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RNS
GB Group PLC  -  GBG   

Final Results

Released 07:00 05-Jun-2018

RNS Number : 2624Q
GB Group PLC
05 June 2018
 

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Embargoed until 7.00 a.m.

 

 

5th June 2018

 

 

GB GROUP PLC

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

 

Annual Results for the Year Ended 31 March 2018

 

Strong organic revenue growth driven by international expansion, a growing customer base and great people

 

GB Group plc (AIM: GBG), the global identity data intelligence specialist, announces its annual results for the Year Ended 31 March 2018.

 

Financial highlights

 

2018

2017

% change

Revenue

£119.7m

£87.5m

+37%

Organic revenue growth

17%

10%

 

Adjusted organic revenue growth1

15%

10%

 

Adjusted operating profit2

£26.3m

£17.0m

+55%

Adjusted basic earnings per share3

15.3p

13.1p

+17%

Group profit before tax

£13.4m

£10.1m

+33%

Deferred income balances

£28.3m

£19.0m

+49%

Net assets

£157.8m

£94.2m

+67%

Net cash4

£13.5m

£5.2m

160%

Dividend per share

2.65p

2.35p

13%

 

 

Strategic and Operational Highlights

 

Enhancing our customer offer

·      Broadening our existing global data portfolio with additional new and improved data identity for China, Australia, France and Sweden

·      Expanding our capabilities with new acquisitions to provide the best products, such as Verifeyed which will improve our digital anti-tampering offer

·      Creation of a new Customer Experience leadership role as part of our Executive Team

 

International Expansion

·      International revenues increased from 31% to 34% of our total business

·      Continuing to make significant progress across EMEA and APAC regions

·      Now employ over 800 people across 18 countries

 

Growing our customer base

·      Strong level of renewals building on our existing customer base

·      Attracting new high-quality customers to the portfolio including LEGO, KBC Ireland and Nordstrom

·      Our overall customer base now stands at over 17,000 businesses and organisations, across 79 countries

 

Outlook & growth opportunities

·      The market for identity data intelligence solutions continues to grow as do our capabilities

·      Recent acquisitions fully integrated and providing new growth opportunities

·      Clear plans for organic growth and a healthy focus on opportunities for acquisitions

·      The new financial year is trading in line with our expectations

 

 

 

Chris Clark, CEO, said:

 

"This has been another strong year for GBG across all of our core products and markets. We have a clear strategy for sustainable, long-term growth based on building ever-closer customer relationships while continuing our international expansion through both acquisitions and investment in our people and technology.

 

"GBG is becoming a truly global business with more than 34% of revenues coming from overseas markets. Today, our customers include more than 17,000 businesses and organisations, in 79 countries and we're continuing to expand and invest in our operations in APAC, North America and EMEA. We believe there are exciting opportunities across all our sectors, in all our markets and that gives us great confidence for the future."

 

 - Ends -

Notes:

 

1 As we highlighted in the October 2017 trading update, the organic revenue growth includes £3.5m from the sale in September 2017 of a material perpetual licence to a leading European bank. Had this particular transaction been a fully delivered, 3-year agreement, payable in annual instalments then our revenue recognition policies would have resulted in an underlying organic growth rate of 15%.

 

2 Adjusted operating profit means profit before amortisation of acquired intangibles, share-based payments, exceptional items, interest and tax. This measure is not defined under IFRS but Management believe that this Alternative Performance Measure (APM) is a more appropriate metric to understand the underlying performance of the Group. See "Alternative Performance Measures" in the Annual Report & Accounts for further details.

 

3 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. 

 

4 Net cash means cash and short-term deposits less loans.

 

 

 

 

For further information, please contact:

 

GBG

Chris Clark, CEO

Dave Wilson, CFO & COO

 

01244 657333

Peel Hunt LLP (Nominated Adviser and Broker)

Edward Knight, Nick Prowting

 

020 7418 8900

Headland Consultancy

Andy Rivett-Carnac, Chloe Francklin, Charlie Twigg

 

020 3805 4822

 

 

Website

www.gbgplc.com/investors

 

About GBG

GBG is a global specialist in Identity Data Intelligence. We help organisations make decisions about their customers and employees.

 

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 18 countries, GBG has some of the world's biggest organisations as its customers, from established brands like HSBC, Zurich Insurance, Lego and Lufthansa, to disruptive newcomers such as Stripe and Plus500.

 

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

 
Chairman's Statement

 

GBG has delivered another strong year with good progress in executing our strategy. Overall growth for the year was very solid, which demonstrates the Group's continued ability to move quickly and capitalise on opportunities in evolving markets.

 

Performance

GBG's financial performance in the year was ahead of market expectations. Revenues increased by 37% to £119.7 million (2017: £87.5 million), of which almost half (17%) was organic growth. Adjusted operating profit saw a 55% increase to £26.3 million (2017: £17.0 million) contributing to an increase in adjusted earnings per share of 17% to 15.3 pence (2017: 13.1 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 £9.3 million to £28.3 million, providing us with clear revenue visibility for the first quarter and beyond.

 

GBG continues to be cash generative and cash balances at 31 March 2018 were £22.8 million (2017: £17.6 million).  Net cash balances were £13.5 million (2017: £5.2 million).

 

Dividend

We remain committed to delivering increasing returns to shareholders. Accordingly, the Board is recommending a final dividend of 2.65 pence per share, which we will propose to shareholders for approval at the Annual General Meeting in July. If approved, this will represent a tenth year of growth in dividends and the dividend will be paid on 24 August 2018.

 

Achievements and Strategic Outlook

There have been a number of highlights this year. We developed our existing products with the addition of Visualise, a capability within GBG Connexus, alongside improvements in other products. We further expanded our global data coverage and we have made good progress throughout the year implementing GDPR (General Data Protection Regulation). We have also seen a number of key international wins and have successfully integrated PCA Predict into the Group.

 

Looking forward there are good opportunities to continue our growth in all of our core markets. We expect to develop our business with existing customers, increase our share of existing markets and continue to expand internationally. We are investing in innovation and customer experience, as well as in sales and marketing capabilities. Our people are vital to our success and we will continue to build upon our special company culture with its high levels of staff engagement.

 

The year overall

2018 has been another successful year. It is testament to our team that we have once again delivered such a strong performance. On behalf of the Board, I would like to thank all of our people for being so passionate in their efforts in helping turn GBG's vision into action. I would also like to thank Chris Clark and his Executive Team for a good first year and to mention the seamless handover of the Audit Committee chair from Dick Linford to Liz Catchpole.

 

 

 

David A Rasche

Chairman

                                                                                                                                       

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

 

 

 

 

 

Chief Executive's Statement

 

I'm really pleased to share our annual results with our shareholders.

 

Looking back it's been a year of building relationships. If I start with our customers, I've spent time meeting them all around the world and getting to understand the challenges they face. In particular, I've been learning about how they balance the need to manage risk with delivering a great experience for their own customers.

 

I've been encouraged by what I've seen. It makes me proud to see that we can support them with this challenge through new, compliant technology solutions that help reduce the risk of fraud, while making sure that their own customers have a smooth onboarding experience. The pace of change in the world is ever increasing and with this security, privacy and fraud are front of mind. The breadth of our data sources and strength of our tools provide increasingly valuable safeguards and mean we are well positioned in this dynamic environment.  

 

Turning to our team, I've really enjoyed working with and getting to know the business, its people, products and operations. We have a solid track record of delivering for both customers and shareholders and I'm encouraged to see those standards maintained with such a positive set of results this year.

 

Overview

This has been another year of healthy financial performance. Last year I expressed confidence that we could capitalise on market opportunities through our clear strategy, strong leadership, good customer relationships, new acquisitions, new products, and investment in our people. We've made good progress delivering sustained growth in our core business, with acquisitions from recent years playing a significant part. International growth has continued, with international revenues increasing from 31% to 34% of our total business.

 

Technology remains the key driver of change. We've increased our focus on how we can exploit technology-driven innovation through a range of 'build and buy' models. We're investing in our own platforms, to make us more agile and efficient, with cloud, microservices and InfoSec as key priorities. We've also been broadening the data sets we use, while enhancing our capabilities in product innovation.

 

In line with our strategy, we continue to explore potential acquisitions to expand our capabilities, datasets and geographic presence. One example is adding Verifeyed to the Group: while small, it's an example of how we're strengthening our capability to detect digital image-tampering. We've also successfully integrated two businesses we'd previously acquired - IDscan and PCA Predict - and it is pleasing to note that PCA Predict is growing even faster this year than it did before the acquisition.

 

Changes in regulation continue to provide opportunities and challenges. Our programme to implement GDPR has gone well leaving us well-positioned from a compliance perspective. It has also given us the chance to review and improve our data-supply relationships.

 

We've made progress with our identity assurance service. We are a certified provider on the UK Government's GOV.UK Verify platform, both indirectly as a technology partner of Royal Mail Group and directly with our own CitizenSafe® brand. We've taken action to improve the service and the GOV.UK Verify project is certainly helping us to learn more about developing digital identity models, with wider opportunities emerging.  

 

We've managed risks effectively and as we refine our strategy and plans for the year ahead we will continue to ensure that changes to the market and international political uncertainties remain at the front of our minds.

 

Growth: New Business and International Expansion

We have a healthy renewal stream from our existing customer base - and we are continuing to attract new, high-quality customers to our portfolio. In November, we announced that LEGO was using our location intelligence services and KBC Ireland was using our IDscan technology. Nordstrom, in the USA, is using our address verification services to improve their customers' online experience during the checkout process.

 

Our fraud and risk management business continues to make progress in the EMEA and APAC regions. New customers using our fraud solutions include a major Indonesian bank, Bank Mega and Bank of Shanghai.

 

Customer Experience

Over the past year we've focussed even more on customer experience across our business. The feedback our customers have given demonstrates the strong and loyal customer relationships we have, but we recognise that there's always more we can do. With that in mind Customer Experience is now a leadership role on our Executive team for the first time. This makes it clear to everybody in the business how important this is to us and will help to speed up improvements to our customer facing programmes.

 

Specifically, in February we launched our first 'service status portal' for customers providing them with real time performance statistics of our eIDV service. We've also put in place measures to make sure customers get a consistent experience of GBG, regardless of how they contact us.

 

Looking to the future we'll be making improvements to our product experience, account management and helpdesks. Our aim is to make it easier and simpler for people to use our services.

 

We have also brought together our strategy, marketing and product teams under a single Executive Team role, focused on Customer Insight & Innovation. This will make sure that the needs of our customers directly inform the direction of the business and our investment in developing new products.

 

Products & Data

We have continued to broaden our global data portfolio. We have:

 

·      New and improved identity data for China, Australia, France and Spain;

·      Better location data for Malaysia, Singapore, Norway, Sweden, Denmark, Austria, Italy, Luxembourg and the Netherlands; and

·      A refreshed supply of mobile data in the UK.

 

As well as providing more data, we want to make it easier for our customers to use our products. We've worked with our suppliers to simplify the customer experience, reducing customer effort and improving reliability by migrating to higher performing platforms and contracts. We have also launched our advanced data visualisation tool, Visualise by GBG Connexus. This lets businesses interrogate and identify patterns, trends and correlations between people, properties, and places. Until now, these would all have been hidden. Visualise delivers simple, intuitive links between more than a billion records and presents the data clearly and concisely.

 

People

We now have more than 800 people in our team, working in 18 countries. We believe that if that team is happy and engaged they'll deliver great service and products for our customers and other stakeholders. Our employee engagement scores show that our people are proud of GBG and feel it is a great place to work.

 

However, we're not standing still; there's still more that we can improve, and we're investing and working hard to make GBG an even better place to work. This year, in learning and development, we've launched our program for people managers, accredited by the Institute of Leadership & Management. We've also simplified the processes for hiring and resourcing and we've refreshed our workplaces, including a new office in Melbourne. 

 

Current Trading & Outlook

The new financial year is trading in line with the Board's expectations. For the future, we have clear plans for organic growth and a healthy focus on opportunities for acquisitions. I'm excited about the prospects we have to develop our business further.

 

 

 

 

 

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.

 

In order to reflect how the Group presents its lines of business to its stakeholders, the naming and structure of the operating segments was amended with effect from 1 April 2017.  'Identity Proofing' became known as 'Fraud, Risk & Compliance' and 'Identity Solutions' became known as 'Customer & Location Intelligence'.  Furthermore, the 'ID Trace & Investigate' line of business transferred into 'Fraud, Risk & Compliance'.

 

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:

 

·      Fraud, Risk & Compliance - which provides ID verification, ID Compliance and Fraud Solutions, ID trace & investigate and employment screening.

·      Customer & Location Intelligence - which provides ID Location Intelligence and ID engage solutions.

 

Postcode Anywhere (Holdings) Limited ('PCA'), which was acquired during the period, is reported within the Customer & Location Intelligence division.

 

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 Compliance and Fraud Solutions, which provides fraud detection, risk management and consumer on-boarding solutions.

·      ID Location Intelligence, 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 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 Fraud, Risk & Compliance and Customer & Location Intelligence segments.  The overall impact of our acquisitions in the year will not be fully evident in our segments until 2019.

 

 

2018


2017

Change

Change

 

£'000

£'000

£'000

%

 

 

 

 

 

Revenue

119,702

87,486

32,216

37%

Adjusted operating profit

26,311

17,006

9,305

55%

Share-based payments

(2,375)

(994)

(1,381)

(139)%

Amortisation of acquired intangibles

(7,885)

(4,022)

(3,863)

(96)%

Operating profit before exceptional items

16,051

11,990

4,061

34%

Exceptional items

(2,143)

(1,410)

(733)

(52)%

Net finance costs

(508)

(498)

(10)

(2)%

Group profit before tax

13,400

10,082

3,318

33%

Total tax (charge)/credit

(2,746)

668

(3,414)

(511)%

Group profit for the year attributable to shareholders

10,654

10,750

(96)

(1)%

Adjusted earnings1

23,057

17,176

5,881

34%

Basic weighted average number of shares ('000)

150,553

131,609

18,944

14%

Adjusted basic earnings per share (pence) 1

15.3

13.1

2.2

17%

                                             

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 2018 while being underpinned by solid organic revenue growth of 17 per cent.

 

Adjusted operating profit for the year increased by 55 per cent to £26.3 million, reflecting:

 

·      Revenue growth of 37 per cent to £119.7 million. This increase included organic growth of 17 per cent.

·      The adjusted operating profit margin increased from 19 per cent to 22 per cent, notwithstanding significant continued investment for growth made over the course of the year.

 

Group profit before taxation increased by 33 per cent in the year to £13.4 million. The total tax charge of £2.7 million compares to a tax credit of £0.7 million in the previous year and as a consequence of this tax change the Group profit for the year attributable to shareholders reduced by 1% to £10.7 million.

 

Adjusted basic earnings per share improved by 17 per cent to 15.3 pence (2017: 13.1 pence).  Basic earnings per share decreased by 13 per cent to 7.1 pence (2017: 8.2 pence).  Group cash conversion was strong with net cash generated from operating activities of £28.4 million (2017: £14.1 million) compared to operating profit before depreciation, amortisation, share-based payments and exceptional items (Adjusted EBITDA) of £28.7 million (2017: £18.7 million).

 

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

 

Adjusted EBITDA

Adjusted EBITDA was £28.7 million (2017: £18.7 million), consisting of adjusted operating profit of £26.3 million (2017: £17.0 million), depreciation of £1.4 million (2017: £1.0 million) and amortisation of purchased software and internally developed software of £1.0 million (2017: £0.7 million).

 

Exceptional Items

Exceptional costs of £2.1 million (2017: £1.4 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 £0.5 million (2017: £0.5 million).

 

Acquired Intangibles Amortisation

The charge for the year of £7.9 million (2017: £4.0 million) represents the non-cash cost of amortising separately identifiable intangible assets including technology-based assets and customer relationships that were acquired through business combinations.  The increased charge in the year is due to the impact of the acquisition of Postcode Anywhere (Holdings) Limited during the current year.

 

Taxation

The Group tax charge of £2.7 million (2017: £0.7 million credit) includes £4.4 million of current tax payable on the Group's profits in the year (2017: £1.7 million).

 

Dividend

The Board of Directors will propose a final ordinary dividend of 2.65 pence per share (2017: 2.35 pence per share), amounting to £4.0 million (2017: £3.6 million).  The final ordinary dividend with respect to the year ended 31 March 2018, if approved, will be paid on 24 August 2018 to ordinary shareholders whose names were on the register on 20 July 2018.   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 (profit attributable to equity holders); 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 £23.0 million (2017: £17.2 million) resulting in a 17 per cent increase in adjusted basic earnings per share from 13.1 pence to 15.3 pence. Basic earnings per share decreased by 13 per cent from 8.2 pence to 7.1 pence reflecting the higher adjusted operating profit being offset by the increase in the amortisation in intangible assets, the costs of deferred consideration, the costs of acquisitions, higher taxes and a higher number of shares in issue. The weighted average number of shares at 31 March 2018 increased to 150.6 million (2017: 131.6 million).

 

Cash Flows

Group operating activities before tax payments generated £31.6 million of cash and cash equivalents (2017: £16.3 million) representing an increase of 94 per cent and an adjusted EBITDA to cash conversion ratio of 110 per cent (2017: 87 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 52 per cent to £23.7 million (2017: £15.6 million).  Group investing activities resulted in net outflows of £72.3 million (2017: £39.0 million) including £70.3 million (2017: £36.8 million) in respect of acquisitions/investments, £2.1 million (2017: £2.2 million) on plant and equipment and software purchases and £nil on product development (2017: £21,000).  Financing activities generated £49.7 million (2017: £29.6 million) of net cash in the year and included £3.6 million of dividends paid (2017: £2.8 million).   The Group's overall cash and cash equivalents increased by £5.1 million (2017: £5.2 million increase) in the year.  Further detailed analysis of this movement is included in the Consolidated Cash Flow Statement.

 

Acquisitions

During the year the Group acquired Postcode Anywhere (Holdings) Limited, an unlisted company based in the UK.  The total cash consideration paid, net of cash acquired, was £62.9 million. This acquisition was part-funded by the issue of 17.1 million shares as part of a placing that raised £56.3 million.  In addition, a total of £7.5 million of contingent consideration was paid out in the year relating to IDscan Biometrics Limited. Further information on these acquisitions and the contingent consideration can be found in notes 30 and 31 to the accounts.

 

Deferred Income

Deferred income balances at the end of the year increased by 49 per cent to £28.3 million (2017: £19.0 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 2018 were £157.8 million, an increase of £63.6 million on the 2017 level of £94.2 million.  This growth is driven by the increase in equity capital of £56.7 million combined with the total comprehensive income for the year of £7.4 million, less dividends paid of £3.6 million and after adjusting for share-based payments and tax on share options of £2.4 million and £0.7 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 24 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. Further information can be found in note 32.

 

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 5 June 2018.

 

 

 

D J Wilson

CFO & COO

 

                       

 

 
Key Performance Indicators

 

The Board monitors the Group's progress against its strategic objectives and the financial performance of the Group's operations on a regular basis.  Performance is assessed against the strategy and budgets using financial and non-financial measures.

 

The following details the principal Key Performance Indicators ('KPI's) used by the Group, giving the basis of calculation and the source of the underlying data.  A summary of performance against these KPIs is given below.

 

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

 

Financial

·      Revenue

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

 

·      Adjusted Operating Profit

This is used throughout the Group by management for internal performance analysis and to assess the execution of our strategies. Management believe that this adjusted measure is a more appropriate metric to understand the underlying performance of the Group.

 

·      Adjusted EBITDA

This is used by the Group for internal performance analysis to assess the execution of our strategies. Management believe that this adjusted measure is a more appropriate metric to understand the underlying performance of the Group.

 

·      Earnings per Share

Earnings per share is calculated as basic earnings per share from continuing operations on both an adjusted and unadjusted basis.

 

·      Cash

Cash and cash equivalent balances are used by the Group for internal performance analysis and by investors to assess progress against outlook statements.

 

·      Deferred Income

Deferred income, which is included in our Consolidated Balance Sheet, is the amount of invoiced business in excess of the amount recognised as revenue.  This is an important internal measure for the business and represents the amount that we will record as revenue in our Consolidated Statement of Comprehensive Income in future periods.  Trends may vary as business conditions change.

 

·      International Revenue as a percentage of Total Revenue

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

 

Non-Financial

·      Employee Engagement

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

 

·      Number of Countries with an Active Customer Presence

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

 

 

 

 

 

Performance against KPIs

A summary of the Group's progress in achieving its objectives, as measured against KPIs, is set out below.

 

 

 

 

Year ended 31 March

 

 

 

 

 

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

Revenue growth

 

 

 

37%

 

19%

 

 

Organic revenue growth

 

 

 

17%

 

10%

 

 

Fraud, Risk & Compliance revenue growth

 

 

 

27%

 

29%

 

 

Customer & Location Intelligence revenue growth

 

 

 

53%

 

5%

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit (£'000)

 

 

 

26,311

 

17,006

 

 

Adjusted operating profit %

 

 

 

22%

 

19%

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (£'000)

 

 

 

28,688

 

18,734

 

 

Adjusted EBITDA %

 

 

 

24%

 

21%

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic

 

 

 

7.1p

 

8.2p

 

 

Earnings per share - adjusted basic

 

 

 

15.3p

 

13.1p

 

 

 

 

 

 

 

 

 

 

 

Cash (£'000)

 

 

 

22,753

 

17,618

 

 

 

 

 

 

 

 

 

 

 

Deferred income (£'000)

 

 

 

28,347

 

18,997

 

 

 

 

 

 

 

 

 

 

 

International revenue as a percentage of total revenue

 

 

 

34%

 

31%

 

 

 

 

 

 

 

 

 

 

 

Employee engagement

 

 

 

>80%

 

>80%

 

 

 

 

 

 

 

 

 

 

 

Number of Countries with an active customer presence

 

 

 

79

 

71

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

Year ended 31 March 2018

 

 

 

 

 

 

 

 

Note

2018

 

2017

 

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Revenue

3

119,702

 

87,486

 

 

 

 

 

Cost of sales

 

(27,092)

 

(20,320)

 

 

 

 

 

Gross profit

 

92,610

 

67,166

 

 

 

 

 

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

 

(66,299)

 

(50,178)

 

 

 

 

 

Other operating income

 

-

 

18

 

 

 

 

 

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

 

 

26,311

 

 

17,006

 

 

 

 

 

 

Amortisation of acquired intangibles

15

(7,885)

 

(4,022)

 

 

 

 

 

Share-based payments charge

26

(2,375)

 

(994)

 

 

 

 

 

Exceptional items

7

(2,143)

 

(1,410)

 

 

 

 

 

 

 

 

 

 

Group operating profit

 

13,908

 

10,580

 

 

 

 

 

Finance revenue

9

37

 

19

 

 

 

 

 

Finance costs

10

(545)

 

(517)

 

 

 

 

 

Profit before tax

 

13,400

 

10,082

 

 

 

 

 

Income tax (charge)/credit

11

(2,746)

 

668

 

 

 

 

 

Profit for the year attributable to equity holders of the parent

 

10,654

 

10,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

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

 

(3,206)

 

3,685

 

 

 

 

 

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

 

7,448

 

14,435

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

13

 

 

 

     - adjusted basic earnings per share for the year

 

15.3p

 

13.1p

 

 

 

 

 

     - adjusted diluted earnings per share for the year

 

15.0p

 

12.8p

 

 

 

 

 

     - basic earnings per share for the year

 

7.1p

 

8.2p

 

 

 

 

 

     - diluted earnings per share for the year

 

7.0p

 

8.0p

 

 

 

 

 

 

 

 

 

 

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 2018

 

 

 

 

 

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 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

20

 

25,505

 

-

 

-

 

-

 

-

 

 

25,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issue costs

20

 

(750)

 

-

 

-

 

-

 

-

 

 

(750)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments charge

26

 

-

 

-

 

-

 

-

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

 

-

 

-

 

-

 

-

 

10,654

 

 

10,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

-

 

-

 

-

 

(3,206)

 

-

 

 

(3,206)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

-

 

-

 

-

 

(3,206)

 

10,654

 

 

7,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

20

 

58,408

 

-

 

-

 

-

 

-

 

 

58,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issue costs

20

 

(1,740)

 

-

 

-

 

-

 

-

 

 

(1,740)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments charge

26

 

-

 

-

 

-

 

-

 

2,375

 

 

2,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax on share options

 

 

-

 

-

 

-

 

-

 

660

 

 

660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity dividend

12

 

-

 

-

 

-

 

-

 

(3,582)

 

 

(3,582)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2018

 

 

108,631

 

6,575

 

3

 

891

 

         41,652

 

 

157,752

 

 

 

 

 

Company Statement of Changes in Equity

Year ended 31 March 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

Equity

share

capital

 

 

Merger reserve

 

Capital redemption reserve

 

 

Other

reserves

 

 

Retained earnings

 

 

Total

equity

 

 

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 April 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

20

 

25,505

 

-

 

-

 

-

 

-

 

25,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issue costs

20

 

(750)

 

-

 

-

 

-

 

-

 

(750)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments charge

26

 

-

 

-

 

-

 

-

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

 

-

 

-

 

-

 

-

 

5,153

 

5,153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

-

 

-

 

-

 

-

 

5,153

 

5,153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

20

 

58,408

 

-

 

-

 

-

 

-

 

58,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issue costs

20

 

(1,740)

 

-

 

-

 

-

 

-

 

(1,740)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Resulting from hive-up transactions

30

 

-

 

-

 

-

 

4,543

 

-

 

4,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments charge

26

 

-

 

-

 

-

 

-

 

2,375

 

2,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax on share options

 

 

-

 

-

 

-

 

-

 

651

 

651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity dividend

12

 

-

 

-

 

-

 

-

 

(3,582)

 

(3,582)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2018

 

 

108,631

 

6,575

 

3

 

4,543

 

39,795

 

159,547

                               

 

 

 

 

 

Consolidated Balance Sheet

As at 31 March 2018

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

2018

 

2017

 

 

 

 

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

14

 

4,700

 

2,856

Intangible assets

 

 

15

 

161,372

 

98,753

Deferred tax asset

 

 

11

 

4,212

 

4,044

 

 

 

 

 

 

 

 

 

 

 

 

 

170,284

 

105,653

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

 

 

 

399

 

233

Trade and other receivables

 

 

18

 

37,969

 

30,569

Current tax

 

 

 

 

-

 

494

Cash and short-term deposits

 

 

19

 

22,753

 

17,618

 

 

 

 

 

61,121

 

48,914

 

 

 

 

 

 

 

                       

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

231,405

 

154,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity share capital

 

 

20

 

108,631

 

51,963

Merger reserve

 

 

 

 

6,575

 

6,575

Capital redemption reserve

 

 

 

 

3

 

3

Foreign currency translation reserve

 

 

 

 

891

 

4,097

Retained earnings

 

 

 

 

41,652

 

31,545

 

 

 

 

 

 

 

 

Total equity attributable to equity holders of the parent

 

 

 

 

157,752

 

94,183

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

21

 

8,451

 

11,499

Deferred tax liability

 

 

11

 

8,260

 

4,441

 

 

 

 

 

16,711

 

15,940

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

21

 

797

 

886

Trade and other payables

 

 

22

 

55,897

 

36,401

Contingent consideration

 

 

31

 

45

 

7,122

Provisions

 

 

23

 

25

 

35

Current tax

 

 

 

 

178

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

56,942

 

44,444

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

73,653

 

60,384

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

 

 

231,405

 

            154,567

                                                                                               

Approved by the Board on 5 June 2018

 

C G Clark - Director

D J Wilson - Director

 

Registered in England number 2415211
 

 

Company Balance Sheet

 

 

As at 31 March 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

2018

 

2017

 

 

 

 

 

 

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

14

 

3,714

 

1,975

 

 

Intangible assets

 

 

15

 

113,174

 

1,701

 

 

Investments

 

 

17

 

76,310

 

104,096

 

 

Deferred tax asset

 

 

11

 

3,163

 

2,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

196,361

 

110,768

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

 

 

 

399

 

-

 

 

Trade and other receivables

 

 

18

 

31,351

 

21,846

 

 

Current tax

 

 

 

 

-

 

614

 

 

Cash and short-term deposits

 

 

19

 

14,778

 

11,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,528

 

33,471

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

242,889

 

144,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity share capital

 

 

20

 

108,631

 

51,963

 

 

Merger reserve

 

 

 

 

6,575

 

6,575

 

 

Capital redemption reserve

 

 

 

 

3

 

3

 

 

Other reserves

 

 

 

 

4,543

 

-

 

 

Retained earnings

 

 

 

 

39,795

 

35,198

 

 

 

 

 

 

 

 

 

 

 

 

Total equity attributable to equity holders of the parent

 

 

 

 

159,547

 

93,739

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax

 

 

     11

 

6,319

 

-

Loans

 

 

     21

 

7,000

 

9,000

 

 

 

 

 

13,319

 

9,000

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables

 

 

22

 

69,541

 

34,343

 

 

Contingent consideration

 

 

31

 

45

 

7,122

 

 

Provisions

 

 

23

 

25

 

35

 

 

Current tax

 

 

 

 

412

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70,023

 

41,500

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

83,342

 

50,500

 

 

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

 

 

242,889

 

           144,239

 

                                   

 

During the year the Company made a profit £5,153,000 (2017: £10,717,000).

 

Approved by the Board on 5 June 2018

C G Clark - Director

D J Wilson - Director

 

Registered in England number 2415211
 

Consolidated Cash Flow Statement

Year ended 31 March 2018

 

 

 

 

 

 

 

 

Note

 

2018

 

2017

 

 

 

£'000

 

£'000

 

 

 

 

 

 

Group profit before tax

 

 

13,400

 

10,082

 

 

 

 

 

 

Adjustments to reconcile Group profit before tax to net cash flows

 

 

 

 

 

 

 

 

 

 

 

Finance revenue

9

 

(37)

 

(19)

Finance costs

10

 

545

 

517

Depreciation of plant and equipment

14

 

1,430

 

1,031

Amortisation of intangible assets

15

 

8,832

 

4,719

Loss on disposal of plant and equipment

 

 

38

 

2

Fair value adjustment on contingent consideration

31

 

383

 

471

Share-based payments

26

 

2,375

 

994

(Decrease)/increase in provisions

23

 

(10)

 

4

Increase in inventories

 

 

(166)

 

(78)

Increase in trade and other receivables

 

 

(5,390)

 

(3,690)

Increase in trade and other payables

 

 

10,220

 

2,272

 

 

 

 

 

 

Cash generated from operations

 

 

31,620

 

16,305

Income tax paid

 

 

(3,247)

 

(2,193)

Net cash generated from operating activities

 

 

28,373

 

14,112

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) investing activities

 

 

 

 

 

 

 

 

 

 

 

Acquisition of subsidiaries, net of cash acquired

30

 

(70,363)

 

(36,840)

Purchase of plant and equipment

14

 

(1,902)

 

(1,437)

Purchase of software

15

 

(212)

 

(774)

Proceeds from disposal of plant and equipment

 

 

96

 

5

Expenditure on product development

15

 

-

 

(21)

Interest received

9

 

37

 

19

 

 

 

 

 

 

Net cash flows used in investing activities

 

 

(72,344)

 

(39,048)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) financing activities

 

 

 

 

 

 

 

 

 

 

 

Finance costs paid

10

 

(545)

 

(517)

Proceeds from issue of shares

20

 

58,408

 

25,505

Share issue costs

20

 

(1,740)

 

(750)

Proceeds from new borrowings

21

 

10,000

 

12,000

Repayment of borrowings

21

 

(12,839)

 

(3,838)

Dividends paid to equity shareholders

12

 

(3,582)

 

(2,775)

 

 

 

 

 

 

Net cash flows from financing activities

 

 

49,702

 

29,625

 

 

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

5,731

 

4,689

Effect of exchange rates on cash and cash equivalents

 

 

(596)

 

514

Cash and cash equivalents at the beginning of the period

 

 

17,618

 

12,415

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

19

 

22,753

 

17,618

 

 

 

 

 

 

 

 

 

 

 

Company Cash Flow Statement

Year ended 31 March 2018

 

 

 

 

 

 

 

 

Note

 

2018

 

2017

 

 

 

£'000

 

£'000

 

 

 

 

 

 

Company profit before tax

 

 

6,303

 

10,831

 

 

 

 

 

 

Adjustments to reconcile Company profit before tax to net cash flows

 

 

 

 

 

 

 

 

 

 

 

Finance revenue

 

 

(16)

 

(12)

Finance costs

 

 

439

 

365

Depreciation of plant and equipment

14

 

856

 

784

Amortisation of intangible assets

15

 

1,851

 

689

Loss on disposal of plant and equipment

 

 

-

 

1

Fair value adjustment on contingent consideration

31

 

383

 

454

Share-based payments

26

 

2,375

 

994

Increase in inventories

 

 

(399)

 

-

(Decrease)/increase in provisions

23

 

(10)

 

4

Increase in trade and other receivables

 

 

(9,505)

 

(3,010)

Increase/(decrease) in trade and other payables

 

 

33,268

 

(1,160)

 

 

 

 

 

 

Cash generated from operations

 

 

35,545

 

9,940

Income tax paid

 

 

(399)

 

(676)

Net cash generated from operating activities

 

 

35,146

 

9,264

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) investing activities

 

 

 

 

 

 

 

 

 

 

 

Acquisition of subsidiary undertakings

30

 

(81,312)

 

(37,000)

Purchase of plant and equipment

14

 

(585)

 

(748)

Purchase of software

15

 

(145)

 

(774)

Expenditure on product development

15

 

-

 

(21)

Interest received

 

 

16

 

12

 

 

 

 

 

 

Net cash flows used in investing activities

 

 

(82,026)

 

(38,531)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) financing activities

 

 

 

 

 

 

 

 

 

 

 

Finance costs paid

 

 

(439)

 

(365)

Proceeds from issue of shares

20

 

58,408

 

25,505

Share issue costs

20

 

(1,740)

 

(750)

Proceeds from new borrowings

21

 

10,000

 

12,000

Repayment of borrowings

21

 

(12,000)

 

(3,000)

Dividends paid to equity shareholders

12

 

(3,582)

 

(2,775)

 

 

 

 

 

 

Net cash flows from financing activities

 

 

50,647

 

30,615

 

 

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

3,767

 

1,348

Cash and cash equivalents at the beginning of the period

 

 

11,011

 

9,663

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

19

 

14,778

 

11,011

 

 

 

 

 

 

 

 

 

 

 
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 2018 or 2017 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 2018. Statutory accounts for 2017 have been delivered to the Registrar of Companies, and those for 2018 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 ('IFRS's) as adopted by the European Union and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.  The financial statements have been prepared under the historical cost convention, modified in respect of the revaluation of financial assets and liabilities at fair value.  A summary of the significant accounting policies is set out below.

 

The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 31 March 2018 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.

 

Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value.  Depreciation is calculated to write off cost less estimated residual value based on prices prevailing at the balance sheet date on a straight-line basis over the estimated useful life of each asset as follows:

 

Plant and equipment                        - over 3 to 10 years

Freehold buildings                             - over 50 years             

 

Freehold land is not depreciated.

 

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.  If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount.

 

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.  Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Statement of Comprehensive Income in the year the item is derecognised.

 

Residual values and estimated remaining lives are reviewed annually.

 

 

 

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 2017.

 

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

 

 

 

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

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

IFRIC 23

Uncertainty over Income Tax Treatments

1 January 2019

IFRS 9

Prepayment Features with Negative Compensation - Amendments to IFRS 9

1 January 2019

IAS 28

Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28

1 January 2019

 

 

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 Group has determined its planned revenue and cost accounting policies under IFRS 15. The Group has been engaged in determining accounting policies under the new standard, specifically in consideration of the application of the five steps to the individual business units, quantifying the transitional adjustments, considering suitable systems solutions, reviewing the impact on forecasting and the additional disclosure requirements required by IFRS 15. New processes and controls are being designed and implemented to complement the adoption of the accounting policies.

 

Whilst some further work is required to determine the impact on reported revenue across all the lines of business, based on the initial findings of this process, management do not currently anticipate that there will be a material change to the quantum and timing of profitability.  The new standard also introduces expanded disclosure requirements and these are expected to change the nature and extent of the group's disclosures about its revenue recognition in future reports, when the new standard is adopted.

 

When IFRS 15 is adopted, it can be applied either on a fully retrospective basis, requiring the restatement of the comparative periods presented in the financial statements, or with the cumulative retrospective impact of IFRS 15 applied as an adjustment to equity on the date of adoption. When the latter approach is applied it is necessary to disclose the impact of IFRS 15 on each line item in the financial statements in the reporting period. The Group is planning to reflect the cumulative impact of IFRS 15 in equity on the date of adoption. This decision depends on a number of factors considering the time, effort and cost involved in doing so when compared to the benefits to users of the financial statements.

 

The main areas of interest to the Group were:

 

Contracts with multiple year and multiple deliverables

IFRS 15 will require the Group to identify deliverables in contracts with customers that qualify as separate 'performance obligations'. The performance obligations identified will depend on the nature of individual customer contracts, but might typically be identified for customer set up fees, data disks, other equipment provided to customers and for services provided to customers such as professional services or post contract support ('PCS') obligations. The
 

 

transaction price receivable from customers must be allocated between the Group's performance obligations under the contracts on a relative stand-alone selling price basis, including the appropriate allocation of any implicit or explicit contractual discounts. Revenue will then be recognised either at a point in time or over time when the respective performance obligations in a contract are delivered to the customer. Stand-alone selling prices will be based on observable sales prices; however, where stand-alone selling prices are not directly observable, estimates of stand-alone selling prices will be required which will maximise the use of observable inputs.

 

The review undertaken by management across the lines of business indicates that the Group allocates revenue to the identifiable deliverables and allocates revenue on a relative stand-alone selling price basis in a manner that is consistent with IFRS 15. As a result, it is not currently anticipated that the adoption of IFRS 15 will materially change either the timing or value of revenue recognised. Alongside the adoption of IFRS 15, the group has instigated a review to confirm that the standalone selling price allocated to PCS continues to be appropriate.

 

Contracts with significant set up and customisation

Contracts that involve significant customisation and implementation work over a period of time are at risk of delayed revenue recognition if they do not meet the criteria set out in IFRS 15. Significant customisation work is currently recognised on the percentage of completion method under IAS18. Under IFRS 15, if the indicators for recognition over time are not present, particularly if there is an absence of contractual rights or proof of 'no alternative use', this may lead to a delay in revenue recognition for development/customisation work. The customisation work undertaken by the Group is considered to be highly specific supported by contractual rights to payment, and there is considered to be no material impact as a result of moving to IFRS 15.

 

Commissions and incremental costs incurred

Under IFRS 15, certain incremental costs incurred in acquiring a contract with a customer will be deferred on the consolidated statement of financial position and amortised as revenue is recognised under the related contract; this will generally lead to the later recognition of charges for some commissions payable to third party dealers and employees. Certain costs incurred in fulfilling customer contracts will be deferred on the consolidated statement of financial position under IFRS 15 and recognised as related revenue is recognised under the contract. Such deferred costs are likely to relate to the provision of deliverables to customers that do not qualify as performance obligations and for which revenue is not recognised; currently such costs are generally expensed as incurred. The review undertaken by management across the lines of business confirmed that the majority of commissions are paid in relation to annual contracts. IFRS 15 includes a practical expedient that allows an entity to recognise the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity would have recognised is one year or less. Where commission has been paid in advance on a multi-year deal, the element of the commission that is payable in relation to subsequent years is recognised at the start of each year. The review undertaken by management indicates this treatment is allowable under IFRS 15.

 

Software Licences

Revenue recognition of software licences delivered by the Group are assessed under IFRS 15 to determine whether they are either a right to use the software as it exists when the software license is granted, or a right to access the software as it exists throughout the licence period, and expectation that the Group will provide significant updates to the software over the contract term.

 

The Group considers for each contract that includes a separate software licence performance obligation all the facts and circumstances in determining whether the licence revenue is recognised over time or at a point in time from the date of the licence.  The review undertaken by management across the lines of business indicates that the Group generally recognises software licence revenue in a manner that is consistent with the principles of IFRS 15. As a result, it is not currently anticipated that the adoption of IFRS 15 will materially change either the timing or value of software licence revenue recognised.

 

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. The Group is largely unaffected by IFRS 9 given the nature of its activities. However, management has reviewed the impact of IFRS 9 and the main areas of interest are:

 

Credit losses

IFRS 9 replaces the existing incurred loss model with a forward looking expected credit loss model. This may result in the earlier recognition of credit losses as it will no longer be appropriate for entities to wait for an incurred loss to have occurred before credit losses are recognised. For the Group, management currently expects the impact will be immaterial to the financial statements.  Due to the exemption in IFRS 9 it will not restate comparative periods in the year of initial application and as a consequence, any adjustments to the carrying amounts of financial assets or liabilities are to be recognised at 1 April 2018.

 

Modifications to financial liabilities

Under both IAS 39 and IFRS 9, when the terms of a financial liability are modified, for example, where the maturity date is extended, an entity must consider whether that modification is substantial or non-substantial. Under IAS 39, the Group did not recognise any gain or loss at the time of a non-substantial modification. However, under IFRS 9 it is a requirement to recognise a gain or loss at the time of the modification. On transition to IFRS 9, this change in policy will need to be applied retrospectively to all financial liabilities that are still recognised at the date of the initial application and an assessment of the impact of this change is ongoing.

 

Whilst an assessment of the new standard is ongoing, the changes to recognition and measurement of financial instruments and changes to hedge accounting rules are not currently considered likely to have any major impact on the Group's current accounting treatment or hedging activities.

 

 

 

 

IFRS 16 'Leases' was issued in January 2016 to replace IAS 17 'Leases'. The standard is effective for accounting periods beginning on or after 1 January 2019 and will be adopted by the Group on 1 April 2019. IFRS 16 will primarily change lease accounting for lessees; lease agreements will give rise to the recognition of an asset representing the right to use the leased item and a loan obligation for future lease payables. Lease costs will be recognised in the form of depreciation of the right to use asset and interest on the lease liability. Lessee accounting under IFRS 16 will be similar in many respects to existing IAS 17 accounting for finance leases, but will be substantively different to existing accounting for operating leases where rental charges are currently recognised on a straight-line basis and no lease asset or lease loan obligation is recognised.

 

Lessor accounting under IFRS 16 is similar to existing IAS 17 accounting and is not expected to have a material impact for the Group.

 

The Group is assessing the impact of the accounting changes that will arise under IFRS 16. However, the following changes to lessee accounting will have an impact as follows:

 

·      There is expected to be an increase in assets, specifically right-of-use assets will be recorded for assets that are leased by the Group; currently no lease assets are included on the Group's consolidated statement of financial position for operating leases.

·      There is expected to be an increase in debt as liabilities will be recorded for future lease payments in the Group's consolidated statement of financial position for the 'reasonably certain' period of the lease, which may include future lease periods for which the Group has extension options. Currently liabilities are generally not recorded for future operating lease payments, which are disclosed as commitments. The amount of lease liabilities will not equal the lease commitments reported in note 25 on 31 March 2019, but may not be dissimilar.

·      Operating lease expenditure will be reclassified and split between depreciation and finance costs, resulting in an increase in EBITDA. Lease expenses will be for depreciation of right-of-use assets and interest on lease liabilities; interest will typically be higher in the early stages of a lease and reduce over the term. Currently operating lease rentals are expensed on a straight-line basis over the lease term within operating expenses.

·      Operating lease cash flows are currently included within operating cash flows in the consolidated statement of cash flows; under IFRS 16 these will be recorded as cash flows from financing activities reflecting the repayment of lease liabilities (borrowings) and related interest.

When IFRS 16 is adopted, it can be applied either on a fully retrospective basis, requiring the restatement of the comparative periods presented in the financial statements, or with the cumulative retrospective impact of IFRS 16 applied as an adjustment to equity on the date of adoption; when the latter approach is applied it is necessary to disclose the impact of IFRS 16 on each line item in the financial statements in the reporting period. Depending on the adoption method that is utilised, certain practical expedients may be applied on adoption. The Group has not yet determined which adoption method will be adopted or which expedients will be applied on adoption.

 

Judgements and Key Sources of Estimation Uncertainty

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.

 

In the process of applying the Group's accounting policies, management has made the following judgements and estimates, which have the most significant effect on the amounts recognised in the financial statements:

 

Impairment of Goodwill

The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy.  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. Within that forecast, management considered the total amount of tax losses available across the Group and the relative restrictions in place for loss streaming and made a judgement not to recognise deferred tax assets on losses of £16,367,000.  The total amount of deferred tax assets that management had forecast as available at the year-end based on these forecasts and estimates was 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 2018 was £4,212,000 (2017: £4,044,000) and the unrecognised deferred tax asset at 31 March 2018 was £3,356,000 (2017: £3,217,000).  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 26.

 

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. During the year, the Company acquired Postcode Anywhere (Holdings) 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 5 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.

 

 

3.  Revenue

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

 

 

 

 

 

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Sale of goods

50,964

 

42,132

Rendering of services

68,738

 

45,354

Revenue

119,702

 

87,486

 

 

 

 

Finance revenue

37

 

19

Total revenue

119,739

 

87,505

 

4.  Segmental Information

The Group's operating segments are internally reported to the Group's Chief Executive Officer as two operating segments: Fraud, Risk & Compliance - which provides ID Verification, ID Employ & Comply and ID Fraud & Risk Management services and Customer & Location Intelligence - 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, being profits before amortisation of acquired intangibles, share-based payment charges, exceptional items, net finance costs and tax, as shown below.

 

Segment results include items directly attributable to either Fraud, Risk & Compliance or Customer & Location Intelligence.  Unallocated items for 2018 represent Group head office costs £1,196,000, exceptional costs £2,143,000, Group finance income £37,000, Group finance costs £545,000, Group income tax charge £2,746,000 and share-based payments charge £2,375,000.  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.

 

As previously reported in the Annual Report and Accounts, in order to reflect how the Group is presenting its lines of business to its stakeholders going forward, the naming and structure of the operating segments were amended with effect from 1 April 2017.  Going forward 'Identity Proofing' is now known as 'Fraud, Risk & Compliance' and 'Identity Solutions' is known as 'Customer & Location Intelligence'.  Furthermore, the 'ID Trace & Investigate' line of business has transferred into Fraud, Risk & Compliance.

 

 

 

 

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

 

 

 

 

Fraud, Risk

& Compliance

 

Customer & Location

 Intelligence

 

 

 

Unallocated

 

 

 

2018

Year ended 31 March 2018

 

£'000

 

£'000

 

£'000

 

£'000

Total revenue

69,767

 

49,935

 

-

 

119,702

Adjusted operating profit

16,049

 

11,458

 

(1,196)

 

26,311

Amortisation of acquired intangibles

(2,940)

 

(4,945)

 

-

 

(7,885)

Share-based payments charge

-

 

-

 

(2,375)

 

(2,375)

Exceptional items

-

 

-

 

(2,143)

 

(2,143)

Operating profit

13,109

 

6,513

 

(5,714)

 

13,908

Finance revenue

 

 

 

 

 

 

37

Finance costs

 

 

 

 

 

 

(545)

Income tax charge

 

 

 

 

 

 

(2,746)

Profit for the year

 

 

 

 

 

 

10,654

 

 

 

 

 

 

 

 

Postcode Anywhere (Holdings) Limited ('PCA'), which was acquired during the period, is reported within the Customer & Location Intelligence division.

 

 

 

Fraud, Risk

& Compliance

 

Customer & Location

Intelligence

 

 

 

Unallocated

 

 

 

2017

Year ended 31 March 2017

 

£'000

 

£'000

 

£'000

 

£'000

Total revenue

54,814

 

32,672

 

-

 

87,486

Adjusted operating profit

12,923

 

4,758

 

(675)

 

17,006

Amortisation of acquired intangibles

(2,507)

 

(1,515)

 

-

 

(4,022)

Share-based payments charge

-

 

-

 

(994)

 

(994)

Exceptional items

-

 

-

 

(1,410)

 

(1,410)

Operating profit

10,416

 

3,243

 

(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 Limited, which was acquired during the period, is reported within the Fraud, Risk & Compliance operating segment.

 

 

Geographical Information

 

Revenues from external customers

 

               Non-current assets

 

2018

 

2017

 

2018

 

2017

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

United Kingdom

78,471

 

60,306

 

147,778

 

80,713

United States of America

11,836

 

7,468

 

163

 

123

Australia

2,559

 

1,489

 

17,797

 

20,308

Others

26,836

 

18,223

 

334

 

465

Total

119,702

 

87,486

 

166,072

 

101,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Non-current assets for this purpose consist of plant and equipment and intangible assets and excludes the deferred tax asset.

 

 

5.  Operating Profit

This is stated after charging/(crediting):

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Research and development costs recognised as an expense

11,367

 

7,849

Depreciation of plant and equipment

1,430

 

1,031

Amortisation/impairment of intangible assets

8,832

 

4,719

Foreign exchange loss/(gain)

177

 

(180)

Operating lease payments  -  land and buildings

1,596

 

1,274

                                                 -  other

18

 

16

 

 

6.  Auditor's Remuneration

 

 

 

 

 

 

2018

 

2017

 

 

£'000

 

£'000

 

 

 

 

 

 

Audit of the financial statements 1

166

 

127

 

 

 

 

 

Other fees to auditor    -  other assurance services

24

 

23

 

                                          -  tax compliance services

25

 

54

 

                                          -  tax advisory services

13

 

19

 

 

228

 

223

 

 

1 £133,000 (2017: £77,000) of this relates to the Company.

 

 

 

 

 

 

7.  Exceptional Items

 

 

 

 

 

 

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Fair value adjustments to contingent consideration (note 31)

885

 

471

Acquisition related costs (note 30)

750

 

574

Costs associated with staff reorganisations

508

 

365

 

2,143

 

1,410

 

Fair value adjustments to contingent consideration in the year to 31 March 2018 relate to the acquisition of IDscan and include £421,000 relating to a contingent purchase price adjustment along with a £457,000 charge relating to the partial unwinding of the discounting relating to the contingent consideration (note 31). 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 2017 include a £92,000 adjustment relating to the contingent purchase price of IDscan (note 31) 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 31) 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.

 

Transaction costs of £735,000 relate to the acquisition of PCA (note 30). In prior periods, transaction costs of £513,000 were incurred in relation to the acquisition of IDscan (note 30). Such costs include those directly attributable to the transaction and exclude operating or integration costs relating to an acquired business, and due to the size and nature of these costs, management consider that they would distort the Group's underlying business performance.

 

As part of the Group's strategy to grow through acquisition it is essential that acquired businesses are restructured to integrate them fully into the Group's operations and deliver anticipated returns. Costs associated with staff reorganisations in both years relate primarily to exit costs of personnel leaving the business on an involuntary basis during the integration and restructuring period in order to implement more suitable post completion staff structures. In order to give a suitable representation of underlying earnings it is appropriate to show these costs as exceptional along with any other items which are exceptional in nature. The tax impact of the exceptional costs was £116,000 (2017: £73,000).

 

 

 

 

 

 

 

8.  Staff Costs and Directors' Emoluments

 

 

Group

 

 

              

              Company

a) Staff Costs

2018

 

2017

 

2018

 

2017

 

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Wages and salaries

41,162

 

31,385

 

27,033

 

23,051

 

Social security costs

4,904

 

3,852

 

3,504

 

3,007

 

Other pension costs

1,668

 

1,359

 

1,080

 

1,040

 

 

47,734

 

36,596

 

31,617

 

27,098

 

                         

 

Included in wages and salaries is a total charge of share-based payments of £2,375,000 (2017: £994,000) 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

 

 

2018

 

2017

 

2018

 

2017

 

 

No.

 

No.

 

No.

 

No.

 

 

 

 

 

 

 

 

 

Research and development

 

241

 

207

 

117

 

117

Production

 

117

 

99

 

44

 

44

Selling and administration

 

416

 

354

 

311

 

298

 

 

774

 

660

 

472

 

459

 

b) Directors' Emoluments

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Wages and salaries

1,369

 

915

Pension

66

 

31

Bonuses

1,231

 

499

 

2,666

 

1,445

 

 

 

Aggregate gains made by Directors on the exercise of options

954

 

1,212

 

 

 

 

The remuneration for the highest paid Director was as follows:

 

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Wages and salaries

492

 

411

Bonus

527

 

288

 

1,019

 

699

 

 

 

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 £84,000 (2017: £70,000 that relates to the previous Chief Executive). The number of share options granted during the year for the highest paid Director was 1,400,000 (2017: nil) and the number of share options exercised during the year was nil (2017: 243,458)..

 

 

9.  Finance Revenue

 

2018

 

2017

 

 

£'000

 

£'000

Bank interest receivable

37

 

19

 

 

 

 

 

37

 

19

 

 

10.  Finance Costs

 

2018

 

2017

 

 

£'000

 

£'000

Bank loan fees and interest

545

 

517

 

 

 

 

 

545

 

517

 

 

11.  Taxation                                                                                                                                                                                                                                                                                      

a) Tax on Profit

 

 

 

 

 

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

 

 

 

 

 

2018

 

2017

 

 

£'000

 

£'000

 

Current income tax

 

 

 

 

UK corporation tax on profit for the year

2,926

 

1,325

 

Amounts underprovided/(overprovided) in previous years

67

 

(231)

 

Foreign tax

1,403

 

638

 

 

4,396

 

1,732

 

Deferred tax

 

 

 

 

Origination and reversal of temporary differences

(1,540)

 

(2,492)

 

Impact of change in tax rates

(110)

 

92

 

 

(1,650)

 

(2,400)

 

 

 

 

 

 

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

2,746

 

(668)

 

 

b) Reconciliation of the Total Tax Charge/(Credit)

 

 

 

 

 

 

 

 

 

The profit before tax multiplied by the standard rate of corporation tax in the UK would result in a tax charge (2017: credit) as explained below:

 

 

 

 

 

 

2018

 

2017

 

 

£'000

 

£'000

 

 

 

 

 

 

Consolidated profit before tax

13,400

 

10,082

 

 

 

 

 

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

the UK of 19% (2017: 20%)

 

2,546

 

 

2,016

 

 

 

 

 

 

Effect of:

 

 

 

 

Permanent differences

560

 

343

 

Rate changes

(179)

 

92

 

Utilisation of losses

(59)

 

(123)

 

Prior year items

63

 

(319)

 

Research and development tax relief

(353)

 

(477)

 

Patent Box relief

(382)

 

(334)

 

Recognition of unrecognised deferred tax assets

(104)

 

(1,498)

 

Effect of higher taxes on overseas earnings

654

 

(368)

 

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

2,746

 

(668)

 

 

The Group is entitled to current year tax relief of £954,000 (2017: £939,000), calculated at a tax rate of 19% (2017: 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 2018 of £17,329,000 (2017: £17,871,000).  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 2018 of £2,257,000 (2017: £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

 

2018

 

2017

 

2018

 

2017

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Decelerated capital allowances

1,633

 

1,996

 

-

 

-

Share options

1,479

 

1,019

 

-

 

-

Other temporary differences

831

 

385

 

-

 

50

Capital losses

-

 

-

 

573

 

384

Trading losses

269

 

644

 

2,783

 

2,783

 

 

 

 

 

 

 

 

 

4,212

 

4,044

 

3,356

 

3,217

                 

 

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

 

 

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Opening balance

4,044

 

3,017

Acquired on acquisition

440

 

-

Foreign currency adjustments

11

 

61

Origination and reversal of temporary differences

(415)

 

1,058

Impact of change in tax rates

132

 

(92)

 

 

 

 

 

4,212

 

4,044

 

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 £16,367,000 (2017: £18,139,000) and unrecognised capital losses of £3,372,000 (2017: £2,257,000).

 

 

Deferred Tax Liability

 

The deferred tax liability of the Group is as follows:

 

 

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Intangible assets

8,260

 

4,441

 

 

 

 

 

8,260

 

4,441

 

 

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

 

 

 

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Opening balance

4,441

 

3,433

Acquisition of intangibles in subsidiaries

5,676

 

1,818

Foreign currency adjustments

(67)

 

149

Origination and reversal of temporary differences

(1,548)

 

(832)

Impact of change in tax rates

(242)

 

(127)

 

 

 

 

 

8,260

 

4,441

 

 

 

 

 

e) Deferred Tax - Company

 

Deferred Tax Asset

 

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

 

                                                                                                                                                             Recognised

 

Unrecognised

 

2018

 

2017

 

2018

 

2017

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Decelerated capital allowances

1,633

 

1,977

 

-

 

-

Share options

1,479

 

1,019

 

-

 

-

Other temporary differences

51

 

-

 

-

 

50

Capital losses

-

 

-

 

384

 

384

Trading losses

-

 

-

 

2,783

 

2,783

 

 

 

 

 

 

 

 

 

3,163

 

2,996

 

3,167

 

3,217

                 

 

 

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

 

 

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Opening balance

2,996

 

2,588

Acquired on acquisition

6

 

-

Origination and reversal of temporary differences

161

 

500

Impact of change in tax rates

-

 

(92)

 

 

 

 

 

3,163

 

2,996

 

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 (2017: £16,635,000) and unrecognised capital losses of £2,257,000 (2017: £2,257,000).

 

Deferred Tax Liability

 

The deferred tax liability of the Company is as follows:

 

 

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Intangible assets

6,319

 

-

 

 

 

 

 

6,319

 

-

 

 

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

 

 

 

2018

 

2017

 

£'000

 

£'000

 

 

 

 

Opening balance

-

 

-

Acquired on acquisition

6,378

 

-

Origination and reversal of temporary differences

(59)

 

-

 

 

 

 

 

6,319

 

-

 

 

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 reduced 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 17% have been used in the calculation of the UK's deferred tax assets and liabilities as at 31 March 2018.

 

The recently enacted US Tax Cuts and Jobs Act which came into effect on 1 January 2018 reduced the headline US federal corporate tax rate from 35% to 21%, effective from 1 January 2018 and has been used in the calculation of US current and deferred taxes with effect from that date.

 

 

 

 

12.  Dividends Paid and Proposed

 

 

 

 

 

 

 

 

 

 

2018

£'000

 

2017

£'000

 

 

 

 

 

 

 

 

 

Declared and paid during the year

 

 

 

 

 

 

 

 

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

 

 

 

 

 

3,582

 

2,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Final dividend for 2018: 2.65p (2017: 2.35p)

 

 

 

 

 

4,047

 

3,566

 

 

 

 

 

 

 

 

 

 

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.

 

 

2018

pence per

share

 

2018

£'000

 

2017

pence per

share

 

2017

£'000

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders of the Company

 

7.1

 

10,654

 

8.2

 

10,750

 

 

 

 

 

 

 

 

 

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.

 

 

 

2018

 

2017

 

 

No.

 

No.

 

 

 

 

 

Basic weighted average number of shares in issue

 

150,552,605

 

131,608,788

Dilutive effect of share options

 

2,704,644

 

2,435,799

Diluted weighted average number of shares in issue

 

153,257,249

 

134,044,587

 

 

 

 

2018

pence per

share

 

2018

£'000

 

2017

pence per

share

 

2017

£'000

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders of the Company

 

7.0

 

10,654

 

8.0

 

10,750

 

 

 

 

 

 

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

2018

pence per share

 

Diluted

2018

pence per

share

 

 

 

2018

£'000

 

Basic

2017

pence per

share

 

Diluted

2017

pence per

share

 

 

 

2017

£'000

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

17.5

 

17.2

 

26,311

 

12.9

 

12.7

 

17,006

Less net finance costs

(0.3)

 

(0.3)

 

(508)

 

(0.3)

 

(0.4)

 

(498)

(Less)/add tax

(1.9)

 

(1.9)

 

(2,746)

 

0.5

 

0.5

 

668

Adjusted earnings

15.3

 

15.0

 

23,057

 

13.1

 

12.8

 

17,176

 

 

 

14.  Property, Plant and Equipment

Group

 

 

 

 

 

 

 

 

 

 

Land and buildings

 

Plant and equipment

 

 

Total

 

 

 

£'000

 

£'000

 

£'000

Cost

 

 

 

 

 

 

 

At 1 April 2016

 

 

-

 

5,785

 

5,785

Acquired on acquisition

 

 

-

 

222

 

222

Additions

 

 

-

 

1,437

 

1,437

Disposals

 

 

-

 

(2,460)

 

(2,460)

Reclassification

 

 

-

 

(23)

 

(23)

Foreign currency adjustment

 

 

-

 

80

 

80

At 31 March 2017

 

 

-

 

5,041

 

5,041

 

 

 

 

 

 

 

 

Acquired on acquisition

 

 

1,251

 

341

 

1,592

Additions

 

 

-

 

1,902

 

1,902

Disposals

 

 

-

 

(189)

 

(189)

Foreign currency adjustment

 

 

-

 

(152)

 

(152)

At 31 March 2018

 

 

1,251

 

6,943

 

8,194

 

 

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

 

 

At 1 April 2016

 

 

-

 

3,551

 

3,551

Provided during the year

 

 

-

 

1,031

 

1,031

Disposals

 

 

-

 

(2,453)

 

(2,453)

Foreign currency adjustment

 

 

-

 

56

 

56

At 31 March 2017

 

 

-

 

2,185

 

2,185

 

 

 

 

 

 

 

 

Provided during the year

 

 

20

 

1,410

 

1,430

Disposals

 

 

-

 

(55)

 

(55)

Foreign currency adjustment

 

 

-

 

(66)

 

(66)

At 31 March 2018

 

 

20

 

3,474

 

3,494

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 March 2018

 

 

1,231

 

3,469

 

4,700

At 31 March 2017

 

 

-

 

2,856

 

2,856

At 1 April 2016

 

 

-

 

2,234

 

2,234

 

 

During the period £nil (2017: £23,000) 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 (2017: £nil).

 

 

 

 

 

Company

 

 

 

 

Land and buildings

 

 

Plant and equipment

 

 

 

Total

 

 

 

£'000

 

£'000

 

£'000

Cost

 

 

 

 

 

 

 

At 1 April 2016

 

 

-

 

5,254

 

5,254

Additions

 

 

-

 

748

 

748

Disposals

 

 

-

 

(2,437)

 

(2,437)

At 31 March 2017

 

 

-

 

3,565

 

3,565

 

 

 

 

 

 

 

 

Acquired on acquisition1, 2

 

 

1,233

 

777

 

2,010

Additions

 

 

-

 

585

 

585

 

 

 

 

 

 

 

 

At 31 March 2018

 

 

1,233

 

4,927

 

6,160

 

 

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

 

 

At 1 April 2016

 

 

-

 

3,242

 

3,242

Provided during the year

 

 

-

 

784

 

784

Disposals

 

 

-

 

(2,436)

 

(2,436)

At 31 March 2017

 

 

-

 

1,590

 

1,590

 

 

 

 

 

 

 

 

Provided during the year

 

 

2

 

854

 

856

 

 

 

 

 

 

 

 

At 31 March 2018

 

 

2

 

2,444

 

2,446

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 March 2018

 

 

1,231

 

2,483

 

3,714

At 31 March 2017

 

 

-

 

1,975

 

1,975

At 1 April 2016

 

 

-

 

2,012

 

2,012

 

1On 28 February 2018, the trade, assets and liabilities of Postcode Anywhere (Holdings) Limited and Postcode Anywhere (Europe) Limited were transferred to the Company.

2On 31 March 2018, the trade assets and liabilities of ID Scan Biometrics Limited were transferred to the Company.

 

 

The net book value in respect of assets held under finance leases and hire purchase agreements is £nil (2017: £nil).

 

 

 

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 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency adjustment

(715)

 

(291)

 

(1,006)

 

(2,230)

 

(2)

 

-

 

(3,238)

Additions - business combinations

24,865

 

6,102

 

30,967

 

43,097

 

-

 

-

 

74,064

Additions - purchased software

-

 

-

 

-

 

-

 

212

 

-

 

212

At 31 March 2018

45,926

 

16,739

 

62,665

 

116,465

 

2,118

 

1,771

 

183,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency adjustment

(218)

 

(193)

 

(411)

 

-

 

(2)

 

-

 

(413)

Amortisation during the year

4,419

 

3,466

 

7,885

 

-

 

442

 

505

 

8,832

At 31 March 2018

10,869

 

7,871

 

18,740

 

-

 

1,195

 

1,712

 

21,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2018

35,057

 

8,868

 

43,925

 

116,465

 

923

 

59

 

161,372

At 31 March 2017

15,108

 

6,330

 

21,438

 

75,598

 

1,153

 

564

 

98,753

At 1 April 2016

12,532

 

2,229

 

14,761

 

37,765

 

679

 

908

 

54,113

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                 

 

The customer relationships intangible asset acquired through the acquisition of Capscan Parent Limited has a carrying value of £1,689,000 and a remaining amortisation period of 3.6 years.  The customer relationships intangible asset acquired through the acquisition of TMG.tv Limited has a carrying value of £490,000 and a remaining amortisation period of 4.6 years.  The customer relationships intangible asset acquired through the acquisition of CRD (UK) Limited has a carrying value of £461,000 and a remaining amortisation period of 5.25 years.  The customer relationships intangible asset acquired through the acquisition of DecTech Solutions Pty Ltd has a carrying value of £2,590,000 and a remaining amortisation period of 6.1 years.  The customer relationships intangible asset acquired through the acquisition of CDMS Limited has a carrying value of £2,379,000 and a remaining amortisation period of 6.6 years.  The customer relationships intangible asset acquired through the acquisition of Loqate Inc. has a carrying value of £1,443,000 and a remaining amortisation period of 7.1 years. The customer relationships intangible asset acquired through the acquisition of ID Scan Biometrics Limited has a carrying value of £3,231,000 and a remaining amortisation period of 8.25 years. The customer relationships intangible asset acquired through the acquisition of Postcode Anywhere (Holdings) Limited has a carrying value of £22,586,000 and a remaining amortisation period of 9.1 years. Intangible assets categorised as 'other acquisition intangibles' include assets such as non-compete clauses and software technology.

 

Goodwill arose on the acquisition of GB Mailing Systems Limited, e-Ware Interactive Limited, Data Discoveries Holdings Limited, Advanced Checking Services Limited ('ACS'), Capscan Parent Limited, TMG.tv Limited, CRD (UK) Limited, DecTech Solutions Pty Ltd, CDMS Limited, Loqate Inc., ID Scan Biometrics Limited and Postcode Anywhere (Holdings) Limited.  Under IFRS, goodwill is not amortised and is tested annually for impairment (note 16).

 

During the period £nil (2017: £23,000) of purchased software assets (at net book value) were reclassified as intangible assets (previously classified as tangible assets).

 

 

 

Company

 

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 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired on acquisition1, 2

26,078

 

8,279

 

34,357

 

78,154

 

52

 

616

 

113,179

Additions - purchased software

-

 

-

 

-

 

-

 

145

 

-

 

145

At 31 March 2018

26,078

 

8,279

 

34,357

 

78,154

 

2,098

 

2,353

 

116,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 2016

-

 

-

 

-

 

-

 

1,700

 

823

 

2,523

Amortisation during the year

-

 

-

 

-

 

-

 

327

 

362

 

689

Disposals

-

 

-

 

-

 

-

 

(1,275)

 

-

 

(1,275)

At 31 March 2017

-

 

-

 

-

 

-

 

752

 

1,185

 

1,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation during the year

207

 

106

 

313

 

-

 

418

 

1,120

 

1,851

At 31 March 2018

207

 

106

 

313

 

-

 

1,170

 

2,305

 

3,788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2018

25,871

 

8,173

 

34,044

 

78,154

 

928

 

48

 

113,174

At 31 March 2017

-

 

-

 

-

 

-

 

1,149

 

552

 

1,701

At 1 April 2016

-

 

-

 

-

 

-

 

702

 

893

 

1,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                               

 

1On 28 February 2018, the trade, assets and liabilities of Postcode Anywhere (Holdings) Limited and Postcode Anywhere (Europe) Limited were transferred to the Company.

2On 31 March 2018, the trade assets and liabilities of ID Scan Biometrics Limited were transferred to the Company. This included internally generated software assets, valued within IDscan's financial statements at £616,000, that were immediately written down to £nil within the Company, the assets having previously been valued at £nil within the Group accounts.

 

The customer relationships intangible asset acquired through the acquisition of ID Scan Biometrics Limited has a carrying value of £3,231,000 and a remaining amortisation period of 8.25 years. The customer relationships intangible asset acquired through the acquisition of Postcode Anywhere (Holdings) Limited has a carrying value of £22,586,000 and a remaining amortisation period of 9.1 years. Intangible assets categorised as 'other acquisition intangibles' include assets such as non-compete clauses and software technology.

 

Goodwill arose on the acquisition of ID Scan Biometrics Limited and Postcode Anywhere (Holdings) Limited.  Under IFRS, goodwill is not amortised and is tested annually for impairment (note 16).

 

 

16.  Impairment Testing of Goodwill

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

 

§  Customer & Location Intelligence Unit (represented by the Customer & Location Intelligence operating segment excluding e-Ware and Loqate)

§  Fraud, Risk & Compliance Unit (represented by the Fraud, Risk & Compliance operating segment excluding DecTech)

§  e-Ware Interactive Unit (part of the Customer & Location Intelligence operating segment)

§  DecTech Unit (part of the Fraud, Risk & Intelligence operating segment)

§  Loqate Unit (part of the Customer & Location Intelligence operating segment)

 

This represents the lowest level within the Group at which goodwill is monitored for internal management purposes.  In previous years other entities were identified  as separate CGU's but following the transfer of the trade, assets and liabilities to the Company and the consequential integration of revenue streams these are now included within the appropriate group of CGU's.

 

During the year, the transfer of trade, assets and liabilities resulted in the IDscan CGU being included in the Fraud, Risk & Compliance group of CGU's and the PCA CGU being included in the Customer & Location Intelligence group of CGU's.

 

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

 

 

2018

 

2017

 

 

 

 

£'000

 

£'000

 

 

 

 

 

 

 

Customer & Location Intelligence Unit

 

 

 

54,494

 

11,672

Fraud, Risk & Compliance Unit

 

 

 

40,626

 

5,293

e-Ware Interactive Unit

 

 

 

79

 

79

IDscan Unit

 

 

 

-

 

34,899

DecTech Unit

 

 

 

14,367

 

15,972

Loqate Unit

 

 

 

6,899

 

7,683

 

 

 

 

 

 

 

 

 

 

 

116,465

 

75,598

                 

 

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.

 

2018

 

2017

 

 

Pre-tax

WACC

 

Growth rate

(in perpetuity)

 

Pre-tax

WACC

 

Growth rate

(in perpetuity)

 

%

 

%

 

%

 

%

 

 

 

 

 

 

 

 

Customer & Location Intelligence Unit

9.0%

 

1.8%

 

6.5%

 

2.0%

Fraud, Risk & Compliance Unit

9.0%

 

1.8%

 

6.5%

 

2.0%

e-Ware Interactive Unit

9.0%

 

-

 

6.5%

 

-

IDscan Unit

-

 

-

 

6.5%

 

2.0%

DecTech Unit

16.2%

 

2.8%

 

16.2%

 

2.7%

Loqate Unit

12.5%

 

2.0%

 

12.7%

 

2.3%

 

In the case of the enlarged Customer & Location Intelligence CGU, the annual impairment review as at 31 March 2018 indicated that the recoverable amount exceeded the carrying value of the CGU by £81,745,000 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 7% in the pre-tax weighted average cost of capital from 9% to 16%; or

·      a reduction of 52% in the forecast profit margins.

In the case of the enlarged Fraud, Risk & Compliance CGU, the annual impairment review as at 31 March 2018 indicated that the recoverable amount exceeded the carrying value of the CGU by £167,000,000 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 26% in the pre-tax weighted average cost of capital from 9% to 35%; or

·      a reduction of 79% in the forecast profit margins.     

In the case of the e-Ware Interactive CGU, the annual impairment review as at 31 March 2018 indicated that the recoverable amount exceeded the carrying value by £138,000 (2017: £150,000) 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 DecTech CGU, the annual impairment review as at 31 March 2018 indicated that the recoverable amount exceeded the carrying value of by £8,100,000 (2017: £11,200,000) 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 4% in the pre-tax weighted average cost of capital from 16% to 20%; or

·      a reduction of 24% in the forecast profit margins.

In the case of the Loqate CGU, the annual impairment review as at 31 March 2018 indicated that the recoverable amount exceeded the carrying value of by £25,300,000 (2017: £11,500,000) 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 20% in the pre-tax weighted average cost of capital from 12.5% to 32%; or

·      a reduction of 24% in the forecast profit margins.

 

17.  Investments

 

Company

 

 

 

 

 

 

 

 

 

 

 

 

£'000

Cost

 

 

 

 

 

 

At 1 April 2017

 

 

 

 

 

104,096

Acquisition of subsidiary undertakings

 

 

 

 

 

73,877

Transfer to goodwill and intangibles (note 30)

 

 

 

 

 

(101,663)

At 31 March 2018

 

 

 

 

 

76,310

 

 

 

 

 

 

 

Amounts written off

 

 

 

 

 

 

At 1 April 2017 and 31 March 2018

 

 

 

 

 

-

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 31 March 2018

 

 

 

 

 

76,310

At 31 March 2017

 

 

 

 

 

104,096

 

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

 

 

 

 

Capscan Parent Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Capscan Limited 1

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Data Discoveries Holdings Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Data Discoveries Limited 1

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Managed Analytics Limited 1

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Fastrac Limited 1

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

e-Ware Interactive Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

GB Information Management Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

GB Datacare Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

GB Mailing Systems Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Citizensafe Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

TelMe.com Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Farebase Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

TMG.tv Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

CRD (UK) Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Postcode Anywhere (Holdings) Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Postcode Anywhere (Europe) Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Postcode Anywhere (North America) Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

PCA Predict Inc.

100%

United States

National Registered Agents Inc., 106 Greentree Drive, Suite 101, Dover DE 19904

GBG (Australia) Holding Pty Ltd

100%

Australia

Co Sec Consulting Pty Ltd, 59 Gipps Street, Collingwood, VIC 3066

GBG (Australia) Pty Ltd 1

100%

Australia

Co Sec Consulting Pty Ltd, 59 Gipps Street, Collingwood, VIC 3066

GBG (Malaysia) Sdn Bhd1

100%

Malaysia

Level 7 Menara Millenium, Jalan Damanlela Pusat Bandar, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan

GBG DecTech Solutions S.L1

100%

Spain

08002-Barcelona, Edifici The Triangle, 4th Floor, Placa de Catalunya, Barcelona, Spain

迪安科1

100%

China

Room 1714, Building 4, China Investment Center, No.9 Guangan Road, Fengtai District, Beijing, China

 

 

 

 

 

 

Name of company

Proportion of voting rights and shares held

 

 

Country of incorporation

 

 

 

Registered office address

 

 

 

 

Loqate Inc.

100%

United States

98-5 Veterans Blvd Ste 305, Redwood City CA 94063

Loqate Limited 1

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

ID Scan Biometrics Limited

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

IDscan Research Bilisim Teknolojileri Sanayi Ve Ticaret Limited Sirketi

100%

Turkey

Mersin Universitesi Çiftlikköy Kampüsü, Teknopark İdari Bina No: 106 Yenişehir - Mersin

IDScan Research (Pty) Ltd

100%

South Africa

145, 5th Avenue, Franklin Roosevelt Park, Johannesburg, Gauteng, 2195 South Africa

UAB IDscan Biometrics R&D

100%

Lithuania

Kauno m. Kauno m. I. Kanto g. 18-4B Lithuania

Safer Clubbing At Night Network (Scan Net) Ltd

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Transactis Limited 1

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

Inkfish Limited1

100%

United Kingdom

The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB

 

1 held indirectly.

 

18.  Trade and Other Receivables

Trade receivables are non-interest bearing and are generally on 14 to 60 day terms.  At 31 March 2018, the value of trade receivables outstanding in excess of the standard expected credit term but not impaired was £11,178,000 (2017: £7,468,000).

 

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

 

 

2018

£'000

 

2017

£'000

 

2018

£'000

 

2017

£'000

 

 

 

 

 

 

 

 

Trade receivables

33,503

 

26,160

 

27,965

 

18,897

Amounts owed from subsidiary undertakings

-

 

-

 

7

 

251

Prepayments and accrued income

4,466

 

4,409

 

3,379

 

2,698

 

 

 

 

 

 

 

 

 

37,969

 

30,569

 

31,351

 

21,846

 

 

 

 

 

 

 

 

 

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

 

 

            Group

 

        Company

 

 

2018

£'000

 

2017

£'000

 

2018

£'000

 

2017

£'000

 

 

 

 

 

 

 

 

Balance at 1 April

681

 

855

 

367

 

673

Acquired on acquisition

-

 

8

 

604

 

-

Additional provisions

951

 

261

 

380

 

137

Write-offs

(244)

 

(470)

 

(186)

 

(443)

Foreign exchange

(44)

 

27

 

-

 

-

 

 

 

 

 

 

 

 

Balance at 31 March

1,344

 

681

 

          1,165

 

       367

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

2018

33,503

22,325

7,816

1,235

2,127

2017

26,160

18,692

3,355

945

3,168

 

 

 

 

 

19.  Cash

 

 

 

 

 

Group

 

Company

 

2018

£'000

 

2017

£'000

 

2018

£'000

 

2017

£'000

 

 

 

 

 

 

 

 

Cash at bank and in hand

22,753

 

17,618

 

14,778

 

11,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,753

 

17,618

 

14,778

 

11,011

                 

 

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

 

 

20.

Equity Share Capital

 

 

 

 

 

 

 

 

 

 

 

2018

 

2017

 

 

 

 

 

£'000

 

£'000

 

Authorised

 

 

 

 

 

 

 

147,663,704 (2017: 147,663,704) ordinary shares of 2.5p each

 

 

 

3,692

 

3,692

 

 

 

 

 

 

 

 

 

Issued

 

 

 

 

 

 

 

Allotted, called up and fully paid

 

 

 

3,817

 

3,368

 

Share premium

 

 

 

104,814

 

48,595

 

 

 

 

 

108,631

 

51,963

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

2017

 

 

 

 

 

No.

 

No.

 

 

 

 

 

 

 

 

 

Number of shares in issue at 1 April

 

 

 

134,702,937

 

123,886,390

 

Issued on placing

 

 

 

17,058,824

 

9,090,910

 

Issued on exercise of share options

 

 

 

906,937

 

1,725,637

 

Number of shares in issue at 31 March

 

 

 

152,668,698

 

134,702,937

 

During the year 17,965,761 (2017: 10,816,547) ordinary shares with a nominal value of 2.5p were issued for an aggregate cash consideration of £58,408,000 (2017: £25,505,000).   The cost associated with the issue of shares in the year was £1,740,000 (2017: £750,000).

 

 

21.  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 2019. 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 2019 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

 

2018

£'000

 

2017

£'000

 

2018

£'000

 

2017

£'000

 

 

 

 

 

 

 

 

Opening bank loan

12,385

 

3,742

 

9,000

 

-

New borrowings

10,000

 

12,000

 

10,000

 

12,000

Repayment of borrowings

(12,839)

 

(3,838)

 

(12,000)

 

(3,000)

Foreign currency translation adjustment

(298)

 

481

 

-

 

-

 

 

 

 

 

 

 

 

Closing bank loan

9,248

 

12,385

 

7,000

 

9,000

 

Analysed as:

Amounts falling due within 12 months

797

 

886

 

-

 

-

Amounts falling due after one year

8,451

 

11,499

 

7,000

 

9,000

 

 

 

 

 

 

 

 

 

9,248

 

12,385

 

7,000

 

9,000

 

 

 

 

 

22.  Trade and Other Payables

 

Group

 

Company

 

2018

£'000

 

2017

£'000

 

2018

£'000

 

2017

£'000

 

 

 

 

 

 

 

 

Trade payables

4,307

 

2,748

 

3,363

 

2,363

Amounts owed to subsidiary undertakings

-

 

-

 

23,361

 

8,044

Other taxes and social security costs

4,236

 

3,014

 

4,202

 

2,578

Accruals

19,007

 

11,642

 

14,829

 

9,412

Deferred income

28,347

 

18,997

 

23,786

 

11,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

55,897

 

36,401

 

69,541

 

34,343

 

 

23.  Provisions

 

 

 

         Group

 

 

 

          Company

 

 

2018

£'000

 

2017

£'000

 

2018

£'000

 

 

 

 

 

 

 

 

 

 

Opening balance

35

 

31

 

35

 

 

Provided for dilapidation obligations in less than 1 year

-

 

10

 

-

 

 

Utilised

(10)

 

(6)

 

(10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closing balance

25

 

35

 

25

 

35

 

 

Provisions associated with the costs of dilapidation obligations on certain leasehold properties within the Group are £25,000 (2017: £29,000).  The cash flows associated with these provisions are expected to occur in less than one year.

 

                                                                                                         

24.  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 £318,000 (2017: £88,000 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 £260,000 (2017: £107,000 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 £247,000 (2017: £109,000 increase).  The effect on equity of a 10% decrease in the US Dollar and Sterling exchange rate would be a decrease of £202,000 (2017: £133,000 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 £82,000 (2017: £84,000).

 

 

 

 

 

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 21.

 

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 21, 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 2018 and 2017.

 

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 2018

On

demand

 

Less than

12 months

 

1 to 5

years

 

 

Total

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Loans

-

 

1,148

 

8,661

 

9,809

Contingent consideration (note 31)

-

 

45

 

-

 

45

Trade and other payables

4,307

 

23,243

 

-

 

27,550

 

4,307

 

24,436

 

8,661

 

37,404

 

 

Year ended 31 March 2017

On

demand

 

Less than

12 months

 

1 to 5

years

 

 

Total

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Loans

-

 

1,295

 

12,294

 

13,589

Contingent consideration (note 31)

-

 

7,575

 

-

 

7,575

Trade and other payables

2,748

 

14,656

 

-

 

17,404

 

2,748

 

23,526

 

12,294

 

38,568

 

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:

 

 

2018

 

2017

 

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

33,503

 

-

 

26,160

 

-

Total current

33,503

 

-

 

26,160

 

-

 

 

 

 

 

 

 

 

Total

33,503

 

-

 

26,160

 

-

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

Loans

8,451

 

-

 

11,499

 

-

Total non-current

8,451

 

-

 

11,499

 

-

 

 

 

 

 

 

 

 

Trade and other payables

27,550

 

-

 

17,404

 

-

Loans

797

 

-

 

886

 

-

Contingent consideration (note 31)

-

 

45

 

-

 

7,122

Total current

28,347

 

45

 

18,290

 

7,122

 

 

 

 

 

 

 

 

Total

36,798

 

45

 

29,789

 

7,122

 

 

 

 

 

 

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

2018

 

31 March

2017

 

 

 

£'000

 

£'000

 

 

 

 

 

 

Fair value within current liabilities:

 

 

 

 

 

Contingent consideration (note 31)

 

 

45

 

7,122

 

 

 

 

 

 

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 2019.  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 2018 and 31 March 2017, the Group was not in breach of any bank covenants.

 

 

25.  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:

2018

£'000

 

2017

£'000

 

2018

£'000

 

2017

£'000

 

 

 

 

 

 

 

 

Not later than one year

1,339

 

836

 

720

 

486

After one year but not more than five years

1,342

 

1,284

 

373

 

778

After five years

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

2,681

 

2,120

 

1,093

 

1,264

 

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 prior year and this agreement ended in May 2016.

 

 

 

 

 

26.  Share-based Payments

Group and Company

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

 

Executive Share Option Scheme

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

 

Executive Share Option Scheme (Section C Scheme)

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

 

Executive Share Option Scheme (Section D Scheme)

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

 

Share Matching Plan

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

 

Compensatory Options

In the year ended 31 March 2018, the Remuneration Committee granted Compensatory Options to the Chief Executive of the Company, as compensation for lost earnings and shares from his previous employer. The Compensatory Options vest in equal tranches over a period of 12 and 24 months, on each anniversary of the date of grant, provided he still holds the position of CEO of GBG on the respective dates. The Compensatory Options are valid for a period of 12 months from the vesting date.

 

GBG Sharesave Scheme

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

 

The charge recognised from equity-settled share-based payments in respect of employee services received during the year is £2,375,000 (2017: £994,000).

 

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

 

 

2018

No.

 

2018

WAEP

 

2017

No.

 

2017

WAEP

 

 

 

 

 

 

 

 

Outstanding as at 1 April

3,341,470

 

54.93p

 

5,018,024

 

46.28p

Granted during the year

2,616,007

 

233.04p

 

522,880

 

38.98p

Forfeited during the year

(37,435)

 

200.35p

 

(451,004)

 

32.78p

Cancelled during the year

(15,275)

 

217.01p

 

(22,793)

 

163.0p

Exercised during the year

(906,967)

 

44.94p1

 

(1,725,637)

 

29.19p2

Expired during the year

-

 

-

 

-

 

-

Outstanding at 31 March

4,997,800

 

148.39p

 

3,341,470

 

54.93p

 

 

 

 

 

 

 

 

Exercisable at 31 March

2,675,668