REG - GB Group PLC - Final Results
15/06/2023 07:00
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RNS Number : 7627C GB Group PLC 15 June 2023
Embargoed until 7.00 a.m. 15 June 2023
GB GROUP PLC
("GBG", the "Group" or the "Company")
FULL YEAR RESULTS FOR THE YEAR ENDED 31 MARCH 2023
GB Group plc (AIM: GBG), the experts in digital location, identity
verification and fraud prevention software, announces its audited results for
the year ended 31 March 2023.
Chris Clark, CEO, commented:
"GBG continued to make important strategic progress and operational
improvements that will have long-term benefits; however, we were impacted by
unexpectedly deep post-pandemic corrections in some end markets. These
corrections were largely felt in the internet economy, notably by
cryptocurrency and fintech customers primarily in our Identity business in the
Americas, as flagged in our February trading update.
Looking ahead to FY24, since our update in February, there has been no
material change in market conditions. Uncertainty remains; however, we still
expect some gradual revenue acceleration in the latter part of the year. The
Board is confident that GBG will deliver its FY24 profit expectations assisted
by a group-wide focus on efficiency. The business is well-placed to benefit
from structural growth, including the increasing proliferation and
sophistication of fraud through the advent of generative AI, capitalising on
the breadth of its capabilities and global reach to deliver our mid-term
growth targets."
Financials FY23 FY22
Statutory revenue £278.8m £242.5m
Pro forma constant currency revenue(1) £279.8m £269.9m
Adjusted operating profit(1) £59.8m £58.8m
Adjusted operating margin(1) 21.5% 24.3%
Operating (loss)/profit(2) (£112.4)m £23.4m
(Loss)/profit before tax (£118.8)m £21.7m
Adjusted diluted earnings per share(3) 16.4p 20.2p
Diluted (loss)/earnings per share (47.5)p 6.9p
Net assets £694.1m £787.1m
Net debt(1) (£105.9)m (£107.0)m
Final dividend per share 4.00p 3.81p
Notes: (1)Defined within note 20 to the Full Year Results. (2)Exceptional
costs of (£127.2)m include a (£122.2)m non-cash goodwill impairment charge
following the Group's annual impairment review, as explained further within
the financial review and note 7 to the Full Year Results. (3) Defined within
note 9 to the Full Year Results.
Financial summary
· Statutory revenue growth of 15.0% as a result of prior year
acquisitions and despite tough comparators driven by the US stimulus project
and exceptional cryptocurrency volumes in the prior year
· Pro forma revenue of £279.8 million up 3.7% on an organic
constant currency basis reflects:
‒ Double-digit growth in both Location and Fraud segments
‒ Challenging post-pandemic conditions in the internet economy within
Identity
· 94% of revenue from subscription and consumption models and
strong customer retention demonstrates the attractiveness and repeatability of
our cash-generative model
· Adjusted operating profit up 1.7% to £59.8 million, representing
an adjusted operating profit margin of 21.5%. Within this, gains on foreign
exchange were £3 million
· Reflecting the macro challenges in the last year, the annual
impairment review resulted in a non-cash exceptional goodwill impairment
charge of £122.2 million against our Identity business in the Americas, which
is formed of our IDology and Acuant acquisitions
· Net debt of £105.9 million as at 31 March 2023 (FY22: £107.0
million) despite a negative £8.6 million retranslation impact since FY22;
focused on cash generation to further reduce our debt during FY24
· The Board recommends a final dividend per ordinary share of
4.00p, up 5%
Important strategic progress; well-positioned for the future
Addressing the convergence of identity and fraud, while driving efficiency
through simplification:
· Prioritised product and technology investment, and simplified our
portfolio to meet the rapidly changing market needs which has enabled GBG to
accelerate product innovation
‒ Mobile Fraud signals in EMEA, Fraud Alerts and Compliance platform
in APAC and AI-powered anti-tampering technology
· Entering markets at pace, winning new opportunities and building
our pipeline, which includes our expanding Southeast Asia footprint driven by
growing demand for identity fraud solutions
· Enhanced capabilities and breadth: Documents and biometrics
portfolio now powered by one library with 8,000 documents; expanded Multi
Bureau to cover Australia and Canada, and GBG GO, our no-code platform is
resonating with customers, who require expertise to manage onboarding at speed
· Continued to enhance our Location intelligence products with
customers now benefitting from the release of our latest AI-powered address
capture/verify solutions to increase match rates
· Acuant integration complete. IDology is now our primary
go-to-market identity brand in the Americas, our differentiated capabilities
in biometrics, document and data offer a powerful, combined solution and the
combined team have secured over 100 cross-sell/up-sell opportunities
· We are proud recipients of Gallup's 2023 Exceptional Workplace
Award, reflecting our commitment to prioritising team engagement and embedding
it within our business strategy
· Progress on our ESG strategy; achieved carbon neutral operations
this year and set an ambition to become a carbon net zero business by 2045
· Capital Market's event in January articulated how GBG is uniquely
positioned to capitalise on the long-term growth opportunity
Today's results presentation
Management will be hosting a results presentation webcast this morning at
09:00am for sell-side analysts and institutional investors. The webcast can be
accessed via our website www.gbgplc.com/en/investors
(http://www.gbgplc.com/en/investors) or directly at
https://brrmedia.news/GBG_FY23 (https://brrmedia.news/GBG_FY23) . Playback
will be available along with the presentation materials shortly following the
event.
For further information, please contact:
GBG
Chris Clark, CEO & David Ward, CFO +44 (0) 1244 657333
Richard Foster, Investor Relations +44 (0) 7816 124164
Numis (Nominated Adviser and Corporate Broker) +44 (0) 0207 260 1000
Simon Willis & Joshua Hughes
Barclays (Corporate Broker) +44 (0) 0207 623 2323
Robert Mayhew & Stuart Jempson
Teneo (Financial PR) +44 (0) 20 7353 4200
James Macey White GBG@teneo.com
Website www.gbgplc.com/investors
About GBG
We are the experts in digital location, identity and managing fraud risk and
compliance. Helping organisations across the globe eliminate customer friction
and fraud from their digital experiences. GBG develop and deliver address
verification, digital identity, fraud risk and compliance software to
businesses globally.
Through the combination of the latest technology, the most accurate data and
our unrivalled expertise, GBG helps organisations ranging from start-ups to
the largest consumer and technology brands in the world deliver seamless
experiences, so their customers can transact online with greater confidence.
To find out more about how we help our customers establish trust with their
customers visit www.gbgplc.com (http://www.gbgplc.com) and follow us on
LinkedIn and Twitter @gbgplc.
About GBG
We are the experts in digital location, identity and managing fraud risk and
compliance. Helping organisations across the globe eliminate customer friction
and fraud from their digital experiences. GBG develop and deliver address
verification, digital identity, fraud risk and compliance software to
businesses globally.
Through the combination of the latest technology, the most accurate data and
our unrivalled expertise, GBG helps organisations ranging from start-ups to
the largest consumer and technology brands in the world deliver seamless
experiences, so their customers can transact online with greater confidence.
To find out more about how we help our customers establish trust with their
customers visit www.gbgplc.com (http://www.gbgplc.com) and follow us on
LinkedIn and Twitter @gbgplc.
Chief Executive Officer's review
GBG has a clear purpose, to build trust in a digital world, enabling
individuals and businesses to transact online with confidence in the growing
digital marketplace. We are at the forefront of the global market for location
intelligence, identity verification and fraud prevention. These markets are
converging and have strong structural growth drivers such as digital
acceleration, eCommerce adoption, increased regulation and the rising
industrialisation of digital fraud across sectors. The rapid development of
artificial intelligence (AI) has further reinforced the need for customers to
adopt multi-layered identity solutions to combat bad actors exploiting these
emerging technologies to the detriment of consumers.
The global identity market has seen significant macro uncertainty and GBG has
not been immune, with the challenging post-pandemic conditions for the
internet economy, cryptocurrency and fintech customers in particular,
primarily impacting our identity business in the Americas. Overall, GBG has
demonstrated resilience, with growth in revenue and a strong adjusted
operating profit margin for FY23, despite, as previously indicated, tough
comparators driven by the US stimulus project and exceptional cryptocurrency
volumes.
Importantly, against this backdrop, GBG has maintained its leading market
positions and its strong customer relationships. We have continued to win new
logos, accelerated up-sell and cross-sell and maintained excellent customer
retention rates. At the same time we have driven simplification and efficiency
within the business. GBG's performance this year is in no small part due to
the dedication of our 1,250+ global team. Their commitment and expertise,
working tirelessly in partnership with our valued customers, have enabled GBG
to navigate the present and evolving macro uncertainty and deliver important
strategic progress and operational improvements to enable the Group to achieve
its medium-term growth and profitability plans.
Important strategic progress with our product and technology portfolio
The need to detect and prevent fraud is critically important to our customers,
who rely on GBG millions of times each day to increase efficiency, prevent bad
actors, and to ensure they know their end customers are who they say they are,
with technological shifts such as the advent of generative AI only
accelerating the risk involved with operating in the digital world. Our
established reputation and relationships as a trusted industry specialist mean
GBG is well-positioned as one of the world's leading experts in digital
identity to help customers navigate these changes, delivering our
multi-layered approach underpinned by our leading combination of data,
technologies, and people.
A recent study by identity and security specialists, KuppingerCole, noted the
convergence of identity and fraud across the full customer lifecycle,
recognising GBG as a market leader in fraud prevention. This year we have
focused on deploying our technological capabilities globally, simplifying and
rationalising our portfolio to deliver innovation locally that responds
effectively to rapidly changing market dynamics. This includes Mobile Fraud
Signals in EMEA, while in APAC we extended the fraud monitoring capabilities
acquired with Acuant via the GBG Compliance Platform and launched GBG Fraud
Alerts. The innovative nature of our solutions supports entry into new markets
with growing demand for identity fraud services. Opportunities in Thailand,
Vietnam and the Philippines demonstrate our expanding footprint in Southeast
Asia, where we are providing fraud data-sharing consortiums to enable
customers to combat suspicious transactions effectively.
Our market-leading breadth of capability is a key differentiator in a
customer's decision to work with GBG. The integration of the comprehensive
document library built by Acuant has upgraded our global documents and
biometrics capability to cover 8,000 identity documents, underpinned by AI
tampering detection to counter increasing sophistication in counterfeit
documents. We are also leveraging our global data partnerships, we have
launched our Multi Bureau product in Australia and Canada to build on its
success in delivering higher match rates to EMEA customers. As we evolve, we
will remain an expert partner that is easy to work with. The launch of the GBG
GO platform enables customers to orchestrate their identity services quickly
via a no-code platform. This is resonating with customers, and we are already
working with multi-brand gaming operators such as OX and Jumpman to reduce
their risk and maximise customer conversion.
We have continued to expand our broader capabilities in Location, with
customers now benefitting from the release of our latest AI-powered address
capture/verify solutions, which include AI-parsing capability. This has
increased our ability to understand address data with an increased match-rate
performance of up to 19% in some markets. Location has also successfully
upgraded its digital-first capabilities, developing a next-generation customer
experience that we can replicate globally following its initial launch in the
Americas. Location's progress this year reinforces the strength of our
location intelligence products, which have been recognised by a product
leadership award from industry experts, Frost & Sullivan, who highlighted
our ability to handle address data more efficiently and accurately than our
peers.
Well-positioned for the future
GBG has continued to evolve its go-to-market activities, concentrating on
profitable growth through up-selling and cross-selling the breadth of our
portfolio, while driving enduring value through our commercial approach,
developing solutions bundles to elevate the customer experience. We are
enhancing GBG's longer-term competitiveness with product and technology
investment in areas to deliver the highest returns, alongside operational
efficiency initiatives. This includes reviews of our office footprint in light
of hybrid working, marketing activities, the creation of a single global
customer support framework and active headcount management.
One of the key activities undertaken this year has been the integration of
Acuant with our existing Identity business, IDology, to form the largest
pure-play identity verification provider in the Americas. We are
well-positioned to navigate the short-term headwinds in our largest region,
with the work to achieve the anticipated products and technology benefits of
this combination continuing at pace. We delivered £5 million of planned
synergy benefits in the last year, with a runway of enduring benefit to the
Group over the medium to long term that reflects the strategic nature of the
acquisition.
GBG's go-to-market approach in the Americas has evolved as we capitalise on
the increased scale generated by bringing the two businesses together.
Beginning April 2023, IDology is the primary go-to-market brand for our
identity solutions in this region. This will amplify our voice in a large and
fragmented market and leverage our combined capabilities to deliver a unique
multifaceted approach in documents & biometrics and data, augmented by the
latest machine learning and AI innovations. This is underpinned by a unified
sales structure, led by a newly established Chief Revenue Officer role for the
Americas, to execute on our priority to capture cross-sell, with over 100
opportunities with new and existing customers secured to date.
Looking ahead, there is a compelling opportunity to build our markets,
capitalising on cross-sell and upsell opportunities throughout GBG as we
expand use cases with existing customers, as well as capturing new business as
we move into new sectors and geographies. High customer satisfaction and net
promoter score higher than our industry benchmarks demonstrate our focus on
delivering for the customer. Over 1,275 responses to our Voice of Customer
programme this year provide relevant and actionable feedback which we apply to
build differentiation through our products, technology and data. This is
reflected in the enhanced solutions we bring to market that offer proprietary
data insights to serve customers' evolving needs.
Trading performance
Group revenue and adjusted operating profit were in line with the trading
update released on 20 April 2023. Our statutory revenue of £278.8 million
(FY22: £242.5 million) increased by 15.0%. The contribution from prior year
acquisitions more than offset the tough prior period comparative that includes
the unusually high and non-repeating transaction volumes driven by the US
stimulus project and cryptocurrency trading customers.
On a pro forma basis, constant currency revenue growth was 3.7%. This fully
adjusts for the impact of the two prior year acquisitions, including the
associated FY23 deferred revenue haircut adjustment. It also adjusts for £4.2
million of revenue from US stimulus customers in the prior period and the full
£15.4 million impact from the year-on-year decline in cryptocurrency customer
revenues, which was 1.8% of Group revenue in FY23, having stabilised at a run
rate of around 1% going forward. Our Location and Fraud segments performed
strongly, delivering double-digit growth, however, overall growth was impacted
by the post-pandemic reduction in demand experienced in the internet economy,
primarily within our Identity business in the Americas.
Adjusted operating profit increased by 1.7% to £59.8 million, representing an
adjusted operating profit margin of 21.5%. Throughout the year, we have
maintained discipline around cost and overall headcount, proactively managing
our resources to ensure ongoing investment in the business aligns with our
medium-term guidance for growth and profitability. On a statutory basis, there
was an operating loss of £112.4 million (FY22: profit of £23.4 million),
principally due to the FY23 goodwill impairment charge of £122.2 million
following the annual impairment review and higher charge for amortisation of
acquired intangibles.
The Group's net debt position at the year-end was £105.9 million (FY22:
£107.0 million), despite a negative £8.6 million retranslation impact since
FY22 from the conversion of US dollar-denominated debt into pound sterling. We
will continue to use GBG's ongoing ability to generate good levels of cash to
further reduce our net debt over the coming year.
The Board remains committed to a progressive dividend policy that provides
consistent reliable cash returns to investors as part of our balanced approach
to capital allocation. Based on its ongoing confidence that the business is
well-placed for the future, the Board has recommended a final dividend per
share of 4.00 pence (FY22: 3.81 pence per share), which represents a
year-on-year increase of 5.0%.
Location (28% of Group revenue)
Location delivered a strong performance with revenue growth of 11.7% on a
constant currency basis to £76.9 million driven by our international
expansion in Europe, Americas and APAC, despite softer demand in some sectors.
We more than offset these lower transactional volumes with effective up-sell
and cross-sell campaigns, proactive pricing strategies and new business in
increasingly diversified sectors. This approach yielded positive growth to
demonstrate the resilience of Location's business model. We also expanded our
existing partnership with IBM, extending our long-standing relationship with a
new agreement.
Our new business pipeline has seen wins across sectors and regions. Notable
new retail customers include Inditex (owner of Zara), Converse and Clarks,
while the trend of manufacturers transitioning to direct-to-consumer sales
continues with Scentsy in North America, Delonghi in Italy and Teufel Audio in
Germany. We have also continued to diversify through our new customer
acquisition. By building on the Group's strength in financial services and
gaming, we are now delivering our Location capabilities to customers such as
Credit One, Klarna, Lloyds Bank and Bet365 to help meet their regulatory needs
and improve transaction effectiveness.
Identity (58% of Group revenue)
FY23 FY22 Change
£m £m %
Statutory revenue 162.7 142.8 13.9%
Acquisitions/disposals - 31.4 -
Full year-on-year decline in cryptocurrency customer revenue - (15.4) -
Revenue related to US stimulus work - (4.2) -
Constant currency adjustment - 12.3 -
Unwind of deferred revenue haircut and other 1.0 - -
Pro forma constant currency revenue 163.7 166.9 (1.9%)
Identity's statutory revenue increased to £162.7 million as a result of the
acquisitions of Acuant and Cloudcheck in FY22. On a pro forma constant
currency basis, revenue declined by 1.9%, which adjusts for the slowdown in
volume from cryptocurrency customers and the non-repeat of the US stimulus
work. This reduction, as previously announced, largely reflects the specific
impact of lower volumes from internet economy customers, who benefitted
significantly from pandemic-related changes in consumer behaviour,
particularly in the Americas. The uncertainty also led to an incremental
lengthening of sales cycles and project delays. The trends in this region
influenced the assumptions used for the annual impairment review, which
resulted in an exceptional non-cash impairment charge of £122.2 million, with
more detail provided in the financial review.
Outside the Americas, Identity demonstrated resilience through greater sector
diversity as EMEA and APAC achieved combined constant currency pro forma
organic growth of 9.1%. We are also pleased that, regardless of the overall
volume reduction, our customer retention rate remains strong. New customer
acquisition continues to contribute to underlying growth, driven by structural
opportunities in sectors such as gaming, financial services and the public
sector. We demonstrated our ongoing strength in gaming; securing Bally's,
Pollard, and NTD in the Americas and Australia; while securing new financial
services customers such as Confidia, Mortgage Advice Bureau and Transamerica
Lending. A number of additional law enforcement and local authority customers
continue to indicate growing public sector demand.
As noted above, we completed the integration of our two businesses in the
Americas, creating a strong foundation as our team moves forward as IDology.
The team is focused on a number of cross-sell and up-sell revenue initiatives,
with customers such as B2B Soft, ClickBank and Qolo among over 100 customers
now gaining the benefit of the expanded capabilities we offer. We have also
been encouraged by cross-sell in our EMEA and APAC regions for the GBG
Compliance platform, with customers such as ZeusFX, Tazapay and BuddyBet being
notable new logos selecting our SaaS-based solution for its international
coverage.
Fraud (14% of Group revenue)
We continue to see an increasing convergence of fraud and identity which is
driving the strong demand for our fraud prevention and detection solutions as
customers look to deploy an integrated approach to respond to the
fast-evolving threat landscape. Revenue of £39.2 million represents strong
organic constant currency growth of 14.7% from success in securing new
customers and renewals of agreements with large financial institutions, which
demonstrate the importance of GBG's fraud prevention capabilities to customers
in both APAC and EMEA. Our new customer pipeline reflects our expansion in
Southeast Asia, in Malaysia with CTOS, Union Bank of the Philippines and Bank
BJB in Indonesia, while in EMEA we secured Banque Marocaine. We continue to
see use case expansion for our specialist fraud investigation capabilities
within the UK Government's Department for Work & Pensions, in addition to
a competitive win-back of Next, one of the UK's largest non-food retailers.
Recognition for our highly engaged team
Our success and ongoing progress is driven by our 1,250+ people delivering
each day for our customers. They create an inclusive environment that supports
our position as an employer of choice. We were delighted to have been
recognised with Gallup's 2023 Exceptional Workplace Award. Of 57 companies
awarded globally, GBG was one of only two companies headquartered in the UK to
be selected.
The award reflects our commitment to prioritising team engagement, which we
have placed at the heart of our business strategy. We measure this on an
ongoing basis with the results consistently demonstrating the high levels of
engagement in the organisation, with our latest Q12 survey reporting that 93%
of our team members recommend GBG as a great place to work. While we have
actively managed our headcount, we have continued to invest in our people.
This year we have recognised 138 team members by awarding them with
promotions for their contributions to the Group's performance.
Progress on Environment, Social & Governance (ESG)
At GBG, we are committed to driving positive change and ensuring that the
needs of our stakeholders are reflected in our evolving ESG strategy. We have
worked closely with our team, customers and investors to identify key areas
for improvement, including business and data ethics, people development and
inclusion, diversity and equality. We have embedded this feedback into our
strategy and processes, as we strive to meet our targets to reduce our
environmental impact and increase diversity within our business.
We are actively managing the environmental impact of our operations and
solutions while continuing to drive growth and innovation across our business.
This year we formalised our ESG strategy and approach to measure, communicate
and enhance our impact. Having become carbon neutral in our operations during
FY23, we have now set out a longer-term target to become a carbon net zero
business by 2045, supported by a 42% reduction in our Scope 1 and 2 emissions
over the next decade.
GBG's approach to data use is critical to building a more inclusive digital
economy, with our recent Digital Identity Service Provider certification
against the UK Government's trust framework being one such example of our
commitment to data privacy and security. Following the UK's Information
Commissioners Office 2018 audit of data in GBG's services conducted along with
several companies, we have now received confirmation that formal engagement
has closed. Our significant capabilities and expertise will enable us to
continue applying the highest data privacy and protection standards in our
operations as a key differentiator for our offering.
Outlook
In the year ahead, GBG will continue to evolve its go-to-market activities,
concentrating on profitable growth through up-selling and cross-selling the
breadth of our portfolio, driving enduring value through our commercial model
as we implement solutions bundles to elevate the customer experience. We will
also prioritise enhancing GBG's competitiveness over the longer term, focusing
product and technology investment in areas that deliver the highest returns
and implementing initiatives to increase our operational effectiveness.
Since our update in February, there has been no material change in market
conditions. While uncertainty remains, we still expect some gradual revenue
acceleration in the latter part of the year. The Board is confident that GBG
will deliver its FY24 profit expectations assisted by a group-wide focus on
efficiency. The business is well-placed to benefit from structural growth,
capitalising on the breadth of its capabilities and global reach to deliver
our mid-term targets.
GBG has a high-quality global customer base, engaged people and differentiated
products. The business is well-positioned to capitalise on the significant
potential in our markets with solutions that are crucial for customers to
operate safely and efficiently in a digital world. Notwithstanding the current
headwinds facing the business, the Board remains confident in the long-term
opportunity for GBG as the world continues to build an ever-increasing
business presence online.
Chris Clark
Chief Executive Officer
On behalf of the Board
14 June 2023
Financial review
In the year to 31 March 2023 (FY23), GBG's revenue and profit growth was lower
than we had expected at the start of the year largely due to two significant
external factors that emerged in the period. Firstly, significantly higher
levels of cost inflation, which had an impact on interest rates and consumer
confidence. Secondly, GBG was not alone in experiencing an impact during FY23
from adjustments to consumer behaviours following the end of the Covid-19
pandemic that caused some level of reversal of the large accelerating strides
made in the digitalisation of the economy during the pandemic. Despite these
factors that led to GBG falling short of our original financial expectations
for FY23, we still recorded our highest ever level of revenue and adjusted
operating profit.
Growth in the year included contributions from the Acuant and Cloudcheck
businesses that were acquired during the prior year. This more than offset a
tough prior period comparative that included a benefit from unusually high and
non-repeating transaction volumes driven by the US stimulus project and
cryptocurrency trading. Excluding this non-repeating revenue, the pro forma
growth was 3.7% on a constant currency basis.
The Group responded proactively to the tough macroeconomic conditions,
undertaking initiatives that will benefit our operational efficiency over the
longer term, with the near-term outcome enabling an adjusted profit margin of
21.5% (FY22: 24.3%), despite the margin of the prior year having benefited
from the non-repeating revenue mentioned above, but also in the face of higher
cost inflation pressure. Excluding gains on foreign exchange partially offset
by the impact of the FY23 deferred revenue haircut adjustment, the FY23
adjusted operating profit margin would have been 20.7% (FY22: 24.7%).
GBG's commercial model and resilient customer retention continues to support
strong cash generation and good forward visibility due to our high levels of
repeatable revenue, with 93.7% (FY22: 91.6%) of pro forma revenue coming from
subscriptions or consumption. It is our commercial model that ensures that
GBG's balance sheet remains strong and during FY23 we continued to focus on
cash generation and repayment of the debt that we took on to facilitate the
two acquisitions that we completed in FY22. By the end of the year GBG's net
debt to EBITDA ratio was 1.68 times (FY22: 1.72 times).
We were pleased to obtain approval for the exercise of the first of the
one-year extension options on the existing revolving credit facility.
Extending the length of the facility through to July 2026 provides a platform
to support investment in organic growth and potential future M&A activity.
The Group uses adjusted figures as key performance indicators in addition to
those reported under UK-adopted International Financial Reporting Standards
and in accordance with standards issued by IFRIC. Adjusted figures exclude
certain non-operational or exceptional items, which is consistent with prior
year treatments.
FY23 FY22
£'000 £'000
Revenue 278,810 242,480
Gross profit margin 71.0% 70.9%
Adjusted operating profit 59,817 58,839
Adjusted operating profit margin 21.5% 24.3%
Share-based payments (2,313) (6,171)
Amortisation of acquired intangibles (42,758) (24,735)
Impairment of goodwill (122,225) -
Other exceptional items (4,950) (4,526)
Operating (loss)/profit (112,429) 23,407
Net finance costs (6,401) (1,754)
(Loss)/profit before tax (118,830) 21,653
Total tax charge (964) (6,390)
(Loss)/profit for the year (119,794) 15,263
Final dividend per share 4.00 3.81
Diluted (loss) / earnings per share (pence) (47.5) 6.9
Adjusted diluted earnings per share (pence) 16.4 20.2
Revenue and gross margin
Total revenue growth in the year was 15.0% (FY22: 11.4%). On a pro forma
basis, adjusting for the impact of acquisitions, disposals and non-repeating
revenue and at constant foreign exchange rates, revenue growth was 3.7%. More
detail on revenue performance in each of our operating segments is included in
the Chief Executive Officer's Review.
Statutory revenue Pre-acquisition /disposal Revenue Deferred Revenue Haircut Pro forma Revenue
Non-repeating revenue(1)
FY23 £'000 £'000 £'000 £'000 £'000
Subscription revenues:
Consumption-based 45,427 - - 45,427
Term-based 112,034 - 1,241 113,275
Total subscription revenues 157,461 - 1,241 158,702
Consumption 103,834 (219) - 103,615
Other 17,515 - - 17,515
Revenue 278,810 (219) 1,241 279,832
FY22
Subscription revenues:
Consumption-based 37,402 7,573 - - 44,975
Term-based 76,465 14,781 1,381 - 92,627
Total subscription revenues 113,867 22,354 1,381 - 137,602
Consumption 115,212 (409) - (19,565) 95,238
Other 13,401 7,986 - - 21,387
Revenue 242,480 29,931 1,381 (19,565) 254,227
(1)Non-repeating revenue represents revenue from the US government's stimulus
programme and exceptional cryptocurrency volume.
In total on a pro forma basis, 93.7% (FY22: 91.6%) of revenue came from the
combination of subscriptions and consumption revenue models which is
illustrated in the table above.
This mix of business models provides a strong foundation for investment and
growth as subscription revenues (56.7%) provide greater forward visibility
whilst the consumption revenues (37.0%) enable GBG to share in the future
growth of our customers. In the current year, the statutory consumption
revenues at constant currency have declined in absolute terms by 17% as well
as on a relative basis (37.8% in FY22) due to the economic environment where
underlying consumer demand has been lower in some of our key end markets.
Gross margin for the year of 71.0% (FY22: 70.9%) was consistent with the prior
year.
Operating loss and cost management
On a statutory basis, there was an operating loss of £112.4 million (FY22:
profit of £23.4 million), principally due to the FY23 goodwill impairment
charge of £122.2 million and higher charge for amortisation of acquired
intangibles (FY23: £42.8 million).
Adjusted operating profit was £59.8 million (FY22: £58.8 million), which
represents a margin of 21.5% (FY22: 24.3%). The decrease in margin was
expected as FY22 benefitted from the one-off revenue impacts, while the
current period benefitted from an FX gain of £3 million.
During FY23, we undertook a number of initiatives and reviews designed to
increase operational efficiency and enable sharper focus. In totality, these
actions kept our adjusted operating cost increase over FY22, in pro forma
constant currency terms, to just 2.5%, despite our investments in Technology
and the higher inflationary environment. For example, we reviewed our office
space requirements in light of our hybrid working patterns, combined our
Identity go-to-market teams and brands in Americas and created a single global
customer support framework. These initiatives facilitated a disciplined
approach to cost control throughout the year, responding to the macro
environment but also enabling GBG to increase investment into a number of key
product development activities to ensure we maintain our competitive advantage
and are positioned to achieve our short, medium and long term goals. Total
spend on technology increased to £54.0m (FY22: £37.7m), which represents
growth on a constant currency basis of 22.8% excluding the impact of prior
year acquisitions.
Exceptional and normalised items
Amortisation of acquired intangibles
The charge for the year of £42.8 million (FY22: £24.7 million) represents
the non-cash cost of amortising separately identifiable intangible assets
including technology-based assets and customer relationships that were
acquired through business combinations.
The increased charge in the year is due to the full-year impact of the
acquisitions of Acuant (4 months only in FY22) and Cloudcheck (2 months only
in FY22) in the prior year.
Share-based payments
During FY23 3.3 million (FY22: 1.9 million) new share option awards were
granted to Directors and team members across the Group. This increase was due
to the share price being comparatively lower in FY23 leading to a greater
number of shares being awarded for any given value.
The charge for the year of £2.3 million (FY22: £6.2 million) has decreased
due to a combination of the fair value of current year awards being lower as
the Group's share price has fallen, and some prior year awards now not
expected to vest in full due to performance conditions not being expected to
be fully met.
Impairment of goodwill
As required under IFRS, the Group conducts an annual impairment review of
goodwill and intangible assets. This review compares the carrying value on the
Group's balance sheet of those assets against the present value of the future
cashflows they are expected to generate.
As explained in more detail in the Chief Executive Officer's Review, the Group
did not fully meet the financial objectives we set ourselves at the start of
the year, primarily through the difficult trading conditions in our identity
business in the Americas which represents the combination of the IDology and
Acuant acquisitions. This group of cash-generating units (CGUs) was tested for
impairment for the 30 September 2022 half-year review, based on the
information at that time, and the conclusion was that there was no impairment
under the base case or sensitised models.
However, as reported in the trading update in February 2023, the trends that
had been impacting our identity business in the Americas continued into the
second half of the year. Furthermore, we also saw incremental lengthening of
sales cycles and project delays due to macro-economic uncertainty which
impacted some customer contracts that had been included in the FY23 forecast.
As a result, the cashflows used in the year-end impairment assessment were
lower than those at the half-year, consequently, the outcome of the impairment
review was a non-cash, exceptional impairment charge of £122.2 million, which
represents approximately 19% of the pre-impairment carrying value of £644.1
million.
Other exceptional items
In addition to the goodwill impairment charge, other exceptional costs of
£5.0 million (FY22: £4.5 million) were incurred by the Group in the year and
have been detailed in note 5 to the accounts. Broadly, these exceptional
charges arose either from our M&A activities in prior years or were
incurred to enable our initiatives to achieve operational efficiency.
The most significant elements in the current year were: £2.8 million
write-off of the intangible asset for the Acuant brand following the strategic
decision to adopt IDology as our primary go-to-market Identity brand in the
Americas; the exit costs for a limited number of team members which totalled
£1.8m and were necessary as we streamlined some teams and delivered
acquisition synergies; and acquisition integration costs of £1.1 million.
Exceptional items also contained contingent consideration adjustments related
to acquisitions in prior years, where these adjustments needed to be reflected
in the Consolidated Statement of Profit or loss. We released £2.8 million
contingent consideration related to the Cloudcheck acquisition where the
maximum earn-out targets were not achieved and we completed the final payment
in respect of the IDology acquisition with an FY23 cost of £0.8 million. The
majority of this cost was offset by interest income as detailed in note 6.
Net finance costs
The Group incurred net finance costs for the year of £6.4 million (FY22:
£1.8 million). The increase is due to the interest payable on the loan that
was drawn down to part fund the Acuant acquisition in November 2021. The
interest rate on the loan is variable and the interest rates payable have
continued to increase
during FY23.
Taxation
The total tax charge of £1.0 million (FY22: £6.4 million) includes £12.9
million of current tax payable on the Group's taxable profits in the year
(FY22: £12.1 million), offset by a deferred tax credit of £11.9 million
(FY22: £5.7 million).
The statutory effective tax rate for the Group has decreased from 29.5% in
FY22 to negative 0.8% in FY23. The majority of this decrease is due to the
impairment of goodwill which is not deductible for tax purposes and greater
amortisation on acquired intangibles in the United States which has a higher
tax rate.
The adjusted effective tax rate, which excludes the impact of amortisation of
acquired intangibles, share-based payments and exceptional items decreased
from 22.1% to 21.3%.
Following the increase in the UK corporation tax rate from 19% to 25% from 1
April 2023, the Group expects its future adjusted effective tax rate to be
within the range of 25% to 27%. However, the Group's future tax charge and
effective tax rate could be affected by several factors which may be currently
unknown, including the geographical split of future revenues and profits.
Earnings per share
Basic earnings per share decreased from 7.1 pence to a loss of 47.5 pence
reflecting the goodwill impairment charge, higher interest expense and higher
number of shares in issue following the issue of additional shares to fund the
two prior year acquisitions.
Adjusted earnings (adjusted operating profit less net finance costs and
adjusted tax) was £42.1 million (FY22: £44.5 million) resulting in an 18.7%
decrease in adjusted diluted earnings per share from 20.2 pence to 16.4 pence.
The basic weighted average number of shares at 31 March 2023 increased to
252.2 million (FY22: 216.2 million), primarily due to the issue of 52.1
million shares to part fund the acquisition of Acuant in November 2021.
Deferred and accrued revenue
Deferred revenue at the end of the year decreased by 3.9% to £56.5 million
(FY22: £58.8 million).
This balance principally consists of contracted license revenues and profits
that are payable up front but recognised over time as the Group's revenue
recognition criteria are met.
The deferred revenue 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 revenue is determined by several factors, including seasonality, the
compounding effects of renewals, invoice duration, invoice timing, FX rates
and new business linearity within a reporting period.
Accrued revenue at the end of the year increased by £4.0 million to £7.6
million (FY22: £3.6 million). This increase was primarily due to timing
differences with several larger contracts, mostly in the Fraud segment, signed
or renewed during the year where the revenue recognition profile is different
to the invoicing profile.
Cash flows
Group operating activities before tax payments and exceptional items generated
£42.5 million of cash (FY22: £59.5 million) representing an Adjusted EBITDA
to operating cash conversion ratio of 67.3% (FY22: 95.7%).
This decline reflects some specific non-recurring factors including:
· settlement of an acquired liability related to the prior year
acquisitions that reduced cash without a similar EBITDA impact
· reported FX gains on the retranslation of intercompany balances,
which improved EBITDA without a similar impact on cash
· bonus payments made during FY23 in respect of FY22 were higher
than the bonus accruals at the FY23 year-end, which has a negative impact on
cash conversion.
Normalising the cash conversion for the above would result in an Adjusted
EBITDA to operating cash conversion of 86.9% and therefore more consistent
with previous years and GBG's medium-term guidance.
During the year to 31 March 2023 net repayments against the RCF were £10.4
million, resulting in outstanding balances of $149 million (FY22: $170
million) and £7 million (FY22: £nil).
Overall, our net debt at 31 March 2023 decreased to £105.9 million. This was
despite a negative £8.6 million retranslation impact from the conversion of
the US dollar denominated debt into pound sterling, the £9.6 million full
year dividend payment, £2.5 million of GBG shares purchased for the new
Employee Benefit Trust and a one-off payment of £2.3 million for an acquired
liability related to the prior year acquisitions.
Further detailed analysis of this movement is included in the Consolidated
Cash Flow Statement.
Post year-end further loan repayments of £6.6 million (£5 million and $2
million) have been made.
Dividend
At the AGM, the Board of Directors will propose a final ordinary dividend of
4.00 pence per share (FY22: 3.81 pence), amounting to £10.1 million (FY22:
£9.6 million). If approved, this will be paid on 3 August 2023 to ordinary
shareholders whose names appear on the register of members at the close of
business on 23 June 2023. The Group continues to operate a Dividend
Reinvestment Plan, allowing eligible shareholders to reinvest their dividends
into GBG shares.
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.
The Treasury Committee receives weekly cash information to monitor liquidity
across the Group and ensure that significant cash outflows, such as the
acquisition payments, dividends 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 £47.5 million of
further funding from a committed revolving credit facility. 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
used to repay the RCF, whilst ensuring that a suitable operational level of
cash is retained.
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. It is not the Group's policy to engage in speculative
activity or to use complex financial instruments.
Silicon Valley Bank
In March 2023 members of the Treasury Committee and wider management team
responded quickly to the collapse of Silicon Valley Bank (SVB) to minimise any
potential risk and disruption to our customers, team members and operations.
SVB US were the primary day-to-day banking partner used by GBG's US businesses
and SVB UK was one of five syndicate banks participating in the Group's
revolving credit facility (RCF). Following the acquisition of SVB UK by HSBC,
there is no change to the loan syndicate and SVB US have been replaced by HSBC
in the US as our primary day-to-day banking partner.
Approved by the Board on 14 June 2023
David Ward
Chief Financial Officer
Consolidated Statement of Profit or Loss
Year ended 31 March 2023
Note 2023 2022
£'000 £'000
Revenue 3 278,810 242,480
Cost of sales (80,994) (70,549)
Gross profit 197,816 171,931
Operating expenses (313,481) (148,192)
Net gain/(loss) on foreign exchange 3,022 (42)
Decrease/(increase) in expected credit losses of trade receivables 214 (290)
Operating (loss)/profit (112,429) 23,407
Finance revenue 6 636 40
Finance costs 7 (7,037) (1,794)
(Loss)/profit before tax (118,830) 21,653
Income tax charge 8 (964) (6,390)
(Loss)/profit for the year attributable to equity holders of the parent (119,794) 15,263
Operating (loss)/profit (112,429) 23,407
Amortisation of acquired intangibles 42,758 24,735
Equity-settled share-based payments 2,313 6,171
Exceptional items: 5
- impairment of goodwill 122,225 -
- other exceptional items 4,950 4,526
Adjusted operating profit 20 59,817 58,839
Earnings per share 9
- basic earnings per share for the year (47.5p) 7.1p
- diluted earnings per share for the year (47.5p) 6.9p
- adjusted basic earnings per share for the year 16.7p 20.6p
- adjusted diluted earnings per share for the year 16.4p 20.2p
The accompanying notes are an integral part of this Consolidated Statement of
Profit or Loss.
Consolidated Statement of Comprehensive Income
Year ended 31 March 2023
2023 2022
£'000 £'000
(Loss)/profit after tax for the period attributable to equity holders of the (119,794) 15,263
parent
Other comprehensive income:
Fair value movement on investments 700 -
Exchange differences on retranslation of foreign operations (net of tax) 35,060 18,029
Total comprehensive (expense)/income for the period attributable to equity
holders of the parent
(84,034) 33,292
Upon disposal of investments held at fair value through other comprehensive
income or a foreign operation, these elements of other comprehensive income
will be recycled to the Consolidated Statement of Comprehensive Income.
The accompanying notes are an integral part of this Consolidated Statement of
Comprehensive Income.
Consolidated Statement of Changes in Equity
Year ended 31 March 2023
Other reserves
Foreign currency translation reserve
Equity Share premium Capital redemption reserve Total other reserves
share Merger reserve Treasury shares Retained earnings Total
capital equity
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2021 4,908 267,627 9,918 3 (16,606) - (6,685) 98,406 364,256
Profit for the period - - - - - - - 15,263 15,263
Other comprehensive income - - - - 18,029 - 18,029 - 18,029
Total comprehensive (expense)/income for the period - - - - 18,029 15,263 33,292
- 18,029
Issue of share capital 1,389 299,142 90,081 - - - 90,081 - 390,612
Share-based payments - - - - - - - 6,171
6,171
Tax on share options - - - - - - - (498) (498)
Share forfeiture refund - - - - - - - (29) (29)
Equity dividend 10 - - - - - - - (6,677) (6,677)
Balance at 31 March 2022 6,297 566,769 99,999 3 1,423 - 101,425 112,636 787,127
Loss for the period - - - - - - - (119,794) (119,794)
Other comprehensive income - - - - 35,060 - 35,060 700 35,760
Total comprehensive expense for the period - - - - 35,060 - 35,060 (119,094) (84,034)
14 812 - - - - - - 826
Issue of share capital
Investment in own shares - - - - - (2,500) (2,500) (2,500)
Cost of employee benefit trust shares issued to employees - - - - - 1,426 1,426 (1,417) 9
Share-based payments - - - - - - - 2,313 2,313
Tax on share options - - - - - - - (143) (143)
Net share forfeiture receipt - - - - - - - 146 146
Equity dividend 10 - - - - - - - (9,600) (9,600)
Balance at 31 March 2023 6,311 567,581 99,999 3 36,483 (1,074) 135,411 (15,159) 694,144
The accompanying notes are an integral part of this Consolidated Statement of
Changes in Equity.
Consolidated Balance Sheet
As at 31 March 2023
Note Restated(1)
2023 2022
£'000 £'000
Assets
Non-current assets
Goodwill 12 626,394 713,946
Other intangible assets 12 224,834 255,747
Property, plant and equipment 12 3,752 4,601
Right-of-use assets 12 1,449 2,742
Investments 3,026 2,326
Deferred tax asset 8 793 695
Trade and other receivables 14 4,305 -
864,553 980,057
Current assets
Inventories 2,619 1,196
Trade and other receivables 14 65,313 69,626
Current tax 1,083 7,804
Cash and short-term deposits 21,552 22,302
90,567 100,928
Total assets 955,120 1,080,985
Equity and liabilities
Capital and reserves
Equity share capital 6,311 6,297
Share premium 567,581 566,769
Other reserves 135,411 101,425
Retained earnings (15,159) 112,636
Total equity attributable to equity holders of the parent 694,144 787,127
Non-current liabilities
Loans 16 126,411 128,226
Lease liabilities
524 1,529
Provisions 792 866
Deferred revenue 1,492 1,805
Contingent consideration 17 - 1,920
Deferred tax liability 8 34,986 43,674
164,205 178,020
Current liabilities
Lease liabilities 1,242 1,842
Trade and other payables 15 37,312 49,615
Deferred revenue 55,015 57,018
Contingent consideration 17 1,237 5,856
Current tax 1,965 1,507
96,771 115,838
Total liabilities 260,976 293,858
Total equity and liabilities 955,120 1,080,985
( )
(1) The prior year has been restated for a reclassification of deferred tax
balances (see note 8c) and a measurement period adjustment (see note 11).
The accompanying notes are an integral part of this Consolidated Balance
Sheet.
Approved by the Board on xx June 2023
C G Clark - Director
D M Ward - Director
Registered in England number 2415211
Consolidated Cash Flow Statement
Year ended 31 March 2023
Note 2023 2022
£'000 £'000
Group (loss)/profit before tax: (118,830) 21,653
Adjustments to reconcile Group loss/profit before tax to net cash flows
Finance revenue 6 (636) (40)
Finance costs 7 7,037 1,794
Depreciation of plant and equipment 12 1,771 1,531
Depreciation of right-of-use assets 12 1,491 1,593
Amortisation of intangible assets 12 42,826 24,968
Impairment of goodwill and intangible assets 12 125,022 -
Loss on disposal of plant and equipment and intangible assets 379 34
Loss on disposal of businesses 113 330
Fair value adjustment on contingent consideration (1,660) 188
Unrealised (gain)/loss on foreign exchange (3,512) -
Share-based payments 2,313 6,171
(Increase)/decrease in inventories (1,448) (27)
Decrease in provisions (47) (169)
Decrease/(increase) in trade and other receivables (20) (3,967)
(Decrease)/increase in trade and other payables (16,229) 2,197
Cash generated from operations 38,570 56,256
Income tax paid (4,263) (11,610)
Net cash generated from operating activities 34,307 44,646
Cash flows used in investing activities
Acquisition of subsidiaries, net of cash acquired 17 (4,991) (460,383)
Purchase of plant and equipment 12 (968) (1,611)
Purchase of software 12 (57) (120)
Proceeds from disposal of plant and equipment 79 -
Net outflow from disposal of businesses (18) (101)
Interest received 569 10
Net cash flows used in investing activities (5,386) (462,205)
Cash flows used in financing activities
Finance costs paid (6,426) (1,383)
Proceeds from issue of shares 826 305,997
Purchase of shares for Employee Benefit Trust (2,500) -
Share issue costs - (5,780)
Proceeds/(refund) from share forfeiture 146 (29)
Proceeds from new borrowings, net of arrangement fee 16 12,000 155,591
Repayment of borrowings 16 (22,394) (30,073)
Repayment of lease liabilities (2,062) (1,969)
Dividends paid to equity shareholders 10 (9,600) (6,677)
Net cash flows used in financing activities (30,010) 415,677
Net decrease in cash and cash equivalents (1,089) (1,882)
Effect of exchange rates on cash and cash equivalents 339 3,049
Cash and cash equivalents at the beginning of the period 22,302 21,135
Cash and cash equivalents at the end of the period 21,552 22,302
The accompanying notes are an integral part of this Consolidated Cash Flow
Statement.
Notes to the Accounts
1. Basis of preparation
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards, as applied in accordance with
the provisions of the Companies Act 2006. Accounting policies have been
applied consistently to all years presented unless otherwise stated.
The preliminary announcement covers the period from 1 April 2022 to 31 March
2023 and was approved by the Board on 14 June 2023. It is presented in Pounds
Sterling (£) and all values are rounded to the nearest thousand pounds
(£'000) except where otherwise indicated.
The financial information set out herein does not constitute the Company's
statutory accounts for the years ended 31 March 2023 or 2022 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 2023. Statutory accounts for 2022 have
been delivered to the Registrar of Companies, and those for 2023 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.
Non-GAAP Measures
The Group presents the non-GAAP performance measure 'adjusted operating
profit' on the face of the Consolidated Statement of Profit or Loss. Adjusted
operating profit is not defined by IFRSs and therefore may not be directly
comparable with the adjusted operating profit measures of other companies.
The business is managed and measured on a day-to-day basis using adjusted
results. To arrive at adjusted results, certain adjustments are made for
normalised and exceptional items that are individually significant and which
could, if included, distort the understanding of the performance for the year
and the comparability between periods.
Normalised items
These are recurring items which management considers could affect the
underlying results of the Group. These items relate to:
• amortisation of acquired
intangibles; and
• equity-settled share-based
payments charges.
Other types of recurring items may arise; however, no others were identified
in either the current or prior year. Recurring items are adjusted each year
irrespective of materiality to ensure consistent treatment.
Management consider these items to not reflect the underlying performance of
the Group.
Exceptional items
The Group presents as exceptional items those significant 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. Such items may include, but are not restricted to,
significant acquisition, restructuring and integration related costs,
adjustments to contingent consideration, profits or losses on disposal of
businesses and significant impairment of assets. Exceptional costs are
discussed further in note 5.
Redundancy costs are only classified within exceptional items if they are
linked to a reorganisation of part of the business, including when as a result
of a business integration.
Management considers these significant and/or non-recurring-items to be
inherently not reflective of the future or underlying performance of the
Group.
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 the
period through to 30 September 2024. Although GBG has a robust budgeting and
forecasting process, the continued economic uncertainty caused by the
macroeconomic environment 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 of 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,
which remain unchanged from the prior year-end 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 16). Under the terms of the agreement this would lead to the
outstanding balance becoming due for immediate repayment. These covenants
are:
o Leverage - consolidated net borrowings (outstanding loans and contingent
consideration liability less current cash balance) as a multiple of Adjusted
EBITDA for the last 12 months (adjusted to deduct depreciation of right-of-use
assets and lease liability interest), assessed quarterly in arrears, must not
exceed 3.00:1.00
o Interest cover - Adjusted EBITDA (adjusted to deduct depreciation of
right-of-use assets and lease liability interest) as a multiple of
consolidated net finance charges (excluding lease liability interest), for the
last 12, assessed quarterly in arrears, must not fall below 4.00:1.00
As at 31 March 2023, the leverage ratio was 1.74:1.00 and the interest cover
was 9.77 times.
b) Consider the current customer and sector position, liquidity
status and availability of additional funding if required
The performance for the year is detailed in the Chief Executive Officer's
Review. Revenue growth has been impacted by macroeconomic uncertainty which
has reduced transaction volumes in the Identity businesses, although Location
and Fraud have continued to show strong growth.
The Group's customers continue to operate in a range of different sectors
which reduces the risk of a downturn in any particular sector being material
to the Group. The financial services sector accounts for the largest
percentage of GBG's customers, particularly within the Identity and Fraud
segments, and although there has been a downturn in transaction volumes during
the period in some elements of this sector (e.g. cryptocurrency and online
payments), other elements have been much more resilient and shown growth (e.g.
traditional banking) and the overall diversification of the Group means that
this does not result in a risk to the going concern assumption.
As a global company GBG operates in different countries and therefore is less
exposed if particular countries are impacted at different rates. The breakdown
of our revenue by country is shown in note 3 to the Full Year Results. The
Group has no operations or active suppliers in Russia, Belarus or Ukraine and
business was suspended with the small number of customers who were
incorporated in Russia in the previous year. There is no exposure to Russian
customers in the current year.
There are also macro dynamics supporting the increased use of GBG products and
services, such as:
• The continued compliance
requirements globally
• The ongoing existence of fraud
globally, leading to increased cyber security risks and therefore demand for
GBG anti-fraud solutions
• The continued digitalisation and
rise of online versus physical transactions in both consumer and business to
business settings
• The speed and quality of customer
onboarding being a key differentiator, which is enhanced through the use of
GBG's software
As expected, the adjusted operating profit margin for the year declined
relative to the comparative period as the prior year was positively impacted
by the revenue from the US stimulus project and spike in cryptocurrency
trading. This decline was further influenced by the underlying decline in
transaction volumes in the Identity business during the year which has been
reflected in our base case and range of potential downside scenarios. Despite
an impairment being recognised for Identity - Americas group of CGUs, the
impairment charge represents a non-cash transaction and therefore does not
impact the liquidity or going concern assessment for the Group.
The Board of Directors is aware that there continues to be macroeconomic
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 global economic pressures 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.
GBG is not reliant upon any one supplier to provide critical services to
support either the services we provide to our customers or to our internal
infrastructure. For these critical services, such as the provision of data and
cloud hosting, 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 2023 31 March 2022 Variance
£'000 £'000 £'000
Operating cashflow before tax and exceptional items paid 42,504 59,532 (17,028)
Adjusted 63,147 62,196 951
EBITDA
Cash conversion % 67.3% 95.7% (28.4%)
Cash 21,552 22,302 (750)
Loans (excluding unamortised loan fees) (note 16) (127,470) (129,254) 1,784
Net (Debt)/Cash (105,918) (106,952) 1,034
Leverage 1.68 1.72 (0.04)
At 31 March 2023 GBG was in a net debt position of £105.9 million (2022:
£107.0 million), an improvement of £1.0 million since 31 March 2022. Net
debt was adversely impacted by £8.6 million from the translation of the US
dollar denominated debt into pound sterling due to the movement in exchange
rates. Cashflow was negatively impacted by higher than expected increases in
interest rates (Secured Overnight Financing Rate (SOFR)) increased by over 4%
throughout the financial year) which has led to higher interest payments on
the RCF facility.
In addition to the revenue (and adjusted operating profit) performance, the
Group has continued to successfully convert this trading performance into
cash. During the year to 31 March 2023, GBG's operating cash to Adjusted
EBITDA ratio ('cash conversion') was 67.3%, a decrease of 28.4% on the prior
year. Whilst the reported level has declined there were some specific factors
influencing this including the settlement of pre-acquisition non-recurring
liabilities from acquisitions, intercompany FX gains and movements in bonus
accruals. Adjusting for the above would result in an Adjusted EBITDA to
operating cash conversion % of 86.9%. This demonstrates the continued ability
of GBG to convert profit into cash.
The RCF facility has a maximum level of £175 million which could be drawn
down for working capital purposes if required. As at 31 March 2023, the
available undrawn facility was £47.5 million compared to £45.7 million at 31
March 2022.
Following bank approval in November 2022 for the exercise of the one-year
extension on the facility it now does not expire until July 2026, with a
further one-year extension available in September 2023 (subject to approval
from the bank syndicate).
At 31 March 2023 the Group was in a net current liabilities position of £6.2
million (2022: net current liabilities of £14.9 million). However, within
current liabilities is deferred revenue of £55.0 million (2022: £57.0
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 to 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
The annual budget setting process utilises a detailed bottom-up approach which
is then subject to review and challenge by the Executive Team and Board of
Directors. Management use both the internal and external information available
in addition to their industry knowledge to produce the base case forecast.
Management note that analysts' forecasts published after the trading update in
April 2023 estimate an overall revenue growth in the year to 31 March 2024 due
to the impact of organic growth. These estimates range from growth of 2.9% to
6.9%, with the consensus position being growth of 5.2% which would be revenue
of £293.4 million on a constant currency basis. The budget for the year to 31
March 2024 is within the range of the analyst estimates.
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 scenarios, including increases
in costs, interest rates as well as reduced revenue growth both on an overall
Group basis and specific to certain areas of the business. Under these
downside scenarios, 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 being taken by
management. 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 13% which is the level that is
considered possible without causing significant disruption to business
operations. These savings would primarily be linked to people costs, including
reductions in discretionary bonus payments and budgeted recruitment, net of
any related redundancy costs.
With a 13% operating expenses saving introduced in Q2 of FY24 it would take a
revenue decline of 18.0% for a covenant breach (leverage) to occur. This
breach would be as at 30 September 2024 although even at this point it would
only take an Adjusted EBITDA increase of £300k or reduction in net debt of
£100k during the quarter 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 18.0% 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 remote event of the reverse stress test case scenario above
occurring, there would be a breach of covenants on 30 September 2024 unless
further mitigation steps were taken. The principal steps below would be taken
(prior to the breach taking place) to avoid such a breach occurring:
· Take similar cash conservation measures to those
that were implemented in the early stages of the pandemic in FY21 such as not
declaring a final dividend.
· 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 less than 1% of overheads (based on the 31
March 2023 level) to increase Adjusted EBITDA to remedy a covenant breach of
£300k.
· 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 2023 corporation tax payments averaged £500k per quarter, employment
tax payments (including employee taxes) were approximately £1.5 million per
month and sales tax payments were £1.5 to £2.0 million per quarter.
· Request a covenant waiver or covenant reset from
our bank syndicate. The business would still be Adjusted 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.
The preliminary statement has been prepared on a consistent basis with the
accounting policies set out in the last published financial statements for the
year ended 31 March 2022. New standards and interpretations which came into
force during the year did not have a significant impact on the Group's
financial statements.
3. Segmental information
The Group's operating segments are internally reported to the Group's Chief
Executive Officer as three reportable segments: Location, Identity and Fraud
on the basis that they provide similar products and services. Included
within 'Other' was the revenue and profit of the marketing services business
disposed of in the year to 31 March 2021. Following this disposal, the
remaining portion was incorporated within the Fraud operating segment.
'Central overheads' represents Group operating costs such as technology,
compliance, finance, legal, people team, information security, premises,
Directors' remuneration and PLC costs.
The measure of performance of those segments that is reported to the Group's
Chief Executive Officer is adjusted operating profit, being profits before
amortisation of acquired intangibles, equity-settled share-based payments,
exceptional items, net finance costs and tax, as shown below.
Information on segment assets and liabilities is not regularly provided to the
Group's Chief Executive Officer and is therefore not disclosed below.
Location Identity Fraud Total
Year ended 31 March 2023 £'000 £'000 £'000 £'000
Subscription revenues:
Transactions/consumption-based 16,809 27,427 1,191 45,427
Term-based 53,522 27,586 30,926 112,034
Total subscription revenues 70,331 55,013 32,117 157,461
Transactions/consumption-based 5,917 96,269 1,648 103,834
Other 642 11,447 5,426 17,515
Total revenue 76,890 162,729 39,191 278,810
Contribution 29,897 47,623 10,259 87,779
Central overheads (31,198)
Foreign exchange gain 3,022
Expected credit losses of trade receivables 214
Adjusted operating profit 59,817
Amortisation of acquired intangibles (42,758)
Share-based payments charge (2,313)
Exceptional items (127,175)
Operating loss (112,429)
Finance revenue 636
Finance costs (7,037)
Income tax expense (964)
Loss for the year (119,794)
Location (Represented)Identity(1) Other
Fraud Total
Year ended 31 March 2022 £'000 £'000 £'000 £'000 £'000
Subscription revenues:
Transactions/consumption-based 18,648 17,843 911 - 37,402
Term-based 43,129 9,465 23,871 - 76,465
Total subscription revenues 61,777 27,308 24,782 - 113,867
Transactions/consumption-based 3,877 109,842 1,493 - 115,212
Other 675 5,646 7,042 38 13,401
Total revenue 66,329 142,796 33,317 38 242,480
Contribution 24,601 57,030 8,025 (106) 89,550
Central overheads (30,379)
Foreign exchange gain/(loss) (42)
Expected credit losses of trade receivables (290)
Adjusted operating profit 58,839
Amortisation of acquired intangibles (24,735)
Share-based payments charge (6,171)
Exceptional items (4,526)
Operating profit 23,407
Finance revenue 40
Finance costs (1,794)
Income tax expense (6,390)
Profit for the year 15,263
(1) To align the classification of revenue from FY22 acquisitions with how
similar revenue is presented across the Group, FY22 revenue of £1,572,000
within the Identity segment has been reclassified from 'Other' to
'Transaction/consumption-based subscriptions'.
4. Operating (loss)/profit
This is stated after charging/(crediting): Restated
2023 2022
£'000 £'000
Research and development costs recognised as an operating expense 20,176 16,713
Other technology related costs recognised as an operating expense 33,817 20,942
Total technology related costs recognised as an operating expense 53,993 37,655
Depreciation of property, plant and equipment (note 12) 1,771 1,531
Depreciation of right-of-use assets (note 12) 1,491 1,593
Expense relating to short term leases 869 558
Expense relating to low value leases 7 6
(Profit)/loss on disposal of plant and equipment (60) 34
Amortisation of intangible assets (note 12) 42,826 24,968
The prior year total technology related costs have been restated following a
review of the allocation of costs within the acquired Acuant business to
provide a consistent comparison with other Group technology costs. This
resulted in an increase in research and development costs of £488,000 and
other technology costs of £3,724,000. The restatement had no impact on
operating expenses.
The above information does not include exceptional items which have been
disclosed in note 5.
5. Exceptional items
2023 2022
£'000 £'000
(a) Acquisition related costs (1,087) 2,711
(b) Integration costs 686 422
(c) Costs associated with team member reorganisations 1,813 1,063
(d) Rationalisation of office locations 391 -
(e) Impairment of goodwill (note 12 & 13) 122,225
(f) Impairment of intangibles (note 13) 2,797 -
(g) Loss on disposal of businesses 113 330
(h) Write off of cloud-based software 237 -
127,175 4,526
(a) Acquisition related credit of £1,087,000 (2022: £2,711,000
cost) includes:
· Legal and professional advisor costs directly attributable to the
acquisition of Acuant and the possible offer by GTCR to acquire GBG of
£573,000 (2022: £5,607,000). In the year to 31 March 2022, the costs related
to the acquisitions of Acuant and Cloudcheck, as well as costs which were
incurred as part of a potential acquisition.
· Fair value adjustments to contingent consideration (see note 17).
During the year, a fair value reassessment of the Cloudcheck contingent
consideration was performed. Based on actual performance in the period
following initial acquisition, it was determined that the performance criteria
would not be met in full. As a result, £2,753,000 of the balance initially
recognised at acquisition has been taken as a credit within exceptional items.
· The contingent consideration in respect of the pre-acquisition
tax losses within IDology Inc was also settled during the year with an
additional charge to exceptional items of £806,000 representing the
difference between the estimated and final amount due. £548,000 of this
difference related to interest income received by the Group on the tax losses
which has been recognised within interest income. However, as an amount equal
to the interest income was payable to the sellers this cost has been recorded
within exceptional items.
· £92,000 received from the IDology escrow administrator to
reimburse pre-acquisition liabilities paid for by the Group.
· Foreign exchange movement on contingent consideration (see note
17). The contingent consideration liabilities related to IDology and
Cloudcheck are based on the US Dollar and New Zealand dollar respectively. As
a result, the liabilities were retranslated at the balance sheet date with a
loss of £379,000 (2022: loss £157,000) being treated as an exceptional item.
· During the prior year, a foreign exchange forward contract was
entered into to fix the value at which GBG could convert the GBP proceeds from
the equity raise into USD to part fund the Acuant acquisition. On settlement
of the forward contract a gain of £3,053,000 was recognised which has been
treated as an exceptional item.
(b) Integration costs have been incurred relating to the integration
of Acuant and Cloudcheck. This principally relates to consultancy fees paid to
advisors in running programmes to deliver revenue and cost synergies from the
acquisitions, travel for specific integration meetings and the costs of
additional other temporary resources required for the integration. To 31 March
2023, the Group expensed £686,000 (2022: £422,000) relating to the
integration of Acuant and Cloudcheck. Costs are anticipated to continue into
the year ended 31 March 2024. Due to the size and nature of acquisition and
integration costs, management consider that they do not reflect the Group's
trading performance and so are adjusted to ensure consistency between periods.
(c) 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.
(d) During the year to 31 March 2023, a project has commenced to
rationalise the Group's office locations. To 31 March 2023, the Group expensed
£391,000 (2022: £nil) with £202,000 relating to the impairment of a
right-of-use asset following the exit of a leased building. Due to the nature
of these costs, management deem them to be exceptional in order to better
reflect our underlying performance. Costs are anticipated to continue until
the end of the year ended 31 March 2024.
(e) As part of the Group's annual impairment testing, it was
identified that the goodwill allocated to the Identity - Americas group of
CGUs was impaired and an impairment charge of £122,225,000 was recognised.
(f) During the year to 31 March 2023, as part of the continued
integration of Acuant and simplification of our brands in the Amercias region,
Acuant was rebranded as IDology. As a result, the value of the Acuant brand
included within acquired intangibles was considered to be £nil and an
impairment charge of £2,797,000 was recognised.
(g) During the year to 31 March 2021, the business disposed of its
Marketing Services and Employ and Comply businesses which resulted in an
overall profit on disposal. In the year to 31 March 2023, additional costs of
£113,000 (2022: £330,000) were incurred in relation to the finalisation of
the disposal of these businesses.
(h) During the year to 31 March 2023, a write off of cloud-based
software of £237,000 has been recognised. A final agenda decision by the IFRS
Interpretations Committee clarified that configuration or customisation costs
from cloud computing arrangements do not usually meet the definition of
intangible assets under IAS 38 Intangible Assets' and therefore should not be
capitalised. As a result, previously capitalised costs that did not satisfy
the clarified recognition criteria were written off.
The total cash net outflow during the year as a result of exceptional items
was £3,934,000 (2022: £3,276,000 outflow). The tax impact of the exceptional
items was a tax credit of £917,000 (2022: tax credit of £1,274,000).
6. Finance revenue
2023 2022
£'000 £'000
Bank interest receivable 16 10
Interest income on multi-year contracts 53 30
Tax interest receivable 567 -
636 40
7. Finance costs
2023 2022
£'000 £'000
Bank interest payable 6,413 1,400
Interest on long service award 9 9
Amortisation of bank loan fees 326 252
Tax interest payable 14 -
Unwinding of discount on contingent consideration liability 165 -
Lease liability interest 110 133
7,037 1,794
8. Taxation
a) Tax on loss/profit
The tax charge in the Consolidated Statement of Profit or Loss for the year is
as follows:
2023 2022
£'000 £'000
Current income tax
UK corporation tax on loss/profit for the year 4,485 3,841
Amounts underprovided/(overprovided) in previous years 637 (387)
Foreign tax 7,754 8,681
12,876 12,135
Deferred tax
Origination and reversal of temporary differences (12,539) (7,154)
Amounts (overprovided)/underprovided in previous years (225) 1,045
Impact of change in tax rates 852 364
(11,912) (5,745)
Tax charge in the Consolidated Statement of Profit or Loss
964 6,390
b) Reconciliation of the total tax charge
The loss/profit before tax multiplied by the standard rate of corporation tax
in the UK would result in a tax charge as explained below:
2023 2022
£'000 £'000
Consolidated (loss)/profit before tax (118,830) 21,653
Consolidated profit before tax multiplied by the standard rate of corporation
tax in
(22,578) 4,114
the UK of 19% (2022: 19%)
Effect of:
Permanent differences(1) 31,813 753
Non-taxable income (809) (30)
Rate changes 775 364
Recognition of previously unrecognised deferred tax assets (266) (142)
Tax provision recognised 392 -
Adjustments in respect of prior years 412 657
Research and development incentives (123) (113)
Patent Box relief (509) (571)
Share option relief 518 623
Effect of higher taxes on overseas earnings (8,660) 735
Total tax charge reported in the Consolidated Statement of Profit or Loss
964 6,390
1 £30,556,000 (2022: £Nil) of the permanent differences related to the
impairment of goodwill which is not tax deductible.
The Group's reported effective tax rate for the year was (0.8%) (2022: 29.5%).
After adjusting for the impact of amortisation of acquired intangibles,
equity-settled share-based payments and exceptional items, the adjusted
effective tax rate was 21.3% (2022: 22.1%). These measures are defined in the
note 20.
c) Deferred tax
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and there is an intention to settle on a net basis, and to the same fiscal
authority. To that effect, the prior year presentation of the deferred tax
assets and deferred tax liabilities has been restated so that, in accordance
with IAS 12, deferred tax assets and deferred tax liabilities arising in the
same tax jurisdiction have been offset.
Analysed in the balance sheet, after offset of balances as:
Restated
2023 2022
£'000 £'000
Deferred tax asset
Pre-offset of balances 23,738 21,860
Offset of balances within countries (22,945) (21,165)
793 695
Restated
2023 2022
£'000 £'000
Deferred tax liability
Pre-offset of balances 57,931 64,839
Offset of balances within countries (22,945) (21,165)
34,986 43,674
9. Earnings per ordinary share from continuing operations
Basic Basic Diluted Diluted
2023 2022 2023 2022
pence per pence per pence per pence per
share share share share
(Loss)/profit attributable to equity holders of the Company from continuing (47.5) 7.1 (47.5) 6.9
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.
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.
2023 2022
No. No.
Basic weighted average number of shares in issue 252,235,803 216,155,932
Basic weighted average number of shares held by the EBT (269,104) -
Dilutive effect of share options 5,030,313 4,339,614
Diluted weighted average number of shares in issue 256,997,012 220,495,546
Adjusted
Adjusted earnings per share is defined as adjusted operating profit less net
finance costs and adjusted tax divided by the basic weighted average number of
ordinary shares of the Company.
Basic Diluted Basic Diluted
2023 2023 2022 2022
2023 pence per share pence per 2022 pence per share pence per
£'000 share £'000 share
Adjusted operating profit 59,817 23.7 23.3 58,839 27.2 26.7
Less net finance costs (6,401) (2.5) (2.5) (1,754) (0.8) (0.8)
Less adjusted tax (11,354) (4.5) (4.4) (12,587) (5.8) (5.7)
Adjusted earnings 42,062 16.7 16.4 44,498 20.6 20.2
10. Dividends paid and proposed
2023 2022
£'000 £'000
Declared and paid during the year
Final dividend for 2022 paid in July 2022: 3.81p (final dividend for 2021 paid 9,600 6,677
in July 2021: 3.40p)
Proposed for approval at AGM (not recognised as a liability at 31 March)
Final dividend for 2023: 4.00p (2022: 3.81p) 10,098 9,596
11. Acquisitions
There were no new business combinations within the year ended 31 March 2023.
In the year to 31 March 2022, GBG completed two acquisitions, the measurement
periods for which end during the year to 31 March 2023.
Under IFRS 3 'Business Combinations' there is a measurement period of no
longer than 12 months in which to finalise the valuation of the acquired
assets and liabilities. During the measurement period, the acquirer shall
retrospectively adjust the provisional amounts recognised at the acquisition
date to reflect new information obtained about facts and circumstances that
existed as of the acquisition date and, if known, would have affected the
measurement of the amounts recognised as of that date. During the measurement
period, the acquirer shall also recognise additional assets or liabilities if
new information is obtained about facts and circumstances that existed as of
the acquisition date and, if known, would have resulted in the recognition of
those assets and liabilities as of that date. No further adjustments were
identified to the provisional fair values in respect of the acquisition of
Cloudcheck.
In respect of the acquisition of Acuant, adjustments to the provisional fair
values were made during the measurement period, as follows:
· Reduce the fair value of purchased intangibles to £nil. This
adjustment relates to the write-off of configuration and customisation costs
for cloud-based software. A final agenda decision by the IFRS Interpretations
Committee clarified that configuration or customisation costs from cloud
computing arrangements do not usually meet the definition of intangible assets
under IAS 38 Intangible Assets' and therefore should not be capitalised.
· Reduce trade and other receivables by £88,000 to £7,415,000 and
increase trade and other payables by £43,000 to £21,213,000. The adjustments
to trade and other receivables and trade and other payables relate to matters
identified following balance sheet reviews which related to the
pre-acquisition period, including an omitted accrual for professional
services.
The overall impact of the measurement period adjustments was to increase
goodwill by £315,000 to £408,043,000.
The impact of the measurement period adjustments has been applied
retrospectively, meaning that the results and financial position for the year
to 31 March 2022 have been restated.
12. Non-current assets
Property, plant & equipment Right-of-use assets
Goodwill Other intangible assets £'000 £'000
£'000 £'000
Cost
At 1 April 2022 - as reported 713,785 343,400 11,698 8,819
Additions - measurement period(1) 315 - - -
Disposals - measurement period(1) - (183) - -
As at 1 April 2022 - as restated 714,100 343,217 11,698 8,819
Additions - 57 968 420
Disposals - (1,602) (1,507) (2,234)
Foreign exchange adjustment 34,656 16,135 308 148
At 31 March 2023 748,756 357,807 11,467 7,153
Depreciation, impairment and amortisation
At 1 April 2022 154 87,470 7,097 6,077
Charge for the period - 42,826 1,771 1,491
Impairment (note 13) 122,225 2,797 - 202
Disposals - (1,364) (1,264) (2,156)
Foreign exchange adjustment (17) 1,244 111 90
At 31 March 2023 122,362 132,973 7,7,15 5,704
Net book value
At 31 March 2023 626,394 224,834 3,752 1,449
At 1 April 2022 - as restated(1) 713,946 255,747 4,601 2,742
(1) For details of the prior year measurement period adjustment refer to note
11.
13. Impairment
Summary
Following the completion of the annual impairment review detailed below, the
carrying value of the Identity - Americas group of CGUs has been reduced to
its recoverable amount through recognition of an impairment charge of
£122,225,000 against goodwill. This charge is recognised within exceptional
items in the Consolidated Statement of Profit or Loss.
This group of CGUs was tested for impairment for the 30 September 2022
half-year review, with the conclusion that there was no impairment and
headroom of £141,414,000 under the base case assumptions. There was also no
impairment under the sensitised assumptions. Within the base case was the
judgement, based on the information available at that time, that the negative
impact of the macro environment had peaked and therefore trading in H2 FY23
and going into FY24 would see a return to higher levels of growth.
However, as reported in the Trading Update in February 2023, the trends that
had been impacting our end markets for identity services, most notably the
challenging conditions for cryptocurrency and our internet economy customers
continued into the second half of the year and given the relative
concentration of these customers in our Americas business this is the region
where we saw the most pronounced impact. We also saw incremental lengthening
of sales cycles and project delays as a result of the macro-economic
uncertainty which delayed some customer contracts that were included in the
FY23 forecast.
In preparing the cashflows for the year-end impairment review, key changes to
those used at the half-year were:
· the FY24 budget reflected the expectation that the macro
challenges are likely to continue to restrain the growth at least until Q4
FY24
· the growth in FY25 was reduced by 2% to reflect increasing sales
cycles
· growth rates from 2029 - 2032, which are based on industry growth
rates, were reduced by 1% per year from the starting point of 14.7%. In the
half-year review they remained flat during this period
· the discount rate remained unchanged at 12.3% but the long-term
growth rate assumption in the United States decreased from 2.5% to 2.4%.
As a result of these changes the cashflows used in the year-end impairment
assessment are lower than those at the half-year. Whilst our mid-long term
expectations for the business remain unchanged, as the higher level of growth
in these years is now being applied to lower earlier year cashflows it has had
a material impact on the value in use calculation, resulting in the impairment
charge.
Impairment review
Goodwill and intangible assets acquired through business combinations is
allocated to the CGUs that are expected to benefit from that business
combination and has been allocated for impairment testing purposes to seven
groups of CGUs as follows:
§ Location CGU (represented by the Location operating segment excluding the
Location - APAC Unit)
§ Location - APAC CGU (part of the Location operating segment)
§ Identity - EMEA CGU (part of the Identity operating segment)
§ Identity - APAC CGU (part of the Identity operating segment)
§ Identity - Americas CGU (part of the Identity operating segment)
§ Fraud - Investigate CGU (part of the Fraud operating segment)
§ Fraud - APAC Unit (part of the Fraud 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 the first anniversary following
acquisition.
Carrying Amount of Goodwill and Acquired Intangible Assets Allocated to CGUs
2023 2022
Goodwill Acquired Intangibles Total Goodwill Acquired Intangibles Restated(1)
Total
Revised Name Name at 31 March 22 (if different) £'000 £'000 £'000 £'000 £'000 £'000
Location Unit - 61,775 10,634 72,409 53,992 12,725 66,717
N/A (Combined into Location Unit) Loqate Unit - - - 7,333 679 8,012
Location - APAC Unit N/A (Split from VIX Verify Unit) 2,336 614 2,950 - - -
Identity - EMEA Unit Identity Unit 104,484 26,588 131,072 35,058 1,665 36,723
Identity - APAC Unit VIX Verify Unit 75,325 26,402 101,727 16,385 5,314 21,699
Identity - Americas Unit(2) IDology Unit 364,662 157,251 521,913 164,051 51,143 215,194
Fraud - Investigate Unit Fraud Unit 3,608 2,821 6,429 3,181 3,841 7,022
Fraud - APAC Unit CAFS Unit 14,204 456 14,660 14,941 922 15,863
N/A (Combined into Fraud - Investigate Unit) Transactis Unit - - - 427 192 619
Unallocated
N/A - Now Allocated Acuant Unit - - - 408,043 174,122 582,165
N/A - Now Allocated Cloudcheck Unit - - - 10,535 4,805 15,340
626,394 224,766 851,160 713,946 255,408 969,354
(1 )For details of the prior year measurement period adjustment refer to
note 11.
(2) 2023 goodwill value is stated after impairment
Key Assumptions Used in Value in Use Calculations - Base Case
The key assumptions for value in use calculations are those regarding the
forecast cash flows, discount rates and growth rates.
The Group prepares cash flow forecasts using:
· budgets and forecasts approved by the Directors covering a 5 year
period;
· for the Identity segment, an appropriate extrapolation of cash
flows is applied beyond this using a combination of industry analysis of
market growth rates to 2032; and
· a long-term average growth rate is applied to perpetuity for the
geographic market being assessed.
Forecast revenue growth rates, margins and cash flow conversion rates were
based on past experience, industry market analysis and strategic opportunities
specific to the group of CGUs being assessed.
For the Identity segment, it was considered that beyond the initial period
covered by budgets and forecasts, it was most appropriate to include a further
period of 4 years of growth rates that are higher than the long-term average
growth rates for that particular region. This was determined on the basis of
multiple pieces of industry and market research covering the Identity and
Identity Fraud markets which support that, over this period, this market is
expected to grow at a higher rate than the long-term growth rates of these
geographic markets as a whole.
Beyond this forecast period, the long-term average growth rate is not greater
than the average long-term retail growth rate in the territory where the group
of CGUs is based UK - 2.0%; USA - 2.4%; Australia - 3.6% (2022: UK - 2.0%; USA
- 2.0%; Australia - 2.5%).
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.
2023 2022
Revised Name Pre-tax Growth rate Pre-tax Growth rate
Discount rate (in perpetuity) Discount rate (in perpetuity)
% % % %
Location Unit 13.5% 2.0% 12.3% 2.0%
Location - APAC Unit 13.6% 3.6% n/a n/a
Identity - EMEA Unit* 13.5% 2.0% 12.3% 2.0%
Identity - APAC Unit* 13.6% 3.6% 14.3% 2.5%
Identity - Americas Unit* 12.3% 2.4% 12.4% 2.0%
Fraud - Investigate Unit 13.5% 2.0% 12.3% 2.0%
Fraud - APAC Unit 13.6% 3.6% 14.3% 2.5%
* For the year to 31 March 2023, the following revenue growth rates have been
applied to the 4 year period from 1 April 2028 to 31 March 2032 for these
groups of CGUs: Identity - EMEA 10.3%, Identity - APAC 12.5% and Identity -
Americas 14.7%. These growth rates were applied consistently to Identity -
EMEA and Identity - APAC but reduced by 1% per year to 2032 for Identity -
Americas to account for the increased risk associated with these cash flows as
the time horizon increases.
The headroom/(impairment) (i.e. the excess/(shortfall) of the value of
discounted future cash flows over the carrying amount of the CGU) under the
base case scenario was as follows:
2023 2022(2)
Revised Name Base Case(1) Base Case(1)
£'000 £'000
Location Unit 102,029 122,106
Location - APAC Unit 12,298 n/a
Identity - EMEA Unit 32,301 16,927
Identity - APAC Unit 2,741 14,933
Identity - Americas Unit (122,208) 123,280
Fraud - Investigate Unit 26,628 33,740
Fraud - APAC Unit 49,372 18,921
(1) The excess of the recoverable amount over the carrying amount of the CGU
before applying sensitivities
(2) The goodwill and acquired intangible assets in relation to the Acuant and
Cloudcheck acquisitions remained unallocated to a CGU as at 31 March 2022 and
therefore the prior year impairment assessment excluded these assets
The carrying value of the Identity - Americas group of CGUs has been reduced
to its recoverable amount through recognition of an impairment charge of
£122,225,0000 against goodwill. There is a difference of £17,000 to the
negative headroom value in the above table due to the impairment charge being
recorded in USD at an average FX rate in the income statement, whereas the
table above is based on the closing FX rate. Further details of the reason for
this impairment are in the summary section above and in the Financial Review
on page 9.
This charge is recognised within exceptional items in the Group income
statement. Any additional adverse movement in the key assumptions at the
balance sheet date would lead to a further impairment of goodwill.
Key Assumptions Used in Value in Use Calculations - Sensitised Case
The Group has considered the impact of changes in future cash flows and key
assumptions on the base case value in use model, to create a sensitised value
in use model. This has been included applying the cumulative impact of:
· Increasing pre-tax discount rates by 25bps, to reflect potential
increases in government bond yields and associated risk-free rates
· Decreasing average annual growth forecasts to between 2029 and
2032 by 50bps, to reflect the potential for a worse than predicted market
outlook; and
· Decreasing long term growth rates by 25bps, to reflect a worse
than predicted long term global economic outlook.
It was not deemed necessary to sensitise the operating margin of the CGU given
the strategy for growth. Despite the forecast growth the unsensitised forecast
cashflows do not assume any operating leverage which would increase operating
profit margins. Management determined that should growth be slower than
estimated then there was adequate headroom in the estimates of costs that
operating margins could be preserved.
The headroom (i.e. the excess of the value of discounted future cash flows
over the carrying amount of the CGU) under the sensitised scenario is below:
2023 2022(2)
Revised Name Sensitised(1) Sensitised(1)
£'000 £'000
Location Unit 95,680 101,303
Location - APAC Unit 11,622 n/a
Identity - EMEA Unit 23,337 10,143
Identity - APAC Unit (2,776) 8,838
Identity - Americas Unit (157,506) 61,508
Fraud - Investigate Unit 25,445 28,719
Fraud - APAC Unit 46,517 12,333
(1) Headroom after adjusting future cash flows and key assumptions to create a
sensitised value in use model
(2) The goodwill and acquired intangible assets in relation to the Acuant and
Cloudcheck acquisitions remained unallocated to a CGU as at 31 March 2022 and
therefore the prior year impairment assessment excluded these assets.
The sensitised scenario would lead to further impairment of £35,298,000 for
Identity - Americas and an impairment charge of £2,776,000 for Identity -
APAC. Therefore, a reasonably possible change in the value of the key
assumptions could cause CGU Carrying amount to exceed its recoverable amount.
When considering goodwill impairment, the break-even rate at which headroom
within each CGU is reduced to £nil, if all other assumptions remain
unchanged, has also been considered.
2023 2022(1)
Revised Name Pre-tax Decrease in Base Case Cashflows Revenue Growth Rate Pre-tax Decrease in Base Case Cashflows Revenue Growth Rate
Discount rate (2029 to 2032) Discount rate (2028 to 2032)
Location Unit 28.7% (58.0)% n/a 29.7% (64.0)% n/a
Location - APAC Unit 48.6% (80.0)% n/a n/a n/a n/a
Identity - EMEA Unit 15.8% (20.0)% 4.5% 16.7% (30.0)% n/a
Identity - APAC Unit 13.9% (3.0)% 11.4% 22.4% (41.0)% n/a
Identity - Americas Unit n/a n/a n/a 18.1% (36.0)% n/a
Fraud - Investigate Unit 63.7% (80.0)% n/a 66.5% (82.0)% n/a
Fraud - APAC Unit 41.1% (76.0)% n/a 27.6% (53.0)% n/a
(1) The goodwill and acquired intangible assets in relation to the Acuant and
Cloudcheck acquisitions remained unallocated to a CGU as at 31 March 2022 and
therefore the prior year impairment assessment excluded these assets
With the exception of the Identity - Americas and Identity - APAC groups of
CGUs, the Directors do not believe that any reasonably possible changes in the
value of the key assumptions noted above would cause a CGU carrying amount to
exceed its recoverable amount.
14. Trade and other receivables
Restated(1)
2023 2022
£'000 £'000
Current
Trade receivables 52,892 59,557
Allowance for unrecoverable amounts (2,394) (3,968)
Net trade receivables 50,498 55,589
Prepayments 10,818 10,472
Accrued income 3,997 3,565
65,313 69,626
Non-current
Prepayments 701 -
Accrued income 3,604 -
4,305 -
(1) For details of the prior year measurement period adjustment refer to note
11.
15. Trade and Other Payables
Restated(1)
2023 2022
£'000 £'000
Trade payables 11,427 10,558
Other taxes and social security costs 3,996 4,785
Accruals 21,889 34,272
37,312 49,615
( )
(1) For details of the prior year measurement period adjustment refer to note
11.
16. Loans
Bank loans
During the year to 31 March 2023, the Group drew down an additional
£12,000,000 and made repayments of $21,000,000 (£17,394,000) and
£5,000,000. The outstanding balance on the loan facility at 31 March 2023 was
£127,470,000 (2022: £129,254,000) representing £7,000,000 in GBP (2022:
£nil) and $149,000,000 in USD (2022: $170,000,000).
The facility was due to expire in July 2025 but on 18 November 2022, the Group
exercised the first of the one-year extension options on the existing
revolving credit facility so that the facility is now due to expire in July
2026. A further arrangement fee of £358,000 was payable for this extension.
Loan arrangement fees have been netted off the loan balance. A second one-year
extension option can be exercised in November 2023, subject to bank approval.
The debt bears an interest rate of Sterling Overnight Index Average (SONIA)
for GBP drawdowns or Secured Overnight Financing Rate (SOFR) for USD drawdowns
plus a margin of between 1.6% and 2.4% depending on the Group's current
leverage position.
The loan is secured by a fixed and floating charge over the assets of the
Group.
2023 2022
£'000 £'000
Opening bank loan 128,226 -
New borrowings 12,000 156,748
Loan arrangement fee - (1,157)
Loan fees paid for extension (357) -
Repayment of borrowings (22,394) (30,073)
Amortisation of loan fees 326 129
Foreign currency translation adjustment 8,610 2,579
Closing bank loan 126,411 128,226
Analysed as:
Amounts falling due within 12 months - -
Amounts falling due after one year 126,411 128,226
126,411 128,226
Analysed as:
Bank loans 127,470 129,254
Unamortised loan fees (1,059) (1,028)
126,411 128,226
17. Contingent consideration
2023 2022
£'000 £'000
At 1 April 7,776 3,662
Recognition on the acquisition of subsidiary undertakings - 3,618
Remeasurement of contingent consideration charged to profit or loss(1) 806 -
Unwinding of discount(2) 165 34
Release of contingent consideration(1) (2,753) -
Foreign exchange - unrealised(1) 234 462
Settlement of consideration (4,991) -
At 31 March
1,237 7,776
Analysed as:
Amounts falling due within 12 months 1,237 5,856
Amounts falling due after one year - 1,920
At 31 March
1,237 7,776
(1) Included in Consolidated Cash Flow Statement within fair value adjustment
on contingent consideration line totalling £1,660,000 credit (2022: £188,000
debit). Since the contingent consideration in respect of Cloudcheck sits
within a foreign subsidiary, the £234,000 foreign exchange movement includes
a £145,000 credit that has been recognised within the foreign currency
translation reserve following the translation of foreign subsidiaries. The
£1,660,000 credit to exceptional items therefore represents the remaining
foreign exchange movement of £379,000, the remeasurement of contingent
consideration of £806,000 (less £92,000 received from the IDology escrow
administrator in the prior year) and the credit for the partial release of
Cloudcheck contingent consideration £2,753,000.
(2) Included in Consolidated Cash Flow Statement within the finance costs line
totalling £7,037,000 (2022: £1,794,000).
The opening balance at 1 April 2022 included £3,842,000 related to the
pre-acquisition tax assets within IDology Inc. A value equivalent to the cash
benefit GBG received for these assets was payable to the sellers once the cash
benefit had been received by GBG. In December 2022, IDology received the cash
refund which was subsequently paid to the sellers. There are no further
payments due in respect of the IDology acquisition.
The remaining contingent consideration at 31 March 2023 is in respect of the
acquisition of Cloudcheck during the year ended 31 March 2022. Since the
contingent consideration is payable in stages, it was discounted to fair value
on the acquisition date and subsequently unwound to profit and loss. During
the year, a fair value reassessment of the Cloudcheck contingent consideration
was performed. Based on actual performance in the period following initial
acquisition, it was determined that the full performance criteria would not be
met. As a result, £2,753,000 of the balance initially recognised at
acquisition has been taken as a credit within exceptional items during the
year.
18. Contingent liability (prior year only)
The Information Commissioner's Office, the data industry regulator in the UK,
announced in November 2018 that it was conducting audits on a number of
companies to understand the use of data in their services. GBG was included in
this review and has engaged and worked with the ICO in order to address the
recommendations that were made to improve privacy compliance. On 23 February
2023, GBG received official confirmation that their engagement had been
formally closed.
19. Subsequent events
Post year-end further loan repayments of £6.6 million (£5 million and $2
million) have been made.
20. Alternative performance measures
Management assess the performance of the Group using a variety of alternative
performance measures. In the discussion of the Group's reported operating
results, alternative performance measures are presented to provide readers
with additional financial information that is regularly reviewed by
management. However, this additional information presented is not uniformly
defined by all companies including those in the Group's industry. Accordingly,
it may not be comparable with similarly titled measures and disclosures by
other companies. Additionally, certain information presented is derived from
amounts calculated in accordance with IFRS but is not itself an expressly
permitted GAAP measure. Such measures are not defined under IFRS and are
therefore termed 'non-GAAP' measures. These non-GAAP measures are not
considered to be a substitute for or superior to IFRS measures and should not
be viewed in isolation or as an alternative to the equivalent GAAP measure.
The Group's income statement and segmental analysis separately identify
trading results before certain items. The Directors believe that presentation
of the Group's results in this way is relevant to an understanding of the
Group's financial performance, as such items are identified by virtue of their
size, nature or incidence. This presentation is consistent with the way that
financial performance is measured by management and reported to the Board and
assists in providing a meaningful analysis of the trading results of the
Group. In determining whether an event or transaction is presented separately,
management considers quantitative as well as qualitative factors such as the
frequency or predictability of occurrence. Examples of charges or credits
meeting the above definition, and which have been presented separately in the
current and/or prior years include amortisation of acquired intangibles,
share-based payments charges, acquisition related costs and business
restructuring programmes. In the event that other items meet the criteria,
which are applied consistently from year to year, they are also presented
separately.
During the year, organic growth has been replaced with pro forma underlying
revenue. As reported in the chief executive officer's review, there has been
reduced demand from cryptocurrency exchange customers and internet-economy
customers due to macro-economic factors. Therefore, presenting reported
revenue adjusting for revenue from acquisitions/disposals in the past twelve
months and excluding other non-underlying items is considered to provide a
more effective comparison of the Group's trading performance from one period
to the next.
The following are the key non-GAAP measures used by the Group:
Constant currency
Constant currency means that non-Pound Sterling revenue in the comparative
period is translated at the same exchange rate applied to the current year
non-Pound Sterling revenue. This therefore eliminates the impact of
fluctuations in exchange rates on underlying performance and enables
measurement of performance on a comparable year-on-year basis without the
impact of foreign exchange movements.
Pro forma underlying revenue
This includes adjustments to reported revenue for the pre-acquisition/disposal
revenue from acquisitions/disposals in the past 12 months and is presented
excluding non-underlying items. Underlying pro forma revenue is presented as
we believe this provides both management and investors with useful additional
information about the Group's performance and aids a more effective comparison
of the Group's trading performance from one period to the next.
2023 2022 Growth
£'000 £'000 %
Reported revenue 278,810 242,480 15.0%
Pre-acquisition/disposal revenue - 31,314 (13.2%)
Post-acquisition unwind of deferred revenue haircut(1) on Acuant 1,241 - 0.5%
Non-repeating revenue(2) (219) (19,565) 7.8%
Pro forma revenue 279,832 265,021 10.1%
Constant currency adjustment - 15,665 (6.4%)
Pro forma revenue at constant currency 279,832 269,894 3.7%
(1) The deferred revenue haircut represents the cost of providing the deferred
revenue service in the post-acquisition period.
(2) Non-repeating revenue represents revenue from the US Government's stimulus
programme and exceptional cryptocurrency volume.
Normalised items
These are recurring items which management considers could affect the
underlying results of the Group. These include:
· amortisation of acquired intangibles; and
· share-based payment charges
Normalised items are excluded from statutory measures to determine adjusted
results.
Adjusted operating profit
Adjusted operating profit means operating profit before exceptional items and
normalised items. Adjusted results allow for the comparison of results
year-on-year without the potential impact of significant one-off items or
items which do not relate to the underlying performance of the Group. Adjusted
operating profit is a measure of the underlying profitability of the Group.
2023 2022
£'000 £'000
Operating (loss)/profit (112,429) 23,407
Amortisation of acquired intangibles 42,758 24,735
Share-based payment charges 2,313 6,171
Exceptional items 127,175 4,526
Adjusted Operating Profit 59,817 58,839
Adjusted operating profit margin
Adjusted operating profit margin is calculated as adjusted operating profit as
a percentage of revenue.
Adjusted EBITDA
Adjusted EBITDA means adjusted operating profit before depreciation and
amortisation of non-acquired intangibles.
2023 2022
£'000 £'000
Adjusted operating profit 59,817 58,839
Depreciation of property, plant and equipment 1,771 1,531
Depreciation of right-of-use assets 1,491 1,593
Amortisation of non-acquired intangibles 68 233
Adjusted EBITDA 63,147 62,196
Adjusted tax
Adjusted Tax means income tax charge before the tax impact of amortisation of
acquired intangibles, share-based payment charges and exceptional items. This
provides an indication of the ongoing tax rate across the Group.
Adjusted effective tax rate
The adjusted effective tax rate means adjusted tax divided by adjusted
earnings.
2023 2022
Loss before tax Income tax charge Effective tax rate Profit before tax Income tax charge Effective tax rate
£'000 £'000 % £'000 £'000 %
Reported effective tax rate (118,830) 964 (0.8%) 21,653 6,390 29.5%
Add back:
Amortisation of acquired intangibles 42,758 9,463 (12.9%) 24,735 5,082 (4.8%)
Equity-settled share-based payments 2,313 10 (0.5%) 6,171 218 (2.5%)
Exceptional items 4,950 917 35.5% 4,526 897 (0.2%)
Adjusted effective tax rate 53,416 11,354 21.3% 57,085 12,587 22.1%
Adjusted earnings per share ('Adjusted EPS')
Adjusted EPS represents adjusted earnings divided by a weighted average number
of shares in issue and is disclosed to indicate the underlying profitability
of the Group. Adjusted EPS is a measure of underlying earnings per share for
the Group. Adjusted earnings represents adjusted operating profit less net
finance costs and income tax charges. Refer to note 9 for calculation.
Net (debt)/cash
This is calculated as cash and cash equivalent balances less outstanding
external loans. Unamortised loan arrangement fees are netted against the loan
balance in the financial statements but are excluded from the calculation of
net cash/debt. Lease liabilities following the implementation of IFRS 16 are
also excluded from the calculation of net cash/debt since they are not
considered to be indicative of how the Group finances the business. This is a
measure of the strength of the Group's balance sheet.
2023 2022
£'000 £'000
Cash and cash equivalents 21,552 22,302
Loans on balance sheet 126,411 128,226
Unamortised loan arrangement fees 1,059 1,028
External loans 127,470 129,254
Net (debt)/cash (105,918) (106,952)
Debt leverage
This is calculated as the ratio of net (debt)/cash to adjusted EBITDA. This
demonstrates the Group's liquidity and its ability to pay off its incurred
debt.
2023 2022
£'000 £'000
Net (debt)/cash (105,918) (106,952)
Adjusted EBITDA 63,147 62,196
Debt leverage 1.68 1.72
Cash conversion %
This is calculated as cash generated from operations in the Consolidated Cash
Flow Statement, adjusted to exclude cash payments in the year for exceptional
items, as a percentage of adjusted operating profit. This measures how
efficiently the Group's operating profit is converted into cash.
2023 2022
£'000 £'000
Cash generated from operations before tax payments (from Consolidated Cash 38,570 56,256
Flow Statement)
Opening unpaid exceptional items 1,372 549
Total exceptional items 127,715 4,526
Non-cash exceptional items (123,362) (427)
Closing unpaid exceptional items (1,251) (1,372)
Cash generated from operations before tax payments and exceptional items paid 42,504 59,532
Adjusted EBITDA 63,147 62,196
Cash conversion % 67.3% 95.7%
Website
The Investors section of the Company's website, www.gbgplc.com/investors,
contains detailed information on news, press releases, key financial
information, annual and interim reports, share price information, dividends
and key contact details. Our share price is also available on the London Stock
Exchange website. The following information is a summary and readers are
encouraged to view the website for more detailed information.
Dividend Reinvestment Plan
The Company offers a Dividend Reinvestment Plan that enables shareholders to
reinvest cash dividends into additional shares in the Company. Application
forms can be obtained from Equiniti.
Share scams
Shareholders should be aware that fraudsters may try and use high pressure
tactics to lure investors into share scams. Information on share scams can be
found on the Financial Conduct Authority's website, www.fca.org.uk/scams
Financial calendar 2023
Annual General Meeting 20 July 2023
Shareholder enquiries
GBG's registrar, Equiniti, can deal with any enquiries relating to your
shareholding, such as a change of name or address or a replacement of a share
certificate. Equiniti's Shareholder Contact Centre can be contacted by
telephone on 0371 38 2365 (international callers: +44 (0)121 415 7161) between
8.30am and 5.30pm Monday to Friday, excluding public holidays in England and
Wales. You can also access details of your shareholding and a range of other
shareholder services by registering at www.shareview.co.uk
(https://protect-eu.mimecast.com/s/x0eDCn54oI61mW7iJCV-g?domain=shareview.co.uk)
.
Company Secretary & Registered Office Auditor
Annabelle Burton
Ernst & Young LLP
GB Group plc 1 Bridgewater Place
The Foundation, Herons Way Water Lane
Chester Business Park Leeds
Chester LS11 5QR
CH4 9GB Solicitors
Squire Patton Boggs (UK) LLP
United Kingdom
1 Spinningfields
1 Hardman Square
Registered in England & Wales
Manchester
Company Number: 2415211
M3 3EB
T: +44 (0)1244 657333
E: enquiries@gbgplc.com
W: www.gbgplc.com
Nominated Advisor and Joint Broker Registrars
Numis Securities Limited
Equiniti
45 Gresham Street Aspect House
London Spencer Road
EC2V 7BF Lancing
West Sussex
Joint Broker
Barclays Bank plc BN99 6DA
5 The North Colonnade
Canary Wharf
London
E14 4BB
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