Interim Results
GB Group PLC
19 November 2003
Embargoed until 07.01 19 November 2003
GB GROUP PLC (the 'Company')
Interim Results for the Six Months Ended 30 September 2003
Highlights
• GB Group continued to make good progress. The pipeline of sales
opportunities increased significantly and turnover increased by 7% to £5.5
million (2002: £5.2 million).
• GB today announced that it has entered into three related strategic
agreements with British Telecommunications plc ('BT') to build a strong
position in the rapidly growing identity fraud, credit referencing and
anti-money laundering markets for its joint online identity authentication
service, URU(TM) (You Are You).
• The Company continues to be cash generative. Net cash balances at 30
September 2003 was £6.6 million (2002: £6.2 million). In August 2003, the
Group paid its first dividend of £0.4 million.
• The Group invested in its new business and product development
initiative with BT and also increased its sales force by 27% from 22 to 28.
As a result operating costs on a like-for-like basis increased, compared to
last year, by £0.5 million.
• Operating loss for the period was £0.3 million (2002: £0.2 million
profit). Profitability continues to be weighted towards the second half of
the financial year due to contract renewals.
• GB Group's management team was strengthened further during the period
with Ian Davidson (previously of Pitney Bowes Inc.) appointed as Managing
Director of the Company's DataIntegrity Division.
• Commenting on the results, GB Group's Chairman, John Walker-Haworth,
said: 'The directors believe that the Group is well positioned to take
advantage of the investment made in recent months in product development
and the improvement and increase in the sales team. Overall, the quality of
the business continues to improve.'
- Ends -
For further information, please contact:
GB Group plc
Richard Law, Chief Executive 01244 657333
Mona Navin-Mealey, Finance Director
Weber Shandwick Square Mile 020 7067 0700
Richard Hews
Rachel Taylor
Website www.gb.co.uk
Notes to Editors
About GB Group plc
GB Group plc provides a range of products and services to enable organisations
to capitalise on one of their greatest assets - customer data. The company has
expertise across a range of sectors and is able to transform customer data into
valuable information, enabling clients to make better, more informed decisions.
Developing innovative software and services, through to the provision of the
UK's most comprehensive consumer business database - The National Register(R) -
positions GB Group as a widely acknowledged industry leader in this specialist
area.
GB Group plc has three business areas.
• The Data Authentication business helps businesses validate personal identity
information and provides anti-fraud solutions to fight crime.
• The Data Integrity business helps companies capture and maintain accurate
customer contact data, an essential foundation for any profitable customer
relationship.
• The Data Solutions business empowers companies to consolidate and analyse
customer data from various sources, enabling them to make better, more
informed decisions.
Established since 1989, GB's core competencies combined with industry sector
knowledge have enabled the company to deliver significant value to organisations
such as npower, Lloyds TSB Group, Astra Zeneca and WH Smith, in helping them
derive maximum value from their customer data and sustain real advantage over
their competition.
GB Group is supported by its key relationships with organisations such as
British Telecom, with whom it partners on major initiatives, together with a
team of highly talented and motivated staff successfully delivering solutions.
GB Group plc is listed on the London Stock Exchange (www.gb.co.uk).
CHAIRMAN'S HALF YEAR STATEMENT
Overview
The Group is pleased with the progress made in the half year to 30 September
2003. Turnover increased by 7% compared to the same period last year and
significant additional resource was invested in the Group's Business Development
and Sales areas to sow the seeds for further growth. In November this investment
was rewarded with the signing of a strategically important series of contracts
with BT to develop new products to combat the growing problems of Identity Fraud
and Money Laundering.
The Group continues to be cash generative and cash balances at 30 September 2003
were £6.6 million (2002: £6.2 million). The Group paid its first dividend of
£0.4 million to shareholders in August of this year.
Group Trading
Our trading performance in the first half was marginally ahead of market
expectations. Although the economy remains subdued, the measures that we are
taking to grow the business are showing signs of success. GB's pipeline of sales
opportunities increased significantly in the period and turnover also increased
in the period to £5.5 million (2002: £5.5 million).
The Group increased its sales force during the first half from 22 to 28, and
invested significantly in new business and product development with partners
such as BT. As a result, operating costs on a like-for-like basis, and ignoring
provision adjustments which benefited the previous half year by £0.1 million,
increased by £0.5 million but again were in line with expectations.
The Group's operating loss for the period was £0.3 million (2002: £0.2 million
profit). After adjusting for goodwill and other non-cash items, cash generated
from operating activities in the period was £0.2 million.
Management
GB continued to strengthen its management team and in June announced the
appointment of Ian Davidson as Managing Director of its DataIntegrity division.
Ian previously worked in the USA as Vice President of Enterprise Accounts and
Software Sales at Pitney Bowes Inc. and, returning to the UK, brings with him a
wealth of sales and management experience in complementary markets.
New Business Opportunities
Authenticator
The Group's development of new business opportunities has focused on the design
and build of new products to combat the rapidly growing problem of Identity
Fraud, Credit Fraud and Money Laundering.
In my statement in June, I indicated that GB's Authenticator product had been
launched and subsequently licensed to the Bristol & West Building Society and
HBOS for use in the prevention of fraud. Since that time Authenticator has been
licensed to a further two customers and, whilst revenues associated with this
new area of business currently represent a small proportion of the Group
business, these early signs of adoption are encouraging.
BT URU(TM)
In parallel with the launch of Authenticator, GB has continued its work with BT
to develop an online version of Authenticator called URU(TM) (You are You). URU(TM)
combines GB's data sources and technology with BT's Web Services infrastructure
to provide organisations with an effective and robust online service which is
capable of preventing and detecting Identity Fraud and Credit Fraud. URU(TM) is
particularly valuable in non face-to-face transactions such as those conducted
over the telephone or on the Internet. Progress on this project has been good
and today GB announced that it had entered into a series of three year deals
with BT under which GB and BT will jointly host and sell URU(TM). Trials of the
URU(TM) service will include customers in the Gaming and Financial Services sectors.
In addition to the URU(TM) contracts, GB and BT have also entered into an Agreement
to identify and develop other products and services to address the wider
Identity Fraud, Credit Fraud and Anti-Money Laundering markets.
Further details of GB's work in the area of Identity Authentication can be found
on the Group's website at www.gb.co.uk.
Long Term Contract
In our Annual Report and Accounts issued in June we indicated that one of our
long term contracts initially entered into in 2001 continued to be problematic
and that this was being addressed. This has now moved on to a legal process. Our
advice is that legal fees of up to £100,000 may be incurred in resolving this
issue over the course of the year, £26,000 of which was incurred in the first
half.
Prospects
Profitability of the Group continues to be weighted substantially towards the
second half of the financial year and accordingly we continue to be cautious
with respect to the prospects for the year as a whole. The directors believe
that the Group is well positioned to take advantage of the investment made in
recent months in product development and the improvement and increase in the
sales team. Overall, the quality of the business continues to improve.
John Walker-Haworth
Chairman
19 November 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 September 2003
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
2003 2002 2003
£'000 £'000 £'000
Note
Turnover 5,537 5,183 11,243
Cost of sales (2,530) (2,283) (4,779)
-------- -------- --------
Gross profit 3,007 2,900 6,464
Other operating expenses
(excluding goodwill
amortisation) (3,080) (2,475) (5,373)
Goodwill amortisation (264) (224) (482)
-------- -------- --------
Operating (loss)/profit
Operating Division (194) 178 506
Head Office 4 (143) 23 103
-------- -------- --------
(337) 201 609
Share of operating (loss)/profit
in associate (9) (5) (11)
-------- -------- --------
Total operating (loss)/profit:
Group and share of associate (346) 196 598
Interest receivable less payable 104 105 215
-------- -------- --------
(Loss)/profit on ordinary
activities before taxation (242) 301 813
Taxation (32) (31) (67)
-------- -------- --------
(Loss)/profit on ordinary
activities after taxation (274) 270 746
Dividend - - (398)
-------- -------- --------
(Loss)/profit attributable to
shareholders (274) 270 348
-------- -------- --------
(Loss)/profit per 2.5p ordinary
share (pence) 6 (0.3) 0.3 0.9
-------- -------- --------
(Loss)/profit per 2.5p ordinary
share (pence)
- diluted 6 (0.3) 0.3 0.9
-------- -------- --------
Adjusted profit per 2.5p ordinary
share (pence)
- before goodwill amortisation 6 0.0 0.6 1.5
-------- -------- --------
CONSOLIDATED BALANCE SHEET
As at 30 September 2003
Unaudited Unaudited Audited
30 September 30 September 31 March
2003 2002 2003
£'000 £'000 £'000
Fixed assets
Intangible assets 6,815 7,101 7,080
Tangible assets 438 558 514
Investments 13 29 22
--------- --------- ---------
7,266 7,688 7,616
--------- --------- ---------
Current assets
Stocks 5 18 2
Debtors 2,450 2,690 2,944
Cash and short term deposits 6,588 6,203 6,748
--------- --------- ---------
9,043 8,911 9,694
Creditors : amounts falling due
within one year (2,695) (2,765) (3,440)
--------- --------- ---------
Net current assets 6,348 6,146 6,254
--------- --------- ---------
Total assets less current liabilities 13,614 13,834 13,870
Creditors : amounts due in more than
one year - - -
Provisions for liabilities and
charges (206) (218) (190)
--------- --------- ---------
13,408 13,616 13,680
--------- --------- ---------
Capital and reserves
Called up share capital 1,989 1,991 1,988
Share premium account 3,133 3,132 3,132
Merger reserve 6,575 6,575 6,575
Capital redemption reserve 3 - 3
Profit and loss account 1,708 1,918 1,982
--------- --------- ---------
13,408 13,616 13,680
--------- --------- ---------
CONSOLIDATED CASHFLOW STATEMENT
For the six months ended 30 September 2003
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
2003 2002 2003
£'000 £'000 £'000
Note
Net cash (outflow)/inflow from
operating activities 5(a) 186 840 1,412
--------- ---------- ---------
Returns on investments and
servicing of finance
Interest received 104 105 215
--------- ---------- ---------
104 105 215
--------- ---------- ---------
Taxation
Corporation tax paid - - (29)
--------- ---------- ---------
- - (29)
--------- ---------- ---------
Capital expenditure and
financial investment
Payments to acquire tangible
fixed assets (54) (89) (172)
Receipts from the sale of
tangible fixed assets - 9 9
--------- ---------- ---------
(54) (80) (163)
--------- ---------- ---------
Acquisitions and disposals
Acquisition of subsidiary
undertakings - - (40)
Net cash acquired with
subsidiary undertakings - - 29
--------- ---------- ---------
- - (11)
--------- ---------- ---------
Equity dividends paid (398) - -
--------- ---------- ---------
--------- ---------- ---------
Net Cash (outflow)/inflow (162) 865 1,424
--------- ---------- ---------
Management of liquid resources
Cash (withdrawn from)/deposited
to short term deposits (394) 1,178 1,797
Financing
Proceeds from issue of ordinary
shares (2) - -
Redemption of ordinary shares - - 14
Increase/(decrease) in cash 5(b) 234 (313) (387)
--------- ---------- ---------
(162) 865 1,424
--------- ---------- ---------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The interim financial statements are prepared on the basis of the accounting
policies set out in the annual report and accounts for the year ended 31
March 2003.
2. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the full preceding year is based on the
statutory accounts for the financial year ended 31 March 2003. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
3. SEGMENTAL INFORMATION
Turnover and Operating Profit
All of the turnover, profits and operating assets relate to the Groups
principal business activities, being the development, sale and support of
business application software, the provision of marketing database
management and analaysis services and the licensing of technology. Turnover
is stated net of value added tax. Turnover and operating profit arise
principally in the United Kingdom.
4. HEAD OFFICE COST ANALYSIS
Head Office costs for last year showed profits for the six months to
September 2002 and for the twelve months to March 2003, this was as a result
of the release of unused balance sheet provisions.
A comparison on a like-for-like basis to the current half year is as follows:
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
2003 2002 2003
£'000 £'000 £'000
Head Office (143) (105) (228)
Reversal of balance sheet accruals - 128 331
---------- ---------- ----------
(143) 23 103
---------- ---------- ----------
5. NOTES TO THE STATEMENT OF CASH FLOWS
a) Reconciliation of operating (loss)/profit to operating cash flows
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
2003 2002 2003
£'000 £'000 £'000
Operating (loss)/profit (337) 201 609
Depreciation 132 136 269
Goodwill amortisation 264 224 482
Profit on disposal
of fixed assets - (1) (2)
Increase in stocks (3) (18) (2)
Increase/(decrease) in
provisions 15 (28) (56)
Decrease in debtors 494 1,453 1,218
Decrease in creditors (379) (1,127) (1,106)
---------- ---------- ----------
186 840 1,412
---------- ---------- ----------
b) Reconciliation of net cashflow to movement in net funds
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
2003 2002 2003
£'000 £'000 £'000
At the beginning of the period 6,748 5,338 5,338
Increase/(decrease) in cash 234 (313) (387)
Movement in short term deposits
with banks (394) 1,178 1,797
---------- ---------- ----------
At the end of the period 6,588 6,203 6,748
---------- ---------- ----------
c) Analysis of net funds At
At 31 March Cashflow 30 September
2003 Six Months 2003
£'000 £'000 £'000
Cash 925 234 1,159
Short term deposits 5,823 (394) 5,429
---------- ---------- ----------
6,748 (160) 6,588
---------- ---------- ----------
6. EARNINGS PER SHARE
Earnings per share has been calculated in accordance with Financial Reporting
Standard 14 by reference to the following:
Unaudited 6 Months Unaudited 6 Months Audited Year to
to 30 September to 30 September 31 March
2003 2002 2003
Pence £'000 Pence £'000 Pence £'000
(Loss)/profit
after taxation (0.3) (274) 0.3 270 0.9 746
Add goodwill
amortisation 0.3 264 0.3 224 0.6 482
-------- -------- ------- -------- -------- --------
Adjusted profit
/(loss) after
taxation 0.0 (10) 0.6 494 1.5 1,228
-------- -------- ------- -------- -------- --------
Weighted average number
of shares in issue 79,579,898 79,665,527 79,648,527
Dilution effect of share
options - 240,968 685,044
----------- ----------- -----------
Diluted weighted average
number of shares (pence) 79,579,898 79,906,495 80,333,571
----------- ----------- -----------
Diluted earnings per share (0.3) 0.3 0.9
-------- -------- --------
The loss for the period and the weighted average number of ordinary shares for
calculating the diluted earnings per share for the period to 30 September 2003
is identical to those used for the basic earnings per share. This is because the
outstanding share options would have the effect of reducing the loss per
ordinary share and would therefore not be dilutive under the terms of Financial
Reporting Standard No. 14 (FRS 14).
INDEPENDENT REVIEW REPORT TO GB GROUP PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2003 which comprises the Consolidated Profit
and Loss Account, Consolidated Balance Sheet, Consolidated Cash Flow Statement
and the related notes 1 to 6. We have read the other information contained in
the interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of group management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether
the accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2003.
Ernst & Young LLP
Manchester
19 November 2003
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