REG - GB Group PLC - Preliminary Results
16/06/2022 07:00
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RNS Number : 0680P GB Group PLC 16 June 2022
Thursday, 16 June 2022
GB GROUP PLC
("GBG", "Group" or the "Company")
Preliminary results for the year ended 31 March 2022
Strong financial results and significant strategic progress
GB Group plc (AIM: GBG), the experts in digital location, identity
verification and fraud software, today announces its unaudited results for the
year ended 31 March 2022.
Financial highlights
2022 2021 % change(2)
Revenue £242.5m(1) £217.7m 11.4%
Adjusted(3) operating profit £58.8m £57.9m 1.6%
Adjusted(3) operating profit margin 24.3% 26.6% n/a
Profit before tax £21.7m £34.3m (36.8)%
Diluted earnings per share 6.9p 13.5p (48.9)%
Adjusted(3) diluted earnings per share (restated) 20.2p 22.4p (9.8)%
Deferred revenue balance £58.8m £42.8m 37.3%
Net assets £787.1m £364.3m 116.1%
Net (debt)/cash (£107.0)m £21.1m n/a
Final dividend per share 3.81p 3.4p 12.1%
Chris Clark, CEO, commented:
"I am proud of the team's performance this year, their focus on delivering
critical digital identity solutions with a great customer experience underpins
GBG's strong financial results. Our excellent customer advocacy and record
team engagement scores highlight each team member's huge contribution towards
achieving our success and delivering on the considerable potential in our
markets. The acquisition of Acuant marks a powerful and complementary addition
to GBG, accelerating our strategic progress and strengthening our leadership
position in the identity verification and fraud markets."
Summary
Strong financial results
· Revenue increased 11.4% to £242.5 million, which represented
growth on an organic constant currency basis of 10.6%(4).
o Underlying growth was 15.5%, excluding the substantial one-off benefit
related to the US stimulus in the prior year.
· Growth across all segments underpinned by subscription and
consumption revenue of £227.5 million (94% of total). Combined with growth in
the deferred revenue balance and strong customer retention, this provides good
forward revenue visibility.
· Adjusted operating profits up 1.6% to £58.8 million with an
adjusted operating margin of 24.3% (2021: 26.6%), reflecting investment in the
business and the unwinding of prior year cost-saving measures taken during the
Covid-19 pandemic.
· Strong cash generation enabled repayment of £30.1 million ($40.2
million) of the £157 million ($210 million) of debt drawn to finance the
Acuant acquisition. Year-end net debt of £(107.0) million expected to reduce
further during FY23.
· Proposed final dividend of 3.81 pence (2021:3.40 pence) reflects
our ongoing commitment to delivering increased returns to shareholders.
Summary (continued)
Accelerating our strategic progress
· Completed the acquisition of Acuant to create a leader in
identity verification and identity fraud prevention with FY22 pro forma(5)
revenue of £273.8 million.
· Integration has progressed well and is on track:
o Acuant and IDology teams have combined to form the largest pure-play
identity verification provider in the US, the world's largest identity market.
o £3 million already implemented towards £5 million of FY23 synergy
target plus a strong pipeline of cross-selling opportunities to derive revenue
synergies.
· Organic investment has focused on our data and solution
portfolio, securing new customers and extending our geographic reach. This
includes the bolt-on acquisition of Cloudcheck, a leader in New Zealand's
identity verification market.
· Benefiting from expanding total addressable markets; Identity
verification and adjacent identity fraud markets expected to reach $25
billion(6) by 2025.
Advancing our solutions
· Enhanced identity releases - ExpectID Flex API for US enterprise
customers, ProID for SMEs in EMEA and low/no-code version of our GreenID
platform in APAC.
· Location released the latest generation of its advanced address
capture solution.
· Evolved our fraud portfolio with the successful Investigate
platform integration.
Our highly engaged team
· Grew our team to over 1,250 people during the year, including
team members joining through the Acuant and Cloudcheck acquisitions.
· Record team engagement: 95% 'recommend GBG as a great place to
work'.
Setting new targets to increase our diversity and reduce our climate impact
· Our solutions make an important contribution to society,
safeguarding customers and consumers is at the heart of our proposition.
· Setting new targets to increase our diversity and reduce our
climate change impact including a target to be carbon neutral in our own
operations by the end of FY23.
Confident in the outlook
· The Board is excited by the long runway of sustainable growth
opportunities and our unique ability to capitalise on these given the
significant strategic progress of the last few years and additional capability
presented by the acquisition of Acuant.
· As demonstrated by our ability to adapt to the challenges of the
pandemic over the last two years, we have a resilient and adaptable business
model and we are used to navigating macroeconomic uncertainty.
· In FY23 we will continue to manage the business tightly through
the current climate of rising inflation and interest rates.
· Well-positioned to successfully achieve our strategic and
financial objectives in FY23.
Chair succession
· We have announced today the appointment of Richard Longdon as a
Non-Executive Director and Chair with effect from 1 September 2022. This will
allow for a managed and orderly transition from the current Chair, David
Rasche, who will step down from the Board on 30 September 2022.
Notes:
(1) FY22 reported revenue impacted by the deferred revenue 'haircut'
acquisition accounting adjustment
(2) Growth percentages are calculated with reference to the actual unrounded
figures in the primary financial statements and
so might not tie directly to the rounded figures in the table if recalculated
(3) Adjusted metrics are calculated before amortisation of intangible assets,
share-based payments and exceptional items. Adjusted earnings per share also
includes the tax effects of these adjustments.
(4) After adjusting for the effects of currency translation, acquisitions and
the businesses divested in the prior year
5 Pro forma includes a full 12 months of GBG, Acuant and Cloudcheck
(6) Source: Markets and Markets Identity Verification, and Fraud Detection and
Prevention Reports (2020-2021)
For further information, please contact:
GBG
Chris Clark, CEO & David Ward, CFO +44 (0) 1244 657333
Richard Foster, Investor Relations +44 (0) 7816 124164
Peel Hunt LLP (Nominated Adviser and Broker)
Edward Knight & Paul Gillam +44 (0) 20 7418 8900
Tulchan Communications LLP (Financial PR)
James Macey White & Matt Low +44 (0) 20 7353 4200
GBG@tulchangroup.com
Website www.gbgplc.com/investors
Results presentation
Management will be hosting a results presentation webcast this morning at
9:00am for sell-side analysts and institutional investors.
The link to join the event is available on the investor section of our
website. The webcast will also be available on-demand along with the
presentation materials after the event. Website link:
https://www.gbgplc.com/en/investors/ (https://www.gbgplc.com/en/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 develops and delivers digital
identity, address verification, fraud prevention 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.
Chairman's Statement
I am pleased to report that GBG has achieved strong financial results again
this year, with record revenue and adjusted operating profit ahead of original
market expectations. We have also made important strategic progress through
the acquisitions of Acuant and Cloudcheck. GBG now has more talent and
expertise than ever before to execute on the attractive long-term market
opportunity through accelerating our global expansion and technology roadmap.
Our excellent customer advocacy and record team member engagement scores
demonstrate why we are a trusted partner and supplier to many great
organisations around the world. We continue to be confident, despite the
current macroeconomic uncertainties, in the strength and resilience of our
diversified business to deliver sustainable growth underpinned by our strong,
cash generative model.
Purpose, strategy and progress
GBG's purpose is to build trust in a digital world with a vision where
everyone can transact online with confidence. We see it as our mission to act
as a force for good in the expanding digital marketplace. Our solutions are
used millions of times each day to keep individuals and businesses safe. We
improve trust, increase efficiency and prevent bad actors from causing loss
and distress. Embedding sustainability in our strategy is fundamental to our
success and we are committed to a holistic approach that takes account of all
stakeholders in our decisions.
We have a track record in developing and scaling innovative solutions; our
customers trust those solutions because of our competitive advantage in data,
software technology and people. This year we have achieved significant
strategic progress throughout the business, allowing us to capitalise on the
structural growth in our markets. Organic investment has focused on our data
sources and solution portfolio, helping to secure new customers and extending
our geographic reach.
In November 2021 we acquired Acuant, a leading US identity verification and
identity fraud prevention business. This transaction strengthens our
competitive differentiation, materially increases our US presence and primes
GBG for accelerated global expansion. We are able to leverage the knowledge
and experience developed following 13 successful acquisitions in the last 10
years prior to Acuant, which will ensure that integration risk is well managed
and the full benefits of the combination are realised.
Our strong operating margins and cash generation mean that we can pursue
geographic and sector expansion as well as continued product and technology
development. In January 2022 we completed the bolt-on acquisition of
Cloudcheck, a New Zealand-based identity verification and anti-money
laundering provider. This demonstrates how GBG can combine its international
data, solutions and expertise with local capabilities to expand at pace
regionally.
These strategic actions will allow GBG to capture significant long-term value
for shareholders. We have created a leader in data, document and
biometric-driven identity verification with combined FY22 pro forma revenue of
£273.8 million. Our Location, Identity and Fraud segments all benefit from
expanding total addressable markets.
This includes the identity verification and adjacent identity fraud markets,
which industry analysts forecast to reach an estimated $25 billion by 2025.
Our highly engaged team
Our people bring the global expertise and passion responsible for GBG's
ongoing success with record levels of team engagement achieved throughout the
business this year. We are committed to providing an inclusive and supportive
environment to enable all of our team members to grow, develop and fulfil
their potential. Positive change is being made to improve our diversity and
inclusion, well-being and professional development. These changes reflect our
desire to innovate working practices for our team members.
The team has delivered our strong results despite a backdrop of fast-evolving
macroeconomic challenges, such as the continued impact of the Covid-19
pandemic and the effects of rising inflationary pressures on our team members
and customers alike. We do not expect any direct impact from the war in
Ukraine. Our sympathies are with the Ukrainian people afflicted by this
conflict and we are proud to support charities sending help to the country and
its displaced citizens in Europe and the UK.
Governance
On 1 November 2021 we welcomed Bhavneet (Bhav) Singh to the Board as an
independent Non-Executive Director. Bhav has over 25 years of experience
leading successful digital businesses through ambitious periods of growth and
transformational change. His experience managing international expansion is
highly applicable to GBG's strategic priorities and the Board is already
benefitting from his sector expertise and global perspective.
Our solutions have an important contribution to society, establishing trust
between our customers, consumers and citizens, preventing fraud, enabling
compliance and verifying locations to reduce climate emissions from failed or
repeated deliveries. Recognising its ongoing significance to GBG, the Board
formed an Environmental, Social and Governance (ESG) Committee during the
year. This committee will provide oversight of the strategy, targets and
investments we make. In particular, the UN's COP26 climate summit demonstrated
the need for ambitious action to reduce global emissions. At GBG we are
committed to reducing our climate impact with a near-term plan to become
carbon neutral in our own operations by FY23.
Financial performance
Our financial performance this year was ahead of original market expectations.
Revenue increased 11.4% to £242.5 million (2021: £217.7 million), which
represented growth on an organic constant currency basis of 10.6%. The level
of growth is pleasing given the substantial one-off benefit in the prior year
relating to the US government's stimulus programme. Adjusting for this,
underlying growth was 15.5%. Adjusted operating profit increased 1.6% to
£58.8 million (2021: £57.9 million). On a statutory basis, operating profit
decreased to £23.4 million (2021: £35.5 million), principally due to the
increase in amortisation of acquired intangibles and costs related to the
acquisition of Acuant.
Strong cash generation enabled the Group to repay £30.1 million ($40.2
million) of the £157 million ($210 million) of debt financing drawn in
November 2021 to finance the Acuant acquisition. The Group's net debt position
at the year-end was £107.0 million. We expect that our ongoing ability to
generate good levels of cash will allow net debt to reduce further during
FY23.
AGM and dividend
We plan to host GBG's Annual General Meeting ("AGM") 2022 as a hybrid meeting
on
28 July 2022 at 10.00am (BST). Shareholders are encouraged to attend
virtually. The meeting will be held at our Chester office using a live audio
link. Shareholders can participate in the meeting using this link with the
ability to listen live to the meeting, ask questions and vote, although there
will be the possibility to attend in person. Further details will be provided
in the Notice of AGM.
The Board would like to reiterate the Group's progressive dividend policy.
This ongoing commitment to delivering increased returns to shareholders is
supported by our confidence that GBG is well-positioned for the future. The
Board will propose a final dividend of 3.81 pence per share to shareholders at
the AGM in July. If approved, it will represent the fourteenth consecutive
year of dividend growth.
Closing remarks
In summary, it has been a very good year. The business has performed strongly
and the team has made significant progress against our strategic priorities.
We are well-positioned to continue delivering the critical digital identity
solutions that enable our customers to be safe and successful.
On a personal note, I have talked with my colleagues on the Board concerning
my intention to retire from this great business during the first half of the
current financial year. It has been a genuine privilege to be the Chairman of
GBG as the company has grown to become the largest pure-play identity software
solutions provider on the public markets. It is, however, now time to hand on
the baton after twelve enjoyable and successful years.
On behalf of the Board, I take this final opportunity to extend my
appreciation to our customers and shareholders for their ongoing support. To
the GBG team, I express my sincere thanks for your hard work and contribution
to the business. I know that you will continue to work effectively for our
customers, our communities and our shareholders.
David Rasche
Chairman
Chief Executive Review
I am proud of the team's performance this year, their focus on delivering
critical digital identity solutions with a great customer experience underpins
GBG's strong financial results. Our excellent customer advocacy and record
team engagement scores highlight each team member's huge contribution towards
achieving our success and delivering on the considerable potential in our
markets. The acquisition of Acuant marks a powerful and complementary addition
to GBG, accelerating our strategic progress and strengthening our leadership
position in the identity verification and fraud markets.
Our strategy for sustainable growth
GBG is at the forefront of fast-growing global markets in location
intelligence, identity verification and fraud prevention, underpinned by
powerful long-term structural drivers. Our solutions enable our customers to
quickly respond to the adoption of digital commerce, increased regulatory
demands and the growing risk of digital fraud in their sectors.
Our strategy to deliver long-term sustainable growth is unchanged and built
upon six key strategic priorities with a clear purpose to build trust in a
digital world:
· Build markets: Continue to grow in our existing markets and
identify demand in new markets to increase our geographic and sector reach.
· Build differentiation: Increase our competitive advantage by
continuously innovating; enhancing our solutions and data. In particular, we
will use the data we ingest, process or create to develop proprietary
insights.
· Build once: Accelerate our vision for a single platform
experience by leveraging global solutions and capabilities. Core technology
will be interoperable across products and regions for a consistent user
experience.
· Customer trust: Listen and respond to customer feedback to ensure
satisfaction. We will get, keep and grow our customers by identifying the
cross-selling and up-selling opportunities that best suit their needs and by
being easy to work with.
· Team trust: Nurture the industry's best and most engaged team,
empowered and proud to deliver on our purpose. We will retain, develop and
attract talent by making GBG a diverse and inclusive place to work.
· Investor trust: Deliver shareholder value through a
well-diversified business, resilient operating model and a focus on cash
generation.
Significant strategic progress
We have delivered significant strategic progress this year, advancing our
technology and data insights in our core solution areas of location
intelligence, identity verification and fraud prevention. Our sustainable
business model, comprising both subscription and consumption revenue streams,
continues to deliver the strong cash generation required to fund organic
investment and acquisition opportunities as they arise and to increase the
pace of our go-to-market initiatives.
This year we also pursued growth in APAC through organic expansion into the
Philippines, Thailand and Vietnam and the bolt-on acquisition of Cloudcheck in
New Zealand, where it is a leader in identity verification. Investment has
been maintained in our products, data and technology. This enables innovation
to drive the scale, flexibility and compliance required to help our customers
onboard new consumers quickly and securely across the regions and sectors we
serve.
Acuant is a strategically compelling acquisition that will enhance our ability
to help our global customers address the ever-increasing challenges of the
digital world. Progress on integration has been pleasing and continues at
pace, with our Acuant and IDology teams in the Americas combining to form the
largest pure-play identity verification provider throughout the region. We now
have the scale and breadth of offering to lead and win in North America, the
biggest and most strategically important market for our solutions.
We are confident that this acquisition will deliver significant value to GBG
over the medium term. This is underpinned by the excellent progress to date
from our teams on the integration. We will realise at least £5 million of
synergy benefits in FY23, with £3 million already identified and implemented
alongside a strong sales pipeline of cross-selling opportunities where we
expect to derive revenue synergies.
The formation of our Global Products Group brings together Acuant and GBG's
identity verification and fraud prevention roadmaps as we execute on the
strategic benefits of the acquisition. This combination creates an opportunity
to accelerate our data, product and platform strategy by approximately two
years as we focus on developing a consistent global experience for current and
future customers. We will also build on our proprietary document and data
verification knowledge as well as expand our automated fraud detection
capabilities. For instance, offering the market's largest, continuously
updated identity document library and accelerating the development of a best
of breed cloud-based fraud prevention solution for release in the second half
of FY23.
Customers and growth
GBG's revenue in FY22 was £242.5 million which represents constant currency
organic growth for the year of 10.6%. This was a good result given the
substantial one-off benefit related to the US government's stimulus programme
in the prior year; excluding this, underlying growth was 15.5%. With high net
retention of revenue, existing customers accounted for two-thirds of growth,
with new business driven by initiatives undertaken to expand our sectors and
geographic presence across our segments.
Location's growth of 12.7% was driven by demand for our solutions supporting
the ongoing consumer shift to greater online activity and structural tailwinds
as brands adopt direct-to-consumer strategies. New customer wins this year
include ASICS, HarperCollins and JetBlue Airways which demonstrate the broad
market opportunity.
Identity delivered growth of 8.5% across all regions. Adjusting for the
one-off benefit impact of the US stimulus programme, this was 17.1%. Our
identity verification capabilities were chosen by customers for an increasing
number of digital transformation projects, while our frictionless and
efficient user experience makes us the partner of choice for many fintech
customers. New customers secured include Hymans Robertson, St James's Place,
Nintendo and CUNA Mutual.
Our acquisition of Acuant positions GBG to deliver a wider scope of identity
verification and identity fraud solutions to our customers and partners than
ever before. The experience and track record from prior acquisitions is
proving valuable in helping generate a strong cross-selling pipeline. North
America has the most opportunities in the short term, with many already being
converted between existing customers for document verification and compliance
solutions.
As anticipated, with on-premise deployment activity resuming, our Fraud
segment experienced strong year-on-year growth of 15.7%. New multi-year
contracts were secured in APAC with Bank Simpanan Nasional (Malaysia), Bank
BTPN (Indonesia) and
FE Credit (Vietnam) in addition to E.ON and AXA in Europe. We also continued
to see high renewal rates which demonstrates our strong customer retention.
The acceleration of digital commerce continues to be of net benefit to GBG's
customers. This year we continued to expand our sales reach and marketing
activity across our direct, digital-first and partnership channels to market.
This means we are well placed to capture the growth opportunity from new
sectors, geographic expansion and further customer development during FY23.
Advancing our solutions
We provide end-to-end coverage of the customer identity lifecycle, from
onboarding to in-life management, offering standalone or layered capabilities
to address multiple customer channels and touchpoints. Differentiated location
intelligence, identity verification and fraud and compliance solutions drive
competitive advantage for GBG as we increasingly combine capabilities to be
delivered through resilient and secure global platforms.
Digital identities have never been so complex and we have continued to
innovate and advance solutions to address customer challenges throughout the
year. In the US, ExpectID Flex API enables enterprise businesses to utilise
IDology's full portfolio of verification solutions through the customer
journey while ProID offers an advanced data and document solution to SME
clients in Europe. The launch of Mobile Signal Intelligence in Europe expands
our identity fraud capability, integrating mobile network operator data to
more easily verify customers during a transaction and combat growing levels of
origination fraud. In APAC, we have developed a low and no code option version
of our GreenID platform for faster onboarding of new customers.
Location released the latest generation of the industry's most advanced
type-ahead address capture solution, adding machine learning and predictive
addressing capability to effectively self-learn 'hard-to-find' locations. The
benefits to businesses in a digital-first economy are clear as more activity
moves online, ensuring an improved customer experience, reduced shopping cart
abandonment and reduced failed deliveries.
Our fraud prevention portfolio has evolved with the successful integration of
the Investigate platform. The full breadth and depth of GBG data now available
within the platform offers a leading fraud and investigation capability. A
broad range of use cases has secured significant new customer wins in sectors
such as insurance, financial services and utilities alongside existing
customer upgrades.
Our reputation continues to grow in an expanding market, attracting industry
recognition and demonstrating our strategic progress as a business. In their
2022-2026 industry forecast, Juniper Research recognises GBG as an established
leader in global digital identity, while Gartner names GBG as a Representative
Vendor in the 2022 Gartner(®) Market Guide for Identity Proofing and
Affirmation(1).
Our team
Every day we build, collaborate and partner to create a safer digital world.
It is the energy and expertise of our team that takes GBG to new heights and
we are proud of our people and the culture we create together. Empowering and
engaging our people remains a key priority for the Board and Executive Team.
We invest considerable time each year developing GBG's culture and improving
our team member experience. This is shaped by our absolute commitment to
reducing inequality, broadening diversity and facilitating inclusion. We are
committed to ongoing investment in our group-wide 'be/yourself' programme and
family-friendly initiatives. This includes our 'Work When and Where You Want'
policy that offers our team the flexibility to manage their work-life balance.
Our culture is a key differentiator enabling GBG to retain talent and
successfully execute our hiring plans. We are now a team of 1,276 people, up
from 1,024 last year, with team members welcomed through the Acuant and
Cloudcheck acquisitions among those coming into the business. Our senior team
has also evolved. Christina Luttrell (previously IDology CEO) now leads our
combined teams in the Americas and Yossi Zekri, (previously Acuant CEO) joins
our Executive Team and will lead our newly formed Global Products Group.
We believe our investment in people makes a real difference to business
performance. Our recent record team engagement score reflects this, putting us
in the top quartile of global companies surveyed by Gallup. Importantly, 95%
of our team 'recommend GBG as a great place to work'. This is a fantastic
endorsement as we aim to become an employer of choice in a highly competitive
marketplace for talent.
Sustainability
Safeguarding the current and future needs of our customers and their consumers
from negative environmental and social impacts is at the heart of GBG's
offering. We balance fraud prevention, regulatory compliance and great user
experience to help our customers establish trust in their digital services.
Our broad portfolio is continually evolving across our three segments to help
our customers address the societal, environmental and regulatory challenges
they face.
Alongside the benefits our products and solutions offer, we have also invested
in other areas to build on our environment, society and governance (ESG)
impact. Examples include the launch of our first women's network, a mentoring
scheme with over 100 participating team members and working in partnership
with the Slave-Free Alliance to ensure that no exploitation of vulnerable
people occurs in our business and supply chain. In addition, we recruited our
first ESG strategist & programme manager as we scale up our positive
action, which includes stretching targets to reduce our climate impact and
increase our diversity.
We take pride in our ethical approach to data throughout the Group. This
ranges from our internal practices to the advice and solutions provided to
customers. As we have communicated previously, 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, including GBG, to
understand the use of data in their services. We continue to work
collaboratively with the Commissioner's Office as it strives to improve
privacy compliance and we will keep investors informed of any material
developments.
Outlook
GBG addresses a broad range of large and expanding end markets all of which
are adapting to structural drivers such as digitalisation and an
ever-increasing need to protect against fraud. This plays to GBG's strength
and will bring further opportunity for the Group. The Board is excited by the
long runway of sustainable growth opportunities and our unique ability to
capitalise on these given the significant strategic progress of the last few
years and the additional capability presented by the acquisition of Acuant.
As demonstrated by our ability to adapt to the challenges of the pandemic over
the last two years, we have a resilient and adaptable business model and we
are used to navigating macroeconomic uncertainty. In FY23 we will continue to
manage the business tightly through the current climate of rising inflation
and interest rates.
We have previously communicated that we did benefit in the first quarter of
last year from particularly high transaction volumes, partly driven by the US
Covid-19 stimulus project and new entrants into the crypto currency market,
which gave us a fast start to FY22 and will be a tough comparative for the
first half of FY23. However, taking the year as a whole, the business is
well-positioned to successfully achieve its strategic and financial objectives
in FY23. Our teams will continue to move at pace with the Acuant integration
and we are confident in our ability to deliver the committed financial
synergies.
Chris Clark
Chief Executive Officer
Notes
(1)Source: Gartner "Market Guide for Identity Proofing and Affirmation," Akif
Khan, 2 March 2022.
Finance Review
In GBG's financial year 2022 we delivered revenue and adjusted operating
profit at a level that exceeded market expectations. In November 2021 we also
completed the acquisition of Acuant, the largest in GBG's history, which
firmly positions the enlarged group as a global leader in identity and fraud
solutions - particularly in the strategically important North American market.
In the prior year the level of revenue growth was influenced by non-recurring
revenue linked to the US Government's Covid-19 stimulus package. This created
a tough revenue comparator and therefore to still achieve organic growth at
constant currency of 10.6% was a significant achievement. Excluding this
non-recurring revenue, the growth would have been 15.5%.
As expected, the adjusted operating profit margin has decreased relative to
the prior year. The margin last year benefitted from the non-recurring revenue
mentioned above, but also from the temporary cost saving measures implemented
at the start of the Covid-19 pandemic such as pay and recruitment freezes. In
the second half of the prior year and continuing throughout the current year,
these temporary measures were removed and we returned to a focus on investing
in our team and technology to enable future growth.
Throughout the pandemic we have been supported by our strong balance sheet.
This is a result of the level of recurring revenue (over 46% of FY22 revenue
came from subscriptions and a further 48% from consumption) giving
predictability, repeatability and continued strong cash conversion,
demonstrating our ability to turn revenue and profits into cash quickly. This
strength supported GBG in obtaining favourable commercial terms on the
refinancing of our Revolving Credit Facility ('RCF') to part fund the Acuant
acquisition - extending the length of the facility through to July 2025
provides a platform to support future growth.
The Group uses adjusted figures as key performance indicators in addition to
those reported 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.
2022 2021 Change Change
£'000 £'000 £'000 %
Revenue 242,480 217,659 24,821 11.4%
Gross profit margin 70.9% 70.1% 0.8% 1.1%
Adjusted operating profit 58,839 57,896 943 1.6%
Adjusted operating profit margin 24.3% 26.6% (2.3%) (8.6%)
Share-based payments charge (6,171) (5,170) 1,001 19.4%
Amortisation of acquired intangibles (24,735) (17,671) 7,064 40.0%
Operating profit before exceptional items 27,933 35,055 (7,122) (20.3%)
Exceptional items (4,526) 448 (4,974) -
Operating profit 23,407 35,503 (12,096) (34.1%)
Net finance costs (1,754) (1,240) 514 41.5%
Profit before tax 21,653 34,263 (12,610) (36.8%)
Total tax charge (6,390) (7,385) (995) 13.5%
Profit for the year 15,263 26,878 (11,615) (43.2%)
Proposed final dividend per share 3.81 3.40 0.41 12.1%
Basic earnings per share (pence) 7.1 13.8 (6.7) (48.6%)
Adjusted basic earnings per share (pence) -restated 20.6 22.8 (2.2) (9.6%)
Revenue and gross margin
Total revenue growth in the year was 11.4% (FY21: 9.3%). On an organic basis,
adjusting for the impact of acquisitions and disposals in the past twelve
months, revenue growth was 8.7% (FY21: 12.1%). This result was negatively
impacted by movements in exchange rates, particularly the higher GBP:USD
relative to 2021. On a constant currency basis, the organic revenue growth was
10.6% (FY21: 12.1%) which we consider to be a significant achievement given
the tough comparator.
More detail on revenue performance in each of our operating segments is
included in the CEO Review.
The FY22 revenue includes four months of revenue from Acuant and two months of
revenue from the acquisition of Cloudcheck. As required by IFRS 3 (Business
Combinations), the revenue for Acuant includes a negative adjustment of £1.4m
related to the restatement to fair value of the acquired deferred revenue
balance (commonly known as the deferred revenue 'haircut'). We have presented
a pro forma revenue measure that includes pre-acquisition revenue from Acuant
(eight months) and Cloudcheck (ten months) so that both have 12 months
included. In addition, we have adjusted for the deferred revenue haircut
adjustment explained above to present revenue on a normalised basis.
Total Revenue Pre-acquisition /disposal Revenue Deferred Revenue Haircut Pro forma Revenue
£'000 £'000 £'000 £'000
Subscription revenues:
Consumption-based 35,830 5,848 - 41,678
Term-based 76,465 14,781 1,381 92,627
Total subscription revenues 112,295 20,629 1,381 134,305
Consumption 115,212 (409) - 114,803
Other 14,973 9,711 - 24,684
Revenue 242,480 29,931 1,381 273,792
In total, 94% (pro forma 91%) of revenue came from the combination of
subscriptions and consumption revenue models. On a pro forma basis 49% of
revenue came from subscription agreements. Term-based subscriptions increased
by 12.8% driven by recovery in the Fraud segment while consumption revenue,
which is predominantly in the Identity segment, grew by 9.6%. Excluding the
revenue from the US stimulus project, consumption revenue increased by 19.6%.
Gross margin for the year was 70.9% (FY21: 70.1%) and increased due to a
change in the sales mix, such as growth in the higher-margin Fraud segment
relative to the prior year.
Operating profit and cost management
Adjusted operating profit was £58.8 million (FY21: £57.9 million), which
represents a margin of 24.3% (FY21: 26.6%). The decrease in margin was
expected as the FY21 level was influenced by the cost saving measures taken at
the start of the Covid-19 pandemic. In FY22, on an organic basis, expenditure
increased on people costs as we reintroduced salary increases and grew
headcount. We also increased investment in R&D and technology in addition
to increasing spend on marketing activities.
On a statutory basis, operating profit decreased to £23.4 million (FY21:
£35.5 million), principally due to the increase in amortisation of acquired
intangibles and exceptional costs related to the acquisition of Acuant
explained below.
Exceptional and normalised items
Amortisation of acquired intangibles
The charge for the year of £24.7 million (FY21: £17.7 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 acquisition of HooYu in the prior year and
more significantly the current year acquisitions of Acuant and Cloudcheck.
Share-based payments
During FY22 1.9 million (FY21: 1.8 million) new share option awards were
granted to Directors and team members across the Group. This included 258,000
related to an award of 300 share options to each team member in April 2021
which will vest provided those employees are still in employment in April
2023. This was both to reward the team for their performance during the
pandemic, but also supports our ambition to retain team members given the
current competitive recruitment market.
The charge for the year of £6.2 million (FY21: £5.2 million) has increased
as this was the first year in which there has been a full 12 month charge for
three LTIP awards (2019, 2020 and 2021).
Exceptional items
Exceptional costs of £4.5 million (FY21: exceptional income of £0.4 million)
were incurred by the Group in the year and have been detailed in note 5 to the
accounts.
The most significant elements in the current year were acquisition related
with legal & professional fees, integration costs and related team member
reorganisations resulting in expenditure of £7.1 million (FY21: £1.3
million). This was offset by a gain of £3.1 million on a foreign currency
forward contract put in place to fix the rate at which the equity placing
funds for the Acuant acquisition were converted from GBP to USD.
In the prior year the exceptional income arose from the £1.4 million gain on
disposal of the Employ & Comply and Marketing Services businesses. In the
current year there was a cost of £0.3 million related to the finalisation of
those disposals.
Net finance costs
The Group incurred net finance costs for the year of £1.8 million (FY21:
£1.2 million). The increase is due to the interest payable on the loan drawn
down to part fund the Acuant acquisition in November 2021. The interest rate
on the loan is variable and we expect the interest rate payable to increase in
FY23. As noted in the cash flows section below, we expect to mitigate this
increase by continuing to reduce the outstanding loan balance.
Taxation
The total tax charge of £6.4 million (FY21: £7.4 million) includes £12.1
million of current tax payable on the Group's profits in the year (FY21:
£12.4 million), offset by a deferred tax credit of £5.7 million (FY21: £5.0
million).
The reported effective tax rate for the group has increased from 21.6% in 2021
to 29.5% in 2022. The majority of this increase is due to non-deductible
costs related to acquisitions.
The adjusted effective tax rate, which excludes the impact of amortisation of
acquired intangibles, share-based payments and exceptional items increased
from 21.5% to 22.1%.
Earnings per share
Basic earnings per share decreased by 48.6% from 13.8 pence to 7.1 pence
reflecting the lower operating profit and higher number of shares in issue.
Since the 31 March 2021 financial statements were produced, the Group has
decided to amend the adjusted earnings per share calculation so that an
adjusted tax charge is used rather than the full reported tax charge. The
calculation of the adjusted tax charge is consistent with the calculation of
adjusted operating profit and therefore excludes the impact on tax of
amortisation of acquired intangibles, equity-settled share-based payments and
exceptional items.
This has resulted in a restatement of the comparative figures for the year to
31 March 2021. The impact was a decrease to adjusted basic earnings per share
for the period and adjusted diluted earnings per share for the period of 2.4p
and 2.4p respectively.
Adjusted earnings (adjusted operating profit less net finance costs and
adjusted tax) was £44.5 million (FY21 restated: £44.5 million) resulting in
a 9.6% decrease in adjusted basic earnings per share from 22.8 pence to 20.6
pence.
The basic weighted average number of shares at 31 March 2022 increased to
216.2 million (FY21: 195.2 million), primarily due to the issue of 52.1
million shares to part fund the acquisition of Acuant in November 2021.
Deferred revenue
Deferred revenue at the end of the year increased by 37.3% to £58.8 million
(FY21: £42.8 million). Excluding the year-end deferred revenue balance for
Acuant the increase was 21.2%.
This balance principally consists of contracted licence revenues and profits
that are payable up front but recognised over time as the Group's revenue
recognition criteria are met.
The deferred 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 and new
business linearity within a reporting period.
Cash flows
In November 2021 the Group refinanced its RCF, increasing the facility to
£175 million (from £110 million) and extending the expiry to July 2025 (from
February 2023). £157 million ($210 million) of this facility was drawn down
to part fund the Acuant acquisition.
Group operating activities before tax payments and exceptional items generated
£59.5 million of cash and cash equivalents (FY21: £73.4 million)
representing Adjusted EBITDA to cash conversion ratio of 95.7% (FY21:
119.5%). This strong operating cash flow and cash conversion enabled £30.1
million to be repaid against the RCF in the four months since the Acuant
acquisition.
Dividend
At the AGM, the Board of Directors will propose a final ordinary dividend of
3.81 pence per share (FY21: 3.40 pence), amounting to £9.6 million (FY21:
£6.7 million).
If approved, this will be paid on 3 August 2022 to ordinary shareholders on
the register on 24 June 2022. The Group continues to operate a Dividend
Reinvestment Plan, allowing eligible shareholders to reinvest their dividends
into GBG shares.
Acquisitions and Synergy Benefits
In November 2021 we announced the acquisition of Acuant for a purchase price
of $736 million (£555 million). The purchase price was funded through cash of
£305 million raised through a new equity placing, £157 million from a
drawdown against the new RCF and £87 million issued as new GBG shares to the
sellers.
Since the acquisition we have been successfully executing against our 100 and
200 day integration plans and our teams have made excellent progress in
realising at least £5 million of synergy benefits for FY23, with £3 million
already identified and implemented.
In January 2022 we announced the acquisition of Cloudcheck, a leading New
Zealand based provider of identity verification services, for an initial NZ$20
million (£10.0 million). The purchase price was funded through $12 million
(£6.7 million) of cash which came from existing cash resources, and the issue
of $8 million (£3.4 million) of new GBG shares to the sellers.
Contingent upon Cloudcheck's revenue growth, a further payment of up to NZ$4
million (£2 million) in cash may become payable at the conclusion of the
financial year ending 31 March 2023; then another NZ$4 million (£2 million)
in cash at the conclusion of the financial year ending 31 March 2024.
Further information regarding the acquisitions have been detailed in note 9.
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 £46 million of further
funding from a revolving credit facility that is in place. Other financial
assets and liabilities, such as trade receivables and trade payables, arise
directly from the Group's operating activities. Surplus funds of the Group are
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.
Approved by the Board on 15 June 2022
David Ward
CFO
Consolidated Statement of Profit or Loss
Year ended 31 March 2022
Note 2022 2021
£'000 £'000
(Unaudited)
Revenue 3,4 242,480 217,659
Cost of sales (70,549) (65,096)
Gross profit 171,931 152,563
Operating expenses (148,524) (117,060)
Group operating profit 23,407 35,503
Finance revenue 40 120
Finance costs (1,794) (1,360)
Profit before tax 21,653 34,263
Income tax charge 6 (6,390) (7,385)
Profit for the year attributable to equity holders of the parent 15,263 26,878
Group operating profit 23,407 35,503
Amortisation of acquired intangibles 24,735 17,671
Equity-settled share-based payments 6,171 5,170
Exceptional items 5 4,526 (448)
Adjusted operating profit 15 58,839 57,896
Earnings per share 8
- basic earnings per share for the year 7.1p 13.8p
- diluted earnings per share for the year 6.9p 13.5p
The accompanying notes are an integral part of this Consolidated Statement of
Profit or Loss.
Consolidated Statement of Comprehensive Income
Year ended 31 March 2022
2022 2021
£'000 £'000
(Unaudited)
Profit after tax for the period attributable to equity holders of the parent 15,263 26,878
Other comprehensive income:
Exchange differences on retranslation of foreign operations (net of tax) 18,029 (20,559)
Total comprehensive income for the period attributable to equity holders of
the parent
33,292 6,319
The accompanying notes are an integral part of this Consolidated Statement of
Comprehensive Income.
Consolidated Statement of Changes in Equity
Year ended 31 March 2022
Share premium Foreign currency translation reserve
Equity Capital redemption reserve
share Merger reserve Retained earnings Total
Note capital equity
(Unaudited) £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2020 4,855 261,648 6,575 3 3,953 67,900 344,934
Profit for the period - - - - - 26,878 26,878
Other comprehensive income - - - - (20,559) - (20,559)
Total comprehensive income for the period - - - - (20,559) 26,878 6,319
Issue of share capital 53 5,979 3,343 - - - 9,375
Share-based payments - - - - - 5,170 5,170
Tax on share options - - - - - 1,700 1,700
Share forfeiture - - - - - 2,641 2,641
receipt
Equity dividend - - - - - (5,883) (5,883)
Balance at 31 March 2021 4,908 267,627 9,918 3 (16,606) 98,406 364,256
Profit for the period - - - - - 15,263 15,263
Other comprehensive income - - - - 18,029 - 18,029
Total comprehensive income for the period - - - - 18,029 15,263 33,292
Issue of share capital 1,389 299,142 90,081 - - - 390,612
Share-based payments - - - - - 6,171 6,171
Tax on share options - - - - - (498) (498)
Share forfeiture - - - - - (29) (29)
refund
Equity dividend 7 - - - - - (6,677) (6,677)
Balance at 31 March 2022 6,297 566,769 99,999 3 1,423 112,636 787,127
The accompanying notes are an integral part of this Consolidated Statement of
Changes in Equity.
Consolidated Balance Sheet
As at 31 March 2022
(Unaudited) Note 2022 2021
£'000 £'000
Assets
Non-current assets
Goodwill 713,631 286,351
Other intangible assets 255,930 91,312
Property, plant and equipment 4,601 3,706
Right-of-use assets 2,742 3,231
Investments 2,326 2,288
Deferred tax asset 21,860 7,676
1,001,090 394,564
Current assets
Inventories 1,196 123
Trade and other receivables 10 69,715 58,617
Current tax 7,804 5,778
Cash and short-term deposits 22,302 21,135
101,017 85,653
Total assets 1,102,107 480,217
Equity and liabilities
Capital and reserves
Equity share capital 6,297 4,908
Share premium 566,769 267,627
Merger reserve 99,999 9,918
Capital redemption reserve 3 3
Foreign currency translation reserve 1,423 (16,606)
Retained earnings 112,636 98,406
Total equity attributable to equity holders of the parent 787,127 364,256
Non-current liabilities
Loans 11 128,226 -
Lease liabilities
1,529 2,286
Provisions 866 1,010
Deferred revenue 1,805 545
Contingent consideration 1,920 -
Deferred tax liability 64,839 22,120
199,185 25,961
Current liabilities
Lease liabilities 1,842 1,650
Trade and other payables 12 49,572 41,067
Deferred revenue 57,018 42,298
Contingent consideration 5,856 3,662
Current tax 1,507 1,323
115,795 90,000
Total liabilities 314,980 115,961
Total equity and liabilities 1,102,107 480,217
The accompanying notes are an integral part of this Consolidated Balance
Sheet.
Consolidated Cash Flow Statement
Year ended 31 March 2022
Note 2022 2021
(Unaudited) £'000 £'000
Group profit before tax: 21,653 34,263
Adjustments to reconcile Group profit before tax to net cash flows
Finance revenue (40) (120)
Finance costs 1,794 1,360
Depreciation of plant and equipment 1,531 1,433
Depreciation of right-of-use assets 1,593 1,838
Amortisation of intangible assets 24,968 17,914
Impairment of goodwill - 154
Loss on disposal of plant and equipment and intangible assets 34 -
Loss/(profit) on disposal of businesses 330 (1,403)
Fair value adjustment on contingent consideration 188 245
Share-based payments 6,171 5,170
(Increase)/decrease in inventories (27) 6
(Decrease)/increase in provisions (169) 88
(Increase)/decrease in trade and other receivables (3,967) 10,028
Increase in trade and other payables 2,197 1,655
Cash generated from operations 56,256 72,631
Income tax paid (11,610) (14,205)
Net cash generated from operating activities 44,646 58,426
Cash flows (used in)/from investing activities
Acquisition of subsidiaries, net of cash acquired 9 (460,383) (2,762)
Purchase of plant and equipment (1,611) (455)
Purchase of software (120) (283)
Net (outflow)/proceeds from disposal of businesses (101) 5,307
Interest received 10 20
Net cash flows (used in)/from investing activities (462,205) 1,827
Cash flows from/(used in) financing activities
Finance costs paid (1,383) (1,231)
Proceeds from issue of shares 305,997 3,087
Share issue costs (5,780) -
(Refund)/proceeds from share forfeiture (29) 2,641
Proceeds from new borrowings (net of arrangement fee) 11 155,591 -
Repayment of borrowings (30,073) (62,500)
Repayment of lease liabilities (1,969) (2,252)
Dividends paid to equity shareholders 7 (6,677) (5,883)
Net cash flows from/(used in) financing activities 415,677 (66,138)
Net decrease in cash and cash equivalents (1,882) (5,885)
Effect of exchange rates on cash and cash equivalents 3,049 (479)
Cash and cash equivalents at the beginning of the period 21,135 27,499
Cash and cash equivalents at the end of the period 22,302 21,135
The accompanying notes are an integral part of this Consolidated Cash Flow
Statement.
Notes to the Accounts (Unaudited)
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 2021 to 31 March
2022 and was approved by the Board on 15 June 2022. It is presented in Pounds
Sterling (£) and all values are rounded to the nearest thousand pounds
(£'000) except where otherwise indicated.
This report is based on accounts which are in the process of being audited and
will be approved by the Board. Accordingly, the financial information for 2022
is unaudited and does not constitute the Group's statutory accounts for the
years ended 31 March 2022 or 2021 within the meaning of Section 434 of the
United Kingdom Companies Act 2006 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 2022.
The statutory accounts for the year ended 31 March 2022 will be finalised on
the basis of the financial information presented by the Directors in these
results and will be delivered to the Registrar of Companies following the AGM
of GB Group plc. Ernst & Young LLP has confirmed to GB Group plc that at
the present time they are not aware of any matters that may give rise to a
modification to their audit report. The same accounting policies and methods
of computation are followed as in the latest published audited accounts for
the year ended 31 March 2021, which are available on the Group's website at
https://www.gbgplc.com/en/investors/resources/reports-and-presentations/
Statutory accounts for 2021 have been delivered to the Registrar of Companies.
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.
The statutory accounts for the year ended 31 March 2022 are expected to be
posted to shareholders in due course and will be delivered to the Registrar of
Companies after they have been laid before the shareholders in a general
meeting on 28 July 2022. Copies can be accessed at www.gbgplc.com. The
registered number of GB Group plc is 2415211.
Non-GAAP Measures
The Group presents the non-GAAP performance measure 'adjusted operating
profit' on the face of the Consolidated Income Statement. 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, not be reflective of the underlying performance of the
Group 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 consider these significant and/or non-recurring-items to be
inherently not reflective of the future or underlying performance of the
Group.
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 2023. Although GBG has a robust budgeting and
forecasting process, the continued economic uncertainty caused by the
macro-economic 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 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 could be taken in the event
of these stress test scenarios
f) Conclude upon the going concern assumption
a) Understand what could cause GBG not to be a going concern
The potential scenarios which could lead to GBG not being a going concern are
considered to be:
• Not having sufficient cash to meet
our liabilities as they fall due and therefore not being able to provide
services to our customers, pay our employees or meet financing obligations.
• A non-remedied breach of the
financial covenants within the Group Revolving Credit Facility (RCF) agreement
(detailed in note 11). Under the terms of the agreement this would lead to the
outstanding balance becoming due for immediate repayment. These covenants
are:
o Leverage - consolidated net borrowings (outstanding loans less current
cash balance) as a multiple of adjusted consolidated EBITDA for the last 12
months, assessed quarterly in arrears, must not exceed 3.00:1.00
o Interest cover - adjusted consolidated EBITDA as a multiple of
consolidated net finance charges, for the last 12 months, assessed quarterly
in arrears, must not fall below 4.00:1.00
b) Consider the current customer and sector position, liquidity
status and availability of additional funding if required
The market consensus forecast for the year to 31 March 2022 was a decline in
revenue of 3.2% (£7 million). The actual performance was significantly ahead
of this with revenue of £242.5 million, representing revenue growth of 11.4%
(10.6% on an organic constant currency basis).
The Board of Directors are aware that there continues to be economic
uncertainty, but the experience in the past year gives enhanced confidence to
be able to forecast which of our products and services are positively or
negatively impacted by 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.
During the prior year approximately 7% of revenue came from two customers in
the United States who provided services directly related to Covid-19. As
expected, the level of revenue from these customers decreased in the current
year to represent only 2% of revenue. GBG does not have a high customer
concentration risk since no individual customer generates more than 6% of
Group revenue. The Group's customers operate in a range of different sectors
which further reduces the risk of a downturn in any particular sector. The
financial services sector accounts for the largest percentage of customers,
particularly within the Fraud and Identity segments.
As a global company GBG operates in different countries and therefore is less
exposed if particular countries are impacted at different rates. The Group has
no operations or active suppliers in Russia, Belarus or Ukraine and we can
confirm that business has been suspended with the small number of customers
who are incorporated in Russia. Exposure to Russian customers is limited with
combined revenue in the current year of less than 0.5% of Group revenue.
There are also macro dynamics supporting the increased use of GBG products and
services, such as:
• Continued compliance requirements
globally
• The ongoing existence of fraud
globally, leading to increased cyber security risks and therefore demand for
GBG anti-fraud solutions
• Continued digitisation and rise of
online versus physical transactions in both consumer and business to business
settings
• Speed and quality of customer
onboarding being a key differentiator, which is enhanced through the use of
GBG's software
GBG is not reliant upon any one supplier to provide critical services either
to support the services we provide to our customers or to our internal
infrastructure. For these critical services, such as the provision of data,
contingency plans exist in the event of a supplier failure to be able to move
to an alternative supplier with minimal disruption to customers or to the
wider business.
Liquidity
31 March 2022 31 March 2021 Variance
£'000 £'000 £'000
Operating cashflow before tax and exceptional items paid 59,532 73,385 (13,853)
Adjusted 62,196 61,410 786
EBITDA
Cash conversion % 95.7% 119.5% (23.8%)
Cash and cash equivalents 22,302 21,135 1,167
Loans (excluding unamortised loan fees) (note 11) (129,254) - (129,254)
Net (Debt)/Cash (106,952) 21,135 (128,087)
Leverage 1.72 Positive Cash 1.72
At 31 March 2022 GBG was in a net debt position of £107.0 million, a decline
of £128.1 million since 31 March 2021 following the acquisition of Acuant
where the RCF facility was refinanced and partially drawn down to fund the
acquisition (see note 11).
During the year to 31 March 2022, GBG's operating cash to EBITDA ratio ('cash
conversion') was 95.7%, a decrease of 23.8% on the prior year. The decrease in
the cash conversion was partly attributable to cash receipts in the first half
of the prior year related to large multi-year deals where the profit was
recognised at the end of the year to 31 March 2020. Notwithstanding this, the
current year level is a strong indicator of GBG's ability to convert profit
into cash.
c) Board review and challenge of the budget including comparison
against external data sources available and a potential downside scenario
The refinanced RCF facility has a maximum level of £175 million which could
be drawn down for working capital purposes if required. As at 31 March 2022,
the available undrawn facility was £45.7 million. The expiry of this facility
is not until July 2025 with two one-year extension options available (subject
to approval from the bank syndicate).
At 31 March 2022 the Group was in a net current liabilities position of £14.8
million (2021: net current liabilities of £4.3 million). However, within
current liabilities is deferred revenue of £57.0 million (2021: £42.3
million) which represents a liability to provide a future service rather than
a direct cash liability. Whilst there is a cash cost to providing these
services (principally related data costs or employee wages) these costs would
be lower than the value of the deferred revenue liability, and will unwind
over the course of the year rather than being a liability settled on demand.
On this basis the net current liabilities position is not considered to be a
risk from a going concern perspective.
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 analyst's forecasts published after the trading update in
April 2022 estimate an overall revenue growth in the year to 31 March 2023 due
to the impact of the acquired businesses and organic growth. These estimates
range from growth of 23.0% to 32.0%, with the consensus position being growth
of 26% which would be revenue of £299 million on a constant currency basis.
The budget for the year to 31 March 2023 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 scenario by incorporating both
reductions in revenue and increases in costs and interest rates. 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. A covenant
breach would occur before the available cash resources of the Group are fully
exhausted and therefore the focus of the reverse stress test was on covenant
compliance. In making this assessment it was assumed that management had
reduced operating expenses by 20% which is the level that is considered
possible without causing significant disruption to business operations. These
savings would primarily be linked to people costs, net of any related
redundancy costs.
With a 20% operating expenses saving introduced in Q1 of FY23 it would take a
revenue decline of 40% from acquired revenue and 18% from organic revenue for
a covenant breach (leverage) to occur. This breach would be as at 30 September
2023 although even at this point it would only take an EBITDA increase of
£200,000 to remedy this breach.
Based on the prior year trading performance, performance in the period since
the year end and through reference to external market data a decline of
anywhere near 18% in organic revenue 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 unlikely event of the reverse stress test case scenario above
occurring, a breach of covenants would occur on 30 September 2023 unless
further mitigation steps were taken. Detailed below are the principal steps
that would be taken (prior to the breach taking place) to avoid such a breach
occurring:
· Make deeper cuts to overheads, primarily within
the sales function if the market opportunities had declined to this extent. It
would only take a reduction of 1% of overheads (based on the 31 March 2022
level) to increase EBITDA to remedy a covenant breach of £200,000
· Take similar cash conservation measures to those
that were implemented in the early stages of the pandemic in 2020. These
included not declaring a final dividend, pay and recruitment freezes and a
deferral of director bonus payments
· Request a delay to UK Corporation Tax, Employment
Tax or Sales Tax payments under the HMRC 'Time to Pay' scheme. In the year to
31 March 2022 Corporation Tax payments averaged £500,000 per quarter,
Employment Tax payments (including employee taxes) were approximately £1.6
million per month and Sales Tax payments were £2.0 million per quarter
· Request a covenant waiver or covenant reset from
our Bank Syndicate. Whilst this is not entirely within the Group's control,
the business would still be EBITDA positive on a rolling 12-month basis at
this point and the Directors believe they would have a reasonable expectation
of achieving a temporary covenant waiver from the banks if needed
· Raise cash through an equity placing. Under the
Articles of Association GBG has the right to raise cash through an equity
placing up to 10% of its market valuation at the date of the placing
· Disposal of part of the business
f) Conclude upon the going concern assumption
Following consideration of the budget, reverse stress test scenarios and
future outlook, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future. Therefore, the Directors consider it appropriate to adopt the going
concern basis of accounting in preparing the consolidated financial
statements.
2. Accounting Policies
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 2021. New standards and interpretations which came into
force during the year did not have a significant impact on the Group's
financial statements.
3. Revenue
Revenue disclosed in the Consolidated Statement of Profit or Loss is analysed
as follows:
(Re-presented)(1)
2022 2021
£'000 £'000
Subscription revenues:
Consumption-based 35,830 32,750
Term-based 76,465 62,244
Total subscription revenues 112,295 94,994
Consumption 115,212 111,265
Other 14,973 11,400
Revenue 242,480 217,659
Finance revenue 40 120
Total revenue 242,520 217,779
(1) As disclosed in note 4, during the current year, the Group has changed the
presentation and disclosure of its fee types and revenue streams in order to
disaggregate revenue recognised from contracts with customers into recurring
and non-recurring revenue streams. As a result, the disaggregation of revenue
has been re-presented from the previous year.
4. Segmental Information
The Group's operating segments are internally reported to the Group's Chief
Executive Officer as three operating segments: Location, Identity and Fraud.
Included within 'Other' (previously disclosed as 'Unallocated' as at 31 March
2021) is the revenue and profit of the marketing services business (which was
disposed in January 2021).
'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.
The acquisitions of Acuant and Cloudcheck have been included within the
Identity segment.
Changes to Segmental Analysis for 31 March 2022 Disclosure
The implementation of a new group wide finance system in the prior year has
enabled transactions to be analysed in more detail internally. As a result,
during the year to 31 March 2022, the presentation of the segmental
information that is reported to the Group's Chief Executive Officer and the
categories revenue is grouped into, has continued to evolve and has been
updated to better reflect the nature of how customers consume our services.
Previously the Group has presented an 'Unallocated' column in the segment
disclosure, which represented both the revenue and profit of the Marketing
Services business as well as group operating costs. However, following the
disposal of part of its Marketing Services division in the prior year, the
Group has now incorporated the remaining portion of the Marketing Services
division within the Fraud operating segment. Due to these changes in the
presentation of the segmental analysis during the year ended 31 March 2022,
the segmental information for the year ended 31 March 2021 has been
re-presented on the same basis. The value that has been re-presented in the
year to 31 March 2021 for revenue is £1,952,000. The disposed part of the
Group's Marketing Services division for the year to 31 March 2021 is now
disclosed within 'Other' and group operating costs are disclosed within the
'Central overheads' line.
Historically a portion of group operating costs were attributed to the
operating segments using a variety of allocation methods. However, in order to
better reflect the underlying trading performance of the operating segments
without distortion from changes in corporate costs, from 1 April 2021 group
operating costs are no longer allocated and instead are included fully within
'Central overheads'. The removal of allocated group operating costs from
operating segment results ensures that performance is measured against costs
that can be directly controlled or influenced by individual segments.
Due to the variety of allocation methods used historically, often at a
granular transaction level, changes from analysing by cost centre to business
unit, as well as the use of different systems across the Group at various
times during the comparative periods, it was not practical to restate the
prior periods (being the year ended 31 March 2021) to remove allocated group
operating costs out of the operating segment results. Had the prior year
information been updated then the adjusted operating profit of the individual
segments would have increased because fewer central overheads would have been
allocated to them.
Location Identity Fraud Other Total
Year ended 31 March 2022 £'000 £'000 £'000 £'000 £'000
Subscription revenues:
Consumption-based 18,648 16,271 911 - 35,830
Term-based 43,129 9,465 23,871 - 76,465
Total subscription revenues 61,777 25,736 24,782 - 112,295
Consumption 3,877 109,842 1,493 - 115,212
Other 675 7,218 7,042 38 14,973
Total revenue 66,329 142,796 33,317 38 242,480
Contribution 24,601 57,030 8,025 (106) 89,550
Central overheads (30,711)
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
(Re-presented) (Re-presented) (Re-presented) (Re-presented)
Location Identity Fraud Other Total
Year ended 31 March 2021 £'000 £'000 £'000 £'000 £'000
Subscription revenues:
Consumption-based 18,384 13,718 648 - 32,750
Term-based 37,399 4,938 19,907 - 62,244
Total subscription revenues 55,783 18,656 20,555 - 94,994
Consumption 2,970 107,173 1,122 - 111,265
Other 916 2,256 6,767 1,461 11,400
Total revenue 59,669 128,085 28,444 1,461 217,659
Contribution 19,472 47,746 5,332 (954) 71,596
Central overheads (13,700)
Adjusted operating profit 57,896
Amortisation of acquired intangibles (17,671)
Share-based payments charge (5,170)
Exceptional items 448
Operating profit 35,503
Finance revenue 120
Finance costs (1,360)
Income tax expense (7,385)
Profit for the year 26,878
5. Exceptional Items
2022 2021
£'000 £'000
(a) Acquisition related costs 5,607 862
(b) Gain on forward contracts linked to acquisitions (3,053) -
(c) Integration costs 422 -
(d) Costs associated with team member reorganisations 1,063 441
(e) Impairment of goodwill - 154
(f) Fair value adjustments to contingent consideration - (50)
(g) Foreign exchange movement on contingent consideration 157 (452)
(h) Loss/(profit) on disposal of businesses 330 (1,403)
4,526 (448)
(a) Acquisition related costs of £5,607,000 (2021: £862,000)
include legal and professional advisor costs directly attributable to the
acquisitions of Acuant and Cloudcheck detailed in note 9, as well as costs
which were incurred as part of a potential acquisition. In the prior year, the
costs related to the acquisition of HooYu Investigate and the investment in
Credolabs.
(b) During the 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 (2021: £nil) was recognised which
has been treated as an exceptional item. Due to the size and nature of this
gain, management considers that it would not reflect the Group's underlying
business performance.
(c) Integration costs were incurred relating to the integration of
Acuant and Cloudcheck. This principally related 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. Future
costs of integrating Acuant and Cloudcheck will primarily relate to the
alignment of global systems and business operations. To 31 March 2022, the
Group expensed £422,000 (2021: £nil) relating to the integration of Acuant
and Cloudcheck and it is expected that these costs will continue into the next
year.
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.
(d) 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.
(e) During the prior year £79,000 was recognised as an impairment
expense relating to the goodwill in the e-Ware Interactive cash generating
unit, and £75,000 relating to the goodwill in the Transactis cash generating
unit.
(f) In the year to 31 March 2021, adjustments were made to the
contingent consideration previously recognised as due to the sellers of
IDology due to an unrecognised payroll tax credit in the State of Georgia of
£747,000. The Group agreed to settle this liability with the sellers early,
in exchange for a reduction of £50,000 in the amount payable.
(g) 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 £157,000 (2021: gain £452,000) being treated as an exceptional
item.
(h) During the prior year, the business disposed of its Marketing
Services and Employ and Comply businesses which resulted in an overall profit
on disposal. The profit recognised on disposal of Employ and Comply was
£2,578,000. The loss on disposal of Marketing Services was £1,175,000. In
the year to 31 March 2022, additional costs of £330,000 were incurred in
relation to the finalisation of the disposal of these businesses.
The total cash net outflow during the year as a result of exceptional items
was £2,720,000 outflow (2021: £4,556,000 inflow). The tax impact of the
exceptional items was a tax credit of £1,274,000 (2021: tax charge of
£818,000).
6. Taxation
a) Tax on Profit
The tax charge in the Consolidated Statement of Profit or Loss for the year is
as follows:
2022 2021
£'000 £'000
Current income tax
UK corporation tax on profit for the year 3,841 3,841
Amounts underprovided/(overprovided) in previous years (387) (388)
Foreign tax 8,681 8,958
12,135 12,411
Deferred tax
Origination and reversal of temporary differences (7,154) (5,217)
Amounts underprovided in previous years 1,045 311
Impact of change in tax rates 364 (120)
(5,745) (5,026)
Tax charge in the Consolidated Statement of Profit or Loss
6,390 7,385
b) Reconciliation of the Total Tax Charge
The profit before tax multiplied by the standard rate of corporation tax in
the UK would result in a tax charge as explained below:
2022 2021
£'000 £'000
Consolidated profit before tax 21,653 34,263
Consolidated profit before tax multiplied by the standard rate of corporation
tax in
4,114 6,510
the UK of 19% (2021: 19%)
Effect of:
Permanent differences 753 157
Non-taxable income (30) -
Rate changes 364 (100)
Recognition of previously unrecognised deferred tax assets (142) (261)
Disposal of businesses - 480
Adjustments in respect of prior years 657 (77)
Research and development incentives (113) (69)
Patent Box relief (571) (579)
Share option relief 623 39
Effect of higher taxes on overseas earnings 735 1,285
Total tax charge reported in the Consolidated Statement of Profit or Loss
6,390 7,385
The Group's Reported Effective Tax Rate for the year was 29.5% (2021: 21.6%).
After adjusting for the impact of amortisation of acquired intangibles,
equity-settled share-based payments and exceptional items the Adjusted
Effective Tax rate was 22.1% (2021: 21.5%). These measures are defined in note
15.
7. Dividends Paid and Proposed
2022 2021
£'000 £'000
Declared and paid during the year
Final dividend for 2021 paid in July 2021: 3.40p (interim dividend for 2021 6,677 5,885
paid in January 2021: 3.00p)
Proposed for approval at AGM (not recognised as a liability at 31 March)
Final dividend for 2022: 3.81p (2021: 3.40p) 9,596 6,674
£nil (2021: £2,000) was received during the year relating to dividends paid
on forfeited shares. The total net cash impact of dividends during the year
was therefore £6,677,000 (2021: £5,883,000).
8. Earnings Per Ordinary Share from Continuing Operations
Basic Basic Diluted Diluted
2022 2021 2022 2021
pence per pence per pence per pence per
share share share share
Profit attributable to equity holders of the Company from continuing 7.1 13.8 6.9 13.5
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.
2022 2021
No. No.
Basic weighted average number of shares in issue 216,155,932 195,224,730
Dilutive effect of share options 4,339,614 3,281,173
Diluted weighted average number of shares in issue 220,495,546 198,505,903
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.
Restated(1)
Basic Diluted Basic Diluted
2022 2022 2021 2021
2022 pence per share pence per 2021 pence per share pence per
£'000 share £'000 share
Adjusted operating profit 58,839 27.2 26.7 57,896 29.7 29.2
Less net finance costs (1,754) (0.8) (0.8) (1,240) (0.6) (0.6)
Less adjusted tax (12,587) (5.8) (5.7) (12,175) (6.3) (6.2)
Adjusted earnings 44,498 20.6 20.2 44,481 22.8 22.4
(1) Since the 31 March 2021 financial statements were produced, the Group has
decided to amend the adjusted earnings per share calculation so that an
adjusted tax charge is used rather than the full reported tax charge. The
calculation of the adjusted tax charge is consistent with the calculation of
adjusted operating profit and therefore excludes the impact on tax of
amortisation of acquired intangibles, equity-settled share-based payments and
exceptional items. This has resulted in a restatement of the comparative
figures for the year to 31 March 2021. The impact of the prior year
restatement on the year to 31 March 2021 was a decrease to adjusted earnings
of £4,790,000 and a decrease to adjusted basic earnings per share for the
period and adjusted diluted earnings per share for the period of 2.4p and 2.4p
respectively.
9. 2022 Acquisitions
Acquisition of Acuant Intermediate Holding Corp
On 29 November 2021, GB Group plc acquired the entire share capital of Acuant
Intermediate Holding Corp ("Acuant"), a leading US identity verification
platform, for total consideration of £554,545,000. Consideration for the
acquisition was £468,118,000 in cash and £87,039,000 in GB Group plc shares
issued directly to the Acuant vendors. The cash consideration was funded
£305,000,000 from an equity placing of 42,068,965 new ordinary shares in GB
Group plc, a partial drawdown of £156,748,000 from the Group's renewed
revolving credit facility, with the remaining balance being funded by existing
cash resources.
The acquisition of Acuant increases GB Group plc's identity verification
presence in North America, a key growth region for the Group, accelerates
GBG's data, product and platform strategy and provides further customer and
sector diversification. Following completion of the purchase, GB Group plc's
investment in Acuant was immediately sold to GBG (USA) Holdings LLC at cost in
exchange for share capital in GBG (USA) Holdings LLC. The Consolidated
Statement of Profit or Loss includes the results for the four-month period
since the acquisition of Acuant.
The provisional fair value of the identifiable assets and liabilities of
Acuant as at the date of acquisition was:
Fair value recognised on acquisition
£'000
Assets
Technology intellectual property 127,897
Customer relationships 48,594
Brand 3,390
Investments 38
Property, plant and equipment 823
Right-of-use assets 892
Purchased software 181
Deferred tax asset 14,695
Inventory 1,034
Trade and other receivables 7,503
Corporation tax receivable 847
Cash 13,733
Trade and other payables (22,017)
Lease liability (971)
Deferred tax liabilities (45,581)
Total identifiable net assets at fair value 151,058
Goodwill arising on acquisition 403,487
Total purchase consideration transferred 554,545
Purchase consideration:
Cash 468,118
Net working capital adjustment* (612)
Share purchase 87,039
Total purchase consideration 554,545
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included in cash flows from operating (5,195)
activities)
Net cash acquired with the subsidiary 13,733
Cash paid (468,118)
Acquisition of subsidiaries, net of cash acquired (included in cash flows from (454,385)
investing activities)
Net cash outflow (459,580)
* The net working capital adjustment was included within other receivables as
at 31 March 2022.
The fair value of the identifiable assets and liabilities set out above are
considered provisional as, due to the size and complexity of the acquisition,
in addition to completion being in the second half of the year, detailed
analysis is still ongoing to agree the final values.
The fair value of the acquired trade receivables amounts to £5,769,000. The
gross amount of trade receivables is £6,704,000 with a provision of
£935,000.
There is no contingent or deferred consideration recognised as part of this
business combination.
The excess of the fair value of the consideration paid over the fair value of
the assets acquired is represented by technology related intangibles of
£127,897,000, customer relationships intangibles of £48,594,000 and brand
intangibles of £3,390,000; with residual goodwill arising of £403,487,000.
The goodwill recognised above is attributed to intangible assets that cannot
be individually separated and reliably measured from Acuant due to their
nature. These items include the capability for synergies from bringing the
businesses together, combining propositions and capabilities that will help
the business achieve accelerated consolidated growth from both cross-sell and
up-sell. None of the goodwill is expected to be deductible for income tax
purposes.
GB Group plc issued 12,005,359 ordinary shares as consideration for the
business combination. Since the share consideration was subject to certain
restrictions, the fair value of the shares was discounted to take into account
the lack of marketability, which resulted in a fair value of £7.25 per share.
The fair value of the consideration given was therefore £87,039,000.
£300,000 of the total consideration was recognised within share capital with
£86,739,000 recognised within the merger relief reserve in accordance with
the requirements of section 612 of the Companies Act 2006.
Transaction costs of £5,195,000 were incurred and included within exceptional
items in the Consolidated Statement of Comprehensive Income and are part of
operating cash flows in the Cash Flow Statement. There were no directly
attributable share issue costs recognised on this issue.
From the date of acquisition, Acuant contributed £12,304,000 of revenue (net
of deferred revenue haircut) and £1,677,000 of loss to profit before tax from
continuing operations of the Group. If the combination had taken place at the
beginning of the year, revenue would have been £270,457,000 and profit before
tax for the Group would have been £25,752,000.
Acquisition of Verifi Identity Services Limited
On 31 January 2022, GB Group plc acquired the entire share capital of Verifi
Identity Services Limited ("Cloudcheck"), a New Zealand provider of identity
verification software, for initial consideration of £10,048,000. Initial
consideration for the acquisition was £6,691,000 in cash and £3,357,000 in
GB Group plc shares issued directly to the Cloudcheck vendors. The cash
consideration was funded by existing cash resources. The Consolidated
Statement of Profit or Loss includes the results for the two-month period
since the acquisition of Cloudcheck.
The acquisition of Cloudcheck increases GB Groups plc's identity verification
presence in New Zealand and Australia, two markets where the Group currently
provides fraud detection solutions to customers. Following completion of the
purchase, GB Group plc's investment in Cloudcheck was immediately transferred
to GBG (Australia) Holding Pty Limited who subsequently transferred this
investment to GBG (Australia) Pty Limited at cost with the transaction being
settled through intercompany accounts.
The provisional fair value of the identifiable assets and liabilities of
Cloudcheck as at the date of acquisition was:
Fair value recognised on acquisition
£'000
Assets
Technology intellectual property 1,535
Customer relationships 2,930
Brand 68
Property, plant and equipment 3
Purchased software 12
Trade and other receivables 404
Cash 693
Trade and other payables (423)
Deferred tax liabilities (1,269)
Total identifiable net assets at fair value 3,953
Goodwill arising on acquisition 9,713
Total purchase consideration transferred 13,666
Purchase consideration:
Cash 6,691
Share purchase 3,357
Contingent consideration 3,618
Total purchase consideration 13,666
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included in cash flows from operating (88)
activities)
Net cash acquired with the subsidiary 693
Cash paid (6,691)
Acquisition of subsidiaries, net of cash acquired (included in cash flows from (5,998)
investing activities)
Net cash outflow (6,086)
The fair value of the identifiable assets and liabilities set out above are
considered provisional as completion was only two months prior to the year-end
and so detailed analysis is still ongoing to agree the final values.
The fair value of the acquired trade receivables amounts to £398,000. The
gross amount of trade receivables is £398,000 with a provision of £nil.
The contingent consideration is payable in stages based on revenue targets
established with the vendor. The first stage of contingent consideration is
linked to growth in revenue in the financial year ended 31 March 2023 and is
payable in May 2023. The second stage of contingent consideration is linked to
growth in revenue in the financial year ended 31 March 2024 and is payable in
May 2024. The maximum amount payable is NZ$8,000,000.
The fair value measurement of the contingent consideration represents a level
3 valuation due to unobservable inputs, which are not derived from market
data. The key assumption within the forecast revenue is volume.
The excess of the fair value of the consideration paid over the fair value of
the assets acquired is represented by technology related intangibles of
£1,535,000, customer relationships intangibles of £2,930,000 and brand
intangibles of £68,000; with residual goodwill arising of £9,713,000.
The goodwill recognised above is attributed to intangible assets that cannot
be individually separated and reliably measured from Cloudcheck due to their
nature. These items include the capability for synergies from bringing the
businesses together, combining propositions and capabilities that will help
the business achieve accelerated consolidated growth from both cross-sell and
up-sell. None of the goodwill is expected to be deductible for income tax
purposes.
GB Group plc issued 580,768 ordinary shares as consideration for the business
combination. Since the share consideration was subject to certain
restrictions, the fair value of the shares was discounted to take into account
the lack of marketability, which resulted in a fair value of £5.78 per share.
The fair value of the consideration given was therefore £3,357,000. £15,000
of the total consideration was recognised within share capital with
£3,342,000 recognised within the merger relief reserve in accordance with the
requirements of section 612 of the Companies Act 2006.
Transaction costs of £88,000 were incurred and included within exceptional
items in the Consolidated Statement of Comprehensive Income and are part of
operating cash flows in the Cash Flow Statement. There were no directly
attributable share issue costs recognised on this issue.
From the date of acquisition, Cloudcheck contributed £340,000 of revenue and
£140,000 of profit to profit before tax from continuing operations of the
Group. If the combination had taken place at the beginning of the year,
revenue would have been £244,891,000 and profit before tax for the Group
would have been £22,717,000.
10. Trade and Other Receivables
2022 2021
£'000 £'000
Trade receivables 59,557 48,883
Allowance for unrecoverable amounts (3,968) (3,600)
Net trade receivables 55,589 45,283
Prepayments 10,561 8,211
Accrued income 3,565 5,123
69,715 58,617
11. Loans
Bank Loans
On 18 November 2021, the Group refinanced its existing revolving credit
facility and the total was increased to a £175,000,000 multi-currency
facility. This facility is due to expire in July 2025 with two one-year
extension options. Total fees paid in relation to the extension were
£1,157,000 which included an arrangement fee of £1,122,000.
On 22 November 2021, the Group drew down $210,220,000 (£156,748,000) against
the new facility in order to part fund the acquisition of Acuant (see note 9).
Subsequent to this drawdown repayments totalling $40,220,000 (£30,106,000)
have been made prior to 31 March 2022.
During the year to 31 March 2021, loan arrangement fees on the previous
revolving credit facility were reclassified to prepayments due to the loan
value being £nil at 31 March 2021 and the net position was therefore an asset
rather than a liability. In the year to 31 March 2022 loan arrangement fees
have been netted off the loan balance.
The debt bears an interest rate of Sterling Overnight Index Average (SONIA)
for British Pound Sterling drawdowns or Secured Overnight Financing Rate
(SOFR) for US Dollar 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.
2022 2021
£'000 £'000
Opening bank loan - 62,139
New borrowings 156,748 -
Loan arrangement fee (1,157)
Repayment of borrowings (30,073) (62,500)
Loan fees paid for extension - (193)
Amortisation of loan fees 129 193
Foreign currency translation adjustment 2,579 -
Reclassification of loan fees to prepayments - 361
Closing bank loan 128,226 -
Analysed as:
Amounts falling due within 12 months - -
Amounts falling due after one year 128,226 -
128,226 -
Analysed as:
Bank loans 129,254 -
Unamortised loan fees (1,028) -
128,226 -
12. Trade and Other Payables
2022 2021
£'000 £'000
Trade payables 10,558 6,345
Other taxes and social security costs 4,785 4,202
Accruals 34,229 30,520
49,572 41,067
13. Contingent Liability
The Information Commissioner's Office, the data industry regulator in the UK,
announced in November 2018 that it was conducting audits on a number of
companies to understand the use of data in their services. GBG was included in
this review and has continued to actively engage and work with the
Commissioner to continue to improve its privacy compliance. We will keep the
market informed of any material developments.
14. Subsequent Events
On 10 May 2022, The GB Group Employee Benefit Trust ("the Trust") was
established. The purpose of this trust will be to acquire and hold a pool of
shares to satisfy share awards under the Group's employee share option
schemes.
15. 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.
The following are the key non-GAAP measures used by the Group:
Organic Growth
Organic growth is defined by the Group as year-on-year continuing revenue
growth, excluding acquisitions which are included only after the first
anniversary following their purchase and disposed businesses. This enables
measurement of performance on a comparable year-on-year basis without the
impact of M&A activity.
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.
2022 2021 Growth
£'000 £'000 %
Group revenue 242,480 217,659 11.4%
Revenue from acquisitions up to their first anniversary (13,213) - (6.1)%
Revenue from disposals (38) (6,583) 3.5%
Organic revenue 229,229 211,076 8.6%
Constant currency adjustment - (3,897) 2.0%
Organic revenue at constant currency 229,229 207,179 10.6%
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.
2022 2021
£'000 £'000
Operating profit 23,407 35,503
Amortisation of acquired intangibles 24,735 17,671
Share-based payment charges 6,171 5,170
Exceptional items 4,526 (448)
Adjusted Operating Profit 58,839 57,896
Adjusted Operating Profit Margin
Adjusted operating profit margin is calculated as adjusted operating profit as
a percentage of revenue.
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.
2022 2021
£'000 £'000
Income tax charge 6,390 7,385
Tax impact of amortisation of acquired intangibles 5,082 4,541
Tax impact of share-based payment charges 218 1,067
Tax impact of exceptional items 897 (818)
Adjusted Tax 12,587 12,175
Adjusted Effective Tax Rate
The Adjusted Effective Tax Rate means Adjusted Tax divided by Adjusted
Earnings.
2022 2021
Profit 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 21,645 6,390 29.5% 34,263 7,385 21.6%
Add back:
Amortisation of acquired intangibles 24,735 5,082 (4.8%) 17,671 4,541 1.4%
Equity-settled share-based payments 6,171 218 (2.5%) 5,170 1,067 (0.2%)
Exceptional items 4,526 897 (0.1%) (448) (818) (1.3%)
Adjusted Effective Tax Rate 57,077 12,587 22.1% 56,656 12,175 21.5%
Adjusted EBITDA
Adjusted EBITDA means Adjusted Operating Profit before depreciation and
amortisation of non-acquired intangibles.
2022 2021
£'000 £'000
Adjusted Operating Profit 58,839 57,896
Depreciation of property, plant and equipment 1,531 1,433
Depreciation of right-of-use assets 1,593 1,838
Amortisation of non-acquired intangibles 233 243
Adjusted EBITDA 62,196 61,410
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 8 for calculations.
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.
2022 2021
£'000 £'000
Cash and cash equivalents 22,302 21,135
Loans on balance sheet 128,226 (361)
Unamortised loan arrangement fees 1,028 361
External Loans 129,254 -
Net (Debt)/Cash (106,952) 21,135
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.
2022 2021
£'000 £'000
Cash generated from operations before tax payments (from Consolidated Cash 56,256 72,631
Flow Statement)
Opening unpaid exceptional items 549 -
Total exceptional items in the year 4,526 (448)
Non-cash exceptional items (427) 1,751
Closing unpaid exceptional items (1,372) (549)
Cash generated from operations before tax payments and exceptional items paid 59,532 73,385
Adjusted EBITDA 62,196 61,410
Cash Conversion % 95.7% 119.5%
Debt Leverage
This is calculated as the ratio of net (debt)/cash to adjusted operating
profit. This demonstrates the Group's liquidity and its ability to pay off its
incurred debt.
2022 2021
£'000 £'000
Cash and cash equivalents 22,302 21,135
Loans on balance sheet 128,226 (361)
Unamortised loan arrangement fees 1,028 361
External Loans 129,254 -
Net (Debt)/Cash (106,952) 21,135
Adjusted EBITDA 62,196 57,896
Debt Leverage 1.72 Positive cash
Pro forma revenue
This includes adjustments to reported revenue for the pre-acquisition/disposal
revenue from acquisitions/disposals in the past twelve months in order to
provide a more meaningful comparison to assess growth against in future
periods. This includes the pre-acquisition revenue from 1 April 2021 to 29
November 2021 for Acuant and from 1 April 2021 to 31 January 2022 for
Cloudcheck.
2022
£'000
Reported revenue 242,480
Pre-acquisition/disposal revenue 29,931
Post-acquisition unwind of deferred revenue haircut(1) on Acuant 1,381
Pro forma revenue 273,792
(1) As required by IFRS 3 (Business Combinations, the revenue for Acuant
includes a negative adjustment of £1.4m related to the restatement to fair
value of the acquired deferred revenue balance (commonly known as the deferred
revenue 'haircut'). The deferred revenue haircut represents the cost of
providing the deferred revenue service in the post-acquisition period.
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 2022
Annual General Meeting 28 July 2022
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 Broker Registrars
Peel Hunt LLP
Equiniti
7th Floor, Aspect House
100 Liverpool St, Spencer Road
London Lancing
EC2M 2AT West Sussex
BN99 6DA
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