Final Results

RNS Number : 0352I

GB Group PLC

08 June 2011

 



Embargoed until 7.00 a.m.

8 June 2011

GB GROUP PLC

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

Annual Results Announcement for the Year Ended 31 March 2011

GB Group Plc, the identity management specialist, is pleased today to announce its annual results for year ended 31st March 2011.

Highlights

·     Good progress against strategic objectives, including continued development of cross border service.

·     Significantly increased profits,* ahead of market expectations; profit increased 46% to £1.9 million (2010: £1.3 
million) on revenue of £24.4 million (2010: £22.2 million).

·     Profits* from DataAuthentication, GB's identity verification business, grew to £0.5 million (2010: £0.1 million), 
benefiting from a significant number of new customers, increased business from current customers and growth in cross border verifications.

·     Profits* from DataSolutions, GB's provider of identity based marketing services, increased by 11% to £1.7 million 
(2010: £1.5 million), benefiting from investment in sales resources and strong product differentiation.

·     The Group has a strong balance sheet and good cash generation. Cash and cash equivalents at the year-end of £6.2 
million (2010: £5.7 million) after payment of a dividend of £1 million during the year.

·     Proposed 6.25% increase in dividend per share to 1.275p (2010: 1.2p), reflecting the strong results and the Board's 
confidence in future prospects.

*Profits means profit before interest, tax, exceptional items and share based payments.

Commenting, David Rasche, Chairman, said:

"GB is in good shape and is well positioned to address its quickly developing markets, accordingly, we anticipate continued growth for the current year and look to the future with confidence."

Commenting, Richard Law, Chief Executive, said:

"GB has continued to benefit from the strength of its software and services. Creating differentiation is something that we do well and we will continue to invest to keep our software and services at the forefront of their markets. These are exciting times for GB and accelerating our growth through earnings enhancing acquisitions, as well as through organic growth, continues to be an objective. With a recovering economy and a clear strategy that is delivering results we remain optimistic for the future."

- Ends -

For further information, please contact:

GB Group plc	01244 657333
Richard Law, Chief Executive Dave Wilson, Finance Director
Peel Hunt (Nominated Adviser and Broker)	020 7418 8900
Richard Kauffer Daniel Harris
Weber Shandwick Financial Nick Oborne John Moriarty	020 7067 0700
Website	www.gb.co.uk

Notes to Editors

About GB Group plc

The most successful organisations recognise the value of understanding your individual identity - who you are, what you need and what you like. GB combines this concept of identity with technology to create an environment of trust so that organisations can connect, communicate and transact with consumers safely, responsibly and profitably. We call this identity management.

GB Group has three complementary identity management offerings:

·  Identity Verification - combating ID fraud, money laundering and under-age gambling

·  Identity Capture and Maintenance - providing accurate and up-to-date customer information for your contact strategy

·  Identity Analysis - understanding, targeting and retaining profitable customers

This enables our clients to make informed business decisions based on a thorough knowledge of consumer identity and behaviour, leading to more effective communication and interaction with the customer.

GB is listed on the London Stock Exchange (GBG). For more information, please visit GB's website: www.gb.co.uk.

GB Group - because identity matters® 

CHAIRMAN'S STATEMENT

In this my first statement as Chairman of GB Group plc I am pleased to report on a successful year in which GB has delivered strong financial results and made continued progress against its strategic objectives.

GB's revenue increased by 10% to £24.4 million in the year (2010: £22.2 million), its profitability improved significantly and cash balances increased, resulting in overall performance being ahead of market expectations, which had already been upgraded following the half year trading update in October 2010.

GB's vision is to be the recognised leader in the field of identity management, a fundamental enabler of the growing online business marketplace. This has been, and will continue to be, achieved through the creation of unique online products and services, which provide new market opportunities for us and additional value to our clients.   

Richard Law, our Chief Executive Officer, and his experienced executive team have driven the growth of GB and pursued our vision, objectives and strategies skilfully against a UK economic climate which remains challenging for traditional business models.   As we move into the new financial year I shall be working closely with Richard and his team to both accelerate top line growth and increase net margins through acquisitions, organic growth and efficiencies.

The strong results for the year to 31 March 2011 and our confidence in the future prospects for GB has enabled the Board to maintain its progressive dividend policy.  A final dividend of 1.275 pence per share will therefore be proposed at the Group's Annual General Meeting, which represents an increase of 6.25% over the dividend of 1.2 pence paid last year.

John Walker Haworth, who had been GB's Chairman for 10 years, stepped down in November and on behalf of the shareholders and the Board I would like to thank him for his work over the years to help put GB in the exciting position which it now is.

GB is fortunate to have very loyal stakeholders and I would like to thank our shareholders and clients for their continued commitment to our business and our staff and management for their hard work in ensuring we deliver quality solutions and high levels of customer service.

GB is in good shape and is well positioned to address its quickly developing markets, accordingly, we anticipate continued growth for the current year and look to the future with confidence.

D A Rasche

Chairman

CHIEF EXECUTIVE'S REVIEW

Overview

The Group made good progress during the year and delivered growth in revenues and a significantly increased profit performance ahead of market expectations.

Group revenues in the year increased by 10% to £24.4 million (2010: £22.2 million) and full year operating profits* increased by 46% to £1.9 million (2010: £1.3 million).  Profit after tax for the financial year was £2.1 million (2010: £1.5 million). The Group's cash balances also increased to £6.2 million (2010: £5.7 million) after taking account of the dividend payment of £1 million and capital investment of £0.4 million.

*Before share based payments and exceptionals.

DataAuthentication

DataAuthentication provides the electronic ID verification component of GB's identity management offerings.  With URU and ID3 Check, its UK and international electronic ID verification solutions, it continues to be a market leader in this developing market with a growing presence in the online retail and Government sectors as well as a strong presence in mobile telecoms, gaming and financial services.

A large proportion of Identity checks are still performed using manual, paper based methods and accordingly there is considerable scope for future growth in the electronic ID verification market by displacement of these manual processes. Verifications of Identity, whether manual or electronic, generally take place as the trading relationship between organisations and their customers begin, therefore, the volume of checks performed is largely driven by activity in the wider economy which, during the year, remained subdued.

Revenues increased by 4% to £10.0 million (2010: £9.7 million) and as a result of this growth, along with strong cost control, profitability in DataAuthentication increased to £0.5 million (2010: £0.1 million). A significant number of new customers, some operating new and growing internet business models such as Pure Holiday Homes were added giving us a more diversified customer base, with less reliance on our larger accounts.

Our view of the future is that electronic ID verification, which remains the most effective means of identifying new customers online, will continue to grow in importance as a fundamental enabler of online business.  In addition we recognise that there will be an increase in the propensity for consumers to transact cross border because country boundaries don't exist in the online world.

During the year GB saw an increase in the volume of verifications of overseas nationals, through its existing services for the USA, Australia, Norway, Sweden and Germany.  Whilst the absolute volume is still modest in comparison to UK verifications, we believe this is an important indication of future potential and accordingly we have continued to invest in new country services.

During the year a new service was added for Canada working with the international credit reference agency Transunion and an improved Australian service was developed working with Dun & Bradstreet.  Our strategy is to continue to build upon our relationships with major international businesses and build out our ability to identify individuals globally. Additional new country services are planned for the current year.

DataSolutions

DataSolutions provides ID Customer Registration, ID Marketing Services and ID Tracing software and services.  This business performed well and increased its overall revenues by 15% to £14.4 million (2010: £12.5 million).  Increased investment in sales resources capitalised on DataSolutions strong product differentiation and resulted in profitability increasing by 11% to £1.7 million (2010: £1.5 million).

During the year an increasing proportion of revenue came from tracing software and services that were developed to help our clients in the public and private sector to trace and make contact with individuals.  The growth in this area can be attributed to the fact that GB's tracing solution is the most comprehensive and accurate tracing and intelligence gathering tool available to the market and is an illustration of GB's successful strategy of strong product and service differentiation. Recent client wins in this area have included a key multi-year deal with HM Revenue and Customs to enable them to further strengthen their ability to manage fraud.

Our strategy for the DataSolutions business is to continue to strongly differentiate our services from those of our competitors and increasingly to link these services with the Identity Verification services provided by DataAuthentication. 

Outlook

GB has continued to benefit from the strength of its software and services. Creating differentiation is something that we do well and we will continue to invest to keep our software and services at the forefront of their markets. These are exciting times for GB and accelerating our growth through earnings enhancing acquisitions, as well as through organic growth, continues to be an objective. With a recovering economy and a clear strategy that is delivering results we remain optimistic for the future.

R A Law

Chief Executive

FINANCE DIRECTOR'S REPORT

The Group's Business

GB is a leading Identity Management business.  It helps organisations recognise and verify all elements of an individual's identity at every interaction. Through the application of our proprietary technology, we enable organisations to connect, communicate and transact with people safely, responsibly and profitably.

The performance of the Group is reported by segment, reflecting the management responsibilities and economic characteristics of each division.  The Group's two operating segments are as follows:

·     DataAuthentication - which provides electronic ID Verification services for combating ID fraud, money 
laundering and under-age gambling

·     DataSolutions - which provides ID Customer Registration, ID Marketing Services and ID Tracing software and 
services that provide accurate and up-to-date customer information and facilitate better understanding, targeting and retention of profitable customers.

Group Vision, Objectives and Strategy

The Group's vision is to be the recognised leader in the field of identity management, a fundamental enabler of online business.

The Group's strategy is to create and maintain unique online products and services which provide additional value for clients and are of sufficient strength to enable the Group to create new markets and to consistently win new business against our competition.  The Group achieves this through its investment in people and business development opportunities and the application of innovation, quality and excellence in everything it does.

Group Overview

The following table sets out the results of the Group for the year ended 31 March 2011.

		Years ended 31 March
		2011		2010
		£'000		£'000
Revenue		24,411		22,208
Operating profit before exceptional items and share based payments		1,897		1,294
Operating profit before share based payments		1,691		1,200
Operating profit		1,697		1,157
Finance revenue		28		106
Profit before tax		1,725		1,263
Income tax credit		379		243
Profit for the financial year		2,104		1,506

2011 Financial Year Compared to 2010 Financial Year

In the year to 31 March 2011, revenue for the Group increased 10% to £24.4 million (2010: £22.2 million) principally resulting from strong growth in the DataSolutions business.  Profits before exceptional items, finance revenue, taxation and share based payments increased 46% to £1.9 million compared to £1.3 million in the previous year.

Explanations of the significant items in the Statement of Comprehensive Income during the year are as follows:

Revenue

Revenues from DataSolutions increased by 15% to £14.4 million (2010: £12.5 million).  In the DataAuthentication business revenues increased by 4% to £10.0 million (2010: £9.7 million).

Gross Profit and Cost of Sales

Group gross profit margins of 53% (2010: 53%) were maintained, despite increased pricing pressure in the DataAuthentication business.

Other Operating Expenses

Other operating expenses were £11.0 million (2010: £10.6 million) with an increase principally as a result of further investment in sales resource to continue our future growth.

Exceptional Items

Exceptional items totalled £206,000 (2010: £94,000).  These costs were associated principally with the Company's move to AIM on 27 August 2010, along with some redundancy payments following a small number of staff reorganisations that took place in the second half of the year.

Group Profit

The Group generated an operating profit of £1.7 million (2010: £1.2 million) and after a negligible amount of finance revenue earned (2010: £0.1 million), the resultant profit before tax was £1.7 million (2010: £1.3 million).

Taxation

The current tax credit of £379,000 (2010: £243,000 credit) principally reflects the recognition of an increased deferred tax asset relating to capital allowances and tax losses.  This was partially offset by a small amount of current tax payable on the Company's finance revenue.

Dividend

The Board of Directors will propose a final ordinary dividend of 1.275 pence per share (2010: 1.2 pence per share), amounting to £1,099,000 (2010: £1,026,000).  The final ordinary dividend with respect to the year ended 31 March 2011, if approved, will be paid on 12 August 2011 to ordinary shareholders whose names were on the register on 15 July 2011.

Amounts Transferred To Retained Earnings

The amount transferred to reserves is £1,072,000 (2010: £565,000) after accounting for the previous year's dividend of £1,026,000 (2010: £984,000) which was paid during the year ended 31 March 2011.

Balance Sheet and Liquidity

Explanations of the most significant items in the Balance Sheet during the year are as follows:

Property, Plant and Equipment

The amount invested in property, plant and equipment during the year was £256,000 (2010: £462,000).

Intangible Assets

The carrying value of goodwill at 31 March 2011 was £6.5 million (2010: £6.5 million).  The carrying value of product development costs capitalised in accordance with IAS 38 'Intangible Assets' was £201,000 (2010: £98,000).  Intangible assets are tested annually for impairment and no impairment was required.

Trade and Other Receivables

The value of trade and other receivables increased by £0.3 million to £6.5 million at 31 March 2011, compared to the same date last year.

Cash Flows

Cash generated from operating activities was £1.7 million (2010: £2.5 million).  After taking account of the payment of the dividend of £1.0 million (2010: £1.0 million), investment in property, plant equipment of £0.3 million (2010: £0.5 million), investment in product development of £0.2 million (2010: £0.1 million) and other investing and financing cash flows of £0.2 million (2010: £0.3 million) cash and cash equivalents increased by £0.4 million (2010: £1.2 million).  Further detailed analysis of this movement is included in the Consolidated Cashflow Statement.

Cash and Cash Equivalents

At 31 March 2011, the Group held cash and short-term deposit balances of £6.2 million (2010: £5.7 million) and in accordance with the Group's treasury policy, all funds are placed with major UK clearing banks and building societies.

Trade and Other Payables

The value of trade and other payables has decreased by £0.1 million to £7.1 million (2010: £7.2 million) at 31 March 2011, compared to the same date last year.

The value of deferred income at 31 March 2011 was £0.9 million (2010: £0.9 million).

Key Performance Indicators

The Board monitor the Group's progress against its strategic objectives and the financial performance of the Group's operations on a regular basis.  Performance is assessed against the strategy and budgets using financial and non-financial measures.

The following details some of the principal Key Performance Indicators (KPIs) used by the Group, their purpose, the basis of calculation and the source of the underlying data.  A summary of performance against these KPIs is given below.

·        Financial

The Group uses the following primary measures to assess the performance of the Group and its propositions.

-     Revenue

Revenue and revenue growth are used for internal performance analysis and by investors to assess progress against outlook statements in the market.

-     Operating profit before exceptional items and share based payments

This is used by the Group for internal performance analysis and by investors to assess progress against outlook statements in the market.

-     Operating profit before exceptional items and share based payments, depreciation and amortisation (EBITEDA)

This is used by the Group for internal performance analysis and by investors to assess progress against outlook statements in the market.

-     Earnings per share

                Earnings per share is calculated as basic earnings per share from continuing operations.

-     Cash

Cash and cash equivalent balances are used by the Group for internal performance analysis and by investors to assess progress against outlook statements.

·        Transaction Based

-     Underlying Identity Verifications

Management believe that DataAuthentication transaction-based measures provide useful information for investors regarding trends in client revenue derived from electronic identity verification services and the extent to which clients have adopted the service.  The data used to calculate this KPI is extracted from the Group's billing and financial systems.  Underlying identity verifications is the total number of verifications on the Group's URU™ and ID3-Check™ systems and excludes one-off batch verifications.

Performance Against KPIs

A summary of the Group's progress in achieving its objectives, as measured against KPIs, is set out below.

	Years ended 31 March
	2011		2010
Revenue Growth	10%		-5%1
DataAuthentication Revenue Growth	4%		-17%
DataSolutions Revenue Growth	15%		6%1
EBITE % excluding share based payments	7.8%		5.8%
EBITEDA%	9.7%		7.9%
Earnings Per Share	2.5p		1.8p
Cash (£'000)	6,168		5,747
Underlying Identity Verifications	9,758,636		9,334,531

Note¹ Like-for-like revenues and profits in 2009 (which factor in to the 2010 growth calculation) excluded revenue of £350,000 from a one-off settlement for licence arrears. The profit associated with this settlement was £333,000.

Principal Risks and Uncertainties

Management use a model to identify and assess the impact of risks to the business under four key headings - financial, strategic, operational and knowledge.  For each risk, the likelihood and consequence are identified, management controls are confirmed and results reported.  The corporate governance report in the Annual Report describes more about the Group's risk management process.  The significant risks and uncertainties faced by the Group are set out below:

·        Regulatory risk:  legislation in all the markets we serve changes on a regular basis, and interpretation of existing laws can also change to create ever tightening standards, often requiring additional human and financial resources and the provision of new assets and systems.  Whilst the Group is committed to respond positively to new regulation and legislation, changes could affect the pricing for, or adversely affect the revenue from, the services the Group offers.

·        Competitive position: the Group operates in competitive markets and intensified competition could lead to a reduction in the rate at which the Group adds new customers and to a decrease in the size of the Group's market share if clients chose to receive services from other providers.

·        Non-supply by major supplier:  the Group sources some of its data and infrastructure from third party suppliers and partners.  The removal from the market of one or more of these third party suppliers or interruption in supply could quickly affect the Group's operations adversely and could result in loss of revenue or additional expenditure for the Group.

·        Disaster recovery and business continuity:  the Group has an understandable reliance on its place of business, IT systems and people and currently operates from a single site.  The loss of key components could affect the Group's operations and result in additional expenditure whilst the established business continuity plan is effected following an incident.

·        New product development:  in order to maintain competitive advantage, the group invests significant amounts of resources into product development. The development of all new technologies and products involves risk, including the product being more expensive, or taking longer, to develop than originally planned; that the market for the product is smaller than originally envisaged; or that the product fails to reach the production stage.

·        Intellectual property risk:  we generally protect our proprietary application software products and services by licensing rights to use the applications, rather than selling or licensing the computer source code.  We rely on trademark, copyright, patent and other intellectual property laws to establish and protect our proprietary rights in these products and services.  However, there is a risk that our proprietary rights could be challenged, limited, invalidated or circumvented.

Relationships

Other than our shareholders, the Group's performance and value are influenced by other stakeholders, principally our customers, suppliers, employees and our strategic partners.   Relationships are managed both on an individual basis and via representative groups.  The Group participates in industry groups which give a genuine access to client and supplier groups and decision makers in government and other regulatory bodies.

Treasury Policy and Financial Risk

The Group's treasury operation is managed within formally defined policies which are reviewed by the Board.  The Group finances its activities with cash and short-term deposits.  Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group's operating activities.  Surplus funds of the Group are invested through the use of short-term deposits with the objective of maximising fixed interest rate returns whilst still providing the flexibility to fund on-going operations when required.  It is not the Group's policy to engage in speculative activity or to use complex financial instruments.

D J Wilson

Group Finance Director

Consolidated Statement of Comprehensive Income

Year ended 31 March 2011

		2011		2010
		£'000		£'000
	Note
Revenue	3	24,411		22,208
Cost of sales		(11,512)		(10,330)
Gross profit		12,899		11,878
Other operating expenses excluding exceptional items		(10,996)		(10,627)
Exceptional items	5	(206)		(94)
Operating profit		1,697		1,157
Finance revenue - excluding exceptional item		28		32
Finance revenue - exceptional item	5	-		74
Profit before tax		1,725		1,263
Income tax credit		379		243
Profit for the year attributable to equity holders of the parent		2,104		1,506
Earnings per share	7
- basic earnings per share for the year		2.5p		1.8p
- diluted earnings per share for the year		2.4p		1.8p

Consolidated Statement of Changes in Equity Year ended 31 March 2011

			Equity share capital		Merger reserve		Capital redemption reserve		Retained earnings		Total equity
			£'000		£'000		£'000		£'000		£'000
Balance at 1 April 2009			5,867		6,575		3		(99)		12,346
Profit for the period			-		-		-		1,506		1,506
Total comprehensive income for the period			-		-		-		1,506		1,506
Exercise of options			40		-		-		-		40
Recovery of VAT on share issue fees			114		-		-		-		114
Share-based payments charge			-		-		-		43		43
Equity dividend			-		-		-		(984)		(984)
Balance at 31 March 2010			6,021		6,575		3		466		13,065
Profit for the period			-		-		-		2,104		2,104
Total comprehensive income for the period			-		-		-		2,104		2,104
Exercise of options			150		-		-		-		150
Share-based payments credit			-		-		-		(6)		(6)
Equity dividend			-		-		-		(1,026)		(1,026)
Balance at 31 March 2011			6,171		6,575		3		1,538		14,287

Company Statement of Changes in Equity Year ended 31 March 2011

			Equity share capital		Merger reserve		Capital redemption reserve		Retained earnings		Total Equity
			£'000		£'000		£'000		£'000		£'000
Balance at 1 April 2009			5,867		6,575		3		2,200		14,645
Profit for the period			-		-		-		1,506		1,506
Total comprehensive income for the period			-		-		-		1,506		1,506
Exercise of options			40		-		-		-		40
Recovery of VAT on share issue fees			114		-		-		-		114
Share-based payments charge			-		-		-		43		43
Equity dividend			-		-		-		(984)		(984)
Balance at 31 March 2010			6,021		6,575		3		2,765		15,364
Profit for the period			-		-		-		2,104		2,104
Total comprehensive income for the period			-		-		-		2,104		2,104
Exercise of options			150		-		-		-		150
Share-based payments credit			-		-		-		(6)		(6)
Equity dividend			-		-		-		(1,026)		(1,026)
Balance at 31 March 2011			6,171		6,575		3		3,837		16,586

Consolidated Balance Sheet

As at 31 March 2011

	Note		2011		2010
			£'000		£'000
ASSETS
Non-current assets
Property, plant and equipment	8		848		1,023
Intangible assets	9		6,707		6,604
Deferred tax asset			1,200		815
			8,755		8,442
Current assets
Trade and other receivables			6,495		6,165
Cash and short-term deposits			6,168		5,747
			12,663		11,912
TOTAL ASSETS			21,418		20,354
EQUITY AND LIABILITIES
Capital and reserves
Equity share capital	10		6,171		6,021
Merger reserve			6,575		6,575
Capital redemption reserve			3		3
Retained earnings			1,538		466
Total equity attributable to equity holders of the parent			14,287		13,065
Current liabilities
Trade and other payables			7,125		7,215
Current tax			6		22
Provisions			-		52
			7,131		7,289
TOTAL LIABILITIES			7,131		7,289
TOTAL EQUITY AND LIABILITIES			21,418		20,354

Approved by the Board on 7 June 2011

R A Law- Director

Registered in England number 2415211

Company Balance Sheet

As at 31 March 2011

	Note		2011		2010
			£'000		£'000
ASSETS
Non-current assets
Property, plant and equipment	8		848		1,023
Intangible assets	9		201		98
Investments			9,317		9,317
Deferred tax asset			1,200		815
			11,566		11,253
Current assets
Trade and other receivables			6,495		6,165
Cash and short-term deposits			6,168		5,747
			12,663		11,912
TOTAL ASSETS			24,229		23,165
EQUITY AND LIABILITIES
Capital and reserves
Equity share capital	10		6,171		6,021
Merger reserve			6,575		6,575
Capital redemption reserve			3		3
Retained earnings			3,837		2,765
Total equity			16,586		15,364
Current liabilities
Trade and other payables			7,637		7,727
Current tax			6		22
Provisions			-		52
			7,643		7,801
TOTAL LIABILITIES			7,643		7,801
TOTAL EQUITY AND LIABILITIES			24,229		23,165

Approved by the Board on 7 June 2011

R A Law- Director

Consolidated Cash Flow Statement Year ended 31 March 2011

			2011		2010
			£'000		£'000
Group profit before tax			1,725		1,263
Adjustments to reconcile Group profit before tax to net cash flows
Finance revenue			(28)		(106)
Depreciation of property, plant and equipment			431		422
Amortisation of intangible fixed assets			49		47
Share-based payments			(6)		43
Increase in trade and other receivables			(330)		(20)
(Decrease)/increase in trade and other payables			(90)		870
Decrease in provisions			(52)		-
Cash generated from operations			1,699		2,519
Income tax paid			(22)		(39)
Net cash generated from operating activities			1,677		2,480
Cash flows from investing activities
Purchase of property, plant and equipment			(256)		(462)
Expenditure on product development			(152)		(51)
Interest received			28		106
Net cash flows used in investing activities			(380)		(407)
Cash flows from financing activities
Proceeds from issue of shares			150		40
VAT reclaim on share issue costs			-		114
Dividends paid to equity shareholders			(1,026)		(984)
Net cash flows used in financing activities			(876)		(830)
Net increase in cash and cash equivalents			421		1,243
Cash and cash equivalents at the beginning of the period			5,747		4,504
Cash and cash equivalents at the end of the period			6,168		5,747

Company Cash Flow Statement Year ended 31 March 2011

 

			2011		2010
			£'000		£'000
Company profit before tax			1,725		1,263
Adjustments to reconcile Company profit before tax to net cash flows
Finance revenue			(28)		(106)
Depreciation of property, plant and equipment			431		422
Amortisation of intangible fixed assets			49		47
Share-based payments			(6)		43
Increase in trade and other receivables			(330)		(20)
(Decrease)/increase in trade and other payables			(90)		870
Decrease in provisions			(52)		-
Cash generated from operations			1,699		2,519
Income tax paid			(22)		(39)
Net cash generated from operating activities			1,677		2,480
Cash flows from investing activities
Purchase of property, plant and equipment			(256)		(462)
Expenditure on product development			(152)		(51)
Interest received			28		106
Net cash flows used in investing activities			(380)		(407)
Cash flows from financing activities
Proceeds from issue of shares			150		40
VAT reclaim on share issue costs			-		114
Dividends paid to equity shareholders			(1,026)		(984)
Net cash flows used in financing activities			(876)		(830)
Net increase in cash and cash equivalents			421		1,243
Cash and cash equivalents at the beginning of the period			5,747		4,504
Cash and cash equivalents at the end of the period			6,168		5,747

Notes to the Accounts

1.  AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRSs

The Group and Company financial statements of GB Group plc (the 'Company') for the year ended 31 March 2011 were authorised for issue by the Board of Directors on 7 June 2011 and the balance sheets were signed on the Board's behalf by R A Law.  GB Group plc is a public limited company incorporated and domiciled in England & Wales.  The Company's ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange.

The Group and Company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to the financial statements of the Group and Company for the year ended 31 March 2011.

The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual Statement of Comprehensive Income and related notes.

2.  ACCOUNTING POLICIES

Basis of Preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.  A summary of the significant accounting policies is set out below.

The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 31 March 2011.  The Group and Company have applied the same policies throughout the year.

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

Basis of Consolidation

The Group financial statements consolidate the financial statements of GB Group plc and its subsidiary undertakings drawn up to 31 March each year.

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.  Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement.  The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.  All intragroup balances and transactions, including unrealised profits arising from them, are eliminated.

The Company's Investments in Subsidiaries

In its separate financial statements the Company recognises its investments in subsidiaries at cost less any provision for impairment.

Property, Plant and Equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.  Depreciation is calculated to write off cost less estimated residual value based on prices prevailing at the balance sheet date on a straight-line basis over the estimated useful life of each asset as follows:

Plant and equipment - over 3 to 10 years

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.  If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount.

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.  Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Statement of Comprehensive Income in the year the item is derecognised.

Residual values and estimated remaining lives are reviewed annually.

Goodwill

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.  Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.  Goodwill already carried in the balance sheet at 1 April 2004 or relating to acquisitions after that date is not amortised.  Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill is allocated to the cash-generating unit expected to benefit from the synergies.  Impairment is determined by assessing the recoverable amount of the cash-generating unit, including the related goodwill.  Where the recoverable amount of the cash-generating unit is less than the carrying amount, including goodwill, an impairment loss is recognised in the Statement of Comprehensive Income.  The carrying amount of goodwill allocated to a cash-generating unit is taken into account when determining the gain or loss on disposal of the unit, or an operation within it.  Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Business Combinations

GB Group has applied the business combinations exemption in IFRS 1.  It has not restated business combinations that took place prior to the 1 April 2004 transition date.

Impairment of Assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired.  If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount.  An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.  Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the Statement of Comprehensive Income in those expense categories consistent with the function of the impaired asset.

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

Intangible Assets

Research and development costs

Research costs are expensed as incurred. An intangible asset arising from development expenditure on an individual project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the availability to measure reliably the expenditure during the development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure capitalised is amortised on a straight line basis over 2 to 4 years.

Trade and Other Receivables

Trade receivables, which generally have 30-60 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectable amounts.  A provision is made against a trade receivable only when there is objective evidence that the Group may not be able to recover the entire amount due under the original terms of the invoice.  The carrying amount of the receivable is reduced through the use of a provision for doubtful debts account.  Impaired debts are derecognised when they are assessed as uncollectible.

Cash and Short-Term Deposits

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity date of three months or less.

For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of any outstanding bank overdrafts.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.  Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.  The expense relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement.  If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.  Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

Pensions

The Group does not have a contributory pension scheme.  Payments are made to individual private defined contribution pension arrangements.  Contributions are charged in the Statement of Comprehensive Income as they become payable.

Exceptional Items

The Group presents as exceptional items on the face of the Statement of Comprehensive Income, those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.

Dividends

Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders.

Share-Based Payment Transactions

Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions').

The Group has taken advantage of the exemption in IFRS 1 in respect of equity settled awards so as to apply IFRS 2 only to those equity settled awards granted after 7 November 2002 that had not vested on or before 1 January 2005.

Equity-Settled Transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted.  The fair value is determined by an external valuer using a binomial model.  In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of GB Group plc ('market conditions') and non-vesting conditions, if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ('the vesting date').  The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest.  The Statement of Comprehensive Income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting conditions were satisfied, provided that all other vesting conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified.  In addition, an expense is recognised over the remainder of the new vesting period for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately.  However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it was granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected in the computation of earnings per share (see note 7).

Revenue Recognition

Revenue is measured at the fair value of the consideration received from the sale of software and rendering of services, net of value-added tax, rebates and discounts and after the elimination of inter-company transactions within the Group.  Revenue is recognised as follows:

(a) Sale of software licences

Revenue in respect of software licences where the Group has no further obligations and the contract is non cancellable is recognised at the time of sale.  Revenue in respect of software licences where there are further contractual obligations, in the form of additional services provided by the Group, is recognised over the duration of the licence in line with when the costs are incurred.

(b) Rendering of services

Revenue from the rendering of services is recognised by reference to the stage of completion.  Stage of completion of the specific transaction is assessed on the basis of the actual services provided as a proportion of the total services to be provided.

(c) Interest income

Revenue is recognised as interest accrues using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to its net carrying amount.

Operating Leases

Payments made under operating leases (net of any incentives received from the lessor) are charged to the Statement of Comprehensive Income on a straight-line basis over the period of the lease.

Deferred Income Tax

Deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities included in the financial statements and the amounts used for tax purposes, that will result in an obligation to pay more, or a right to pay less or to receive more tax, with the following exceptions:

No provision is made where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction which is not a business combination that at the time of the transaction affect neither accounting nor taxable profit.

No provision is made for deferred tax that would arise on all taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, where the timing of the reversal of temporary differences can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised only to the extent that the directors consider that it is probable that there will be suitable taxable profits from which the future reversal of the underlying temporary differences and unused tax losses and credits can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

 

Foreign currencies

The Company's functional currency and presentation currency is pounds sterling.  Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction.  Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date.  All differences are taken to the Statement of Comprehensive Income.

New Accounting Standards and Interpretations Applied

The accounting policies adopted in the preparation of these financial statements are consistent with those followed in the preparation of the financial statements for the year ended 31 March 2010, except for the adoption of new Standards and Interpretations noted below.  Adoption of these Standards and Interpretations did not have any effect on the financial position or performance of the Group and the Company.

International Financial Reporting Interpretations Committee (IFRIC)

Adoption date

IFRIC 17	Distribution of Non-Cash Assets to Owners	1 July 2009
IFRIC 18	Transfers of Assets from Customers	1 July 2009

International Accounting Standards (IAS / IFRS)		Adoption date
IFRS 1	Amendment to IFRS 1 - Additional Exemptions for First-time Adopters	1 January 2010
IFRS 2	Amendment to IFRS 2 - Group Cash-Settled Share-based Payment Transactions	1 January 2010
IFRS 3	Business Combinations (revised January 2008)	1 July 2009
IAS 12	Amendment to IAS 12 - Recovery of Underlying Assets	1 January 2012
IAS 27	Consolidated and Separate Financial Statements (revised January 2008)	1 July 2009
IAS 32	Amendment to IAS 32 - Classification of Rights Issues	1 February 2010
IAS 39	Amendment to IAS 39 - Eligible Hedged Items	1 July 2009
	Improvements to IFRS (issued April 2009)	Various dates

New Accounting Standards and Interpretations not Applied

During the year, the IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:

International Accounting Standards (IAS / IFRS)		Effective date
IFRS 1	Amendment to IFRS 1 - Limited Exemption from Comparative IFRS 7 disclosures	1 July 2010
IFRS 9	Financial Instruments: Classification & Measurement	1 January 2013
IAS 24	Related Party Disclosures (revised)	1 January 2011

International Financial Reporting Interpretations Committee (IFRIC)		Effective date
IFRIC 14	Amendment: Prepayments of a Minimum Funding Requirement	1 January 2011
IFRIC 19	Extinguishing Financial Liabilities with Equity Instruments	1 July 2010

The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's or the Company's financial statements in the period of initial application.

Judgements and key sources of estimation uncertainty

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.

In the process of applying the Group's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy at note 2 above.  An analysis of the Group's goodwill and the assumptions used to test for impairment are set out in the Annual Report and Accounts.

Impairment of other assets

The Group reviews the carrying value of all assets for indications of impairment at each balance sheet date.  If indicators of impairment exist the carrying value of the asset is subject to further testing to determine whether its carrying value exceeds its recoverable amount.  The recoverable amount represents the higher of the asset's fair value less costs to sell and its value in use, which is determined by measuring the discounted cash flows arising from the asset (including ultimate realisation on disposal).

Deferred tax assets

Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits. The carrying value of the recognised deferred tax asset at 31 March 2011 was £1,200,000 (2010: £815,000) and the unrecognised deferred tax asset at 31 March 2011 was £4,765,000 (2010: £5,964,000).  Further details are contained in the Annual Report and Accounts.

Share-based payments

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Judgement is required in determining the most appropriate valuation model for a grant of equity instruments, depending on the terms and conditions of the grant.  Management are also required to use judgement in determining the most appropriate inputs to the valuation model including expected life of the option, volatility and dividend yield.  The assumptions and models used are disclosed in Note 11.

3.  REVENUE

Revenue disclosed in the Statement of Comprehensive Income is analysed as follows:

	2011		2010
	£'000		£'000
Sale of goods	7,703		6,843
Rendering of services	16,708		15,365
Revenue	24,411		22,208
Finance revenue	28		106
Total revenue	24,439		22,314

4.  SEGMENTAL INFORMATION

The Group's operating segments are internally reported to the Group's Chief Executive Officer based on two separable areas grouped into two operating segments: DataAuthentication - which provides electronic identity verification services and DataSolutions - which provides identity capture, maintenance and analysis services.  The Directors believe that the best measure of performance of those segments is operating profit before finance revenue and income tax as shown below. 

All revenues and all non-current assets are derived from UK operations.  Segment results include items directly attributable to either DataAuthentication or DataSolutions.  Unallocated items for 2011 represent Group head office costs (£293,000), exceptional costs (£206,000), Group finance income (£28,000), Group income tax credit (£379,000) and share-based payments credit (£6,000).  Unallocated items for 2010 represent Group head office costs (£333,000), exceptional costs (£94,000), Group finance income (£106,000), Group income tax credit (£243,000) and share-based payments charge (£43,000).

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

	Data Authentication		Data Solutions		Unallocated		2011
Year ended 31 March 2011	£'000		£'000		£'000		£'000
Revenue	10,049		14,362		-		24,411
Operating profit before depreciation	619		2,051		(499)		2,171
Depreciation and amortisation	(99)		(381)		-		(480)
Operating profit before finance revenue and income tax	520		1,670		(499)		1,691
Finance revenue							28
Share-based payments credit							6
Income tax							379
Profit for the period							2,104

	Data Authentication		Data Solutions		Unallocated		2010
Year ended 31 March 2010	£'000		£'000		£'000		£'000
Revenue	9,694		12,514		-		22,208
Operating profit before depreciation	221		1,875		(427)		1,669
Depreciation and amortisation	(97)		(372)		-		(469)
Operating profit before finance revenue and income tax	124		1,503		(427)		1,200
Finance revenue							106
Share-based payments							(43)
Income tax							243
Profit for the period							1,506

Information about major customers

Annual revenue from one (2010: one) customer amounted to £3,352,000 (2010: £3,138,000) arising from sales reported in the DataAuthentication segment.

5.  EXCEPTIONAL ITEMS

Exceptional costs of £206,000 in the year ended 31 March 2011 were costs principally associated with the Company's move to AIM on 27 August 2010 along with staff reorganisation costs.  Exceptional costs in the year ended 31 March 2010 of £94,000 were costs associated with staff reorganisation.

The £74,000 finance revenue item in year ended 31 March 2010 relates to interest received from HM Revenue and Customs following a reclaim of VAT associated with fees for share issues in 1993, 1995 and 1996.  The total amount of VAT recovered was £114,000 which has been credited to the share premium account.

6.  DIVIDENDS PAID AND PROPOSED

						2011 £'000		2010 £'000
Declared and paid during the year
Final dividend for 2010: 1.20p (2009: 1.15p)						1,026		984
Proposed for approval at AGM (not recognised as a liability at 31 March)
Final dividend for 2011: 1.275p (2010: 1.20p)						1,099		1,026

7.  EARNINGS PER ORDINARY SHARE

Basic

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

		2011 pence per share		2011 £'000		2010 pence per share		2010 £'000
Profit attributable to equity holders of the parent		2.5		2,104		1.8		1,506

Diluted

Diluted earnings/(loss) per share amounts are calculated by dividing the profit/(loss) for the year attributable to ordinary equity holders 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.

		2011		2010
		No.		No.
Basic weighted average number of shares in issue		85,737,711		85,487,254
Dilutive effect of share options		1,256,829		280,177
Diluted weighted average number of shares in issue		86,994,540		85,767,431

		2011 pence per share		2011 £'000		2010 pence per share		2010 £'000
Profit attributable to equity holders of the Company		2.4		2,104		1.8		1,506

8.  PROPERTY, PLANT AND EQUIPMENT

Group and Company
							Plant and equipment
							£'000
Cost
At 1 April 2009							2,542
Additions							462
At 31 March 2010							3,004
Additions							256
Disposals							(105)
At 31 March 2011							3,155
Depreciation and impairment
At 1 April 2009							1,559
Provided during the year							422
At 31 March 2010							1,981
Provided during the year							431
Disposals							(105)
At 31 March 2011							2,307
Net book value
At 31 March 2011							848
At 31 March 2010							1,023
At 1 April 2009							983

The net book value in respect of assets held under finance leases and hire purchase agreements is £nil (2010: £nil).

9.  INTANGIBLE ASSETS

Group	Development costs £'000		Goodwill £'000		Total £'000
Cost
At 1 April 2009	242		6,506		6,748
Additions - product development	51		-		51
At 31 March 2010	293		6,506		6,799
Additions - product development	152		-		152
At 31 March 2011	445		6,506		6,951
Amortisation and impairment
At 1 April 2009	148		-		148
Amortisation during the year	47		-		47
At 31 March 2010	195		-		195
Amortisation during the year	49		-		49
At 31 March 2011	244		-		244
Net book value
At 31 March 2011	201		6,506		6,707
At 31 March 2010	98		6,506		6,604
At 1 April 2009	94		6,506		6,600

Goodwill arose on the acquisition of GB Mailing Systems Limited and e-Ware Interactive Limited.  Under IFRS, goodwill is no longer amortised and is annually tested for impairment (see the Annual Report and Accounts).

Company	Development costs £'000		Total £'000
Cost
At 1 April 2009	242		242
Additions - product development	51		51
At 31 March 2010	293		293
Additions - product development	152		152
At 31 March 2011	445		445
Amortisation and impairment
At 1 April 2009	148		148
Amortisation during the year	47		47
At 31 March 2010	195		195
Amortisation during the year	49		49
At 31 March 2011	244		244
Net book value
At 31 March 2011	201		201
At 31 March 2010	98		98
At 1 April 2009	94		94

10. EQUITY SHARE CAPITAL

					2011		2010
					£'000		£'000
	Authorised
	93,609,520 (2010: 93,609,520) ordinary shares of 2.5p each				2,340		2,340
	Issued and fully paid
	Allotted, called up and fully paid				2,155		2,138
	Share premium				4,016		3,883
					6,171		6,021
					2011		2010
					No.		No.
	Number of shares in issue at 1 April				85,535,692		85,314,692
	Issued on exercise of share options				678,189		221,000
	Number of shares in issue at 31 March				86,213,881		85,535,692

During the year, the Company received £150,000 (2010: £40,000) on the issue of shares in respect of the exercise of options awarded under various share option plans.  The nominal value of these shares was £17,000 (2010: £5,000).

During 2010, the Company recovered £114,000 of VAT from HM Revenue and Customs following a reclaim of VAT associated with fees for share issues in 1993, 1995 and 1996.  This was credited to the share premium account.

11.  SHARE-BASED PAYMENTS

Group and Company

The Group operates Executive Share Option Schemes under which executive directors, managers and staff of the Company are granted options over shares.

Executive Share Option Scheme

Options are granted to executive directors and employees on the basis of their performance.  Options are granted at the full market value of the Company's shares at the time of grant and are exercisable between three and ten years from the date of grant.  The options vest when the Company's earnings per share growth is greater than the growth of the Retail Prices Index (RPI) over a 3 year period prior to the exercise date.  There are no cash settlement alternatives.

Executive Share Option Scheme (Section C Scheme)

Options are granted to executive directors and employees on the basis of their performance.  Options are granted at the full market value of the Company's shares at the time of grant and are exercisable between three and ten years from the date of grant.  The percentage of an option that will vest and be capable of exercise will depend on the performance of the Company.  A minimum of 50 per cent. of the options will vest when the Total Shareholder Return (TSR) performance of the Company, as compared to the TSR of the FTSE Computer and CPU Services Sub-Sector over a three-year period, matches or exceeds the median company.  The percentage of shares subject to an option in respect of which that option becomes capable of exercise will then increase on a sliding scale so that the option will become exercisable in full if top quartile performance is achieved.

Executive Share Option Scheme (Section D Scheme)

Options are granted to executive directors and employees on the basis of their performance.  Options are granted at the full market value of the Company's shares at the time of grant and are exercisable between three and ten years from the date of grant.  The vesting of awards under the Section D Scheme is subject to the achievement of normalised EPS growth at an annual compound rate of 20 per cent. over the performance period.  The base year for the purposes of the EPS target will be the financial year of the Company ended immediately prior to the grant of the award.  The performance period will be the three financial years following the base year.  Section D Scheme options will only become exercisable to the extent they have vested in accordance with the EPS target.

GB Sharesave Scheme

The Group has a savings-related share option plan, under which employees save on a monthly basis, over a three or five year period, towards the purchase of shares at a fixed price determined when the option is granted.  This price is usually set at a 20% discount to the market price at the time of grant.  The option must be exercised within six months of maturity of the savings contract, otherwise it lapses.

The credit recognised from equity-settled share-based payments in respect of employee services received during the year is £6,000 (2010: £43,000 charge).

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.

	2011 No.		2011 WAEP		2010 No.		2010 WAEP
Outstanding as at 1 April	8,178,842		27.51p		9,239,935		29.61p
Granted during the year	1,500,000		25.75p		1,050,000		20.99p
Forfeited during the year	(862,211)		32.23p		(1,246,087)		28.19p
Cancelled during the year	(62,272)		28.35p		(452,830)		27.14p
Exercised during the year	(678,189)		22.07p2		(221,000)		18.26p3
Expired during the year	(240,000)		36.50p		(191,176)		100.50p
Outstanding at 31 March	7,836,170		26.85p		8,178,842		27.51p
Exercisable at 31 March	3,772,000		27.32p		4,207,000		27.31p

¹Included within this balance are options over 120,000 (2010: 360,000) shares that have not been recognised in accordance with IFRS 2 as the options were granted on or before 7 November 2002.  These options have not been subsequently modified and therefore do not need to be accounted for in accordance with IFRS 2.

² The weighted average share price at the date of exercise for the options exercised is 34.07p

³ The weighted average share price at the date of exercise for the options exercised is 24.25p

For the shares outstanding as at 31 March 2011, the weighted average remaining contractual life is 5.8 years (2010: 5.5 years).

The weighted average fair value of options granted during the year was 7.82p (2010: 4.13p).  The range of exercise prices for options outstanding at the end of the year was 11.75p - 36.50p (2010: 11.75p - 49.50p).

The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model, taking into account the terms and conditions upon which the options were granted.  The following table lists the inputs to the model for the years ended 31 March 2011 and 31 March 2010.

		2011		2010
Dividend yield (%)		4.7		5.0 - 5.8
Expected share price volatility (%)		45		45
Risk-free interest rate (%)		1.8		2.4 - 2.6
Lapse rate (%)		5.0		5.0
Expected exercise behaviour		See below		See below
Market-based condition adjustment (%)		48.00		48.00
Expected life of option (years)		3.0		3.0 - 5.0
Weighted average share price (p)		25.75p		20.99p

It is assumed that 50% of options will be exercised by participants as soon as they are 20% or more "in-the-money" (i.e. 120% of the exercise price) and the remaining 50% of options will be exercised gradually at the rate of 20% per annum for each year they remain at or above 20% "in-the-money".

The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.

The market-based condition adjustment takes into account the likelihood of achieving market conditions, and allows for the fact if a Section C option vests it does not always vest at 100%.

No other features of options granted were incorporated into the measurement of fair value.

12.  RELATED PARTY TRANSACTIONS

Compensation of key management personnel (including directors)

Group & Company

			2011		2010
			£'000		£'000
Short-term employee benefits			768		527
Post-employment benefits			62		47
Share-based payments			63		1
			893		575

OTHER INFORMATION

(i)	The above financial information, which is unaudited, does not constitute statutory accounts as defined in section 435 (1) and (2) of the Companies Act 2006.  The financial information for the year ended 31 March 2011 has been extracted from the draft statutory accounts on which an unqualified audit opinion has been issued.  Statutory accounts for the year ended 31 March 2011 will be delivered to the Registrar in due course.  The annual results announcement is prepared on the same basis as set out in the previous year's statutory accounts.  Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies.
(ii)	The annual results announcement was approved by the Board of Directors of GB Group plc on 7 June 2011.
(iii)	The ex-dividend date is 13 July 2011; the record date is 15 July 2011; the payment date is 12 August 2011.
(iv)	The AGM will take place on 28 July 2011.
(v)	The 2011 interim results announcement is expected to be on 30 November 2011.
(vi)	This report will also be available on the GB Group web site: www.gb.co.uk from 8 June 2011.
(vii)	The Company intends to dispatch to shareholders copies of the full annual report and accounts for the year to 31 March 2011 and to make it available on the Group's website (www.gb.co.uk) by 6 July 2011.

 

END

 

 

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