segments: Identity Proofing - which provides ID Verification, ID Employ & Comply and ID Fraud & Risk Management services and Identity Solutions - 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 2017 represent Group head office costs £675,000, exceptional costs £1,410,000, Group finance income £19,000, Group finance costs £517,000, Group income tax credit £668,000 and share-based payments charge £994,000.  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.

 

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


 

2017

Year ended 31 March 2017

 

£'000


£'000


£'000


£'000

Total revenue

44,206


43,280


-


87,486

Adjusted operating profit

8,348


9,333


(675)


17,006

Amortisation of acquired intangibles

(2,469)


(1,553)


-


(4,022)

Share-based payments charge

-


-


(994)


(994)

Exceptional items

-


-


(1,410)


(1,410)

Operating profit

5,879


7,780


(3,079)


10,580

Finance revenue





19


19

Finance costs





(517)


(517)

Income tax credit





668


668

Profit for the year







10,750









ID Scan Biometrics, which was acquired during the period, is reported within the Identity Proofing operating segment.

 


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.

 



 

 

Geographical Information


Revenues from external customers


Non-current assets


2017


2016


2017


2016


£'000


£'000


£'000


£'000









United Kingdom

60,306


54,045


80,713


36,461

United States of America

7,468


4,940


123


90

Australia

1,489


1,192


20,308


19,796

Others

18,223


13,224


465


-

Total

87,486


73,401


101,609


56,347

















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.  Operating Profit

This is stated after charging/(crediting):

2017


2016


£'000


£'000





Research and development expense written off

7,849


5,719

Depreciation of plant and equipment

1,031


1,071

Amortisation/impairment of intangible assets

4,719


2,778

Foreign exchange gain

(180)


(29)

Operating lease payments  -  land and buildings

1,274


889

                                                 -  other

16


16

 

 

6.  Auditor's Remuneration







2017


2016

 


£'000


£'000

 





 

Audit of the financial statements 1

127


102

 





 

Other fees to auditors  -  other assurance services

23


21

 

                                          -  taxation compliance services

54


24

 

                                          -  tax advisory services

19


4

 


223


151

 

 

1 £77,000 (2016: £77,000) of this relates to the Company.




 

 

 

7.  Exceptional Items







2017


2016


£'000


£'000





Fair value adjustments to contingent consideration (note 32)

471


78

Fair value gain on revaluation of investment in associate (note 18)

-


(247)

Acquisition related costs (note 31)

574


119

Costs associated with staff reorganisations

365


178

Costs associated with the relocation of the Group head office

-


(34)


1,410


94

 

Fair value adjustments to contingent consideration in the year to 31 March 2017 include a £92,000 adjustment relating to the contingent purchase price of IDscan (note 32) along with a £546,000 charge relating to the partial unwinding of the discounting relating to the contingent consideration of the acquisition of IDscan (note 32) and £17,000 relating to the unwind of the remaining discounted amount in relation to the contingent consideration that arose on the acquisition of DecTech Solutions Pty Ltd. This charge arises because contingent consideration due to be paid at a future date is discounted for the time value of money at the point of initial recognition and over the passage of time, this discount unwinds within the Consolidated Statement of Comprehensive Income. These are non-cash items.

 

Fair value adjustments to contingent consideration in the year to 31 March 2016 include a £177,000 adjustment relating to a contingent purchase price adjustment relating to Loqate (note 32) 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 32). 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.

 

Costs associated with staff reorganisations in both years relate to exit costs of personnel leaving the business on an involuntary basis due to reorganisations within our operating divisions. Due to the nature of these costs, management deem them to be exceptional in order to better reflect our underlying performance.



 

 

 

In the 2016 financial year an exceptional fair value gain of £247,000 was 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.

 

The tax impact of the exceptional costs was £73,000 (2016:£29,000).

 

 

8.  Staff Costs and Directors' Emoluments


 

Group



              

              Company

a) Staff Costs

2017


2016


2017


2016

 


£'000


£'000


£'000


£'000

 









 

Wages and salaries

31,385


26,435


23,051


21,509

 

Social security costs

3,852


3,125


3,007


2,794

 

Other pension costs

1,359


1,172


1,040


965

 


36,596


30,732


27,098


25,268

 

 

Included in wages and salaries is a total charge of share-based payments of £994,000 (2016: £1,245,000) which arises from transactions accounted for as equity-settled share-based payment transactions.

 

The average monthly number of employees during the year within each category was as follows:

 

                                                                                                                                                                                                                        Group                                                                   Company



2017


2016


2017


2016



No.


No.


No.


No.










Research and development


207


165


117


107

Production


99


67


44


48

Selling and administration


354


310


298


283



660


542


459


438

 

 

b) Directors' Emoluments

2017


2016


£'000


£'000





Wages and salaries

915


782

Pension

31


24

Bonuses

499


560


1,445


1,366





Aggregate gains made by Directors on the exercise of options

1,212


2,772





The remuneration for the highest paid Director was as follows:


2017


2016


£'000


£'000





Wages and salaries

411


390

Bonus

288


346


699


736





The highest paid Director has reached the maximum level permitted for a personal pension plan and receives a direct payment in lieu of his pension entitlement, which was £70,000 (2016: £62,000).

 

The number of share options granted during the year for the highest paid Director was nil (2016: 296,562) and the number of share options exercised during the year was 243,458 (2016: 1,219,825).

 

 

9.  Finance Revenue


2017


2016

 

 

£'000


£'000

Bank interest receivable

19


12






19


12

 



 

 

10.  Finance Costs


2017


2016

 

 

£'000


£'000

Bank loan fees and interest

517


282






517


282

11.  Taxation                                                                                                                                                                                                                                                                                      

a) Tax on Profit on Ordinary Activities

 




 

The tax (credit)/charge in the Consolidated Statement of Comprehensive Income for the year is as follows:




 


2017


2016

 


£'000


£'000

 

Current income tax




 

UK corporation tax on profit for the year

1,325


145

 

Amounts overprovided in previous years

(231)


(404)

 

Foreign tax

638


568

 


1,732


309

 

Deferred tax




 

Origination and reversal of temporary differences

(2,492)


(220)

 

Impact of change in tax rates

92


89

 


(2,400)


(131)

 





 

Tax (credit)/charge in the Statement of Comprehensive Income

(668)


178

 

 

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 (2016: charge) as explained below:





 


2017


2016

 


£'000


£'000

 





 

Consolidated profit before tax

10,082


9,318

 





 

Consolidated profit on ordinary activities multiplied by the standard rate of corporation tax in

the UK of 20% (2016: 20%)

 

2,016


 

1,864

 





 

Effect of:




 

Permanent differences

343


(924)

 

Rate changes

92


89

 

Utilisation of unrecognised losses

(123)


-

 

Prior year items

(319)


(357)

 

Research and development tax relief

(477)


(329)

 

Patent Box relief

(334)


-

 

Recognition of unrecognised deferred tax assets

(1,498)


(197)

 

Effect of higher taxes on overseas earnings

(368)


32

 

Total tax (credit)/charge reported in the Statement of Comprehensive Income

(668)


178

 

 

The Group is entitled to current year tax relief of £939,000 (2016: £1,212,000), calculated at a tax rate of 20% (2016: 20%), 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 2017 of £17,871,000 (2016: £18,259,000).  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 2017 of £2,257,000 (2016: £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


2017


2016


2017


2016


£'000


£'000


£'000


£'000









Decelerated capital allowances

1,996


1,200


-


1,032

Share options

1,019


1,460


-


-

Other temporary differences

385


357


50


33

Capital losses

-


-


384


406

Trading losses

644


-


2,783


3,681










4,044


3,017


3,217


5,152

 

 

The movement on the deferred tax asset of the Group is as follows:

 


2017


2016


£'000


£'000





Opening balance

3,017


3,113

Foreign currency adjustments

61


17

Origination and reversal of temporary differences

1,058


4

Impact of change in tax rates

(92)


(117)






4,044


3,017

 

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 £18,139,000 (2016: £24,107,000) and unrecognised capital losses of £2,257,000 (2016: £2,257,000).

 

 

Deferred Tax Liability

 

The deferred tax liability of the Group is as follows:

 


2017


2016


£'000


£'000





Intangible assets

4,441


3,433






4,441


3,433

 

 

The movement on the deferred tax liability of the Group is as follows:

 

 


2017


2016


£'000


£'000





Opening balance

3,433


2,968

Acquisition of intangibles in subsidiaries

1,818


929

Foreign currency adjustments

149


63

Origination and reversal of temporary differences

(832)


(527)

Impact of change in tax rates

(127)


-






4,441


3,433

 



 

 

e) Deferred Tax - Company

 

Deferred Tax Asset

 

The recognised and unrecognised potential deferred tax asset of the Company is as follows:

 

                                                                                                                                                             Recognised


Unrecognised


2017


2016


2017


2016


£'000


£'000


£'000


£'000









Decelerated capital allowances

1,977


1,128


-


1,032

Share options

1,019


1,460


-


-

Other temporary differences

-


-


50


33

Capital losses

-


-


384


406

Trading losses

-


-


2,783


2,946










2,996


2,588


3,217


4,417

 

 

The movement on the deferred tax asset of the Company is as follows:

 


2017


2016


£'000


£'000





Opening balance

2,588


1,585

Acquired on acquisition

-


1,093

Origination and reversal of temporary differences

500


27

Impact of change in tax rates

(92)


(117)






2,996


2,588

 

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

 

The Company has unrecognised deductible temporary differences of £16,635,000 (2016: £22,216,000) and unrecognised capital losses of £2,257,000 (2016: £2,257,000).

 

 

f) Change in corporation tax rate

As legislated in Finance (No. 2) Act 2015, which was substantively enacted on 26 October 2015, the UK corporation tax rate will reduce from 20% to 19% from 1 April 2017.  A further reduction to 17% with effect from 1 April 2020 was enacted in the Finance Act 2016.  The reductions in future rates to 19% and then to 17% have been used in the calculation of the UK's deferred tax assets and liabilities as at 31 March 2017.

 

 

12.  Dividends Paid and Proposed




 







2017

£'000


2016

£'000










Declared and paid during the year









Final dividend for 2016: 2.08p (2015: 1.85p)






2,775


2,277



















Proposed for approval at AGM (not recognised as a liability at 31 March)







Final dividend for 2017: 2.35p (2016: 2.08p)






3,566


2,577










 

 





 



 

13.  Earnings Per Ordinary Share

Basic

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



2017

pence per

share


2017

£'000


2016

pence per

share


2016

£'000










Profit attributable to equity holders of the Company


8.2


10,750


7.4


9,140










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.

 



2017


2016



No.


No.






Basic weighted average number of shares in issue


131,608,788


122,744,412

Dilutive effect of share options


2,435,799


3,770,597

Diluted weighted average number of shares in issue


134,044,587


126,515,009

 

 



2017

pence per

share


2017

£'000


2016

pence per

share


2016

£'000










Profit attributable to equity holders of the Company


8.0


10,750


7.2


9,140










Adjusted

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

 


Basic

2017

pence per share


Diluted

2017

pence per

share


 

 

2017

£'000


Basic

2016

pence per

share


Diluted

2016

pence per

share


 

 

2016

£'000













Adjusted operating profit

12.9


12.7


17,006


10.9


10.6


13,428

Less net finance costs

(0.3)


(0.4)


(498)


(0.2)


(0.2)


(270)

Add/(less) tax

0.5


0.5


668


(0.1)


(0.1)


(178)

Adjusted earnings

13.1


12.8


17,176


10.6


10.3


12,980

 



 

14.  Plant and Equipment

Group















Plant and equipment








£'000

Cost








At 1 April 2015







6,931

Acquired on acquisition







72

Additions







712

Reclassification







(1,953)

Foreign currency adjustment







23

At 31 March 2016







5,785









Acquired on acquisition







222

Additions







1,437

Disposals







(2,460)

Reclassification







(23)

Foreign currency adjustment







80

At 31 March 2017







5,041









Depreciation and impairment








At 1 April 2015







4,102

Provided during the year







1,071

Reclassification







(1,636)

Foreign currency adjustment







14

At 31 March 2016







3,551









Provided during the year







1,031

Disposals







(2,453)

Foreign currency adjustment







56

At 31 March 2017







2,185









Net book value








At 31 March 2017







2,856

At 31 March 2016







2,234

At 1 April 2015







2,829

 

The net book value in respect of assets held under finance leases and hire purchase agreements is £nil (2016: £nil).

 

Company

 







 

Plant and equipment








£'000

Cost








At 1 April 2015







6,446

Acquired on acquisition1







137

Additions







624

Reclassification







(1,953)

At 31 March 2016







5,254









Additions







748

Disposals







(2,437)

At 31 March 2017







3,565









Depreciation and impairment








At 1 April 2015







3,858

Provided during the year







1,020

Reclassification







(1,636)

At 31 March 2016







3,242









Provided during the year







784

Disposals







(2,436)

At 31 March 2017







1,590









Net book value








At 31 March 2017







1,975

At 31 March 2016







2,012

At 1 April 2015







2,588

 

During the period £23,000 (2016: £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 (2016: £nil).

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

15.  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 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















Foreign currency adjustment

878


358


1,236


2,934


-


3


4,173

Additions - business combinations

3,917


5,872


9,789


34,899


7


-


44,695

Additions - product development

-


-


-


-


-


21


21

Additions - purchased software

-


-


-


-


774


-


774

Disposals

-


-


-


-


(1,275)


-


(1,275)

Reclassification

-


-


-


-


23


-


23

At 31 March 2017

21,776


10,928


32,704


75,598


1,908


1,771


111,981















Amortisation and impairment














At 1 April 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















Foreign currency adjustment

173


153


326


-


-


1


327

Amortisation during the year

2,046


1,976


4,022


-


330


367


4,719

Disposals

-


-


-


-


(1,275)


-


(1,275)

At 31 March 2017

6,668


4,598


11,266


-


755


1,207


13,228















Net book value














At 31 March 2017

15,108


6,330


21,438


75,598


1,153


564


98,753

At 31 March 2016

12,532


2,229


14,761


37,765


679


908


54,113

At 1 April 2015

12,085


2,228


14,313


30,505


-


478


45,296















 

The customer relationships intangible asset acquired through the acquisition of Capscan Parent Limited has a carrying value of £2,161,000 and a remaining amortisation period of 4.6 years.  The customer relationships intangible asset acquired through the acquisition of TMG.tv Limited has a carrying value of £596,000 and a remaining amortisation period of 5.6 years.  The customer relationships intangible asset acquired through the acquisition of CRD (UK) Limited has a carrying value of £549,000 and a remaining amortisation period of 6.25 years.  The customer relationships intangible asset acquired through the acquisition of DecTech Solutions Pty Ltd has a carrying value of £3,353,000 and a remaining amortisation period of 7.1 years.  The customer relationships intangible asset acquired through the acquisition of CDMS Limited has a carrying value of £2,740,000 and a remaining amortisation period of 7.6 years.  The customer relationships intangible asset acquired through the acquisition of Loqate Inc. has a carrying value of £1,840,000 and a remaining amortisation period of 8.1 years. The customer relationships intangible asset acquired through the acquisition of ID Scan Biometrics Limited has a carrying value of £3,623,000 and a remaining amortisation period of 9.25 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 tested annually for impairment (note 16).

 

During the period £23,000 (2016: £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 2015


-


1,092


1,092

Acquired on acquisition 1


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








Additions - product development


-


21


21

Additions - purchased software


774


-


774

Disposals


(1,275)


-


(1,275)

At 31 March 2017


1,901


1,737


3,638








Amortisation and impairment







At 1 April 2015


-


614


614

Reclassification


1,636


-


1,636

Amortisation during the year


64


209


273

At 31 March 2016


1,700


823


2,523








Disposals


(1,275)


-


(1,275)

Amortisation during the year


327


362


689

At 31 March 2017


752


1,185


1,937








Net book value







At 31 March 2017


1,149


552


1,701

At 31 March 2016


702


893


1,595

At 1 April 2015


-


478


478

 

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

 

During the period £nil (2016: £317,000) of purchased software assets (at net book value) were reclassified as intangible assets (previously classified as tangible assets).



 

16.  Impairment Testing of Goodwill

Goodwill acquired through business combinations has been allocated for impairment testing purposes to six CGUs as follows:

 

§  Identity Solutions Unit (represented by the Identity Solutions operating segment excluding e-Ware and Loqate)

§  Identity Proofing Unit (represented by the Identity Proofing operating segment excluding DecTech and IDscan)

§  e-Ware Interactive Unit (part of the Identity Solutions operating segment)

§  IDscan Unit (part of the Identity Proofing operating segment)

§  DecTech Unit (part of the Identity Proofing operating segment)

§  Loqate Unit (part of the Identity Solutions operating segment)

 

This represents the lowest level within the Group at which goodwill is monitored for internal management purposes.  In previous years Data Discoveries, CDMS and Capscan were identified as separate CGUs but following the transfer of the trade, assets and liabilities to the Company, these are now included within the Identity Solutions Unit.  TMG, CRD and ACS were identified as separate CGUs but following the transfer of the trade, assets and liabilities to the Company, these are now included within the Identity Proofing Unit.

 

Where there are no indicators of impairment on the goodwill arising through business combinations made during the year they are tested for impairment no later than at the end of the year.

 


 

Carrying Amount of Goodwill Allocated to CGUs



2017


2016





£'000


£'000








Identity Solutions Unit




11,672


11,672

Identity Proofing Unit




5,293


5,293

e-Ware Interactive Unit




79


79

IDscan Unit




34,899


-

DecTech Unit




15,972


13,993

Loqate Unit




7,683


6,728












75,598


37,765

 

Key Assumptions Used in Value in Use Calculations

The Group prepares cash flow forecasts using budgets and forecasts approved by the Directors which cover a three year period and an appropriate extrapolation of cash flows beyond this using a long-term average growth rate not greater than the average long-term retail growth rate in the territory where the CGU is based.

 

The key assumptions for value in use calculations are those regarding the forecast cash flows, discount rates and growth rates.  The Directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the individual CGU.  Growth rates reflect long-term growth rate prospects for the economy in which the CGU operates.


2017


2016

 

 

Pre-tax

WACC


Growth rate

(in perpetuity)


Pre-tax

WACC


Growth rate

(in perpetuity)


%


%


%


%









Identity Solutions Unit

6.5%


2.0%


8.2%


2.3%

Identity Proofing Unit

6.5%


2.0%


8.2%


2.3%

e-Ware Interactive Unit

6.5%


-


8.2%


-

IDscan Unit

6.5%


2.0%


-


-

DecTech Unit

16.2%


2.7%


15.6%


2.7%

Loqate Unit

12.7%


2.3%


12.7%


2.3%

 

In the case of the e-Ware Interactive CGU, the annual impairment review as at 31 March 2017 indicated that the recoverable amount exceeded the carrying value by £150,000 (2016: £50,000) after assuming an annual cash flow attrition of 20%.  In assessing the future recoverable amounts, cash flow attrition is assumed on the basis that the recoverable amount is associated with only single remaining customer attributable to that acquisition.  Any decline in estimated value-in-use in excess of that amount would be liable to result in an impairment. Since the value in use of the e-Ware Interactive CGU is based on a single client, its loss or a significant reduction in its cash flow would cause the carrying value of the unit to exceed its recoverable amount.

 

In the case of the IDscan CGU, the annual impairment review as at 31 March 2017 indicated that the recoverable amount exceeded the carrying value of goodwill by £88,800,000 and that any decline in estimated value-in-use in excess of that amount would be liable to result in an impairment.  The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:

·      an absolute increase of 10.7% in the pre-tax weighted average cost of capital from 6.5% to 17.2%; or

·      a reduction of 65% in the forecast profit margins.

In the case of the DecTech CGU, the annual impairment review as at 31 March 2017 indicated that the recoverable amount exceeded the carrying value of goodwill by £11,200,000 (2016: £14,900,000) and that any decline in estimated value-in-use in excess of that amount would be liable to result in an impairment.  The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:

·      an absolute increase of 8.8% in the pre-tax weighted average cost of capital from 16.2% to 25%; or

·      a reduction of 41% in the forecast profit margins.



 

 

In the case of the Loqate CGU, the annual impairment review as at 31 March 2017 indicated that the recoverable amount exceeded the carrying value of goodwill by £11,500,000 (2016: £7,400,000) and that any decline in estimated value-in-use in excess of that amount would be liable to result in an impairment.  The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:

·      an absolute increase of 13.2% in the pre-tax weighted average cost of capital from 12.7% to 25.9%; or

·      a reduction of 60% in the forecast profit margins.

The recoverable amount of the other CGUs exceed their carrying value on the basis of the respective assumptions shown above and any reasonably possible changes thereof.

 

17.  Investments

 

Company













£'000

Cost







At 1 April 2016






60,428

Acquisition of subsidiary undertakings






43,668

At 31 March 2017






104,096








Amounts written off







At 1 April 2016 and 31 March 2017






-








Net book value







At 31 March 2017






104,096

At 31 March 2016






60,428

 

The Company accounts for its investments in subsidiaries using the cost model.  The Company holds 100% of the ordinary share capital of all investments as follows:

 

 

 

Name of company

Proportion of voting rights and shares held

 

 

Country of incorporation

 

 

 

Registered office address





GB Information Management Limited

GB Datacare Limited

GB Mailing Systems Limited

Citizensafe Limited

TelMe Global Traveller Limited

TelMe.com Limited

Ebetsafe Limited

Farebase Limited

TMG.tv Limited

CRD (UK) Limited

GBG DecTech Holding Pty Ltd

GBG DecTech Pty Ltd 1

GBG DecTech Sdn Bhd1

GBG DecTech Solutions S.L1

迪安科

Loqate Inc.

Loqate Limited 1

ID Scan Biometrics Limited

IDscan Research Bilisim Teknolojileri Sanayi Ve Ticaret Limited Sirketi1

IDScan Research (Pty) Ltd1

UAB IDscan Biometrics R&D1

Safer Clubbing At Night Network (Scan Net) Ltd1

Transactis Limited 1

Inkfish Limited1

 

1 held indirectly.

 

 



 

 

18.  Investments in Associates

The Group had a 26.7% 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 was accounted for using the equity method.  On 27 April 2015, the Group acquired the remaining 73.3% of the shares in Loqate Inc. and its performance is included in the consolidated financial statements since that date.

 

At the acquisition date of the remaining 73.3% of shares in Loqate, the Group revalued its previously held equity stake in Loqate at its acquisition-date fair value in accordance with IFRS 3.  The resulting gain of £247,000 has been recognised in the Consolidated Statement of Comprehensive Income for the year ended 31 March 2016.

 

 

19.  Trade and Other Receivables

Trade receivables are non-interest bearing and are generally on 14 to 60 day terms.  At 31 March 2017, the value of trade receivables outstanding in excess of the standard expected credit term but not impaired was £7,468,000 (2016: £6,661,000).

 

The credit quality of trade receivables that are neither past due nor impaired is assessed using a combination of historical information relating to counterparty default rates and external credit ratings where available.

 


           Group


       Company

 

 

2017

£'000


2016

£'000


2017

£'000


2016

£'000









Trade receivables

26,160


19,768


18,897


15,519

Amounts owed from subsidiary undertakings

-


-


251


-

Prepayments and accrued income

4,409


4,006


2,698


3,317










30,569


23,774


21,846


18,836









 

Trade receivables are shown net of an allowance for unrecoverable amounts, movements on which are as follows:

 


            Group


        Company

 

 

2017

£'000


2016

£'000


2017

£'000


2016

£'000









Balance at 1 April

855


659


673


561

Acquired on acquisition

8


67


-


70

Additional provisions

261


226


137


139

Write-offs

(470)


(97)


(443)


(97)

Foreign exchange

27


-


-


-









Balance at 31 March

681


855


       367


673









 



 

As at 31 March, the analysis of Group trade receivables that were past due but not impaired is as follows:

 




Past due but not impaired


 

Total

£'000

Neither past due nor impaired

£'000

 

< 30 days

£'000

 

30 - 60 days

£'000

 

> 60 days

£'000







2017

26,160

18,692

3,355

945

3,168

2016

19,768

13,107

2,720

504

3,437

 


20.  Cash

 





Group


Company


2017

£'000


2016

£'000


2017

£'000


2016

£'000









Cash at bank and in hand

17,618


12,415


11,011


9,663


















17,618


12,415


11,011


9,663

 

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.

 

 

21.

Equity Share Capital












2017


2016






£'000


£'000


Authorised








147,663,704 (2016: 147,663,704) ordinary shares of 2.5p each




3,692


3,692










Issued








Allotted, called up and fully paid




3,368


3,097


Share premium




48,595


24,111






51,963


27,208














2017


2016






No.


No.










Number of shares in issue at 1 April




123,886,390


120,735,364


Issued on placing




9,090,910


-


Issued on exercise of share options




1,725,637


3,151,026


Number of shares in issue at 31 March




134,702,937


123,886,390

 

During the year 10,816,547 (2016: 3,151,026) ordinary shares with a nominal value of 2.5p were issued for an aggregate cash consideration of £25,505,000 (2016: £790,000).   The cost associated with the issue of shares in the year was £750,000 (2016: £nil).

 



 

22.  Loans

In April 2014, the Group secured an Australian Dollar three year term loan of AUS$10,000,000.  The debt bears an interest rate of +1.90% above the Australian Dollar bank bill interest swap rate ('BBSW').  This term loan was extended during the year from its original maturity of April 2017 to November 2018. Security on the debt is provided by way of an all asset debenture.

 

The Group has a three year revolving credit facility agreement expiring in November 2020 which is subject to a limit of £50,000,000. The facility bears an initial interest rate of LIBOR +1.50%. This interest rate is subject to an increase of 0.25% should the business exceed certain leverage conditions.

 


Group


Company


2017

£'000


2016

£'000


2017

£'000


2016

£'000









Opening bank loan

3,742


4,389


-


-

New borrowings

12,000


-


12,000


-

Repayment of borrowings

(3,838)


(752)


(3,000)


-

Foreign currency translation adjustment

481


105


-


-









Closing bank loan

12,385


3,742


9,000


-


Analysed as:

Amounts falling due within 12 months

886


582


-


-

Amounts falling due after one year

11,499


3,160


9,000


-










12,385


3,742


9,000


-


23.  Trade and Other Payables


Group


Company


2017

£'000


2016

£'000


2017

£'000


2016

£'000









Trade payables

2,748


5,572


2,363


5,051

Amounts owed to subsidiary undertakings

-


-


8,044


10,276

Other taxes and social security costs

3,014


3,019


2,578


2,824

Accruals

11,642


8,200


9,412


6,957

Deferred income

18,997


13,752


11,946


10,395


















36,401


30,543


34,343


35,503


 

24.  Provisions

 

 

 

         Group


 

 

          Company

 


2017

£'000


2016

£'000


2017

£'000


2016

£'000

 









 

Opening balance

31


48


31


48

 

Provided for dilapidation obligations in less than 1 year

10


-


10


-

 

Utilised

(6)


(17)


(6)


(17)

 









 









 

Closing balance

35


31


35


31

 

 

Provisions associated with the costs of dilapidation obligations on certain leasehold properties within the Group are £29,000 (2016: £25,000).  The cash flows associated with these provisions are expected to occur in less than one year.

                                                                                                         



 

 

25.  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 £88,000 (2016: £155,000 increase).  The effect on equity of a 10% decrease in the Australian Dollar and Sterling exchange rate net of the effect of the net investment hedge in the foreign operation would be a decrease of £107,000 (2016: £189,000 decrease).

 

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 £109,000 (2016: £38,000 increase).  The effect on equity of a 10% decrease in the US Dollar and Sterling exchange rate would be a decrease of £133,000 (2016: £46,000 decrease).

 

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 £84,000 (2016: £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 22.

 

Capital Management

The Group manages its capital structure in order to safeguard the going concern of the Group and maximise shareholder value.  The capital structure of the Group consists of debt, which includes loans disclosed in note 22, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings.

 

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

 

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

 

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2017 and 2016.



 

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 2017

On

demand


Less than

12 months


1 to 5

years


 

Total


£'000


£'000


£'000


£'000









Loans

-


-


13,589


13,589

Contingent consideration

-


7,575


-


7,575

Trade and other payables

2,748


14,656


-


17,404


2,748


22,231


13,589


38,568

 

 

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

Trade and other payables

5,572


11,219


-


16,791


5,572


12,287


3,895


21,754

 

 

A summary of the Group's use of financial instruments is set out in the 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:

 


2017


2016


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

26,160


-


19,768


-

Total current

26,160


-


19,768


-









Total

26,160


-


19,768


-









Financial liabilities:








Loans

11,499


-


3,160


-

Total non-current

11,499


-


3,160


-









Trade and other payables

17,404


-


16,791


-

Loans

886


-


582


-

Contingent consideration

-


7,122


-


1,050

Total current

18,290


7,122


17,373


1,050









Total

29,789


7,122


20,533


1,050

 

Trade and other receivables exclude the value of any prepayments or accrued income.  Trade and other payables exclude the value of deferred income.  All financial assets and liabilities have a carrying value that approximates to fair value.  For trade and other receivables, allowances are made within the book value for credit risk.

 

The Group does not have any derivative financial instruments.

 

 

 



 

Use of 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

2017


31 March

2016




£'000


£'000







Fair value within current liabilities:






Contingent consideration



7,122


1,050







Fair value within non-current liabilities:






Contingent consideration



-


-

 

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$10,000,000 maturing in November 2018.  The debt bears an interest rate of +1.90% above the Australian Dollar bank bill interest swap rate ('BBSW').

 

The Group has a three year revolving credit facility agreement expiring in November 2020 which is subject to a limit of £50,000,000.  The facility bears an initial interest rate of LIBOR +1.50%.

 

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

 

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

 

·      Leverage

·      Interest cover

 

At 31 March 2017 and 31 March 2016, the Group was not in breach of any bank covenants.

 

 

26.  Obligations Under Leases

Payments made under operating leases are recognised in the income statement on a straight-line basis over the expected term of the lease.  Lease incentives received are recognised in the income statement as an integral part of the total lease expense over the term of the lease.










Group


Company

Future minimum rentals payable under non-cancellable operating leases are as follows:

2017

£'000


2016

£'000


2017

£'000


2016

£'000









Not later than one year

836


1,066


486


749

After one year but not more than five years

1,284


1,585


778


1,232

After five years

-


-


-


-









 

2,120


2,651


1,264


1,981

 

The Group leases various administrative offices and equipment under lease agreements which have varying terms and renewal rights.

 

A Group company sublet surplus space in a property during the year and this agreement ended in May 2016.

 



 

27.  Share-based Payments

Group and Company

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

 

Executive Share Option Scheme

Options are granted to Executive Directors and employees on the basis of their performance.  Options are granted at the full market value of the Company's shares at the time of grant and are exercisable between three and ten years from the date of grant.  The options vest when the Company's earnings per share ('EPS') growth is greater than the growth of the Retail Prices Index ('RPI') over a three year period prior to the exercise date.  There are no cash settlement alternatives.

 

Executive Share Option Scheme (Section C Scheme)

Options are granted to Executive Directors and employees on the basis of their performance.  Options are granted at the full market value of the Company's shares at the time of grant and are exercisable between three and ten years from the date of grant.  The percentage of an option that will vest and be capable of exercise will depend on the performance of the Company.  A minimum of 50% of the options will vest when the Total Shareholder Return ('TSR') performance of the Company, as compared to the TSR of the FTSE Computer Services Sub-Sector over a three-year period, matches or exceeds the median company.  The percentage of shares subject to an option in respect of which that option becomes capable of exercise will then increase on a sliding scale so that the option will become exercisable in full if top quartile performance is achieved.

 

Executive Share Option Scheme (Section D Scheme)

Options are granted to Executive Directors and employees on the basis of their performance.  Options are granted at the full market value of the Company's shares at the time of grant and are exercisable between three and ten years from the date of grant.  The vesting of awards under the Section D Scheme is subject to the achievement of a normalised EPS growth at an annual compound rate of 20% over the performance period.  The base year for the purposes of the EPS target will be the financial year of the Company ended immediately prior to the grant of the award.  The performance period will be the three financial years following the base year.  Section D Scheme options will only become exercisable to the extent they have vested in accordance with the EPS target.

 

Share Matching Plan

In the year ended 31 March 2012, the Remuneration Committee introduced the Share Matching Plan.  Participants who invest a proportion of their annual cash bonus in GBG shares can receive up to a multiple of their original investment in GBG shares, calculated on a pre-tax basis.  Any matching is conditional upon achieving pre-determined Adjusted EPS growth targets set by the Remuneration Committee for the following three years.  Share Matching Plan options will only become exercisable to the extent they have vested in accordance with the Adjusted EPS target.

 

GBG Sharesave Scheme

The Group has a savings-related share option plan, under which employees save on a monthly basis, over a three or five year period, towards the purchase of shares at a fixed price determined when the option is granted.  This price is usually set at a 20% discount to the market price at the time of grant.  The option must be exercised within six months of maturity of the savings contract, otherwise it lapses.

 

 

The charge recognised from equity-settled share-based payments in respect of employee services received during the year is £994,000 (2016: £1,245,000).

 

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

 


2017

No.


2017

WAEP


2016

No.


2016

WAEP









Outstanding as at 1 April

5,018,024


46.28p


6,724,777


26.93p

Granted during the year

522,880


38.98p


1,561,245


87.73p

Forfeited during the year

(451,004)


32.78p


(13,298)


114.73p

Cancelled during the year

(22,793)


163.0p


(15,674)


127.43p

Exercised during the year

(1,725,637)


29.19p1


(3,151,026)


25.07p2

Expired during the year

-


-


(88,000)


35.68p

Outstanding at 31 March

3,341,470


54.93p


5,018,024


46.28p









Exercisable at 31 March

1,471,685


24.58p


1,318,453


38.96p

 

1 The weighted average share price at the date of exercise for the options exercised is 301.38p

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

 

For the shares outstanding as at 31 March 2017, the weighted average remaining contractual life is 6.5 years (2016: 5.9 years).

 

The weighted average fair value of options granted during the year was 266.35p (2016: 133.46p).  The range of exercise prices for options outstanding at the end of the year was 2.5p - 275.0p (2016: 2.50p - 272.25p).

 

 



 

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 2017 and 31 March 2016.

 



2017


2016






Dividend yield (%)


0.7


0.7 - 0.9

Expected share price volatility (%)


30


20 - 25

Risk-free interest rate (%)


0.2 - 0.6


0.9 - 1.3

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)


2.3 - 4.6


3.0 - 5.0

Exercise price (p)


2.50 - 275.0


2.50 - 272.25

Weighted average share price (p)


301.38


217.51

 

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.

 

 

28.  Profit Attributable to Members of the Parent Company

The profit dealt with in the financial statements of the Parent Company is £10,717,000 (2016: £8,317,000).  There are no OCI items in either financial year.

 

 

29.  Description of Reserves

Equity Share Capital

The balance classified as share capital includes the total net proceeds (both nominal value and share premium) on issue of the Company's equity share capital, comprising 2.5p ordinary shares.

 

Merger Reserve

The balance on the merger reserve represents the fair value of the consideration given in excess of the nominal value of the ordinary shares issued in the acquisition of GB Mailing Systems by the issue of shares.

 

Capital Redemption Reserve

The balance classified as capital redemption reserve includes the nominal value of own shares purchased back by the Company and subsequently cancelled.

 

 



 

30.  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

 








 

Directors (see below):







 

  2017


-


3


-

 

  2016


-


1


-

 








 

Other related parties (see below):







 

  2017


55


-


7

 

  2016


33


-


(5)

 








 

 

Company


 

Sales to related parties


Purchases from related parties


Net amounts owed to/(by) related parties



£'000


£'000


£'000








Subsidiaries:







  2017


1,938


853


7,793

  2016


915


714


10,276








Directors (see below):







  2017


-


3


-

  2016


-


1


-








Other related parties (see below):







  2017


55


-


7

  2016


33


-


(5)

 

 

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

 

Richard Law, the Chief Executive of the Company during the year, 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.

 

For part of the year, a Non-Executive Director of the Company was a Director of Avanti Communications Group Plc which is a client of the Group.  A Non-Executive Director of the Company is a Director of Removal Stars Limited which is a client of the Group. Transactions with these companies have been reported under the heading of 'other related parties' in the table above.

 

Terms and Conditions of Transactions with Related Parties

Sales and balances between related parties are made at normal market prices.  Outstanding balances with entities other than subsidiaries are unsecured, interest free and cash settlement is expected within 30 days of invoice.  Terms and conditions 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 2017, the Group has not made any provision for doubtful debts relating to amounts owed by related parties (2016: £nil).

 

Compensation of Key Management Personnel (including Directors)


Group and Company

 




2017


2016




£'000


£'000







Short-term employee benefits


1,731


1,520

Post-employment benefits


31


24

Fair value of share options awarded


393


929









2,155


2,473



 

31.  Business Combinations

Acquisitions in the Year Ended 31 March 2017

 

Group

 

Acquisition of ID Scan Biometrics Limited

 

On 1 July 2016, the Company acquired 100% of the voting shares of ID Scan Biometrics Limited ('IDscan'), a provider of software that automates on-boarding of customers and employees by simplifying the identity verification and data capture process. IDscan helps authentication of documents including passports, visas, ID cards, driving licenses, utility bills and work permits while also capturing facial biometrics which provides proof that those documents are not stolen. The combination represents a highly complementary capability set alongside GBG's unique global Know Your Customer, Anti-Money Laundering and fraud detection solutions. The Consolidated Statement of Comprehensive Income includes the results of IDscan for the nine month period from the acquisition date.

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



Fair value recognised on acquisition

£'000

Assets



Technology intellectual property


5,405

Customer relationships


3,917

Non-compete agreements


467

Plant and equipment


222

Purchased software


7

Acquired goodwill


19

Inventory


155

Trade and other receivables


2,551

Cash


1,186

Trade and other payables


(2,896)

Corporation tax liabilities


(427)

Deferred tax liabilities


(1,818)

Total identifiable net assets at fair value


8,788

Goodwill arising on acquisition


34,880

Total purchase consideration transferred


43,668




Purchase consideration:



Cash


37,000

Contingent consideration adjustment


6,668

Total purchase consideration


43,668




Analysis of cash flows on acquisition:



Transaction costs of the acquisition (included in cash flows from operating activities)


513

Net cash acquired with the subsidiary (included in cash flows from investing activities)


1,186

Cash paid


(37,000)

Net cash outflow


(35,301)

 

The fair values above contain certain provisional amounts which will be finalised no later than one year after the date of acquisition.  Provisional amounts have been included at 31 March 2017 as a consequence of the timing and complexity of the acquisition.

 

The fair value of the acquired trade receivables amounts to £2,200,000. The gross amount of trade receivables is £2,211,000. None of the trade receivables have been impaired and it is expected that the full contractual amounts can be collected.

 

The goodwill recognised above is attributed to intangible assets that cannot be individually separated and reliably measured from IDscan due to their nature.  These items include the expected value of synergies and an assembled workforce.  None of the goodwill is expected to be deductible for income tax purposes.

 

The transaction costs of £513,000 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, IDscan has contributed £6,076,000 of revenue and operating profits of £1,587,000 to the Group.  If the combination had taken place at the beginning of the year, the Group revenue and operating profits would have been £89,514,000 and £10,984,000, respectively.

 

The fair values reported in the Interim Report were provisional due to the ongoing determination of the fair value of certain assets.  As a consequence of the finalisation of these values, the identifiable net assets at fair value has reduced by £39,000 compared to that previously reported with a corresponding increase in the amount of goodwill.

 

Contingent Consideration - IDscan

As part of the share sale and purchase agreement, a contingent consideration amount of up to £8,000,000 has been agreed. This payment is subject to certain future revenue and EBITDA targets between 12 and 18 months from completion date. The obligation has been classed as a liability in accordance with the provisions of IAS 32.

 



 

At the acquisition date the discounted fair value of the contingent consideration was estimated at £6,668,000 having been determined from management's estimates of the range of outcomes and their respective likelihoods. At 31 March 2017, the value of the contingent consideration after partial unwinding of the discounting was £7,122,000. Adjustments to the fair value of the contingent consideration are made in the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised) Business Combinations.

 

Contingent Consideration - DecTech

During the period ending 31 March 2017, final settlement of AUS$2,000,000 (£1,026,000) was made relating to the second tranche of the contingent consideration from the acquisition of DecTech.

 

 

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 for the 2016 financial year.

 

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.

 



 

 

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 £1,280,000 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 7).

 

 

Other Business Combination Adjustments - DecTech

During the year ended 31 March 2016, final settlement of AUS$9,500,000 (£4,700,000) 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 AUS$1,970,000 (£1,050,000).  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 7).

 

 

Other Business Combination Adjustments - CDMS

During the year ended 31 March 2016, final settlement of £1,000,000 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 7).

 

 

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.

 

 



 

 

 

32.  Contingent Consideration

Assets






Group and Company




2017


2016





£'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




2017


2016





£'000


£'000








At 1 April




1,050


6,628

Recognition on the acquisition of subsidiary undertakings




6,668


-

Fair value adjustment to contingent consideration




(92)


-

Settlement of consideration




(1,026)


(5,745)

Unwinding of discount




563


255