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GB Group PLC   -  GBG   

Final Results

Released 07:00 05-Jun-2019

RNS Number : 1573B
GB Group PLC
05 June 2019
 

 

 

 

 

 

 

Embargoed until 7.00 a.m.

 

 

5 June 2019

 

 

 

GB GROUP PLC

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

 

Annual Results for the Year Ended 31 March 2019

 

International expansion and a growing customer base are driving strong growth

 

GB Group plc (AIM: GBG), the global identity data intelligence specialist, announces its annual results for the year ended 31 March 2019.

 

Financial highlights

 

 

2019

2018

% change

Revenue

£143.5m

£119.7m

19.9%

Adjusted operating profit

£32.0m

£26.3m

21.7%

Adjusted basic earnings per share

18.2p

15.3p

19.0%

Profit before tax

£14.7m

£13.4m

10.0%

Deferred income balance

£36.6m

£28.3m

29.2%

Net assets

£321.5m

£157.8m

103.8%

Net (debt)/cash††

£(66.3)m

£13.5m

n/a

Dividend per share

2.99p

2.65p

12.8%

 

 

 

 

2019

2018

Total

Growth

2018

Underlying* (CCY)

Underlying

Organic

Revenue

Growth* (CCY)

 

Revenue

£143.5m

£119.7m

19.9%

 

£116.7m

11.5%

Adjusted operating profit

 

£32.0m

£26.3m

21.7%

£24.0m

-

Note: "CCY" indicates figure reported on a constant currency basis.

 

 

Strategic and operational highlights

 

·      Enhancing our customer proposition

Successfully launched Loqate, our Location solution brand

Key wins across our chosen geographies including Discover Financial Services, N26, Bosch, BNI, Kohls and eBay

Shift to a cloud operational model to support faster growth and evolving security requirements across our key markets

 

·      Strengthening international footprint

International revenues grew from 34% to 45% of total revenue

Encouraging performance from North America and Asia Pacific

Total number of employees increased to nearly 1,000 working in 16 countries

 

·      Strategic acquisitions enhance global capabilities

IDology materially strengthens our position in the North American market

VIX Verify provides complementary technology and data, and increases our reach in Asia Pacific

Both acquisitions are performing in line with expectations 

 

·      Outlook

Significant long-term growth opportunities across our target markets

Clear delivery plans for organic growth

Successfully integrating acquisitions that advance the Group's strategy

New financial year is trading in line with our expectations

 

Chris Clark, CEO, commented,

 

"This was another good year for GBG. The continued investment in our three core solutions led to exciting product innovation and deeper geographical reach. Our strong growth and track record of delivery is a testament to our commitment to customer value and the expansion of our global presence through organic developments and strategic acquisitions."

 

"We remain committed to developing world class products and making the most of the significant market opportunities ahead. As a global business, with a well-defined strategy, we are confident in our future growth and our ambition to become the leading provider of identity data intelligence solutions."

 

Notes:

 

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.

 

 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.

 

††  Net (debt)/cash means cash and short-term deposits less loans.

 

* As highlighted in the October 2017 trading update, organic revenue growth in the year to 31 Match 2018 included £3.5 million from the sale of a material perpetual licence to a leading European bank in September 2017, paid upfront. Had this particular transaction been a fully delivered, 3-year agreement, payable in annual instalments (as is normal), then our revenue recognition policies at the time would have only recognised one third of this value.

 

 

- Ends -

 

 

 

To find out more, please contact:

 

GBG

Chris Clark, CEO

Dave Wilson, CFO & COO

 

01244 657333

Peel Hunt LLP (Nominated Adviser and Broker)

Edward Knight

Peter Stewart

Nick Prowting

 

020 7418 8900

Tulchan Communications LLP

James Macey White

Matt Low

Deborah Roney

 

Website

020 7353 4200

GBG@tulchangroup.com

 

 

www.gbgplc.com/investors

 

 

Presentation and webcast

GBG management will be hosting an analyst presentation today (5 June 2019) at 09.00 a.m. GMT at UBS, 5 Broadgate, London, EC2M 2QS.

 

Shortly following the presentation, an archived webcast will be available on the Investors page of the Company's website. 

 

 

About GBG

 

GBG offers a series of solutions that help organisations quickly validate and verify the identity and location of their customers.

 

Our innovative technology leads the world in location intelligence and fraud detection. Our products are built on an unparalleled breadth of data obtained from over 200 global partners which helps us to verify the identity of 4.4 billion people globally.

 

Our headquarters are in the UK and we have nearly 1,000 team members across 16 countries. We work with clients in 72 countries including some of the best-known businesses around the world, ranging from US e-commerce giants to Asia's biggest banks and European household brands.

 

To find out more about how we help our clients establish trust with their customers, visit www.gbgplc.com, follow us on Twitter @gbgplc, or read more in our newsroom: www.gbgplc.com/newsroom 

 

 

 

 

 

 

Chairman's Statement

 

This has been another strong year for GBG, maintaining a good operating performance. We are accelerating our product innovation and two important acquisitions will also help us to make further strategic progress and support future growth. Our presence in key markets has expanded and we have put an increased focus on providing excellent support to our customers. As a result, we remain confident that the business will capitalise on the opportunities in our target markets and continue to deliver double-digit organic growth.

 

Financial performance

GBG's financial performance in the year was again ahead of original market expectations. Revenues increased by 20% to £143.5 million (2018: £119.7 million), with underlying organic revenue at constant currency of £130.1 million. Adjusted operating profit increased by 22% to £32.0 million (2018: £26.3 million) meaning adjusted earnings per share rose 19% to 18.2 pence (2018: 15.3 pence).

 

GBG's net debt balance of £(66.3) million (2018: £13.5 million net cash) reflects the use of cash and debt to acquire VIX Verify, as well as an additional £84 million of debt to partially finance the purchase of IDology.

 

Achievements and strategic outlook

2018/19 saw us continue our long-standing commitment to innovation. We have evolved our identity propositions, increased the use of machine learning in our fraud and location solutions and improved the breadth of data across our product portfolio.

 

Alongside these important product developments, we also completed two acquisitions. VIX Verify provides us with complementary technology and data, as well as broadening our reach across Asia Pacific. IDology, the largest transaction GBG has made to date, is a leading U.S. provider of identity verification and anti-fraud solutions. It materially strengthens our ability to serve existing customers and win new customers in the large and growing North American market. We are pleased with the ongoing integration of both businesses.

 

A key aspect of the Group's strategic focus is to prioritise our three core propositions: location, identity and fraud. This will increase the effectiveness of our engagement with current and potential customers and improve our response to market trends and developments. We made an important step forward in that process with the launch of our location solution brand, Loqate and we have been encouraged by the initial results and customer feedback following that change.

 

Finally, it is pleasing to see that the Group has further increased its high levels of employee engagement across the business - testament to the Group's ongoing programmes of employee inclusion and development.

 

Dividend

We remain committed to delivering increased returns to shareholders. The Board will propose a final dividend of 2.99 pence per share to shareholders at the Annual General Meeting in July. If approved, this will represent an eleventh year of growth in dividends.

 

The year overall

On behalf of the Board, I would wish to thank Chris Clark, his Executive team and all of GBG's employees for their hard work and also thank our shareholders and customers for their continued support.

 

This has been another successful year and we remain confident in the long-term prospects for GBG. I know we have the capabilities and enthusiasm necessary to take advantage of the significant market momentum and growth opportunities available to us. We expect this to lead to another good year in 2019/20.

 

 

David Rasche

Chairman
 

Chief Executive's Statement

 

I am very pleased to report that 2019 has been another successful year for GBG.  We have reported a strong financial performance and I am very encouraged by the growth in our priority international markets of North America and Asia Pacific. 

 

Good strategic progress has been made, in particular with the two acquisitions completed during the year. This has strengthened the business and keeps us well-placed to support our customers and capitalise on the significant market opportunities ahead.

 

Market drivers and growth opportunities

GBG operates in a global market with a number of drivers for structural growth.  Businesses around the world need innovative digital solutions to help them provide a frictionless customer experience, reduce online fraud and meet increasingly stringent compliance regulations. This is driven by:

 

-       Sustained growth in e-commerce, particularly on mobile

-       An increase in fraud and data breaches

-       A greater focus on consumer data privacy and compliance with evolving regulations

-      Consumer expectations of simple online journeys

 

With the shift accelerating towards a digital economy, coupled with the growing use of mobile devices, businesses need innovation that makes things easier, faster and more convenient for their customers.

 

Overview

Following another strong financial performance in 2019, GBG has the capability and resources to continue to make important investments across the Group. These investments will support further growth.  Organic investment will be directed at developing and launching additional world-class products, improving how we take these products to market and recruiting and developing the very best people.  We intend to support this organic investment by considering acquisitions that can broaden our geographic reach and/or strengthen our product capabilities.  

 

Strategic focus areas

In the past year we have increased our focus on the three core solutions that underpin all of our propositions: location, identity and fraud. This has not only contributed to the strong performance in the period but in a complex and rapidly changing environment, this approach allows us to prioritise and align our developments with customer demand and capitalise on market trends.

 

We have strengthened the capabilities of all our teams, particularly in our key target markets of North America and Asia Pacific.  We are pleased with the progress we have made during the period which is demonstrated by the growth of international revenues from 34% to 45% of our total business. 

 

In June 2018, we launched the first GBG solution brand, Loqate. It was the first step in our brand strategy to provide simpler experiences for our customers by bringing our multiple location products and brands under the Loqate solution. The launch helped the business unit to grow by 17% in the year. Our brand strategy continues to evolve and we are currently researching and profiling further solutions.

 

Corporate transactions

GBG has a strong track record of acquiring companies. During the year we completed two further acquisitions to strengthen our product and technology capabilities, broaden our international reach and take us closer to our strategic goal of providing leading identity data intelligence solutions globally. 

 

The first of these was VIX Verify in Australia. This acquisition enhances our portfolio of international identity and location solutions by complementing our existing fraud offerings, it also extends our reach across Asia Pacific.

 

This was followed by our largest transaction to date, the acquisition of IDology for US$300m, a leading U.S. provider of identity verification and anti-fraud solutions based in Atlanta, Georgia. We had already been working with IDology for several years and our long-term relationship with them has given us an excellent understanding of their products and technology and its strategic fit with GBG.  Adding IDology to the GBG family materially strengthens our ability to serve existing customers and win new business in the large, growing North American market.

 

Together, these acquisitions mean that we now have businesses of genuine scale for all three of our solution areas in each of our key regions.

 

Scale through technology

This year we have significantly advanced the technology that underpins our customer propositions. The shift to a cloud operational model was a strategic priority, which will continue to evolve through our partnership with Amazon Web Services. This innovation means the business is able to scale faster and can continue to support our evolving security requirements in the UK and in our international markets.

 

Growth: new business & international expansion

We have seen good performance in terms of new business and customer retention. This includes key wins across all of our core markets and geographies within each of our three solution areas. 

 

·      Our Location solution, Loqate, generated headline wins in North America which included Kohls, eBay and Sephora. We also saw significant additional growth from our current customer Nordstrom.  In Europe, new customers include Paul Valentine, N26, Bosch and HelloFresh while we were pleased to see traction in Asia Pacific with key wins such as FarFetch.

 

·      With our Identity solution, we had a significant new win in the UK with the fast growing FinTech business, Revolut. We are working with them to make sure they stay compliant as their customer base rapidly increases. Further growth has been seen with Coinbase, Deliveroo and Microgaming and we continue to expand across multiple sectors including gaming, banking, technology and retail.

 

·      The Fraud solution, which operates primarily in Asia Pacific, has again seen good progress with wins with Krunthai Card in Thailand, BNI in Indonesia and PPmoney and Bank of Communications in China. We also saw our first US customer, Discover Financial Services, using our anti-fraud solutions.

 

People

Our global team now has close to 1,000 members working in 16 countries. One of this year's highlights for me personally came from our employee engagement survey, which showed the highest scores ever at GBG, where nine out of ten of our team members said they would recommend GBG as a great place to work. Having a truly engaged team is one of GBG's unique strengths and a key factor in our strong global performance. I am immensely proud to work every day with such a committed and talented team and am delighted to see it reflected in positive feedback from customers.

 

Our learning and development programme is evolving and now offers a range of tools and resources to all of our global team members. We have also simplified our employee review process making it more agile for team members and managers to ensure consistency in real time.

 

Current trading & outlook

Looking ahead, the new financial year is trading in line with the Board's expectations and we have clear plans for delivering organic growth. I am excited about this year and the opportunities to further develop our business.

 

 

 

Chris Clark

Chief Executive Officer

 

 

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 is to be the leader in identity data intelligence, informing business decisions between people and organisations globally.

 

The performance of the Group is reported by segment, reflecting how we run the business and the economic characteristics of each segment.  The Group's two operating segments are as follows:

 

·      Fraud, Risk & Compliance - which provides ID Verification, ID Compliance and Fraud Solutions, ID Trace & Investigate and ID Employ & Comply.

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

 

VIX Verify Global Pty Ltd ('VIX Verify') and IDology Inc. ('IDology'), which were acquired during the year, are reported within the Fraud, Risk & Compliance segment.

 

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

·      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.

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

·      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.

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

 

Group Vision and Strategy

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

 

The Group's strategy is to create and maintain unique online products and services which provide additional value for customers and are of sufficient strength to enable the Group to create new markets and consistently win new business against its competition. The Group achieves this through its investment in people, business and product development opportunities and the application of innovation, quality and excellence in everything it does.

 

Review of the Business

The Group uses adjusted figures as key performance indicators 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 acquisitions in the year will not be fully evident in our segments until 2020.

 

2019

2018

Change

Change

 

£'000

£'000

£'000

%

 

 

 

 

 

Revenue1

143,504

119,702

23,802

19.9

Adjusted operating profit  2

32,031

26,311

5,720

21.7

Share-based payments

(2,287)

(2,375)

88

3.7

Amortisation of acquired intangibles

(10,316)

(7,885)

(2,431)

30.8

Operating profit before exceptional items

19,428

16,051

3,377

21.0

Exceptional items

(4,003)

(2,143)

(1,860)

86.8

Operating profit

15,425

13,908

1,517

10.9

Net finance costs

(689)

(508)

(181)

35.6

Profit before tax

14,736

13,400

1,336

10.0

Total tax charge

(2,583)

(2,746)

163

5.9

Profit for the year

12,153

10,654

1,499

14.1

Dividend per share

2.99

2.65

0.34

12.8

Adjusted earnings2

28,759

23,057

5,702

24.7

Basic weighted average number of shares ('000)

158,052

150,553

7,499

5.0

Basic earnings per share (pence)

7.7

7.1

0.6

8.5

Adjusted basic earnings per share (pence) 2

18.2

15.3

2.9

19.0

 

1 The Group adopted IFRS 15 from 1 April 2018 using the modified retrospective method of adoption where the comparative period is not restated, but a cumulative adjustment is recognised in opening reserves. As a result, the 2018 revenue is still under IAS 18 and therefore not directly comparable. The impact of the transition is explained in note 2.

 

2 Adjusted operating profit, adjusted earnings and adjusted earnings per share ('EPS') are non-GAAP measures explained at the end of the Finance Review.

 

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 2019 while being underpinned by solid underlying organic revenue growth of 11.5 per cent on a constant currency basis.

 

Adjusted operating profit for the year increased by 21.7 per cent to £32.0 million, reflecting:

 

·      Revenue growth of 19.9 per cent to £143.5 million. This increase included organic growth of 11.5 per cent on an underlying constant currency basis (8.7 per cent on a reported basis).

·      The adjusted operating profit margin increased marginally from 22.0 per cent to 22.3 per cent, notwithstanding significant continued investment for growth made over the course of the year.

 

Group profit before tax increased by 10.0 per cent in the year to £14.7 million. The total tax charge of £2.6 million compares to a tax charge of £2.7 million in the previous year resulting in the Group profit for the year attributable to shareholders increasing by 14.1 per cent to £12.2 million.

 

Adjusted basic earnings per share improved by 19.0 per cent to 18.2 pence (2018: 15.3 pence).  Basic earnings per share increased by 8.5 per cent to 7.7 pence (2018: 7.1 pence).  Group cash conversion remained strong with net cash generated from operating activities excluding exceptional items of £31.6 million (2018: £32.9 million) compared to operating profit before depreciation, amortisation, share-based payments and exceptional items (Adjusted EBITDA) of £34.1 million (2018: £28.7 million).

 

The Group's balance sheet and financing ability remain strong. This has been evidenced through the equity placing and long-term loans agreed during the year, which supported our acquisitions of VIX Verify and IDology.

 

Adoption of IFRS 15

The Group adopted IFRS 15 effective 1 April 2018, which is the new standard applicable to revenue recognition. The Group has applied the modified retrospective method of adoption where the cumulative impact of adoption on the Group's performance and financial position at 1 April 2018 is recorded within reserves. Adoption resulted in a reduction in reserves of £1.1 million at 1 April 2018 as outlined in note 2. If the Group had continued to apply the previous revenue recognition standard (IAS 18), revenue for the year to 31 March 2019 would have been £0.2 million lower than under IFRS 15.

 

Adjusted EBITDA

Adjusted EBITDA was £34.1 million (2018: £28.7 million), consisting of adjusted operating profit of £32.0 million (2018: £26.3 million), depreciation of £1.5 million (2018: £1.4 million) and amortisation of purchased software and internally developed software of £0.5 million (2018: £1.0 million).

 

Exceptional Items

Exceptional costs of £4.0 million (2018: £2.1 million) were incurred by the Group in the year and have been detailed in note 7 to the accounts. £3.7 million (2018: £0.8 million) of the exceptional costs were acquisition related transaction costs.

 

Net Finance Costs

The Group has incurred net finance costs for the year of £0.7 million (2018: £0.5 million), the increase being interest on the new long-term loan.

 

Acquired Intangibles Amortisation

The charge for the year of £10.3 million (2018: £7.9 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 full year impact of the acquisition of PCA in the prior year and then VIX Verify and IDology in the current year. As IDology, which is the largest acquisition the Group has completed, completed towards the end of the current year, it is expected that this charge will increase in the next financial year.

 

Taxation

The total tax charge of £2.6 million (2018: £2.7 million) includes £4.6 million of current tax payable on the Group's profits in the year (2018: £4.4 million).

 

Dividend

The Board of Directors will propose a final ordinary dividend of 2.99 pence per share (2018: 2.65 pence per share), amounting to £5.8 million (2018: £4.0 million).  The final ordinary dividend with respect to the year ended 31 March 2019, if approved, will be paid on 23 August 2019 to ordinary shareholders whose names were on the register on 18 July 2019.   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 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 £28.8 million (2018: £23.1 million) resulting in a 19.0 per cent increase in adjusted basic earnings per share from 15.3 pence to 18.2 pence. Basic earnings per share increased by 8.5 per cent from 7.1 pence to 7.7 pence reflecting the higher operating profit although offset by higher number of shares in issue. The weighted average number of shares at 31 March 2019 increased to 158.1 million (2018: 150.6 million).

 

Cash Flows

Group operating activities before tax payments and exceptional items generated £31.6 million of cash and cash equivalents (2018: £32.9 million) representing adjusted EBITDA to cash conversion ratio of 92.7 per cent (2018: 114.6 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 14.6 per cent to £27.2 million (2018: £23.7 million).  Group investing activities resulted in net outflows of £256.7 million (2018: £72.3 million) including £255.1 million (2018: £70.4 million) in respect of acquisitions/investments and £1.6 million (2018: £2.1 million) on plant and equipment and software purchases.  Financing activities generated £230.2 million (2018: £49.7 million) of net cash in the year and included £157.7 million (2018: £56.7 million) of net proceeds from the issue of shares, £77.7 million of net new borrowings (2018: £2.8 million of net repayments) and £4.0 million of dividends paid (2018: £3.6 million).   The Group's overall cash and cash equivalents decreased by £1.6 million (2018: £5.1 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 made two acquisitions:

·      VIX Verify, an unlisted company based in Australia. The total cash consideration paid, net of cash acquired, was £20.4 million. This acquisition was part funded by new bank borrowings of £10.0 million.

·      IDology, an unlisted company based in USA. The total cash consideration paid, net of cash acquired, was £234.6 million. This acquisition was part funded by the issue of 39.0 million shares as part of a placing that raised £160.0 million (before costs of £3.3 million), and new bank borrowings of £84.0 million (£15.0 million of which was repaid prior to the year-end).

 

In addition, a total of £0.1 million of contingent consideration was paid out in the year relating to IDscan. Further information on these acquisitions and the contingent consideration can be found in notes 31 and 32 to the accounts.

 

Deferred Income

Deferred income at the end of the year increased by 29.2 per cent to £36.7 million (20181: £28.3 million under IAS 18 as explained in footnote 1 in the previous table).  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 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 determined by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing and new business linearity within a reporting period.

 

Net Assets

Net assets at the end of 2019 were £321.5 million, an increase of £163.7 million on the 2018 level of £157.8 million.  This growth is driven by the increase in equity capital of £157.3 million combined with the total comprehensive income for the year of £8.5 million, less dividends paid of £4.0 million, IFRS 15 transition adjustment of £1.1 million and after adjusting for share-based payments and tax on share options of £2.3 million and a credit of £0.7 million.

 

Relationships

Other than our shareholders, the Group's performance and value are influenced by other stakeholders, principally our customers, suppliers, lenders, 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 £54 million of further funding from a revolving credit facility that is in place. Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group's operating activities. Surplus funds of the Group are invested through the use of short-term deposits, with the objective of reasonable interest rate returns while still providing the flexibility to fund ongoing operations when required.  It is not the Group's policy to engage in speculative activity or to use complex financial instruments.

 

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

 

 

 

Use of non-GAAP Measures in the Group Financial Statements

The Group has identified certain measures that it believes will assist in understanding the performance of the business. The measures are not defined under IFRS and therefore may not be directly comparable with other companies' adjusted measures.  The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance, however management considers them to be important indicators and key measures used within the business for assessing performance. Further information can be found in note 33.

 

The following are the key non-GAAP measures identified by the Group and used in the Strategic Review and Financial Statements:

 

Organic Growth

Organic growth is defined by the Group as year-on-year continuing revenue growth, excluding acquisitions which are included only after the first anniversary following their purchase.

 

Underlying Organic Growth

As highlighted in the October 2017 trading update, organic revenue growth in the year to 31 Match 2018 included £3.5 million from the sale of a material perpetual licence to a leading European bank in September 2017, paid upfront. Had this particular transaction been a fully delivered, three-year agreement, payable in annual instalments (as is normal), then our revenue recognition policies at the time would have only recognised one third of this value. This means revenues for 2018 would have been £117.4 million (the basis for underlying growth) rather than the reported £119.7 million.

 

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.

 

Net cash generated by operating activities before working capital movements

Net cash generated by operating activities before working capital movements means net cash generated from operations in the Consolidated Cash Flow Statement before the movement in provisions, inventories, trade and other receivables and trade and other payables.

 

 

Approved by the Board on 5 June 2019.

 

 

 

Dave 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. The basis for underlying organic growth is explained on the previous page.

 

·      Adjusted Operating Profit

This is used 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.

 

·      Net Debt/Cash

This is calculated as cash and cash equivalent balances less outstanding external loans. Unamortised loan arrangement fees are netted against the loan balance in the financial statements but are excluded from the calculation of net cash/debt.

 

·      Cash Conversion

This is calculated as cash generated from operations in the Consolidated Cash Flow Statement, adjusted to exclude cash payments for exceptional items, as a percentage of Adjusted EBITDA.

 

·      Deferred Income

Deferred income, which is included in our Consolidated Balance Sheet within Trade and Other Payables, 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.

 

 

 

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

 

 

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

Revenue growth 1

 

 

 

19.9%

 

36.8%

 

 

Underlying organic growth at constant currency

 

 

 

11.5%

 

13.6%

 

 

Organic revenue growth

 

 

 

8.7%

 

17.3%

 

 

Fraud, Risk & Compliance revenue growth

 

 

 

25.6%

 

27.3%

 

 

Customer & Location Intelligence revenue growth

 

 

 

11.9%

 

52.8%

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit (£'000)

 

 

 

32,031

 

26,311

 

 

Adjusted operating profit %

 

 

 

22.3%

 

22.0%

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (£'000)

 

 

 

34,080

 

28,688

 

 

Adjusted EBITDA %

 

 

 

23.7%

 

24.0%

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic

 

 

 

7.7p

 

7.1p

 

 

Earnings per share - adjusted basic

 

 

 

18.2p

 

15.3p

 

 

 

 

 

 

 

 

 

 

 

Net (Debt)/Cash (£'000)

 

 

 

(66,252)

 

13,505

 

 

Cash conversion %

 

 

 

92.7%

 

114.6%

 

 

 

 

 

 

 

 

 

 

 

Deferred income (£'000) 1

 

 

 

36,637

 

28,347

 

 

 

 

 

 

 

 

 

 

 

International revenue as a percentage of total revenue

 

 

 

44.7%

 

34.4%

 

 

 

 

 

 

 

 

 

 

 

Employee engagement

 

 

 

> 90%

 

>80%

 

 

 

1 The Group adopted IFRS 15 from 1 April 2018 using the modified retrospective method of adoption where the comparative period is not restated, but a cumulative adjustment is recognised in opening reserves. As a result, the 2018 revenue is still calculated under IAS 18 and therefore not directly comparable. The impact of the transition is explained in note 2.

 

 

 

Consolidated Statement of Comprehensive Income

Year ended 31 March 2019

 

 

 

 

 

 

 

Note

2019

 

2018

 

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Revenue

3

143,504

 

119,702

 

 

 

 

 

Cost of sales

 

(36,060)

 

(27,092)

 

 

 

 

 

Gross profit

 

107,444

 

92,610

 

 

 

 

 

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

 

(75,413)

 

(66,299)

 

 

 

 

 

 

 

 

 

 

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

 

32,031

 

26,311

 

 

 

 

 

Amortisation of acquired intangibles

15

(10,316)

 

(7,885)

 

 

 

 

 

Equity-settled share-based payments charge

27

(2,287)

 

(2,375)

 

 

 

 

 

Exceptional items

7

(4,003)

 

(2,143)

 

 

 

 

 

 

 

 

 

 

Group operating profit

 

15,425

 

13,908

 

 

 

 

 

Finance revenue

9

31

 

37

 

 

 

 

 

Finance costs

10

(720)

 

(545)

 

 

 

 

 

Profit before tax

 

14,736

 

13,400

 

 

 

 

 

Income tax charge

11

(2,583)

 

(2,746)

 

 

 

 

 

Profit for the year attributable to equity holders of the parent

 

12,153

 

10,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

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

 

(3,702)

 

(3,206)

 

 

 

 

 

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

 

8,451

 

7,448

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

13

 

 

 

     - basic earnings per share for the year

 

7.7p

 

7.1p

 

 

 

 

 

     - diluted earnings per share for the year

 

7.6p

 

7.0p

 

 

 

 

 

     - adjusted basic earnings per share for the year

 

18.2p

 

15.3p

 

 

 

 

 

     - adjusted diluted earnings per share for the year

 

17.9p

 

15.0p

 

 

 

 

 

 

 

 

 

 

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 2019

 

 

 

 

 

Note

 

Equity

share

capital

 

Share premium

 

 

 

Merger reserve

 

 

Capital redemption reserve

 

Foreign currency translation reserve

 

 

 

Retained earnings

 

 

 

 

Total

equity

 

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 April 2017

 

3,368

 

48,595

 

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

2,189

 

56,219

 

-

 

-

 

-

 

-

 

 

58,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issue costs

20

(1,740)

 

-

 

-

 

-

 

-

 

-

 

 

(1,740)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments charge

27

-

 

-

 

-

 

-

 

-

 

2,375

 

 

2,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax on share options

 

-

 

-

 

-

 

-

 

-

 

660

 

 

660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity dividend

12

-

 

-

 

-

 

-

 

-

 

(3,582)

 

 

(3,582)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2018 (As Reported)

 

3,817

 

104,814

 

6,575

 

3

 

891

 

         41,652

 

 

157,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IFRS 15 transition adjustment

2

-

 

-

 

-

 

-

 

-

 

(1,058)

 

 

(1,058)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2018 (Restated)

 

3,817

 

104,814

 

6,575

 

3

 

891

 

         40,594

 

 

156,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

 

-

 

-

 

-

 

-

 

12,153

 

 

12,153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

-

 

-

 

-

 

-

 

(3,702)

 

-

 

 

(3,702)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

(3,702)

 

12,153

 

 

8,451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

20

1,004

 

159,609

 

-

 

-

 

-

 

-

 

 

160,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issue costs

20

-

 

(3,274)

 

-

 

-

 

-

 

-

 

 

(3,274)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments charge

27

-

 

-

 

-

 

-

 

-

 

2,287

 

 

2,287

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax on share options

 

-

 

-

 

-

 

-

 

-

 

738

 

 

738

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity dividend

12

-

 

 

 

-

 

-

 

-

 

(4,049)

 

 

(4,049)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2019

 

4,821

 

261,149

 

6,575

 

3

 

(2,811)

 

51,723

 

 

321,460

 

Company Statement of Changes in Equity

Year ended 31 March 2019

 

 

 

 

 

Note

Equity

share

capital

 

Share premium

 

 

Merger reserve

 

Capital redemption reserve

 

 

Other

reserves

 

 

Retained earnings

 

 

Total

equity

 

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 April 2017

 

3,368

 

48,595

 

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

2,189

 

56,219

 

-

 

-

 

-

 

-

 

58,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issue costs

20

(1,740)

 

-

 

-

 

-

 

-

 

-

 

(1,740)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Resulting from hive-up transactions

31

-

 

-

 

-

 

-

 

4,543

 

-

 

4,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments charge

27

-

 

-

 

-

 

-

 

-

 

2,375

 

2,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax on share options

 

-

 

-

 

-

 

-

 

-

 

651

 

651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity dividend

12

-

 

-

 

-

 

-

 

-

 

(3,582)

 

(3,582)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2018 (As Reported)

 

3,817

 

104,814

 

6,575

 

3

 

4,543

 

39,795

 

159,547

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IFRS 15 transition adjustment

2

-

 

-

 

-

 

-

 

-

 

(1,058)

 

(1,058)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2018 (Restated)

 

3,817

 

104,814

 

6,575

 

3

 

4,543

 

38,737

 

158,489

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

 

-

 

-

 

-

 

-

 

7,275

 

7,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

-

 

7,275

 

7,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

20

1,004

 

159,609

 

-

 

-

 

-

 

-

 

160,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issue costs

20

-

 

(3,274)

 

-

 

-

 

-

 

-

 

(3,274)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments charge

27

-

 

-

 

-

 

-

 

-

 

2,287

 

2,287

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax on share options

 

-

 

-

 

-

 

-

 

-

 

738

 

738

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity dividend

12

-

 

-

 

-

 

-

 

-

 

(4,049)

 

(4,049)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2019

 

4,821

 

261,149

 

6,575

 

3

 

4,543

 

44,988

 

322,079

 

Consolidated Balance Sheet

As at 31 March 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

2019

 

2018

 

 

 

 

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

14

 

4,815

 

4,700

Intangible assets

 

 

15

 

420,137

 

161,372

Investments

 

 

17

 

411

 

-

Deferred tax asset

 

 

11

 

8,222

 

4,212

 

 

 

 

 

 

 

 

 

 

 

 

 

433,585

 

170,284

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

 

 

 

341

 

399

Trade and other receivables

 

 

18

 

54,874

 

37,969

Cash and short-term deposits

 

 

19

 

21,189

 

22,753

 

 

 

 

 

76,404

 

61,121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

509,989

 

231,405

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity share capital

 

 

20

 

4,821

 

3,817

Share premium

 

 

 

 

261,149

 

104,814

Merger reserve

 

 

 

 

6,575

 

6,575

Capital redemption reserve

 

 

 

 

3

 

3

Foreign currency translation reserve

 

 

 

 

(2,811)

 

891

Retained earnings

 

 

 

 

51,723

 

41,652

 

 

 

 

 

 

 

 

Total equity attributable to equity holders of the parent

 

 

 

 

321,460

 

157,752

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

21

 

85,447

 

8,451

Long service award

 

 

24

 

528

 

-

Trade and other payables

 

 

22

 

1,184

 

-

Deferred tax liability

 

 

11

 

29,548

 

8,260

 

 

 

 

 

116,707

 

16,711

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

21

 

1,441

 

797

Trade and other payables

 

 

22

 

68,961

 

55,897

Contingent consideration

 

 

32

 

79

 

45

Provisions

 

 

23

 

-

 

25

Current tax

 

 

 

 

1,341

 

178

 

 

 

 

 

 

 

 

 

 

 

 

 

71,822

 

56,942

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

188,529

 

73,653

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

 

 

509,989

 

231,405

                                                                                               

Approved by the Board on 5 June 2019

 

C G Clark - Director

D J Wilson - Director

 

Registered in England number 2415211
 

Company Balance Sheet

As at 31 March 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

2019

 

2018

 

 

 

 

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

14

 

3,803

 

3,714

Intangible assets

 

 

15

 

139,139

 

113,174

Investments

 

 

17

 

298,268

 

76,310

Deferred tax asset

 

 

11

 

3,094

 

            3,163

 

 

 

 

 

 

 

 

 

 

 

 

 

444,304

 

196,361

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

 

 

 

338

 

399

Trade and other receivables

 

 

18

 

35,899

 

31,351

Cash and short-term deposits

 

 

19

 

7,791

 

14,778

 

 

 

 

 

 

 

 

 

 

 

 

 

44,028

 

46,528

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

488,332

 

242,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity share capital

 

 

20

 

4,821

 

3,817

Share premium

 

 

 

 

261,149

 

104,814

Merger reserve

 

 

 

 

6,575

 

6,575

Capital redemption reserve

 

 

 

 

3

 

3

Other reserves

 

 

 

 

4,543

 

4,543

Retained earnings

 

 

 

 

44,988

 

39,795

 

 

 

 

 

 

 

 

Total equity attributable to equity holders of the parent

 

 

 

 

322,079

 

159,547

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

21

 

85,447

 

7,000

Long service award

 

 

24

 

395

 

-

Trade and other payables

 

 

22

 

863

 

-

Deferred tax

 

 

11

 

5,020

 

6,319

 

 

 

 

 

91,725

 

13,319

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables

 

 

22

 

73,657

 

69,541

Contingent consideration

 

 

32

 

79

 

45

Provisions

 

 

23

 

-

 

25

Current tax

 

 

 

 

792

 

412

 

 

 

 

 

 

 

 

 

 

 

 

 

74,528

 

70,023

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

166,253

 

83,342

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

 

 

488,332

 

242,889

 

During the year the Company made a profit £7,275,000 (2018: £5,153,000).

 

Approved by the Board on 5 June 2019

C G Clark - Director

D J Wilson - Director

 

Registered in England number 2415211
 

Consolidated Cash Flow Statement

 

Year ended 31 March 2019

 

 

 

 

 

 

 

 

Note

 

2019

 

2018

 

 

 

£'000

 

£'000

 

 

 

 

 

 

Group profit before tax

 

 

14,736

 

13,400

 

 

 

 

 

 

Adjustments to reconcile Group profit before tax to net cash flows

 

 

 

 

 

 

 

 

 

 

 

Finance revenue

9

 

(31)

 

(37)

Finance costs

10

 

720

 

545

Depreciation of plant and equipment

14

 

1,544

 

1,430

Amortisation of intangible assets

15

 

10,821

 

8,832

Loss on disposal of plant and equipment

 

 

46

 

38

Fair value adjustment on contingent consideration   

32

 

-

 

383

Share-based payments

27

 

2,287

 

2,375

(Decrease)/increase in provisions

23

 

(25)

 

(10)

Increase in inventories

 

 

58

 

(166)

Increase in trade and other receivables

 

 

(9,904)

 

(5,390)

Increase in trade and other payables

 

 

7,527

 

10,220

 

 

 

 

 

 

Cash generated from operations

 

 

27,779

 

31,620

Income tax paid

 

 

(2,930)

 

(3,247)

Net cash generated from operating activities

 

 

24,849

 

28,373

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) investing activities

 

 

 

 

 

 

 

 

 

 

 

Acquisition of subsidiaries, net of cash acquired

31

 

(255,107)

 

(70,363)

Purchase of plant and equipment

14

 

(1,453)

 

(1,902)

Purchase of software

15

 

(172)

 

(212)

Proceeds from disposal of plant and equipment

 

 

6

 

96

Interest received

9

 

31

 

37

 

 

 

 

 

 

Net cash flows used in investing activities

 

 

(256,695)

 

(72,344)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) financing activities

 

 

 

 

 

 

 

 

 

 

 

Finance costs paid

10

 

(720)

 

(545)

Proceeds from issue of shares

20

 

160,613

 

58,408

Share issue costs

20

 

(3,274)

 

(1,740)

Proceeds from new borrowings

21

 

110,447

 

10,000

Repayment of borrowings

21

 

(32,807)

 

(12,839)

Dividends paid to equity shareholders

12

 

(4,049)

 

(3,582)

 

 

 

 

 

 

Net cash flows from financing activities

 

 

230,210

 

49,702

 

 

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

(1,636)

 

5,731

Effect of exchange rates on cash and cash equivalents

 

 

72

 

(596)

Cash and cash equivalents at the beginning of the period

 

 

22,753

 

17,618

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

19

 

21,189

 

22,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Cash Flow Statement

 

 

Year ended 31 March 2019

 

 

 

 

 

 

 

 

 

Note

 

2019

 

2018

 

 

 

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Company profit before tax

 

 

9,078

 

6,303

 

 

 

 

 

 

 

 

Adjustments to reconcile Company profit before tax to net cash flows

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance revenue

 

 

-

 

(16)

 

Finance costs

 

 

                      642

 

439

 

Depreciation of plant and equipment

14

 

                  1,125

 

856

 

Amortisation of intangible assets

15

 

                    6,116

 

1,851

 

Loss on disposal of plant and equipment

 

 

                        47

 

-

 

Fair value adjustment on contingent consideration

32

 

                           -  

 

383

 

Share-based payments

27

 

                   2,287

 

2,375

 

Increase in inventories

 

 

                          61

 

(399)

 

(Decrease)/increase in provisions

23

 

                    (25) 

 

(10)

 

Increase in trade and other receivables

 

 

               (4,548)

 

(9,505)

 

Increase/(decrease) in trade and other payables

 

 

4,074 

 

33,268

 

 

 

 

                         

 

 

 

Cash generated from operations

 

 

18,857

 

35,545

 

Income tax paid

 

 

(1,674)

 

(399)

 

Net cash generated from operating activities

 

 

17,183

 

35,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of subsidiary undertakings

31

 

(256,348)

 

(81,312)

 

Dividends received

 

 

2,464

 

-

 

Purchase of plant and equipment

14

 

(1,214)

 

(585)

 

Purchase of software

15

 

(167)

 

(145)

 

Interest received

 

 

-

 

16

 

 

 

 

 

 

 

 

Net cash flows used in investing activities

 

 

(255,265)

 

(82,026)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance costs paid

 

 

(642)

 

(439)

 

Proceeds from issue of shares

20

 

160,613

 

58,408

 

Share issue costs

20

 

(3,274)

 

(1,740)

 

Proceeds from new borrowings

21

 

110,447

 

10,000

 

Repayment of borrowings

21

 

(32,000)

 

(12,000)

 

Dividends paid to equity shareholders

12

 

(4,049)

 

(3,582)

 

 

 

 

 

 

 

 

Net cash flows from financing activities

 

 

231,095

 

50,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

(6,987)

 

3,767

 

Cash and cash equivalents at the beginning of the period

 

 

14,778

 

11,011

 

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

19

 

7,791

 

14,778

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

               

 

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.

 

These consolidated financial statements have been approved for issue by the Board of Directors on 5 June 2019.

 

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 2019 and the Group and Company have applied the same policies throughout the year.

 

Changes to accounting policies

The following new IFRS standards relevant to the Company have been adopting in these financial statements:

 

(i)                    IFRS 15 Revenue from Contracts with Customers: Replaces IAS 18 Revenue and IAS 11 Construction Contracts.  The core principle of IFRS 15 is that revenue reflects the transfer of goods or services to customers in an amount that reflect the consideration to which an entity expects to be entitled.  The recognition of such revenue is in accordance with five steps to: identify the contract; identify the performance obligations; determine the transaction price; allocate the transaction price to the performance obligations; and recognised revenue when the performance obligations are satisfied. The impact of adopting IFRS 15 is detailed below.

 

(ii)                  IFRS 9 Financial Instruments: The Group has adopted IFRS 9 'Financial Instruments' with a date of initial application of 1 April 2018. IFRS 9 'Financial Instruments' replaces IAS 39 and impacts upon the classification and measurement of financial instruments and will require certain additional disclosures. Management have confirmed that there are no changes as a result of adopting IFRS 9. The following areas were identified as the main items of interest to the Group:

Credit losses

IFRS 9 replaced the existing incurred loss model with a forward looking expected credit loss model. The expected credit losses on these trade receivable and contract assets are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for management judgement concerning factors that are specific to the receivables, general economic conditions and assessment of the current as well as the forecast direction of conditions at the reporting date based on reasonable and supportable information that is available, without undue cost or effort to obtain. Due to the exemption in IFRS 9, there is no requirement to 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. The change from an incurred loss model under IAS 39 to an expected loss model has not had a material impact and no adjustment is required 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 non-substantial modification. On transition to IFRS 9, this change in policy was applied retrospectively to all financial liabilities that were still recognised at the date of the initial application. There was no material impact and therefore no adjustment is required at 1 April 2018.

 

(iii)                 Amendment to IFRS 2 'Classification and Measurement of Share-based Payment Transactions': the amendments are intended to clarify the standard in relation to the accounting for cash-settled share-based payment transaction that include a performance obligation, the classification of share-based payment transactions with net settlement features, and the accounting for modifications of share-based payment transactions from cash-settled to equity-settled.

 

 

 

 

2.  Accounting Policies

 

(iv)                 IFRIC 22 'Foreign Currency Transactions and Advance Consideration': The interpretation addresses foreign currency transactions or parts of transactions where (i) there is consideration that is denominated or priced in a foreign currency; (ii) the entity recognises a prepayment asset or a deferred income liability in respect of that consideration, in advance of the recognition of the related asset, expense or income; and (iii) the prepayment asset or deferred income liability is non-monetary.  The Interpretations Committee came to the following conclusions: The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability.  If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt.

 

(v)                   Amendment to IAS 40 'Transfers of Investment Property': the amendments are intended to clarify when an entity should transfer property, including property under construction or development into, or out of investment property.  The amendments state that a chance in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. 

Apart from IFRS 15, none of these pronouncements has had any impact for amounts recognised in these financial statements.  The Group has adopted IFRS 15 from 1 April 2018 using the modified retrospective method of adoption, details of the impact are set out below.  In accordance with the new five step model, revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be measured reliably. 

 

The following table provides information about areas of revenue recognition where there has been a change under IFRS 15 compared to the treatment that would have been applied under IAS 18.

 

 

Type of product / service

Description of the product or service

Treatment under IAS 18

Revised treatment under IFRS 15

Software licences - data disk sales within Fraud, Risk & Compliance segment

Customers are provided with a physical disk of data that they can use over an agreed licence period. During the licence period they are provided with new data disks containing updates to that data on a regular basis.

 

The frequency of changes in the data provided in these disks and the uses of this data by the customer makes it important that they are using up-to-date data.

The revenue is apportioned between the data disk and the post-contract support, which incorporates providing the data updates.

 

The revenue for the data disk is recognised upon delivery to the customer as that was considered to be when the risks and rewards of ownership have passed which was the criteria under IAS 18.

 

The revenue for the post-contract support was recognised evenly over the licence period.

 

Under IFRS 15 revenue recognition is now based on the transfer of control of goods or services to a customer, rather than just the transfer of risks and rewards which was the case under IAS 18. Control is defined as "the ability to direct the use of and obtain substantially all of the remaining benefits from the asset".

 

Due to the relative importance of the data updates to the customer's use of the data disk, it is considered that control over the full licence period does not pass on delivery of the initial data disk. This is because they require the future updates to that data to be able to obtain the benefits of it.

 

We consider that the delivery of each data disk containing the updates meet the criteria under IFRS 15 paragraph 22: "a promise to transfer to the customer a series of distinct goods or services that are substantially the same and that have the same pattern of transfer". Consequently, the revenue for the full licence period is recognised over time as each data disk is delivered, rather than all upfront on delivery of the original data disk.

 

Software licences - data disk sales within Customer Location & Intelligence segment - multi year deals

Customers are provided with a physical disk of data that they can use over an agreed licence period of more than one year. During the licence period they are provided with new data disks containing data updates on a regular basis.

 

In contrast to Fraud, Risk & Compliance data disks, the data within the customer location and intelligence data disks changes less frequently and so the updates are not considered as critical to the customer.

The revenue is apportioned between the data disk and the post-contract support, which incorporates providing the data updates.

 

In the majority of cases GBG multi-year contracts were not paid upfront and were invoiced and paid annually.

 

The timeframe between each invoice meant that the criteria in IAS 18 that it is 'probable that any future economic benefit associated with the item of revenue will flow to the entity' was assessed not to be met and so the revenue was recognised in line with the invoicing - i.e. one year at a time.

 

The revenue for the post-contract support was recognised evenly over the licence period.

As the data updates are less critical to the customer, it is considered that the delivery of the original disk and the data updates are separate performance obligations.

 

Under IFRS 15 the credit risk is not considered in the revenue recognition and so whilst there is a requirement to account for a financing component in the recognition profile, this is not a significant element of the overall revenue. Therefore, the full amount of revenue allocated to the data disk should be recognised upfront as the control criteria has been met.

 

The revenue for the post-contract support continues to be recognised evenly over the licence period.

 

 

 

 

Transactional services - forfeitures

Customers make a prepayment, which entitles them to perform a specific number of transactions over an agreed contract period. Once this period has expired, any unused transactions are forfeited.

Revenue was recognised based on the number of transactions used by the customer at each measurement date.

 

Any remaining deferred revenue balance at the end of the contract period was recognised as revenue at that point.

 

Based on a review of forfeitures in previous years an estimate has been made of the expected percentage of transactions that will remain unused over their contracted life.

 

This percentage is applied such that revenue for expected forfeitures is recognised at in proportion to the pattern of transactions performed by the customer.

 

 

Revenue from contracts with customers

 

Due to the transition method chosen by the Group in applying IFRS 15, comparative information throughout these financial statements has not been restated to reflect the requirements of the new standard.

 

The follow table summarise the impact, net of tax, of the transition to IFRS 15 on retained earnings at 1 April 2018.

 

 

 

 

 

 

 

 

Impact of adopting IFRS 15 at

1 April 2018

£000

 

 

 

 

 

 

 

 

Retained earnings - as reported

 

 

 

 

 

 

41,652

 

 

 

 

 

 

 

 

Software licences - data disk sales within Fraud, Risk & Compliance segment

 

 

 

 

 

 

(1,929)

Software licences - data disk sales within Customer Location & Intelligence segment - multi-year deals

 

454

Transactional services - forfeitures

 

 

 

 

 

 

176

 

 

 

 

 

 

 

(1,299)

Related tax

 

 

 

 

 

 

241

Impact at 1 April 2018

 

 

 

 

 

 

(1,058)

Retained earnings - restated

 

 

 

 

 

 

40,594

 

If reporting under IAS 18 for the period, revenue would have been £0.2 million lower, and operating profit £0.2 million lower.  There was no material impact on the Group's statement of cash flows for the year ended 31 March 2019. 

 

Significant accounting policies

 

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

 

 

 

 2.  Accounting Policies continued

 

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 IFRS 9 'Financial Instruments: Recognition and Measurement' (31 March 2019) and IAS 39 'Financial Instruments: Recognition and Measurement' (31 March 2018), are 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% in 2015 of shares in Loqate, Inc., 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             

 

 

 

2.  Accounting Policies continued

 

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 5 years

Brands and trademarks                   - over 2 to 3 years

Customer relationships                  - over 10 years

 

 

 

2.  Accounting Policies continued

 

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.

 

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.

 

Financial Assets

Initial recognition and measurement

Financial assets are classified at initial recognition and subsequently as measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.

 

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15.

 

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

 

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

 

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

 

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

·      Financial assets at amortised cost (debt instruments)

·      Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

·      Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)

·      Financial assets at fair value through profit or loss

The Group only has financial assets falling into the first two categories above and as such has only included the policy for these two below.

 

Financial assets at amortised cost (debt instruments)

This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met:

 

•         The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows

And

•         The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

 

The Group's financial assets at amortised cost includes trade receivables.

 

 

 

2.  Accounting Policies continued

 

Financial assets designated at fair value through OCI (equity instruments)

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

 

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

 

The Group elected to classify irrevocably its non-listed equity investments under this category.

 

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group's consolidated statement of financial position) when:

 

• The rights to receive cash flows from the asset have expired

Or

• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset

 

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

 

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

 

Impairment of financial assets

The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

 

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

 

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

 

The Group recognises loss allowances for expected credit losses (ECL) on financial assets measured at amortised cost. Loss allowances for trade receivables are always measured at an amount equal to lifetime ECL. ECL are a probability-weighted estimate of credit losses. An assessment of ECL is calculated using a provision matrix model to estimate the loss rates to be applied to each trade receivable category. ECL are discounted at the effective interest rate of the financial asset. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.  The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.

 

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

 

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.

 

 

2.  Accounting Policies continued

 

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 fair value and subsequently recorded at amortised cost using the EIR 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 stated net of value-added tax, rebates and discounts and after the elimination of intercompany transactions within the Group.  The Group operates a number of different businesses offering a range of products and services and accordingly applies a variety of methods for revenue recognition, based on the principles set out in IFRS 15.

 

Revenue is recognised to represent the transfer of promised services to customers in a way that reflects the consideration expected to be received in return. Consideration from contracts with customers is allocated to the performance obligations identified based on their standalone selling price and is recognised when those performance obligations are satisfied and the control of goods or services is transferred to the customer, either over time or at a point in time.

 

In determining the amount of revenue and profits to record, and related balance sheet items (such as contract assets, contract liabilities, accrued income and deferred income) to recognise in the period, management is required to form a number of judgements and assumptions. These may include an assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised. These judgements are inherently subjective and may cover future events such as the achievement of contractual milestones.

 

For contracts with multiple components to be delivered, management may have to apply judgement to consider whether those promised goods and services are (i) distinct - to be accounted for as separate performance obligations; (ii) not distinct - to be combined with other promised goods or services until a bundle is identified that is distinct or (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer.

 

At contract inception the total transaction price is determined, and the Group allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied. Because of the bespoke nature of some solutions, judgement is sometimes required to determine and estimate an appropriate standalone selling price.

 

a)        Software Licences

Revenue from software licences is recognised when control is considered to have passed to the customer. Control can pass either at a point in time or over time depending on the performance obligations under the contract.

 

Web-service hosted software solutions

The performance obligation is to provide the customer a right to access the software throughout the licence period for which revenue is recognised over the licence period.

 

On-premise installation or data disk - Customer Location & Intelligence segment

The performance obligations can include the provision of a software licence, data sets, updates to those data sets during the licence period and support and maintenance. There are instances where customers are provided a data set to use with their own software rather than the Group's.

 

The Group's software has no standalone value to the customer without the data as there is nothing to apply the algorithms to. The data file cannot be accessed outside of the software so has no standalone value (unless under the circumstance where it has been licenced for use on the

 

 

 

2.  Accounting Policies continued

 

customer's system). As a result, the software and the data are considered one performance obligation as the customer cannot benefit from one without the other.

 

Customers are given a right to use the software and data as it exists at the point in time the licence is granted, for which revenue is recognised at the point in time the customer can first use and benefit from it.

 

A proportion of the transaction price is allocated to the provision of data updates and support and maintenance, which are considered separate performance obligations. This is either based on the stand-alone selling price for those services or, where the Group does not have a history of stand-alone selling prices for a particular software licence, a cost plus mark-up approach is applied.

 

Data disk - Fraud, Risk & Compliance segment

The performance obligations can include the licence to use specific data sets, updates to those data sets during the licence period and support and maintenance.

 

The delivery of the initial data disk and then subsequent disks containing the updates meet the criteria under IFRS 15 paragraph 22: "a promise to transfer to the customer a series of distinct goods or services that are substantially the same and that have the same pattern of transfer". Accordingly, the revenue for the full licence period is recognised over time as each software update is delivered.

 

b)        Transactional

A number of GBG SaaS solutions provide for the provision of transactional identity data intelligence services with customer paying only for the number of searches they perform. The performance obligation is to provide this identity check and revenue in respect of those solutions is recognised based on usage. Customers are either invoiced in arrears for searches performed or make a prepayment giving them the right to a specific number of searches.

 

Where customers make a prepayment, which entitles them to perform a specific number of transactions over an agreed contract period, once this period has expired any unused transactions are forfeited. Based on a review of historic forfeitures an estimate is made of the expected percentage of transactions that will remain unused over their contracted life. This percentage is applied such that revenue for expected forfeitures is recognised at in proportion to the pattern of transactions performed by the customer.               

 

c)        Rendering of Services

Revenue from the rendering of services is recognised over time 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 services consist of the delivery of support and maintenance on software licence agreements, it is generally considered to be a separate performance obligation and revenue is recognised on a straight-line basis over the term of the support period.

 

d)        Contract assets and contract liabilities

Costs to obtain a contract in the Group typically include sales commissions and under IFRS 15 certain costs such as these are deferred as Contract Assets and are amortised on a systematic basis consistent with the pattern of transfer of the goods or services to which the asset relates. As a practical expedient, these costs are expensed if the amortisation period to which they relate is one year or less.

 

Where the Group completes performance obligations under a contract with a customer in advance of invoicing the customer, the value of the accrued revenue is initially recognised as a contract asset.

 

Any contract assets are disclosed within the trade and other receivables in the Consolidated Balance Sheet.

 

Where the Group receives a short-term prepayment or advance of consideration prior to completion of performance obligations under a contract with a customer, the value of the advance consideration received is initially recognised as a contract liability in liabilities. Revenue is subsequently recognised as the performance obligations are completed over the period of the contract (i.e. as control is passed to the customer). Contract liabilities are presented in deferred income within trade and other payables in the Consolidated Balance Sheet.

 

e)        Principal versus agent

The Group has arrangements with some of its customers whereby it needs to determine if it acts as a principal or an agent as more than one party is involved in providing the goods and services to the customer.

 

The Group is an agent if its role is to arrange for another entity to provide the goods or services. Factors considered in making this assessment are most notably the discretion the Group has in establishing the price for the specified good or service, whether the Group has inventory risk and whether the Group is bears the responsibility for fulfilling the promise to deliver the service or good. Where the Group is acting as an agent revenue is recorded at a net amount reflecting the margin earned.

 

The Group acts as a principal if it controls a promised good or service before transferring that good or service to the customer. Where the Group is acting as a principal, revenue is recorded on a gross basis.

 

 

 

2.  Accounting Policies continued

 

This assessment of control requires some judgement in particular in relation to certain service contracts. An example is the provision of certain employment screening services where the Group may be assessed to be agent or principal dependent upon the facts and circumstances of the arrangement and the nature of the services being delivered.

 

f)         Contract Modifications

Although infrequent, contracts may be modified for changes in contract terms or requirements. These modifications and amendments to contracts are always undertaken via an agreed formal process. Contract modifications exist when the amendment either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group's measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one of the following ways:

a.        Prospectively as an additional separate contract;

b.        Prospectively as a termination of the existing contract and creation of a new contract;

c.        As part of the original contract using a cumulative catch up; or

d.        As a combination of b) and c).

 

For contracts for which the Group has decided there is a series of distinct goods and services that are substantially the same and have the same pattern of transfer where revenue is recognised over time, the modification will always be treated under either a) or b). d) may arise when a contract has a part termination and a modification of the remaining performance obligations.

 

The facts and circumstances of any contract modification are considered individually as the types of modifications will vary contract by contract and may result in different accounting outcomes.

 

g)        Interest Income

Revenue is recognised as interest accrues using the effective interest rate 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.

 

h)        Presentation and disclosure requirements

The Group has disaggregated revenue recognised from contracts into contract type (Licences, Transaction and Services) as management believe this best depicts how the nature, amount, timing and uncertainty of the Group's revenue and cash flows are affected by economic factors. The Group has also disclosed information about the relationship between the disclosure of disaggregated revenue and revenue information disclosed for each reportable segment. Refer to note 4 for the disclosure on disaggregated revenue.

 

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).

 

 

2.  Accounting Policies continued

 

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.

 

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.

 

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.

 

New Accounting Standards and Interpretations not Applied

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 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 16 'Leases' replaces IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC-15 Operating Lease Incentives and SIC-27 Evaluating the Substance of Transactions involving the Legal Form of a Lease.  IFRS 16 sets out principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17.  The standard included two recognition exemptions for lessess - leases of low-value assets and short-term leases.  At the commencement date of a lease, a lessee will recognised a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term (i.e. the right of use asset).  Lessees will be required to separately recognise the interest expense on the lease liability and depreciation expense on the right of use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events.  The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right of use asset. 

 

IFRS 16 is effective for annual periods beginning on or after 1 January 2019 and will be adopted by the Group on 1 April 2019. 

 

The Group has entered into a number of long-term leases in respect of land and buildings.  The Group is continuing to evaluate the full impact of the accounting changes that will arise under IFRS 16. To see the volume of operating leases, see note 26 for more information.  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

 

 

2.  Accounting Policies continued

 

of lease liabilities will not equal the lease commitments that will be reported in the operating lease commitments note in the 2019 Annual Report, 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 currently expect to adopt the full retrospective method to provide consistency when looking at comparative results.

 

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, 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 stated earlier in note 2.  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 (2018: £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 2019 was £8,222,000 (2018: £4,212,000) and the unrecognised deferred tax asset at 31 March 2019 was £3,166,000 (2018: £3,356,000).  Further details are contained in note 11.

 

Share-based Payments

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Judgement is required in determining the most appropriate valuation model for a grant of equity instruments, depending on the terms and conditions of the grant.  Management are also required to use judgement in determining the most appropriate inputs to the valuation model including expected life of the option, volatility and dividend yield.  The assumptions and models used are disclosed in note 27.

 

Long Service Award

An actuarial model is used to value long service awards in accordance with IAS 19. Management are required to use judgement in determining the most appropriate inputs to the valuation model. The assumptions and models used are disclosed in note 24.

 

Revenue Recognition

Under IFRS 15 revenue is recognised when control passes to the customer. Control is defined as "the ability to direct the use of and obtain substantially all of the remaining benefits from the asset". In respect of software licences delivered either through a local installation or on a data disk there is a judgement as to when the customer is in control of obtaining substantially all the remaining benefits of the asset. It was considered by management that in certain agreements the relative importance of the data updates provided during the software licence period are a key factor in assessing when control passes. In the Fraud, Risk & Compliance division, certain updates are considered a critical part of the licence and therefore revenue is recognised when each software update is delivered. In the Customer & Location Intelligence segment there are less frequent changes in the data being used and it is considered less critical to the use of the software by the customer. Therefore, the revenue for these software licences is recognised on initial installation.

 

 

 

2.  Accounting Policies continued 

 

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 VIX Verify and IDology 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:

 

 

 

 

 

2019

 

2018

 

£'000

 

£'000

 

 

 

 

Licence

75,322

 

64,143

Transactional

56,191

 

42,577

Services

11,991

 

12,982

Revenue

143,504

 

119,702

 

 

 

 

Finance revenue

31

 

37

Total revenue

143,535

 

119,739

 

 

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 Compliance & Fraud Solutions, ID Trace & Investigate and ID Employ & Comply; and Customer & Location Intelligence - which provides ID Location Intelligence and ID Engage Solutions.  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.

 

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

 

 

 

2019

Year ended 31 March 2019

 

£'000

 

£'000

 

£'000

 

£'000

Licence

39,781

 

35,541

 

-

 

75,322

Transactional

45,459

 

10,732

 

-

 

56,191

Services

2,373

 

9,618

 

-

 

11,991

Total revenue

87,613

 

55,891

 

-

 

143,504

Adjusted operating profit

20,417

 

12,633

 

(1,019)

 

32,031

Amortisation of acquired intangibles

(5,163)

 

(5,153)

 

-

 

(10,316)

Share-based payments charge

-

 

 

 

(2,287)

 

(2,287)

Exceptional items

-

 

 

 

(4,003)

 

(4,003)

Operating profit

15,254

 

7,480

 

(7,309)

 

15,425

Finance revenue

 

 

 

 

31

 

31

Finance costs

 

 

 

 

(720)

 

(720)

Income tax charge

 

 

 

 

(2,583)

 

(2,583)

Profit for the year

 

 

 

 

 

 

12,153

 

 

 

 

 

 

 

 

 

 

 

VIX Verify Global Pty Ltd ('VIX Verify') and IDology Inc. ('IDology'), which were acquired during the year, are reported within the Fraud, Risk & Compliance segment.

 

 

Fraud, Risk

& Compliance

 

Customer & Location

 Intelligence

 

 

 

Unallocated

 

 

 

2018

Year ended 31 March 2018

 

£'000

 

£'000

 

£'000

 

£'000

Licence

34,884

 

29,259

 

-

 

64,143

Transactional

32,388

 

10,189

 

-

 

42,577

Services

2,495

 

10,487

 

-

 

12,982

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

 

37

Finance costs

 

 

 

 

(545)

 

(545)

Income tax charge

 

 

 

 

(2,746)

 

(2,746)

Profit for the year

 

 

 

 

 

 

10,654

 

 

 

 

 

 

 

 

Postcode Anywhere (Holdings) Limited ('PCA'), which was acquired in 2017/18, is reported within the Customer & Location Intelligence segment.

 

Geographical Information

 

 

Revenues from external customers

 

 

               Non-current assets

 

Underlying*

 

 

 

2019

 

2018

 

2018

 

2019

 

2018

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

United Kingdom

79,368

 

78,471

 

76,138

 

133,059

 

147,778

United States of America

20,525

 

11,836

 

11,836

 

254,071

 

163

Australia

10,241

 

2,559

 

2,559

 

39,789

 

17,797

Others

33,370

 

26,836

 

26,836

 

54

 

334

Total

143,504

 

119,702

 

117,369

 

426,973

 

166,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* As highlighted in the October 2017 trading update, organic revenue growth in the year to 31 Match 2018 included £3.5 million from the sale of a material perpetual licence to a leading European bank in September 2017, paid upfront. Had this particular transaction been a fully delivered, three-year agreement, payable in annual instalments (as is normal), then our revenue recognition policies at the time would have only recognised one third of this value. This revenue was within the United Kingdom classification in the above table.

 

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):

2019

 

2018

 

£'000

 

£'000

 

 

 

 

Research and development costs recognised as an expense 1

10,370

 

9,516

Depreciation of property, plant and equipment

1,544

 

1,430

Amortisation/impairment of intangible assets

10,821

 

8,832

Foreign exchange (gain)/loss

(35)

 

177

Operating lease payments  -  land and buildings

2,235

 

1,596

                                                 -  other

19

 

18

 

1 The prior year cost has been restated to reflect the correct retranslation of international costs.

 

6.  Auditor's Remuneration

 

2019

 

2018

 

£'000

 

£'000

 

 

 

 

Audit of the financial statements 1

266

 

166

 

 

 

 

Other fees to auditor    -  other assurance services

25

 

24

                                          -  tax compliance services

2

 

25

                                          -  tax advisory services

21

 

13

 

314

 

228

 

1 £136,000 (2018: £133,000) of this relates to the Company.

 

 

 

 

7.  Exceptional Items

 

2019

 

2018

 

£'000

 

£'000

 

 

 

 

Acquisition related costs (note 31)

3,747

 

750

Costs associated with staff reorganisations

256

 

508

Fair value adjustments to contingent consideration (note 32)

-

 

885

 

4,003

 

2,143

 

 

Transaction costs of £3,747,000 include those related to the acquisition of VIX Verify (£449,000) and IDology (£2,391,000) (note 31). In prior periods, transaction costs primarily related to the acquisition of PCA (£735,000) (note 31). Such costs include those directly attributable to the transaction including legal and professional advisors and exclude operating or integration costs relating to an acquired business. The balance of costs relate to potential acquisitions that were either aborted or are not complete at the date of these financial statements. 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.

 

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 32). This charge arises because contingent consideration due to be paid at a future date is discounted for the time value of money at the point of initial recognition and over the passage of time, this discount unwinds within the Consolidated Statement of Comprehensive Income. These are non-cash items.

 

The tax impact of the exceptional costs was £77,000 (2018: £116,000).

 

 

 

8.  Staff Costs and Directors' Emoluments

 

Group

 

Company

a) Staff Costs

2019

 

2018

 

2019

 

2018

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Wages and salaries

41,719

 

41,162

 

31,392

 

27,033

Social security costs

4,858

 

4,904

 

4,352

 

3,504

Other pension costs

1,956

 

1,668

 

1,486

 

1,080

 

48,533

 

47,734

 

37,230

 

31,617

 

Included in wages and salaries is a total charge of share-based payments of £2,287,000 (2018: £2,375,000) 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

 

 

2019

 

2018

 

2019

 

2018

 

 

No.

 

No.

 

No.

 

No.

 

 

 

 

 

 

 

 

 

Research and development

 

367

 

241

 

227

 

117

Production

 

42

 

117

 

42

 

44

Selling and administration

 

475

 

416

 

388

 

311

 

 

884

 

774

 

657

 

472

 

b) Directors' Emoluments

2019

 

2018

 

£'000

 

£'000

 

 

 

 

Wages and salaries

1,438

 

1,369

Pension

72

 

66

Bonuses

1,131

 

1,231

 

2,641

 

2,666

 

 

 

 

Aggregate gains made by Directors on the exercise of options

2,467

 

954

 

 

 

 

 

The remuneration for the highest paid Director was as follows:

 

2019

 

2018

 

£'000

 

£'000

 

 

 

 

Wages and salaries

589

 

492

Bonus

527

 

527

 

1,116

 

1,019

 

 

 

 

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 (2018: £84,000). The number of share options granted during the year for the highest paid Director was 128,853 (2018: 1,400,000) and the number of share options exercised during the year was 200,000 (2018: nil).

 

 

9.  Finance Revenue

 

2019

 

2018

 

 

£'000

 

£'000

Bank interest receivable

31

 

37

 

 

 

 

 

31

 

37

 

 

10.  Finance Costs

 

2019

 

2018

 

 

£'000

 

£'000

Bank loan fees and interest

720

 

545

 

 

 

 

 

720

 

545

 

 

 

 

11.  Taxation

                                                                                                                                                                                                                                                                                                                   

a) Tax on Profit

 

 

 

 

 

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

 

 

 

 

 

2019

 

2018

 

 

£'000

 

£'000

 

Current income tax

 

 

 

 

UK corporation tax on profit for the year

2,765

 

2,926

 

Amounts underprovided/(overprovided) in previous years

(292)

 

67

 

Foreign tax

2,158

 

1,403

 

 

4,631

 

4,396

 

Deferred tax

 

 

 

 

Origination and reversal of temporary differences

(1,868)

 

(1,540)

 

Amounts underprovided/(overprovided) in previous years

26

 

-

 

Impact of change in tax rates

(206)

 

(110)

 

 

(2,048)

 

(1,650)

 

 

 

 

 

 

Tax charge in the Statement of Comprehensive Income

2,583

 

2,746

 

 

b) Reconciliation of the Total Tax Charge

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

2019

 

2018

 

 

£'000

 

£'000

 

 

 

 

 

 

Consolidated profit before tax

14,736

 

13,400

 

 

 

 

 

 

Consolidated profit before tax multiplied by the standard rate of corporation tax in

the UK of 19% (2018: 19%)

 

2,800

 

 

2,546

 

 

 

 

 

 

Effect of:

 

 

 

 

Permanent differences

1,094

 

560

 

Non-taxable income

(11)

 

-

Rate changes

(120)

 

(179)

 

Utilisation of losses

-

 

(59)

 

Prior year items

(266)

 

63

 

Research and development tax relief

(492)

 

(353)

 

Patent Box relief

(460)

 

(382)

 

Share option relief

(67)

 

-

Recognition of unrecognised deferred tax assets

(698)

 

(104)

 

Effect of higher taxes on overseas earnings

803

 

654

 

Total tax charge reported in the Statement of Comprehensive Income

2,583

 

2,746

 

 

The Group is entitled to current year tax relief of £1,023,000 (2018: £954,000), calculated at a tax rate of 19% (2018: 19%), 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 2019 of £30,561,000 (2018: £17,329,000).  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 2019 of £2,257,000 (2018: £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

 

2019

 

2018

 

2019

 

2018

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Decelerated capital allowances

 1,283

 

1,633

 

-

 

-

Share options

1,627

 

1,479

 

-

 

-

Other temporary differences

1,664

 

831

 

-

 

-

Capital losses

-

 

-

 

384

 

573

Trading losses

3,648

 

269

 

2,782

 

2,783

 

 

 

 

 

 

 

 

 

8,222

 

4,212

 

3,166

 

3,356

 

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

 

 

2019

 

2018

 

£'000

 

£'000

 

 

 

 

Opening balance - as reported

4,212

 

4,044

IFRS 15 transition adjustment

241

 

-

Opening balance - restated

4,453

 

4,044

 

 

 

 

Acquired on acquisition

3,955

 

440

Foreign currency adjustments

(73)

 

11

Origination and reversal of temporary differences

24

 

(415)

Impact of change in tax rates

(137)

 

132

 

 

 

 

 

8,222

 

4,212

 

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 (2018: £16,367,000) and unrecognised capital losses of £2,257,000 (2018: £3,372,000).

 

Deferred Tax Liability

 

The deferred tax liability of the Group is as follows:

 

 

2019

 

2018

 

£'000

 

£'000

 

 

 

 

Intangible assets

29,378

 

8,148

Land and buildings

108

 

112

Accelerated capital allowances

62

 

-

 

 

 

 

 

29,548

 

8,260

 

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

 

 

2019

 

2018

 

£'000

 

£'000

 

 

 

 

Opening balance

8,260

 

4,441

Acquisition of intangibles in subsidiaries

23,913

 

5,676

Foreign currency adjustments

(359)

 

(67)

Origination and reversal of temporary differences

(1,923)

 

(1,548)

Impact of change in tax rates

(343)

 

(242)

 

 

 

 

 

29,548

 

8,260

f) Change in corporation tax rate

A reduction in the UK corporation tax rate 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 2019.

 

 

12.  Dividends Paid and Proposed

 

 

 

 

 

 

 

2019

£'000

 

2018

£'000

 

 

 

 

 

 

 

 

 

Declared and paid during the year

 

 

 

 

 

 

 

 

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

 

 

 

 

 

4,049

 

3,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Final dividend for 2019: 2.99p (2018: 2.65p)

 

 

 

 

 

5,766

 

4,047

 

 

 

 

 

 

 

 

 

 

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.

 

 

2019

pence per

share

 

2019

£'000

 

2018

pence per

share

 

2018

£'000

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders of the Company

 

7.7

 

12,153

 

7.1

 

10,654

 

 

 

 

 

 

 

 

 

 

Diluted

Diluted earnings per share is 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.

 

 

 

2019

 

2018

 

 

No.

 

No.

 

 

 

 

 

Basic weighted average number of shares in issue

 

158,051,687

 

150,552,605

Dilutive effect of share options

 

2,754,605

 

2,704,644

Diluted weighted average number of shares in issue

 

160,806,292

 

153,257,249

 

 

 

 

2019

pence per

share

 

2019

£'000

 

2018

pence per

share

 

2018

£'000

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders of the Company

 

7.6

 

12,153

 

7.0

 

10,654

 

 

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

2019

pence per share

 

Diluted

2019

pence per

share

 

 

 

2019

£'000

 

Basic

2018

pence per share

 

Diluted

2018

pence per

share

 

 

 

2018

£'000

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

20.3

 

19.9

 

32,031

 

17.5

 

17.2

 

26,311

Less net finance costs

(0.4)

 

(0.4)

 

(689)

 

(0.3)

 

(0.3)

 

(508)

Less tax

(1.7)

 

(1.6)

 

(2,583)

 

(1.9)

 

(1.9)

 

(2,746)

Adjusted earnings

18.2

 

17.9

 

28,759

 

15.3

 

15.0

 

23,057

 

 

14.  Property, Plant and Equipment

 

Group

 

 

 

 

 

 

 

 

 

 

Land and buildings

 

Plant and equipment

 

 

Total

 

 

 

£'000

 

£'000

 

£'000

Cost

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

Acquired on acquisition

 

 

-

 

231

 

231

Additions

 

 

-

 

1,453

 

1,453

Disposals

 

 

-

 

(51)

 

(51)

Foreign currency adjustment

 

 

-

 

(35)

 

(35)

At 31 March 2019

 

 

1,251

 

8,541

 

9,792

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

Provided during the year

 

 

22

 

1,522

 

1,544

Disposals

 

 

-

 

(46)

 

(46)

Foreign currency adjustment

 

 

-

 

(15)

 

(15)

At 31 March 2019

 

 

42

 

4,935

 

4,977

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 March 2019

 

 

1,209

 

3,606

 

4,815

At 31 March 2018

 

 

1,231

 

3,469

 

4,700

At 1 April 2017

 

 

-

 

2,856

 

2,856

 

 

The net book value in respect of assets held under finance leases and hire purchase agreements is £nil (2018: £nil).

 

 

 

 

14.  Property, Plant and Equipment continued

 

Company

 

 

 

 

Land and buildings

 

 

Plant and equipment

 

 

 

Total

 

 

 

£'000

 

£'000

 

£'000

Cost

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

Additions

 

 

-

 

1,214

 

1,214

Disposals

 

 

-

 

(2)

 

(2)

At 31 March 2019

 

 

1,233

 

6,139

 

7,372

 

 

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

 

 

At 1 April 2017

 

 

-

 

1,590

 

1,590

Provided during the year

 

 

2

 

854

 

856

At 31 March 2018

 

 

2

 

2,444

 

2,446

 

 

 

 

 

 

 

 

Provided during the year

 

 

22

 

1,103

 

1,125

Disposals

 

 

-

 

(2)

 

(2)

At 31 March 2019

 

 

24

 

3,545

 

3,569

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 March 2019

 

 

1,209

 

2,594

 

3,803

At 31 March 2018

 

 

1,231

 

2,483

 

3,714

At 1 April 2017

 

 

-

 

1,975

 

1,975

 

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 (2018: £nil).

 

 

 

15.  Intangible Assets

 

Group

 

Customer

relationships

£'000

 

Other acquired intangibles

£'000

 

Total acquired intangibles

£'000

 

 

 

Goodwill

£'000

 

 

Purchased

software

£'000

 

Internally developed software

£'000

 

 

 

Total

£'000

 

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency adjustment

(1,078)

 

(328)

 

(1,406)

 

(2,625)

 

30

 

-

 

(4,001)

Additions - business combinations

73,212

 

21,615

 

94,827

 

178,651

 

-

 

-

 

273,478

Additions - purchased software

-

 

-

 

-

 

-

 

172

 

-

 

172

Disposals

-

 

-

 

-

 

-

 

(67)

 

-

 

(67)

At 31 March 2019

118,060

 

38,026

 

156,086

 

292,523

 

2,253

 

1,771

 

452,633

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency adjustment

22

 

31

 

53

 

-

 

(5)

 

-

 

48

Amortisation during the year

5,779

 

4,537

 

10,316

 

-

 

468

 

37

 

10,821

Disposals

-

 

-

 

-

 

-

 

(20)

 

-

 

(20)

Reclassification

-

 

-

 

-

 

-

 

-

 

-

 

-

At 31 March 2019

16,670

 

12,439

 

29,109

 

-

 

1,638

 

1,749

 

32,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2019

101,390

 

25,587

 

126,977

 

292,523

 

615

 

22

 

420,137

At 31 March 2018

35,057

 

8,868

 

43,925

 

116,465

 

923

 

59

 

161,372

At 1 April 2017

15,108

 

6,330

 

21,438

 

75,598

 

1,153

 

564

 

98,753

                                 

 

·      The customer relationships intangible asset acquired through the acquisition of Capscan Parent Limited has a carrying value of £1,218,000 and a remaining amortisation period of 2.6 years. 

·      The customer relationships intangible asset acquired through the acquisition of TMG.tv Limited has a carrying value of £383,000 and a remaining amortisation period of 3.6 years. 

·      The customer relationships intangible asset acquired through the acquisition of CRD (UK) Limited has a carrying value of £374,000 and a remaining amortisation period of 4.25 years. 

·      The customer relationships intangible asset acquired through the acquisition of DecTech Solutions Pty Ltd has a carrying value of £2,148,000 and a remaining amortisation period of 5.1 years. 

·      The customer relationships intangible asset acquired through the acquisition of CDMS Limited has a carrying value of £2,017,000 and a remaining amortisation period of 5.6 years. 

·      The customer relationships intangible asset acquired through the acquisition of Loqate Inc. has a carrying value of £1,331,000 and a remaining amortisation period of 6.1 years.

·      The customer relationships intangible asset acquired through the acquisition of ID Scan Biometrics Limited has a carrying value of £2,839,000 and a remaining amortisation period of 7.25 years.

·      The customer relationships intangible asset acquired through the acquisition of Postcode Anywhere (Holdings) Limited has a carrying value of £20,099,000 and a remaining amortisation period of 8.1 years.

·      The customer relationships intangible asset acquired through the acquisition of VIX Verify Global Pty Limited has a carrying value of £4,013,000 and a remaining amortisation period of 9.5 years.

·      The customer relationships intangible asset acquired through the acquisition of IDology Inc. has a carrying value of £63,639,000 and a remaining amortisation period of 9.9 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, Postcode Anywhere (Holdings) Limited, VIX Verify Global Pty Limited and IDology Inc.  Under IFRS, goodwill is not amortised and is tested annually for impairment (note 16).

 

 

15.  Intangible Assets continued

 

 

Company

 

Customer

relationships

£'000

 

Other acquired intangibles

£'000

 

Total acquired intangibles

£'000

 

 

 

Goodwill

£'000

 

 

Purchased

software

£'000

 

Internally developed software

£'000

 

 

 

Total

£'000

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired on acquisition

-

 

-

 

-

 

-

 

-

 

-

 

-

Additions - purchased software

-

 

-

 

-

 

-

 

167

 

-

 

167

Transfer from investments3

-

 

-

 

-

 

31,961

 

-

 

-

 

31,961

Disposals

-

 

-

 

-

 

-

 

(67)

 

-

 

(67)

At 31 March 2019

26,078

 

8,279

 

34,357

 

110,115

 

2,198

 

2,353

 

149,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 2017

-

 

-

 

-

 

-

 

752

 

1,185

 

1,937

Amortisation during the year

207

 

106

 

313

 

-

 

418

 

1,120

 

1,851

At 31 March 2017

207

 

105

 

313

 

-

 

1,170

 

2,305

 

3,788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation during the year

2,776

 

2,878

 

5,654

 

-

 

425

 

37

 

6,116

Disposals

-

 

-

 

-

 

-

 

(20)

 

-

 

(20)

At 31 March 2019

2,984

 

2,984

 

5,968

 

-

 

1,575

 

2,342

 

9,884

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2019

23,095

 

5,295

 

28,390

 

110,115

 

623

 

11

 

139,139

At 31 March 2018

25,871

 

8,173

 

34,044

 

78,154

 

928

 

48

 

113,174

At 1 April 2017

-

 

-

 

-

 

-

 

1,149

 

552

 

1,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                               

 

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.

3 A transfer between investments and goodwill has been made as the directors consider that this better reflects the nature of the non-current assets following hive-ups that occurred in previous years.

 

·      The customer relationships intangible asset acquired through the acquisition of ID Scan Biometrics Limited has a carrying value of £2,839,000 and a remaining amortisation period of 7.25 years.

·      The customer relationships intangible asset acquired through the acquisition of Postcode Anywhere (Holdings) Limited has a carrying value of £20,099,000 and a remaining amortisation period of 8.1 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 CAFs)

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

§  CAFs 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.

 

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

 

 

2019

 

2018

 

 

 

 

£'000

 

£'000

 

 

 

 

 

 

 

Customer & Location Intelligence Unit

 

 

 

54,494

 

54,494

Fraud, Risk & Compliance Unit

 

 

 

216,296

 

40,626

e-Ware Interactive Unit

 

 

 

79

 

79

CAFs Unit

 

 

 

14,261

 

14,367

Loqate Unit

 

 

 

7,393

 

6,899

 

 

 

 

 

 

 

 

 

 

 

292,523

 

116,465

 

Key Assumptions Used in Value in Use Calculations

The Group prepares cash flow forecasts using budgets and forecasts approved by the Directors covering 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.

 

2019

 

2018

 

 

Pre-tax

WACC

 

Growth rate

(in perpetuity)

 

Pre-tax

WACC

 

Growth rate

(in perpetuity)

 

%

 

%

 

%

 

%

 

 

 

 

 

 

 

 

Customer & Location Intelligence Unit

10.4%

 

1.8%

 

9.0%

 

1.8%

Fraud, Risk & Compliance Unit

10.4%

 

1.8%

 

9.0%

 

1.8%

e-Ware Interactive Unit

10.4%

 

-

 

9.0%

 

-

CAFs Unit

15.1%

 

2.8%

 

16.2%

 

2.8%

Loqate Unit

11.3%

 

1.8%

 

12.5%

 

2.0%

 

In the case of the Customer & Location Intelligence CGU, the annual impairment review as at 31 March 2019 indicated that the recoverable amount exceeded the carrying value of the CGU by £97,321,000 (2018: £71,037,000) and that any decline in estimated value in use in excess of that amount would be liable to result in an impairment.  The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:

·      an absolute increase of 10% in the pre-tax weighted average cost of capital from 10% to 20%; or

·      a reduction of 50% in the forecast profit margins.

In the case of the Fraud, Risk & Compliance CGU, the annual impairment review as at 31 March 2019 indicated that the recoverable amount exceeded the carrying value of the CGU by £259,452,000 (2018: £163,331,000) 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 44% in the pre-tax weighted average cost of capital from 10% to 54%; or

·      a reduction of 80% in the forecast profit margins.    

In the case of the e-Ware Interactive CGU, the annual impairment review as at 31 March 2019 indicated that the recoverable amount exceeded the carrying value by £165,000 (2018: £137,000).  In assessing the future recoverable amounts, forecast cash flows are assumed for a three-year period only 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.

 

 

16.  Impairment Testing of Goodwill continued

 

In the case of the CAFs CGU, the annual impairment review as at 31 March 2019 indicated that the recoverable amount exceeded the carrying value of by £15,637,000 (2018: £16,743,000) 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 15% in the pre-tax weighted average cost of capital from 15% to 30%; or

·      a reduction of 40% in the forecast profit margins.

In the case of the Loqate CGU, the annual impairment review as at 31 March 2019 indicated that the recoverable amount exceeded the carrying value of by £26,775,000 (2018: £28,217,000) 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 25% in the pre-tax weighted average cost of capital from 13% to 38%; or

·      a reduction of 75% in the forecast profit margins.

Based on the impairment reviews performed no impairment has been identified.

 

17.  Investments

 

 

Group

2019

£'000

 

2018

£'000

 

 

 

 

Cost and net book value

 

 

 

At 1 April

-

 

-

Acquired through acquisition of subsidiary undertakings

419

 

-

Foreign currency adjustment

(8)

 

-

At 31 March

411

 

-

 

 

 

 

 

 

 

Company

2019

£'000

 

2018

£'000

 

 

 

 

Cost

 

 

 

At 1 April

76,310

 

104,096

Acquisition of subsidiary undertakings

235,744

 

73,877

Capital investment in subsidiary undertaking

20,639

 

-

Transfer to goodwill and intangibles1

(31,961)

 

(101,663)

At 31 March

300,732

 

76,310

 

 

 

 

Provision for impairment

 

 

 

At 1 April

-

 

-

Charge for the year2

2,464

 

-

At 31 March

2,464

 

-

 

 

 

 

Net book value

 

 

 

At 31 March

298,268

 

76,310

 

1 A transfer between investments and goodwill has been made as the directors consider that this better reflects the nature of the non-current assets following hive-ups that occurred in previous years.

 

2The impairment charge for the year of £2,464,000 was following a dividend from Loqate Inc. out of its pre-acquisition reserves, which was recognised in the Company income statement.

 
 

17.  Investments continued

 

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

VIX Verify Global Pty Ltd1

100%

Australia

Level 3, 20 Bond Street, Sydney NSW 2000

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

Loqate Inc.

100%

United States

805 Veterans Blvd Ste 305, Redwood City CA 94063

Loqate Limited 1

100%

United Kingdom

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

IDology Inc.

100%

United States

2018 Powers Ferry Rd, Atlanta, GA 30339, USA

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

VIX Verify Pty Ltd1

100%

Australia

Co Sec Consulting Pty Ltd, 58 Gipps Street, Collingwood, Victoria 3066, Australia

GreenID Limited1

100%

New Zealand

Moore Stephens Markhams Wellington Limited, Level 11 Sovereign House, 34-42 Manners Street, Wellington 6011, New Zealand

Mastersoft Group Pty Ltd1

100%

Australia

Co Sec Consulting Pty Ltd, 58 Gipps Street, Collingwood, Victoria 3066, Australia

Mastersoft (New Zealand) Ltd1

100%

New Zealand

Moore Stephens Markhams Wellington Limited, Level 11 Sovereign House, 34-42 Manners Street, Wellington 6011, New Zealand

DataSan Pty Ltd1

100%

Australia

Co Sec Consulting Pty Ltd, 58 Gipps Street, Collingwood, Victoria 3066, Australia

VIX Verify International Pty Ltd1

100%

Australia

Co Sec Consulting Pty Ltd, 58 Gipps Street, Collingwood, Victoria 3066, Australia

VIX Verify Singapore Pte Ltd1

100%

Singapore

C/O S.S. Corporate Management Pte. Ltd, 138 Cecil Street, #12-01A Cecil Court, 069538 Singapore

VIX Verify SA (Pty) Ltd1

100%

South Africa

C/O Eversheds Sutherland, 3rd Floor, 54, Melrose Boulevard, Melrose Arch, Melrose North, 2196, Johannesburg, South Africa

 

The Company accounts for its non-listed equity investments as financial assets designated at fair value through OCI.  The Company holds the following non-listed equity investment:

 

 

 

Name of company

Proportion of voting rights and shares held

 

 

Country of incorporation

 

 

 

Registered office address

Payfone Inc. 1

0.32%

 

United States

215 Park Avenue South New York, NY 10003 United States

 

 

 

 

 

1 held indirectly.

 

 

18.  Trade and Other Receivables

 

           Group

 

       Company

 

 

2019

£'000

 

2018

£'000

 

2019

£'000

 

2018

£'000

 

 

 

 

 

 

 

 

Trade receivables

45,996

 

33,503

 

31,586

 

27,965

Amounts owed from subsidiary undertakings

-

 

-

 

-

 

7

Prepayments and accrued income

8,878

 

4,466

 

4,313

 

3,379

 

 

 

 

 

 

 

 

 

54,874

 

37,969

 

35,899

 

31,351

 

 

 

 

 

 

 

 

 

 

19.  Cash

 

Group

 

Company

 

2018

£'000

 

2017

£'000

 

2018

£'000

 

2017

£'000

 

 

 

 

 

 

 

 

Cash at bank and in hand

21,189

 

22,753

 

7,791

 

14,778

 

 

 

 

 

 

 

 

 

21,189

 

22,753

 

7,791

 

14,778

 

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

 

 

20.

Equity Share Capital

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

 

 

 

 

£'000

 

£'000

 

Authorised

 

 

 

 

 

 

 

192,850,117 (2018: 147,663,704) ordinary shares of 2.5p each

 

 

 

3,692

 

3,692

 

 

 

 

 

 

 

 

 

Issued

 

 

 

 

 

 

 

Allotted, called up and fully paid

 

 

 

4,821

 

3,817

 

Share premium

 

 

 

261,149

 

104,814

 

 

 

 

 

265,970

 

108,631

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

 

 

 

 

No.

 

No.

 

 

 

 

 

 

 

 

 

Number of shares in issue at 1 April

 

 

 

152,668,698

 

134,702,937

 

Issued on placing

 

 

 

39,024,390

 

17,058,824

 

Issued on exercise of share options

 

 

 

1,157,029

 

906,937

 

Number of shares in issue at 31 March

 

 

 

192,850,117

 

152,668,698

 

During the year 39,024,390 (2018: 17,965,761) ordinary shares with a nominal value of 2.5p were issued for an aggregate cash consideration of £160,613,000 (2018: £58,408,000).  The cost associated with the issue of shares in the year was £3,274,000 (2018: £1,740,000).

 

 

 

 

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.

 

In October 2018, the Group drew down £10,000,000 from its existing revolving credit facility agreement in order to part fund the acquisition of VIX Verify. This drawdown took the borrowing on that facility to £17,000,000 at that date.

 

In February 2019, the Group refinanced its existing revolving facility and the total facility was increased to £110,000,000, with a further £30,000,000 accordion option. The facility now expires in February 2022. The existing liability of £17,000,000 was repaid at the point of the refinancing with a simultaneous drawdown of £101,000,000 (net increase of £84,000,000), which was used to part fund the IDology acquisition. A further repayment of £15,000,000 was made in March 2019.

 

The debt 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

 

2019

£'000

 

2018

£'000

 

2019

£'000

 

2018

£'000

 

 

 

 

 

 

 

 

Opening bank loan

9,248

 

12,385

 

7,000

 

9,000

New borrowings (net of arrangement fee)

110,447

 

10,000

 

110,447

 

10,000

Repayment of borrowings

(32,804)

 

(12,839)

 

(32,000)

 

(12,000)

Foreign currency translation adjustment

(3)

 

(298)

 

-

 

-

 

 

 

 

 

 

 

 

Closing bank loan

86,888

 

9,248

 

85,447

 

7,000

 

Analysed as:

Amounts falling due within 12 months

1,441

 

797

 

-

 

-

Amounts falling due after one year

85,447

 

8,451

 

85,447

 

7,000

 

 

 

 

 

 

 

 

 

86,888

 

9,248

 

85,447

 

7,000

 

Included within the closing bank loan balance above is £553,000 of unamortised loan arrangement fees (2018: £nil).

 

22.  Trade and Other Payables

 

Group

 

Company

 

2019

£'000

 

2018

£'000

 

2019

£'000

 

2018

£'000

 

 

 

 

 

 

 

 

Trade payables

8,687

 

4,307

 

3,842

 

3,363

Amounts owed to subsidiary undertakings

-

 

-

 

23,952

 

23,361

Other taxes and social security costs

13,977

 

4,236

 

2,888

 

4,202

Accruals

10,844

 

19,007

 

15,782

 

14,829

Deferred income

36,637

 

28,347

 

28,056

 

23,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70,145

 

55,897

 

74,520

 

69,541

 

Analysed as:

Amounts falling due within 12 months

68,961

 

55,897

 

73,657

 

69,541

Amounts falling due after one year

1,184

 

-

 

863

 

-

 

 

 

 

 

 

 

 

 

70,145

 

55,897

 

74,520

 

69,541

 

 

23.  Provisions 

 

         Group

 

          Company

 

2019

£'000

 

2018

£'000

 

2019

£'000

 

2018

£'000

 

 

 

 

 

 

 

 

Opening balance

25

 

35

 

25

 

35

Utilised

(25)

 

(10)

 

(25)

 

(10)

 

 

 

 

 

 

 

 

Closing balance

-

 

25

 

-

 

25

 

Provisions relate to the costs of dilapidation obligations on certain leasehold properties within the Group.

 

 

 

 

24.  Long Service Award 

 

The Group provides long service awards, providing employees with a benefit after they attain a set period of service with the Group, for example 10 or 20 years. For these benefits, IAS 19 requires a liability to be held on the Group's balance sheet. These benefits were introduced in the year to 31 March 2019, and the service requirements have been applied retrospectively, therefore a liability has been recognised for a past service cost in income statement for the year to 31 March 2019.

 

 

 

         Group

 

          Company

 

2019

£'000

 

2018

£'000

 

2019

£'000

 

2018

£'000

 

 

 

 

 

 

 

 

At 1 April

-

 

-

 

-

 

-

Service cost

102

 

-

 

76

 

-

Net interest charge

9

 

-

 

7

 

-

Past service cost

349

 

-

 

261

 

-

Actuarial loss during the year

68

 

-

 

51

 

-

 

 

 

 

 

 

 

 

At 31 March

528

 

-

 

395

 

-

 

 

The following table lists the inputs to the valuation of the long service award for the years ended 31 March 2019 and 31 March 2018.

 

 

 

2019

 

2018

Discount rate (%)

 

2.4

 

-

Salary increases (%)

 

3.5

 

-

Employee turnover (% probability of leaving depending on age)

 

2% - 20%

 

-

 

 

25.  Financial Instruments and Risk Management

 

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

 

Credit Risk

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

 

The maximum exposure to credit risk at the reporting dates is the carrying value of each class of financial assets as disclosed below:

 

Year ended 31 March 2019

Group

 

Company

 

2019

 

2018

 

2019

 

2018

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Trade receivables

48,241

 

34,847

 

33,319

 

29,130

Allowance for unrecoverable amounts

(2,245)

 

(1,344)

 

(1,733)

 

(1,165)

 

45,996

 

33,503

 

31,586

 

27,965

 

Expected credit loss allowance for trade receivables

 

The group applies the IFRS 9 simplified approach to measuring expected credit loses which uses a lifetime expected loss allowance for all trade receivables and contract assets.   To measure the expected credit losses, trade receivables have been groups based on shared credit risk characteristics and days past due.  The provision rates are based on days past due, historical information relating to counterparty default rates and external credit ratings where available.  The following table provides an analysis of the Group's credit risk exposure on trade receivables using a provision matrix to measure expected credit losses.

 

31 March 2019

 

Trade receivables

 

 

 

 

Days past due

                       

 

Current

 

< 30 days

 

30 - 60 days

 

61 - 90 days

 

> 90 days

 

Total

 

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

Expected credit loss rate

 

2.3%

 

1.2%

 

6.6%

 

0.8%

 

27%

 

4.7%

Gross carrying amount

 

28,724

 

9,336

 

4,171

 

1,597

 

4,413

 

48,241

Expected credit loss

 

658

 

115

 

277

 

13

 

1,182

 

2,245

 

Set out below is the movement in the allowance for expected credit losses of trade receivables:

 

 

        Group

 

Company

 

 

 

2019

£'000

 

2019

£'000

 

 

 

 

 

Balance at 1 April

 

                       1,344       

 

1,165

Acquired on acquisition

 

196

 

-

Additional provisions

 

852

 

704

Write-offs

 

(151)

 

(136)

Foreign exchange