Final Results

Source: RNS
RNS Number : 9135B
GB Group PLC
15 June 2021
 

 

 

 

GB GROUP PLC

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

 

Annual Results for the Year Ended 31 March 2021

 

Record financial performance and strong execution

 

GB Group plc (AIM: GBG), the global identity data intelligence specialist, announces its annual results for the year ended 31 March 2021.

 

Financial highlights

 

 

2021

2020

% change

Revenue

£217.7m

£199.1m

9.3%

Organic revenue (CCY)1

£210.8m

£187.9m

12.1%

Adjusted operating profit2

£57.9m

£47.9m

20.8%

Adjusted basic earnings per share2

25.2p

21.8p

15.6%

Profit before tax

£34.3m

£20.6m

66.1%

Deferred income balance

£42.8m

£38.4m

11.5%

Net assets

£364.3m

£344.9m

5.6%

Net cash/(debt)2

£21.1m

£(35.0)m

-

Dividend per share

6.4p3

 

 

 

 

Strategic and operational highlights

 

Strong revenue, profit and cash performance:

·      Record financial performance ahead of updated market expectations4

·      Revenue growth of 12.1% in organic constant currency terms

·      Adjusted operating profit increased by 20.8% from £47.9m to £57.9m

·      Continued strong cash generation resulted in a net cash position of £21.1m (£35.0m net debt at the start of the year)

·      Final dividend in respect of FY21 declared of 3.4p per share

 

People:

·      Achieved our highest team engagement scores to date

·   Continued to strengthen our team across the business and also added new talent to our Executive and senior management, delivered via internal promotions as well as external appointments

 

Customers and growth:

·      Achieved our best ever customer engagement scores

·      All channels to market (direct, self-serve and partnership) performed well

·      Revenue growth driven by significant demand from existing customers who experienced increased usage in their digital channels, as well as  adding new clients in all lines of business

 

Continued enhancements in strategy and products:

·    Launched significant new product features and opened an AI-focused centre of excellence, while strengthening security and adding breadth to data products

·      Acquired HooYu Investigate and invested in Singapore based fraud detection business Credolab

·      Completed the disposals of two non-core businesses, Marketing Services and Employ & Comply, both to high-quality acquirers

 

Current trading & outlook:

·      Good start to the year with current trading in line with the Board's expectations

·      Continue our strategy of organic and inorganic investment to drive product and market expansion

 

Chris Clark, CEO, commented:

 

"Today we report a record financial performance together with our best ever customer and team member engagement scores. In the fast changing global economic environment this is an excellent outcome and I sincerely thank each and every one of our team in all territories who all played a part in this success.

 

The pandemic has accelerated customer digitalisation initiatives and permanently shifted more consumer activity online. Satisfying consumer expectations for simple online journeys, while meeting the needs of businesses to reduce fraud and trade in compliant ways, creates significant long-term opportunities for GBG.

 

In the year ahead we will continue to invest in our people, technology and channel to market capabilities in order to further converge our Location, Identity and Fraud solutions, create new propositions and capitalise on the growth opportunities our strategy identifies." 

 

Notes:

 

1 "CCY" indicates figure reported on a constant currency basis. Constant currency means that non-Sterling revenue in the comparative period is translated at the same exchange rate applied to the current year non-Sterling revenue.

2 These measures are defined within note 37 to the Annual Report.

3 This comprises 3.00p as an interim dividend paid posthumously in January 2021 in lieu of no FY20 dividend, in addition to 3.40p declared for FY21.

4 Company compiled consensus of analysts' estimates for year ending 31 March 2021, as detailed in our trading update on 22 April 2021: Revenue of £213.2 million and adjusted operating profit of £53.5 million.

 

Ends -

 

For further information, please contact:

 

GBG

Chris Clark, CEO & Dave Wilson, CFO & COO

 

01244 657333

Peel Hunt LLP (Nominated Adviser and Broker)

Edward Knight, Paul Gillam & Nick Prowting

 

020 7418 8900

Tulchan

James Macey White & Matt Low

 

020 7353 4200

GBG@tulchangroup.com

 

Website

www.gbgplc.com/investors

 

 

 

Presentation and webcast

Chris Clark, Chief Executive, Dave Wilson, Chief Financial Officer & Chief Operating Officer and David Ward, new Chief Financial Officer will be hosting an analyst webcast presentation on 15 June 2021 at 9am.

 

Shortly following the presentation, an archived webcast will be available on the Investors page of the Company'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 15 countries, we work with over 19,000 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 last year has been the most testing time for business anyone can remember and I am pleased to report that on every level GBG rose to the challenge. We are reporting another year of record financial performance but most pleasingly this has been delivered alongside our best ever customer and team engagement scores. The GBG team has focused relentlessly on supporting our customers and each other and this effort underpins our success. Our ability to achieve such results, in some of the most adverse economic and social conditions that we have seen for decades, demonstrates the strength of GBG's team and business model. On behalf of our customers and shareholders my heartfelt thanks go to the whole GBG team.

 

Covid-19, team members and customers

 

At the start of the pandemic GBG acted decisively. We took steps to ensure the safety and wellbeing of our people, to support our customers and to protect our business from the then-unknown impact of Covid-19.

 

I was impressed but not surprised at the pace and professionalism shown by colleagues as we rapidly transitioned to working from home. We helped our team members adjust to the change with technology and created a communications programme and virtual culture that helped unite us all. We sometimes shared meetings with our colleagues' families as home-schooling and homeworking competed across kitchen tables and we thank our customers for their patience and good humour. The success of our approach shows in our employee engagement survey in Q4 which recorded our best-ever results and record high customer advocacy scores.

 

The pace at which we adapted to virtual working meant that we were able to support our customers through the challenges they faced. As we reported during the year we saw the impact of the pandemic vary according to geography, customer vertical and product. Our solutions helped our customers by playing a key role in the digital transformation that the pandemic accelerated. We have been able to contribute to the success of many customers who have traded successfully through the crisis. However, many customers were impacted, some severely. We took steps to support these customers by suspending contracts, extending credit and maintaining services - in sectors as diverse as online sports betting, hospitality and leisure, travel and sports-related associations. We were also pleased and proud to directly help with pandemic relief efforts. This included enabling the rollout of emergency funds in the USA; improving data quality for the vaccine rollout in the UK and supporting the Health & Safety Executive to ensure that businesses took appropriate steps to protect employees.

 

Although our results demonstrate overall revenue growth, some areas of our business did see a decline. This was particularly true where there was a need to deploy services onsite or where solutions were focused on challenged sectors, which accounted for around 14% of our total revenues before Covid-19. In response we adapted our sales and marketing efforts to align with changing demand, win new business and accelerate our share of many customers' investments.

 

At the time of writing, while restrictions are easing and vaccination programmes are well underway in some countries, the pandemic is not yet over. This means we must remain vigilant to the longer-term impact of the pandemic on our global customer base. However, GBG's solutions address key requirements of modern economies, especially the need to verify digital identities, fight fraud and understand locations. This means we are well-positioned to take advantage of these opportunities as economies reopen.

 

 

 

Board changes

 

At the end of June, we will say a sad farewell to Dave Wilson, our current CFO and COO, who has decided to retire. Dave has been instrumental in GBG's success over the last 12 years, helping transform us from a £14.2m market cap business when he joined, into one of the UK's largest technology companies. He leaves with all of our best wishes.

 

On behalf of the Board I was delighted to welcome David Ward to GBG early in May. He will bring highly complementary experience to the Board and following a decade at Aveva, he offers very relevant experience to the next stages of GBG's growth. David will be formally appointed to the Board from July 1st on Dave's retirement.

 

Charmaine Carmichael also resigned from the Board this year when she started a new full-time executive role and had to step down from her external Non-Executive board appointments.  The Board is currently conducting a search for a new Non-Executive Director to support GBG as it broadens its technology capability and international reach. 

 

Financial performance

 

GBG's financial performance in the year was again ahead of original market expectations. Revenues increased by 9.3% to £217.7 million (2020: £199.1 million), with organic revenue growth at constant currency of 12.1%. Adjusted operating profit increased by 20.8% to £57.9 million (2020: £49.7 million) and adjusted earnings per share rose 15.6% to 25.2 pence (2020: 21.8 pence).

 

Cash generation remained strong allowing GBG to clear its net debt position of £35 million at the start of the year to a cash positive level of £21.1 million. This significant improvement and robust financial position means we enter FY22 in very good shape with a strong balance sheet, a cash generative business model and access to liquidity.

 

AGM and dividend

 

The Board intends to uphold its progressive dividend policy and remains committed to delivering increased returns to shareholders. The Board will propose a final dividend of 3.40 pence per share to shareholders at the Annual General Meeting ("AGM") in July. If approved, this will be our thirteenth year of growth in dividends.

 

This year GBG's AGM will be held as a hybrid meeting. Shareholders will be encouraged to attend virtually although there will be limited availability for those that would like to attend in person. The meeting will be held at our Chester office using a live audio link and shareholders can participate by being able to listen live to the meeting, ask questions and vote.  Further details can be found in the Notice of AGM.

 

Progress and strategy

 

GBG took action to conserve cash in the early phases of the pandemic. These actions contributed to the higher than expected net margins this year. We have now returned to our strategy of re-investing cash into product development and go-to-market resources, making sure that GBG has the products it needs to capture the global market opportunity in front of us.

 

Our strategy is to invest in building innovative solutions which can scale and where we can achieve competitive differentiation. We reviewed our portfolio with this in mind and identified that our Marketing Services and Employ & Comply businesses were not aligned to this strategy. During the year we have been able to find high-quality acquirers for these businesses with the market expertise to provide a great experience for our customers and team members who have transferred to new ownership. We wish them well for the future.

 

We also added capability to the Group in the year by acquiring HooYu Investigate and by taking an investment in Credolab, both of which enhance our fraud portfolio. We continue to monitor the market for high-quality acquisitions that will accelerate our product development and geographic reach, supporting our promise to make quality investment decisions and innovate at pace.

 

Commitment to innovation remains at the core of GBG's success and our strategies for product evolution retain this focus. However, as digital transformation accelerates, we are also investing in the security of our solutions and systems as well as continuing to add breadth to our data assets. Our use of these assets does though need to respect the privacy requirements of the territories in which we operate.  We will, of course, continue to invest in our team members who make GBG so successful.

 

GBG's people are also active in helping support the communities in which we live and work and they support and contribute to the Group's ESG strategy. The Board is dedicated to ensuring that GBG uses its resources and skills to the broader benefit of the economies we operate in, as well as taking a socially responsible approach to the decisions and investments the Group makes.

 

As previously indicated, in November 2018, The Information Commissioner's Office (ICO), the data industry regulator in the UK, announced 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 continues to positively engage with the Commissioner as part of that review. We will keep the market informed of any material developments.  

 

The year overall and outlook

 

We have a lot to be proud of this year. We have been sure-footed in navigating the ramifications of the pandemic, made strategic investments and disposals, enhanced our products, provided a safe and motivational environment for our people and contributed to the success of our customers. We believe all of these components position us well for the coming year. With market momentum, we expect to maintain good progress in FY22 and into the future.

 

On behalf of the Board, I want to thank our team members for their hard work and dedication that underpins GBG's success, as well as our shareholders and customers for their continued support.

 

 

David Rasche

Chairman

 

 

 

 

Chief Executive Review

 

As described by the Chairman, the GBG team successfully navigated the challenges posed by the pandemic this year. We took immediate action to protect the wellbeing of our people and to make sure that we were able to provide strong support for our customers. We acted decisively in terms of the way we used our resources, making sure that we could meet our customers' new requirements as they too transitioned to remote working and accelerated the digitalisation of their businesses.

 

I am very pleased that these actions were successful. While one result was record revenue and profit performance, I am even more pleased that this was achieved alongside our best ever team engagement and customer advocacy scores.

 

Strategic focus

 

Strategic progress in the year was not restricted to reacting to Covid-19. We made meaningful strides in a number of areas, including: strengthening our global management team; extending into new markets and winning new customers; delivering innovative product enhancements; focussing our business with a mix of non-core divestments; investment in a strategic partner and making an acquisition. We have also refreshed our vision and purpose as we take the opportunity presented by the acceleration of digital business to enhance our brand, making sure that GBG becomes better known and more respected by our core audiences and markets. 

 

Our new purpose is to help build trust in a digital world, while our updated vision is to create a world where everyone can transact online with confidence.

 

The short-term impact of Covid-19 varied significantly by geography and from sector to sector. We experienced increases and reductions in transactions from customers depending on the demands of their end consumers. However, we are clear that in the medium and longer term the impact has been to accelerate the existing drivers of growth for GBG. Consumer adoption of technology has increased and changes in their behaviour made through necessity during the pandemic are becoming permanent preferences. For businesses the changes in the last year have sustained consequences, with accelerated digitalisation driving more transactions online. Without face-to-face transactions, new types of fraud are emerging. Consumers need to assert their identity to access services and businesses need to react within an increasingly complex privacy and regulatory environment.

 

Our customers are recognising that simple single products do not provide a complete solution to these challenges. This is where our products, services and - perhaps critically - our experience comes to play. We have been addressing these themes for more than 30 years and have the expertise to balance consumer expectations for simple online journeys with the needs of businesses to reduce fraud and trade in compliant ways. This is a challenging but exciting journey for our customers and we are an essential partner at their side, helping them establish trust in their growing digital operations.

 

We have aligned our core capabilities in location, identity and fraud to drive growth globally. Although each capability area can meet standalone customer requirements, the expertise we have can also come together. The experience we have built with proving digital identities provides GBG a unique capability in identifying online fraud. We expect to see increasing convergence of our products and services in the coming years, providing new cross-sell opportunities and developing new use cases for our customers. We are meeting these challenges by adding new data and new services, including decision-builder capability in ExpectID in the USA, multi-bureau data feeds in identity Europe and service orchestration across our fraud products in APAC. In addition to our organic investments, we enhanced our EMEA anti-fraud portfolio with the acquisition of HooYu Investigate, one of the UK's leading investigation software solutions.

 

We also exited two businesses that served adjacent but non-core markets. Marketing Services moved to HH Global in January 2021, while Employ & Comply joined First Advantage Inc, an international background screening provider, at the end of March 2021. We were pleased that in both cases the new owners were global specialists in their field, creating opportunities for long-standing customers and the employees of those businesses, while helping us to simplify GBG.

 

We look forward to continued progress in FY22 in each of our core solutions and in our three core geographies. We will continue our strategy of organic and inorganic investment to drive product and market expansion.

 

Team

 

We have exceptional talent within our global team of approximately 1,000 people, each committed to delivering the best products and experiences for our customers. We understand that our people are at the heart of our success - whether that's winning new customers, developing the technologies that deliver first-class solutions, or supporting our team members to be the very best they can be.

 

I have been so impressed by our team members' continued dedication and commitment to GBG in light of the challenging conditions we are all facing, as a result of the Covid-19 pandemic. Our teams have remained cohesive and collaborative despite the challenges of remote working conditions. In particular, I want to thank our People Team and managers who rose to the challenge by increasing their efforts in communicating and engaging with all our team members and prioritising wellbeing programmes, training and development.

 

We support our team members by providing a safe and rewarding working environment.  We also support them through our absolute commitment to reducing inequalities, broadening diversity and facilitating inclusion within GBG, our markets and society. We have and will continue to invest and develop initiatives to help us improve in this critical area, including our 'be/yourself' programme and supporting family friendly policies at work. I believe our focus on this has created our very positive team environment where over 90% of our team members would recommend GBG as a great place to work.

 

This culture has enabled us to attract new talent to the business, including senior hires to support our growth. In addition to David Ward, who joins us as CFO, Dev Dhiman now leads our APAC business, Boris Huard joined to lead EMEA and Lara Clark leads our legal and risk management group. These hires join 160 new team members in the GBG family this year.

 

Customers and growth

 

GBG maintained its track record of organic growth, but the source of growth shifted in the year as a direct result of the impact of the pandemic. Although we continued to win new business, often with global brands, the majority of our revenue growth came from within our existing customer base.

 

Strategically we have three primary channels to market: direct, self-serve and through partnerships. All channels performed well. In the period we saw significant demand from existing customers who were experiencing increased usage in their digital channels. We were able to mobilise quickly to address these additional requirements and make a real difference to their ability to respond to these new digital needs.  We were also delighted to have played our part in supporting organisations delivering services to people and businesses directly impacted by the pandemic. In the USA, we helped support the distribution of stimulus payments to businesses and roll out verification services to Covid-19 testing facilities. We also played a small part in England enabling vaccine distribution.  

 

Not all sectors and customers proved to be resilient. Our ability to win new customers and in new markets offset the impact of lower demand in hospitality, travel and leisure, as well as in situations where customers deferred decisions due to Covid-19 related priorities or where on-site product deployment was a constraint. 

 

New business came from initiatives in new sectors and by expanding geographically. In the USA we grew identity revenues in the financial services and online gaming markets, as well as winning new customers in insurance and healthcare sectors. EMEA saw good growth for Loqate in the online retail and food distribution sectors. In APAC, despite challenges with onsite deployments, we have won new business and achieved significant upsells across the region, including a major project in the Philippines and new Loqate sales in China, positioning us well for future sales in the territory.

 

As we enter the new financial year, the sales and marketing teams are well placed to continue to focus on growth sectors, geographic expansion and further customer development. Although there is always a short-term risk of further contract delays where the pandemic is still causing significant impact, the overall acceleration of digital commerce will be of net benefit to GBG's customers. We intend to continue to invest in extending our sales reach to maximise this opportunity.

 

Product and technology update

 

Our product and technology teams have delivered a strong set of new features through the year. These include Decision Builder in our IDology business, integration of our IDScan technology with GreenID in Australia and a multi-bureau data integration in EMEA.    We also established a number of Global Centres of Excellence, one being focussed on Artificial Intelligence, which has benefitted a number of our products.

 

When we are confident it is an efficient use of resources, we can also supplement our development resource by acquiring technology. This year, this included the acquisition of HooYu Investigate, which accelerates the development of our Connexus products.

 

We have invested in our technology to deliver the scale, agility and compliance requirements at the increasing pace demanded by our international customer base, which also helps us improve the maturity of our operational capabilities.  We have underpinned product releases with major upgrades to infrastructure and security - and of course, successfully supported the shift to remote working.

 

Corporate transactions

 

As noted above, we completed several transactions this year. This included, an 11% stake in Credolab Pte Ltd in August 2020. Credolab Pte Ltd is a developer of bank-grade digital scorecards headquartered in Singapore. The company's AI-based proprietary technology complements our existing offering but also provides critical behavioural risk reference data from good customers who are financially excluded. We also acquired HooYu Investigate in December 2020 to further enhance our leading position in fraud investigation solutions in the UK. HooYu Investigate automates fraud investigations and will broaden the services GBG provides. Finally, we made the decision to divest two businesses that served adjacent but non-core markets in the period: Marketing Services in January 2021 and Employ and Comply in March 2021.

 

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 broaden our geographic reach and product capabilities.

 

Current trading and outlook

 

What is clear is the pandemic has accelerated company digitalisation initiatives and permanently shifted consumer activity online, creating a long-term demand environment for all three of our solution sets. The services we offer have proven to be mission critical to customers within both traditional and new industries and I am excited by the prospect of continuing to broaden our customer base geographically and across sectors.

 

We are pleased to report that the new financial year has got off to a good start, in line with the Board's expectations. We have continued to see strong transactional volumes in Identity, driven in part by increases in transactions in crypto currency trading, which has smoothed some of the impact of the high transaction volumes from stimulus activity in the USA last year.  While this is unlikely to continue in the long term, it gives us good momentum and we continue to be encouraged by the vaccine-driven relaxing of lockdowns in some of our key geographies. However, the situation in other countries offers a timely reminder that the pandemic is not over and due to elevated pandemic uncertainties a wide range of outcomes remains possible.

 

I am pleased with our strategic progress and we plan to continue to make significant investments in the coming year to enable us to capture the medium-term opportunity.

 

 

Chris Clark

Chief Executive Officer

 

Finance Review

 

The performance of the Group is reported by segment, reflecting how we run the business and the economic characteristics of each segment. There are three reportable segments, Location, Identity and Fraud.

 

The Group results are set out in the Consolidated Statement of Profit or Loss 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.

 

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.

 

2021

2020

Change

Change

 

£'000

£'000

£'000

%

 

 

 

 

 

Revenue

217,659

199,101

18,558

9.3%

Adjusted operating profit

57,896

47,945

9,951

20.8%

Adjusted operating profit margin

26.6%

24.1%

2.5%

10.5%

Share-based payments charge

(5,170)

(4,541)

(629)

13.9%

Amortisation of acquired intangibles

(17,671)

(19,008)

1,337

(7.0%)

Operating profit before exceptional items

35,055

24,396

10,659

43.7%

Exceptional items

448

(1,552)

2,000

-

Operating profit

35,503

22,844

12,659

55.4%

Net finance costs

(1,240)

(2,218)

978

(44.1%)

Profit before tax

34,263

20,626

13,637

66.1%

Total tax charge

(7,385)

(3,562)

(3,823)

107.3%

Profit for the year

26,878

17,064

9,814

57.5%

Final dividend per share

3.40

-

-

Adjusted earnings

49,271

42,165

7,106

16.9%

Basic weighted average number of shares ('000)

195,225

193,631

1,594

0.8%

Basic earnings per share (pence)

13.8

8.8

5.0

56.8%

Adjusted basic earnings per share (pence)

25.2

21.8

3.4

15.6%

 

The primary focus at the beginning of the year was to protect the business in light of the uncertainty of how Covid-19 would impact our customers, people and operations. This resulted in a number of cash preservation measures being taken such as not paying a final dividend, a non-essential recruitment and pay freeze and deferral of director bonus payments.

 

As the year progressed the underlying trends of how Covid-19 would impact the business became clearer and allowed the focus to shift back to driving sustainable organic growth. Whilst the level of revenue growth was influenced by non-recurring revenue linked to the US Government's Covid-19 stimulus package, the underlying growth was still ahead of expectations at the start of the year.

 

The level of profitability, combined with strong cash generation, has allowed full repayment of the Group's loan facility by the year-end. This will enable cash generated in the coming year to be invested back into the business to support our organic growth plans, in addition to providing funding for acquisitions.

 

Adjusted EBITDA

Adjusted EBITDA was £61.4 million (2020: £51.7 million), consisting of adjusted operating profit of £57.9 million (2020: £47.9 million), depreciation (including right-of-use assets) of £3.3 million (2020: £3.6 million) and amortisation of purchased software and internally developed software of £0.2 million (2020: £0.2 million).

 

Amortisation of Acquired Intangibles

The charge for the year of £17.7 million (2020: £19.0 million) represents the non-cash cost of amortising separately identifiable intangible assets including technology-based assets and customer relationships that were acquired through business combinations.

 

Exceptional Items

Exceptional income of £0.4 million (2020: exceptional costs of £1.6 million) was generated/incurred by the Group in the year and has been detailed in note 7 to the accounts.

 

Net Finance Costs

The Group has incurred net finance costs for the year of £1.2 million (2020: £2.2 million). The significant reduction was due to the loan repayments made during the year reducing the level of interest paid.

 

Taxation

The total tax charge of £7.4 million (2020: £3.6 million) includes £12.4 million of current tax payable on the Group's profits in the year (2020: £4.8 million), offset by a deferred tax credit of £5.0 million (2020: £1.2 million).

 

The effective tax rate for the group has increased from 17.3% in 2020 to 21.6% in 2021. The principal reason for this change is that included within the prior year total tax charge was a credit of £0.8 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 was a corresponding cost within exceptional items to reflect the increase in the contingent consideration liability. Excluding this one-off the prior year effective tax rate would have been 21%.

 

Deferred Income

Deferred income at the end of the year increased by 11.5% to £42.8 million (2020: £38.4 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 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.

 

Dividend

In order to preserve short term liquidity no final dividend was declared in respect of the year ended 31 March 2020. Following strong trading performance in the first half of the year the Board of Directors declared an interim dividend of 3.00 pence per share which was paid in January 2021 at a cash cost of £5.9 million.

 

With respect to the year ended 31 March 2021, the Board of Directors will propose a final ordinary dividend of 3.40 per share (2020: nil), amounting to £6.7 million (2020: £nil). If approved, this will be paid on 3 August 2021 to ordinary shareholders whose names were on the register on 25 June 2021. The Group continues to operate a Dividend Reinvestment Plan, allowing eligible shareholders to reinvest their dividends into GBG shares.

 

Earnings per Share

The earnings per share analysis in note 13 cover four measures:

·      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)

·      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 56.8% from 8.8 pence to 13.8 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 £49.3 million (2020: £42.2 million) resulting in a 15.6% increase in adjusted basic earnings per share from 21.8 pence to 25.2 pence.

 

The basic weighted average number of shares at 31 March 2021 increased to 195.2 million (2020: 193.6 million), partly due to the issue of 0.8 million shares to fund the investment in CredoLabs and acquisition of HooYu.

 

Cash Flows

Group operating activities before tax payments and exceptional items generated £73.4 million of cash and cash equivalents (2020: £49.3 million) representing Adjusted EBITDA to cash conversion ratio of 119.5% (2020: 95.2%).

 

The increase in the cash conversion was partly attributable to cash receipts in the first half of the year related to large multi-year deals where the profit was recognised at the end of the previous financial year. Notwithstanding this, operating cash flows continued to be strong and the Group continually monitors its measures of cash generation and collection.

 

The cash generated from operations, in addition to the disposal proceeds from the Employ and Comply business disposal, enabled debt repayments of £62.5 million to be made during the year to clear the outstanding loan balance. Further detailed analysis of this movement is included in the Consolidated Cash Flow Statement.

 

In January 2021 the £110 million Revolving Credit Facility was extended by a further year. The facility now expires in February 2023.

 

Acquisitions

During the year, an investment was made into CredoLabs Pte Ltd, acquiring 10.53% of the share capital of the company. The investment, based in Singapore, has been designated as a financial instrument and as such will be held at fair value through other comprehensive income. This investment was funded by the issue of new GBG shares with a value of USD$3 million (£2.3 million).

 

In December 2020, the Group acquired 100% of the share capital of Investigate 2020 Ltd (HooYu Investigate) immediately following a transfer of assets from HooYu Limited. HooYu Investigate uses leading database and UX technologies to improve the productivity of an investigation process. The Investigate product complements GBG's existing Connexus portfolio. This acquisition was funded by the issue of new GBG shares with a value of £4.0 million. The purchase price allocation has attributed the majority of the value to the technology acquired, with remaining goodwill of £0.1 million.

 

Further information regarding the acquisition has been detailed in note 35.

 

 

 

Disposals

In the second half of the year the Group disposed of two businesses which were not part of our core global capabilities in location intelligence, identity verification and fraud prevention.

 

In January 2021, the Group disposed of its Marketing Services business to HH Global Interactive Limited and in March 2021 the Employ and Comply business was sold to First Advantage Europe Limited. The net cash proceeds from the disposals was £5.3 million.

 

Further information regarding the disposals has been detailed in note 35.

 

Treasury Policy and Financial Risk

The Group's treasury operation is managed by a Treasury Committee within formally defined policies and reviewed by the Board. 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.

 

During the pandemic the Treasury Committee received weekly cash information to monitor liquidity across the Group and ensure that significant cash outflows, such as the interim dividend and loan repayments, could be made without exposing the Group to undue risk.

 

The Group finances its activities principally with cash, short-term deposits and borrowings but has the ability to draw down up to £110 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 14 June 2021.

 

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 forecasts using financial and non-financial measures. Due to the uncertainty of the impact of Covid-19 at the start of the year, there was no formal budget and therefore the assessment was made against rolling forecasts which were updated as the impact of Covid-19 became clearer.

 

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.

 

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 disposed businesses that 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 an 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 an 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 Cash/Debt

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 Profit or Loss 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 and reducing risk concentration.

 

Non-Financial

·      Employee Engagement

Team member 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

 

 

 

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

Revenue Growth

 

 

 

9.3%

 

38.7%

 

 

Organic Revenue Growth at Constant Currency

 

 

 

12.1%

 

10.7%

 

 

Organic Revenue Growth

 

 

 

12.1%

 

10.3%

 

 

Fraud Organic Growth at Constant Currency

 

 

 

(27.4%)

 

24.3%

 

 

Identity Organic Growth at Constant Currency

 

 

 

28.5%

 

11.5%

 

 

Location Organic Growth at Constant Currency

 

 

 

10.5%

 

6.8%

 

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Profit (£'000)

 

 

 

57,896

 

47,945

 

 

Adjusted Operating Profit %

 

 

 

26.6%

 

24.1%

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (£'000)

 

 

 

61,410

 

51,739

 

 

Adjusted EBITDA %

 

 

 

28.2%

 

26.0%

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share - Basic

 

 

 

13.8p

 

8.8p

 

 

Earnings per Share - Adjusted Basic

 

 

 

25.2p

 

21.8p

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share Growth - Basic

 

 

 

56.8%

 

14.3%

 

 

Earnings per Share Growth - Adjusted basic

 

 

 

15.6%

 

19.8%

 

 

 

 

 

 

 

 

 

 

 

Net Cash/(Debt) (£'000)

 

 

 

21,135

 

(35,001)

 

 

Cash Conversion %

 

 

 

119.5%

 

95.2%

 

 

 

 

 

 

 

 

 

 

 

Deferred Income (£'000)

 

 

 

42,843

 

38,414

 

 

 

 

 

 

 

 

 

 

 

International Revenue as a Percentage of Total Revenue

 

 

 

64.4%

 

55.9%

 

 

 

 

 

 

 

 

 

 

 

Employee Engagement

 

 

 

>90%

 

> 90%

 

 

 

 

Principal Risks and Uncertainties

 

Risk Appetite and Principal Risks

The Board is responsible for setting the level of risk and our associated risk appetite to ensure we focus appropriately on the risks we face. We identify and assess the impact of risks to the business under four key headings - financial, strategic, operational and knowledge. For each risk, we identify the likelihood and assess the impact using quantitative and qualitative information. As a result of the exceptional circumstances presented by Covid-19 and the unexpected consequences that have affected economies and organisations globally, GBG suspended the periodic scoring of risks. We focussed on the more immediate and dynamic nature of the risks and implementing and monitoring the mitigation actions that were implemented.  

 

The significant risks and uncertainties we face are set out below together with a summary of the control measures and mitigations employed. Notwithstanding these actions, due to the pace and nature at which risks evolve, we remain vigilant in addressing these areas of concern and developing our control measures.

 

As a public company, reputational damage is an omni-present risk and as such is a key area of concern for the Board. The potential effects on our good name and reputation are not under-estimated by the Board. Whilst the following commentary is not specific in detailing reputational damage, as an identified risk, its impact is a major, over-arching consideration across our risk portfolio.

 

In addition to updates on GBG's internal audit reviews, during the year the Board has been appraised regularly on a range of risk matters and actions taken. These have included: overall Group strategy; Covid-19 matters; detailed going concern reviews; new product and technology strategy updates; information security matters; people initiatives; relationships with investors; remuneration matters; succession planning; Brexit; governance developments; and regulatory matters.

 

 

 

 

Risk

Description

Mitigation

Failure to Comply with Regulations and Laws and/or Changes in Regulatory Environment & Enforcement

Regulation continues to increase within the markets we operate. Legislation changes on a regular basis and the interpretation of existing laws can also change, creating ever-tightening standards. This will often require additional human and financial resources and the provision of new assets and systems.

 

We are committed to responding positively to regulatory change to ensure compliance, as this could affect the pricing for, or adversely affect the revenue from, the services the Group offers or cause reputational issues.

 

We also acknowledge that we are required to maintain a number of accreditations and registrations to meet a number of contractual and statutory obligations.

 

We are aware of increasing international regulation for data processing and privacy in the geographies in which we operate.

We have dedicated Legal, Governance, Health and Safety, Privacy & Information Security Teams who are collectively responsible for monitoring changes to legislation and ensuring compliance in each area. We continue to invest and have increased the number and skills levels of the respective teams in the past year. The strength of the management team has been augmented by the appointment, during the year, of a Chief Regulation Officer ("CRO") with risk management experience.

 

We have established procedures which we invoke when presented by material issues and changes (such as Covid-19, Brexit and regulatory challenge), which involves: bringing together a senior team; assessing the issue and scoping a plan of action; assigning activities and monitoring progress and developments. There is also an established process for keeping the Board informed and escalating matters.  

 

We have access to an extensive and global range of external professional advisors.

 

We have a Group-wide intranet through which we advise, train and provide ongoing development to all of our team members, globally, about our policies. This provides us with the means to ensure (and demonstrate) ongoing compliance with regulatory obligations including those required under data protection and privacy legislation. Our monitoring processes allow us to ensure that all team members undertake the necessary training and we can present the evidence to regulators and customers where needed.

 

GBG is committed to continued investment in training team members in relation to data handling and privacy best practices.

 

During this pandemic our priorities have been to protect our team members and to support their health and wellbeing, to look after our customers and to secure our business both financially and operationally.

 

Covid-19 has led to additional legislation in the jurisdictions in which we operate, covering health and safety, finance and governance. There are various work streams within our Covid Team which consider changes in legislation and guidance, in conjunction with our professional advisors. This ensures that we have assimilated information to understand and comply with the requirements. This focus will be maintained as lockdown restrictions are eased globally and governments implement further initiatives to support their citizens and economies.

 

As reported in previous periods, in November 2018 The Information Commissioner's Office, the data industry regulator in the UK, announced 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 continues to engage positively with the Commissioner as part of that review. We will keep the market informed of any material developments. 

 

We work closely with our tax advisors to ensure we comply with international regulations that are appropriate for the Group but not to take positions that are open to challenge and/or misinterpretation.

 

Increasing Competition

Our markets continue to be increasingly competitive and intensified competition could lead to pricing pressures.

 

A reduction in the rate at which we add, grow and retain customers may decrease the size of our market share if customers choose to receive services from other providers.

Our business development and product functions track the activities of both our long established and market disruptor competitors. This insight is used by management to quickly adapt our go-to-market strategy.

 

We always seek to differentiate ourselves from the competition and have increased our focus on data sourcing, product innovations, product marketing and pricing to support this.  

 

We continue to enhance our product portfolio and focus on innovation through a mix of internal development; partnering; acquisition and investment; and strategic recruitment.

 

We maintain a strong focus on our core target markets within Europe, North America and APAC and work with partners to extend our reach in our chosen verticals.

 

Our acquisition strategy has opened up new markets and territories enabling cross selling, as well as leveraging opportunities to increase the size of our customer base within established markets. We remain vigilant to future acquisition opportunities to further develop our strategic aims. 

 

We have increased focus on our core strengths of location, identity and fraud and have exited businesses (such as marketing services and employee onboarding) that do not add to these strengths. In our core business we have increased focus on product development, both organically and inorganically, such as with the acquisition of HooYu Investigate in December 2020.

 

Non-supply by Major Supplier

Some of our data and infrastructure is sourced from third party suppliers and partners. The removal from the market by one or more of these third-party suppliers or interruptions in supply could quickly and adversely affect our operations and result in the loss of revenue and/or additional expenditure.

Our Product, Data and Technology teams work strategically to prevent over reliance on any one key supplier, having multiple suppliers and other such mitigations where required.

 

Suppliers are carefully selected to minimise risk of supplier failure or insolvency.

 

We ensure our team members are aware of supplier requirements or restrictions, to minimise the risk of loss of a supplier, due to a breach of contractual obligations.

 

In support of our work undertaken prior to the pandemic, as part of our Covid-19 business continuity plan ("BCP") process, we conducted more immediate risk assessments and checks of our key suppliers' BCPs to assess their preparedness and ability to meet GBG's ongoing requirements during the pandemic.

 

This list was prioritised to deal with our most critical suppliers initially and work then continued during the period to assess those suppliers further down the priority. This review process now forms part of the onboarding of new suppliers.

 

Cyber Attack

The nature of our business means the threat of unauthorised or malicious attacks on our IT systems is an ongoing risk. The risk of a cyber-attack (such as denial of service attacks, phishing, data theft and disruptive software campaigns) is constantly evolving and becoming increasingly sophisticated.

Cyber risk continues to be an ever-increasing threat and the Group's strategy ensures continuing improvements in developing, maturing and testing our defences.

 

Natalie Gammon, GBG's Non-Executive director with a specific technology background, meets the Chief Technical Officer and Chief Information Security Officer regularly. In addition, they provide the Board and Audit & Risk Committee with regular updates and progress reports on our information security plans and strategy through written reports in Board packs and in-person updates at Audit & Risk Committee and Board meetings. 

 

We have cyber insurance in place and have policies established and monitored by our Chief Information Security Officer to protect the Group against a cyber-attack and any security breaches in this area.

 

The Group's Information Security ("InfoSec") capability has been strengthened during the year as part of our ongoing cyber strategy, providing additional support and expertise.

 

We continue to develop our InfoSec awareness programme with all of our team members to raise the knowledge of cyber risk and information security. We use our global intranet training programme to ensure that all team members undergo training and development on cyber threats and good IT business practices.

 

Penetration testing is conducted via an approved third-party specialist.

 

GBG has been diligent in maintaining the scope of review and monitoring of cyber threats. We are keenly aware of the increase during Covid-19 of phishing and fraud attempts and have dealt with these issues proactively including awareness campaigns to update all of our team members to supplement prior training given.

 

Loss of Data and Systems Despite Disaster Recovery & Business Continuity Plans

We have an understandable reliance on our IT systems and people. In the event of an incident affecting business continuity, we would initiate our business continuity plans. However, the loss of key components as a result of the incident could affect the Group's operations and result in additional expenditure.

Our global business continuity programme covers policies and procedures for the key components of each of the Group's operating units. During the 2021 financial year, the Group completed a comprehensive review of our business continuity programme to ensure that the programme continues to meet the needs of the Group, as we continue to grow in size, diversity and complexity.  

 

Disaster recovery requirements and network security are regularly reviewed, back-ups are maintained in databases and data centres have off-site provisions. These policies and programmes are subject to annual review and audit.

 

We engage and undertake due diligence with our data partners and suppliers to ensure vulnerabilities are identified and mitigated.

 

For risk analysis and mitigation processes relating to products and services that we either provide or consume. We feed these into a risk matrix where we track treatment plans against each risk.

 

As part of our increased monitoring of this risk area, the Covid Team receives weekly reports on usage volumes of all of our services together with network service availability updates. This data has been provided throughout the period to identify trends and to support our activities.

 

Inability to Meet New Product Development and Scalability Challenge                           

We invest significant amounts of resource into our product development in order to maintain a competitive advantage.

 

The development of all new technologies and products involves risk, including the product being more expensive, or taking longer to develop than originally planned. The market for the product may be smaller than originally envisaged or the product may fail to reach the production stage.

 

It is also imperative that our developments have the ability to scale as the business grows both in size and complexity.

 

We carry out extensive research and market analysis around the viability of a product before the development phase is initiated and have increased the involvement of customers throughout the process.

 

We have increased the investment in our product development teams, ensuring that development meets both tactical and strategic business objectives. We continuously improve our development skills, processes and platforms to ensure that GBG adopts best practice and can address, at pace, potential challenges and opportunities.

 

 

We have invested in improvements in methods, tools and skills in our product and technology teams to reinforce best practice development approaches.

 

We have increased our focus on product retirement, as part of our Product Lifecycle Management approach, to ensure our development resources are focused on the activities that drive growth.

 

We are investing in modernisation of our customer-facing platforms to enable greater scale and reach. In FY21 these developments included the front-end platforms for location and fraud the back-end platform for identity and plans are in hand to extend this investment in FY22. As well as improving our product platforms, we are investing in business support systems and have established a new team to drive automation and other improvements that help the business scale.

 

Loss of Intellectual Property

We protect our proprietary application software products and services by licensing rights to use the applications rather than selling or licensing the computer source code. 

 

In addition to verifying and auditing our customers' use of GBG's intellectual property, we also rely on trademark, copyright, patent and other intellectual property laws to establish and protect our proprietary rights in these products and services.  However, there is a risk that our proprietary rights could be challenged, limited, invalidated or circumvented.

All of our contracts include provisions to protect the proprietary rights of the Group. GBG's legal function also ensures that such rights are secured and protected during any negotiation with customers or suppliers. 

 

Where appropriate, we register trademarks globally and work closely with external advisors to ensure that our business rights are safeguarded in all the territories in which we operate.

 

GBG has also invested in increasing resources to improve how proactively we conduct audits of customer compliance with licensing obligations and successfully enforce our rights.

 

Ineffective Succession Planning and Dependence on Highly Skilled People

Our people are key to our success. We operate in very competitive markets and acknowledge that the skills that our people possess are attractive to other employers. There is the risk that not having the right people and skills could impact negatively on our ability to serve our customers and grow the business.

 

It is important that we maintain high levels of employee engagement to ensure that we are able to retain and attract the best talent.

We are very mindful that we operate in a highly competitive talent market. As a result we have ensured especially during the pandemic, that we continue to provide high levels of support and consideration to our team members' wellbeing and ongoing development. In light of Covid-19, the Board and the Remuneration Committee have also discussed a range of proposals and potential actions to support these initiatives, in order to maintain our ability to retain and attract talent needed by the business.

 

We invest in developing the skills and abilities of our people across all our locations and geographies.

 

We offer competitive total benefits packages (compensation and benefits) and these are reviewed and benchmarked regularly.

 

Employee engagement is monitored formally every six months through a Group-wide survey and the results are used to focus on improvement activities. This survey has continued during the Covid-19 pandemic.

 

We monitor attrition rates by business function and location in order to identify issues and prioritise restorative action where necessary.

 

We strongly believe that diversity throughout the Group is a driver of success and recognise it has significant benefits. We have taken a number of proactive steps to promote diversity and equality within GBG under our Group-wide initiative, be/yourself. Launched over three years ago this initiative supports a range of activities in our focus areas of: nationality, race & religion; sexual identities; experience & age as well as addressing gender imbalances in our business, our industry and our communities.

 

We also monitor the effectiveness and skill set of the Board and recruit additional members where necessary. This enables effective succession, to supplement the Board's skill set as well as maintaining a strong independent director.

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Profit or Loss

Year ended 31 March 2021

 

 

 

 

 

 

 

 

Note

2021

 

2020

 

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

3

217,659

 

199,101

 

 

 

 

 

Cost of sales

 

(65,096)

 

(54,914)

 

 

 

 

 

 

 

 

 

 

Gross profit

 

152,563

 

144,187

 

 

 

 

 

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

 

(94,667)
 

 

(96,242)

 

 

 

 

 

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

 

57,896

 

47,945

 

 

 

 

 

Amortisation of acquired intangibles

16

(17,671)

 

(19,008)

 

 

 

 

 

Equity-settled share-based payments

29

(5,170)

 

(4,541)

 

 

 

 

 

Exceptional items

7

448

 

(1,552)

 

 

 

 

 

 

 

 

 

 

Group operating profit

 

35,503

 

22,844

 

 

 

 

 

Finance revenue

3, 9

120

 

143

 

 

 

 

 

Finance costs

10

(1,360)

 

(2,361)

 

 

 

 

 

Profit before tax

 

34,263

 

20,626

 

 

 

 

 

Income tax charge

11

(7,385)

 

(3,562)

 

 

 

 

 

Profit for the year attributable to equity holders of the parent

 

26,878

 

17,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

13

 

 

 

     - basic earnings per share for the year

 

13.8p

 

8.8p

 

 

 

 

 

     - diluted earnings per share for the year

 

13.5p

 

8.7p

 

 

 

 

 

     - adjusted basic earnings per share for the year

 

25.2p

 

21.8p

 

 

 

 

 

     - adjusted diluted earnings per share for the year

 

24.8p

 

21.4p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

Year ended 31 March 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

                    2020

 

 

 

 

 

 

 

                    £'000

 

                    £'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit after tax for the period attributable to equity holders of the parent

 

 

 

 

 

26,878

 

17,064

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

(20,559)

 

6,756

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

6,319

 

 

23,820

 

                         

 

 

*Upon disposal of a foreign operation, the associated element will be recycled to the Income Statement.

 

 

 

                                                                                  

 

 

 

 

 

 

Consolidated Statement of Changes in Equity

Year ended 31 March 2021

 

 

 

 

 

 

Note

 

Equity

share

capital

 

Share premium

 

 

 

Merger reserve

 

 

Capital redemption reserve

 

Foreign currency translation reserve

 

 

 

Retained earnings

 

 

 

 

Total

equity

 

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 April 2019

 

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

 

-

 

-

 

-

 

-

 

26,878

 

 

26,878

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

-

 

-

 

-

 

-

 

(20,559)

 

-

 

 

(20,559)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

(20,559)

 

26,878

 

 

6,319

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

21

53

 

5,979

 

3,343

 

-

 

-

 

-

 

 

9,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments

29

-

 

-

 

-

 

-

 

-

 

5,170

 

 

5,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax on share options

 

-

 

-

 

-

 

-

 

-

 

1,700

 

 

1,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share forfeiture receipt                                                    

    21

-

 

-

 

-

 

-

 

-

 

2,641

 

 

2,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity dividend

12

-

 

-

 

-

 

-

 

-

 

(5,883)

 

 

(5,883)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2021

 

4,908

 

267,627

 

9,918

 

3

 

(16,606)

 

98,406

 

 

364,256

 

 

 

Company Statement of Changes in Equity

Year ended 31 March 2021

 

 

 

 

Note

Equity

share

capital

 

Share premium

 

 

Merger reserve

 

Capital redemption reserve

 

 

Other

reserves

 

 

Retained earnings

 

 

Total

equity

 

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 April 2019

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

 

-

 

-

 

-

 

-

 

25,844

 

25,844

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

-

 

25,844

 

25,844

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

21

53

 

5,979

 

3,343

 

-

 

-

 

-

 

9,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments charge

29

-

 

-

 

-

 

-

 

-

 

5,170

 

5,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax on share options

 

-

 

-

 

-

 

-

 

-

 

1,700

 

1,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share forfeiture receipt

21

-

 

-

 

-

 

-

 

-

 

2,641

 

2,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity dividend

12

-

 

-

 

-

 

-

 

-

 

(5,883)

 

(5,883)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2021

 

4,908

 

267,627

 

9,918

 

3

 

4,489

 

97,037

 

383,982

 

 

 

 

Consolidated Balance Sheet

As at 31 March 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

2021

 

2020

 

 

 

 

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment

Right-of-use assets

 

 

14

15

 

3,706

3,231

 

4,653

4,767

Intangible assets

 

 

16

 

377,663

 

414,505

Investments

 

 

18

 

2,288

 

-

Deferred tax asset

 

 

11

 

7,676

 

6,294

 

 

 

 

 

 

 

 

 

 

 

 

 

394,564

 

430,219

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Inventories

 

 

 

 

123

 

128

Trade and other receivables

 

 

19

 

58,617

 

66,554

Current tax

 

 

 

 

5,778

 

1,803

Cash and short-term deposits

 

 

20

 

21,135

 

27,499

 

 

 

 

 

 

 

 

 

 

 

 

 

85,653

 

95,984

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

480,217

 

526,203

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

 

 

Equity share capital

 

 

21,31

 

4,908

 

4,855

Share premium

 

 

21,31

 

267,627

 

261,648

Merger reserve

 

 

31

 

9,918

 

6,575

Capital redemption reserve

 

 

31

 

3

 

3

Foreign currency translation reserve

 

 

31

 

(16,606)

 

3,953

Retained earnings

 

 

 

 

98,406

 

67,900

 

 

 

 

 

 

 

 

Total equity attributable to equity holders of the parent

 

 

 

 

364,256

 

344,934

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Loans

Lease liabilities

 

 

22

23

 

-

2,286

 

62,139

3,713

Provisions

 

 

25

 

1,010

 

1,016

Deferred revenue

 

 

 

 

545

 

787

Deferred tax liability

 

 

11

 

22,120

 

27,155

 

 

 

 

 

 

 

 

 

 

 

 

 

25,961

 

94,810

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Lease liabilities

 

 

23

 

1,650

 

2,012

Trade and other payables

 

 

24

 

41,067

 

40,641

Deferred revenue

 

 

 

 

42,298

 

37,627

Contingent consideration

 

 

36

 

3,662

 

6,179

Current tax

 

 

 

 

1,323

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

90,000

 

86,459

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

115,961

 

181,269

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

 

 

480,217

 

526,203

                                                                                               

Approved by the Board on 14 June 2021

 

C G Clark - Director

D J Wilson - Director

 

Registered in England number 2415211

 

 

 

 

Company Balance Sheet

As at 31 March 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

2021

 

2020

 

 

 

 

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment

Right-of-use assets

 

 

14

15

 

2,752

1,277

 

3,447

2,098

Intangible assets

 

 

16

 

123,681

 

133,289

Investments

 

 

18

 

309,124

 

303,483

Deferred tax asset

 

 

11

 

4,733

 

3,867

 

 

 

 

 

 

 

 

 

 

 

 

 

441,567

 

446,184

Current assets

 

 

 

 

 

 

 

Inventories

 

 

 

 

120

 

124

Trade and other receivables

 

 

19

 

32,626

 

41,290

Current tax

 

 

 

 

-

 

1,212

Cash and short-term deposits

 

 

20

 

11,947

 

15,031

 

 

 

 

 

 

 

 

 

 

 

 

 

44,693

 

57,657

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

486,260

 

503,841

 

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

 

 

Equity share capital

 

 

21,31

 

4,908

 

4,855

Share premium

 

 

21,31

 

267,627

 

261,648

Merger reserve

 

 

31

 

9,918

 

6,575

Capital redemption reserve

 

 

31

 

3

 

3

Other reserves

 

 

31

 

4,489

 

4,489

Retained earnings

 

 

 

 

97,037

 

67,565

 

 

 

 

 

 

 

 

Total equity attributable to equity holders of the parent

 

 

 

 

383,982

 

345,135

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

External loans

Intercompany loans

Lease liabilities

 

 

22

22

23

 

-

9,825

983

 

62,139

4,156

1,978

Deferred revenue

 

 

 

 

312

 

467

Provisions

 

 

25

 

797

 

843

Deferred tax

 

 

11

 

4,555

 

4,474

 

 

 

 

 

 

 

 

 

 

 

 

 

16,472

 

74,057

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

24

 

49,296

 

47,747

Deferred revenue

 

 

 

 

31,780

 

30,019

Lease liabilities

 

 

23

 

704

 

704

Contingent consideration

 

 

36

 

3,662

 

6,179

Current tax

 

 

 

 

364

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

85,806

 

84,649

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

102,278

 

158,706

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

 

 

486,260

 

503,841

 

During the year the Company made a profit of £25,844,000 (2020: £23,271,000).

 

Approved by the Board on 14 June 2021

 

C G Clark - Director

D J Wilson - Director

 

Registered in England number 2415211

 

 

Consolidated Cash Flow Statement

 

Year ended 31 March 2021

 

 

 

 

 

 

 

 

Note

 

2021

 

2020

 

 

 

£'000

 

£'000

 

 

 

 

 

 

Group profit before tax:

 

 

34,263

 

20,626

 

 

 

 

 

 

Adjustments to reconcile Group profit before tax to net cash flows

 

 

 

 

 

 

 

 

 

 

 

Finance revenue

9

 

(120)

 

(143)

Finance costs

10

 

1,360

 

2,361

Depreciation of plant and equipment

14

 

1,433

 

1,760

Depreciation of right-of-use assets

15

 

1,838

 

1,850

Amortisation of intangible assets

16

 

17,914

 

19,192

Impairment of goodwill

16

 

154

 

-

Loss on disposal of plant and equipment and intangible assets

5

 

-

 

260

Profit on disposal of businesses

35

 

(1,403)

 

-

Fair value adjustment on contingent consideration   

36

 

245

 

971

Share-based payments

29

 

5,170

 

4,541

Decrease in inventories

 

 

6

 

213

Increase in provisions

 

 

88

 

-

Decrease/(increase) in trade and other receivables

 

 

10,028

 

(5,725)

Increase in trade and other payables

 

 

1,655

 

2,592

 

 

 

 

 

 

Cash generated from operations

 

 

72,631

 

48,498

Income tax paid

 

 

(14,205)

 

(6,386)

 

 

 

 

 

 

Net cash generated from operating activities

 

 

58,426

 

42,112

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) investing activities

 

 

 

 

 

 

 

 

 

 

 

Acquisition of subsidiaries, net of cash acquired

36

 

(2,762)

 

(86)

Purchase of plant and equipment

14

 

(455)

 

(1,199)

Purchase of software

16

 

(283)

 

(140)

Proceeds from disposal of plant and equipment

 

 

-

 

5

Net proceeds from disposal of businesses

35

 

5,307

 

-

Interest received

9

 

20

 

143

 

 

 

 

 

 

Net cash flows from/(used in) investing activities

 

 

1,827

 

(1,277)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows used in financing activities

 

 

 

 

 

 

 

 

 

 

 

Finance costs paid

 

 

(1,231)

 

(1,911)

Proceeds from issue of shares

21

 

3,087

 

490

Proceeds from share forfeiture

21

 

2,641

 

-

Repayment of borrowings

22

 

(62,500)

 

(24,914)

Repayment of lease liabilities

23

 

(2,252)

 

(2,043)

Dividends paid to equity shareholders

12

 

(5,883)

 

(5,761)

 

 

 

 

 

 

Net cash flows used in financing activities

 

 

(66,138)

 

(34,139)

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

 

(5,885)

 

6,696

Effect of exchange rates on cash and cash equivalents

 

 

(479)

 

(386)

Cash and cash equivalents at the beginning of the period

 

 

27,499

 

21,189

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

20

 

21,135

 

27,499

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Cash Flow Statement

 

 

Year ended 31 March 2021

               

 

 

 

 

 

 

 

 

Note

 

2021

 

2020

 

 

 

£'000

 

£'000

 

 

 

 

 

 

Company profit before tax:

 

 

28,479

 

24,659

 

 

 

 

 

 

Adjustments to reconcile Company profit before tax to net cash flows

 

 

 

 

 

 

 

 

 

 

 

Finance costs

 

 

1,656

 

2,200

Depreciation of plant and equipment

14

 

911

 

1,214

Depreciation of right-of-use assets

15

 

561

 

675

Amortisation of intangible assets

16

 

4,899

 

5,720

Impairment of goodwill

 

 

6,112

 

-

Loss on disposal of plant and equipment and intangible assets

 

 

-

 

256

Profit on disposal of businesses

 

 

(1,113)

 

-

Fair value adjustment on contingent consideration

36

 

245

 

971

Dividends received recognised within income statement

 

 

(21,855)

 

(16,604)

Share-based payments

29

 

4,341

 

4,271

Decrease in inventories

 

 

4

 

214

Decrease in provisions

 

 

56

 

-

Decrease/(increase) in trade and other receivables

 

 

7,600

 

(4,325)

Increase in trade and other payables

 

 

1,293

 

3,069

 

 

 

 

 

 

Cash generated from operations

 

 

33,189

 

22,320

Income tax paid

 

 

(781)

 

(3,678)

 

 

 

 

 

 

Net cash generated from operating activities

 

 

32,408

 

18,642

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows (used in)/from investing activities

 

 

 

 

 

 

 

 

 

 

 

Acquisition of subsidiaries, net of cash acquired

 

 

(2,762)

 

(86)

Dividends received

 

 

21,855

 

16,604

Purchase of plant and equipment

14

 

(226)

 

(452)

Purchase of software

16

 

(283)

 

(140)

Net proceeds from disposal of businesses

 

 

5,306

 

3

 

 

 

 

 

 

Net cash flows from investing activities

 

 

23,890

 

15,929

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows (used in)/from financing activities

 

 

 

 

 

 

 

 

 

 

 

Finance costs paid

 

 

(1,611)

 

(1,884)

Proceeds from issue of shares

21

 

3,087

 

490

Proceeds from share forfeiture

21

 

2,641

 

-

Proceeds from new borrowings

22

 

5,669

 

4,156

Repayment of borrowings

Repayment of lease liabilities

22

23

 

(62,500)

(785)

 

(23,500)

(832)

Dividends paid to equity shareholders

12

 

(5,883)

 

(5,761)

 

 

 

 

 

 

Net cash flows used in financing activities

 

 

(59,382)

 

(27,331)

 

 

 

 

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

 

(3,084)

 

7,240

Cash and cash equivalents at the beginning of the period

 

 

15,031

 

7,791

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

20

 

11,947

 

15,031

 

 

 

 

 

 

 

 

 

 

 

 

 

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 14 June 2021.

 

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 Company, GB Group plc is the ultimate group company of the consolidated group.

 

The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 March 2021 or 2020 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 2021. Statutory accounts for 2020 have been delivered to the Registrar of Companies, and those for 2021 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 accounting standards in conformity with the requirements of the Companies Act 2006 and with those parts of the Companies Act 2006 applicable to companies reporting under International Accounting Standards.  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 2021 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 2022. Although GBG has a robust budgeting and forecasting process, the continued 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 budget including comparison against external data sources available and a potential downside scenario

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:

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

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

Following the outbreak of the Covid-19 pandemic the market consensus forecast for the year to 31 March 2021 was a decline in revenue of 10.3% (£175 million). The actual performance was significantly ahead of this with revenue of £217.7 million, representing revenue growth of 9.3% (12.3% on an organic constant currency basis).

 

 

 

 

2.  Accounting Policies continued

The Board of Directors are aware that future Covid-19 outbreaks could lead to further economic uncertainty, but the experience in the past year gives enhanced confidence to be able to forecast which of our products and services are positively or negatively impacted by Covid-19 and therefore what steps are needed to react to this. The overall performance has illustrated the relevance and importance of our products and services, even in a time of significant economic decline in many of our key markets.

 

During the pandemic approximately 7% of revenue came from two customers in the United States who provided services directly related to Covid-19. We would not expect this level of revenue to recur in the year to 31 March 2022. Aside from this one-off, GBG does not have a high customer concentration risk with no individual customer generating more than 4% 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. There was a decline in revenue from the financial services sector in Fraud (principally in Asia Pacific) as these contracts are generally larger and more complex in nature and can require onsite installation which was more difficult during the pandemic. However, this was more than offset by the growth in Identity services from the financial services sector.

 

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 we are already seeing growth in these sectors as the pandemic restrictions are lifted.

 

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 further 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 such as with government support loans, 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 a supplier failure to be able to move to an alternative supplier with minimal disruption to customers or to the wider business.

 

Liquidity

 

 

31 March 2021

31 March 2020

Variance

 

 

£'000

£'000

£'000

 

 

 

 

 

Operating cashflow before tax and exceptional items paid (note 37)

 

73,385

49,279

24,106

Adjusted EBITDA (note 37)                                  

 

61,410

51,739

9,671

Cash conversion %

 

119.5%

95.2%

24.3%

 

 

 

 

 

Cash (note 20)

 

21,135

27,499

(6,364)

Loans (excluding unamortised loan fees) (note 22)

 

-

(62,500)

62,500

Net Cash/(Debt)

 

21,135

(35,001)

56,136

 

 

 

 

 

Leverage

 

Positive Cash

0.68

(0.68)

 

 

At 31 March 2021 GBG was in a net cash position of £21.1 million, an improvement of £56.1 million since 31 March 2020. The outstanding RCF loan was fully repaid during the year.

 

During the year to 31 March 2021, GBG's cash conversion improved with an EBITDA to operating cash ratio of 119.5%, an improvement of 24.3% on the prior year. The increase in the cash conversion was partly attributable to cash receipts in the first half of the year related to large multi-year deals where the profit was recognised at the end of the previous financial year. Notwithstanding this, operating cash flows continued to be strong and the Group continually monitors its cash generation and collection.

 

The RCF has a maximum level of £110 million which could be drawn down for working capital purposes if required. The expiry of this facility was extended by one year in January 2021, so this now expires in February 2023 (previously February 2022). 

 

At 31 March 2021 the Group was in a net current liabilities position of £4.3 million (2020: net current assets of £9.5 million). However, within current liabilities is deferred revenue of £42.3 million (2020: £37.6 million) which represents a liability to provide a future service rather than a direct cash liability. Whilst there is a cash cost to providing these services (principally related data costs or employee wages) these costs would be lower than the value of the deferred revenue liability, and will unwind over the course of the year rather than being a liability settled on demand. On this basis the net current liabilities position is not considered to be a risk from a going concern perspective.

 

c)        Board review and challenge of the budget including comparison against external data sources available and a potential downside scenario

In the prior year the uncertainty around the scale, timing and impact of the coronavirus pandemic meant it was impossible to set a meaningful budget. For the current year we have reverted back to the normal budget process using a detailed bottom-up approach which is then subject to review and challenge by the Executive Team and Board of Directors.

 

Management note that analyst's forecasts published after the trading update in April 2021 estimate an overall revenue decline in the year to 31 March 2022 due to the impact of the disposed businesses and one-off revenue linked to the Covid-19 in the US. These estimates range from a decline of 4.9% and growth of 0.2% in the year to 31 March 2022 compared to the prior year, with the consensus position being decline of 3.2% which would be revenue of £210 million on a constant currency basis. The budget for the year to 31 March 2022 is within the range of the analyst estimates.

 

2.  Accounting Policies continued

 

This budget showed continued significant headroom in the covenant compliance tests and sufficient liquidity to maintain operations. The budget model was then adjusted to reflect a realistic downside scenario and under this the covenant compliance and liquidity position did not result in any risk to going concern. Relative to the budget produced by management there have not been any adverse variances in the overall trading performance since the year-end.

 

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 budget 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 Q2 of FY22 it would take a revenue decline of 45% for a covenant breach (interest cover) to occur (31% without any operating expenses savings). This breach would be as at 30 June 2022 although even at this point it would only take an EBITDA increase of £50,000 to remedy this breach.

 

Based on the prior year trading performance, performance in the period since the year end and through reference to external market data a decline of anywhere near 45% is considered by the Directors to be remote. If this became even a 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 occurring, causing a breach of covenants on 30 June 2022 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 2021 level) to increase EBITDA to remedy a covenant breach of £50,000

·              Take similar cash conservation measures to those that were implemented in the early stages of the pandemic in 2020. These included not declaring a final dividend, pay and recruitment freezes and a deferral of director bonus payments

·              Request a delay to UK Corporation Tax, Employment Tax or Sales Tax payments under the HMRC 'Time to Pay' scheme. In the year to 31 March 2021 Corporation Tax payments averaged £200,000 per quarter, Employment Tax payments (including employee taxes) were approximately £1.2 million per month and Sales Tax payments were £2.5 million per quarter

·              Draw down on the £30 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 2022) before returning to covenant compliance the following quarter. The business would still be EBITDA positive on a rolling 12-month basis at this point and the Directors believe they would have a reasonable expectation of achieving a temporary covenant waiver from the banks if needed

·              Raise cash through an equity placing. Under the 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

·              Disposal of part of the business

 

f)         Conclude upon the going concern assumption

Following consideration of the budget 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 Significant accounting policies

 

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

 

Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 March each year.

 

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.  Specifically, the Group controls an investee if, and only if, the Group has:

 

·      Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

·      Exposure, or rights, to variable returns from its involvement with the investee

·      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

·      The Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. 

 

Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

 

Profit or loss and each component of Other Comprehensive Income ('OCI') are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.  When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.  All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

 

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

 

Business Combinations

The Group uses the acquisition method of accounting to account for business combinations of entities not under common control.  The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group.  The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.  Acquisition-related costs are expensed as incurred.  Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

 

Any contingent consideration to be transferred by the acquirer 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 Consolidated Statement of Profit or Loss in those expense categories consistent with the function of the impaired asset.

 

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased.  If such indication exists, the recoverable amount is estimated.  A previously recognised impairment loss is reversed only on assets other than goodwill if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised.  If that is the case, the carrying amount of the asset is increased to its recoverable amount.  That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.  Such reversal is recognised in profit or loss.  After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

 

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 Consolidated Statement of Profit or Loss in the year the item is derecognised.

 

Residual values and estimated remaining lives are reviewed annually.

 

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.

 

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 Consolidated Statement of Profit or Loss.  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

 

 

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 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.

 

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.

 

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 £5,000).  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.

 

 

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.

 

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 Consolidated Statement of Profit or Loss 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.

 

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 group contributory pension scheme.  Payments are made to individual private defined contribution pension arrangements.  Contributions are charged in the Consolidated Statement of Profit or Loss 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 upon which to apply the algorithms. 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 forfeiture is recognised in proportion to the pattern of transactions performed by the customer.                     

 

c)        Rendering of services

Revenue from the rendering of services is recognised over time by reference to the stage of completion. Stage of completion of the specific transaction is assessed on the basis of the actual services provided as a proportion of the total services to be provided. Where the services consist of the delivery of support and maintenance on software licence agreements, it is generally considered to be a separate performance obligation and revenue is recognised on a straight-line basis over the term of the support period.

 

d)        Contract assets and contract liabilities

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

 

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

 

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

 

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

 

e)        Principal versus agent

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

 

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

 

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

 

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

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.

 

 

 

Exceptional Items

The Group presents as exceptional items on the face of the Statement of Profit or Loss 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.

 

Redundancy costs are only classified within exceptional items if they are linked to a reorganisation of part of the business.

 

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 Consolidated Statement of Profit or Loss 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

 

The following standards and amendments were effective for periods beginning on or after 1 January 2020 and as such have been applied in these financial statements. The Group has not early adopted any other standard or interpretation that is issued but not yet effective.

 

Amendments to IFRS 3: Definition of a Business

The amendment to IFRS 3 provides further clarity on the definition of a business when entering into a business combination. It states that to be classified as a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output as well as clarifying that a business can exist without including all of the inputs and processes needed to create outputs. The Group has considered this in the business combinations entered into during the period ended 31 March 2021, and although did not impact the way in which the combination was recognised, could impact future periods should the business enter into further business combinations.

 

The following standards and amendments had no impact on the financial statements of the Group:

 

Amendments to IAS 1 and IAS 8 Definition of Material

Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform

Conceptual Framework for Financial Reporting issued on 29 March 2018

Amendments to IFRS 16 Covid-19 Related Rent Concessions

 

New Accounting Standards and Interpretations Issued but not yet Effective

The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements are disclosed below. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective.

 

Amendments to IAS 1: Classification of Liabilities as Current or Non-current - effective for annual reporting periods beginning on or after 1 January 2023

Reference to the Conceptual Framework - Amendments to IFRS 3 - effective for annual reporting periods beginning on or after 1 January 2022

Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16 - effective for annual reporting periods beginning on or after 1 January 2022

Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37 - effective for annual reporting periods beginning on or after 1 January 2022

IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities - effective for annual reporting periods beginning on or after 1 January 2022

 

None of the amendments are expected to have a significant impact to the Group, however the Group will continue to consider these and any additional amendments, interpretations and new standards to identity potential future impact.

 

2.4 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 and Company tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated earlier in note 2.3.  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 and Company goodwill and the assumptions used to test for impairment are set out in note 17.

 

Impairment of Investments in Subsidiary Undertakings

The Company 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. Refer to note 16 for further details.

 

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.

 

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. In the prior year, due to the Covid-19 pandemic the unprecedented economic uncertainty increased the likelihood of a higher level of ECL, but there was no historical comparative evidence to draw upon to build the impact of this pandemic into the normal ECL model used. The Group responded by calculating an additional level of provision to overlay the normal ECL calculation. This overlay was 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 were expected to see the biggest impact of the pandemic.

 

For the current year this additional overlay has been maintained as, although it is now over 12 months since the pandemic began, the majority of governments have maintained economy support packages throughout this period, such as furlough in the UK. As a result, the past 12 months is not considered to be a fair representation of the potential risk profile for the coming year once these support packages are removed. 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.

 

Deferred Tax Assets (both Judgement and Estimate)

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 £13,705,000 (2020: £15,084,000).  The carrying value of the recognised deferred tax asset at 31 March 2021 was £7,676,000 (2020: £6,294,000) and the unrecognised deferred tax asset at 31 March 2021 was £3,033,000 (2020: £5,123,000).  Further details are contained in note 11.

 

Disclosure of Discontinued Operations

During the year GBG disposed of two businesses, Marketing Services and Employ and Comply. A judgement was made to considered whether the financial results of the disposed businesses should be presented as discontinued operations in accordance with IFRS 5. The assessment was that neither business 'represents a separate major line of business or geographical area of operations' and therefore did not meet the criteria for this classification. This was based on their level of revenue and adjusted operating profit relative to the overall Group.

 

Classification of Investment

As detailed in note 18, during the year the Group made an investment in CredoLab Pte Ltd. Management have had to apply judgement to assess the appropriate accounting treatment for this investment.

 

Under IAS 28 Investments in Associates and Joint Ventures: "If an entity holds, directly or indirectly (e.g. through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the entity holds, directly or indirectly (e.g. through subsidiaries), less than 20 per cent of the voting power of the investee, it is presumed that the entity does not have significant influence, unless such influence can be clearly demonstrated."

 

This investment represents approximately 10% of the shareholding in CredoLab. Under the above guidance this would indicate the investment should be accounted for as a financial asset under IFRS 9 Financial Instruments. However, judgement was required to assess whether the board seat held by GBG gave the Group the power to participate in financial and operating policy decisions. On the basis that this seat is held in an observer capacity only and does not provide a vote on board matters, management has determined that the Group does not have significant influence and therefore the investment has been recognised as a financial asset under IFRS 9.

 

Valuation and Asset Lives of Separately Identifiable Intangible Assets (both judgement and estimate)

In accounting for acquisitions management are required to make judgements in relation to the identification of separately identifiable intangible assets, the methodologies used to fair value these assets and the key inputs used in the models require significant estimation.

 

During the year, the Company acquired HooYu and in valuing the separately identifiable intangible assets made specific judgements as to the appropriate methodology to be used to value the most significant element of the transaction being the technology intangible asset. This has been done on a replacement cost basis which was considered the most appropriate based on the characteristics of the transaction. The most significant estimate within this methodology was the mark-up applied to the historic internally capitalised costs during the development of the technology to equate these to a market participant replacement value. This estimate was based on consideration of the rates GBG pay development contractors against salary averages.

 

3.  Revenue

Revenue disclosed in the Consolidated Statement of Profit or Loss is analysed as follows:

 

 

 

 

 

2021

 

2020

 

£'000

 

£'000

 

 

 

 

Licence

61,350

 

71,543

Transactional

141,278

 

112,079

Services

15,031

 

15,479

Revenue

217,659

 

199,101

 

 

 

 

Finance revenue

120

 

143

Total revenue

217,779

 

199,244

 

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 £4,877,000 (2020: £6,014,000). 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 £37,701,000 (2020: £35,453,000) was included in the opening contract liability.

 

4.  Segmental Information

 

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 (which was disposed in January 2021), 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, as defined in note 37. 

 

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

 

Changes to Segmental Analysis for 31 March 2021 Disclosure

During the year to 31 March 21 the Group implemented a new financial system which has enabled transactions to be analysed differently. As a result, the segmental analysis for the year to 31 March 21 includes changes to the classification of revenue between segments and revenue types when compared to the 31 March 20 analysis. As this analysis was not available for the year to 31 March 20 it has not been possible to restate the comparative period, however an estimate of their impact has been detailed below:

·      Revenue from Location products in VIX Verify have been able to be reclassified from the Identity segment to the Location segment (2020: estimate of £2,700,000 split between Licence - £1,700,000, Transactional - £975,000 and Services - £25,000)

·      Revenue from Location products in the UK have been reclassified between Licence, Transactional and Services revenue. The estimated impact on 2020 revenue is an increase of £590,000 in 2020 Location Licence revenue, £385,000 increase in 2020 Location transactional revenue and £975,000 reduction in 2020 Location services revenue

·      Revenue for professional services in the Asia Pacific Fraud business has previously been bundled with the associated Licence revenue. This element has now been separated and presented within Services revenue (2020: estimate of £5,400,000)

Representation of 31 March 2020 Disclosure

The amendments to the presentation of the segmental information for the year ended 31 March 2020 is due to the evolution in the go-to-market strategy of the Datacare part of the business, and the subsequent change in how this is reported internally. Previously Datacare was included within the Unallocated segment whereas it is now presented in Location. The values that have been represented in the year to 31 March 2020 are as follows: revenue £1,689,000, adjusted operating profit £49,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

Fraud

 

Identity

 

Location

 

Unallocated

Total

Year ended 31 March 2021

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

Licence

19,609

 

4,653

 

37,088

 

-

 

61,350

Transactional

133

 

121,130

 

20,015

 

-

 

141,278

Services

6,749

 

2,302

 

2,567

 

3,413

 

15,031

Total revenue

26,491

 

128,085

 

59,670

 

3,413

 

217,659

Adjusted operating profit

5,332

 

47,746

 

19,472

 

(14,654)

 

57,896

Amortisation of acquired intangibles

(749)

 

(12,295)

 

(4,331)

 

(296)

 

(17,671)

Share-based payments charge

-

 

-

 

-

 

(5,170)

 

(5,170)

Exceptional items

-

 

-

 

-

 

448

 

448

Operating profit

4,583

 

35,451

 

15,141

 

(19,672)

 

35,503

Finance revenue

-

 

-

 

-

 

120

 

120

Finance costs

-

 

-

 

-

 

(1,360)

 

(1,360)

Income tax expense

-

 

-

 

-

 

(7,385)

 

(7,385)

Profit for the year

 

 

 

 

 

 

 

 

26,878

 

Fraud

 

 

Identity

 

Represented

Location

 

Represented

Unallocated

 

Total

Year ended 31 March 2020

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

Licence

33,563

 

7,135

 

30,845

 

-

 

71,543

Transactional

-

 

95,489

 

16,590

 

-

 

112,079

Services

1,943

 

2,784

 

4,045

 

6,707

 

15,479

Total revenue

35,506

 

105,408

 

51,480

 

6,707

 

199,101

Adjusted operating profit

13,444

 

33,626

 

14,601

 

(13,726)

 

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

 

10,602

 

(20,180)

 

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

 

 

 

 

 

 

 

Geographical information

 

Revenues from external customers

 

Non-current assets

 

 

 

 

 

 

 

 

 

2021

 

2020

 

2021

 

2020

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

United Kingdom

77,302

 

87,814

 

123,338

 

126,945

United States of America

78,998

 

52,386

 

223,843

 

259,558

Australia

23,636

 

19,063

 

39,695

 

37,374

Others

37,723

 

39,838

 

12

 

48

 

217,659

 

199,101

 

386,888

 

423,925

 

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:

2021

 

2020

 

£'000

 

£'000

 

 

 

 

Research and development costs recognised as an operating expense

14,970

 

16,821

Other Technology related costs recognised as an operating expense

12,968

 

13,043

Total Technology related costs recognised as an operating expense

27,938

 

29,864

 

 

 

 

Depreciation of property, plant and equipment (note 14)

Depreciation of right-of-use assets (note 15)

1,433

               1,838

 

1,760

     1,850             

Expense relating to short term leases

514

 

447

Expense relating to low value leases

5

 

5

Expected credit losses of trade receivables (note 27)

25

 

2,532

Loss on disposal of plant and equipment

-

 

260

Amortisation of intangible assets (note 16)

17,914

 

19,192

Foreign exchange loss

188

 

69

 

The above information does not include exceptional items which have been disclosed in note 7.

 

6.  Auditor's Remuneration

 

 

 

 

 

 

Restated*

 

2021

 

2020

 

£'000

 

£'000

 

 

 

 

Audit of the financial statements 1

661

 

311

 

 

 

 

Other fees to auditor    -  other assurance services

123

 

72

                                          -  tax advisory services

 

-

 

10

 

784

 

393

1 £273,000 (2020: £208,000) of this relates to the Company.

 

 

 

 

* The Audit of the financial statements for the Company for the year-ended 31 March 2020 has been increased by £49,000 from the amount disclosed in the 2020 Annual Report. This is to reflect amounts paid in respect of the 31 March 2020 audit that were agreed and paid subsequent to the publication of those accounts.

 

 

 

 

7.  Exceptional Items

 

2021

 

2020

 

£'000

 

£'000

 

 

 

 

(a)       Costs associated with team member reorganisations

(441)

 

(555)

(b)      Impairment of goodwill (note 16 & 35)

(154)

 

-

(c)       Acquisition related costs

(862)

 

(26)

(d)      Recognition of payroll tax credit

747

 

-

(e)      Fair value adjustments to contingent consideration (note 36)

(697)

 

(829)

(f)        Foreign exchange movement on contingent consideration (note 36)

452

 

(142)

(g)       Profit on disposal of businesses (note 35)

1,403

 

-

 

448

 

(1,552)

 

(a)       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.

 

(b)      During the year £79,000 (2020: £nil) has been recognised as an impairment expense relating to the goodwill in the e-Ware Interactive cash generating unit, and £75,000 relating to the goodwill in the Transactis cash generating unit. Refer to note 17 for further details.

 

(c)       Acquisition related costs of £862,000 (2020: £26,000) include legal and professional advisor costs directly attributable to the transactions and exclude operating or integration costs relating to an acquired business. Also includes costs which were incurred as part of a potential acquisition. In the current year these costs related to fees in relation to the acquisition of HooYu Investigate and the investment in Credolabs. In the prior year the costs relate to the final acquisition costs relating to the acquisition of Idology Inc. Due to the size and nature of these costs, management consider that they would distort the Group's underlying business performance.

 

(d)      In the first half of the year to 31 March 2021, a previously unrecognised payroll tax credit in the State of Georgia of £747,000 was recognised on the balance sheet, with a corresponding credit being recognised in exceptional items. Previously there was uncertainty over the Group's eligibility to this credit, but this has now been confirmed. As and when the Group receives the benefit of this asset an equivalent amount is due to the sellers of IDology. On this basis the contingent consideration liability was increased by £747,000 with a corresponding exceptional item charge.

 

(e)      Subsequent to the recognition of the additional contingent consideration of £747,000 referred to in (d) above, in December 2020 the Group agreed to settle this liability with the sellers early, in exchange for a reduction of £50,000 in the amount payable. Therefore, the net exceptional cost in the year related to this was £697,000. 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 reflected that the benefit of this DTA is due to the sellers. On 27 March 2020 in the United States the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress and signed into law by President Trump. This Act included 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 had increased. In the year to 31 March 2020 GBG 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 was available). The related increase in the liability to the sellers has been recognised as an exceptional item in the year to 31 March 2020 (£829,000) as it arose outside of the 12-month hindsight period permitted for adjustments to the acquisition accounting. A further agreed increase to the deferred consideration was recognised during the year to 31 March 2021 of £749,000.

 

(f)        The contingent consideration liability is based on the US Dollar value of the losses and deferred tax asset. As a result, the liability was retranslated at the balance sheet date with a  gain of £452,000 (2020: loss £142,000) being treated as an exceptional item.
 

(g)       During the year, the business disposed of its Marketing Services and Employ and Comply businesses. Intangible assets, property plant and equipment, and trading balances were disposed of as part of these transactions and deducted from the proceeds received which has resulted in an overall profit on disposal. The profit recognised on disposal of Employ and Comply is £2,578,000. The loss on disposal of Marketing Services is £1,175,000. Refer to note 35 for further details.

 

The tax impact of the exceptional items was a tax charge of £818,000 (2020: tax deduction of £969,000 which was principally in relation to the increase in the deferred tax asset of £829,000 related to the IDology tax losses).

 

 

 

 

8.  Team Member Costs and Directors' Emoluments

 

Group

 

Company

 

Restated

 

Restated

a) Team Member Costs (including Directors)

2021

 

2020*

 

2021

 

2020*

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Wages and salaries including commission and bonuses

69,301

 

67,946

 

42,362

 

40,313

Social security costs

6,140

 

6,126

 

4,488

 

4,550

Other pension costs

2,799

 

2,770

 

1,509

 

1,495

Share-based payments

5,170

 

4,541

 

4,341

 

4,271

 

83,410

 

81,383

 

52,700

 

50,629

 

* The components of costs included within this note has been expanded in the current year to include share-based payments, bonus costs and commission. As a result, the prior year information has been restated to be consistent.

 

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

 

 

 

Group

 

Company

 

 

2021

 

Restated2020*

 

2021

 

2020

 

 

No.

 

No.

 

No.

 

No.

 

 

 

 

 

 

 

 

 

Technology

 

352

 

355

 

235

 

226

General and administration

 

135

 

120

 

103

 

97

Sales and marketing

 

560

 

547

 

360

 

364

 

 

1,047

 

1,022

 

698

 

687

 

*Categorisation of team members have changed in the year following the implementation of the new finance systems and as such the comparatives have been adjusted to be consistent. The overall total remains the same.

 

b) Directors' Emoluments

2021

 

2020

 

£'000

 

£'000

 

 

 

 

Wages and salaries

1,526

 

1,513

Pension

74

 

74

Bonuses

1,448

 

1,449

 

3,048

 

3,036

 

 

 

 

Aggregate gains made by Directors on the exercise of share options

2,611

 

5,936

 

 

 

 

The remuneration for the highest paid Director was as follows:

 

2021

 

2020

 

£'000

 

£'000

 

 

 

 

Wages and salaries

606

 

607

Bonus

723

 

723

 

1,329

 

1,330

 

 

 

 

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 £88,253 (2020: £90,353). The number of share options granted during the year for the highest paid Director was 173,267 (2020: 206,136) and the number of share options exercised during the year was 241,000 (2020: 200,000).

 

9.  Finance Revenue

 

 

 

 

 

2021

 

2020

 

 

£'000

 

£'000

Bank interest receivable

20

 

143

Interest income on multi-year contracts

100

 

-

 

 

 

 

 

120

 

143

 

10.  Finance Costs

 

2021

 

2020

 

 

£'000

 

£'000

Bank interest payable

957

 

1,911

Interest on long service award

12

 

13

Amortisation of bank loan fees

193

 

192

Lease liability interest

198

 

245

 

 

 

 

 

1,360

 

2,361

 

 

 

 

11.  Taxation

                                                                                                                                                                                                                                                                                                                   

a) Tax on Profit

 

 

 

 

 

The tax charge in the Consolidated Statement of Profit or Loss for the year is as follows:

 

 

 

 

 

2021

 

2020

 

 

£'000

 

£'000

 

Current income tax

 

 

 

 

UK corporation tax on profit for the year

3,841

 

2,760

 

Amounts underprovided/(overprovided) in previous years

(388)

 

120

 

Foreign tax

8,958

 

1,903

 

 

12,411

 

4,783

 

Deferred tax

 

 

 

 

Origination and reversal of temporary differences

(5,217)

 

(2,625)

 

Amounts underprovided in previous years

311

 

876

 

Impact of change in tax rates

(120)

 

528

 

 

(5,026)

 

(1,221)

 

 

 

 

 

 

Tax charge in the Consolidated Statement of Profit or Loss

 

7,385

 

 

3,562

 

 

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:

 

 

 

 

 

 

2021

 

2020

 

 

£'000

 

£'000

 

 

 

 

 

 

Consolidated profit before tax

34,263

 

20,626

 

 

 

 

 

 

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

the UK of 19% (2020: 19%)

 

6,510

 

 

3,919

 

 

 

 

 

 

Effect of:

 

 

 

 

Permanent differences

157

 

347

 

Non-taxable income

-

 

(489)

Rate changes

(100)

 

(1,283)

 

Recognition of previously unrecognised deferred tax assets

(261)

 

-

 

Utilisation of losses

-

 

(14)

 

Disposal of businesses

480

 

-

 

Prior year items

(77)

 

996

 

Research and development tax relief

(69)

 

(880)

 

Patent Box relief

(579)

 

(545)

 

Share option relief

39

 

9

Effect of higher taxes on overseas earnings

1,285

 

1,502

 

Total tax charge reported in the Consolidated Statement of Profit or Loss

 

7,385

 

 

3,562

 

 

The Group is entitled to current year tax relief of £1,316,000 (2020: £811,000), calculated at a tax rate of 19% (2020: 19%), in relation to the statutory deduction available on share options exercised in the year.

 

c) Deferred Tax - Group

Deferred Tax Asset

 

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

                                                                                                                                                                Recognised

 

Unrecognised

 

2021

 

2020

 

2021

 

2020

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Decelerated capital allowances

1,278

 

 1,259

 

-

 

-

Share options

3,112

 

1,848

 

-

 

-

Long service award

273

 

233

 

-

 

-

Accrued bonuses

558

 

522

 

-

 

-

Provision for bad debt

189

 

368

 

-

 

-

Other temporary differences

1,888

 

1,420

 

-

 

-

Leases

228

 

429

 

-

 

-

Capital losses

-

 

-

 

429

 

429

Trading losses

150

 

215

 

410

 

2,866

 

 

 

 

 

 

 

 

 

7,676

 

6,294

 

839

 

3,295

 

 

 

 

 

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

 

2021

 

2020

 

£'000

 

£'000

 

 

 

 

Opening balance - as reported

6,294

 

8,222

IFRS 16 transition adjustment

-

 

326

Opening balance - restated

6,294

 

8,548

 

 

 

 

Acquired on acquisition

-

 

-

Foreign currency adjustments

83

 

11

Origination and reversal of temporary differences

1,299

 

(2,265)

 

 

 

 

 

7,676

 

6,294

 

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 £2,914,000 (2020: £15,084,000) and unrecognised capital losses of £2,257,000 (2020: £2,257,000). Refer to 11e below for details of movement in the year.

 

Deferred Tax Liability

 

The deferred tax liability of the Group is as follows:

 

 

2021

 

2020

 

 

£'000

 

£'000

 

 

 

 

 

 

Intangible assets

21,518

 

26,553

 

Land and buildings

159

 

186

 

Leases

183

 

277

 

Accelerated capital allowances

260

 

139

 

 

 

 

 

 

 

22,120

 

27,155

 

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

 

 

 

2021

 

2020

 

 

£'000

 

£'000

 

 

 

 

 

 

Opening balance

27,155

 

29,548

 

IFRS 16 transition adjustment

-

 

189

 

Opening balance - restated

27,155

 

29,737

 

 

 

 

 

 

Acquisitions

1,000

 

-

 

Foreign currency adjustments

(1,532)

 

713

 

Origination and reversal of temporary differences

(4,398)

 

(3,823)

 

Impact of change in tax rates

(105)

 

528

 

 

 

 

 

 

 

22,120

 

27,155

 

d) Deferred Tax - Company

Deferred Tax Asset

 

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

 

                                                                                                                                                                Recognised

 

Unrecognised

 

2021

 

2020

 

2021

 

2020

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Decelerated capital allowances

1,279

 

1,259

 

-

 

-

Share options

3,041

 

1,839

 

-

 

-

Long service award

84

 

105

 

-

 

-

Provision for bad debt

83

 

308

 

-

 

-

Other temporary differences

101

 

310

 

-

 

-

Leases

-

 

46

 

-

 

-

Capital losses

-

 

-

 

429

 

429

Trading losses

145

 

-

 

405

 

2,866

 

 

 

 

 

 

 

 

 

4,733

 

3,867

 

834

 

3,295

                     

 

 

 

 

 

 

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

 

2021

 

2020

 

£'000

 

£'000

 

 

 

 

Opening balance - as reported

3,867

 

3,094

IFRS 16 transition adjustment

-

 

59

Opening balance - restated

3,867

 

3,153

 

 

 

 

Origination and reversal of temporary differences

866

 

714

 

 

 

 

 

4,733

 

3,867

 

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 £2,894,000 (2020: £15,084,000) and unrecognised capital losses of £2,757,000 (2020: £2,257,000). Refer to 11e below for details of movement in the year.

 

Deferred Tax Liability

 

The deferred tax liability of the Company is as follows:

 

2021

 

2020

 

£'000

 

£'000

 

 

 

 

Intangible assets

4,447

 

4,362

Land and buildings

108

 

112

 

 

 

 

 

4,555

 

4,474

 

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

 

 

2021

 

2020

 

£'000

 

£'000

 

 

 

 

Opening balance

4,474

 

5,020

Origination and reversal of temporary differences

(919)

 

(1,014)

Acquisition

1,000

 

-

Impact of change in tax rates

                               -                      

 

468

 

 

 

 

 

4,555

 

4,474

 

e) Tax Losses

The Group has carried forward trading losses at 31 March 2021 of £2,914,000 (2020: £15,591,000).  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.  The reduction in the trading losses is due to a provisional assessment that 80% of the losses related to the Marketing Services business would no longer be available following the disposal of part of that business (detailed in note 35). This assessment will be finalised as part of the submission of the UK tax return for the year to 31 March 2021.

 

There were also capital losses carried forward at 31 March 2021 of £2,257,000 (2020: £2,257,000), which should be available for offset against future capital gains of the Group to the extent that they arise.

 

f) Change in United States Deferred Tax Rates

The tax rate in applied in the calculation of deferred tax assets and liabilities in the United States has been updated to reflect forecast changes in the effective State tax rate that will apply to these businesses based on the location of customers and business activities. For IDology Inc the rate is 24.9% (2020: 25.2% and for Loqate Inc the rate is 25.8% (2020: 21.0%).

 

g) Future change in United Kingdom Tax Rate

On 3 March 2021 the UK Government announced that effective 1 April 2023 the UK corporation rate will increase from 19% to 25%. As this change had not been substantively enacted at 31 March 2021, UK deferred tax assets and liabilities have continued to be based on a rate of 19%.

 

h) Unremitted earnings

The Group's foreign subsidiaries have net unremitted earnings of £31,150,000 (2020: £26,979,000), resulting in temporary differences of £21,000 (2020: £Nil) that may be payable as withholding tax if dividends were declared. No deferred tax has been provided in respect of these differences since the timing of the reversals can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

 

 

 

 

 

 

 

 

 

 

 

 

12.  Dividends Paid and Proposed

 

 

 

 

 

 

 

2021

£'000

 

2020

£'000

 

 

 

 

 

 

 

 

 

Declared and paid during the year

 

 

 

 

 

 

 

 

Interim dividend for FY21 paid in January 2021: 3.00p (final dividend for FY19 paid in August 2019: 2.99p)

 

 

 

 

 

5,885

 

5,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Final dividend for 2021: 3.40p (2020: 0p)

 

 

 

 

 

6,674

 

-

 

 

 

 

 

 

 

 

 

£2,000 (2020: £21,000)  was received during the year relating to dividends paid on forfeited shares. The total net cash impact of dividends during the year was therefore £5,883,000 (2020: £5,761,000).

 

 

13.  Earnings Per Ordinary Share from Continuing Operations

 

Basic

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

 

 

2021

pence per

share

 

2021

£'000

 

2020

pence per

share

 

2020

£'000

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders of the Company

 

13.8

 

26,878

 

8.8

 

17,064

 

 

 

 

 

 

 

 

 

 

Diluted

Diluted earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders from continuing operations 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.

 

 

 

 

 

2021

 

2020

 

 

No.

 

No.

 

 

 

 

 

Basic weighted average number of shares in issue

 

195,224,730

 

193,630,621

Dilutive effect of share options

 

3,281,173

 

3,144,641

Diluted weighted average number of shares in issue

 

198,505,903

 

196,775,262

 

 

 

 

2021

pence per

share

 

2021

£'000

 

2020

pence per

share

 

2020

£'000

 

 

 

 

 

 

 

 

 

Profit attributable to equity holders of the Company from continuing operations

 

13.5

 

26,878

 

8.7

 

17,064

 

 

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.

 

 

 

 

2021

£'000

Basic

2021

pence per share

 

Diluted

2021

pence per

share

 

 

 

 

2020

£'000

Basic

2020

pence per share

 

Diluted

2020

pence per

share

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

57,896

29.7

 

29.2

 

 

47,945

24.8

 

24.4

 

Less net finance costs

(1,240)

(0.6)

 

(0.6)

 

 

(2,218)

(1.1)

 

(1.1)

 

Less tax

(7,385)

(3.9)

 

(3.8)

 

 

(3,562)

(1.9)

 

(1.9)

 

Adjusted earnings

49,271

25.2

 

24.8

 

 

42,165

21.8

 

21.4

 

 

 

14.  Property, Plant and Equipment

 

Group

 

 

 

 

 

 

 

 

 

 

Property

 

Plant and equipment

 

 

Total

 

 

 

£'000

 

£'000

 

£'000

Cost

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

Additions

 

 

-

 

455

 

455

Disposals (other than sale of businesses)

 

 

-

 

(145)

 

(145)

Sale of business disposals

 

 

-

 

(514)

 

(514)

Foreign currency adjustment

 

 

-

 

(46)

 

(46)

At 31 March 2021

 

 

1,251

 

8,969

 

10,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

Provided during the year

 

 

19

 

                 1,414

 

1,433

Disposals (other than sale of businesses)

 

 

-

 

(145)

 

(145)

Sale of business disposals

 

 

-

 

(504)

 

(504)

Foreign currency adjustment

 

 

-

 

                    (87)

 

(87)

At 31 March 2021

 

 

80

 

6,434

 

6,514

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 March 2021

 

 

1,171

 

2,535

 

3,706

At 31 March 2020

 

 

1,190

 

3,463

 

4,653

At 1 April 2019

 

 

1,209

 

3,606

 

4,815

 

Company

 

 

 

Property

 

Plant and equipment

 

 

Total

 

 

 

£'000

 

£'000

 

£'000

Cost

 

 

 

 

 

 

 

At 1 April 2019

 

 

1,233

 

6,139

 

7,372

Additions

 

 

-

 

858

 

858

Disposals

 

 

-

 

(872)

 

(872)

At 31 March 2020

 

 

1,233

 

6,125

 

7,358

 

 

 

 

 

 

 

 

Additions

 

 

-

 

226

 

226

Disposals (other than sale of businesses)

 

 

-

 

   (145)

 

(145)

Sale of business disposals

 

 

-

 

(514)

 

(514)

At 31 March 2021

 

 

1,233

 

5,692

 

6,925

 

 

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

 

 

At 1 April 2019

 

 

24

 

3,545

 

3,569

Provided during the year

Disposals

 

 

19

-

 

1,195

(872)

 

1,214

(872)

At 31 March 2020

 

 

43

 

3,868

 

3,911

 

 

 

 

 

 

 

 

Provided during the year

 

 

11

 

900

 

               911

Disposals (other than sale of businesses)

 

 

-

 

(145)

 

(145)

Sale of business disposals

 

 

-

 

(504)

 

(504)

At 31 March 2021

 

 

54

 

4,119

 

4,173

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 March 2021

 

 

1,179

 

1,573

 

2,752

At 31 March 2020

 

 

1,190

 

2,257

 

3,447

At 1 April 2019

 

 

1,209

 

2,594

 

3,803

 

 

 

 

 

 

 

15. Right-of-use assets

 

Group

 

 

 

 

Right of use assets

£'000

 

 

Total

£'000

Cost

 

 

 

 

 

 

 

At 1 April 2019

 

 

 

 

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

 

 

 

 

 

 

 

 

Additions

 

 

 

 

504

 

504

Disposals (other than sale of business)

 

 

 

 

(912)

 

(912)

Sale of business disposals

 

 

 

 

(704)

 

(704)

Foreign currency adjustment

 

 

 

 

(91)

 

(91)

At 31 March 2021

 

 

 

 

8,914

 

8,914

 

 

 

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

 

 

At 1 April 2019

 

 

 

 

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

 

 

 

 

 

 

 

 

Provided during the year

 

 

 

 

1,838

 

1,838

Disposals (other than sale of businesses)

 

 

 

 

(910)

 

(910)

Sale of business disposals

 

 

 

 

(444)

 

(444)

Foreign currency adjustment

 

 

 

 

(151)

 

(151)

At 31 March 2021

 

 

 

 

5,683

 

5,683

 

 

Net book value

 

 

 

 

 

 

 

At 31 March 2021

 

 

 

 

3,231

 

3,231

At 31 March 2020

 

 

 

 

4,767

 

4,767

At 1 April 2019

 

 

 

 

5,166

 

5,166

 

Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Right of use assets

£'000

 

 

Total

£'000

Cost

 

 

 

 

 

 

 

At 1 April 2019

 

 

 

 

4,691

 

4,691

At 31 March 2020

 

 

 

 

4,691

 

            4,691

 

 

 

 

 

 

 

 

Disposals (other than sale of businesses)

 

 

 

 

(781)

 

(781)

Sale of business disposals

 

 

 

 

(704)

 

             (704)

At 31 March 2021

 

 

 

 

3,206

 

            3,206

 

 

 

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

 

 

At 1 April 2019

 

 

 

 

1,918

 

1,918

Provided during the year

 

 

 

 

675

 

675

At 31 March 2020

 

 

 

 

2,593

 

2,593

 

 

 

 

 

 

 

 

Provided during the year

 

 

 

 

561

 

561

Disposals (other than businesses)

 

 

 

 

(781)

 

(781)

Sale of business disposals

 

 

 

 

(444)

 

(444)

At 31 March 2021

 

 

 

 

1,929

 

1,929

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 March 2021

 

 

 

 

1,277

 

1,277

At 31 March 2020

 

 

 

 

2,098

 

2,098

At 1 April 2019

 

 

 

 

2,773

 

2,773

 

The underlying class of assets and their net book values are leasehold property Group £3,216,000 (2020: £4,760,000), Company £1,277,000 (2020: £2,093,000) and equipment Group £15,000 (2020: £7,000) Company £nil (2020: £5,000).
 

 

16.  Intangible Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

 

Customer

relationships

£'000

 

 

Software technology

£'000

 

Non-complete clauses

£'000

 

Total acquired intangibles

£'000

 

 

 

Goodwill

£'000

 

 

Purchased

software

£'000

 

Internally developed software

£'000

 

 

Total

£'000

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 2019

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency adjustment

(5,577)

 

(1,400)

 

(434)

 

(7,411)

 

(14,369)

 

(2)

 

-

 

(21,782)

Additions - business combinations (note 35)

-

 

4,620

 

645

 

5,265

 

141

 

-

 

-

 

5,406

Additions - purchased software

-

 

-

 

-

 

-

 

-

 

283

 

-

 

283

Disposals (other than sale of businesses)

-

 

-

 

-

 

-

 

-

 

(705)

 

-

 

(705)

Sale of business disposals

(4,842)

 

(1,446)

 

-

 

(6,288)

 

(2,529)

 

-

 

-

 

(8,817)

At 31 March 2021

109,716

 

34,949

 

5,088

 

149,753

 

286,505

 

1,754

 

1,212

 

439,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency adjustment

(783)

 

(391)

 

(138)

 

(1,312)

 

-

 

(3)

 

-

 

(1,315)

Amortisation during the year

11,682

 

5,070

 

919

 

17,671

 

-

 

243

 

-

 

17,914

Impairment

-

 

-

 

-

 

-

 

154

 

-

 

-

 

154

Disposals (other than sale of businesses)

-

 

-

 

-

 

-

 

-

 

(705)

 

-

 

(705)

Sale of business disposals

(3,375)

 

(1,446)

 

-

 

(4,821)

 

-

 

-

 

-

 

(4,821)

At 31 March 2021

36,348

 

20,304

 

2,206

 

58,858

 

      154

 

1,337

 

1,212

 

61,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2021

73,368

 

14,645

 

2,882

 

90,895

 

286,351

 

417

 

-

 

377,663

At 31 March 2020

91,311

 

16,104

 

3,452

 

110,867

 

303,262

 

376

 

-

 

414,505

At 1 April 2019

101,390

 

21,257

 

4,330

 

126,977

 

298,032

 

615

 

22

 

425,646

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16.  Intangible Assets continued

 

 

Carrying Value of Customer Relationship

 

Remaining Amortisation Period

 

£'000

 

Years

 

 

 

 

Data Discoveries Holdings Limited

9

 

0.25

Capscan Parent Limited

275

 

0.58

DecTech Solutions Pty Ltd

1,321

 

3.08

CDMS Limited

267

 

3.58

Loqate Inc

844

 

4.08

ID Scan Biometrics Limited

2,057

 

5.25

Postcode Anywhere (Holdings) Limited

15,126

 

6.08

VIX Verify Global Pty Limited

5,550

 

7.50

IDology Inc

47,919

 

7.83

 

73,368

 

 

 

 

 

 

 

 

 

 

 

Goodwill arose on the acquisition of GB Mailing Systems Limited, e-Ware Interactive Limited, Data Discoveries Holdings Limited, Capscan Parent Limited, DecTech Solutions Pty Ltd, CDMS Limited, Loqate Inc., ID Scan Biometrics Limited, Postcode Anywhere (Holdings) Limited, VIX Verify Global Pty Limited, IDology Inc and Investigate 2020 Limited. Under IFRS, goodwill is not amortised and is tested annually for impairment (note 17).

 

The impairment of £154,000 is in respect of:

·      £75,000 for the Transactis CGU. Following the disposal of part of the Marketing Services business detailed in note 35, the future cashflows from the remaining part of the Marketing Services business were not sufficient to support the carrying value of the Acquired Goodwill.

·      £79,000 for the e-Ware Interactive CGU. As detailed in the 2020 Annual Report, the remaining value in use was based on a single remaining customer from that acquisition. During the current year this customer cancelled their contract and as a result the full amount of goodwill in the Group was impaired.

 

 

16.  Intangible Assets continued

 

Company

 

Customer

relationships

£'000

 

Software technology

£'000

 

Non-complete clauses

£'000

 

Total acquired intangibles

£'000

 

 

 

Goodwill

£'000

 

 

Purchased

software

£'000

 

Internally developed software

£'000

 

 

 

Total

£'000

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 2019

26,078

 

7,818

 

461

 

34,357

 

110,115

 

2,198

 

2,353

 

149,023

Additions - purchased software

-

 

-

 

-

 

-

 

-

 

183

 

-

 

183

Hive-up adjustment1

(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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions - business combinations

-

 

4,620

 

645

 

5,265

 

141

 

-

 

-

 

5,406

Additions- purchased software

-

 

-

 

-

 

-

 

-

 

283

 

-

 

283

Disposals (other than sale of businesses)

-

 

-

 

-

 

-

 

-

 

(705)

 

-

 

(705)

Sale of business disposals

-

 

-

 

-

 

-

 

(4,286)

 

-

 

-

 

(4,286)

At 31 March 2021

26,024

 

12,438

 

912

 

39,374

 

105,970

 

1,700

 

1,794

 

148,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Amortisation during the year

2,878

 

1,715

 

64

 

4,657

 

 

 

242

 

-

 

4,899

Impairment

-

 

-

 

-

 

-

 

6,112

 

-

 

-

 

6,112

Disposals (other than sale of businesses)

-

 

-

 

-

 

-

 

-

 

(705)

 

-

 

(705)

At 31 March 2021

8,841

 

6,806

 

321

 

15,968

 

6,112

 

1,283

 

1,794

 

25,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2021

17,183

 

5,632

 

591

 

23,406

 

99,858

 

417

 

-

 

123,681

At 31 March 2020

20,061

 

2,727

 

10

 

22,798

 

110,115

 

376

 

-

 

133,289

At 1 April 2019

23,095

 

5,123

 

172

 

28,390

 

110,115

 

623

 

11

 

139,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 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.

 

 

Carrying Value of Customer Relationship

 

Remaining Amortisation Period

 

£'000

 

Years

 

 

 

 

ID Scan Biometrics Limited

2,057

 

5.25

Postcode Anywhere (Holdings) Limited

15,126

 

6.08

 

17,183

 

 

 

 

 

 

 

Goodwill arose on the acquisition of ID Scan Biometrics Limited,  Postcode Anywhere (Holdings) Limited and Investigate 2020 Limited.  Under IFRS, goodwill is not amortised and is tested annually for impairment (note 17).

 

The impairment of £6,112,000 is in respect of:

·      £6,052,000 for the Transactis CGU. Following the disposal of part of the Marketing Services business detailed in note 35, the future cashflows from the remaining part of the Marketing Services business were not sufficient to support the carrying value of the Acquired Goodwill.

·      £60,000 for the e-Ware Interactive CGU. As detailed in the 2020 Annual Report, the remaining value in use was based on a single remaining customer from that acquisition. During the current year this customer cancelled their contract and as a result the full amount of goodwill in the Company was impaired.

 

 

 

 

17.  Impairment Testing of Goodwill and Acquired Intangible Assets

Goodwill and intangible assets acquired through business combinations has been allocated for impairment testing purposes to nine 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 and acquired intangibles arising through business combinations made during the year they are tested for impairment no later than at the end of the year.

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

2020

Group

Goodwill

 

Acquired Intangibles

 

Total

 

Goodwill

 

Acquired Intangibles

 

Total

 

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fraud Unit

3,181

 

4,990

 

8,171

 

3,040

 

47

 

3,087

 

Identity Unit

35,058

 

2,056

 

37,114

 

 37,586

 

3,374

 

40,960

 

Location Unit

53,992

 

16,643

 

70,635

 

53,992

 

20,758

 

74,750

 

CAFS Unit

14,461

 

1,321

 

15,782

 

12,922

 

1,564

 

14,486

 

Loqate Unit

7,002

 

844

 

7,846

 

7,731

 

1,165

 

8,896

 

VIX Verify Unit

15,859

 

6,118

 

21,977

 

 14,171

 

6,345

 

20,516

 

IDology Unit

156,371

 

58,656

 

215,027

 

 173,239

 

75,958

 

249,197

 

e-Ware Interactive Unit

-

 

-

 

-

 

 79

 

-

 

79

 

Transactis Unit

427

 

267

 

694

 

 502

 

1,656

 

2,158

 

 

286,351

 

90,895

 

377,246

 

303,262

 

110,867

 

414,129

 

                               

 

 

Company

2021

 

2020

 

Goodwill

 

Acquired Intangibles

 

Investments*

 

Total

 

Goodwill

 

Acquired Intangibles

 

Investments*

 

Total

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fraud Unit

 4,796

 

 4,980

 

 3,506

 

13,282

 

 4,654

 

 -  

 

 153

 

 4,807

Identity Unit

 35,082

 

 2,056

 

7,745

 

44,883

 

 39,368

 

 2,786

 

 7,745

 

 49,899

Location Unit

 59,286

 

 16,370

 

 14,928  

 

 90,584

 

 59,286

 

 20,012

 

 14,928  

 

 94,226

CAFS Unit

 -  

 

 -  

 

 13,868

 

 13,868

 

 -  

 

 -  

 

 13,868

 

 13,868

Loqate Unit

 -  

 

 -  

 

 5,188

 

 5,188

 

 -  

 

 -  

 

 5,188

 

 5,188

VIX Verify Unit

 -  

 

 -  

 

 20,639

 

 20,639

 

 -  

 

 -  

 

 20,639

 

 20,639

IDology Unit

 -  

 

 -  

 

 240,962

 

 240,962

 

 -  

 

 -  

 

 240,962

 

 240,962

e-Ware Interactive Unit

 -  

 

 -  

 

 -  

 

 -  

 

 60

 

 -  

 

 -  

 

 60

Transactis Unit

 694

 

 -  

 

 -  

 

 694

 

 6,747

 

 -  

 

 -  

 

 6,747

 

99,858

 

23,406

 

306,836

 

430,100

 

110,115

 

22,798

 

303,483

 

436,396

 

* Investments are presented net of £2,288,000 (2020: £Nil) of equity investments held at Fair Value through Other Comprehensive Income.

 

 

17.  Impairment Testing of Goodwill continued

 

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 - 1.9%; USA - 2.2%; Australia - 3.0% (2020: 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.

 

 

2021

 

2020

 

 

Pre-tax

Discount rate

 

Growth rate

(in perpetuity)

 

Pre-tax

 Discount rate

 

Growth rate

(in perpetuity)

 

%

 

%

 

%

 

%

 

 

 

 

 

 

 

 

Fraud Unit

11.1%

 

1.9%

 

10.7%

 

1.8%

Identity Unit

11.1%

 

1.9%

 

10.7%

 

1.8%

Location Unit

11.1%

 

1.9%

 

10.7%

 

1.8%

CAFs Unit

13.7%

 

3.0%

 

14.3%

 

2.5%

Loqate Unit

12.0%

 

2.2%

 

12.8%

 

1.8%

VIX Verify Unit

13.7%

 

3.0%

 

14.3%

 

2.5%

Idology Unit

12.0%

 

2.2%

 

12.8%

 

1.8%

Transactis Unit

11.1%

 

-

 

10.7%

 

-

 

The sensitivity analysis below is related to the Group. Information on the sensitivities for the Company have been included in instances where there is either an impairment or where a reasonably possible change in assumptions could result in an impairment.

 

In the case of the Fraud CGU, the annual impairment review as at 31 March 2021 indicated that the recoverable amount exceeded the carrying value of the CGU by £56,117,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:

·      an absolute increase of 64.1% in the pre-tax weighted average cost of capital from 11.1% to 75.2%; or

·      a reduction of 87% in the forecast profit margins; and

In the case of the Identity CGU, the annual impairment review as at 31 March 2021 indicated that the recoverable amount exceeded the carrying value of the CGU by £148,690,000. The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:

·      an absolute increase of 35.8% in the pre-tax weighted average cost of capital from 11.1% to 46.9%; or

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

In the case of the Location CGU, the annual impairment review as at 31 March 2021 indicated that the recoverable amount exceeded the carrying value of the CGU by £203,725,000.  The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:

·      an absolute increase of 25.5% in the pre-tax weighted average cost of capital from 11.1% to 36.6%; or

·      a reduction of 74% in the forecast profit margins.  

 

In the case of CAFs CGU, the annual impairment review as at 31 March 2021 indicated that the recoverable amount exceeded the carrying value of the CGU by £14,976,000.  The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:

·      an absolute increase of 8.7% in the pre-tax weighted average cost of capital from 13.7% to 22.4%; or

·      an increase in the GBP/AUD exchange rate from 1.79 to 3.49; or

·      a reduction of 49% in the forecast profit margins.

In the case of Loqate CGU, the annual impairment review as at 31 March 2021 indicated that the recoverable amount exceeded the carrying value of the CGU by £50,085,000.  The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:

·      an absolute increase of 67.4% in the pre-tax weighted average cost of capital from 12.0% to 79.4%; or

·      an increase in the GBP/USD exchange rate from 1.36 to 10.04; or

·      a reduction of 86% in the forecast profit margins.

In the case of the VIX Verify CGU, the annual impairment review as at 31 March 2021 indicated that the recoverable amount exceeded the carrying value of the CGU by £22,629,000.  The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:

·      an absolute increase of 10.9% in the pre-tax weighted average cost of capital from 13.7% to 24.6%; or

·      an increase in the GBP/AUD exchange rate from 1.79 to 3.63; or

·      a reduction of 51% in the forecast profit margins.

                       

In the case of the IDology CGU, the annual impairment review as at 31 March 2021 indicated that the recoverable amount exceeded the carrying value of the CGU by £57,487,000.  The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:

·      an absolute increase of 2.5% in the pre-tax weighted average cost of capital from 12.0% to 14.5% (which is considered reasonably possible); or

·      an increase in the GBP/USD exchange rate from 1.36 to 1.72; or

·      a reduction of 21% in the forecast profit margins.  

The carrying value of the IDology CGU in the Company is £25,935,000 higher than in the Group and therefore the headroom in the Company is £31,552,000. The sensitivities, which result in the recoverable amount equalling the carrying value in the Company, can be summarised as follows:

·      an absolute increase of 1.2% in the pre-tax weighted average cost of capital from 12.0% to 13.2% (which is considered reasonably possible); or

an increase in the GBP/USD exchange rate from 1.36 to 1.54; or

a reduction of 12% in the forecast profit margins.

In the case of the Transactis CGU, this originated with the acquisition of CDMS Limited which formed part of the Marketing Services business that was disposed during the year. Part of the intangible assets within the CGU were disposed of and the remaining goodwill and intangibles were subject to an impairment review. Due to the disposal of a number of contracts impairment review as at 31 March 2021 indicated that the recoverable amount based on value in use exceeded the carrying value of the CGU in the Group by £75,000, based on a discount rate of 11.1%. This was therefore recorded as an impairment which has been allocated against the goodwill balance of the CGU. Following the impairment there is no headroom and therefore a reduction in the future cashflows would result in a further impairment.

 

An impairment of £6,052,000 has been recorded in the Company in respect of the Transactis CGU on the same basis as for the Group. The difference in value is due to the previous amortisation of the intangible assets in the Group which have reduced the carrying value, whereas in the Company accounts the carrying value is in goodwill which is not amortised.

 

In the case of the e-Ware Interactive CGU, as detailed in the 2020 Annual Report, the remaining value in use was based on a single remaining customer from that acquisition. During the current year this customer cancelled their contract and as a result the full amount of goodwill (£79,000) was impaired in the Group. The carrying value of £60,000 in the Company was also fully impaired.

 

Based on the impairment reviews performed, with the exception of the Transactis CGU and e-Ware Interactive CGU , no impairment has been identified.

 

18.  Investments

 

Group

2021

£'000

 

2020

£'000

Cost

 

 

 

At 1 April

-

 

-

Acquisition of investment1

2,288

 

-

At 31 March

2,288

 

-

 

 

Company

2021

£'000

 

2020

£'000

Cost

 

 

 

At 1 April

305,947

 

305,940

Acquisition of subsidiary undertakings2

3,353

 

7

Addition1

2,288

 

-

At 31 March

311,588

 

305,947

 

 

 

 

Provision for impairment

 

 

 

At 1 April

2,464

 

2,464

At 31 March

2,464

 

2,464

 

 

 

 

Net book value

 

 

 

At 31 March

309,124

 

303,483

 

1 During the year an investment was made into CredoLab Pte Ltd by the Group (and Company) and on initial recognition the Group (and Company) have elected to designate the equity instrument as Fair Value through Other Comprehensive Income

 

2 See note 35 for detail of business combinations in the period

 

 

 

 

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:

 

 

 

Name of company

Proportion of voting rights and shares held

 

 

Country of incorporation

 

 

 

Registered office address

 

 

 

 

Capscan Parent Limited

100%

United Kingdom

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

Capscan Limited 1

100%

United Kingdom

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

Data Discoveries Holdings Limited

100%

United Kingdom

25 Bothwell Street, 2nd Floor, Glasgow, G2 6NL

Data Discoveries Limited 1

100%

United Kingdom

25 Bothwell Street, 2nd Floor, Glasgow, G2 6NL

Managed Analytics Limited 1

100%

United Kingdom

25 Bothwell Street, 2nd Floor, Glasgow, G2 6NL

e-Ware Interactive Limited

100%

United Kingdom

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

GB Mailing Systems Limited

100%

United Kingdom

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

Citizensafe Limited

100%

United Kingdom

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

Farebase Limited

100%

United Kingdom

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

TMG.tv Limited

100%

United Kingdom

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

CRD (UK) Limited

100%

United Kingdom

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

Postcode Anywhere (Holdings) Limited

100%

United Kingdom

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

Postcode Anywhere (Europe) Limited

100%

United Kingdom

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

Postcode Anywhere (North America) Limited

100%

United Kingdom

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

GBG (Australia) Holding Pty Ltd

100%

Australia

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

GBG (Australia) Pty Ltd 1

100%

Australia

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

VIX Verify Global Pty Ltd1

100%

Australia

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

GBG (Malaysia) Sdn Bhd1

100%

Malaysia

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

GBG (Europe) SL1

100%

Spain

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

迪安科1

100%

China

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

Loqate Inc.

100%

United States

805 Veterans Blvd Ste 305, Redwood City CA 94063

Loqate Limited 1

100%

United Kingdom

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

IDology Inc.

100%

United States

900 Old Roswell Lakes, Parkway, Suite 310, 30076

ID Scan Biometrics Limited

100%

United Kingdom

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

IDscan Research Bilisim Teknolojileri Sanayi Ve Ticaret Limited Sirketi

100%

Turkey

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

UAB IDscan Biometrics R&D

100%

Lithuania

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

Transactis Limited 1

100%

United Kingdom

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

Inkfish Limited1

100%

United Kingdom

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

GBG ANZ Pty Ltd1

100%

Australia

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

GreenID Limited1

100%

New Zealand

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

Mastersoft Group Pty Ltd1