TIDMGBG
RNS Number : 7627C
GB Group PLC
15 June 2023
Embargoed until 7.00 a.m. 15 June 2023
GB GROUP PLC
("GBG", the "Group" or the "Company")
FULL YEAR RESULTS FOR THE YEARED 31 MARCH 2023
GB Group plc (AIM: GBG), the experts in digital location,
identity verification and fraud prevention software, announces its
audited results for the year ended 31 March 2023.
Chris Clark, CEO, commented:
"GBG continued to make important strategic progress and
operational improvements that will have long-term benefits;
however, we were impacted by unexpectedly deep post-pandemic
corrections in some end markets. These corrections were largely
felt in the internet economy, notably by cryptocurrency and fintech
customers primarily in our Identity business in the Americas, as
flagged in our February trading update.
Looking ahead to FY24, since our update in February, there has
been no material change in market conditions. Uncertainty remains;
however, we still expect some gradual revenue acceleration in the
latter part of the year. The Board is confident that GBG will
deliver its FY24 profit expectations assisted by a group-wide focus
on efficiency. The business is well-placed to benefit from
structural growth, including the increasing proliferation and
sophistication of fraud through the advent of generative AI,
capitalising on the breadth of its capabilities and global reach to
deliver our mid-term growth targets."
Financials FY23 FY22
---------------------------------------- ------------ ------------
Statutory revenue GBP278.8m GBP242.5m
Pro forma constant currency revenue(1) GBP279.8m GBP269.9m
Adjusted operating profit(1) GBP59.8m GBP58.8m
Adjusted operating margin(1) 21.5% 24.3%
Operating (loss)/profit(2) (GBP112.4)m GBP23.4m
(Loss)/profit before tax (GBP118.8)m GBP21.7m
Adjusted diluted earnings per share(3) 16.4p 20.2p
Diluted (loss)/earnings per share (47.5)p 6.9p
Net assets GBP694.1m GBP787.1m
Net debt(1) (GBP105.9)m (GBP107.0)m
Final dividend per share 4.00p 3.81p
Notes: (1) Defined within note 20 to the Full Year Results. (2)
Exceptional costs of (GBP127.2)m include a (GBP122.2)m non-cash
goodwill impairment charge following the Group's annual impairment
review, as explained further within the financial review and note 7
to the Full Year Results. (3) Defined within note 9 to the Full
Year Results.
Financial summary
-------------------------------------------------------------------
* Statutory revenue growth of 15.0% as a result of
prior year acquisitions and despite tough comparators
driven by the US stimulus project and exceptional
cryptocurrency volumes in the prior year
* Pro forma revenue of GBP279.8 million up 3.7% on an
organic constant currency basis reflects:
* Double-digit growth in both Location and Fraud
segments
* Challenging post-pandemic conditions in the internet
economy within Identity
* 94% of revenue from subscription and consumption
models and strong customer retention demonstrates the
attractiveness and repeatability of our c
ash-generative model
* Adjusted operating profit up 1.7% to GBP59.8 million,
representing an adjusted operating profit margin of
21.5%. Within this, gains on foreign exchange were
GBP3 million
* Reflecting the macro challenges in the last year, the
annual impairment review resulted in a non-cash
exceptional goodwill impairment charge of GBP122.2
million against our Identity business in the Americas,
which is formed of our IDology and Acuant
acquisitions
* Net debt of GBP105.9 million as at 31 March 2023
(FY22: GBP107.0 million) despite a negative GBP8.6
million retranslation impact since FY22; focused on
cash generation to further reduce our debt during
FY24
* The Board recommends a final dividend per ordinary
share of 4.00p, up 5%
Important strategic progress; well-positioned for the future
--------------------------------------------------------------------------------------------------------------
Addressing the convergence of identity and fraud, while driving efficiency through simplification:
* Prioritised product and technology investment, and
simplified our portfolio to meet the rapidly changing
market needs which has enabled GBG to accelerate
product innovation
* Mobile Fraud signals in EMEA, Fraud Alerts and
Compliance platform in APAC and AI-powered
anti-tampering technology
* Entering markets at pace, winning new opportunities
and building our pipeline, which includes our
expanding Southeast Asia footprint driven by growing
demand for identity fraud solutions
* Enhanced capabilities and breadth: Documents and
biometrics portfolio now powered by one library with
8,000 documents; expanded Multi Bureau to cover
Australia and Canada, and GBG GO, our no-code
platform is resonating with customers, who require
expertise to manage onboarding at speed
* Continued to enhance our Location intelligence
products with customers now benefitting from the
release of our latest AI-powered address
capture/verify solutions to increase match rates
* Acuant integration complete. IDology is now our
primary go-to-market identity brand in the Americas,
our differentiated capabilities in biometrics,
document and data offer a powerful, combined solution
and the combined team have secured over 100
cross-sell/up-sell opportunities
* We are proud recipients of Gallup's 2023 Exceptional
Workplace Award, reflecting our commitment to
prioritising team engagement and embedding it within
our business strategy
* Progress on our ESG strategy; achieved carbon neutral
operations this year and set an ambition to become a
carbon net zero business by 2045
* Capital Market's event in January articulated how GBG
is uniquely positioned to capitalise on the long-term
growth opportunity
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Today's results presentation
--------------------------------------------------------------------------------------------------------------
Management will be hosting a results presentation webcast this morning at 09:00am for sell-side
analysts and institutional investors. The webcast can be accessed via our website www.gbgplc.com/en/investors
or directly at https://brrmedia.news/GBG_FY23 . Playback will be available along with the
presentation materials shortly following the event.
--------------------------------------------------------------------------------------------------------------
For further information, please contact:GBG
Chris Clark, CEO & David Ward, CFO +44 (0) 1244 657333
Richard Foster, Investor Relations +44 (0) 7816 124164
Numis (Nominated Adviser and Corporate Broker)
Simon Willis & Joshua Hughes +44 (0) 0207 260 1000
Barclays (Corporate Broker)
Robert Mayhew & Stuart Jempson +44 (0) 0207 623 2323
Teneo (Financial PR) +44 (0) 20 7353 4200
James Macey White GBG@teneo.com
Website www.gbgplc.com/investors
About GBG
We are the experts in digital location, identity and managing fraud risk and compliance. Helping
organisations across the globe eliminate customer friction and fraud from their digital experiences.
GBG develop and deliver address verification, digital identity, fraud risk and compliance
software to businesses globally.
Through the combination of the latest technology, the most accurate data and our unrivalled
expertise, GBG helps organisations ranging from start-ups to the largest consumer and technology
brands in the world deliver seamless experiences, so their customers can transact online with
greater confidence.
To find out more about how we help our customers establish trust with their customers visit
www.gbgplc.com and follow us on LinkedIn and Twitter @gbgplc.
Chief Executive Officer's review
GBG has a clear purpose, to build trust in a digital world,
enabling individuals and businesses to transact online with
confidence in the growing digital marketplace. We are at the
forefront of the global market for location intelligence, identity
verification and fraud prevention. These markets are converging and
have strong structural growth drivers such as digital acceleration,
eCommerce adoption, increased regulation and the rising
industrialisation of digital fraud across sectors. The rapid
development of artificial intelligence (AI) has further reinforced
the need for customers to adopt multi-layered identity solutions to
combat bad actors exploiting these emerging technologies to the
detriment of consumers.
The global identity market has seen significant macro
uncertainty and GBG has not been immune, with the challenging
post-pandemic conditions for the internet economy, cryptocurrency
and fintech customers in particular, primarily impacting our
identity business in the Americas. Overall, GBG has demonstrated
resilience, with growth in revenue and a strong adjusted operating
profit margin for FY23, despite, as previously indicated, tough
comparators driven by the US stimulus project and exceptional
cryptocurrency volumes.
Importantly, against this backdrop, GBG has maintained its
leading market positions and its strong customer relationships. We
have continued to win new logos, accelerated up-sell and cross-sell
and maintained excellent customer retention rates. At the same time
we have driven simplification and efficiency within the business .
GBG's performance this year is in no small part due to the
dedication of our 1,250+ global team. Their commitment and
expertise, working tirelessly in partnership with our valued
customers, have enabled GBG to navigate the present and evolving
macro uncertainty and deliver important strategic progress and
operational improvements to enable the Group to achieve its
medium-term growth and profitability plans.
Important strategic progress with our product and technology
portfolio
The need to detect and prevent fraud is critically important to
our customers, who rely on GBG millions of times each day to
increase efficiency, prevent bad actors, and to ensure they know
their end customers are who they say they are, with technological
shifts such as the advent of generative AI only accelerating the
risk involved with operating in the digital world. Our established
reputation and relationships as a trusted industry specialist mean
GBG is well-positioned as one of the world's leading experts in
digital identity to help customers navigate these changes,
delivering our multi-layered approach underpinned by our leading
combination of data, technologies, and people.
A recent study by identity and security specialists,
KuppingerCole, noted the convergence of identity and fraud across
the full customer lifecycle, recognising GBG as a market leader in
fraud prevention . This year we have focused on deploying our
technological capabilities globally, simplifying and rationalising
our portfolio to deliver innovation locally that responds
effectively to rapidly changing market dynamics. This includes
Mobile Fraud Signals in EMEA, while in APAC we extended the fraud
monitoring capabilities acquired with Acuant via the GBG Compliance
Platform and launched GBG Fraud Alerts. The i nnovative nature of
our solutions supports entry into new markets with growing demand
for identity fraud services . Opportunities in Thailand, Vietnam
and the Philippines demonstrate our expanding footprint in
Southeast Asia, where we are providing fraud data-sharing
consortiums to enable customers to combat suspicious transactions
effectively.
Our market-leading breadth of capability is a key differentiator
in a customer's decision to work with GBG. The integration of the
comprehensive document library built by Acuant has upgraded our
global documents and biometrics capability to cover 8,000 identity
documents, underpinned by AI tampering detection to counter
increasing sophistication in counterfeit documents. We are also
leveraging our global data partnerships, we have launched our Multi
Bureau product in Australia and Canada to build on its success in
delivering higher match rates to EMEA customers . As we evolve, we
will remain an expert partner that is easy to work with. The launch
of the GBG GO platform enables customers to orchestrate their
identity services quickly via a no-code platform. This is
resonating with customers, and we are already working with
multi-brand gaming operators such as OX and Jumpman to reduce their
risk and maximise customer conversion.
We have continued to expand our broader capabilities in
Location, with customers now benefitting from the release of our
latest AI-powered address capture/verify solutions, which include
AI-parsing capability. This has increased our ability to understand
address data with an increased match-rate performance of up to 19%
in some markets. Location has also successfully upgraded its
digital-first capabilities, developing a next-generation customer
experience that we can replicate globally following its initial
launch in the Americas. Location's progress this year reinforces
the strength of our location intelligence products, which have been
recognised by a product leadership award from industry experts,
Frost & Sullivan, who highlighted our ability to handle address
data more efficiently and accurately than our peers.
Well-positioned for the future
GBG has continued to evolve its go-to-market activities,
concentrating on profitable growth through up-selling and
cross-selling the breadth of our portfolio, while driving enduring
value through our commercial approach, developing solutions bundles
to elevate the customer experience. We are enhancing GBG's
longer-term competitiveness with product and technology investment
in areas to deliver the highest returns, alongside operational
efficiency initiatives. This includes reviews of our office
footprint in light of hybrid working, marketing activities, the
creation of a single global customer support framework and active
headcount management.
One of the key activities undertaken this year has been the
integration of Acuant with our existing Identity business, IDology,
to form the largest pure-play identity verification provider in the
Americas. We are well-positioned to navigate the short-term
headwinds in our largest region, with the work to achieve the
anticipated products and technology benefits of this combination
continuing at pace. We delivered GBP5 million of planned synergy
benefits in the last year, with a runway of enduring benefit to the
Group over the medium to long term that reflects the strategic
nature of the acquisition.
GBG's go-to-market approach in the Americas has evolved as we
capitalise on the increased scale generated by bringing the two
businesses together. Beginning April 2023, IDology is the primary
go-to-market brand for our identity solutions in this region. This
will amplify our voice in a large and fragmented market and
leverage our combined capabilities to deliver a unique multifaceted
approach in documents & biometrics and data, augmented by the
latest machine learning and AI innovations. This is underpinned by
a unified sales structure, led by a newly established Chief Revenue
Officer role for the Americas, to execute on our priority to
capture cross-sell, with over 100 opportunities with new and
existing customers secured to date.
Looking ahead, there is a compelling opportunity to build our
markets, capitalising on cross-sell and upsell opportunities
throughout GBG as we expand use cases with existing customers, as
well as capturing new business as we move into new sectors and
geographies. High customer satisfaction and net promoter score
higher than our industry benchmarks demonstrate our focus on
delivering for the customer. Over 1,275 responses to our Voice of
Customer programme this year provide relevant and actionable
feedback which we apply to build differentiation through our
products, technology and data. This is reflected in the enhanced
solutions we bring to market that offer proprietary data insights
to serve customers' evolving needs.
Trading performance
Group revenue and adjusted operating profit were in line with
the trading update released on 20 April 2023. Our statutory revenue
of GBP278.8 million (FY22: GBP242.5 million) increased by 15.0%.
The contribution from prior year acquisitions more than offset the
tough prior period comparative that includes the unusually high and
non-repeating transaction volumes driven by the US stimulus project
and cryptocurrency trading customers.
On a pro forma basis, constant currency revenue growth was 3.7%.
This fully adjusts for the impact of the two prior year
acquisitions, including the associated FY23 deferred revenue
haircut adjustment. It also adjusts for GBP4.2 million of revenue
from US stimulus customers in the prior period and the full GBP15.4
million impact from the year-on-year decline in cryptocurrency
customer revenues, which was 1.8% of Group revenue in FY23, having
stabilised at a run rate of around 1% going forward. Our Location
and Fraud segments performed strongly, delivering double-digit
growth, however, overall growth was impacted by the post-pandemic
reduction in demand experienced in the internet economy, primarily
within our Identity business in the Americas.
Adjusted operating profit increased by 1.7% to GBP59.8 million,
representing an adjusted operating profit margin of 21.5%.
Throughout the year, we have maintained discipline around cost and
overall headcount, proactively managing our resources to ensure
ongoing investment in the business aligns with our medium-term
guidance for growth and profitability. On a statutory basis, there
was an operating loss of GBP112.4 million (FY22: profit of GBP23.4
million), principally due to the FY23 goodwill impairment charge of
GBP122.2 million following the annual impairment review and higher
charge for amortisation of acquired intangibles.
The Group's net debt position at the year-end was GBP105.9
million (FY22: GBP107.0 million), despite a negative GBP8.6 million
retranslation impact since FY22 from the conversion of US
dollar-denominated debt into pound sterling. We will continue to
use GBG's ongoing ability to generate good levels of cash to
further reduce our net debt over the coming year.
The Board remains committed to a progressive dividend policy
that provides consistent reliable cash returns to investors as part
of our balanced approach to capital allocation. Based on its
ongoing confidence that the business is well-placed for the future,
the Board has recommended a final dividend per share of 4.00 pence
(FY22: 3.81 pence per share), which represents a year-on-year
increase of 5.0%.
Location (28% of Group revenue)
Location delivered a strong performance with revenue growth of
11.7% on a constant currency basis to GBP76.9 million driven by our
international expansion in Europe, Americas and APAC, despite
softer demand in some sectors. We more than offset these lower
transactional volumes with effective up-sell and cross-sell
campaigns, proactive pricing strategies and new business in
increasingly diversified sectors. This approach yielded positive
growth to demonstrate the resilience of Location's business model.
We also expanded our existing partnership with IBM, extending our
long-standing relationship with a new agreement.
Our new business pipeline has seen wins across sectors and
regions. Notable new retail customers include Inditex (owner of
Zara), Converse and Clarks, while the trend of manufacturers
transitioning to direct-to-consumer sales continues with Scentsy in
North America, Delonghi in Italy and Teufel Audio in Germany. We
have also continued to diversify through our new customer
acquisition. By building on the Group's strength in financial
services and gaming, we are now delivering our Location
capabilities to customers such as Credit One, Klarna, Lloyds Bank
and Bet365 to help meet their regulatory needs and improve
transaction effectiveness.
Identity (58% of Group revenue )
FY23 FY22 Change
GBPm GBPm %
---------------------------------------------- ------ ------- -------
Statutory revenue 162.7 142.8 13.9%
Acquisitions/disposals - 31.4 -
Full year-on-year decline in cryptocurrency - (15.4) -
customer revenue
Revenue related to US stimulus work - (4.2) -
Constant currency adjustment - 12.3 -
Unwind of deferred revenue haircut and other 1.0 - -
---------------------------------------------- ------ ------- -------
Pro forma constant currency revenue 163.7 166.9 (1.9%)
Identity's statutory revenue increased to GBP162.7 million as a
result of the acquisitions of Acuant and Cloudcheck in FY22. On a
pro forma constant currency basis, revenue declined by 1.9%, which
adjusts for the slowdown in volume from cryptocurrency customers
and the non-repeat of the US stimulus work. This reduction, as
previously announced, largely reflects the specific impact of lower
volumes from internet economy customers, who benefitted
significantly from pandemic-related changes in consumer behaviour,
particularly in the Americas. The uncertainty also led to an
incremental lengthening of sales cycles and project delays. The
trends in this region influenced the assumptions used for the
annual impairment review, which resulted in an exceptional non-cash
impairment charge of GBP122.2 million, with more detail provided in
the financial review.
Outside the Americas, Identity demonstrated resilience through
greater sector diversity as EMEA and APAC achieved combined
constant currency pro forma organic growth of 9.1%. We are also
pleased that, regardless of the overall volume reduction, our
customer retention rate remains strong. New customer acquisition
continues to contribute to underlying growth, driven by structural
opportunities in sectors such as gaming, financial services and the
public sector. We demonstrated our ongoing strength in gaming;
securing Bally's, Pollard, and NTD in the Americas and Australia;
while securing new financial services customers such as Confidia,
Mortgage Advice Bureau and Transamerica Lending. A number of
additional law enforcement and local authority customers continue
to indicate growing public sector demand.
As noted above, we completed the integration of our two
businesses in the Americas, creating a strong foundation as our
team moves forward as IDology. The team is focused on a number of
cross-sell and up-sell revenue initiatives, with customers such as
B2B Soft, ClickBank and Qolo among over 100 customers now gaining
the benefit of the expanded capabilities we offer. We have also
been encouraged by cross-sell in our EMEA and APAC regions for the
GBG Compliance platform, with customers such as ZeusFX, Tazapay and
BuddyBet being notable new logos selecting our SaaS-based solution
for its international coverage.
Fraud (14% of Group revenue)
We continue to see an increasing convergence of fraud and
identity which is driving the strong demand for our fraud
prevention and detection solutions as customers look to deploy an
integrated approach to respond to the fast-evolving threat
landscape. Revenue of GBP39.2 million represents strong organic
constant currency growth of 14.7% from success in securing new
customers and renewals of agreements with large financial
institutions, which demonstrate the importance of GBG's fraud
prevention capabilities to customers in both APAC and EMEA. Our new
customer pipeline reflects our expansion in Southeast Asia, in
Malaysia with CTOS, Union Bank of the Philippines and Bank BJB in
Indonesia, while in EMEA we secured Banque Marocaine. We continue
to see use case expansion for our specialist fraud investigation
capabilities within the UK Government's Department for Work &
Pensions, in addition to a competitive win-back of Next, one of the
UK's largest non-food retailers.
Recognition for our highly engaged team
Our success and ongoing progress is driven by our 1,250+ people
delivering each day for our customers. They create an inclusive
environment that supports our position as an employer of choice. We
were delighted to have been recognised with Gallup's 2023
Exceptional Workplace Award. Of 57 companies awarded globally, GBG
was one of only two companies headquartered in the UK to be
selected.
The award reflects our commitment to prioritising team
engagement, which we have placed at the heart of our business
strategy. We measure this on an ongoing basis with the results
consistently demonstrating the high levels of engagement in the
organisation, with our latest Q12 survey reporting that 93% of our
team members recommend GBG as a great place to work. While we have
actively managed our headcount, we have continued to invest in our
people. This year we have recognised 138 team members by awarding
them with promotions for their contributions to the Group's
performance.
Progress on Environment, Social & Governance (ESG)
At GBG, we are committed to driving positive change and ensuring
that the needs of our stakeholders are reflected in our evolving
ESG strategy. We have worked closely with our team, customers and
investors to identify key areas for improvement, including business
and data ethics, people development and inclusion, diversity and
equality. We have embedded this feedback into our strategy and
processes, as we strive to meet our targets to reduce our
environmental impact and increase diversity within our
business.
We are actively managing the environmental impact of our
operations and solutions while continuing to drive growth and
innovation across our business. This year we formalised our ESG
strategy and approach to measure, communicate and enhance our
impact. Having become carbon neutral in our operations during FY23,
we have now set out a longer-term target to become a carbon net
zero business by 2045, supported by a 42% reduction in our Scope 1
and 2 emissions over the next decade.
GBG's approach to data use is critical to building a more
inclusive digital economy, with our recent Digital Identity Service
Provider certification against the UK Government's trust framework
being one such example of our commitment to data privacy and
security. Following the UK's Information Commissioners Office 2018
audit of data in GBG's services conducted along with several
companies, we have now received confirmation that formal engagement
has closed. Our significant capabilities and expertise will enable
us to continue applying the highest data privacy and protection
standards in our operations as a key differentiator for our
offering.
Outlook
In the year ahead, GBG will continue to evolve its go-to-market
activities, concentrating on profitable growth through up-selling
and cross-selling the breadth of our portfolio, driving enduring
value through our commercial model as we implement solutions
bundles to elevate the customer experience. We will also prioritise
enhancing GBG's competitiveness over the longer term, focusing
product and technology investment in areas that deliver the highest
returns and implementing initiatives to increase our operational
effectiveness.
Since our update in February, there has been no material change
in market conditions. While uncertainty remains, we still expect
some gradual revenue acceleration in the latter part of the year.
The Board is confident that GBG will deliver its FY24 profit
expectations assisted by a group-wide focus on efficiency. The
business is well-placed to benefit from structural growth,
capitalising on the breadth of its capabilities and global reach to
deliver our mid-term targets.
GBG has a high-quality global customer base, engaged people and
differentiated products. The business is well-positioned to
capitalise on the significant potential in our markets with
solutions that are crucial for customers to operate safely and
efficiently in a digital world. Notwithstanding the current
headwinds facing the business, the Board remains confident in the
long-term opportunity for GBG as the world continues to build an
ever-increasing business presence online.
Chris Clark
Chief Executive Officer
On behalf of the Board
14 June 2023
Financial review
In the year to 31 March 2023 (FY23), GBG's revenue and profit
growth was lower than we had expected at the start of the year
largely due to two significant external factors that emerged in the
period. Firstly, significantly higher levels of cost inflation,
which had an impact on interest rates and consumer confidence.
Secondly, GBG was not alone in experiencing an impact during FY23
from adjustments to consumer behaviours following the end of the
Covid-19 pandemic that caused some level of reversal of the large
accelerating strides made in the digitalisation of the economy
during the pandemic. Despite these factors that led to GBG falling
short of our original financial expectations for FY23, we still
recorded our highest ever level of revenue and adjusted operating
profit.
Growth in the year included contributions from the Acuant and
Cloudcheck businesses that were acquired during the prior year.
This more than offset a tough prior period comparative that
included a benefit from unusually high and non-repeating
transaction volumes driven by the US stimulus project and
cryptocurrency trading. Excluding this non-repeating revenue, the
pro forma growth was 3.7% on a constant currency basis.
The Group responded proactively to the tough macroeconomic
conditions, undertaking initiatives that will benefit our
operational efficiency over the longer term, with the near-term
outcome enabling an adjusted profit margin of 21.5% (FY22: 24.3%),
despite the margin of the prior year having benefited from the
non-repeating revenue mentioned above, but also in the face of
higher cost inflation pressure. Excluding gains on foreign exchange
partially offset by the impact of the FY23 deferred revenue haircut
adjustment, the FY23 adjusted operating profit margin would have
been 20.7% (FY22: 24.7%).
GBG's commercial model and resilient customer retention
continues to support strong cash generation and good forward
visibility due to our high levels of repeatable revenue, with 93.7%
(FY22: 91.6%) of pro forma revenue coming from subscriptions or
consumption. It is our commercial model that ensures that GBG's
balance sheet remains strong and during FY23 we continued to focus
on cash generation and repayment of the debt that we took on to
facilitate the two acquisitions that we completed in FY22. By the
end of the year GBG's net debt to EBITDA ratio was 1.68 times
(FY22: 1.72 times).
We were pleased to obtain approval for the exercise of the first
of the one-year extension options on the existing revolving credit
facility. Extending the length of the facility through to July 2026
provides a platform to support investment in organic growth and
potential future M&A activity.
The Group uses adjusted figures as key performance indicators in
addition to those reported under UK-adopted International Financial
Reporting Standards and in accordance with standards issued by
IFRIC. Adjusted figures exclude certain non-operational or
exceptional items, which is consistent with prior year
treatments.
FY23 FY22
GBP'000 GBP'000
--------------------------------------------------------- ---------
Revenue 278,810 242,480
Gross profit margin 71.0% 70.9%
Adjusted operating profit 59,817 58,839
Adjusted operating profit margin 21.5% 24.3%
Share-based payments (2,313) (6,171)
Amortisation of acquired intangibles (42,758) (24,735)
Impairment of goodwill (122,225) -
Other exceptional items (4,950) (4,526)
Operating (loss)/profit (112,429) 23,407
Net finance costs (6,401) (1,754)
(Loss)/profit before tax (118,830) 21,653
Total tax charge (964) (6,390)
(Loss)/profit for the year (119,794) 15,263
Final dividend per share 4.00 3.81
Diluted (loss) / earnings per share (pence) (47.5) 6.9
Adjusted diluted earnings per share (pence) 16.4 20.2
Revenue and gross margin
Total revenue growth in the year was 15.0% (FY22: 11.4%). On a
pro forma basis, adjusting for the impact of acquisitions,
disposals and non-repeating revenue and at constant foreign
exchange rates, revenue growth was 3.7%. More detail on revenue
performance in each of our operating segments is included in the
Chief Executive Officer's Review.
Pre-acquisition
Statutory /disposal Deferred Non-repeating Pro forma
revenue Revenue Revenue Haircut revenue(1) Revenue
FY23 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------------- ---------------- ---------------- --------------- ----------------
Subscription
revenues:
Consumption-based 45,427 - - 45,427
Term-based 112,034 - 1,241 113,275
------------------- ---------------- ---------------- ---------------- --------------- ----------------
Total subscription
revenues 157,461 - 1,241 158,702
Consumption 103,834 (219) - 103,615
Other 17,515 - - 17,515
------------------- ---------------- ---------------- ---------------- --------------- ----------------
Revenue 278,810 (219) 1,241 279,832
FY22
------------------- ---------------- ---------------- ---------------- --------------- ----------------
Subscription
revenues:
Consumption-based 37,402 7,573 - - 44,975
Term-based 76,465 14,781 1,381 - 92,627
------------------- ---------------- ---------------- ---------------- --------------- ----------------
Total subscription
revenues 113,867 22,354 1,381 - 137,602
Consumption 115,212 (409) - (19,565) 95,238
Other 13,401 7,986 - - 21,387
------------------- ---------------- ---------------- ---------------- --------------- ----------------
Revenue 242,480 29,931 1,381 (19,565) 254,227
(1) Non-repeating revenue represents revenue from the US
government's stimulus programme and exceptional cryptocurrency
volume.
In total on a pro forma basis, 93.7% (FY22: 91.6%) of revenue
came from the combination of subscriptions and consumption revenue
models which is illustrated in the table above.
This mix of business models provides a strong foundation for
investment and growth as subscription revenues (56.7%) provide
greater forward visibility whilst the consumption revenues (37.0%)
enable GBG to share in the future growth of our customers. In the
current year, the statutory consumption revenues at constant
currency have declined in absolute terms by 17% as well as on a
relative basis (37.8% in FY22) due to the economic environment
where underlying consumer demand has been lower in some of our key
end markets.
Gross margin for the year of 71.0% (FY22: 70.9%) was consistent
with the prior year.
Operating loss and cost management
On a statutory basis, there was an operating loss of GBP112.4
million (FY22: profit of GBP23.4 million), principally due to the
FY23 goodwill impairment charge of GBP122.2 million and higher
charge for amortisation of acquired intangibles (FY23: GBP42.8
million).
Adjusted operating profit was GBP59.8 million (FY22: GBP58.8
million), which represents a margin of 21.5% (FY22: 24.3%). The
decrease in margin was expected as FY22 benefitted from the one-off
revenue impacts, while the current period benefitted from an FX
gain of GBP3 million.
During FY23, we undertook a number of initiatives and reviews
designed to increase operational efficiency and enable sharper
focus. In totality, these actions kept our adjusted operating cost
increase over FY22, in pro forma constant currency terms, to just
2.5%, despite our investments in Technology and the higher
inflationary environment. For example, we reviewed our office space
requirements in light of our hybrid working patterns, combined our
Identity go-to-market teams and brands in Americas and created a
single global customer support framework. These initiatives
facilitated a disciplined approach to cost control throughout the
year, responding to the macro environment but also enabling GBG to
increase investment into a number of key product development
activities to ensure we maintain our competitive advantage and are
positioned to achieve our short, medium and long term goals. Total
spend on technology increased to GBP54.0m (FY22: GBP37.7m), which
represents growth on a constant currency basis of 22.8% excluding
the impact of prior year acquisitions.
Exceptional and normalised items
Amortisation of acquired intangibles
The charge for the year of GBP42.8 million (FY22: GBP24.7
million) represents the non-cash cost of amortising separately
identifiable intangible assets including technology-based assets
and customer relationships that were acquired through business
combinations.
The increased charge in the year is due to the full-year impact
of the acquisitions of Acuant (4 months only in FY22) and
Cloudcheck (2 months only in FY22) in the prior year.
Share-based payments
During FY23 3.3 million (FY22: 1.9 million) new share option
awards were granted to Directors and team members across the Group.
This increase was due to the share price being comparatively lower
in FY23 leading to a greater number of shares being awarded for any
given value.
The charge for the year of GBP2.3 million (FY22: GBP6.2 million)
has decreased due to a combination of the fair value of current
year awards being lower as the Group's share price has fallen, and
some prior year awards now not expected to vest in full due to
performance conditions not being expected to be fully met.
Impairment of goodwill
As required under IFRS, the Group conducts an annual impairment
review of goodwill and intangible assets. This review compares the
carrying value on the Group's balance sheet of those assets against
the present value of the future cashflows they are expected to
generate.
As explained in more detail in the Chief Executive Officer's
Review, the Group did not fully meet the financial objectives we
set ourselves at the start of the year, primarily through the
difficult trading conditions in our identity business in the
Americas which represents the combination of the IDology and Acuant
acquisitions. This group of cash-generating units (CGUs) was tested
for impairment for the 30 September 2022 half-year review, based on
the information at that time, and the conclusion was that there was
no impairment under the base case or sensitised models.
However, as reported in the trading update in February 2023, the
trends that had been impacting our identity business in the
Americas continued into the second half of the year. Furthermore,
we also saw incremental lengthening of sales cycles and project
delays due to macro-economic uncertainty which impacted some
customer contracts that had been included in the FY23 forecast. As
a result, the cashflows used in the year-end impairment assessment
were lower than those at the half-year, consequently, the outcome
of the impairment review was a non-cash, exceptional impairment
charge of GBP122.2 million, which represents approximately 19% of
the pre-impairment carrying value of GBP644.1 million.
Other exceptional items
In addition to the goodwill impairment charge, other exceptional
costs of GBP5.0 million (FY22: GBP4.5 million) were incurred by the
Group in the year and have been detailed in note 5 to the accounts.
Broadly, these exceptional charges arose either from our M&A
activities in prior years or were incurred to enable our
initiatives to achieve operational efficiency.
The most significant elements in the current year were: GBP2.8
million write-off of the intangible asset for the Acuant brand
following the strategic decision to adopt IDology as our primary
go-to-market Identity brand in the Americas; the exit costs for a
limited number of team members which totalled GBP1.8m and were
necessary as we streamlined some teams and delivered acquisition
synergies; and acquisition integration costs of GBP1.1 million.
Exceptional items also contained contingent consideration
adjustments related to acquisitions in prior years, where these
adjustments needed to be reflected in the Consolidated Statement of
Profit or loss. We released GBP2.8 million contingent consideration
related to the Cloudcheck acquisition where the maximum earn-out
targets were not achieved and we completed the final payment in
respect of the IDology acquisition with an FY23 cost of GBP0.8
million. The majority of this cost was offset by interest income as
detailed in note 6.
Net finance costs
The Group incurred net finance costs for the year of GBP6.4
million (FY22: GBP1.8 million). The increase is due to the interest
payable on the loan that was drawn down to part fund the Acuant
acquisition in November 2021. The interest rate on the loan is
variable and the interest rates payable have continued to
increase
during FY23.
Taxation
The total tax charge of GBP1.0 million (FY22: GBP6.4 million)
includes GBP12.9 million of current tax payable on the Group's
taxable profits in the year (FY22: GBP12.1 million), offset by a
deferred tax credit of GBP11.9 million (FY22: GBP5.7 million).
The statutory effective tax rate for the Group has decreased
from 29.5% in FY22 to negative 0.8% in FY23. The majority of this
decrease is due to the impairment of goodwill which is not
deductible for tax purposes and greater amortisation on acquired
intangibles in the United States which has a higher tax rate.
The adjusted effective tax rate, which excludes the impact of
amortisation of acquired intangibles, share-based payments and
exceptional items decreased from 22.1% to 21.3%.
Following the increase in the UK corporation tax rate from 19%
to 25% from 1 April 2023, the Group expects its future adjusted
effective tax rate to be within the range of 25% to 27%. However,
the Group's future tax charge and effective tax rate could be
affected by several factors which may be currently unknown,
including the geographical split of future revenues and
profits.
Earnings per share
Basic earnings per share decreased from 7.1 pence to a loss of
47.5 pence reflecting the goodwill impairment charge, higher
interest expense and higher number of shares in issue following the
issue of additional shares to fund the two prior year
acquisitions.
Adjusted earnings (adjusted operating profit less net finance
costs and adjusted tax) was GBP42.1 million (FY22: GBP44.5 million)
resulting in an 18.7% decrease in adjusted diluted earnings per
share from 20.2 pence to 16.4 pence.
The basic weighted average number of shares at 31 March 2023
increased to 252.2 million (FY22: 216.2 million), primarily due to
the issue of 52.1 million shares to part fund the acquisition of
Acuant in November 2021.
Deferred and accrued revenue
Deferred revenue at the end of the year decreased by 3.9% to
GBP56.5 million (FY22: GBP58.8 million).
This balance principally consists of contracted license revenues
and profits that are payable up front but recognised over time as
the Group's revenue recognition criteria are met.
The deferred revenue balance does not represent the total
contract value of any future unbilled annual or multi-year,
non-cancellable agreements as the Group more typically invoices
customers in annual or quarterly instalments. Deferred revenue is
determined by several factors, including seasonality, the
compounding effects of renewals, invoice duration, invoice timing,
FX rates and new business linearity within a reporting period.
Accrued revenue at the end of the year increased by GBP4.0
million to GBP7.6 million (FY22: GBP3.6 million). This increase was
primarily due to timing differences with several larger contracts,
mostly in the Fraud segment, signed or renewed during the year
where the revenue recognition profile is different to the invoicing
profile.
Cash flows
Group operating activities before tax payments and exceptional
items generated GBP42.5 million of cash (FY22: GBP59.5 million)
representing an Adjusted EBITDA to operating cash conversion ratio
of 67.3% (FY22: 95.7%).
This decline reflects some specific non-recurring factors
including:
-- settlement of an acquired liability related to the prior year
acquisitions that reduced cash without a similar EBITDA impact
-- reported FX gains on the retranslation of intercompany
balances, which improved EBITDA without a similar impact on
cash
-- bonus payments made during FY23 in respect of FY22 were
higher than the bonus accruals at the FY23 year-end, which has a
negative impact on cash conversion.
Normalising the cash conversion for the above would result in an
Adjusted EBITDA to operating cash conversion of 86.9% and therefore
more consistent with previous years and GBG's medium-term
guidance.
During the year to 31 March 2023 net repayments against the RCF
were GBP10.4 million, resulting in outstanding balances of $149
million (FY22: $170 million) and GBP7 million (FY22: GBPnil).
Overall, our net debt at 31 March 2023 decreased to GBP105.9
million. This was despite a negative GBP8.6 million retranslation
impact from the conversion of the US dollar denominated debt into
pound sterling, the GBP9.6 million full year dividend payment,
GBP2.5 million of GBG shares purchased for the new Employee Benefit
Trust and a one-off payment of GBP2.3 million for an acquired
liability related to the prior year acquisitions.
Further detailed analysis of this movement is included in the
Consolidated Cash Flow Statement.
Post year-end further loan repayments of GBP6.6 million (GBP5
million and $2 million) have been made.
Dividend
At the AGM, the Board of Directors will propose a final ordinary
dividend of 4.00 pence per share (FY22: 3.81 pence), amounting to
GBP10.1 million (FY22: GBP9.6 million). If approved, this will be
paid on 3 August 2023 to ordinary shareholders whose names appear
on the register of members at the close of business on 23 June
2023. The Group continues to operate a Dividend Reinvestment Plan,
allowing eligible shareholders to reinvest their dividends into GBG
shares.
Treasury Policy and Financial Risk
The Group's treasury operation is managed by a Treasury
Committee within formally defined policies and reviewed by the
Board. The Treasury Committee meets on a regular basis to review
cash flow forecasts, covenant compliance, exposure to interest rate
and foreign currency movements and make recommendations to the
Board based on these reviews.
The Treasury Committee receives weekly cash information to
monitor liquidity across the Group and ensure that significant cash
outflows, such as the acquisition payments, dividends and loan
repayments, could be made without exposing the Group to undue
risk.
The Group finances its activities principally with cash,
short-term deposits and borrowings but has the ability to draw down
up to GBP47.5 million of further funding from a committed revolving
credit facility. Other financial assets and liabilities, such as
trade receivables and trade payables, arise directly from the
Group's operating activities. Surplus funds of the Group are used
to repay the RCF, whilst ensuring that a suitable operational level
of cash is retained.
The Group is exposed to a variety of financial risks including:
market risk (including foreign currency risk and cash flow interest
rate risk), credit risk and liquidity risk. It is not the Group's
policy to engage in speculative activity or to use complex
financial instruments.
Silicon Valley Bank
In March 2023 members of the Treasury Committee and wider
management team responded quickly to the collapse of Silicon Valley
Bank (SVB) to minimise any potential risk and disruption to our
customers, team members and operations.
SVB US were the primary day-to-day banking partner used by GBG's
US businesses and SVB UK was one of five syndicate banks
participating in the Group's revolving credit facility (RCF).
Following the acquisition of SVB UK by HSBC, there is no change to
the loan syndicate and SVB US have been replaced by HSBC in the US
as our primary day-to-day banking partner.
Approved by the Board on 14 June 2023
David Ward
Chief Financial Officer
Consolidated Statement of Profit or Loss
Year ended 31 March 2023
-----------------------------------------
Note 2023 2022
GBP'000 GBP'000
Revenue 3 278,810 242,480
Cost of sales (80,994) (70,549)
Gross profit 197,816 171,931
Operating expenses (313,481) (148,192)
Net gain/(loss) on foreign exchange 3,022 (42)
Decrease/(increase) in expected credit losses of
trade receivables 214 (290)
Operating (loss)/profit (112,429) 23,407
Finance revenue 6 636 40
Finance costs 7 (7,037) (1,794)
--------- ---------
(Loss)/profit before tax (118,830) 21,653
Income tax charge 8 (964) (6,390)
--------- ---------
(Loss)/profit for the year attributable to equity
holders of the parent (119,794) 15,263
--------- ---------
Operating (loss)/profit (112,429) 23,407
Amortisation of acquired intangibles 42,758 24,735
Equity-settled share-based payments 2,313 6,171
Exceptional items: 5
- impairment of goodwill 122,225 -
- other exceptional items 4,950 4,526
Adjusted operating profit 20 59,817 58,839
----------------------------------------------------- ---- --------- ---------
Earnings per share 9
- basic earnings per share for the year (47.5p) 7.1p
- diluted earnings per share for the year (47.5p) 6.9p
- adjusted basic earnings per share for the year 16.7p 20.6p
- adjusted diluted earnings per share for the
year 16.4p 20.2p
The accompanying notes are an integral part of
this Consolidated Statement of Profit or Loss.
Consolidated Statement of Comprehensive Income
Year ended 31 March 2023
-----------------------------------------------
2023 2022
GBP'000 GBP'000
(Loss)/profit after tax for the period
attributable to equity holders of the
parent (119,794) 15,263
-------------------------- --------------------------
Other comprehensive income:
Fair value movement on investments 700 -
Exchange differences on retranslation
of foreign operations (net of tax) 35,060 18,029
-------------------------- --------------------------
Total comprehensive (expense)/income
for the period attributable to equity
holders of the parent (84,034) 33,292
========================== ==========================
Upon disposal of investments held at fair value through other
comprehensive income or a foreign operation, these elements of
other comprehensive income will be recycled to the Consolidated
Statement of Comprehensive Income.
The accompanying notes are an integral part of this Consolidated
Statement of Comprehensive Income.
Consolidated Statement of Changes in Equity
Year ended 31 March 2023
--------------------------------------------
Other reserves
----------------------------------------------
Foreign
Equity Capital currency Total
share Share Merger redemption translation Treasury other Retained Total
capital premium reserve reserve reserve shares reserves earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
April 2021 4,908 267,627 9,918 3 (16,606) - (6,685) 98,406 364,256
Profit for the
period - - - - - - - 15,263 15,263
Other
comprehensive
income - - - - 18,029 - 18,029 - 18,029
-------- -------- -------- ----------- ----------- ---------- --------- --------- ---------
Total
comprehensive
(expense)/income
for the period - - - - 18,029 - 18,029 15,263 33,292
Issue of share
capital 1,389 299,142 90,081 - - - 90,081 - 390,612
Share-based
payments - - - - - - - 6,171 6,171
Tax on share
options - - - - - - - (498) (498)
Share forfeiture
refund - - - - - - - (29) (29)
Equity dividend 10 - - - - - - - (6,677) (6,677)
---------- ---------
Balance at 31
March 2022 6,297 566,769 99,999 3 1,423 - 101,425 112,636 787,127
Loss for the
period - - - - - - - (119,794) (119,794)
Other
comprehensive
income - - - - 35,060 - 35,060 700 35,760
-------- -------- -------- ----------- ----------- ---------- --------- --------- ---------
Total
comprehensive
expense for the
period - - - - 35,060 - 35,060 (119,094) (84,034)
Issue of share
capital 14 812 - - - - - - 826
Investment in own
shares - - - - - (2,500) (2,500) (2,500)
Cost of employee
benefit trust
shares issued to
employees - - - - - 1,426 1,426 (1,417) 9
Share-based
payments - - - - - - - 2,313 2,313
Tax on share
options - - - - - - - (143) (143)
Net share
forfeiture
receipt - - - - - - - 146 146
Equity dividend 10 - - - - - - - (9,600) (9,600)
-------- -------- -------- ----------- ----------- ---------- --------- --------- ---------
Balance at 31
March 2023 6,311 567,581 99,999 3 36,483 (1,074) 135,411 (15,159) 694,144
-------- -------- -------- ----------- ----------- ---------- --------- --------- ---------
The accompanying notes are an integral part of this Consolidated
Statement of Changes in Equity.
Consolidated Balance Sheet
As at 31 March 2023
----------------------------------------------------------------------------
Note Restated(1)
2023 2022
GBP'000 GBP'000
Assets
Non-current assets
Goodwill 12 626,394 713,946
Other intangible assets 12 224,834 255,747
Property, plant and equipment 12 3,752 4,601
Right-of-use assets 12 1,449 2,742
Investments 3,026 2,326
Deferred tax asset 8 793 695
Trade and other receivables 14 4,305 -
864,553 980,057
-------- -------------
Current assets
Inventories 2,619 1,196
Trade and other receivables 14 65,313 69,626
Current tax 1,083 7,804
Cash and short-term deposits 21,552 22,302
-------- -------------
90,567 100,928
Total assets 955,120 1,080,985
-------- -------------
Equity and liabilities
Capital and reserves
Equity share capital 6,311 6,297
Share premium 567,581 566,769
Other reserves 135,411 101,425
Retained earnings (15,159) 112,636
Total equity attributable to equity
holders of the parent 694,144 787,127
-------- -------------
Non-current liabilities
Loans Lease liabilities 16 126,411 128,226
524 1,529
Provisions 792 866
Deferred revenue 1,492 1,805
Contingent consideration 17 - 1,920
Deferred tax liability 8 34,986 43,674
-------- -------------
164,205 178,020
-------- -------------
Current liabilities
Lease liabilities 1,242 1,842
Trade and other payables 15 37,312 49,615
Deferred revenue 55,015 57,018
Contingent consideration 17 1,237 5,856
Current tax 1,965 1,507
96,771 115,838
-------- -------------
Total liabilities 260,976 293,858
-------- -------------
Total equity and liabilities 955,120 1,080,985
-------- -------------
(1) The prior year has been restated for a reclassification of
deferred tax balances (see note 8c) and a measurement period
adjustment (see note 11).
The accompanying notes are an integral part of this Consolidated
Balance Sheet.
Approved by the Board on xx June 2023
C G Clark - Director
D M Ward - Director
Registered in England number 2415211
Consolidated Cash Flow Statement
Year ended 31 March 2023
----------------------------------------------------------------------------------
Note 2023 2022
GBP'000 GBP'000
Group (loss)/profit before tax: (118,830) 21,653
Adjustments to reconcile Group loss/profit
before tax to net cash flows
Finance revenue 6 (636) (40)
Finance costs 7 7,037 1,794
Depreciation of plant and equipment 12 1,771 1,531
Depreciation of right-of-use assets 12 1,491 1,593
Amortisation of intangible assets 12 42,826 24,968
Impairment of goodwill and intangible assets 12 125,022 -
Loss on disposal of plant and equipment and
intangible assets 379 34
Loss on disposal of businesses 113 330
Fair value adjustment on contingent consideration (1,660) 188
Unrealised (gain)/loss on foreign exchange (3,512) -
Share-based payments 2,313 6,171
(Increase)/decrease in inventories (1,448) (27)
Decrease in provisions (47) (169)
Decrease/(increase) in trade and other receivables (20) (3,967)
(Decrease)/increase in trade and other payables (16,229) 2,197
--------- -----------
Cash generated from operations 38,570 56,256
Income tax paid (4,263) (11,610)
--------- -----------
Net cash generated from operating activities 34,307 44,646
--------- -----------
Cash flows used in investing activities
Acquisition of subsidiaries, net of cash acquired 17 (4,991) (460,383)
Purchase of plant and equipment 12 (968) (1,611)
Purchase of software 12 (57) (120)
Proceeds from disposal of plant and equipment 79 -
Net outflow from disposal of businesses (18) (101)
Interest received 569 10
Net cash flows used in investing activities (5,386) (462,205)
--------- -----------
Cash flows used in financing activities
Finance costs paid (6,426) (1,383)
Proceeds from issue of shares 826 305,997
Purchase of shares for Employee Benefit Trust (2,500) -
Share issue costs - (5,780)
Proceeds/(refund) from share forfeiture 146 (29)
Proceeds from new borrowings, net of arrangement
fee 16 12,000 155,591
Repayment of borrowings 16 (22,394) (30,073)
Repayment of lease liabilities (2,062) (1,969)
Dividends paid to equity shareholders 10 (9,600) (6,677)
Net cash flows used in financing activities (30,010) 415,677
--------- -----------
Net decrease in cash and cash equivalents (1,089) (1,882)
Effect of exchange rates on cash and cash equivalents 339 3,049
Cash and cash equivalents at the beginning
of the period 22,302 21,135
--------- -----------
Cash and cash equivalents at the end of the
period 21,552 22,302
--------- -----------
The accompanying notes are an integral part
of this Consolidated Cash Flow Statement.
Notes to the Accounts
1. Basis of preparation
The consolidated financial statements have been prepared in
accordance with UK-adopted international accounting standards, as
applied in accordance with the provisions of the Companies Act
2006. Accounting policies have been applied consistently to all
years presented unless otherwise stated.
The preliminary announcement covers the period from 1 April 2022
to 31 March 2023 and was approved by the Board on 14 June 2023. It
is presented in Pounds Sterling (GBP) and all values are rounded to
the nearest thousand pounds (GBP'000) except where otherwise
indicated.
The financial information set out herein does not constitute the
Company's statutory accounts for the years ended 31 March 2023 or
2022 but is derived from those accounts. The financial information
has been prepared using accounting policies consistent with those
set out in the annual report and accounts for the year ended 31
March 2023. Statutory accounts for 2022 have been delivered to the
Registrar of Companies, and those for 2023 will be delivered in due
course. The auditors have reported on those accounts; their report
was unqualified, did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report, and did not contain any statements under
Section 498(2) or (3) of the Companies Act 2006.
Non-GAAP Measures
The Group presents the non-GAAP performance measure 'adjusted
operating profit' on the face of the Consolidated Statement of
Profit or Loss. Adjusted operating profit is not defined by IFRSs
and therefore may not be directly comparable with the adjusted
operating profit measures of other companies.
The business is managed and measured on a day-to-day basis using
adjusted results. To arrive at adjusted results, certain
adjustments are made for normalised and exceptional items that are
individually significant and which could, if included, distort the
understanding of the performance for the year and the comparability
between periods.
Normalised items
These are recurring items which management considers could
affect the underlying results of the Group. These items relate
to:
-- amortisation of acquired intangibles; and
-- equity-settled share-based payments charges.
Other types of recurring items may arise; however, no others
were identified in either the current or prior year. Recurring
items are adjusted each year irrespective of materiality to ensure
consistent treatment.
Management consider these items to not reflect the underlying
performance of the Group.
Exceptional items
The Group presents as exceptional items those significant items
of income and expense which, because of the nature and expected
infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better the
elements of financial performance in the year, so as to facilitate
comparison with prior periods and to assess better trends in
financial performance. Such items may include, but are not
restricted to, significant acquisition, restructuring and
integration related costs, adjustments to contingent consideration,
profits or losses on disposal of businesses and significant
impairment of assets. Exceptional costs are discussed further in
note 5.
Redundancy costs are only classified within exceptional items if
they are linked to a reorganisation of part of the business,
including when as a result of a business integration.
Management considers these significant and/or
non-recurring-items to be inherently not reflective of the future
or underlying performance of the Group.
2. Going concern
The assessment of going concern relies heavily on the ability to
forecast future cashflows over the going concern assessment period
which covered the period through to 30 September 2024. Although GBG
has a robust budgeting and forecasting process, the continued
economic uncertainty caused by the macroeconomic environment means
that additional sensitivities and analysis have been applied to
test the going concern assumption under a range of downside and
stress test scenarios. The following steps have been undertaken to
allow the Directors to conclude on the appropriateness of the going
concern assumption:
a) Understand what could cause GBG not to be a going concern
b) Consider the current customer and sector position, liquidity
status and availability of additional funding if required
c) Board review and challenge of the budget including comparison
against external data sources available and a potential downside
scenario
d) Perform reverse stress tests to assess under what
circumstances going concern would become a risk - and assess the
likelihood of whether they could occur
e) Examine what mitigating actions would be taken in the event
of these stress test scenarios
f) Conclude upon the going concern assumption
a) Understand what could cause GBG not to be a going concern
The potential scenarios which could lead to GBG not being a
going concern, which remain unchanged from the prior year-end are
considered to be:
-- Not having sufficient cash to meet our liabilities as they
fall due and therefore not being able to provide services to our
customers, pay our employees or meet financing obligations.
-- A non-remedied breach of the financial covenants within the
Group revolving credit facility (RCF) agreement (detailed in note
16). Under the terms of the agreement this would lead to the
outstanding balance becoming due for immediate repayment. These
covenants are:
o Leverage - consolidated net borrowings (outstanding loans and
contingent consideration liability less current cash balance) as a
multiple of Adjusted EBITDA for the last 12 months (adjusted to
deduct depreciation of right-of-use assets and lease liability
interest), assessed quarterly in arrears, must not exceed
3.00:1.00
o Interest cover - Adjusted EBITDA (adjusted to deduct
depreciation of right-of-use assets and lease liability interest)
as a multiple of consolidated net finance charges (excluding lease
liability interest), for the last 12, assessed quarterly in
arrears, must not fall below 4.00:1.00
As at 31 March 2023, the leverage ratio was 1.74:1.00 and the
interest cover was 9.77 times.
b) Consider the current customer and sector position, liquidity
status and availability of additional funding if required
The performance for the year is detailed in the Chief Executive
Officer's Review. Revenue growth has been impacted by macroeconomic
uncertainty which has reduced transaction volumes in the Identity
businesses, although Location and Fraud have continued to show
strong growth.
The Group's customers continue to operate in a range of
different sectors which reduces the risk of a downturn in any
particular sector being material to the Group. The financial
services sector accounts for the largest percentage of GBG's
customers, particularly within the Identity and Fraud segments, and
although there has been a downturn in transaction volumes during
the period in some elements of this sector (e.g. cryptocurrency and
online payments), other elements have been much more resilient and
shown growth (e.g. traditional banking) and the overall
diversification of the Group means that this does not result in a
risk to the going concern assumption.
As a global company GBG operates in different countries and
therefore is less exposed if particular countries are impacted at
different rates. The breakdown of our revenue by country is shown
in note 3 to the Full Year Results. The Group has no operations or
active suppliers in Russia, Belarus or Ukraine and business was
suspended with the small number of customers who were incorporated
in Russia in the previous year. There is no exposure to Russian
customers in the current year.
There are also macro dynamics supporting the increased use of
GBG products and services, such as:
-- The continued compliance requirements globally
-- The ongoing existence of fraud globally, leading to increased
cyber security risks and therefore demand for GBG anti-fraud
solutions
-- The continued digitalisation and rise of online versus
physical transactions in both consumer and business to business
settings
-- The speed and quality of customer onboarding being a key
differentiator, which is enhanced through the use of GBG's
software
As expected, the adjusted operating profit margin for the year
declined relative to the comparative period as the prior year was
positively impacted by the revenue from the US stimulus project and
spike in cryptocurrency trading. This decline was further
influenced by the underlying decline in transaction volumes in the
Identity business during the year which has been reflected in our
base case and range of potential downside scenarios. Despite an
impairment being recognised for Identity - Americas group of CGUs,
the impairment charge represents a non-cash transaction and
therefore does not impact the liquidity or going concern assessment
for the Group.
The Board of Directors is aware that there continues to be
macroeconomic uncertainty, but the experience in the past year
gives enhanced confidence to be able to forecast which of our
products and services are positively or negatively impacted by
global economic pressures and therefore what steps are needed to
react to this. The overall performance has illustrated the
relevance and importance of our products and services, even in a
time of significant economic decline in many of our key
markets.
GBG is not reliant upon any one supplier to provide critical
services to support either the services we provide to our customers
or to our internal infrastructure. For these critical services,
such as the provision of data and cloud hosting, contingency plans
exist in the event of a supplier failure to be able to move to an
alternative supplier with minimal disruption to customers or to the
wider business.
Liquidity
31 March 31 March
2023 2022 Variance
GBP'000 GBP'000 GBP'000
Operating cashflow before tax and
exceptional items paid 42,504 59,532 (17,028)
Adjusted EBITDA 63,147 62,196 951
---------- ---------- ---------
Cash conversion % 67.3% 95.7% (28.4%)
Cash 21,552 22,302 (750)
Loans (excluding unamortised loan
fees) (note 16) (127,470) (129,254) 1,784
---------- ---------- ---------
Net (Debt)/Cash (105,918) (106,952) 1,034
Leverage 1.68 1.72 (0.04)
At 31 March 2023 GBG was in a net debt position of GBP105.9
million (2022: GBP107.0 million), an improvement of GBP1.0 million
since 31 March 2022. Net debt was adversely impacted by GBP8.6
million from the translation of the US dollar denominated debt into
pound sterling due to the movement in exchange rates. Cashflow was
negatively impacted by higher than expected increases in interest
rates (Secured Overnight Financing Rate (SOFR)) increased by over
4% throughout the financial year) which has led to higher interest
payments on the RCF facility.
In addition to the revenue (and adjusted operating profit)
performance, the Group has continued to successfully convert this
trading performance into cash. During the year to 31 March 2023,
GBG's operating cash to Adjusted EBITDA ratio ('cash conversion')
was 67.3%, a decrease of 28.4% on the prior year. Whilst the
reported level has declined there were some specific factors
influencing this including the settlement of pre-acquisition
non-recurring liabilities from acquisitions, intercompany FX gains
and movements in bonus accruals. Adjusting for the above would
result in an Adjusted EBITDA to operating cash conversion % of
86.9%. This demonstrates the continued ability of GBG to convert
profit into cash.
The RCF facility has a maximum level of GBP175 million which
could be drawn down for working capital purposes if required. As at
31 March 2023, the available undrawn facility was GBP47.5 million
compared to GBP45.7 million at 31 March 2022.
Following bank approval in November 2022 for the exercise of the
one-year extension on the facility it now does not expire until
July 2026, with a further one-year extension available in September
2023 (subject to approval from the bank syndicate).
At 31 March 2023 the Group was in a net current liabilities
position of GBP6.2 million (2022: net current liabilities of
GBP14.9 million). However, within current liabilities is deferred
revenue of GBP55.0 million (2022: GBP57.0 million) which represents
a liability to provide a future service rather than a direct cash
liability. Whilst there is a cash cost to providing these services
(principally related to data costs or employee wages) these costs
would be lower than the value of the deferred revenue liability,
and will unwind over the course of the year rather than being a
liability settled on demand. On this basis the net current
liabilities position is not considered to be a risk from a going
concern perspective.
c) Board review and challenge of the budget including comparison
against external data sources available and a potential downside
scenario
The annual budget setting process utilises a detailed bottom-up
approach which is then subject to review and challenge by the
Executive Team and Board of Directors. Management use both the
internal and external information available in addition to their
industry knowledge to produce the base case forecast.
Management note that analysts' forecasts published after the
trading update in April 2023 estimate an overall revenue growth in
the year to 31 March 2024 due to the impact of organic growth.
These estimates range from growth of 2.9% to 6.9%, with the
consensus position being growth of 5.2% which would be revenue of
GBP293.4 million on a constant currency basis. The budget for the
year to 31 March 2024 is within the range of the analyst
estimates.
This budget showed continued significant headroom in the
covenant compliance tests and sufficient liquidity to maintain
operations. The budget model was then adjusted to reflect a
realistic downside scenarios, including increases in costs,
interest rates as well as reduced revenue growth both on an overall
Group basis and specific to certain areas of the business. Under
these downside scenarios, the covenant compliance and liquidity
position did not result in any risk to going concern. Relative to
the budget produced by management there have not been any adverse
variances in the overall trading performance since the
year-end.
d) Perform reverse stress tests to assess under what
circumstances going concern would become a risk - and assess the
likelihood of whether they could occur
The budget model was then further adjusted to establish at what
point a covenant breach would occur without further mitigating
actions being taken by management. A covenant breach would occur
before the available cash resources of the Group are fully
exhausted and therefore the focus of the reverse stress test was on
covenant compliance. In making this assessment it was assumed that
management had reduced operating expenses by 13% which is the level
that is considered possible without causing significant disruption
to business operations. These savings would primarily be linked to
people costs, including reductions in discretionary bonus payments
and budgeted recruitment, net of any related redundancy costs.
With a 13% operating expenses saving introduced in Q2 of FY24 it
would take a revenue decline of 18.0% for a covenant breach
(leverage) to occur. This breach would be as at 30 September 2024
although even at this point it would only take an Adjusted EBITDA
increase of GBP300k or reduction in net debt of GBP100k during the
quarter to remedy this breach.
Based on the prior year trading performance, performance in the
period since the year end and through reference to external market
data, a decline of anywhere near 18.0% is considered by the
Directors to be remote. If this became even a possibility, then
deeper cost cutting measures would be implemented well in advance
of a covenant breach as well as consideration of a range of other
mitigation actions detailed in the next section.
e) Look at what mitigating actions could be taken in the event
of these reverse stress test scenarios
In the very remote event of the reverse stress test case
scenario above occurring, there would be a breach of covenants on
30 September 2024 unless further mitigation steps were taken. The
principal steps below would be taken (prior to the breach taking
place) to avoid such a breach occurring:
-- Take similar cash conservation measures to those that were
implemented in the early stages of the pandemic in FY21 such as not
declaring a final dividend.
-- Make deeper cuts to overheads, primarily within the sales
function if the market opportunities had declined to this extent.
It would only take a reduction of less than 1% of overheads (based
on the 31 March 2023 level) to increase Adjusted EBITDA to remedy a
covenant breach of GBP300k.
-- Request a delay to UK corporation tax, employment tax or
sales tax payments under the HMRC 'Time to Pay' scheme. In the year
to 31 March 2023 corporation tax payments averaged GBP500k per
quarter, employment tax payments (including employee taxes) were
approximately GBP1.5 million per month and sales tax payments were
GBP1.5 to GBP2.0 million per quarter.
-- Request a covenant waiver or covenant reset from our bank
syndicate. The business would still be Adjusted EBITDA positive on
a rolling 12-month basis at this point and the Directors believe
they would have a reasonable expectation of achieving a temporary
covenant waiver from the banks if needed.
-- Raise cash through an equity placing. Under the Articles of
Association GBG has the right to raise cash through an equity
placing up to 10% of its market valuation at the date of the
placing.
-- Disposal of part of the business.
f) Conclude upon the going concern assumption
Following consideration of the budget and reverse stress test
scenario, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for the foreseeable future. Therefore, the Directors consider it
appropriate to adopt the going concern basis of accounting in
preparing the consolidated financial statements.
The preliminary statement has been prepared on a consistent
basis with the accounting policies set out in the last published
financial statements for the year ended 31 March 2022. New
standards and interpretations which came into force during the year
did not have a significant impact on the Group's financial
statements.
3. Segmental information
The Group's operating segments are internally reported to the
Group's Chief Executive Officer as three reportable segments:
Location, Identity and Fraud on the basis that they provide similar
products and services. Included within 'Other' was the revenue and
profit of the marketing services business disposed of in the year
to 31 March 2021. Following this disposal, the remaining portion
was incorporated within the Fraud operating segment.
'Central overheads' represents Group operating costs such as
technology, compliance, finance, legal, people team, information
security, premises, Directors' remuneration and PLC costs.
The measure of performance of those segments that is reported to
the Group's Chief Executive Officer is adjusted operating profit,
being profits before amortisation of acquired intangibles,
equity-settled share-based payments, exceptional items, net finance
costs and tax, as shown below.
Information on segment assets and liabilities is not regularly
provided to the Group's Chief Executive Officer and is therefore
not disclosed below.
Location Identity Fraud Total
Year ended 31 March GBP'000 GBP'000 GBP'000 GBP'000
2023
Subscription revenues:
Transactions/consumption-based 16,809 27,427 1,191 45,427
Term-based 53,522 27,586 30,926 112,034
--------- --------- -------- ----------
Total subscription
revenues 70,331 55,013 32,117 157,461
Transactions/consumption-based 5,917 96,269 1,648 103,834
Other 642 11,447 5,426 17,515
--------- --------- -------- ----------
Total revenue 76,890 162,729 39,191 278,810
--------- --------- -------- ----------
Contribution 29,897 47,623 10,259 87,779
Central overheads (31,198)
Foreign exchange gain 3,022
Expected credit losses
of trade receivables 214
----------
Adjusted operating
profit 59,817
Amortisation of acquired
intangibles (42,758)
Share-based payments
charge (2,313)
Exceptional items (127,175)
----------
Operating loss (112,429)
Finance revenue 636
Finance costs (7,037)
Income tax expense (964)
----------
Loss for the year (119,794)
----------
Location (Represented)Identity(1) Fraud Other Total
Year ended 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2022
Subscription revenues:
Transactions/consumption-based 18,648 17,843 911 - 37,402
Term-based 43,129 9,465 23,871 - 76,465
--------- ------------------------- -------- -------- ---------
Total subscription
revenues 61,777 27,308 24,782 - 113,867
Transactions/consumption-based 3,877 109,842 1,493 - 115,212
Other 675 5,646 7,042 38 13,401
--------- ------------------------- -------- -------- ---------
Total revenue 66,329 142,796 33,317 38 242,480
--------- ------------------------- -------- -------- ---------
Contribution 24,601 57,030 8,025 (106) 89,550
Central overheads (30,379)
Foreign exchange gain/(loss) (42)
Expected credit losses
of trade receivables (290)
---------
Adjusted operating
profit 58,839
Amortisation of acquired
intangibles (24,735)
Share-based payments
charge (6,171)
Exceptional items (4,526)
---------
Operating profit 23,407
Finance revenue 40
Finance costs (1,794)
Income tax expense (6,390)
---------
Profit for the year 15,263
---------
(1) To align the classification of revenue from FY22
acquisitions with how similar revenue is presented across the
Group, FY22 revenue of GBP1,572,000 within the Identity segment has
been reclassified from 'Other' to 'Transaction/consumption-based
subscriptions'.
4. Operating (loss)/profit
This is stated after charging/(crediting): Restated
2023 2022
GBP'000 GBP'000
Research and development costs recognised as an operating
expense 20,176 16,713
Other technology related costs recognised as an operating
expense 33,817 20,942
-------- ---------
Total technology related costs recognised as an
operating expense 53,993 37,655
Depreciation of property, plant and equipment (note
12) 1,771 1,531
Depreciation of right-of-use assets (note 12) 1,491 1,593
Expense relating to short term leases 869 558
Expense relating to low value leases 7 6
(Profit)/loss on disposal of plant and equipment (60) 34
Amortisation of intangible assets (note 12) 42,826 24,968
The prior year total technology related costs have been restated
following a review of the allocation of costs within the acquired
Acuant business to provide a consistent comparison with other Group
technology costs. This resulted in an increase in research and
development costs of GBP488,000 and other technology costs of
GBP3,724,000. The restatement had no impact on operating
expenses.
The above information does not include exceptional items which
have been disclosed in note 5.
5. Exceptional items
2023 2022
GBP'000 GBP'000
(a) Acquisition related costs (1,087) 2,711
(b) Integration costs 686 422
(c) Costs associated with team member reorganisations 1,813 1,063
(d) Rationalisation of office locations 391 -
(e) Impairment of goodwill (note 12 & 13) 122,225
(f) Impairment of intangibles (note 13) 2,797 -
(g) Loss on disposal of businesses 113 330
(h) Write off of cloud-based software 237 -
127,175 4,526
-------- --------
(a) Acquisition related credit of GBP1,087,000 (2022: GBP2,711,000 cost) includes:
-- Legal and professional advisor costs directly attributable to
the acquisition of Acuant and the possible offer by GTCR to acquire
GBG of GBP573,000 (2022: GBP5,607,000). In the year to 31 March
2022, the costs related to the acquisitions of Acuant and
Cloudcheck, as well as costs which were incurred as part of a
potential acquisition.
-- Fair value adjustments to contingent consideration (see note
17). During the year, a fair value reassessment of the Cloudcheck
contingent consideration was performed. Based on actual performance
in the period following initial acquisition, it was determined that
the performance criteria would not be met in full. As a result,
GBP2,753,000 of the balance initially recognised at acquisition has
been taken as a credit within exceptional items.
-- The contingent consideration in respect of the
pre-acquisition tax losses within IDology Inc was also settled
during the year with an additional charge to exceptional items of
GBP806,000 representing the difference between the estimated and
final amount due. GBP548,000 of this difference related to interest
income received by the Group on the tax losses which has been
recognised within interest income. However, as an amount equal to
the interest income was payable to the sellers this cost has been
recorded within exceptional items.
-- GBP92,000 received from the IDology escrow administrator to
reimburse pre-acquisition liabilities paid for by the Group.
-- Foreign exchange movement on contingent consideration (see
note 17). The contingent consideration liabilities related to
IDology and Cloudcheck are based on the US Dollar and New Zealand
dollar respectively. As a result, the liabilities were retranslated
at the balance sheet date with a loss of GBP379,000 (2022: loss
GBP157,000) being treated as an exceptional item.
-- During the prior year, a foreign exchange forward contract
was entered into to fix the value at which GBG could convert the
GBP proceeds from the equity raise into USD to part fund the Acuant
acquisition. On settlement of the forward contract a gain of
GBP3,053,000 was recognised which has been treated as an
exceptional item.
(b) Integration costs have been incurred relating to the
integration of Acuant and Cloudcheck. This principally relates to
consultancy fees paid to advisors in running programmes to deliver
revenue and cost synergies from the acquisitions, travel for
specific integration meetings and the costs of additional other
temporary resources required for the integration. To 31 March 2023,
the Group expensed GBP686,000 (2022: GBP422,000) relating to the
integration of Acuant and Cloudcheck. Costs are anticipated to
continue into the year ended 31 March 2024. Due to the size and
nature of acquisition and integration costs, management consider
that they do not reflect the Group's trading performance and so are
adjusted to ensure consistency between periods.
(c) Costs associated with team member reorganisations relate to
exit costs of personnel leaving the business on an involuntary
basis, either as a result of integrating acquisitions or due to
reorganisations within our operating divisions. Due to the nature
of these costs, management deem them to be exceptional in order to
better reflect our underlying performance. Exit costs outside of
these circumstances are treated as an operating expense.
(d) During the year to 31 March 2023, a project has commenced to
rationalise the Group's office locations. To 31 March 2023, the
Group expensed GBP391,000 (2022: GBPnil) with GBP202,000 relating
to the impairment of a right-of-use asset following the exit of a
leased building. Due to the nature of these costs, management deem
them to be exceptional in order to better reflect our underlying
performance. Costs are anticipated to continue until the end of the
year ended 31 March 2024.
(e) As part of the Group's annual impairment testing, it was
identified that the goodwill allocated to the Identity - Americas
group of CGUs was impaired and an impairment charge of
GBP122,225,000 was recognised.
(f) During the year to 31 March 2023, as part of the continued
integration of Acuant and simplification of our brands in the
Amercias region, Acuant was rebranded as IDology. As a result, the
value of the Acuant brand included within acquired intangibles was
considered to be GBPnil and an impairment charge of GBP2,797,000
was recognised.
(g) During the year to 31 March 2021, the business disposed of
its Marketing Services and Employ and Comply businesses which
resulted in an overall profit on disposal. In the year to 31 March
2023, additional costs of GBP113,000 (2022: GBP330,000) were
incurred in relation to the finalisation of the disposal of these
businesses.
(h) During the year to 31 March 2023, a write off of cloud-based
software of GBP237,000 has been recognised. A final agenda decision
by the IFRS Interpretations Committee clarified that configuration
or customisation costs from cloud computing arrangements do not
usually meet the definition of intangible assets under IAS 38
Intangible Assets' and therefore should not be capitalised. As a
result, previously capitalised costs that did not satisfy the
clarified recognition criteria were written off.
The total cash net outflow during the year as a result of
exceptional items was GBP3,934,000 (2022: GBP3,276,000 outflow).
The tax impact of the exceptional items was a tax credit of
GBP917,000 (2022: tax credit of GBP1,274,000).
6. Finance revenue
2023 2022
GBP'000 GBP'000
Bank interest receivable 16 10
Interest income on multi-year contracts 53 30
Tax interest receivable 567 -
-------- --------
636 40
-------- --------
7. Finance costs
2023 2022
GBP'000 GBP'000
Bank interest payable 6,413 1,400
Interest on long service award 9 9
Amortisation of bank loan fees 326 252
Tax interest payable 14 -
Unwinding of discount on contingent consideration 165 -
liability
Lease liability interest 110 133
-------- --------
7,037 1,794
-------- --------
8. Taxation
a) Tax on loss/profit
The tax charge in the Consolidated Statement of Profit
or Loss for the year is as follows:
2023 2022
GBP'000 GBP'000
Current income tax
UK corporation tax on loss/profit for the year 4,485 3,841
Amounts underprovided/(overprovided) in previous
years 637 (387)
Foreign tax 7,754 8,681
12,876 12,135
Deferred tax
Origination and reversal of temporary differences (12,539) (7,154)
Amounts (overprovided)/underprovided in previous
years (225) 1,045
Impact of change in tax rates 852 364
(11,912) (5,745)
Tax charge in the Consolidated Statement of Profit
or Loss 964 6,390
--------- --------
b) Reconciliation of the total tax charge
The loss/profit before tax multiplied by the standard rate of corporation
tax in the UK would result in a tax charge as explained below:
2023 2022
GBP'000 GBP'000
Consolidated (loss)/profit before tax (118,830) 21,653
----------- --------
Consolidated profit before tax multiplied by the
standard rate of corporation tax in
the UK of 19% (2022: 19%) (22,578) 4,114
Effect of:
Permanent differences(1) 31,813 753
Non-taxable income (809) (30)
Rate changes 775 364
Recognition of previously unrecognised deferred tax
assets (266) (142)
Tax provision recognised 392 -
Adjustments in respect of prior years 412 657
Research and development incentives (123) (113)
Patent Box relief (509) (571)
Share option relief 518 623
Effect of higher taxes on overseas earnings (8,660) 735
Total tax charge reported in the Consolidated Statement
of Profit or Loss 964 6,390
----------- --------
1 GBP30,556,000 (2022: GBPNil) of the permanent differences
related to the impairment of goodwill which is not tax
deductible.
The Group's reported effective tax rate for the year was (0.8%) (2022:
29.5%). After adjusting for the impact of amortisation of acquired
intangibles, equity-settled share-based payments and exceptional items,
the adjusted effective tax rate was 21.3% (2022: 22.1%). These measures
are defined in the note 20.
c) Deferred tax
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and there is an intention to settle on a
net basis, and to the same fiscal authority. To that effect, the
prior year presentation of the deferred tax assets and deferred tax
liabilities has been restated so that, in accordance with IAS 12,
deferred tax assets and deferred tax liabilities arising in the
same tax jurisdiction have been offset.
Analysed in the balance sheet, after offset of balances as:
Restated
2023 2022
GBP'000 GBP'000
Deferred tax asset
Pre-offset of balances 23,738 21,860
Offset of balances within countries (22,945) (21,165)
793 695
--------- ---------
Restated
2023 2022
GBP'000 GBP'000
Deferred tax liability
Pre-offset of balances 57,931 64,839
Offset of balances within countries (22,945) (21,165)
34,986 43,674
--------- ---------
9. Earnings per ordinary share from continuing operations
Basic Basic Diluted Diluted
2023 2022 2023 2022
pence pence pence pence
per per per per
share share share share
(Loss)/profit attributable to equity
holders of the Company from continuing
operations (47.5) 7.1 (47.5) 6.9
------- ------- -------- --------
Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company from continuing
operations by the basic weighted average number of ordinary shares
in issue during the year.
Diluted
Diluted earnings per share is calculated by dividing the profit
for the year attributable to ordinary equity holders from
continuing operations by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number
of ordinary shares that would be issued on the conversion of all
the dilutive potential ordinary shares into ordinary shares.
2023 2022
No. No.
Basic weighted average number of
shares in issue 252,235,803 216,155,932
Basic weighted average number of (269,104) -
shares held by the EBT
Dilutive effect of share options 5,030,313 4,339,614
Diluted weighted average number
of shares in issue 256,997,012 220,495,546
------------ ------------
Adjusted
Adjusted earnings per share is defined as adjusted operating
profit less net finance costs and adjusted tax divided by the basic
weighted average number of ordinary shares of the Company.
Basic Diluted Basic Diluted
2023 2023 2022 2022
2023 pence pence 2022 pence pence
GBP'000 per share per GBP'000 per per
share share share
Adjusted operating
profit 59,817 23.7 23.3 58,839 27.2 26.7
Less net finance
costs (6,401) (2.5) (2.5) (1,754) (0.8) (0.8)
Less adjusted tax (11,354) (4.5) (4.4) (12,587) (5.8) (5.7)
---------- ---------- -------
Adjusted earnings 42,062 16.7 16.4 44,498 20.6 20.2
---------- ----------- -------- ---------- ------- --------
10. Dividends paid and proposed
2023 2022
GBP'000 GBP'000
Declared and paid during the year
Final dividend for 2022 paid in
July 2022: 3.81p (final dividend
for 2021 paid in July 2021: 3.40p) 9,600 6,677
--------- ---------
Proposed for approval at AGM (not recognised
as a liability at 31 March)
Final dividend for 2023: 4.00p
(2022: 3.81p) 10,098 9,596
--------- ---------
11. Acquisitions
There were no new business combinations within the year ended 31
March 2023.
In the year to 31 March 2022, GBG completed two acquisitions,
the measurement periods for which end during the year to 31 March
2023.
Under IFRS 3 'Business Combinations' there is a measurement
period of no longer than 12 months in which to finalise the
valuation of the acquired assets and liabilities. During the
measurement period, the acquirer shall retrospectively adjust the
provisional amounts recognised at the acquisition date to reflect
new information obtained about facts and circumstances that existed
as of the acquisition date and, if known, would have affected the
measurement of the amounts recognised as of that date. During the
measurement period, the acquirer shall also recognise additional
assets or liabilities if new information is obtained about facts
and circumstances that existed as of the acquisition date and, if
known, would have resulted in the recognition of those assets and
liabilities as of that date. No further adjustments were identified
to the provisional fair values in respect of the acquisition of
Cloudcheck.
In respect of the acquisition of Acuant, adjustments to the
provisional fair values were made during the measurement period, as
follows:
-- Reduce the fair value of purchased intangibles to GBPnil.
This adjustment relates to the write-off of configuration and
customisation costs for cloud-based software. A final agenda
decision by the IFRS Interpretations Committee clarified that
configuration or customisation costs from cloud computing
arrangements do not usually meet the definition of intangible
assets under IAS 38 Intangible Assets' and therefore should not be
capitalised.
-- Reduce trade and other receivables by GBP88,000 to
GBP7,415,000 and increase trade and other payables by GBP43,000 to
GBP21,213,000. The adjustments to trade and other receivables and
trade and other payables relate to matters identified following
balance sheet reviews which related to the pre-acquisition period,
including an omitted accrual for professional services.
The overall impact of the measurement period adjustments was to
increase goodwill by GBP315,000 to GBP408,043,000.
The impact of the measurement period adjustments has been
applied retrospectively, meaning that the results and financial
position for the year to 31 March 2022 have been restated.
12. Non-current assets
Property,
Other intangible plant & Right-of-use
Goodwill assets equipment assets
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2022
- as reported 713,785 343,400 11,698 8,819
Additions - measurement 315 - - -
period(1)
Disposals - measurement - (183) - -
period(1)
As at 1 April
2022 - as restated 714,100 343,217 11,698 8,819
Additions - 57 968 420
Disposals - (1,602) (1,507) (2,234)
Foreign exchange
adjustment 34,656 16,135 308 148
----------- ------------------- ----------- -------------
At 31 March 2023 748,756 357,807 11,467 7,153
----------- ------------------- ----------- -------------
Depreciation, impairment and amortisation
At 1 April 2022 154 87,470 7,097 6,077
Charge for the
period - 42,826 1,771 1,491
Impairment (note
13) 122,225 2,797 - 202
Disposals - (1,364) (1,264) (2,156)
Foreign exchange
adjustment (17) 1,244 111 90
----------- ------------------- ----------- -------------
At 31 March 2023 122,362 132,973 7,7,15 5,704
----------- ------------------- ----------- -------------
Net book value
----------- ------------------- ----------- -------------
At 31 March 2023 626,394 224,834 3,752 1,449
----------- ------------------- ----------- -------------
At 1 April 2022
- as restated(1) 713,946 255,747 4,601 2,742
(1) For details of the prior year measurement period adjustment
refer to note 11.
13. Impairment
Summary
Following the completion of the annual impairment review
detailed below, the carrying value of the Identity - Americas group
of CGUs has been reduced to its recoverable amount through
recognition of an impairment charge of GBP122,225,000 against
goodwill. This charge is recognised within exceptional items in the
Consolidated Statement of Profit or Loss.
This group of CGUs was tested for impairment for the 30
September 2022 half-year review, with the conclusion that there was
no impairment and headroom of GBP141,414,000 under the base case
assumptions. There was also no impairment under the sensitised
assumptions. Within the base case was the judgement, based on the
information available at that time, that the negative impact of the
macro environment had peaked and therefore trading in H2 FY23 and
going into FY24 would see a return to higher levels of growth.
However, as reported in the Trading Update in February 2023, the
trends that had been impacting our end markets for identity
services, most notably the challenging conditions for
cryptocurrency and our internet economy customers continued into
the second half of the year and given the relative concentration of
these customers in our Americas business this is the region where
we saw the most pronounced impact. We also saw incremental
lengthening of sales cycles and project delays as a result of the
macro-economic uncertainty which delayed some customer contracts
that were included in the FY23 forecast.
In preparing the cashflows for the year-end impairment review,
key changes to those used at the half-year were:
-- the FY24 budget reflected the expectation that the macro
challenges are likely to continue to restrain the growth at least
until Q4 FY24
-- the growth in FY25 was reduced by 2% to reflect increasing sales cycles
-- growth rates from 2029 - 2032, which are based on industry
growth rates, were reduced by 1% per year from the starting point
of 14.7%. In the half-year review they remained flat during this
period
-- the discount rate remained unchanged at 12.3% but the
long-term growth rate assumption in the United States decreased
from 2.5% to 2.4%.
As a result of these changes the cashflows used in the year-end
impairment assessment are lower than those at the half-year. Whilst
our mid-long term expectations for the business remain unchanged,
as the higher level of growth in these years is now being applied
to lower earlier year cashflows it has had a material impact on the
value in use calculation, resulting in the impairment charge.
Impairment review
Goodwill and intangible assets acquired through business
combinations is allocated to the CGUs that are expected to benefit
from that business combination and has been allocated for
impairment testing purposes to seven groups of CGUs as follows:
-- Location CGU (represented by the Location operating segment
excluding the Location - APAC Unit)
-- Location - APAC CGU (part of the Location operating
segment)
-- Identity - EMEA CGU ( part of the Identity operating
segment)
-- Identity - APAC CGU (part of the Identity operating
segment)
-- Identity - Americas CGU (part of the Identity operating
segment)
-- Fraud - Investigate CGU (part of the Fraud operating
segment)
-- Fraud - APAC Unit (part of the Fraud operating segment)
Where there are no indicators of impairment on the goodwill and
acquired intangibles arising through business combinations made
during the year, they are tested for impairment no later than the
first anniversary following acquisition.
Carrying Amount of Goodwill and Acquired Intangible Assets Allocated to CGUs
2023 2022
Restated
Acquired Acquired (1)
Goodwill Intangibles Total Goodwill Intangibles Total
Revised Name Name at 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
22 (if
different)
Location Unit - 61,775 10,634 72,409 53,992 12,725 66,717
N/A (Combined
into Location
Unit) Loqate Unit - - - 7,333 679 8,012
N/A (Split from
Location - APAC VIX Verify
Unit Unit) 2,336 614 2,950 - - -
Identity - EMEA
Unit Identity Unit 104,484 26,588 131,072 35,058 1,665 36,723
Identity - APAC
Unit VIX Verify Unit 75,325 26,402 101,727 16,385 5,314 21,699
Identity -
Americas
Unit(2) IDology Unit 364,662 157,251 521,913 164,051 51,143 215,194
Fraud -
Investigate
Unit Fraud Unit 3,608 2,821 6,429 3,181 3,841 7,022
Fraud - APAC
Unit CAFS Unit 14,204 456 14,660 14,941 922 15,863
N/A (Combined
into Fraud -
Investigate
Unit) Transactis Unit - - - 427 192 619
Unallocated
N/A - Now
Allocated Acuant Unit - - - 408,043 174,122 582,165
N/A - Now
Allocated Cloudcheck Unit - - - 10,535 4,805 15,340
626,394 224,766 851,160 713,946 255,408 969,354
--------- ------------ -------- --------- ------------ ------------
(1) For details of the prior year measurement period adjustment
refer to note 11.
(2) 2023 goodwill value is stated after impairment
Key Assumptions Used in Value in Use Calculations - Base
Case
The key assumptions for value in use calculations are those
regarding the forecast cash flows, discount rates and growth
rates.
The Group prepares cash flow forecasts using:
-- budgets and forecasts approved by the Directors covering a 5 year period;
-- for the Identity segment, an appropriate extrapolation of
cash flows is applied beyond this using a combination of industry
analysis of market growth rates to 2032; and
-- a long-term average growth rate is applied to perpetuity for
the geographic market being assessed.
Forecast revenue growth rates, margins and cash flow conversion
rates were based on past experience, industry market analysis and
strategic opportunities specific to the group of CGUs being
assessed.
For the Identity segment, it was considered that beyond the
initial period covered by budgets and forecasts, it was most
appropriate to include a further period of 4 years of growth rates
that are higher than the long-term average growth rates for that
particular region. This was determined on the basis of multiple
pieces of industry and market research covering the Identity and
Identity Fraud markets which support that, over this period, this
market is expected to grow at a higher rate than the long-term
growth rates of these geographic markets as a whole.
Beyond this forecast period, the long-term average growth rate
is not greater than the average long-term retail growth rate in the
territory where the group of CGUs is based UK - 2.0%; USA - 2.4%;
Australia - 3.6% (2022: UK - 2.0%; USA - 2.0%; Australia -
2.5%).
The Directors estimate discount rates using pre-tax rates that
reflect current market assessments of the time value of money and
the risks specific to the individual CGU. Growth rates reflect
long-term growth rate prospects for the economy in which the CGU
operates.
2023 2022
Revised Pre-tax Growth Pre-tax Growth
Name Discount rate Discount rate
rate (in perpetuity) rate (in perpetuity)
% % % %
Location
Unit 13.5% 2.0% 12.3% 2.0%
Location
- APAC Unit 13.6% 3.6% n/a n/a
Identity
- EMEA Unit* 13.5% 2.0% 12.3% 2.0%
Identity
- APAC Unit* 13.6% 3.6% 14.3% 2.5%
Identity
- Americas
Unit* 12.3% 2.4% 12.4% 2.0%
Fraud - Investigate
Unit 13.5% 2.0% 12.3% 2.0%
Fraud - APAC
Unit 13.6% 3.6% 14.3% 2.5%
* For the year to 31 March 2023, the following revenue growth
rates have been applied to the 4 year period from 1 April 2028 to
31 March 2032 for these groups of CGUs: Identity - EMEA 10.3%,
Identity - APAC 12.5% and Identity - Americas 14.7%. These growth
rates were applied consistently to Identity - EMEA and Identity -
APAC but reduced by 1% per year to 2032 for Identity - Americas to
account for the increased risk associated with these cash flows as
the time horizon increases.
The headroom/(impairment) (i.e. the excess/(shortfall) of the
value of discounted future cash flows over the carrying amount of
the CGU) under the base case scenario was as follows:
2023 2022 (2)
Revised Name Base Case(1) Base Case(1)
GBP'000 GBP'000
Location Unit 102,029 122,106
Location - APAC Unit 12,298 n/a
Identity - EMEA Unit 32,301 16,927
Identity - APAC Unit 2,741 14,933
Identity - Americas Unit (122,208) 123,280
Fraud - Investigate Unit 26,628 33,740
Fraud - APAC Unit 49,372 18,921
(1) The excess of the recoverable amount over the carrying
amount of the CGU before applying sensitivities
(2) The goodwill and acquired intangible assets in relation to
the Acuant and Cloudcheck acquisitions remained unallocated to a
CGU as at 31 March 2022 and therefore the prior year impairment
assessment excluded these assets
The carrying value of the Identity - Americas group of CGUs has
been reduced to its recoverable amount through recognition of an
impairment charge of GBP122,225,0000 against goodwill. There is a
difference of GBP17,000 to the negative headroom value in the above
table due to the impairment charge being recorded in USD at an
average FX rate in the income statement, whereas the table above is
based on the closing FX rate. Further details of the reason for
this impairment are in the summary section above and in the
Financial Review on page 9.
This charge is recognised within exceptional items in the Group
income statement. Any additional adverse movement in the key
assumptions at the balance sheet date would lead to a further
impairment of goodwill.
Key Assumptions Used in Value in Use Calculations - Sensitised
Case
The Group has considered the impact of changes in future cash
flows and key assumptions on the base case value in use model, to
create a sensitised value in use model. This has been included
applying the cumulative impact of:
-- Increasing pre-tax discount rates by 25bps, to reflect
potential increases in government bond yields and associated
risk-free rates
-- Decreasing average annual growth forecasts to between 2029
and 2032 by 50bps, to reflect the potential for a worse than
predicted market outlook; and
-- Decreasing long term growth rates by 25bps, to reflect a
worse than predicted long term global economic outlook.
It was not deemed necessary to sensitise the operating margin of
the CGU given the strategy for growth. Despite the forecast growth
the unsensitised forecast cashflows do not assume any operating
leverage which would increase operating profit margins. Management
determined that should growth be slower than estimated then there
was adequate headroom in the estimates of costs that operating
margins could be preserved.
The headroom (i.e. the excess of the value of discounted future
cash flows over the carrying amount of the CGU) under the
sensitised scenario is below:
2023 2022 (2)
Revised Name Sensitised(1) Sensitised(1)
GBP'000 GBP'000
Location Unit 95,680 101,303
Location - APAC Unit 11,622 n/a
Identity - EMEA Unit 23,337 10,143
Identity - APAC Unit (2,776) 8,838
Identity - Americas Unit (157,506) 61,508
Fraud - Investigate Unit 25,445 28,719
Fraud - APAC Unit 46,517 12,333
(1) Headroom after adjusting future cash flows and key
assumptions to create a sensitised value in use model
(2) The goodwill and acquired intangible assets in relation to
the Acuant and Cloudcheck acquisitions remained unallocated to a
CGU as at 31 March 2022 and therefore the prior year impairment
assessment excluded these assets.
The sensitised scenario would lead to further impairment of
GBP35,298,000 for Identity - Americas and an impairment charge of
GBP2,776,000 for Identity - APAC. Therefore, a reasonably possible
change in the value of the key assumptions could cause CGU Carrying
amount to exceed its recoverable amount.
When considering goodwill impairment, the break-even rate at
which headroom within each CGU is reduced to GBPnil, if all other
assumptions remain unchanged, has also been considered.
2023 2022 (1)
Revised Name Pre-tax Decrease Revenue Growth Pre-tax Decrease Revenue Growth
Discount rate in Base Rate Discount in Base Rate
Case (2029 to 2032) rate Case (2028 to 2032)
Cashflows Cashflows
Location Unit 28.7% (58.0)% n/a 29.7% (64.0)% n/a
Location -
APAC Unit 48.6% (80.0)% n/a n/a n/a n/a
Identity -
EMEA Unit 15.8% (20.0)% 4.5% 16.7% (30.0)% n/a
Identity -
APAC Unit 13.9% (3.0)% 11.4% 22.4% (41.0)% n/a
Identity -
Americas
Unit n/a n/a n/a 18.1% (36.0)% n/a
Fraud -
Investigate
Unit 63.7% (80.0)% n/a 66.5% (82.0)% n/a
Fraud - APAC
Unit 41.1% (76.0)% n/a 27.6% (53.0)% n/a
(1) The goodwill and acquired intangible assets in relation to
the Acuant and Cloudcheck acquisitions remained unallocated to a
CGU as at 31 March 2022 and therefore the prior year impairment
assessment excluded these assets
With the exception of the Identity - Americas and Identity -
APAC groups of CGUs, the Directors do not believe that any
reasonably possible changes in the value of the key assumptions
noted above would cause a CGU carrying amount to exceed its
recoverable amount.
14. Trade and other receivables
Restated(1)
2023 2022
GBP'000 GBP'000
Current
Trade receivables 52,892 59,557
Allowance for unrecoverable amounts (2,394) (3,968)
----------- ------------
Net trade receivables 50,498 55,589
Prepayments 10,818 10,472
Accrued income 3,997 3,565
----------- ------------
65,313 69,626
Non-current
Prepayments 701 -
Accrued income 3,604 -
----------- ------------
4,305 -
(1) For details of the prior year measurement period adjustment
refer to note 11.
15. Trade and Other Payables
Restated(1)
2023 2022
GBP'000 GBP'000
Trade payables 11,427 10,558
Other taxes and social security costs 3,996 4,785
Accruals 21,889 34,272
37,312 49,615
----------- ------------
(1) For details of the prior year measurement period adjustment
refer to note 11.
16. Loans
Bank loans
During the year to 31 March 2023, the Group drew down an
additional GBP12,000,000 and made repayments of $21,000,000
(GBP17,394,000) and GBP5,000,000. The outstanding balance on the
loan facility at 31 March 2023 was GBP127,470,000 (2022:
GBP129,254,000) representing GBP7,000,000 in GBP (2022: GBPnil) and
$149,000,000 in USD (2022: $170,000,000).
The facility was due to expire in July 2025 but on 18 November
2022, the Group exercised the first of the one-year extension
options on the existing revolving credit facility so that the
facility is now due to expire in July 2026. A further arrangement
fee of GBP358,000 was payable for this extension. Loan arrangement
fees have been netted off the loan balance. A second one-year
extension option can be exercised in November 2023, subject to bank
approval.
The debt bears an interest rate of Sterling Overnight Index
Average (SONIA) for GBP drawdowns or Secured Overnight Financing
Rate (SOFR) for USD drawdowns plus a margin of between 1.6% and
2.4% depending on the Group's current leverage position.
The loan is secured by a fixed and floating charge over the
assets of the Group.
2023 2022
GBP'000 GBP'000
Opening bank loan 128,226 -
New borrowings 12,000 156,748
Loan arrangement fee - (1,157)
Loan fees paid for extension (357) -
Repayment of borrowings (22,394) (30,073)
Amortisation of loan fees 326 129
Foreign currency translation adjustment 8,610 2,579
Closing bank loan 126,411 128,226
--------- ---------
Analysed as:
Amounts falling due within 12 months - -
Amounts falling due after one year 126,411 128,226
126,411 128,226
--------- ---------
Analysed as:
Bank loans 127,470 129,254
Unamortised loan fees (1,059) (1,028)
126,411 128,226
--------- ---------
17. Contingent consideration
2023 2022
GBP'000 GBP'000
At 1 April 7,776 3,662
Recognition on the acquisition of
subsidiary undertakings - 3,618
Remeasurement of contingent consideration
charged to profit or loss(1) 806 -
Unwinding of discount(2) 165 34
Release of contingent consideration(1) (2,753) -
Foreign exchange - unrealised(1) 234 462
Settlement of consideration (4,991) -
At 31 March 1,237 7,776
------- -------
Analysed as:
Amounts falling due within 12 months 1,237 5,856
Amounts falling due after one year - 1,920
At 31 March 1,237 7,776
------- -------
(1) Included in Consolidated Cash Flow Statement within fair
value adjustment on contingent consideration line totalling
GBP1,660,000 credit (2022: GBP188,000 debit). Since the contingent
consideration in respect of Cloudcheck sits within a foreign
subsidiary, the GBP234,000 foreign exchange movement includes a
GBP145,000 credit that has been recognised within the foreign
currency translation reserve following the translation of foreign
subsidiaries. The GBP1,660,000 credit to exceptional items
therefore represents the remaining foreign exchange movement of
GBP379,000, the remeasurement of contingent consideration of
GBP806,000 (less GBP92,000 received from the IDology escrow
administrator in the prior year) and the credit for the partial
release of Cloudcheck contingent consideration GBP2,753,000.
(2) Included in Consolidated Cash Flow Statement within the
finance costs line totalling GBP7,037,000 (2022: GBP1,794,000).
The opening balance at 1 April 2022 included GBP3,842,000
related to the pre-acquisition tax assets within IDology Inc. A
value equivalent to the cash benefit GBG received for these assets
was payable to the sellers once the cash benefit had been received
by GBG. In December 2022, IDology received the cash refund which
was subsequently paid to the sellers. There are no further payments
due in respect of the IDology acquisition.
The remaining contingent consideration at 31 March 2023 is in
respect of the acquisition of Cloudcheck during the year ended 31
March 2022. Since the contingent consideration is payable in
stages, it was discounted to fair value on the acquisition date and
subsequently unwound to profit and loss. During the year, a fair
value reassessment of the Cloudcheck contingent consideration was
performed. Based on actual performance in the period following
initial acquisition, it was determined that the full performance
criteria would not be met. As a result, GBP2,753,000 of the balance
initially recognised at acquisition has been taken as a credit
within exceptional items during the year.
18. Contingent liability (prior year only)
The Information Commissioner's Office, the data industry
regulator in the UK, announced in November 2018 that it was
conducting audits on a number of companies to understand the use of
data in their services. GBG was included in this review and has
engaged and worked with the ICO in order to address the
recommendations that were made to improve privacy compliance. On 23
February 2023, GBG received official confirmation that their
engagement had been formally closed.
19. Subsequent events
Post year-end further loan repayments of GBP6.6 million (GBP5
million and $2 million) have been made.
20. Alternative performance measures
Management assess the performance of the Group using a variety
of alternative performance measures. In the discussion of the
Group's reported operating results, alternative performance
measures are presented to provide readers with additional financial
information that is regularly reviewed by management. However, this
additional information presented is not uniformly defined by all
companies including those in the Group's industry. Accordingly, it
may not be comparable with similarly titled measures and
disclosures by other companies. Additionally, certain information
presented is derived from amounts calculated in accordance with
IFRS but is not itself an expressly permitted GAAP measure. Such
measures are not defined under IFRS and are therefore termed
'non-GAAP' measures. These non-GAAP measures are not considered to
be a substitute for or superior to IFRS measures and should not be
viewed in isolation or as an alternative to the equivalent GAAP
measure.
The Group's income statement and segmental analysis separately
identify trading results before certain items. The Directors
believe that presentation of the Group's results in this way is
relevant to an understanding of the Group's financial performance,
as such items are identified by virtue of their size, nature or
incidence. This presentation is consistent with the way that
financial performance is measured by management and reported to the
Board and assists in providing a meaningful analysis of the trading
results of the Group. In determining whether an event or
transaction is presented separately, management considers
quantitative as well as qualitative factors such as the frequency
or predictability of occurrence. Examples of charges or credits
meeting the above definition, and which have been presented
separately in the current and/or prior years include amortisation
of acquired intangibles, share-based payments charges, acquisition
related costs and business restructuring programmes. In the event
that other items meet the criteria, which are applied consistently
from year to year, they are also presented separately.
During the year, organic growth has been replaced with pro forma
underlying revenue. As reported in the chief executive officer's
review, there has been reduced demand from cryptocurrency exchange
customers and internet-economy customers due to macro-economic
factors. Therefore, presenting reported revenue adjusting for
revenue from acquisitions/disposals in the past twelve months and
excluding other non-underlying items is considered to provide a
more effective comparison of the Group's trading performance from
one period to the next.
The following are the key non-GAAP measures used by the
Group:
Constant currency
Constant currency means that non-Pound Sterling revenue in the
comparative period is translated at the same exchange rate applied
to the current year non-Pound Sterling revenue. This therefore
eliminates the impact of fluctuations in exchange rates on
underlying performance and enables measurement of performance on a
comparable year-on-year basis without the impact of foreign
exchange movements.
Pro forma underlying revenue
This includes adjustments to reported revenue for the
pre-acquisition/disposal revenue from acquisitions/disposals in the
past 12 months and is presented excluding non-underlying items.
Underlying pro forma revenue is presented as we believe this
provides both management and investors with useful additional
information about the Group's performance and aids a more effective
comparison of the Group's trading performance from one period to
the next.
2023 2022 Growth
GBP'000 GBP'000 %
Reported revenue 278,810 242,480 15.0%
Pre-acquisition/disposal revenue - 31,314 (13.2%)
Post-acquisition unwind of deferred
revenue haircut(1) on Acuant 1,241 - 0.5%
Non-repeating revenue(2) (219) (19,565) 7.8%
Pro forma revenue 279,832 265,021 10.1%
Constant currency adjustment - 15,665 (6.4%)
-------- --------- ---------
Pro forma revenue at constant
currency 279,832 269,894 3.7%
(1) The deferred revenue haircut represents the cost of
providing the deferred revenue service in the post-acquisition
period.
(2) Non-repeating revenue represents revenue from the US
Government's stimulus programme and exceptional cryptocurrency
volume.
Normalised items
These are recurring items which management considers could
affect the underlying results of the Group. These include:
-- amortisation of acquired intangibles; and
-- share-based payment charges
Normalised items are excluded from statutory measures to
determine adjusted results.
Adjusted operating profit
Adjusted operating profit means operating profit before
exceptional items and normalised items. Adjusted results allow for
the comparison of results year-on-year without the potential impact
of significant one-off items or items which do not relate to the
underlying performance of the Group. Adjusted operating profit is a
measure of the underlying profitability of the Group.
2023 2022
GBP'000 GBP'000
Operating (loss)/profit (112,429) 23,407
Amortisation of acquired intangibles 42,758 24,735
Share-based payment charges 2,313 6,171
Exceptional items 127,175 4,526
Adjusted Operating Profit 59,817 58,839
Adjusted operating profit margin
Adjusted operating profit margin is calculated as adjusted
operating profit as a percentage of revenue.
Adjusted EBITDA
Adjusted EBITDA means adjusted operating profit before
depreciation and amortisation of non-acquired intangibles.
2023 2022
GBP'000 GBP'000
Adjusted operating profit 59,817 58,839
Depreciation of property, plant
and equipment 1,771 1,531
Depreciation of right-of-use assets 1,491 1,593
Amortisation of non-acquired intangibles 68 233
Adjusted EBITDA 63,147 62,196
Adjusted tax
Adjusted Tax means income tax charge before the tax impact of
amortisation of acquired intangibles, share-based payment charges
and exceptional items. This provides an indication of the ongoing
tax rate across the Group.
Adjusted effective tax rate
The adjusted effective tax rate means adjusted tax divided by
adjusted earnings.
2023 2022
Profit
Loss before Income Effective before Income Effective
tax tax charge tax rate tax tax charge tax rate
GBP'000 GBP'000 % GBP'000 GBP'000 %
Reported effective
tax rate (118,830) 964 (0.8%) 21,653 6,390 29.5%
Add back:
Amortisation
of acquired
intangibles 42,758 9,463 (12.9%) 24,735 5,082 (4.8%)
Equity-settled
share-based
payments 2,313 10 (0.5%) 6,171 218 (2.5%)
Exceptional
items 4,950 917 35.5% 4,526 897 (0.2%)
Adjusted effective
tax rate 53,416 11,354 21.3% 57,085 12,587 22.1%
Adjusted earnings per share ('Adjusted EPS')
Adjusted EPS represents adjusted earnings divided by a weighted
average number of shares in issue and is disclosed to indicate the
underlying profitability of the Group. Adjusted EPS is a measure of
underlying earnings per share for the Group. Adjusted earnings
represents adjusted operating profit less net finance costs and
income tax charges. Refer to note 9 for calculation.
Net (debt)/cash
This is calculated as cash and cash equivalent balances less
outstanding external loans. Unamortised loan arrangement fees are
netted against the loan balance in the financial statements but are
excluded from the calculation of net cash/debt. Lease liabilities
following the implementation of IFRS 16 are also excluded from the
calculation of net cash/debt since they are not considered to be
indicative of how the Group finances the business. This is a
measure of the strength of the Group's balance sheet.
2023 2022
GBP'000 GBP'000
Cash and cash equivalents 21,552 22,302
Loans on balance sheet 126,411 128,226
Unamortised loan arrangement fees 1,059 1,028
---------- ----------
External loans 127,470 129,254
Net (debt)/cash (105,918) (106,952)
Debt leverage
This is calculated as the ratio of net (debt)/cash to adjusted
EBITDA. This demonstrates the Group's liquidity and its ability to
pay off its incurred debt.
2023 2022
GBP'000 GBP'000
Net (debt)/cash (105,918) (106,952)
Adjusted EBITDA 63,147 62,196
Debt leverage 1.68 1.72
Cash conversion %
This is calculated as cash generated from operations in the
Consolidated Cash Flow Statement, adjusted to exclude cash payments
in the year for exceptional items, as a percentage of adjusted
operating profit. This measures how efficiently the Group's
operating profit is converted into cash.
2023 2022
GBP'000 GBP'000
Cash generated from operations before tax payments
(from Consolidated Cash Flow Statement) 38,570 56,256
Opening unpaid exceptional items 1,372 549
Total exceptional items 127,715 4,526
Non-cash exceptional items (123,362) (427)
Closing unpaid exceptional items (1,251) (1,372)
Cash generated from operations before tax payments
and exceptional items paid 42,504 59,532
Adjusted EBITDA 63,147 62,196
Cash conversion % 67.3% 95.7%
Website
The Investors section of the Company's website,
www.gbgplc.com/investors, contains detailed information on news,
press releases, key financial information, annual and interim
reports, share price information, dividends and key contact
details. Our share price is also available on the London Stock
Exchange website. The following information is a summary and
readers are encouraged to view the website for more detailed
information.
Dividend Reinvestment Plan
The Company offers a Dividend Reinvestment Plan that enables
shareholders to reinvest cash dividends into additional shares in
the Company. Application forms can be obtained from Equiniti.
Share scams
Shareholders should be aware that fraudsters may try and use
high pressure tactics to lure investors into share scams.
Information on share scams can be found on the Financial Conduct
Authority's website, www.fca.org.uk/scams
Financial calendar 2023
Annual General Meeting 20 July 2023
Shareholder enquiries
GBG's registrar, Equiniti, can deal with any enquiries relating
to your shareholding, such as a change of name or address or a
replacement of a share certificate. Equiniti's Shareholder Contact
Centre can be contacted by telephone on 0371 38 2365 (international
callers: +44 (0)121 415 7161) between 8.30am and 5.30pm Monday to
Friday, excluding public holidays in England and Wales. You can
also access d etails of your shareholding and a range of other
shareholder services by registering at www.shareview.co.uk .
Company Secretary & Registered Auditor
Office Ernst & Young LLP
Annabelle Burton 1 Bridgewater Place
GB Group plc Water Lane
The Foundation, Herons Way Leeds
Chester Business Park LS11 5QR
Chester Solicitors
CH4 9GB Squire Patton Boggs (UK) LLP
United Kingdom 1 Spinningfields
1 Hardman Square
Registered in England & Wales Manchester
Company Number: 2415211 M3 3EB
T: +44 (0)1244 657333
E: enquiries@gbgplc.com
W: www.gbgplc.com
Nominated Advisor and Joint Registrars
Broker Equiniti
Numis Securities Limited Aspect House
45 Gresham Street Spencer Road
London Lancing
EC2V 7BF West Sussex
BN99 6DA
Joint Broker
Barclays Bank plc
5 The North Colonnade
Canary Wharf
London
E14 4BB
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