REG - GB Group PLC - Annual Results for the Year Ended 31 March 2017 <Origin Href="QuoteRef">GBGP.L</Origin> - Part 5

GBAnnouncement

06/06/2017 07:06

- Part 5: For the preceding part double click  ID:nRSF1989Hd 

Net cash acquired with the subsidiary (included in cash flows from investing activities)    1,186                                      
 Cash paid                                                                                   (37,000)                                   
 Net cash outflow                                                                            (35,301)                                   
 
 
The fair values above contain certain provisional amounts which will be finalised no later than one year after the date of
acquisition.  Provisional amounts have been included at 31 March 2017 as a consequence of the timing and complexity of the
acquisition. 
 
The fair value of the acquired trade receivables amounts to £2,200,000. The gross amount of trade receivables is
£2,211,000. None of the trade receivables have been impaired and it is expected that the full contractual amounts can be
collected. 
 
The goodwill recognised above is attributed to intangible assets that cannot be individually separated and reliably
measured from IDscan due to their nature.  These items include the expected value of synergies and an assembled workforce. 
None of the goodwill is expected to be deductible for income tax purposes. 
 
The transaction costs of £513,000 associated with this acquisition have been expensed and are included in exceptional items
in the Consolidated Statement of Comprehensive Income and are part of operating cash flows in the Cash Flow Statement. 
 
From the date of acquisition, IDscan has contributed £6,076,000 of revenue and operating profits of £1,587,000 to the
Group.  If the combination had taken place at the beginning of the year, the Group revenue and operating profits would have
been £89,514,000 and £10,984,000, respectively. 
 
The fair values reported in the Interim Report were provisional due to the ongoing determination of the fair value of
certain assets.  As a consequence of the finalisation of these values, the identifiable net assets at fair value has
reduced by £39,000 compared to that previously reported with a corresponding increase in the amount of goodwill. 
 
Contingent Consideration - IDscan 
 
As part of the share sale and purchase agreement, a contingent consideration amount of up to £8,000,000 has been agreed.
This payment is subject to certain future revenue and EBITDA targets between 12 and 18 months from completion date. The
obligation has been classed as a liability in accordance with the provisions of IAS 32. 
 
At the acquisition date the discounted fair value of the contingent consideration was estimated at £6,668,000 having been
determined from management's estimates of the range of outcomes and their respective likelihoods. At 31 March 2017, the
value of the contingent consideration after partial unwinding of the discounting was £7,122,000. Adjustments to the fair
value of the contingent consideration are made in the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised)
Business Combinations. 
 
Contingent Consideration - DecTech 
 
During the period ending 31 March 2017, final settlement of AUS$2,000,000 (£1,026,000) was made relating to the second
tranche of the contingent consideration from the acquisition of DecTech. 
 
Acquisitions in the Year Ended 31 March 2016 
 
Group 
 
Acquisition of Loqate Inc. 
 
On 27 April 2015, the Group acquired additional shares in Loqate Inc. ('Loqate') taking its shareholding to 100% of the
voting shares. Loqate is an unlisted company based in the United States of America and is a leading provider of global
location intelligence data and technology.  The Company acquired Loqate to bring together all the data that sits behind its
address and identity verification solutions into one common global platform - making for a seamless integration of
registration, on-boarding and identity checking processes. It will also further support GBG's expansion by allowing access
to the North American market through Loqate's significant partnerships with some of the world's largest software companies.
 The Consolidated Statement of Comprehensive Income includes the results of Loqate for the eleven month period from the
acquisition date for the 2016 financial year. 
 
The fair value of the identifiable assets and liabilities of Loqate as at the date of acquisition was: 
 
                                                                                             Fair value recognised on acquisition£'000  
 Assets                                                                                                                                 
 Technology intellectual property                                                            756                                        
 Customer relationships                                                                      1,912                                      
 Non-compete agreements                                                                      63                                         
 Plant and equipment                                                                         72                                         
 Internally developed software                                                               18                                         
 Trade and other receivables                                                                 1,106                                      
 Cash                                                                                        667                                        
 Trade and other payables                                                                    (2,559)                                    
 Deferred tax liabilities                                                                    (929)                                      
 Total identifiable net assets at fair value                                                 1,106                                      
 Goodwill arising on acquisition                                                             6,502                                      
 Total purchase consideration transferred                                                    7,608                                      
                                                                                                                                        
 Purchase consideration:                                                                                                                
 Cash                                                                                        8,641                                      
 Value of original equity stake                                                              247                                        
 Contingent consideration adjustment                                                         (1,280)                                    
 Total purchase consideration                                                                7,608                                      
                                                                                                                                        
 Analysis of cash flows on acquisition:                                                                                                 
 Transaction costs of the acquisition (included in cash flows from operating activities)     (108)                                      
 Net cash acquired with the subsidiary (included in cash flows from investing activities)    667                                        
 Cash paid                                                                                   (8,641)                                    
 Net cash outflow                                                                            (8,082)                                    
 
 
The fair value of the acquired trade receivables amounts to £627,000.  The gross amount of trade receivables is £694,000. 
None of the trade receivables have been impaired and it is expected that the full contractual amounts can be collected. 
 
The goodwill recognised above is attributed to intangible assets that cannot be individually separated and reliably
measured from Loqate due to their nature.  These items include the expected value of synergies and an assembled workforce. 
None of the goodwill is expected to be deductible for income tax purposes. 
 
The transaction costs of £108,000 associated with this acquisition have been expensed and are included in exceptional items
in the Consolidated Statement of Comprehensive Income and are part of operating cash flows in the Cash Flow Statement. 
 
From the date of acquisition, Loqate has contributed £4,140,000 of revenue and operating profits of £296,000 to the Group. 
If the combination had taken place at the beginning of the year, the Group revenue and operating profits would have been
£73,672,000 and £9,335,000, respectively. 
 
Contingent Consideration - Loqate 
 
As part of the share sale and purchase agreement, a purchase price adjustment mechanism was agreed which at the acquisition
date had a fair value of a purchase price reduction of £1,280,000 having been determined from management's estimates of the
ranges and their respective likelihoods.  The contingent consideration adjustment was determined and settled with the
sellers before the year end resulting in a repayment of £1,457,000.  The difference was recognised as an exceptional gain
item in the Consolidated Statement of Comprehensive Income (note 7). 
 
Other Business Combination Adjustments - DecTech 
 
During the year ended 31 March 2016, final settlement of AUS$9,500,000 (£4,700,000) was made relating to the first tranche
of the contingent consideration on the acquisition of DecTech resulting in a reduction in the contingent consideration
liability on the balance sheet.  At 31 March 2016, the value of the second tranche of contingent consideration after
partial unwinding of the discounting was AUS$1,970,000 (£1,050,000).  Adjustments to the fair value of the contingent
consideration are made in the Consolidated Statement of Comprehensive Income under IFRS 3 (Revised) Business Combinations
(note 7). 
 
Other Business Combination Adjustments - CDMS 
 
During the year ended 31 March 2016, final settlement of £1,000,000 was made relating to the contingent consideration on
the acquisition of CDMS resulting in a reduction in the contingent consideration liability on the balance sheet. 
Adjustments to the fair value of the contingent consideration for the unwinding of discounting was made in the Consolidated
Statement of Comprehensive Income under IFRS 3 (Revised) 'Business Combinations' (note 7). 
 
Company 
 
Acquisition of CDMS Limited 
 
On 1 April 2015, the Company acquired the trade, assets and liabilities of CDMS Limited at book value.  Details of the
assets and liabilities that were transferred to the Company were as follows: 
 
                                           Fair value£'000  
                                                            
 Assets                                                     
 Plant and equipment                       137              
 Intangible assets - purchased software    23               
 Deferred tax assets                       1,093            
 Trade and other receivables               2,196            
 Cash                                      1,197            
 Trade and other payables                  (1,824)          
 Total net assets at fair value            2,822            
                                                            
 
 
The Directors believe that the fair values of the assets and liabilities were equal to the book values. 
 
Consideration for the transfer was equal to the book value of total net assets and was settled through intercompany
accounts. 
 
The fair value of the acquired receivables amounts to £2,196,000.  The gross amount of receivables is £2,266,000.  None of
the receivables have been impaired and it is expected that the full contractual amounts can be collected. 
 
32.  Contingent Consideration 
 
Assets 
 
                                                                         
 Group and Company                                                2017     2016     
                                                                  £'000    £'000    
                                                                                    
 At 1 April                                                       -        -        
 Recognition on the acquisition of subsidiary undertakings        -        1,280    
 Fair value adjustment to contingent consideration                -        177      
 Settlement of consideration                                      -        (1,457)  
 At 31 March                                                      -        -        
                                                                                    
 
 
Liabilities 
 
                                                                           
 Group                                                            2017       2016     
                                                                  £'000      £'000    
                                                                                      
 At 1 April                                                       1,050      6,628    
 Recognition on the acquisition of subsidiary undertakings        6,668      -        
 Fair value adjustment to contingent consideration                (92)       -        
 Settlement of consideration                                      (1,026)    (5,745)  
 Unwinding of discount                                            563        255      
 Exchange differences on retranslation                            (41)       (88)     
 At 31 March                                                      7,122      1,050    
                                                                                      
 
 
 Analysed as:                                                
 Amounts falling due within 12 months        7,122    1,050  
 Amounts falling due after one year          -        -      
 At 31 March                                 7,122    1,050  
 
 
The opening balance at 1 April 2016 represented contingent consideration amounts relating to the acquisition of DecTech. 
During the year a final payment of AUS$2,000,000 (£1,026,000) was made to settle the outstanding obligation on DecTech. 
The closing balance at 31 March 2017 relates to provisions for contingent consideration for IDscan. Exchange differences of
£41,000 arose from the retranslation of DecTech into pounds Sterling for consolidation purposes and are not part of the
fair value movement on the underlying contingent consideration. 
 
The opening balance at 1 April 2015 represented contingent consideration amounts relating to the acquisition of CDMS and
DecTech.  During the year a final payment of £1,000,000 was made to settle the outstanding obligation on CDMS and a payment
of £4,745,000 for the first tranche on DecTech.  The closing balance at 31 March 2016 relates to provisions for contingent
consideration for DecTech. Exchange differences of £88,000 arose from the retranslation of DecTech into pounds Sterling for
consolidation purposes and are not part of the fair value movement on the underlying contingent consideration. 
 
                                                                         
 Company                                                          2017     2016     
                                                                  £'000    £'000    
                                                                                    
 At 1 April                                                       -        934      
 Recognition on the acquisition of subsidiary undertakings        6,668    -        
 Fair value adjustment to contingent consideration                (92)     -        
 Settlement of consideration                                      -        (1,000)  
 Unwinding of discount                                            546      66       
 At 31 March                                                      7,122    -        
                                                                                    
 
 
 Analysed as:                                            
 Amounts falling due within 12 months        7,122    -  
 Amounts falling due after one year          -        -  
 At 31 March                                 7,122    -  
 
 
The fair value of contingent consideration is estimated having been determined from management's estimates of the range of
outcomes to certain future revenue and EBITDA forecasts for periods between 12 and 18 months from completion date and their
estimated respective likelihoods.  The contractual cash flows are therefore based on future trading activity, which is
estimated based on latest forecasts (Level 3 as defined by IFRS 13). 
 
33.  Events After the Reporting Period 
 
Acquisition of Postcode Anywhere (Holdings) Limited 
 
On 11 May 2017 the Group acquired 100% of the share capital of Postcode Anywhere (Holdings) Limited ('PCA Predict') a
provider of UK and International address validation and data quality services, for a total consideration of £73,852,423
which included approximately £10,387,000 of cash on the balance sheet of PCA Predict. The combination of the two businesses
represents a highly complementary capability alongside GBG's existing ID Registration solutions. 
 
Part of the consideration was funded through a separate placing of 17,058,824 new ordinary shares in the capital of GB
Group plc which were admitted to trading on 11 May 2017. This placing raised approximately £58 million. Part of the
consideration was also funded through a £10 million draw down on the Group's existing borrowing facilities. 
 
As the completion accounts are yet to be finalised, no information has been disclosed at this time on the fair value of
assets and liabilities acquired and goodwill arising. 
 
Further details of the acquisition are set out in a separate regulatory announcement released on 9 May 2017. 
 
 Other Information  
                      
 
 
Other Information 
 
i.   The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31
March 2017 and 31 March 2016 but is derived from those accounts.  The financial information has been prepared using
accounting policies consistent with those set out in the annual report and accounts for the year ended 31 March 2017. 
Statutory accounts for 2016 have been delivered to the Registrar of Companies, and those for 2017 will be delivered in due
course.  The auditors have reported on those accounts; their report was unqualified, did not include a reference to any
matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain any
statements under Section 498(2) or (3) of the Companies Act 2006. 
 
ii.  The annual results announcement was approved by the Board of Directors of GB Group plc on 6 June 2017. 
 
iii.  The ex-dividend date is 20 July 2017; the record date is 21 July 2017; the payment date is 25 August 2017. 
 
iv. In respect of this year's dividend, the Group will offer a Dividend Reinvestment Plan allowing eligible shareholders to
reinvest their dividends into GB Group shares. 
 
v.  The AGM will take place on 25 July 2017. 
 
vi. The 2017 interim results announcement is expected week commencing 27 November 2017. 
 
vii. This report will also be available on the GB Group web site www.gbgplc.com from 6 June 2017. 
 
viii.       The Company intends to dispatch to shareholders copies of the full annual report and accounts for the year to
31 March 2017 and to make it available on the Group's website (www.gbgplc.com) by 30 June 2017. 
 
This information is provided by RNS
The company news service from the London Stock Exchange