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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gb Group Plc | LSE:GBG | London | Ordinary Share | GB0006870611 | ORD 2.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 42.20 | 16.31% | 301.00 | 299.60 | 300.20 | 303.80 | 283.40 | 285.00 | 3,801,806 | 16:35:07 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Computer Programming Service | 278.81M | -119.79M | -0.4743 | -6.33 | 757.73M |
TIDMGBG
RNS Number : 4961R
GB Group PLC
30 June 2020
. Embargoed until 7.00 a.m 30 June 2020
GB GROUP PLC
("GBG", "Group" or the "Company")
Annual Results for the Year Ended 31 March 2020
Successful year of growth and delivery against strategic objectives
GB Group plc (AIM: GBG), the global identity data intelligence specialist, announces its annual results for the year ended 31 March 2020.
Financial highlights
Hot Features
Premium
2020 2019 % change
Revenue GBP199.1m GBP143.5m 38.7%
Adjusted operating profit
(1) GBP47.9m GBP32.0m 49.7%
Adjusted basic earnings
per share (1) 21.8p 18.2p 19.8%
Profit before tax GBP20.6m GBP14.7m 40.0%
Deferred income balance GBP38.4m GBP36.6m 4.9%
Net assets GBP344.9m GBP321.5m 7.3%
Net (debt)/cash (1) GBP(35.0)m GBP(66.3)m -
Dividend per share - 2.99p -
2020 2019 Total Growth 2020 Organic 2019 Revenue Organic
Revenue (CCY) (1) Revenue
Growth (CCY)
(1)
Total revenue GBP199.1m GBP143.5m 38.7% GBP158.3m GBP143.0m 10.7%
Adjusted GBP47.9m GBP32.0m 49.7% - - -
operating
profit (1)
Strategic and operational highlights
Strong revenue and profit performance:
-- Good growth from all geographies and GBG's three core solutions (Location, Identity and Fraud)
-- International revenues now 56% of the business -- IDology is performing well and delivering on acquisition objectives
Continued investment in data, products and technology:
-- Increasing breadth and depth of data in chosen markets -- Enhancement of product portfolio through internal development and partnerships
-- Enhanced our capabilities in artificial intelligence, multi-modal authentication and validation methods
-- Significant progress in the shift to a globally capable, cloud-based operational model
Covid-19: early and decisive action:
-- Focused on protecting team members, supporting our customers and positioning for the future
-- Prompt actions taken early to maintain our organisational capacity whilst reducing discretionary spending
-- Assisted by a strong balance sheet with available bank draw down facilities, good liquidity and a high proportion of annual recurring licence revenue
Current trading:
-- We are witnessing varying levels of impact depending on customer vertical, product solution and geography with positive and negative effects
-- To date customer churn, solvency and bad debt are at normal levels -- Continuing to win new business though some sales cycles are lengthening
Outlook:
-- It is not yet possible to understand the ongoing impact of Covid-19 on the business -- Dividend and guidance currently suspended
-- Long-term market drivers remain favourable and should be enhanced by accelerated digitalisation of customers' businesses
-- Our strong balance sheet, leading technology and diversified customer base leaves GBG well-positioned for long-term success
Chris Clark, CEO, commented:
"I am extremely proud of our performance in the last 12 months, which saw profit and revenues exceed market expectations. This was driven by GBG's international expansion and innovative product offerings. Although it is hard to predict the full impact of Covid-19, we remain well-positioned to support our customers through the current environment and in the longer term.
None of this would be possible without the incredible hardworking team at GBG. I want to pay tribute to the dedication of my colleagues through this challenging period. I am confident GBG is approaching the future from a position of strength ."
Notes:
(1) These measures are defined within note 37 to the Annual Report.
Ends -
For further information, please contact:
GBG Chris Clark, CEO Dave Wilson, CFO & COO 01244 657333 Pe el Hunt LLP (Nominated Adviser and Broker) Edward Knight Nick Prowting Ed Allsopp 020 7418 8900 Tulchan 020 7353 4200 James Macey White GBG@tulchangroup.com Matt Low Deborah Roney Website www.gbgplc.com/investors
Presentation and webcast
Chris Clark, Chief Executive, and David Wilson, Chief Financial Officer & Chief Operating Officer will be hosting an analyst webcast presentation at 9.00 a.m. on 30 June 2020.
Shortly following the presentation, an archived webcast will be available on the Investors page of GBG's website.
About GBG
GBG offers a range of solutions that help organisations quickly validate and verify the identity and location of their customers.
Our market-leading technology, data and expertise help our customers improve digital access, deliver a seamless experience and establish trust so that they can transact quickly, safely and securely with their customers online.
Headquartered in the UK and with over 1,000 team members across 16 countries, we work with 20,000 customers in over 70 countries. Some of the world's best-known businesses rely on GBG to provide digital services and keep the economy moving, from US e-commerce giants to Asia's biggest banks and European household brands.
To find out more about how we help our customers establish trust with their customers, visit www.gbgplc.com and follow us on LinkedIn and Twitter @gbgplc.
Chairman's Statement
The past year has been a strong one for GBG. We have delivered on our strategic objectives, achieved record levels of revenue and profit and earned our best-ever levels of engagement for both team members and customers. The impact of Covid-19 means, however, that we have little time to celebrate our past success. Instead, we are focussing all our attention and skills on supporting our team members and customers during this demanding and uncertain time. We are taking actions to make sure our business remains strong throughout this period and we are confident that we will emerge from this crisis in a position to deliver against our long-term growth strategy.
Covid-19 Pandemic
On behalf of the Board, I want to say how grateful I am to our team members across the world for their commitment and dedication during the Covid-19 pandemic. While working remotely, they have maintained high levels of service to our customers as well as supporting the well-being of their families and colleagues. It is a credit to them and the senior management team that we have been able to operate so effectively in light of these challenging conditions, putting us in a strong position to maintain the prospects of the Group. I am justly proud of all their efforts.
The Chief Executive's report covers in more detail the steps and actions that GBG has taken to carry out its business continuity plans, ensuring the safety and well-being of our team members and supporting our customers. The Board has been holding virtual meetings on a weekly basis, where we have received updates from the Executive Directors on a range of matters relating to Covid-19. This is a very effective forum to make sure that we can continue to meet our obligations to all of our stakeholders. It has also given us the opportunity to identify and consider any potential challenges and opportunities at an early stage.
We are keenly aware of the challenges posed by the impact of Covid-19 on the global markets we operate in, as well as society at large. While it is still too early to assess the full impact of the pandemic, I am pleased with the pace of actions we have taken to mitigate the effects of the pandemic on our team members, customers and the business.
Financial performance
GBG's financial performance in the year was again ahead of market expectations. Revenues increased by 38.7 % to GBP199.1 million (2019: GBP143.5 million), with organic revenue growth at constant currency (1) of 10.7%. Adjusted operating profit (1) increased by 49.7% to GBP47.9 million (2019: GBP32.0 million) and adjusted earnings per share (1) rose 19.8%% to 21.8 pence (2019: 18.2 pence).
We generated good levels of cash in the year which contributed to a significant improvement in our net debt position, down to GBP35.0 million from GBP66.3m in FY19. We enter FY21 in a robust financial position with a strong balance sheet, a cash generative business model and access to liquidity.
Achievements and strategic outlook
During the year we remained focused on the continued strategic development of our three core solutions: Location, Identity and Fraud. We have been effective in engaging with existing and potential customers, as well as responding to market trends and developments, while maintaining our long-standing commitment to innovation.
GBG is committed to building market-leading products that meet the evolving needs and requirements of our customers, helping them to operate securely and compliantly, at the same time as providing a high quality and seamless customer experience.
We have also continued to embrace new concepts, combining the best ideas from the markets we serve. This includes enhancing our capabilities in artificial intelligence, multi-modal authentication and validation methods including biometrics, voice and images. The increasing breadth, depth and scope of data in our products means we can offer our customers unique access to the most accurate information, enabling them to make more intelligent, commercial and risk-based decisions. In turn, this helps them to increase their revenues and improve operational efficiency.
Following its acquisition in 2019, IDology has integrated well into the Group, contributing significantly to our strategy to enhance our product capability and to expand geographically. It also further demonstrates our ability to identify, acquire and integrate businesses that are complementary to our growth strategy and that will increase GBG's value.
We also welcomed Natalie Gammon to the Board in November 2019. She brings a wealth of relevant experience and we look forward to the input and insights she will bring.
At the half year, I indicated that The Information Commissioner's Office, the data industry regulator in the UK, had announced in November 2018 that it was conducting audits on a number of companies to understand the use of data in their services. We were included in this review and we are continuing to work with the Commissioner to continue to improve privacy compliance. We will keep the market informed of any material developments.
AGM and Dividend
In light of current and anticipated Covid-19 public health guidelines, GBG is asking shareholders to comply with certain unprecedented but urgent measures for this year's AGM. These measures, which follow current best practice, are being taken to safeguard the safety and well-being of shareholders and other participants and to make the AGM as safe as possible.
As the UK Government has imposed measures restricting public gatherings, anyone seeking to attend the meeting in person (beyond the two persons designated by the Board as being necessary to form a quorum) will be refused entry to the AGM. Shareholders wishing to vote on any of the matters of business at the AGM are strongly encouraged to submit their votes in advance by proxy. Further details and instructions will be detailed in the AGM notice issued to shareholders.
As indicated in our April 2020 trading and Covid-19 update, the Board does not intend to declare a final dividend in respect of financial year 2020. We have already taken steps to reduce costs and preserve liquidity, including a Group-wide pay freeze, halting all-but-essential recruitment and deferring Executive Directors' bonuses. This extra prudent step will help to both preserve short-term liquidity and provide GBG with additional financial flexibility to support and invest as we come out of the pandemic.
The year overall and outlook
FY2020 has been another successful year in terms of delivering on our strategic priorities and further growth of the Group. Whilst we are pleased at how GBG has responded to the immediate challenges presented by Covid-19, it still remains unclear how it will affect GBG in the coming months as each customer, sector and geography are impacted in different ways. However, consumers are carrying out more transactions online and organisations are responding to this by accelerating their plans to offer seamless, quick and secure digital services. These are healthy indications that we could see an increasing demand for our services in the medium-term. We look forward to playing our part in supporting businesses as economies recover from the effects of the pandemic.
We remain confident in the longer-term prospects of the Group, thanks to a combination of a well-established growth strategy, a strong balance sheet, significant market opportunity, diversified sectors and customer base and world-class products.
On behalf of the Board, I would like to thank Chris Clark, his Executive Team and all of our team members for their hard work in achieving the result for 2020. I am very grateful for their commitment and dedication during this difficult time. I would also like thank our shareholders and customers for their continued support.
David Rasche
Chairman
(1) These measures are defined within note 37 to the Annual Report
Chief Executive's Review
As you might imagine, our current focus and attention is on Covid-19. That said, I think it is important to acknowledge how strongly GBG performed in the year ending March 2020. We delivered record revenue and profit, ahead of market expectations, while also making strong progress against our key strategic objectives. This has strengthened GBG and gives us the confidence to face the challenges and embrace the opportunities ahead. Before addressing aspects of our performance, achievements and strategic progress in 2020, I will cover the actions we have taken in response to the Covid-19 pandemic.
Covid-19
The Covid-19 crisis had a limited financial impact on FY20, as it escalated towards the end of our financial year. As we said in our Covid-19 update in April 2020, our priorities have been to protect our team members and to support their health and well-being; to look after our customers; and to make our business secure, both financially and operationally. We took a number of swift actions, including:
-- Achieving a smooth transition to full remote working for all of our global teams within a few days of local lockdowns being announced. Although our team members are already used to working from outside of the office, we have taken extra steps to enhance the way we engage with them and support them through the challenges of a sustained time in isolation.
-- We took prudent and decisive action early in the process to preserve liquidity and reduce discretionary costs. This included an immediate Group-wide pay freeze, as well as pausing all non-essential recruitment. We are carefully assessing project spend and are restricting it to those areas critical to the long-term success of GBG. We have also deferred the payment of the accrued bonus for GBG's Executive Directors and we will not declare a final dividend in respect of the 2020 financial year.
-- We formed a Covid Team in mid-March, drawn from the Group's senior management. The team met daily to assess the range of issues impacting GBG. They scoped and rapidly put in place a plan of action, assigning activities and responsibilities. The team continues to meet regularly each week to monitor progress and to consider whether to adapt and/or flex the plan of action in light of ongoing developments.
-- Within the first week of being established, the Covid Team received daily statistics on usage volumes of all of our services together with updates on network service availability. This data has been provided throughout the period to identify trends and to support our activities.
-- We have held a virtual Board meeting each week. The Board's regular agenda covers: team members; customers; financial health; operations; governance; and opportunities.
Although the impact of Covid-19 on GBG has not been as marked as with many other organisations, the full effect on the business is still unfolding. We are seeing different levels of impact depending on the customer vertical, product solution and geography.
In addition to the steps we have taken to reduce discretionary costs, we have been mindful also of our wider obligations to do the right thing to support our team members, customers and other stakeholders. We want to make sure that we are all well-placed to deal with whatever lies ahead as the world adapts to the impact of Covid-19. With that in mind, we will continue to invest in areas that support this longer-term objective.
Overview
The strong financial performance in 2020 means GBG continues to have the capability and resources to make important investments across the Group to support further growth. We are committed to developing and launching additional world-class products, improving how we take these products to market and recruiting and developing the very best people.
Market drivers
With over 30 years' market experience, as well as a suite of products that are truly innovative and global, we help our customers to benefit and succeed in the digital economy by interacting safely and securely with their consumers.
Our growth has been achieved by delivering innovative digital solutions to businesses around the world, helping them provide a frictionless customer experience, reduce online fraud and meet increasingly stringent compliance regulations. This is driven by:
-- Continuing growth in e-commerce, particularly in mobile -- Increasing levels of fraud and data breaches
-- A continued rise in the cost and complexity of local compliance requirements for a number of sectors we serve globally
-- Consumers expecting simple, fast and safe online journeys
While it is too early to draw definitive conclusions on the impact of Covid-19, initial observations indicate that many of these drivers might well accelerate. For example, before Covid-19, many organisations had not yet fully digitalised their systems. Now, we are seeing customers speeding up the digitalisation of their offerings. We are helping them to address the opportunities and threats posed by the pandemic to make things easier, faster and more convenient for their customers and to protect and/or reinvent their business models. We are an essential partner on this journey, helping our customers establish trust in their digital operations.
Strategic focus areas
Our strategic focus is on expanding internationally through three complementary but, in most cases today, distinct solutions that underpin all our propositions: Location, Identity and Fraud. Each solution contributed to the strong performance in the period. We are pleased to see that revenues from our international operations continue to form a major part of our growth - up from 45% to 56% of our total business.
In the current rapidly changing environment, our sector, product and geographical diversification lets us align our developments and resources with evolving customer demand and market trends. We continue to invest and strengthen the capabilities and skills of our teams to meet the growing needs of our customers around the world, especially as their own consumers are speeding up the pace at which they access services using mobile and online technologies. We are committed to supporting our customers as they develop their solutions to meet the demands being made of them, while also making sure that these developments are safe and secure, protecting their consumers from fraud and meeting regulatory requirements.
Corporate transactions
IDology has performed strongly. It has now met a key objective of the acquisition - to help us to secure our goal of providing leading identity data intelligence solutions globally by increasing the scope and coverage of one of our core propositions in North America, a key geography.
We are also making significant progress in our strategic objective to have a business of scale for all of our solution areas of Location, Identity and Fraud in our key regions.
Our financial position at the year-end, together with the steps we have taken to conserve our cash resources and protect access to debt financing, means that we continue to have the means and ability to consider acquisitions and investments when they arise. This gives us the option to increase the pace of our go to market initiatives and/or broaden our geographic reach and product capabilities.
Scale through technology
This year, under the stewardship of a new global technology leadership team, we have significantly advanced the technology and cyber defences underpinning our customer propositions and operations. We made it a strategic priority to shift to a globally capable, cloud-based operational model. We have begun to realise key platform capabilities that will deliver the scale, agility and compliance requirements demanded by our international customer base.
Growth: new business and international expansion
We have seen a good performance across all of our solution areas and geographies in terms of: winning new logos; additional business from existing customers; and customer retention. This includes:
-- Location solution : Loqate secured a number of new customers in the year across Europe and USA. This included Adidas and Wish, together with John Lewis Partnership and GNC, which we secured in the first half of FY20. In addition, it secured a five-year contract with IBM towards year-end that both extended and expanded our existing relationship, worth a minimum of $13.5million.
-- Identity solution : new business wins supported double-digit growth across all our main geographies. This included a deal with Rank Group in the UK to install our technology across their UK casino estate. Other new business wins in the year include PayPal, Adyen and Sky in addition to William Hill Group, announced at the half year.
-- Fraud solution : in addition to building on our successes in the Asia Pacific region, we also saw encouraging growth in the year in EMEA. This was supported by new agreements in the second half of the year with First Abu Dhabi Bank and Volkswagen Payments S.A., along with an extension of our relationship with Arval, a subsidiary of BNP Paribas Fortis, to provide our Fraud solutions across another three European countries.
-- Upsell and Cross-sell: we continue to see growth from existing customers increasing their use and number of services they take from GBG. Examples include Flexi Group in Australia now taking all our Identity and Fraud services in Australia and Domestic and General taking our Location and Identity services in the UK.
Team Members
Our global team now has over 1,000 people working in 16 countries. I want to thank each of them for their dedication and professionalism over the last 12 months and through the very recent period in particular. They have delivered against the key priorities we set and we have entered our new financial year in good shape as a result.
I was also very pleased that our employee engagement survey, completed in March 2020, recorded its best result. We saw an improvement on last year's high score and an even higher response rate. We continue to have more than 90% of the global team who would recommend GBG as a great place to work.
Current trading, guidance and outlook
Our operational performance in FY20, along with the recent actions we have taken to conserve cash, have helped place us in as optimal a position as we could hope, to withstand the impacts of the pandemic.
Given the global impact of Covid-19, we have been encouraged by some countercyclical opportunities. These have, to a certain extent, helped soften the impact of reduced underlying activity in some parts of our business in the first quarter of FY21 trading. Although it is still early in the pandemic, customer churn and levels of insolvency are at normal levels although we have started to see some customers taking more time to settle their invoices . There has been little impact on our suppliers. We have continued to win new business, although sales cycles are, understandably, lengthening.
It is not possible to predict how long the effects of the disruption caused by the pandemic will last. While the Group has a high level of annual recurring licence revenue, which provides good visibility, the full impact on volume-based sales are harder to predict. This means we do not yet have sufficient visibility to provide guidance for the year ending 31 March 2021.
Despite what is happening to global economies, our drivers for growth remain the same and in some cases are more important as businesses have needed to adapt to new norms. We have confidence that the Group is well-positioned to face what might be ahead of us, thanks to a combination of our market-leading solutions, a diversified customer base and revenues not being reliant on a single customer or sector. Fundamentally, I believe that our long-term prospects in a post-Covid-19 environment remain as attractive as before.
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 simply, safely and securely transact with their customers. Through the application of our proprietary technology, our vision 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. In order to reflect how the Group is presenting its lines of business to its stakeholders going forward, the naming and structure of the operating segments were amended with effect from 1 April 2019. Going forward 'Fraud, Risk & Compliance' has been separated into two new segments - 'Identity' and 'Fraud'. The 'Location & Customer Intelligence' segment has been renamed as 'Location'.
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 this Finance Review.
Covid-19
Management has taken decisive action to reduce discretionary costs and preserve liquidity during the uncertainty during this period. These actions included an immediate Group-wide pay freeze and a pausing of all non-essential recruitment. Project spend is being carefully assessed and restricted to those areas critical to the long-term success of GBG. Executive Directors' bonus payments accrued for the year to 31 March 2020 have been deferred and as stated below, there will be no final dividend for 2020. An optional GBP10.0 million loan repayment that was planned for March 2020 was not made until May 2020 to ensure that the directors had been able to better assess the impact Covid-19 was likely to have on future cashflows.
Review of the Business
The Group uses adjusted figures as key performance indicators in addition to those reported under IFRS, as adopted by the European Union and IFRIC. Adjusted figures exclude certain non-operational or exceptional items, which is consistent with prior year treatments. Adjusted measures are marked as such when used and are explained in note 37.
2020 2019 Change Change
GBP'000 GBP'000 GBP'000 %
Revenue 199,101 143, 504 55,597 38.7
-------------------------------------- --------- --------- -------- -------
Adjusted operating profit 47,945 32,031 15,914 49.7
-------------------------------------- --------- --------- -------- -------
Adjusted operating profit/revenue 24.1% 22.3% 1.8% 7.9
-------------------------------------- --------- --------- -------- -------
Share-based payments charge (4,541) (2,287) (2,254) 98.6
-------------------------------------- --------- --------- -------- -------
Amortisation of acquired intangibles (19,008) (10,316) (8,692) 84.3
-------------------------------------- --------- --------- -------- -------
Operating profit before exceptional
items 24,396 19,428 4,968 25.6
-------------------------------------- --------- --------- -------- -------
Exceptional items (1,552) (4,003) 2,451 61.2
-------------------------------------- --------- --------- -------- -------
Operating profit 22,844 15,425 7,419 48.1
-------------------------------------- --------- --------- -------- -------
Net finance costs (2,218) (689) (1,529) 221.9
-------------------------------------- --------- --------- -------- -------
Profit before tax 20,626 14,736 5,890 40.0
-------------------------------------- --------- --------- -------- -------
Total tax charge (3,562) (2,583) (979) 37.9
-------------------------------------- --------- --------- -------- -------
Profit for the year 17,064 12,153 4,911 40.4
-------------------------------------- --------- --------- -------- -------
Dividend per share Nil 2.99 n/a n/a
-------------------------------------- --------- --------- -------- -------
Adjusted earnings 42,165 28,759 13,406 46.6
Basic weighted average number
of shares ('000) 193,631 158,052 35,579 22.5
-------------------------------------- --------- --------- -------- -------
Basic earnings per share (pence) 8.8 7.7 1.1 14.3
-------------------------------------- --------- --------- -------- -------
Adjusted basic earnings per share
(pence) 21.8 18.2 3.6 19.8
-------------------------------------- --------- --------- -------- -------
Following the significant acquisitions over the past couple of years, the focus during the current year was to ensure these acquisitions were successfully integrated into the Group, as well as continued investment in the existing businesses to drive sustainable organic growth. Both the newly acquired businesses delivered profitable growth during the year.
This period of integration has been successful and meant that when the Covid-19 outbreak occurred, the business as a whole was able to adapt quickly to minimise the impact on operations. The profitable growth and continued high cash generation during the year means that the Group's balance sheet and financing ability remain strong, underpinning the Group's ability to navigate successfully through the uncertainty caused by Covid-19.
Adjusted operating profit for the year increased by 49.7 per cent to GBP47.9 million, reflecting:
-- Revenue growth of 38.7 per cent to GBP199.1 million. This increase included organic growth of 10.7 per cent on a constant currency basis (10.3 per cent on a reported basis).
-- The adjusted operating profit margin increased from 22.3 per cent to 24.1 per cent, notwithstanding significant continued investment for growth made over the course of the year.
Adjusted EBITDA
Adjusted EBITDA was GBP51.7 million (2019: GBP34.1 million), consisting of adjusted operating profit of GBP47.9 million (2019: GBP32.0 million), depreciation (including right-of-use assets) of GBP3.6 million (2019: GBP1.5 million) and amortisation of purchased software and internally developed software of GBP0.2 million (2019: GBP0.5 million). Adjusted EBITDA has increased by GBP2.1 million due to the adoption of IFRS 16 as rent expenses previously within operating costs are now split between depreciation and interest and therefore not part of the EBITDA calculation.
Amortisation of Acquired Intangibles
The charge for the year of GBP19.0 million (2019: GBP10.3 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 acquisitions of VIX Verify and IDology in the prior year. As IDology, which is the largest acquisition the Group has made, completed towards the end of the prior year, this accounted for GBP9.0 million of the current year increase.
Exceptional Items
Exceptional costs of GBP1.6 million (2019: GBP4.0 million) were incurred by the Group in the year and have been detailed in note 7 to the accounts. The principal reason for the decrease compared to prior year is that GBP3.7 million was incurred on acquisition related costs last year, compared to less than GBP0.1 million in the current year. GBP0.9 million of the charge relates to an increase in contingent consideration in relation to IDology, as detailed in the tax section below.
Net Finance Costs
The Group has incurred net finance costs for the year of GBP2.2 million (2019: GBP0.7 million), the increase being interest on the new long-term loan which was taken out in February 2019. Also included within net finance costs is GBP0.2 million for interest on lease liabilities following the adoption of IFRS 16 in the year.
Taxation
The total tax charge of GBP3.6 million (2019: GBP2.6 million) includes GBP4.8 million of current tax payable on the Group's profits in the year (2019: GBP4.6 million) . Included within the total tax charge is a credit of GBP0.8 million related to the increase in the deferred tax asset for pre-acquisition losses within IDology. The benefit of this asset is payable to the former shareholders of IDology and so there is a corresponding cost within exceptional items to reflect the increase in the contingent consideration liability.
Dividend
As communicated in the Pre-Close Trading Update on 22 April 2020, following the Covid-19 outbreak, the directors do not intend to declare a final dividend in respect of the 2020 financial year. This prudent step helps both preserve short term liquidity and also provides additional financial flexibility to support and invest in the business as we come out of the Covid-19 pandemic.
Earnings per Share
The earnings per share analysis in note 13 cover four measures:
-- basic earnings per share (profit attributable to equity holders); -- diluted earnings per share (adjusting for the dilutive effect of share options);
-- adjusted basic earnings per share (adjusted operating profit less net finance costs and tax); and
-- 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 increased by 14.3 per cent from 7.7 pence to 8.8 pence reflecting the higher operating profit although offset by higher number of shares in issue. Adjusted earnings (adjusted operating profit less net finance costs and tax) was GBP42.2 million (2019: GBP28.8 million) resulting in a 19.8 per cent increase in adjusted basic earnings per share from 18.2 pence to 21.8 pence.
The basic weighted average number of shares at 31 March 2020 increased to 193.6 million (2019: 158.1 million), primarily due to the placing of 39.0 million shares to part fund the IDology acquisition in February 2019.
Cash Flows
Group operating activities before tax payments and exceptional items generated GBP49.3 million of cash and cash equivalents (2019: GBP31.6 million) representing Adjusted EBITDA to cash conversion ratio of 95.2 per cent (2019: 92.7 per cent). Operating cash flows continued to be strong and the Group continually monitors its measures of cash generation and collection, especially during the Covid-19 outbreak to assess the recoverability of receivables.
The cash generated from operations enabled debt repayments of GBP24.9 million to be made during the year, with leverage reducing to 0.68 from 1.94 in 2019. Further detailed analysis of this movement is included in the Consolidated Cash Flow Statement.
Post year-end a further loan repayment of GBP10.0 million has been made.
Acquisitions
As detailed in note 36, contingent consideration of GBP5.2 million in respect of the deferred tax losses in IDology was recognised as a measurement period adjustment. During the current year the liability increased by GBP0.8 million due to the CARES Act permitting the losses to be carried back to periods when the tax rate was higher. A further increase of GBP0.1 million to the liability was recognised due to movements in exchange rates.
A payment due in relation to the IDology acquisition, completed in February 2019, was made during the current financial year. This payment of GBP86,000 based on the final working capital position was included within the contingent consideration liability at 31 March 2019 at a value of GBP79,000. The variance was due to exchange rate fluctuations between the acquisition date and the final payment date.
Deferred Income
Deferred income at the end of the year increased by 4.9 per cent to GBP38.4 million (2019: GBP36.6 million). This balance principally consists of contracted licence revenues and profits that are payable up front but recognised over time as the Group's revenue recognition criteria are met. The timing of invoicing for multi-year contracts within the Asia Pacific business meant that their deferred revenue balance decreased by 48%. Excluding Asia Pacific in both periods the deferred balance increased by 8.5 per cent.
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.
Treasury Policy and Financial Risk
The Group's treasury operation is managed within formally defined policies and reviewed by the Board. The Treasury Policy was updated during the year and this review also led to the establishment of a Treasury Committee. The Treasury Committee meets on a regular basis to review cash flow forecasts, covenant compliance, exposure to interest rate and foreign currency movements and make recommendations to the Board based on these reviews.
The Group finances its activities principally with cash, short-term deposits and borrowings but has the ability to draw down up to GBP47.5 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 27 to the accounts.
Approved by the Board on 30 June 2020.
Dave 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 ('KPIs') 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. Non-Statutory measures are defined within note 37.
The Group uses the following primary measures to assess the performance of the Group and its propositions.
Financial
-- Revenue and Organic Revenue Growth at Constant Currency
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. Organic growth is measured on a constant currency basis to remove the impact of changes in exchange rates.
-- Adjusted Operating Profit
This is used 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 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.
-- Earnings per Share growth
This is calculated as the growth in year on year earnings per share 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. This is measured twice a year through a group-wide employee survey conducted through an external provider
Performance against KPIs
A summary of the Group's progress in achieving its objectives, as measured against KPIs, is set out below. Non-Statutory measures are defined within note 37.
Year ended 31 March
2020 2019
Revenue Growth 38.7% 19.9%
------------------------------------------ ---------- ----------
Organic Revenue Growth at Constant
Currency 10.7% 9.3%
------------------------------------------ ---------- ----------
Organic Revenue Growth 10.3% 8.7%
------------------------------------------ ---------- ----------
Fraud Organic Growth at Constant
Currency 24.3% 15.8%
------------------------------------------ ---------- ----------
Identity Organic Growth at Constant
Currency 11.5% 5.4%
------------------------------------------ ---------- ----------
Location Organic Growth at Constant
Currency 6.8% 13.6%
------------------------------------------ ---------- ----------
Adjusted Operating Profit (GBP'000) 47,945 32,031
------------------------------------------ ---------- ----------
Adjusted Operating Profit % 24.1% 22.3%
------------------------------------------ ---------- ----------
Adjusted EBITDA (GBP'000) 51,739 34,080
------------------------------------------ ---------- ----------
Adjusted EBITDA % 26.0% 23.7%
------------------------------------------ ---------- ----------
Earnings per Share - Basic 8.8p 7.7p
------------------------------------------ ---------- ----------
Earnings per Share - Adjusted
Basic 21.8p 18.2p
------------------------------------------ ---------- ----------
Earnings per Share Growth -
Basic 14.3% 8.5%
------------------------------------------ ---------- ----------
Earnings per Share Growth -
Adjusted basic 19.8% 18.9%
------------------------------------------ ---------- ----------
Net (Debt)/Cash (GBP'000) (35,001) (66,252)
------------------------------------------ ---------- ----------
Cash Conversion % 95.2% 92.7%
------------------------------------------ ---------- ----------
Deferred Income (GBP'000) 38,414 36,637
------------------------------------------ ---------- ----------
International Revenue as a Percentage
of Total Revenue 55.9% 44.7%
------------------------------------------ ---------- ----------
Employee Engagement > 90% > 90%
------------------------------------------ ---------- ----------
Consolidated Statement of Comprehensive Income
Year ended 31 March 2020
-----------------------------------------------
Note 2020 2019
GBP'000 GBP'000
Revenue 3 199,101 143,504
Cost of sales (54,914) (36,060)
Gross profit 144,187 107,444
Operating expenses before amortisation of acquired
intangibles, equity-settled share-based payments
and exceptional items (96,242) (75,413)
Operating profit before amortisation of acquired
intangibles, equity-settled share-based payments
and exceptional items (adjusted operating profit) 47,945 32,031
Amortisation of acquired intangibles 16 (19,008) (10,316)
Equity-settled share-based payments charge 29 (4,541) (2,287)
Exceptional items 7 (1,552) (4,003)
Group operating profit 22,844 15,425
3,
Finance revenue 9 143 31
Finance costs 10 (2,361) (720)
-------- --------
Profit before tax 20,626 14,736
Income tax charge 11 (3,562) (2,583)
-------- --------
Profit for the year attributable to equity holders
of the parent 17,064 12,153
-------- --------
Other comprehensive income:
Exchange differences on retranslation of foreign
operations (net of tax)(1) 6,756 (3,702)
-------- --------
Total comprehensive income for the year attributable
to equity holders of the parent 23,820 8,451
-------- --------
Earnings per share 13
- basic earnings per share for the year 8.8p 7.7 p
- diluted earnings per share for the year 8.7p 7.6 p
- adjusted basic earnings per share for the year 21.8p 18.2 p
- adjusted diluted earnings per share for the
year 21.4p 17.9p
(1) Upon disposal of a foreign operation, the
element associated to the disposed foreign operation
will be recycled to the Income Statement
Consolidated Statement of Changes in Equity
Year ended 31 March 2020
--------------------------------------------
Foreign
Equity Capital currency
share Share Merger redemption translation Retained Total
Note capital premium reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2018 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 21 1,004 159,609 - - - - 160,613
Share issue costs 21 - (3,274) - - - - (3,274)
Share-based
payments
charge 29 - - - - - 2,287 2,287
Tax on share
options - - - - - 738 738
Equity dividend 12 - - - - - (4,049) (4,049)
-------- ------- -------- ----------- ----------- -------------- -------
Balance at 31 March
2019 (as reported) 4,821 261,149 6,575 3 (2,811) 51,723 321,460
-------- ------- -------- ----------- ----------- -------------- -------
Impact of
measurement
period adjustments 2.3 - - - - 8 - 8
Balance at 31 March
2019 (as restated
prior
to IFRS 16
adoption) 4,821 261,149 6,575 3 (2,803) 51,723 321,468
IFRS 16 transition
adjustment 2.4 - - - - - (446) (446)
-------- ------- -------- ----------- ----------- -------------- -------
Balance at 31 March
2019 (after IFRS
16
adoption) 4,821 261,149 6,575 3 (2,803) 51,277 321,022
Profit for the
period - - - - - 17,064 17,064
Other comprehensive
income - - - - 6,756 - 6,756
-------- ------- -------- ----------- ----------- -------------- -------
Total comprehensive
income for the
period - - - - 6,756 17,064 23,820
Issue of share
capital 21 34 499 - - - - 533
Share-based
payments
charge 29 - - - - - 4,541 4,541
Tax on share
options - - - - - 779 779
Equity dividend 12 - - - - - (5,761) (5,761)
-------- ------- -------- ----------- ----------- -------------- -------
Balance at 31 March
2020 4,855 261,648 6,575 3 3,953 67,900 344,934
-------- ------- -------- ----------- ----------- -------------- -------
Company Statement of Changes in Equity
Year ended 31 March 2020
---------------------------------------
Equity Capital
share Share Merger redemption Other Retained Total
Note capital premium reserve reserve reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2018 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 21 1,004 159,609 - - - - 160,613
Share issue costs 21 - (3,274) - - - - (3,274)
Share-based payments
charge 29 - - - - - 2,287 2,287
Tax on share options - - - - - 738 738
Equity dividend 12 - - - - - (4,049) (4,049)
-------- -------- --------- ----------- ---------- ---------- --------
Balance at 31 March
2019 (as reported) 4,821 261,149 6,575 3 4,543 44,988 322,079
-------- -------- --------- ----------- ---------- ---------- --------
IFRS 16 transition
adjustment 2.4 - - - - - (253) (253)
-------- -------- --------- ----------- ---------- ---------- --------
Balance at 31 March
2019 (after IFRS 16
adoption) 4,821 261,149 6,575 3 4,543 44,735 321,826
Profit for the
period - - - - - 23,271 23,271
-------- -------- --------- ----------- ---------- ---------- --------
Total comprehensive
income for the
period - - - - - 23,271 23,271
Issue of share
capital 21 34 499 - - - - 533
Hive-up adjustment 16 - - - - (54) - (54)
Share-based payments
charge 29 - - - - - 4,541 4,541
Tax on share options - - - - - 779 779
Equity dividend 12 - - - - - (5,761) (5,761)
-------- -------- --------- ----------- ---------- ---------- --------
Balance at 31 March
2020 4,855 261,648 6,575 3 4,489 67,565 345,135
-------- -------- --------- ----------- ---------- ---------- --------
Consolidated Balance Sheet
As at 31 March 2020
---------------------------
Restated
(1)
Note 2020 2019
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 14 4,653 4,815
Right-of-use assets 15 4,767 -
Intangible assets 16 414,505 425,646
Deferred tax asset 11 6,294 8,222
430,219 438,683
------- --------
Current assets
Inventories 128 341
Trade and other receivables 19 66,554 54,992
Current tax 1,803 -
Cash and short-term deposits 20 27,499 21,189
------- --------
95,984 76,522
Total assets 526,203 515,205
------- --------
Equity and liabilities
Capital and reserves
Equity share capital 21 4,855 4,821
Share premium 21 261,648 261,149
Merger reserve 31 6,575 6,575
Capital redemption reserve 31 3 3
Foreign currency translation reserve 31 3,953 (2,803)
Retained earnings 31 67,900 51,723
Total equity attributable to equity
holders of the parent 344,934 321,468
------- --------
Non-current liabilities
Loans 22 62,139 85,447
Lease liabilities 23 3,713 -
Provisions 25 1,016 528
Deferred revenue 787 1,184
Deferred tax liability 11 27,155 29,548
------- --------
94,810 116,707
------- --------
Current liabilities
Loans 22 - 1,441
Lease liabilities 23 2,012 -
Trade and other payables 24 40,641 33,508
Deferred revenue 37,627 35,453
Contingent consideration 36 6,179 5,287
Current tax - 1,341
86,459 77,030
------- --------
Total liabilities 181,269 193,737
------- --------
Total equity and liabilities 526,203 515,205
------- --------
Approved by the Board on 30 June 2020
C G Clark - Director
D J Wilson - Director
Registered in England number 2415211
(1) Refer to note 2.3
Company Balance Sheet
As at 31 March 2020
----------------------
Restated
(1)
Note 2020 2019
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 14 3,447 3,803
Right-of-use assets 15 2,098 -
Intangible assets 16 133,289 139,139
Investments 18 303,483 303,476
Deferred tax asset 11 3,867 3,094
446,184 449,512
------- --------
Current assets
Inventories 124 338
Trade and other receivables 19 41,290 35,899
Current tax 1,212 -
Cash and short-term deposits 20 15,031 7,791
------- --------
57,657 44,028
------- --------
Total assets 503,841 493,540
------- --------
Equity and liabilities
Capital and reserves
Equity share capital 21 4,855 4,821
Share premium 21 261,648 261,149
Merger reserve 31 6,575 6,575
Capital redemption reserve 31 3 3
Other reserves 31 4,489 4,543
Retained earnings 31 67,565 44,988
Total equity attributable to equity
holders of the parent 345,135 322,079
------- --------
Non-current liabilities
External loans 22 62,139 85,447
Intercompany loans 22 4,156 -
Lease liabilities 23 1,978 -
Deferred revenue 467 863
Provisions 25 843 395
Deferred tax 11 4,474 5,020
74,057 91,725
------- --------
Current liabilities
Trade and other payables 24 47,747 46,464
Deferred revenue 30,019 27,193
Lease liabilities 23 704 -
Contingent consideration 36 6,179 5,287
Current tax - 792
84,649 79,736
------- --------
Total liabilities 158,706 171,461
------- --------
Total equity and liabilities 503,841 493,540
------- --------
During the year the Company made a profit of GBP23,271,000 (2019: GBP7,275,000).
Approved by the Board on 30 June 2020
C G Clark - Director
D J Wilson - Director
Registered in England number 2415211
(1) Refer to note 2.3
Consolidated Cash Flow Statement
Year ended 31 March 2020
---------------------------------
Note 2020 2019
GBP'000 GBP'000
Group profit before tax 20,626 14,736
Adjustments to reconcile Group profit before
tax to net cash flows
Finance revenue 9 (143) (31)
Finance costs 10 2,361 720
Depreciation of plant and equipment 14 1,760 1,544
Depreciation of right-of-use assets 15 1,850 -
Amortisation of intangible assets 16 19,192 10,821
Loss on disposal of plant and equipment and
intangible assets 260 46
Fair value adjustment on contingent consideration 36 971 -
Share-based payments 29 4,541 2,287
Increase/(decrease) in provisions 25 - (25)
Decrease in inventories 213 58
Increase in trade and other receivables (5,725) (9,904)
Increase in trade and other payables 2,592 7,527
-------- ---------
Cash generated from operations 48,498 27,779
Income tax paid (6,386) (2,930)
-------- ---------
Net cash generated from operating activities 42,112 24,849
-------- ---------
Cash flows from/(used in) investing activities
Acquisition of subsidiaries, net of cash acquired 36 (86) (255,107)
Purchase of plant and equipment 14 (1,199) (1,453)
Purchase of software 16 (140) (172)
Proceeds from disposal of property, plant and
equipment 5 6
Interest received 9 143 31
Net cash flows used in investing activities (1,277) (256,695)
-------- ---------
Cash flows (used in)/from financing activities
Finance costs paid 10 (1,911) (720)
Proceeds from issue of shares 21 490 160,613
Share issue costs 21 - (3,274)
Proceeds from new borrowings 22 - 110,447
Repayment of borrowings 22 (24,914) (32,807)
Repayment of lease liabilities 23 (2,043) -
Dividends paid to equity shareholders 12 (5,761) (4,049)
Net cash flows (used in)/from financing activities (34,139) 230,210
-------- ---------
Net increase/(decrease) in cash and cash equivalents 6,696 (1,636)
Effect of exchange rates on cash and cash equivalents (386) 72
Cash and cash equivalents at the beginning
of the period 21,189 22,753
-------- ---------
Cash and cash equivalents at the end of the
period 20 27,499 21,189
-------- ---------
Company Cash Flow Statement
Year ended 31 March 2020
----------------------------
Note 2020 2019
GBP'000 GBP'000
Company profit before tax 24,659 9,078
Adjustments to reconcile Company profit before
tax to net cash flows
Finance costs 2,200 642
Depreciation of plant and equipment 14 1,214 1,125
Depreciation of right-of-use assets 15 675 -
Amortisation of intangible assets 16 5,720 6,116
Loss on disposal of plant and equipment 256 47
Fair value adjustment on contingent consideration 36 971 -
Dividends received recognised within income
statement (16,604) -
Share-based payments 29 4,271 2,287
Decrease in inventories 214 61
Decrease in provisions 25 - (25)
Increase in trade and other receivables (4,325) (4,548)
Increase in trade and other payables 3,069 4,074
-------- ---------
Cash generated from operations 22,320 18,857
Income tax paid (3,678) (1,674)
-------- ---------
Net cash generated from operating activities 18,642 17,183
-------- ---------
Cash flows used in investing activities
Acquisition of subsidiary undertakings 36 (86) (256,348)
Dividends received 16,604 2,464
Purchase of plant and equipment 14 (452) (1,214)
Purchase of software 16 (140) (167)
Proceeds from disposal of plant and equipment 3 -
Net cash flows from/(used in) investing activities 15,929 (255,265)
-------- ---------
Cash flows (used in)/from financing activities
Finance costs paid (1,884) (642)
Proceeds from issue of shares 21 490 160,613
Share issue costs 21 - (3,274)
Proceeds from new borrowings 22 4,156 110,447
Repayment of borrowings 22 (23,500) (32,000)
Repayment of lease liabilities 23 (832) -
Dividends paid to equity shareholders 12 (5,761) (4,049)
Net cash flows (used in)/from financing activities (27,331) 231,095
-------- ---------
Net increase/(decrease) in cash and cash equivalents 7,240 (6,987)
Cash and cash equivalents at the beginning
of the period 7,791 14,778
-------- ---------
Cash and cash equivalents at the end of the
period 20 15,031 7,791
-------- ---------
Notes to the Accounts
1. Corporate Information
GB Group plc ('the Company') and its subsidiaries (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 Business Model.
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 18.
These consolidated financial statements have been approved for issue by the Board of Directors on 30 June 2020.
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.
The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 March 2020 or 2019 but is derived from those accounts. The financial information has been prepared using accounting policies consistent with those set out in the annual report and accounts for the year ended 31 March 2020. Statutory accounts for 2019 have been delivered to the Registrar of Companies, and those for 2020 will be delivered in due course. The auditors have reported on those accounts; their report was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain any statements under Section 498(2) or (3) of the Companies Act 2006.
2. Accounting Policies
2.1 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 2020 and the Group and Company have applied the same policies throughout the year.
2.2 Going Concern
The assessment of going concern relies heavily on the ability to forecast future cashflows over the going concern assessment period which covered through to 30 September 2021. Although GBG has a robust budgeting and forecasting process, the current economic uncertainty caused by the Covid-19 pandemic means that additional sensitivities and analysis have been applied to test the going concern assumption under a range of downside and stress test scenarios. The following steps have been undertaken to allow the Directors to conclude on the appropriateness of the going concern assumption:
a) Understand what could cause GBG not to be a going concern
b) Consider the current customer and sector position, liquidity status and availability of additional funding if required
c) Board review and challenge the base case forecast produced by management including comparison against external data sources available and potential downside scenarios
d) Perform reverse stress tests to assess under what circumstances going concern would become a risk - and assess the likelihood of whether they could occur
e) Examine what mitigating actions would be taken in the event of these stress test scenarios
f) Conclude upon the going concern assumption a) Understand what could cause GBG not to be a going concern
The potential scenarios which could lead to GBG not being a going concern are considered to be:
-- Not having sufficient cash to meet our liabilities as they fall due and therefore not being able to provide services to our customers, pay our employees or meet financing obligations.
-- A non-remedied breach of the financial covenants within the Group Revolving Credit Facility (RCF) agreement (detailed in note 22). Under the terms of the agreement this would lead to the outstanding balance becoming due for immediate repayment. These covenants are:
o Leverage - consolidated net borrowings (outstanding loans less current cash balance) as a multiple of adjusted consolidated EBITDA for the last 12 months, assessed quarterly in arrears, must not exceed 3.00:1.00
o Interest cover - adjusted consolidated EBITDA as a multiple of consolidated net finance charges, for the last 12 months , assessed quarterly in arrears, must not fall below 4.00:1.00
b) Consider the current customer and sector position, liquidity status and availability of additional funding if required
In assessing the impact of Covid-19 it is important to consider the rate of growth prior to the pandemic so that the percentage impact can be put in context. Organic growth at constant currency in the current year to 31 March 2020 was 10.7%, and was 11.5% in the year to 31 March 2019. Analyst consensus prior to Covid-19 showed expected organic growth in the year to 31 March 2021 of 10.9%.
GBG does not have a high customer concentration risk with no individual customer generating more than 2% of Group revenue. The Group's customers operate in a range of different sectors which reduces the risk of a downturn in any particular sector. The financial services sector accounts for the largest percentage of customers, particularly within the Fraud and Identity segments, and there has not been a downturn in demand for these services since the pandemic began.
2. Accounting Policies continued
GBG does have exposure to customers in sectors that have had a more direct impact from Covid-19 such as Travel & Leisure, Employment Agencies & Training and Sporting Activities. However these sectors in total account for less than 6% of Group revenue and as noted above there are no single customers across the Group that are a material credit risk on their own.
As a global company GBG operates in different countries and therefore is less exposed if particular countries recover from Covid-19 at different rates or suffer second waves of the pandemic. The breakdown of our revenue by country is shown in note 4.
There are also macro dynamics supporting the increased use of GBG products and services, both in general and within the context of the Covid-19 pandemic, such as:
-- continued compliance requirements globally -- the ongoing existence of fraud globally, with Covid-19 giving fraudsters new opportunities, leading to increased cyber security risks and therefore demand for GBG anti-fraud solutions
-- continued digitisation and rise of online versus physical transactions in both consumer and business to business settings;
-- speed and quality of customer onboarding being a key differentiator, which is enhanced through the use of GBG's software
GBG is not reliant upon any one supplier to provide critical services either to support the services we provide to our customers or to our internal infrastructure. For these critical services, such as the provision of data, contingency plans exist in the event of supplier failure to be able to move to an alternative supplier with minimal disruption to customers or the wider business.
Liquidity
31 March 31 March
2020 2019 Variance
GBP'000 GBP'000 GBP'000
Operating cashflow before tax and
exceptional items (note 37) 49,279 31,582 17,697
Adjusted EBITDA (note 37) 51,739 34,080 17,659
--------- --------- ---------
Cash conversion % 95.2% 92.7% 2.5%
Cash 27,499 21,189 6,310
Loans (excluding unamortised loan
fees) (62,500) (87,441) 24,941
--------- --------- ---------
Net Debt (35,001) (66,252) 31,251
Leverage 0.68 1.94 1.26
At 31 March 2020 the net debt position of the Group was GBP35.0 million, a decrease of GBP31.3 million since 31 March 2019. On 26 May 2020 the Company repaid GBP10.0m of the outstanding revolving credit facility liability. At 31 May 2020 the net debt position had improved to GBP20.5m.
During the year to 31 March 2020, GBG remained highly cash generative with an EBITDA to operating cash ratio of 95.2%.
The RCF has a maximum level of GBP110 million and therefore there is committed available headroom of GBP47.5 million which could be drawn down for working capital purposes if required. There are no mandatory debt repayments on the RCF required to be made until February 2022 when the agreement expires and the full outstanding balance is due.
c) Board review and challenge the base case forecast produced by management including comparison against external data sources available and potential downside scenarios
Uncertainty around the scale, timing and impact of the coronavirus pandemic means it is impossible to give meaningful guidance for profits in the year ahead. Management have used the internal and external information available in addition to their industry knowledge to produce the base case forecast.
This base case forecast focuses on the impact of a potential decline in revenue against the year to 31 March 2020, as this is the component of the income statement that management has the least control over. The decline in revenue would result in a decrease in cost of sales and therefore in order to keep generating cash the remaining gross margin needs to be sufficient to cover the overhead base.
Management notes that analyst forecasts published after the Covid-19 outbreak estimate a decline in GBG revenue of between 7.6% and 12.8% in the year to 31 March 2021 compared to the prior year, with the consensus position being a decline of 10.3% which would be GBP175 million on a constant currency basis. While this is what we assumed, this is not a forecast, just an assumption for going concern.
The overhead base is the component of the income statement management has most control over with the majority of being people related costs. The base case forecast takes account of the cash preservation measures already taken which include cancellation of the dividend, recruitment frozen for all but essential hires, group-wide pay freeze, deferral of Executive Director bonuses for the year to 31 March 2020 and savings in travel. These measures will save cash of approximately GBP22m in the year to 31 March 2021, with GBP15m of these being operating cost savings (all excluding the dividend). No further reductions in operating expenditure are factored into this base case forecast.
Although a number of external economic forecasts suggest a return to overall GDP growth by Spring 2021 across each of the key territories GBG operates in, for prudence it has been assumed that the revenue position in the base case forecast at 31 March 2021 will remain throughout the year to 31 March 2022 (i.e. that year will see flat revenue). This provides robustness in the forecast in the event of a significant second wave of the pandemic.
This base case forecast showed continued significant headroom in the covenant compliance tests and sufficient liquidity to maintain operations. The base case forecast model was then adjusted to reflect a range of possible downside scenarios across different sectors and geographies, and under each of these the covenant compliance and liquidity position did not result in any risk to going concern.
Relative to the base case forecast produced by management there have not been any adverse variances in the overall trading performance since the year-end.
2. Accounting Policies continued
d) Perform reverse stress tests to assess under what circumstances going concern would become a risk - and assess the likelihood of whether they could occur
The base case forecast model was then further adjusted to establish at what point a covenant breach would occur without further mitigating actions. A covenant breach would occur before the available cash resources of the Group are fully exhausted and therefore the focus of the reverse stress test was on covenant compliance. In making this assessment it was assumed that management had reduced operating expenses by 20% which is the level that is considered possible without causing significant disruption to business operations. These savings would primarily be linked to people costs, net of any related redundancy costs.
With a 20% operating expenses saving introduced in Q3 of FY21 it would take a revenue decline of 42% for a covenant breach to occur (33% without any operating expenses savings). This breach would be as at 30 June 2021 although even at this point it would only take a net debt improvement of GBP400,000 or
EBITDA increase of GBP130,000 to remedy this breach. With the assumption of revenue being flat during the year to 31 March 2022 the breach would be remedied by 30 September 2021.
Based on the current trading performance and through reference to external market data a decline of anywhere near 42% is considered by the Directors to be highly unlikely. If this became even a remote possibility then deeper cost cutting measures would be implemented well in advance of a covenant breach as well as consideration of a range of other mitigation actions detailed in the next section.
e) Look at what mitigating actions could be taken in the event of these reverse stress test scenarios
In the very unlikely event of the reverse stress test case scenario above a breach of covenants would occur on 30 June 2021 unless further mitigation steps were taken. Detailed below are the principal steps that would be taken (prior to the breach taking place) to avoid such a breach occurring:
-- Make deeper cuts to overheads, primarily within the sales function if the market opportunities had declined to this extent. It would only take a reduction of 0.1% of overheads (based on the 31 March 2020 level) to increase EBITDA to remedy a covenant breach of GBP130,000.
-- Request a delay to UK Corporation Tax, Employment Tax or Sales Tax payments under the HMRC 'Time to Pay' scheme. This would be in addition to the deferral of VAT payments announced by the UK Government on 20 March 2020. This announcement has meant that VAT which would have been due by the Group between 20 March 2020 and 30 June 2020 is not due until 31 March 2021. In the year to 31 March 2020 Corporation Tax payments averaged GBP900,000 per quarter, Employment Tax payments (including employee taxes) were approximately GBP1.2 million per month and Sales Tax payments were GBP2.5 million per quarter.
-- Draw down on the GBP30 million Accordion facility within the Group's banking agreement. This facility is subject to credit approval from the syndicate banks.
-- Request a covenant waiver or covenant reset from our bank syndicate. Even under this stress test scenario the forecast is that the Group would only be in breach for one quarter (quarter ending 30 June 2021) before returning to covenant compliance the following quarter. The business would still be EBITDA positive at this point and the directors have a reasonable expectation of achieving a temporary covenant waiver from the banks if needed.
-- Raise cash through an equity placing. Under its Articles of Association GBG has the right to raise cash through an equity placing up to 10% of its market valuation at the date of the placing. Even factoring in a discount being applied to the share price, on the basis that the level of extra cash needed to remedy a breach at 30 June 2021 would be GBP400,000, the Directors are confident that funding well in excess of this level could be raised.
-- Disposal of part of the business. f) Conclude upon the going concern assumption
Following consideration of the base case forecast and reverse stress test scenario, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements.
2.3 Prior Year Measurement Period Adjustment
Under IFRS 3 Business Combinations there is a measurement period of no longer than twelve months in which to finalise the valuation of the acquired assets and liabilities. During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognised at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date. During the measurement period, the acquirer shall also recognise additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date.
In the year to 31 March 2019 GBG completed two acquisitions, the measurement periods for which ended during the year to 31 March 2020.
No further adjustments were identified to the provisional fair values in respect of the acquisition of VIX Verify Pty Limited.
In respect of the acquisition of IDology Inc. adjustments to the provisional fair values were made during the measurement period, as set out in note 35.
2. Accounting Policies continued
The impact of the measurement period adjustments have been applied retrospectively, meaning that the results and financial position for the year to 31 March 2019 have been restated as follows:
Impact on the statement of financial position of the Group as at 1 April 2019:
Impact of Including
As previously measurement measurement
reported period adjustments period adjustments
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 4,815 - 4,815
Intangible assets 420,137 5,509 425,646
Investments 411 (411) -
Deferred tax assets 8,222 - 8,222
Current assets 76,404 118 76,522
-------------- -------------------- --------------------
Total assets 509,989 5,216 515,205
Equity
Share capital and share premium 265,970 - 265,970
Other reserves 6,578 - 6,578
Foreign currency translation reserve (2,811) 8 (2,803)
Retained earnings 51,723 - 51,723
-------------- --------------------
Total equity 321,460 8 321,468
Liabilities
Interest-bearing loans and borrowings 86,888 - 86,888
Trade payables and other liabilities 70,145 - 70,145
Contingent consideration 79 5,208 5,287
Provisions 528 - 528
Current tax 1,341 - 1,341
Deferred tax 29,548 - 29,548
-------------- -------------------- --------------------
Total liabilities 188,529 5,208 193,737
-------------- -------------------- --------------------
Impact on the statement of financial position of the Company as at 1 April 2019:
Impact of Including
As previously measurement measurement
reported period adjustments period adjustments
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 3,803 - 3,803
Intangible assets 139,139 - 139,139
Investments 298,268 5,208 303,476
Deferred tax assets 3,094 - 3,094
Current assets 44,028 - 44,028
-------------------------- -------------------- --------------------
Total assets 488,332 5,208 493,540
Equity
Share capital and share premium 265,970 - 265,970
Other reserves 11,121 - 11,121
Retained earnings 44,988 - 44,988
-------------------------- --------------------
Total equity 322,079 - 322,079
Liabilities
Interest-bearing loans and borrowings 85,447 - 85,447
Trade payables and other liabilities 74,520 - 74,520
Contingent consideration 79 5,208 5,287
Provisions 395 - 395
Current tax 792 - 792
Deferred tax 5,020 - 5,020
-------------------------- -------------------- --------------------
Total liabilities 166,253 5,208 171,461
-------------------------- -------------------- --------------------
2. Accounting Policies continued
2.4 Changes to accounting policies
The following new IFRS standards relevant to the Group and Company have been adopting in these financial statements:
(i) IFRS 16 Leases: The Group and Company has adopted IFRS 16 'Leases' with a date of initial application of 1 April 2019. IFRS 16 'Leases' replaces IAS 17 'Leases', IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases- Incentives and SIC-27 Evaluating the substance of transactions involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosures of leases and requires lessees to account for most leases under a single on-balance sheet model.
The Group and Company has adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 April 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised in retained earnings at the date of initial application. Comparatives are not restated under this method of adoption. The lease liability is calculated at the present value of remaining future payments using the related incremental borrowing rates at 1 April 2019. The right-of-use asset is calculated from the lease commencement date, as if IFRS 16 had always been applied using the incremental borrowing rates at 1 April 2019. The Group and Company also elected to use transition expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group and Company also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option ('short-term leases'), and lease contracts for which underlying asset is of low value ('low value assets').
The effect of adoption of IFRS 16 on the Group and Company is as follows:
Impact on the statement of financial position of the Group as at 1 April 2019:
Impact of Including
adoption adoption
As previously of IFRS of IFRS
reported 16 16
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 4,815 - 4,815
Right-of-use assets - 5,166 5,166
Intangible assets 420,137 - 420,137
Investments 411 - 411
Deferred tax assets 8,222 326 8,548
Current assets 76,404 - 76,404
-------------- ---------- ----------
Total assets 509,989 5,492 515,481
Equity
Share capital and share premium 265,970 - 265,970
Other reserves 3,767 - 3,767
Retained earnings 51,723 (446) 51,277
-------------- ----------
Total equity 321,460 (446) 321,014
Liabilities
Interest-bearing loans and borrowings 86,888 - 86,888
Lease liabilities - 6,076 6,076
Trade payables and other liabilities 70,224 (327) 69,897
Provisions 528 - 528
Current tax 1,341 - 1,341
Deferred tax 29,548 189 29,737
-------------- ---------- ----------
Total liabilities 188,529 5,938 194,467
-------------- ---------- ----------
The impact of IFRS 16 on adoption has changed since reported at September 2019 to incorporate a revised valuation of lease assets and liabilities due to an updated assessment on the valuation of lease incentives and dilapidations.
2. Accounting Policies continued
Impact on the statement of financial position of the Company as at 1 April 2019:
Impact of Including
adoption adoption
As previously of IFRS of IFRS
reported 16 16
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 3,803 - 3,803
Right-of-use assets - 2,773 2,773
Intangible assets 139,139 - 139,139
Investments 298,268 - 298,268
Deferred tax assets 3,094 60 3,154
Current assets 44,028 - 44,028
-------------------------- ---------- ----------
Total assets 488,332 2,833 491,165
Equity
Share capital and share premium 265,970 - 265,970
Other reserves 11,121 - 11,121
Retained earnings 44,988 (253) 44,735
-------------------------- ----------
Total equity 322,079 (253) 321,826
Liabilities
Interest-bearing loans and borrowings 85,447 - 85,447
Lease liabilities - 3,406 3,406
Trade payables and other liabilities 74,599 (320) 74,279
Provisions 395 - 395
Current tax 792 - 792
Deferred tax 5,020 - 5,020
-------------------------- ---------- ----------
Total liabilities 166,253 3,086 169,339
-------------------------- ---------- ----------
Summary of new accounting policies
Set out below are the new accounting policies of the Group, which are consistent with the Company, upon adoption of IFRS 16:
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made on or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e. below GBP5,000). Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.
Significant judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
2. Accounting Policies continued
Amounts recognised in the statement of financial position and in the consolidated statement of comprehensive income
Set out below, are the carrying amounts of the Group's right-of-use assets and lease liabilities and the movements during the year:
Right-of-use assets Lease liabilities
------------------------------------- ------------------
Property Other equipment Total Total
GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2019 5,150 16 5,166 6,076
Additions 1,837 - 1,837 1,878
Disposals (115) - (115) (299)
Depreciation expense (1,840) (10) (1,850) -
Interest expense - - - 245
Payments - - - (2,043)
Foreign currency adjustment (272) 1 (271) (132)
--------- ---------------- -------- ------------------
As at 31 March 2020 4,760 7 4,767 5,725
--------- ---------------- -------- ------------------
The lease liabilities as at 1 April 2019 can be reconciled to the operating lease commitments as of 31 March 2019 as follows:
Group Company
GBP'000 GBP'000
Operating lease commitments as at 31 March
2019 5,307 2,450
Less: discounting of future lease commitments (361) (149)
-------- --------
Discounted operating lease commitments at
1 April 2019 4,946 2,301
Less: Commitments relating to leases of low
value assets (6) (1)
Add: Payments in optional extension periods
not recognised as at 31 March 2019 1,136 1,106
Lease liabilities as at 1 April 2019 6,076 3,406
Weighted average incremental borrowing rate
as at 1 April 2019 4.01% 3.47%
(ii) IFRIC 23 ' Uncertainty over Income Tax Treatments': the IASB issued IFRIC 23 'Uncertainty over Income Tax Treatments' which is effective for financial years beginning on or after 1 January 2019 and is intended to clarify when and how to apply the recognition and measurement requirements of IAS 12 'Income Taxes' when there is uncertainty over income tax treatments.
(iii) Amendment to IFRS 9 'Prepayment Features with Negative Compensation' : the amendments are intended to clarify how IFRS 9 'Financial Instruments' classifies particular prepayable financial assets. In addition, the amendment intended to clarify an aspect of accounting for modification of financial liabilities. The amendments are to be applied retrospectively for fiscal years beginning on or after 1 January 2019.
(iv) Amendment to IAS 19 'Plan Amendment, Curtailment or Settlement' : the amendments are intended to clarify the accounting treatment around plans in order to provide more relevant information for decision making. An entity applies the amendments to plan amendments, curtailments or settlements occurring on or after the beginning of the first annual reporting period that begins on or after 1 January 2019.
Apart from IFRS 16, none of these pronouncements has had any impact for amounts recognised in these financial statements.
2.5 Significant accounting policies
The Group and Company financial statements are presented in pounds Sterling and all values are rounded to the nearest thousand pounds (GBP'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.
2. Accounting Policies continued
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.
Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of Other Comprehensive Income ('OCI') are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.
Business Combinations
The Group uses the acquisition method of accounting to account for business combinations of entities not under common control. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as a financial liability within the scope of IFRS 9 'Financial Instruments: Recognition and Measurement' is measured at fair value with the changes in fair value recognised in the statement of profit or loss.
If a 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.
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.
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).
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.
2. Accounting Policies continued
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.
Investment in Subsidiaries
Investments in subsidiaries are held at cost, less provision for impairment.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated to write off cost less estimated residual value based on prices prevailing at the balance sheet date on a straight-line basis over the estimated useful life of each asset as follows:
Plant and equipment - over 3 to 10 years Freehold buildings - over 50 years
Freehold land is not depreciated.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Statement of Comprehensive Income in the year the item is derecognised.
Residual values and estimated remaining lives are reviewed annually.
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:
Software technology assets - over 2 to 5 years Brands and trademarks - over 2 to 3 years Non-compete agreements - over 3 to 5 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.
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.
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.
2. Accounting Policies continued
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
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.
In the current year an additional management overlay to the ECL calculation has been applied as detailed in note 27.
Trade and Other Receivables
Trade receivables, which generally have 14 to 60 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectable amounts. A provision is made against a trade receivable only when there is objective evidence that the Group may not be able to recover the entire amount due under the original terms of the invoice. The carrying amount of the receivable is reduced through the use of a provision for doubtful debts account. Impaired debts are derecognised when they are assessed as uncollectable.
Cash and Short-Term Deposits
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity date of three months or less.
For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of any outstanding bank overdrafts.
Borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate ('EIR') method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
Trade and Other Payables
Trade and other payables are initially recognised at 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.
2. Accounting Policies continued
Dilapidation provisions
A dilapidation provision is recognised when there is an obligation to restore property to its original state at the end of the leasehold period. The provision is estimated as the cost of restoration at the balance sheet date, with the corresponding entry recognised in property plant and equipment. Depreciation is charged in line with the remaining leasehold period.
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. Please see Judgements - Revenue Recognition below for further detail.
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 as further described below.
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 - Location 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
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 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 performance obligations over the period of the licence are satisfied by the provision of disk files to the customer in the same format on a monthly basis to ensure that the customer has access to the most relevant information throughout the contract period. This meets the series guidance 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 the contractual term.
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.
2. Accounting Policies continued
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.
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). However, 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.
Operating Profit
Operating profit is profits after amortisation of acquired intangibles, equity-settled share-based payments and exceptional items but before finance revenue, finance costs and tax.
2. Accounting Policies continued
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).
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.
Finance costs also include the amortisation of bank loan arrangement fees, interest on long-service award liabilities and interest on lease liabilities.
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 3 Definition of a business - Amendments to IFRS 1 January
3 2020
IFRS 9 & Interest Rate Benchmark Reform - Amendments to 1 January
7 IAS 39 IFRS 9, IAS 39 and IFRS 7 2020
IAS 1, IAS Definition of Material - Amendments to IAS 1, 1 January
8 IAS 8 2020
2. Accounting Policies continued
2.6 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:
Estimates
Impairment of Goodwill
The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated earlier in note 2.5. 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. In making these estimates management have reflected the uncertainty due to Covid-19 by assessing the sensitivity of the assets to a wider range of changes in the key inputs to consider if an impairment would arise within these ranges.
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 17.
Impairment of Investments in Subsidiary Undertakings
The Group tests for impairment of investments where there are indicators that the carrying value exceeds the recoverable value.
In order to perform this assessment, management are required to make estimates regarding the timing and amount of future cash flows applicable to the subsidiary, 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.
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 29.
Provisions
The Group provides for the costs of restoring property to its original state at the end of the leasehold period on right-of-use assets. Management are required to estimate these costs using market information regarding the costs to restore at the balance sheet date.
Allowance for Impairment Losses on Credit Exposures
The Group apply the IFRS 9 simplified lifetime expected credit loss approach in calculating expected credit losses (ECL). Under this method ECL provisions are determined using a combination of historical experience and forward-looking information based on management judgement. The Covid-19 pandemic has introduced unprecedented economic uncertainty which increases the likelihood of a higher level of ECL, but there is no historical comparative evidence to draw upon to build the impact of this pandemic into the normal ECL model used.
The Group has responded by calculating an additional level of provision to overlay the normal ECL calculation. This overlay has been based on management estimates taking into account an analysis of trade receivables broken down into customer sectors, using internal and external forecasts to assess the sectors which are likely to see the biggest impact of the pandemic, and comparing cash receipts received post year-end for customers in these sectors against historical averages. The impact of the overlay is detailed in note 27.
Judgements
Revenue Recognition
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.
2. Accounting Policies continued
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 GBP15,084,000 (2019: GBP16,367,000). The total amount of deferred tax assets that management had forecast as available at the year-end based on these forecasts and estimates was lower than the previous year due to the element related to IDology transferring to a current tax asset. The carrying value of the recognised deferred tax asset at 31 March 2020 was GBP6,294,000 (2019: GBP8,222,000) and the unrecognised deferred tax asset at 31 March 2020 was GBP5,123,000 (2019: GBP3,166,000). Further details are contained in note 11.
3. Revenue
Revenue disclosed in the Consolidated Statement of Comprehensive Income is analysed as follows:
2020 2019
GBP'000 GBP'000
Licence 71,543 75,002
Transactional 112,079 56,191
Services 15,479 12,311
Revenue 199,101 143,504
-------- --------
Finance revenue 143 31
-------- --------
Total revenue 199,244 143,535
-------- --------
Significant changes in contract balances
Contract assets predominantly relate to software licence services, where revenue recognition for on premise arrangements occurs as the solution is transferred to the customer, whereas the invoicing pattern is often annually over the contract period. Contract assets recognised during the year totalled GBP6.0m (2019: GBP3.1 m). The contract asset balance for work completed but not invoiced on satisfaction of a performance obligation, unwinds over the contract term. Contract assets are transferred to receivables when the right to consideration becomes unconditional, or conditional over the passage of time.
Revenue recognised in the year of GBP35.4m (2019: GBP28.3m) was included in the opening contract liability. Cash received in advance not recognised as revenue in the year was GBP30.4m (2019: GBP33.4m).
4. Segmental Information
In order to reflect how the Group is presenting its lines of business to its stakeholders going forward, the naming and structure of the operating segments were amended with effect from 1 April 2019. Going forward 'Fraud, Risk & Compliance' has been separated into two new segments - 'Identity' and 'Fraud'. The 'Location & Customer Intelligence' segment has been renamed as 'Location'. Accordingly, the comparative segmental reporting has been represented.
The Group's operating segments are internally reported to the Group's Chief Executive Officer as three operating segments: Location, Identity and Fraud. Included within 'Unallocated' is the revenue and profit of the marketing services business (previously within Location & Customer Intelligence), as well as group operating costs such as compliance, finance, legal, people team, information security, directors' remuneration and PLC costs.
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, equity-settled share-based payments, 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 Identity Location Unallocated Total
Year ended 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2020
Licence 33,563 7,135 30,845 - 71,543
Transactional - 95,489 16,590 - 112,079
Services 1,943 2,784 2,356 8,396 15,479
-------- --------- --------- ------------ ---------
Total revenue 35,506 105,408 49,791 8,396 199,101
-------- --------- --------- ------------ ---------
Adjusted operating profit 13,444 33,626 14,552 (13,677) 47,945
Amortisation of acquired
intangibles (477) (14,171) (3,999) (361) (19,008)
Share-based payments
charge - - - (4,541) (4,541)
Exceptional items - - - (1,552) (1,552)
-------- --------- --------- ------------ ---------
Operating profit 12,967 19,455 10,553 (20,131) 22,844
Finance revenue 143 143
Finance costs (2,361) (2,361)
Income tax expense (3,562) (3,562)
---------
Profit for the year 17,064
---------
(Represented) (Represented) (Represented) (Represented) (Represented)
Fraud Identity Location Unallocated Total
Year ended 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2019
Licence 27,644 12,137 35,221 - 75,002
Transactional - 45,459 10,732 - 56,191
Services 1, 490 633 320 9,868 12,311
-------------- -------------- -------------- -------------- --------------
Total revenue 29, 134 58,229 46,273 9,868 143,504
-------------- -------------- -------------- -------------- --------------
Adjusted operating profit 9,029 15,219 16,683 (8,900) 32,031
Amortisation of acquired (4,37
intangibles (792) 2) (4,662) (490) (10,316)
Share-based payments
charge - - - (2,287) (2,287)
Exceptional items - - - (4,003) (4,003)
-------------- -------------- -------------- -------------- --------------
Operating profit 8,237 10,847 12,021 (15,680) 15,425
Finance revenue 31 31
Finance costs (720) (720)
Income tax expense (2,583) (2,583)
--------------
Profit for the period 12,153
--------------
Geographical information
Revenues from external Non-current assets
customers
Restated(1)
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 87,814 79,368 126,945 138,157
United States of America 52,386 20,525 259,558 252,461
Australia 19,063 10,241 37,374 39,789
Others 39,838 33,370 48 54
------------ ----------- -------- ------------
199,101 143,504 423,925 430,461
------------ ----------- -------- ------------
(1) Refer to note 2.3
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): 2020 2019
GBP'000 GBP'000
Research and development costs recognised as an operating
expense 16,821 10,370
Other Technology related costs recognised as an operating
expense 13,043 13,284
-------- --------
Total Technology related costs recognised as an operating
expense 29,864 23,654
Depreciation of property, plant and equipment (note
14) 1,760 1,544
Depreciation of right-of-use assets (note 15) 1,850 -
Expense relating to short term leases 447 -
Expense relating to low value leases 5 -
Expected credit losses of trade receivables (note
27) 2,532 852
Amortisation of intangible assets (note 16) 19,192 10,821
Foreign exchange loss/(gain) 69 (35)
6. Auditor's Remuneration
2020 2019
GBP'000 GBP'000
Audit of the financial statements (1) 262 266
-------- --------
Other fees to auditor - other assurance services 72 25
- tax compliance services - 2
- tax advisory services 10 21
344 314
-------- --------
(1) GBP 159,000 (2019: GBP136,000) of this relates
to the Company.
7. Exceptional Items
2020 2019
GBP'000 GBP'000
Acquisition related costs 26 3,747
Costs associated with team member reorganisations 555 256
Fair value adjustments to contingent consideration 829 -
(note 36)
Foreign exchange movement on contingent consideration 142 -
(note 36)
1,552 4,003
-------- --------
Acquisition related costs of GBP26,000 (2019: GBP3,747,000) include legal and professional advisor costs directly attributable to the transactions and exclude operating or integration costs relating to an acquired business. In the current year these costs related to final costs in relation to the acquisition of IDology Inc. in the prior year in addition to costs relating 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. In the prior year these costs included GBP449,000 in relation to VIX Verify and GBP2,391,000 in relation to IDology Inc.
Costs associated with team member reorganisations relate to exit costs of personnel leaving the business on an involuntary basis, either as a result of integrating acquisitions or due to reorganisations within our operating divisions. Due to the nature of these costs, management deem them to be exceptional in order to better reflect our underlying performance. Exit costs outside of these circumstances are treated as an operating expense.
As detailed in note 36, under the terms of the IDology Inc acquisition the sellers are entitled to the benefit of the tax losses of the business at the date of the acquisition as and when GBG utilises them to reduce cash tax payments. On acquisition GBG recognised a Deferred Tax Asset (DTA) in relation to these losses which were expected to be utilised in future years and so the valuation of the DTA was based on the prevailing federal tax rate of 21%. An equivalent contingent consideration liability reflects that the benefit of this DTA is due to the sellers.
On 27 March 2020 the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress and signed into law by President Trump. This Act includes the entitlement for tax losses to now be carried back for up to five years. As the tax rate in the United States in the period 2014-2018 was 35% the value of these losses has increased. GBG has recorded an increase in the value of the DTA related to this new law with the benefit recognised within the income tax charge in the income statement (the DTA was then reclassified to a current tax asset as a cash refund is now available). The increase in the liability to the sellers has been recognised as an exceptional item as it arose outside of the 12 month hindsight period permitted for adjustments to the acquisition accounting.
The contingent liability related to these tax losses is based on the US Dollar value of the losses. As a result the liability was retranslated at the balance sheet date with a loss of GBP142,000 being treated as an exceptional item.
The tax impact of the exceptional costs was GBP969,000 (2019: GBP77,000). The largest element of this is the increase in the deferred tax asset of GBP829,000 related to the IDology tax losses.
8. Staff Costs and Directors' Emoluments
Group Company
a) Staff Costs 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Wages and salaries 55,320 45,935 33,000 31,392
Social security costs 6,590 5,318 4,469 4,352
Other pension costs 2,473 2,007 1,668 1,486
-------- -------- -------- --------
64,383 53,260 39,137 37,230
-------- -------- -------- --------
Included in wages and salaries is a total charge of share-based payments of GBP4,541,000 (2019: GBP2,287,000) 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
2020 2019 2020 2019
No. No. No. No.
Technology 395 356 226 227
General and administration 120 108 97 42
Sales and marketing 507 420 364 388
------ ----- ----- -----
1,022 884 687 657
------ ----- ----- -----
b) Directors' Emoluments 2020 2019
GBP'000 GBP'000
Wages and salaries 1,513 1,438
Pension 74 72
Bonuses 1,449 1,318
-------- --------
3,036 2,828
-------- --------
Aggregate gains made by Directors on the exercise
of options 5,936 2,467
-------- --------
The remuneration for the highest paid Director was as follows:
2020 2019
GBP'000 GBP'000
Wages and salaries 607 589
Bonus 723 608
-------- --------
1,330 1,197
-------- --------
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 GBP90,353 (2019: GBP84,000). The number of share options granted during the year for the highest paid Director was 206,136 (2019: 128,853) and the number of share options exercised during the year was 200,000 (2019: 200,000).
9. Finance Revenue
2020 2019
GBP'000 GBP'000
Bank interest receivable 143 31
-------- --------
143 31
-------- --------
10. Finance Costs
2020 2019
GBP'000 GBP'000
Bank interest payable 1,911 613
Interest on long service award 13 9
Amortisation of bank loan fees 192 98
Lease liability interest 245 -
-------- --------
2,361 720
-------- --------
11. Taxation
a) Tax on Profit
The tax charge in the Consolidated Statement of Comprehensive
Income for the year is as follows:
2020 2019
GBP'000 GBP'000
Current income tax
UK corporation tax on profit for the year 2,760 2,765
Amounts underprovided/(overprovided) in previous
years 120 (292)
Foreign tax 1,903 2,158
4,783 4,631
Deferred tax
Origination and reversal of temporary differences (2,625) (1,868)
Amounts underprovided in previous years 876 26
Impact of change in tax rates 528 (206)
(1,221) (2,048)
Tax charge in the Statement of Comprehensive Income 3,562 2,583
-------- --------
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:
2020 2019
GBP'000 GBP'000
Consolidated profit before tax 20,626 14,736
-------- --------
Consolidated profit before tax multiplied by the
standard rate of corporation tax in
the UK of 19% (2019: 19%) 3,919 2,800
Effect of:
Permanent differences 347 1,094
Non-taxable income (489) (11)
Rate changes (1,283) (120)
Utilisation of losses (14) -
Prior year items 996 (266)
Research and development tax relief (880) (492)
Patent Box relief (545) (460)
Share option relief 9 (67)
Recognition of unrecognised deferred tax assets - (698)
Effect of higher taxes on overseas earnings 1,502 803
Total tax charge reported in the Statement of Comprehensive
Income 3,562 2,583
-------- --------
The Group is entitled to current year tax relief of GBP811,398 (2019:
GBP1,023,000), calculated at a tax rate of 19% (2019: 19%), in relation
to the statutory deduction available on share options exercised in
the year.
11. Taxation (continued)
c) Deferred Tax - Group
Deferred Tax Asset
The recognised and unrecognised potential deferred tax asset of the
Group is as follows:
Recognised Unrecognised
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Decelerated capital allowances 1,259 1,283 - -
Share options 1,848 1,627 - -
Long service award 233 234 - -
Accrued bonuses 522 728 - -
Provision for bad debt 368 205 - -
Other temporary differences 1,420 497 - -
Leases 429 - - -
Capital losses - - 429 384
Trading losses 215 3,648 2,866 2,782
----------------------------------------------- ------------------------------------------------- -------- --------
6,294 8,222 3,295 3,166
----------------------------------------------- ------------------------------------------------- -------- --------
The movement on the deferred tax asset of the Group is as follows:
2020 2019
GBP'000 GBP'000
Opening balance - as reported 8,222 4,453
IFRS 16 transition adjustment 326 -
-------- --------
Opening balance - restated 8,548 4,453
Acquired on acquisition - 3,955
Foreign currency adjustments 11 (73)
Origination and reversal of temporary differences (2,265) 24
Impact of change in tax rates - (137)
6,294 8,222
-------- --------
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 GBP15,084,000(2019: GBP16,367,000) and unrecognised capital losses of GBP 2,257,000 (2019: GBP2,257,000).
Deferred Tax Liability
The deferred tax liability of the Group is as follows:
2020 2019
GBP'000 GBP'000
Intangible assets 26,553 29,378
Land and buildings 186 108
Leases 277 -
Accelerated capital allowances 139 62
27,155 29,548
------------------------------------------- --------
The movement on the deferred tax liability of the Group is as follows:
2020 2019
GBP'000 GBP'000
Opening balance 29,548 8,260
IFRS 16 transition adjustment 189 -
------------------------------------------- --------
Opening balance - restated 29,737 8,260
Acquisition of intangibles in subsidiaries - 23,913
Foreign currency adjustments 713 (359)
Origination and reversal of temporary differences (3,823) (1,923)
Impact of change in tax rates 528 (343)
27,155 29,548
------------------------------------------- --------
11. Taxation (continued)
d) Deferred Tax - Company
Deferred Tax Asset
The recognised and unrecognised potential deferred tax asset of the
Company is as follows:
Recognised Unrecognised
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Decelerated capital allowances 1,259 1,283 - -
Share options 1,839 1,627 - -
Long service award 105 100 - -
Provision for bad debt 308 84 - -
Other temporary differences 310 - - -
Leases 46 - - -
Capital losses - - 429 384
Trading losses - - 2,866 2,782
--------------------------------------------------------- ------------------------------------------- ------------- --------
3,867 3,094 3,295 3,166
--------------------------------------------------------- ------------------------------------------- ------------- --------
The movement on the deferred tax asset of the Company is as follows:
2020 2019
GBP'000 GBP'000
Opening balance - as reported 3,094 3,404
IFRS 16 transition adjustment 59 -
-------- --------
Opening balance - restated 3,153 3,404
Origination and reversal of temporary differences 714 (310)
3,867 3,094
-------- --------
The deferred tax asset has been recognised to the extent it is anticipated to be recoverable out of future taxable profits based on profit forecasts for the foreseeable future. The utilisation of the unrecognised deferred tax asset in future periods will reduce the future tax rate below the standard rate. The Company has unrecognised deductible temporary differences of GBP15,084,000 (2019: GBP16,367,000) and unrecognised capital losses of GBP 2,257,000 (2019: GBP2,257,000).
Deferred Tax Liability
The deferred tax liability of the Company is as follows:
2020 2019
GBP'000 GBP'000
Intangible assets 4,362 4,912
Land and buildings 112 108
4,474 5,020
-------- --------
The movement on the deferred tax liability of the Company is as
follows:
2020 2019
GBP'000 GBP'000
Opening balance 5,020 6,319
Origination and reversal of temporary differences (1,014) (1,179)
Impact of change in tax rates 468 (120)
4,474 5,020
-------- --------
e) Tax Losses
The Group has carried forward trading losses at 31 March 2020 of GBP15,591,000 (2019: GBP30,561,000). 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 2020 of GBP2,257,000 (2019: GBP2,257,000), which should be available for offset against future capital gains of the Group to the extent that they arise.
f) Change in corporation tax rate
A reduction in the UK corporation tax rate to 17% (from 19%) with effect from 1 April 2020 was enacted in the Finance Act 2016. The deferred tax assets and liabilities as at 31 March 2019 were based on this rate.
In the UK Budget on 11 March 2020 it was announced that the rate would remain at 19%, with this change substantively enacted on 17 March 2020. The deferred tax assets and liabilities at 31 March 2020 are therefore based on the 19% rate.
12. Dividends Paid and Proposed
2020 2019
GBP'000 GBP'000
Declared and paid during the year
Final dividend for 2019 (paid in
2020): 2.99p (2018 (paid in 2019):
2.65p) 5,782 4,049
--------- ---------
Proposed for approval at AGM (not recognised
as a liability at 31 March)
Final dividend for 2020: 0p (2019:
2.99p) - 5,766
--------- ---------
GBP21,000 was received during the year relating to a refund for dividends not claimed from previous years. The total net cash impact of dividends during the year was therefore GBP5,761,000.
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.
2020 2020 2019 2019
pence GBP'000 pence GBP'000
per per
share share
Profit attributable to equity holders
of the Company 8.8 17,064 7.7 12,153
------- --------- ------- ---------
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.
2020 2019
No. No.
Basic weighted average number of
shares in issue 193,630,621 158,051,687
Dilutive effect of share options 3,144,641 2,754,605
Diluted weighted average number
of shares in issue 196,775,262 160,806,292
------------ ------------
2020 2020 2019 2019
pence GBP'000 pence GBP'000
per per
share share
Profit attributable to equity holders
of the Company 8.7 17,064 7.6 12,153
------- --------- ------- ---------
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 Diluted Basic Diluted
2020 2020 2019 2019
2020 pence pence 2019 pence pence
GBP'000 per share per GBP'000 per per
share share share
Adjusted operating
profit 47,945 24.8 24.4 32,031 20.3 19.9
Less net finance
costs (2,218) (1.1) (1.1) (689) (0.4) (0.4)
Less tax (3,562) (1.9) (1.9) (2,583) (1.7) (1.6)
---------- ---------- -------
Adjusted earnings 42,165 21.8 21.4 28,759 18.2 17.9
---------- ----------- -------- ---------- ------- --------
14. Property, Plant and Equipment
Group
Land and Plant
buildings and equipment Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 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
---------- ----------------------- -------
Additions - 1,653 1,653
Disposals - (881) (881)
Foreign currency adjustment - (94) (94)
---------- ----------------------- -------
At 31 March 2020 1,251 9,219 10,470
---------- ----------------------- -------
Depreciation and impairment
At 1 April 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
---------- ----------------------- -------
Provided during the year 19 1,741 1,760
Disposals - (875) (875)
Foreign currency adjustment - (45) (45)
---------- ----------------------- -------
At 31 March 2020 61 5,756 5,817
---------- ----------------------- -------
Net book value
At 31 March 2020 1,190 3,463 4,653
At 31 March 2019 1,209 3,606 4,815
At 1 April 2018 1,231 3,469 4,700
---------- ----------------------- -------
Company
Land and Plant and
buildings equipment Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 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
Additions - 858 858
Disposals - (872) (872)
----------- ----------- ----------------
At 31 March 2020 1,233 6,125 7,358
----------- ----------- ----------------
Depreciation and impairment
At 1 April 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
Provided during the year 19 1,195 1,214
Disposals - (872) (872)
----------- ----------- ----------------
At 31 March 2020 43 3,868 3,911
----------- ----------- ----------------
Net book value
At 31 March 2020 1,190 2,257 3,447
----------- ----------- ----------------
At 31 March 2019 1,209 2,594 3,803
----------- ----------- ----------------
At 1 April 2018 1,231 2,483 3,714
----------- ----------- ----------------
15. Right-of-use assets
Group
Right of
use assets Total
GBP'000 GBP'000
Cost
At 31 March 2019 - -
Adoption of IFRS 16 (see note 2.4) 8,840 8,840
Additions 1,837 1,837
Disposals (295) (295)
Foreign currency adjustment (265) (265)
----------- -----------------
At 31 March 2020 10,117 10,117
----------- -----------------
Depreciation and impairment
At 31 March 2019 - -
Adoption of IFRS 16 (see note 2.4) 3,674 3,674
Provided during the year 1,850 1,850
Disposals (180) (180)
Foreign currency adjustment 6 6
At 31 March 2020 5,350 5,350
----------- -----------------
Net book value
At 31 March 2020 4,767 4,767
----------- -----------------
At 31 March 2019 - -
----------- -----------------
At 1 April 2018 - -
----------- -----------------
Company
Right of
use assets Total
GBP'000 GBP'000
Cost
At 31 March 2019 - -
Adoption of IFRS 16 (see note 2.4) 4,691 4,691
Additions - -
Disposals - -
----------- ---------------------
At 31 March 2020 4,691 4,691
----------- ---------------------
Depreciation and impairment
At 31 March 2019 - -
Adoption of IFRS 16 (see note 2.4) 1,918 1,918
Provided during the year 675 675
----------- ---------------------
At 31 March 2020 2,593 2,593
----------- ---------------------
Net book value
At 31 March 2020 2,098 2,098
----------- ---------------------
At 31 March 2019 - -
----------- ---------------------
At 1 April 2018 - -
----------- ---------------------
Further detail regarding the impact of the transition to IFRS 16 has been given in note 2.4 of the financial statements.
The underlying class of assets and their net book values are leasehold property (Group GBP4,760,000, Company GBP2,093,000) and equipment (Group GBP7,000, Company GBP5,000).
16. Intangible Assets
Group Total Internally
Customer Software Non-complete acquired Purchased developed
relationships technology clauses intangibles Goodwill software software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April
2018 45,926 15,673 1,066 62,665 116,497 2,118 1,771 183,051
Foreign
currency
adjustment (1,078) (249) (79) (1,406) (2,625) 30 - (4,001)
Additions
- business
combinations 73,212 17,224 4,391 94,827 178,651 - - 273,478
Additions
- purchased
software - - - - - 172 - 172
Disposals - - - - - (67) - (67)
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 - as
reported 118,060 32,648 5,378 156,086 292,523 2,253 1,771 452,633
Additions
-
measurement
period (1) - - - - 5,509 - - 5,509
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 - as
restated 118,060 32,648 5,378 156,086 298,032 2,253 1,771 458,142
Foreign
currency
adjustment 2,075 527 194 2,796 5,230 1 - 8,027
Additions
- purchased
software - - - - - 183 - 183
Disposals - - (695) (695) - (259) (559) (1,513)
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2020 120,135 33,175 4,877 158,187 303,262 2,178 1,212 464,839
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
Amortisation
and
impairment
At 1 April
2018 10,869 7,257 614 18,740 - 1,195 1,712 21,647
Foreign
currency
adjustment 22 29 2 53 - (5) - 48
Amortisation
during the
year 5,779 4,105 432 10,316 - 468 37 10,821
Disposals - - - - - (20) - (20)
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 16,670 11,391 1,048 29,109 - 1,638 1,749 32,496
Foreign
currency
adjustment (77) (43) 18 (102) - 2 - (100)
Amortisation
during the
year 12,231 5,723 1,054 19,008 - 162 22 19,192
Disposals - - (695) (695) - - (559) (1,254)
------------------
At 31 March
2020 28,824 17,071 1,425 47,320 - 1,802 1,212 50,334
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
Net book
value
At 31 March
2020 91,311 16,104 3,452 110,867 303,262 376 - 414,505
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 -
restated
(1) 101,390 21,257 4,330 126,977 298,032 615 22 425,646
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 31 March
2019 - as
reported 101,390 21,257 4,330 126,977 292,523 615 22 420,137
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
At 1 April
2018 35,057 8,416 452 43,925 116,497 923 59 161,404
------------------ ------------------ ------------- ------------ ---------- ----------- ----------- -----------
(1) See note 2.3
16. Intangible Assets continued
Acquisition Carrying Remaining
Value Amortisation
of Customer Period
Relationship
GBP'000 Years
Data Discoveries Holdings
Limited 47 1.25
Advanced Checking Services 26 1.33
Capscan Parent Limited 746 1.58
TMG.tv Limited 276 2.58
CRD (UK) Limited 286 3.58
DecTech Solutions Pty
Ltd 1,564 4.08
CDMS Limited 1,656 4.58
Loqate Inc 1,165 5.08
ID Scan Biometrics
Limited 2,448 6.25
Postcode Anywhere (Holdings)
Limited 17,613 7.08
VIX Verify Global Pty
Limited 5,620 8.50
IDology Inc 59,864 8.83
--------------
91,311
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).
16. Intangible Assets continued
Company Total Internally
Customer Software Non-complete acquired Purchased developed
relationships technology clauses intangibles Goodwill software software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2018 26,078 7,818 461 34,357 78,154 2,098 2,353 116,962
Additions -
purchased
software - - - - - 167 - 167
Transfer from
investments(1) - - - - 31,961 - - 31,961
Disposals - - - - - (67) - (67)
At 31 March
2019 26,078 7,818 461 34,357 110,115 2,198 2,353 149,023
Additions -
product
development - - - - - 183 - 183
Hive-up
adjustment(2) (54) - - (54) - - - (54)
Disposals - - (194) (194) - (259) (559) (1,012)
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
At 31 March
2020 26,024 7,818 267 34,109 110,115 2,122 1,794 148,140
Amortisation
and impairment
At 1 April 2018 207 96 10 313 - 1,170 2,305 3,788
Amortisation
during the year 2,776 2,599 279 5,654 - 425 37 6,116
Disposals - - - - - (20) - (20)
At 31 March
2019 2,983 2,695 289 5,967 - 1,575 2,342 9,884
Reclassification 102 (102) - - - - - -
Amortisation
during the year 2,878 2,498 162 5,538 - 171 11 5,720
Disposals - - (194) (194) - - (559) (753)
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
At 31 March
2020 5,963 5,091 257 11,311 - 1,746 1,794 14,851
Net book value
At 31 March
2020 20,061 2,727 10 22,798 110,115 376 - 133,289
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
At 31 March
2019 23,095 5,123 172 28,390 110,115 623 11 139,139
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
At 1 April 2018 25,871 7,722 451 34,044 78,154 928 48 113,174
--------------- ----------- ------------- ------------ ---------- ----------- ----------- ---------
(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.
(2) This is a correction to the opening acquired cost in respect of the hive-up of IDScan Biometrics Limited in the year to 31 March 2018. The other side to this entry is within 'Other Reserves' within equity.
Acquisition Carrying
Value Remaining
of Customer Amortisation
Relationship Period
GBP'000 Years
ID Scan Biometrics
Limited 2,448 6.25
Postcode Anywhere (Holdings)
Limited 17,613 7.08
--------------
20,061
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 17).
17. Impairment Testing of Goodwill
Goodwill acquired through business combinations has been allocated for impairment testing purposes to seven CGUs as follows:
-- Fraud Unit (represented by the Fraud operating segment excluding the CAFs Unit)
-- Identity Unit (represented by the Identity operating segment excluding the IDology Unit and the VIX Verify Unit)
-- Location Unit (represented by the Location operating segment excluding the Loqate Unit) -- CAFs Unit (part of the Fraud operating segment) -- Loqate Unit (part of the Location operating segment) -- VIX Verify Unit (part of the Identity operating segment) -- IDology Unit (part of the Identity operating segment) -- e-Ware Interactive Unit (included in Other operating segment) -- Transactis Unit (included in Other operating segment)
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 2020 2019
Allocated to CGUs
GBP'000 GBP'000
Fraud Unit 3,040 3,040
Identity Unit 37,586 37,586
Location Unit 53,992 53,992
CAFS Unit 12,922 14,261
Loqate Unit 7,731 7,393
VIX Verify Unit 14,171 15,639
IDology Unit 173,239 160,031
e-Ware Interactive Unit 79 79
Transactis Unit 502 502
-------- --------
303,262 292,523
-------- --------
Key Assumptions Used in Value in Use Calculations
The Group prepares cash flow forecasts using budgets and forecasts approved by the Directors covering a five-year period and an appropriate extrapolation of cash flows beyond this using a long-term average growth rate. The long-term average growth rate is not greater than the average long-term retail growth rate in the territory where the CGU is based (UK - 1.8%; USA - 1.8%; Australia - 2.5%).
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.
2020 2019
Pre-tax Growth Pre-tax Growth
WACC rate WACC rate
(in perpetuity) (in perpetuity)
% % % %
Fraud Unit 10.7% 1.8% 10.4% 1.8%
Identity Unit 10.7% 1.8% 10.4% 1.8%
Location Unit 10.7% 1.8% 10.4% 1.8%
CAFs Unit 14.3% 2.5% 15.1% 2.8%
Loqate Unit 12.8% 1.8% 11.3% 1.8%
VIX Verify Unit 14.3% 2.5% - -
Idology Unit 12.8% 1.8% - -
e-Ware Interactive Unit 10.7% - 10.4% -
Transactis Unit 10.7% - 10.4% -
In the case of the Fraud CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU by GBP67,869,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
-- a reduction of 96% in the forecast profit margins; and
-- any absolute increase in the pre-tax weighted average cost of capital would have GBPnil impact on headroom.
In the case of the Identity CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU by GBP90,251,000. The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:
-- an absolute increase of 23.2% in the pre-tax weighted average cost of capital from 10.7% to 33.9%; or
-- a reduction of 71% in the forecast profit margins.
In the case of the Location CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU by GBP138,799,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
-- an absolute increase of 28.4% in the pre-tax weighted average cost of capital from 10.7% to 39.1%; or
-- a reduction of 72% in the forecast profit margins.
17. Impairment Testing of Goodwill continued
In the case of CAFs CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU by GBP23,013,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
-- an absolute increase of 19.0% in the pre-tax weighted average cost of capital from 14.3% to 33.3%; or
-- a reduction of 64% in the forecast profit margins.
In the case of Loqate CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU by GBP26,379,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
-- an absolute increase of 65.4% in the pre-tax weighted average cost of capital from 12.8% to 78.2%; or
-- a reduction of 77% in the forecast profit margins.
In the case of the VIX Verify CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU by GBP7,498,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
-- an absolute increase of 6.9% in the pre-tax weighted average cost of capital from 14.3% to 21.2%; or
-- a reduction of 35% in the forecast profit margins.
In the case of the IDology CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU by GBP81,374,000. The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:
-- an absolute increase of 5.2% in the pre-tax weighted average cost of capital from 12.8% to 18.0%; or
-- a reduction of 32% in the forecast profit margins.
In the case of the e-Ware Interactive CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value by GBP20,000 (2018: GBP165,000). In assessing the future recoverable amounts, forecast cash flows are assumed for the current contract value only on the basis that the recoverable amount is associated with only a single remaining customer attributable to that acquisition. 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.
-- a reduction of 20% in the forecast profit margins, and
-- any absolute increase in the pre-tax weighted average cost of capital would have GBPnil impact on headroom.
In the case of the Transactis CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU by GBP1,792,000. The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:
-- an absolute increase of 52.6% in the pre-tax weighted average cost of capital from 10.7% to 63.3%; or
-- a reduction of 45% in the forecast profit margins.
Based on the impairment reviews performed no impairment has been identified.
18. Investments
Company 2020 2019
GBP'000 GBP'000
Cost
At 1 April 305,940 76,310
Acquisition of subsidiary undertakings 7 235,744
Capital investment in subsidiary undertaking - 20,639
Transfer to goodwill and intangibles (1) - (31,961)
--------- ---------
At 31 March - as reported 300,732
Acquisition of subsidiary undertakings (measurement
period adjustment) (2) - 5,208
At 31 March - as restated 305,947 305,940
--------- ---------
Provision for impairment
At 1 April 2,464 -
Charge for the year (3) - 2,464
--------- ---------
At 31 March 2,464 2,464
--------- ---------
Net book value
At 31 March 303,483 303,476
--------- ---------
(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 .
(2) Refer to note 2.3
(3) The impairment charge for the year of GBP2,464,000 was following a dividend from Loqate Inc. which was recognised in the Company income statement.
Refer to note 2.3 for details of the measurement period adjustment impacting the Group.
18. 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:
Proportion
of voting
rights Country
Name of company and shares of incorporation Registered office address
held
Capscan Parent Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Capscan Limited (1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Data Discoveries Holdings 100% United The Foundation, Herons Way, Chester
Limited Kingdom Business Park, Chester CH4 9GB
Data Discoveries Limited 100% United The Foundation, Herons Way, Chester
(1) Kingdom Business Park, Chester CH4 9GB
Managed Analytics Limited 100% United The Foundation, Herons Way, Chester
(1) Kingdom Business Park, Chester CH4 9GB
Fastrac Limited (1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
e-Ware Interactive Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
GB Information Management 100% United The Foundation, Herons Way, Chester
Limited Kingdom Business Park, Chester CH4 9GB
GB Datacare Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
GB Mailing Systems Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Citizensafe Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
TelMe.com Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Farebase Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
TMG.tv Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
CRD (UK) Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Postcode Anywhere (Holdings) 100% United The Foundation, Herons Way, Chester
Limited Kingdom Business Park, Chester CH4 9GB
Postcode Anywhere (Europe) 100% United The Foundation, Herons Way, Chester
Limited Kingdom Business Park, Chester CH4 9GB
Postcode Anywhere (North 100% United The Foundation, Herons Way, Chester
America) Limited Kingdom Business Park, Chester CH4 9GB
PCA Predict Inc. 100% United National Registered Agents Inc.,
States 106 Greentree Drive, Suite 101,
Dover DE 19904
GBG (Australia) Holding 100% Australia Co Sec Consulting Pty Ltd, 59 Gipps
Pty Ltd Street, Collingwood, VIC 3066
GBG (Australia) Pty 100% Australia Co Sec Consulting Pty Ltd, 59 Gipps
Ltd (1) Street, Collingwood, VIC 3066
VIX Verify Global Pty 100% Australia Level 3, 20 Bond Street, Sydney
Ltd(1) NSW 2000
GBG (Malaysia) Sdn Bhd(1) 100% Malaysia Level 7 Menara Millenium, Jalan
Damanlela Pusat Bandar, Damansara
Heights, 50490 Kuala Lumpur, Wilayah
Persekutuan
GBG DecTech Solutions 100% Spain 08002-Barcelona, Edifici The Triangle,
S.L(1) 4th Floor, Placa de Catalunya, Barcelona,
Spain
Room 1714, Building 4, China Investment
Center, No.9 Guangan Road, Fengtai
(1) 100% China District, Beijing, China
Loqate Inc. 100% United 805 Veterans Blvd Ste 305, Redwood
States City CA 94063
Loqate Limited (1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
IDology Inc. 100% United 2018 Powers Ferry Rd, Atlanta, GA
States 30339, USA
ID Scan Biometrics Limited 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
IDscan Research Bilisim 100% Turkey Mersin Universitesi Çiftlikköy
Teknolojileri Sanayi Kampüsü, Teknopark İdari
Ve Ticaret Limited Sirketi Bina No: 106 Yeni ehir - Mersin
UAB IDscan Biometrics 100% Lithuania Kauno m. Kauno m. I. Kanto g. 18-4B
R&D Lithuania
Safer Clubbing At Night 100% United The Foundation, Herons Way, Chester
Network (Scan Net) Ltd Kingdom Business Park, Chester CH4 9GB
Transactis Limited (1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
Inkfish Limited(1) 100% United The Foundation, Herons Way, Chester
Kingdom Business Park, Chester CH4 9GB
VIX Verify Pty Ltd(1) 100% Australia Co Sec Consulting Pty Ltd, 58 Gipps
Street, Collingwood, Victoria 3066,
Australia
GreenID Limited(1) 100% New Zealand Moore Stephens Markhams Wellington
Limited, Level 11 Sovereign House,
34-42 Manners Street, Wellington
6011, New Zealand
Mastersoft Group Pty 100% Australia Co Sec Consulting Pty Ltd, 58 Gipps
Ltd(1) Street, Collingwood, Victoria 3066,
Australia
Mastersoft (New Zealand) 100% New Zealand Moore Stephens Markhams Wellington
Ltd(1) Limited, Level 11 Sovereign House,
34-42 Manners Street, Wellington
6011, New Zealand
DataSan Pty Ltd(1) 100% Australia Co Sec Consulting Pty Ltd, 58 Gipps
Street, Collingwood, Victoria 3066,
Australia
VIX Verify International 100% Australia Co Sec Consulting Pty Ltd, 58 Gipps
Pty Ltd(1) Street, Collingwood, Victoria 3066,
Australia
VIX Verify Singapore 100% Singapore C/O S.S. Corporate Management Pte.
Pte Ltd(1) Ltd, 138 Cecil Street, #12-01A Cecil
Court, 069538 Singapore
VIX Verify SA (Pty) 100% South Africa C/O Eversheds Sutherland, 3rd Floor,
Ltd(1) 54, Melrose Boulevard, Melrose Arch,
Melrose North, 2196, Johannesburg,
South Africa
PT Fraud Solutions Indonesia 100% Indonesia Satrio Tower, Lt .16, Jl.Prof.Dr.
(1) Satrio, Blok C4 No 5 RT. 7/RW.2
Kel. Kunnigan Timur, Kec. Setiabudi
Jakarta Selatan- 12950
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:
Proportion
of voting
rights Country
Name of company and shares of incorporation Registered office address
held
Payfone Inc. (1, 2) 0.32% United 215 Park Avenue South New York, NY
States 10003 United States
(1) held indirectly.
(2) held at zero value following measurement period adjustment detailed in note 2.3.
19. Trade and Other Receivables
Group Company
Restated(1)
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 52,496 46,114 36,993 31,586
Prepayments 7,855 5,731 3,847 3,788
Accrued income 6,203 3,147 450 525
--------- ------------ --------- ---------
66,554 54,992 41,290 35,899
--------- ------------ --------- ---------
(1) See note 2.3
20. Cash
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 27,499 21,189 15,031 7,791
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.
21. Equity Share Capital
2020 2019
GBP'000 GBP'000
Authorised
194,193,861 (2019: 192,850,117) ordinary
shares of 2.5p each 4,855 4,821
----------- -----------
Issued
Allotted, called up and fully paid 4,855 4,821
Share premium 261,648 261,149
----------- -----------
266,503 265,970
----------- -----------
2020 2019
No. No.
Number of shares in issue at 1 April 192,850,117 152,668,698
Issued on placing - 39,024,390
Issued in relation to intangible
asset acquisition 7,352 -
Issued on exercise of share options 1,336,392 1,157,029
----------- -----------
Number of shares in issue at 31 March 194,193,861 192,850,117
----------- -----------
2020 2019
Share Share Share Share
Capital Premium Total Capital Premium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
1 April 4,821 261,149 265,970 3,817 104,814 108,631
Consideration received
on share placing - - - 976 159,367 160,343
Share issue costs - - - - (3,274) (3,274)
Fair value of assets
received on acquisition
of intangible asset - 43 43 - - -
Consideration received
on exercise of share
options 34 456 490 28 242 270
-------- -------- ------- -------- -------- -------
Number of shares in
issue at 31 March 4,855 261,648 266,503 4,821 261,149 265,970
-------- -------- ------- -------- -------- -------
During the year to 31 March 2020, 7,352 shares were issued as final consideration in relation to the purchase of an intangible asset. The fair value of the asset was GBP43,000.
22. Loans
Bank 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 prior year from its original maturity of April 2017 to November 2019. This loan was repaid in full during the current financial year.
In October 2018, the Group drew down GBP10,000,000 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 GBP17,000,000 at that date.
In February 2019, the Group refinanced its existing revolving facility and the total facility was increased to GBP110,000,000, with a further GBP30,000,000 accordion option. The facility now expires in February 2022. The existing liability of GBP17,000,000 was repaid at the point of the refinancing with a simultaneous drawdown of GBP101,000,000 (net increase of GBP84,000,000), which was used to part fund the IDology acquisition. A further repayment of GBP15,000,000 was made in March 2019.
During the current financial year there have been no further drawdowns on this facility. Repayments totalling GBP23,500,000 have been made during the year.
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
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Opening bank loan 86,888 9,248 85,447 7,000
New borrowings (net of arrangement
fee) - 110,447 - 110,447
Repayment of borrowings (24,914) (32,804) (23,500) (32,000)
Amortisation of loan fees 192 - 192 -
Foreign currency translation
adjustment (27) (3) - -
Closing bank loan 62,139 86,888 62,139 85,447
----------------------- --------- ------------- ---------
Analysed as:
Amounts falling due within 12 - 1,441 - -
months
Amounts falling due after one
year 62,139 85,447 62,139 85,447
62,139 86,888 62,139 85,447
----------------------- --------- ------------- ---------
Analysed as:
Bank loans 62,500 87,441 62,500 86,000
Unamortised loan fees (361) (553) (361) (553)
62,139 86,888 62,139 85,447
------- ------- ------- -------
Intercompany loans
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Opening intercompany loan - - - -
New borrowings - - 4,156 -
Repayment of borrowings - - - -
Foreign currency translation - - - -
adjustment
Closing intercompany loan - - 4,156 -
------------------------- --------- --------------- ---------
Analysed as:
Amounts falling due within 12 - - - -
months
Amounts falling due after one - - 4,156 -
year
- - 4,156 -
------------------------- --------- --------------- ---------
Interest is charged on intercompany loans at a rate of 3.5% per annum. The loans are unsecured, and repayable within 2 years.
23. Lease liabilities
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
At 1 April - - - -
On transition to IFRS 16 6,076 - 3,407 -
Additions 1,878 - - -
Disposals (299) - - -
Accretion of interest 245 - 107 -
Payments (2,043) - (832) -
Foreign currency adjustment (132) - - -
At 31 March 5,725 - 2,682 -
--------- ------------------- ----------------- ---------
Analysed as:
Amounts falling due within
12 months 2,012 - 704 -
Amounts falling due after one
year 3,713 - 1,978 -
5,725 - 2,682 -
--------- ------------------- ----------------- ---------
Amounts recognised in the Balance Sheet and in the Statement of Changes in Equity have been disclosed within note 2.4.
24. Trade and Other Payables
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 10,403 8,687 6,670 3,842
Amounts owed to subsidiary undertakings - - 20,622 23,952
Other taxes and social security
costs 5,299 3,375 4,751 2,888
Accruals 24,939 21,446 15,704 15,782
40,641 33,508 47,747 46,464
--------- --------- --------- ---------
25. Provisions
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Provisions can be analysed as
follows:
Dilapidation provision (see
below) 465 - 421 -
Long service award (see note
26) 551 528 422 395
1,016 528 843 395
--------- --------- --------- ---------
Dilapidation provision
At 1 April - 25 - 25
Utilised during the year - (25) - (25)
Provided in year 465 - 421 -
Closing balance 465 - 421 -
--------- --------- --------- ---------
This provision relates to the estimated cost of restoration work required upon termination of leasehold property agreements. The estimated level of provision required was reassessed during the year which has led to the recognition of additional provisions being recognised.
26. 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.
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 528 - 395 -
Past service cost - 349 - 261
Service cost 100 102 74 76
Benefits taken (21) - (21) -
Actuarial (gain)/loss during
the year (69) 68 (36) 51
Net interest charge 13 9 10 7
--------- --------- --------- ---------
At 31 March 551 528 422 395
--------- --------- --------- ---------
The following table lists the inputs to the valuation of the long service award for the years ended 31 March 2020 and 31 March 2019.
2020 2019
-------------------------------------------- ------- -------
Discount rate (%) 2.2 2.4
Salary increases (%) 3.0 3.5
Employee turnover (% probability of leaving
depending on age) 2 - 20% 2 - 20%
--------------------------------------------- ------- -------
27. 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.
Covid-19 Assessment
The single largest impact on the Group's credit risk profile is the emergence of the Covid-19 pandemic. The implications of the Covid-19 pandemic are wide spread and the duration and impact of the pandemic is unknown. Given the uncertainty and evolving nature of the pandemic, it is has not been possible to fully reflect the anticipated economic impacts in the underlying assumptions in a mechanistic approach. The Group has responded by calculating an additional level of provision to overlay the normal ECL calculation. This overlay has been based on management judgement taking into account an analysis of trade receivables broken down into customer sectors, using internal and external forecasts to assess the sectors which are likely to see the biggest impact of the pandemic, and comparing cash receipts received post year-end for customers in these sectors against historical averages.
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 2020 Group Company
Restated
(1)
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 56,561 48,241 40,712 33,319
Allowance for unrecoverable
amounts (4,065) (2,127) (3,719) (1,733)
52,496 46,114 36,993 31,586
--------- --------- --------- ---------
(1) See note 2.3
27. Financial instruments and risk management (continued)
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 grouped 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.
Group - 31 March
2020 Trade receivables
------------------------------------------------------------
Days past due
------------------------------------------------------------
< 30 31 - 61 - > 90
Current days 60 days 90 days days Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross carrying
amount 31,638 11,073 4,151 2,610 7,089 56,561
Expected credit
loss 921 286 221 239 2,398 4,065
Company - 31
March 2020 Trade receivables
------------------------------------------------------------
Days past due
------------------------------------------------------------
< 30 31 - 61 - > 90
Current days 60 days 90 days days Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross carrying
amount 21,283 8,690 3,323 1,774 5,642 40,712
Expected credit
loss 875 265 192 188 2,199 3,719
Group - 31 March
2019 Trade receivables
------------------------------------------------------------
Days past due
------------------------------------------------------------
> 90
< 30 31 - 61 - days
Current days 60 days 90 days (1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross carrying
amount 28,724 9,336 4,171 1,597 4,413 48,241
Expected credit
loss (restated
(1) 658 115 277 13 1,064 2,127
Company - 31
March 2019 Trade receivables
------------------------------------------------------------
Days past due
------------------------------------------------------------
< 30 31 - 61 - > 90
Current days 60 days 90 days days Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross carrying
amount 20,240 6,796 1,600 1,435 3,248 33,319
Expected credit
loss 574 35 167 7 950 1,733
Set out below is the movement in the allowance for expected credit losses of trade receivables:
Year ended 31 March 2020 Group Company
Restated
(1)
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2,127 1,344 1,733 1,165
Acquired on acquisition (1) - 78 - -
Increase in provision 2,208 852 2,158 704
Covid-19 provision 731 - 608 -
Write-offs (600) (151) (525) (136)
Release (407) - (255) -
Foreign exchange 6 4 - -
4,065 2,127 3,719 1,733
------------------- --------- -------- --------
(1) See note 2.3
The amount disclosed in note 5, relates to the increase in provision, Covid-19 provision and the amount released in the year.
27. Financial instruments and risk management (continued)
Foreign Currency Risk
The Group's foreign currency exposure arises from:
-- Transactions (sales/purchases) denominated in foreign currencies;
-- Monetary items (mainly cash receivables and borrowings) denominated in foreign currencies; and
-- Investments in foreign operations, whose net assets are exposed to foreign currency translation.
The Group has currency exposure on its investment in a foreign operation in Australia and partially offsets its exposure to fluctuations on the translation into Sterling by holding net borrowings in Australian Dollars. In terms of sensitivities, the effect on equity of a 10% increase in the Australian Dollar and Sterling exchange rate would be an increase of GBP5,324,000 (2019: GBP3,555,000 increase). The effect on equity of a 10% decrease in the Australian Dollar and Sterling exchange rate net of the effect of the net commercial investment hedge in
the foreign operation would be a decrease of GBP4,356,000 (2019: GBP2,908,000 decrease).
The Group has currency exposure on its investment in a foreign operations in the United States of America. In terms of sensitivities, the effect on equity of a 10% increase in the US Dollar and Sterling exchange rate would be an increase of GBP1,084,000 (2019: GBP1,109,000 increase). The effect on equity of a 10% decrease in the US Dollar and Sterling exchange rate would be a decrease of GBP887,000 (2019: GBP907,000 decrease).
The exposure to transactional foreign exchange risk within each company is monitored and managed at both an entity and a Group level. The following table demonstrates the sensitivity of the Group's foreign currency exposure on the net monetary position at 31 March 2019:
Foreign Currency Exposure USD Rate EUR Rate AUD Rate MYR Rate Change in rate +10% +10% +10% +10% Effect on profit before GBP(125) tax (GBP000s) GBP(519) GBP(12) GBP(439) Change in rate -10% -10% -10% -10% Effect on profit before tax (GBP000s) GBP655 GBP37 GBP538 152
The Group's exposure to foreign currency changes for all other currencies is not material.
Cash Flow Interest Rate Risk
The Group has financial assets and liabilities, which are exposed to changes in market interest rates. Changes in interest rates impact primarily on deposits and loans by changing their future cash flows (variable rate). Management does not currently have a formal policy of determining how much of the Group's exposure should be at fixed or variable rates and the Group does not use hedging instruments to minimise its exposure. However, at the time of taking new loans or borrowings, management uses its judgement to determine whether it believes that a fixed or variable rate would be more favourable for the Group over the expected period until maturity. In terms of sensitivities, the effect on profit before taxation of an increase/decrease in the basis points on floating rate borrowings of 25 basis points would be GBP110,000 (2019: GBP110,000).
Liquidity Risk
Cash flow forecasting is performed on a Group basis by the monitoring of rolling forecasts of the Group's liquidity requirements to ensure that it has sufficient cash to meet operational needs and surplus funds are placed on deposit and available at very short notice. The maturity date of the Group's loans are disclosed in note 22.
The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments and includes contractual interest payments:
Year ended 31 March 2020 On Less than 1 to 5
demand 12 months years Total
GBP'000 GBP'000 GBP'000 GBP'000
Loans (note 22) - - 62,139 62,139
Contingent consideration (note
36) - 6,179 - 6,179
Lease liabilities (note 23) - 2,012 3,713 5,725
Trade and other payables (note
24) 10,403 30,238 - 40,641
10,403 38,429 65,852 114,684
--------- ----------- --------- ----------
Year ended 31 March 2019 On Less than 1 to 5
demand 12 months Years Total
GBP'000 GBP'000 GBP'000 GBP'000
Loans (note 22) - 1,441 85,447 86,888
Contingent consideration (note
36) - restated (1) - 5,208 - 5,208
Trade and other payables (note
24) 8,687 24,503 - 33,190
8,687 31,152 85,447 125,286
-------- ----------- --------- ----------
(1) See note 2.3
27. Financial instruments and risk management (continued)
Capital Management
The Group manages its capital structure in order to safeguard the going concern of the Group and maximise shareholder value. The capital structure of the Group consists of debt, which includes loans disclosed in note 22, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings.
The Group may maintain or adjust its capital structure by adjusting the amount of dividend paid to shareholders, returning capital to shareholders, issuing new shares or selling assets to reduce debt.
In order to achieve this overall objective, the Group's capital management, amongst other things, aims to ensure that it meets financial covenants attached to borrowings. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any borrowings in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2020 and 31 March 2019.
Financial instruments: Classification and Measurement
Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the Group at 31 March:
Restated(1)
2020 2019
Loans Fair value Loans Fair
and receivables profit and receivables value
or loss profit
or loss
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets:
Trade and other receivables 52,496 - 46,114 -
----------------- ----------- ----------------- ---------
Total current 52,496 - 46,114 -
Total 52,496 - 46,114 -
----------------- ----------- ----------------- ---------
Financial liabilities:
Lease liabilities 3,713 - - -
Loans 62,139 - 85,447 -
----------------- ----------- ----------------- ---------
Total non-current 65,852 - 85,447 -
Trade and other payables 40,641 - 33,508 -
Lease liabilities 2,012 - - -
Loans - - 1,441 -
Contingent consideration
- restated (1) - 6,179 - 5,287
----------------- ----------- ----------------- ---------
Total current 42,653 6,179 34,949 5,287
Total 108,505 6,179 120,396 5,287
----------------- ----------- ----------------- ---------
(1) Refer to note 2.3
All financial assets and liabilities have a carrying value that approximates to fair value. The Group does not have any derivative financial instruments.
Financial Assets
Trade and other receivables exclude the value of any prepayments or accrued income. Trade and other payables exclude the value of deferred income.
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Trade receivables are non-interest bearing and are generally on 14 to 60 day terms.
Financial Liabilities
The Group has a three year revolving credit facility agreement expiring in February 2022 which is subject to a limit of GBP110,000,000. The facility bears an initial interest rate of LIBOR +1.50%.
The facilities are secured by way of an all asset debenture.
The Group is subject to a number of covenants in relation to its borrowings which, if breached, would result in loan balances becoming immediately repayable. These covenants specify certain maximum limits in terms of the following:
-- Leverage -- Interest cover
At 31 March 2020 and 31 March 2019, the Group was not in breach of any bank covenants.
27. Financial instruments and risk management (continued)
Financial liabilities: interest bearing loans and borrowings
Interest Maturity 2020 2019
rate
% GBP'000 GBP'000
--------------------------------- ---------- ---------- -------- --------
Financial liabilities
Current interest bearing loans
and borrowings
AUD$10,000,000 secured bank
loan BBSW+1.9 Nov 2019 - 1,441
Total current interest-bearing
loans and borrowings - 1,441
Non-current interest bearing
loans and borrowings
GBP110,000,000 revolving credit LIBOR +
facility 1.5 Feb 2022 62,139 85,447
-------- --------
Total non-current interest
bearing loans and borrowings - 85,447
Total interest bearing loans
and borrowing 62,139 86,888
-------- --------
Fair values of financial assets and liabilities
The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of inputs used in making measurements of fair value. The fair value hierarchy has the following levels:
-- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
-- Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
For financial instruments that are recognised at the fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Level Level Level Total
1 2 3
At 31 March 2020 Valuation Technique GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------------------- --------- --------- -------- --------
Financial liability at fair
value through profit and
loss
Present value
of expected
Contingent consideration future cash
(note 36) flow - - 6,179 6,179
Level Level Level Total
1 2 3
At 31 March 2019 (restated) Valuation Technique GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------------------- --------- --------- -------- --------
Financial liability at fair
value through profit and
loss
Present value
of expected
Contingent consideration future cash
restated (note 2.3) flow - - 5,287 5,287
28. Changes in liabilities arising from financing activities
Foreign 31
1 April 2019 Transition Cash exchange Other New March
(as reported) to IFRS 16 flows movement movement leases 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current
liabilities
Interest
bearing
loans 1,441 - (1,414) (27) - - -
Lease
liabilities - 352 (2,043) 26 2,841 836 2,012
Non-current
liabilities
Interest
bearing
loans 85,447 - (23,500) - 192 - 62,139
Lease
liabilities - 5,724 - (158) (2,895) 1,042 3,713
Total
liabilities
arising from
financing
activities 86,888 6,076 (26,957) (159) 138 1,878 67,864
-------------- ----------- -------------------- --------- --------- -------- --------
Other movement in interest bearing loans represents amortisation on loan fees.
Other movement in lease liabilities includes interest and the reclassification of non-current lease liabilities to current lease liabilities.
1 April Cash Foreign Other New 31 March
2018 flows exchange movement leases 2019
movement
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current liabilities
Interest bearing
loans 797 - 3 641 - 1,441
Non-current liabilities
Interest bearing
loans 8,451 77,637 - (641) - 85,447
Total liabilities
arising from financing
activities 9,248 77,637 3 - - 86,888
-------- -------- ---------- ---------- -------- ---------
Other movement represents the reclassification of non-current interest bearing loans to current interest bearing loans.
29. Share-based Payments
Group and Company
The Group operates Executive Share Option Schemes under which Executive Directors, managers and staff of the Company are granted options over shares.
Executive Share Option Scheme
Options are granted to Executive Directors and employees on the basis of their performance. Options are granted at the full market value of the Company's shares at the time of grant and are exercisable between three and ten years from the date of grant. The options vest on the third anniversary of the grant subject to the Company's earnings per share ('EPS') growth being greater than the growth of the Retail Prices Index ('RPI') over a three-year period prior to the vesting date. There are no cash settlement alternatives.
Executive Share Option Scheme (Section C Scheme)
Options are granted to Executive Directors and employees on the basis of their performance. Options are granted at the full market value of the Company's shares at the time of grant and are exercisable between three and ten years from the date of grant. The percentage of an option that will vest and be capable of exercise will depend on the performance of the Company. A minimum of 50% of the options will vest when the Total Shareholder Return ('TSR') performance of the Company, as compared to the TSR of the FTSE Computer Services Sub-Sector over a three-year period, matches or exceeds the median company. The percentage of shares subject to an option in respect of which that option becomes capable of exercise will then increase on a sliding scale so that the option will become exercisable in full if top quartile performance is achieved.
Executive Share Option Scheme (Section D Scheme)
Options are granted to Executive Directors and employees on the basis of their performance. Options are granted at the full market value of the Company's shares at the time of grant and are exercisable between three and ten years from the date of grant. The vesting of awards under the Section D Scheme is subject to the achievement of a normalised EPS growth at an annual compound rate of 20% over the performance period. The base year for the purposes of the EPS target will be the financial year of the Company ended immediately prior to the grant of the award. The performance period will be the three financial years following the base year. Section D Scheme options will only become exercisable to the extent they have vested in accordance with the EPS target.
29. Share-based Payments continued
Share Matching Plan
In the year ended 31 March 2012, the Remuneration Committee introduced the Share Matching Plan. Participants who invest a proportion of their annual cash bonus in GBG shares can receive up to a multiple of their original investment in GBG shares, calculated on a pre-tax basis. Any matching is conditional upon achieving pre-determined Adjusted EPS growth targets set by the Remuneration Committee for the following three years. Share Matching Plan options will only become exercisable to the extent they have vested in accordance with the Adjusted EPS target.
Compensatory Options
In the year ended 31 March 2018, the Remuneration Committee granted Compensatory Options to the Chief Executive of the Company, as compensation for lost earnings and shares from his previous employer. The Compensatory Options vest in equal tranches over a period of 12 and 24 months, on each anniversary of the date of grant, provided he still holds the position of CEO of GBG on the respective dates. The Compensatory Options are valid for a period of 12 months from the vesting date.
GBG Sharesave Scheme
The Group has a savings-related share option plan, under which employees save on a monthly basis, over a three or five year period, towards the purchase of shares at a fixed price determined when the option is granted. This price is usually set at a 20% discount to the market price at the time of grant. The option must be exercised within six months of maturity of the savings contract, otherwise it lapses.
Performance Share Plan (PSP)
The Group operates a PSP for all employees, but it is intended that awards are made to senior management staff below the executive director level. The plan was approved at the 2018 AGM. Awards are subject to a three-year EPS performance condition. Employees can be granted awards of nil cost options with an aggregate value on date of grant of up to 100% of base salary. The awards are subject to malus and clawback.
The charge recognised from equity-settled share-based payments in respect of employee services received during the year is GBP4,541,000 (2019: GBP2,287,000). Of this amount GBP4,271,000 (2019: GBP2,287,000) related to the Company.
The following table illustrates the number and weighted average exercise prices ('WAEP') of, and movements in, share options during the year.
2020 2020 2019 2019
No. WAEP No. WAEP
Outstanding as at 1 April 4,626,400 147.84p 4,997,800 148.39p
Granted during the year 1,807,066 150.95p 1,069,965 227.43p
Forfeited during the year (78,046) 301.55p (270,320) 201.84p
Cancelled during the year (13,541) 333.57p (11,461) 272.00p
Exercised during the year (1,336,392) 36.56p(1) (1,157,029) 52.94p(2)
Expired during the year - - (2,555) 163.00p
Outstanding at 31 March 5,005,487 175.77p 4,626,400 147.84p
----------- ---------------- ----------- ---------
Exercisable at 31 March 10,000 275.00p 2,601,043 76.15p
----------- ---------------- ----------- ---------
(1) The weighted average share price at the date of exercise for the options exercised was 598.45p
(2) The weighted average share price at the date of exercise for the options exercised was 518.97p
For the shares outstanding as at 31 March 2020, the weighted average remaining contractual life is 5.4 years (2019: 4.7 years).
The weighted average fair value of options granted during the year was 417.31p (2019: 440.40p). The range of exercise prices for options outstanding at the end of the year was 2.5p - 544.0p (2019: 2.8p - 481.0p).
The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model for the years ended 31 March 2020 and 31 March 2019.
2020 2019
------------------------------------ ----------- ---------
Dividend yield (%) 0.5 - 0.8 0.5 - 0.6
Expected share price volatility (%) 30 - 35 35
Risk-free interest rate (%) 0.2 - 1.1 0.7 - 1.1
Lapse rate (%) 5.0 - 10.0 5.0
Expected exercise behaviour See below See below
Expected life of option (years) 2.3 - 5.2 2.3 - 6.5
Exercise price (p) 2.5 - 544.0 2.50 -
462.0
Weighted average share price (p) 598.45 518.97
------------------------------------- ----------- ---------
Other than the Matching Scheme, LTIP and SAYE options, it is assumed that 50% of options will be exercised by participants as soon as they are 20% or more "in-the-money" (i.e. 120% of the exercise price) and the remaining 50% of options will be exercised gradually at the rate of 10% per annum each year they remain at or above the 20% "in-the-money".
29. Share-based Payments continued
For the Matching Scheme, LTIP and SAYE options, it is assumes these are exercised at the earliest opportunity in full (i.e. Vesting Date) since the exercise price is a nominal amount and is therefore not expected to influence the timing of a participant's decision to exercise the options.
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.
30. Profit Attributable to Members of the Parent Company
The parent company's profit for the financial year ended 31 March 2020 was GBP 23,271,000 (2019: GBP7,275,000). As permitted by Section 408 of CA 2006, the profit and loss account of the parent company is not presented.
31. Description of Reserves
Equity Share Capital
The balance classified as share capital includes the nominal value on issue of the Company's equity share capital, comprising 2.5p ordinary shares.
Share Premium
The balance classified as share premium includes the excess proceeds over the nominal amount received on the issue of the Company's equity share capital. Costs associated with the issue of new share capital have been offset against this balance.
Merger Reserve
The balance on the merger reserve represents the fair value of the consideration given in excess of the nominal value of the ordinary shares issued in the acquisition of GB Mailing Systems by the issue of shares.
Capital Redemption Reserve
The balance classified as capital redemption reserve includes the nominal value of own shares purchased back by the Company and subsequently cancelled.
Other Reserve
The balance represents the profit from the date of acquisition to the date of hive-up into the Company of ID Scan Biometrics Limited and Postcode Anywhere (Holdings) Limited, offset by amortisation of the identified intangibles and unwinding of the associated deferred tax liabilities.
32. Related Party Transactions
Transactions entered into and trading balances outstanding at 31 March are as follows:
Group
There were no transactions entered into, or outstanding at 31 March 2020 or 31 March 2019.
Company Invoices Net amounts
Invoices from related owed to/(by)
to related parties related
parties parties
GBP'000 GBP'000 GBP'000
Subsidiaries:
2020 19,418 8,435 23,347
2019 2,360 3,130 21,983
Terms and Conditions of Transactions with Related Parties
Sales and balances between related parties are made at normal market prices. Outstanding balances with entities other than subsidiaries are unsecured, interest free and cash settlement is expected within 30 days of invoice. Terms and conditions for transactions with subsidiaries are the same, with the exception that balances are placed on intercompany accounts with no specified credit period. During the year ended 31 March 2020, the Group has not made any provision for doubtful debts relating to amounts owed by related parties (2019: GBPnil).
Compensation of Key Management Personnel
(including Directors)
Group and Company
2020 2019
GBP'000 GBP'000
Short-term employee benefits 2,962 3,290
Post-employment benefits 74 72
Fair value of share options awarded 2,416 1,826
5,452 5,188
--------- ---------
33. Contingent liability
The Information Commissioner's Office, the data industry regulator in the UK, announced in November 2018 that it was conducting audits on a number of companies to understand the use of data in their services. GBG was included in this review and is working with the Commissioner to continue to improve its privacy compliance. We will keep the market informed of any material developments.
34. Subsequent events
On 26 May 2020 the Company repaid GBP10.0m of the outstanding revolving credit facility liability.
35. Business Combinations
There were no new business combinations within the year ended 31 March 2020.
Under IFRS 3 'Business Combinations' there is a measurement period of no longer than twelve months in which to finalise the valuation of the acquired assets and liabilities. During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognised at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date. During the measurement period, the acquirer shall also recognise additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date.
In the year to 31 March 2019 GBG completed two acquisitions, the measurement periods for which ended during the year to 31 March 2020.
No further adjustments were identified to the provisional fair values in respect of the acquisition of VIX Verify Pty Limited.
In respect of the acquisition of IDology Inc. adjustments to the provisional fair values were made during the measurement period, as set out in the table below:
Provisional
fair value Adjustments Final fair
recognised during measurement value recognised
on acquisition period on acquisition
GBP'000 GBP'000 GBP'000
Assets
Technology intellectual property 16,076 - 16,076
Customer relationships 65,976 - 65,976
Non-compete agreements 4,360 - 4,360
Investments(1) 419 (419) -
Plant and equipment 152 - 152
Deferred tax asset 3,955 - 3,955
Trade and other receivables(2) 4,436 118 4,554
Cash 1,033 - 1,033
Trade and other payables (1,993) - (1,993)
Corporation tax liability (81) - (81)
Deferred tax liabilities (21,733) - (21,733)
---------------- -------------------- ------------------
Total identifiable net assets
at fair value 72,600 (301) 72,299
Goodwill arising on acquisition 163,143 5,509 168,652
---------------- -------------------- ------------------
Total purchase consideration
transferred 235,743 5,208 240,951
---------------- -------------------- ------------------
Purchase consideration:
Cash 235,664 - 235,664
Deferred consideration(3) 79 5,208 5,287
Total purchase consideration 235,743 5,208 240,951
---------------- -------------------- ------------------
(1) The adjustment to the investment balance relates to a non-listed equity investment where there is uncertainty over the recoverability of the investment balance.
(2) The adjustment to trade and other receivables is an increase in the carrying value following cash receipts against receivables that had been impaired in the provisional fair values.
(3) Under the terms of the acquisition agreement the sellers are entitled to the benefit of the tax losses of the business at the date of the acquisition as and when GBG utilises them to reduce cash tax payments. Following assessment of the period over which these losses are expected to be utilised, the liability to the sellers has been recognised as contingent consideration.
The impact of the measurement period adjustments have been applied retrospectively, meaning that the results and financial position for the year to 31 March 2019 have been restated as detailed in note 2.3.
35. Business Combinations continued
Acquisitions in the Year Ended 31 March 2019
Group
Acquisition of IDology Inc.
On 13 February 2019, the Group acquired 100% of the voting shares of IDology Inc. ('IDology'), a US-based provider of identity verification and fraud prevention services, for a total consideration of GBP240,951,000. The acquisition of IDology provides a strong foothold for Identity Verification and Fraud Prevention in North America, a key growth region for the Group. The Consolidated Statement of Comprehensive Income includes the results of IDology for the two month period from the acquisition date.
The provisional and final fair values are detailed at the start of this note.
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included
in cash flows from operating activities) (2,391)
Net cash acquired with the subsidiary 1,033
Cash paid (235,664)
----------
Acquisition of subsidiaries, net of cash acquired
(included in cash flows from investing activities) (234,631)
Net cash outflow (237,022)
----------
The fair value of the acquired trade receivables amounts to GBP2,772,000. The gross amount of trade receivables is GBP2,928,000 with a provision of GBP156,000 (adjusted to GBP38,000 during the measurement window).
The goodwill recognised above is attributed to intangible assets that cannot be individually separated and reliably measured from IDology due to their nature. These items include the capability for synergies from bringing the businesses together, combining propositions and capabilities that will help the business achieve accelerated consolidated growth from both cross-sell and up-sell. None of the goodwill is expected to be deductible for income tax purposes.
The transaction costs of GBP2,391,000 associated with this acquisition have been expensed and are included in exceptional items in the Consolidated Statement of Comprehensive Income and are part of operating cash flows in the Cash Flow Statement.
From the date of acquisition, IDology has contributed GBP4,284,000 of revenue and operating profits of GBP1,890,000 to the Group. If the combination had taken place at the beginning of the period, the Group revenue and operating profits would have been GBP173,212,000 and GBP28,529,000, respectively.
Acquisition of VIX Verify Pty Limited
On 23 October 2018, the Group acquired 100% of the voting shares of VIX Verify Pty Limited ('VIX Verify'), an Australian provider of identity verification and location intelligence software, for a total consideration of GBP20,639,000. The acquisition of VIX Verify brings additional scale to the Group's identity verification and location intelligence solutions in Australia and New Zealand, two markets where the Group currently provides fraud detection solutions to customers. The Consolidated Statement of Comprehensive Income includes the results of VIX Verify for the six month period from the acquisition date.
The provisional fair value of the identifiable assets and liabilities of VIX Verify as at the date of acquisition was:
Provisional
fair value
recognised
on acquisition
GBP'000
Assets
Technology intellectual property 1,148
Customer relationships 7,236
Non-compete agreements 31
Plant and equipment 79
Trade and other receivables 2,565
Cash 208
Trade and other payables (3,956)
Deferred tax liabilities (2,180)
----------------
Total identifiable net assets at fair value 5,131
Goodwill arising on acquisition 15,508
----------------
Total purchase consideration transferred 20,639
----------------
Purchase consideration:
Cash 20,639
Total purchase consideration 20,639
----------------
35. Business Combinations continued
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included
in cash flows from operating activities) (449)
Net cash acquired with the subsidiary 208
Cash paid (20,639)
-----------
Acquisition of subsidiaries, net of cash acquired
(included in cash flows from investing activities) (20,431)
Net cash outflow (20,880)
-----------
The fair value of the acquired trade receivables amounts to GBP965,000. The gross amount of trade receivables is GBP1,004,000 with a provision of GBP39,000.
The goodwill recognised above is attributed to intangible assets that cannot be individually separated and reliably measured from VIX Verify due to their nature. These items include the capability for synergies from bringing the businesses together, combining propositions and capabilities that will help the business achieve accelerated consolidated growth from both cross-sell and up-sell. None of the goodwill is expected to be deductible for income tax purposes.
The transaction costs of GBP449,000 associated with this acquisition have been expensed and are included in exceptional items in the Consolidated Statement of Comprehensive Income and are part of operating cash flows in the Cash Flow Statement.
From the date of acquisition, VIX Verify has contributed GBP7,672,000 of revenue and operating profits of GBP1,333,000 to the Group. If the combination had taken place at the beginning of the period, the Group revenue and operating profits would have been GBP153,555,000 and GBP17,171,000, respectively.
36. Contingent Consideration
Restated
(1)
Group and Company 2020 2019
GBP'000 GBP'000
At 1 April 5,287 45
Recognition on the acquisition of
subsidiary undertakings (2) 829 79
Recognition on the acquisition of subsidiary undertakings
- measurement period adjustment - 5,208
Foreign exchange - realised 7 -
Foreign exchange - unrealised (2) 142 -
Settlement of consideration (86) (45)
At 31 March 6,179 5,287
------- --------
Analysed as:
Amounts falling due within 12 months 6,179 5,287
Amounts falling due after one year - -
At 31 March 6,179 5,287
------- -------
(1) See note 2.3
(2) Included in Consolidated Cash Flow Statement within fair value adjustment on contingent consideration line totalling GBP971,000.
The amount recognised on acquisition of subsidiary undertakings in the year to 31 March 2020 is in respect of IDology as detailed within note 7.
The contingent consideration at 31 March 2020 is in respect to the pre-acquisition tax losses within IDology Inc. As and when GBG receives a cash benefit from these losses, either through a reduction in tax payments or through a tax refund, an amount equal to this cash benefit is due to the sellers.
37. Alternative Performance Measures
Management assess the performance of the Group using a variety of alternative performance measures. In the discussion of the Group's reported operating results, alternative performance measures are presented to provide readers with additional financial information that is regularly reviewed by management. However, this additional information presented is not uniformly defined by all companies including those in the Group's industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures are not defined under IFRS and are therefore termed 'non-GAAP' measures and should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
The Group's income statement and segmental analysis separately identify trading results before certain items. The directors believe that presentation of the Group's results in this way is relevant to an understanding of the Group's financial performance, as such items are identified by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and assists in providing a meaningful analysis of the trading results of the Group. In determining whether an event or transaction is presented separately, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Examples of charges or credits meeting the above definition and which have been presented separately in the current and/or prior years include amortisation of acquired intangibles, share-based payments charges, acquisition related costs and business restructuring programmes. In the event that other items meet the criteria, which are applied consistently from year to year, they are also presented separately.
The following are the key non-GAAP measures used by the Group:
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.
Constant Currency
Constant currency means that non-Pound Sterling revenue in the comparative period is translated at the same exchange rate applied to the current year non-Sterling revenue. This therefore eliminates the impact of fluctuations in exchange rates on underlying performance.
2020 2019 Growth
GBP'000 GBP'000 %
Group revenue 199,101 143,504 38.6%
Revenue from acquisitions
up to their first anniversary (40,807) - (28.3%)
--------- -------- --------
Organic revenue 158,294 143,504 10.3%
Constant currency adjustment - (500) 0.4%
--------- -------- --------
Organic revenue at constant
currency 158,294 143,004 10.7%
Adjusted Operating Profit
Adjusted operating profit means operating profit before amortisation of acquired intangibles, share-based payment charges and exceptional items.
2020 2019
GBP'000 GBP'000
Operating profit 22,844 15,425
Amortisation of acquired intangibles 19,008 10,316
Share-based payment charges 4,541 2,287
Exceptional items 1,552 4,003
Adjusted Operating Profit 47,945 32,031
Adjusted EBITDA
Adjusted EBITDA means Adjusted Operating Profit before depreciation and amortisation of non-acquired intangibles.
2020 2019
GBP'000 GBP'000
Adjusted Operating Profit 47,945 32,031
Depreciation of property, plant
and equipment 1,760 1,544
Depreciation of right-of-use assets 1,850 -
Amortisation of non-acquired intangibles 184 505
Adjusted EBITDA 51,739 34,080
Adjusted Earnings
Adjusted earnings represents Adjusted Operating Profit less net finance costs and income tax charges . Refer to note 13 for calculation.
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. Refer to note 13 for calculation.
37. Alternative Performance Measures (continued)
Earnings per Share growth
This is calculated as the growth in year on year earnings per share 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.
2020 2019
GBP'000 GBP'000
Cash and cash equivalents 27,499 21,189
Loans on balance sheet 62,139 86,888
Unamortised loan arrangement fees 361 553
--------- ---------
External Loans 62,500 87,441
Net (Debt)/Cash (35,001) (66,252)
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
2020 2019
GBP'000 GBP'000
Cash generated from operations before tax payments
(from Consolidated Cash Flow Statement) 48,498 27,779
Total exceptional items 1,552 4,003
Non-cash exceptional items (771) (200)
Cash generated from operations before tax payments
and exceptional items paid 49,279 31,582
Adjusted EBITDA 51,739 34,080
Cash Conversion % 95.2% 92.7%
.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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