Interim Results

RNS Number : 9408I

GB Group PLC

26 November 2008

 



Embargoed until 7.00 a.m.

26 November 2008

GB GROUP PLC 

('GB' or the 'Group')

Interim Results for the Six Months Ended 30 September 2008

GB is today pleased to announce interim results for the six months ended 30 September 2008.

Highlights

• Group revenue in the six months to 30 September 2008 increased by 43% to £11.3 million (2007: £7.9 million) and profit before tax improved significantly to £0.5 million (2007: £1.0 million loss). This strong growth was in line with expectations

• Growth has been driven by the continued move away from paper-based, manual methods of age and identity verification to the online electronic methods provided by our identity verification services, URU™ and ID3® Check

• Revenue in DataAuthentication, GB's verification business, increased to £6.4 million (2007: £2.8 million)

• Growth came from new clients, including FCE Bank plc, Victor Chandler, ASOS and Adecco, and from increased volume usage by existing clients

• DataIntegrity and DataSolutions, providers of identity-based marketing services, generated like for like revenues of £4.9 million (2007: £5.1 million)

• We have reinforced our aim of securing future revenue through online transaction services with the launch of an enhanced version of e-Trace, our online tracing product

• Cash balances at 30 September 2008 were £4.2 million (2007: £4.08 million)

• Group revenue in October 2008 was approximately 20% ahead of the same month last year

Commenting on the results, John Walker-Haworth, Chairman of GB, said:

'GB has demonstrated significantly improved profitability and cashflow in the first half of the year compared to the same period last year.  

Our focus on the identity management market has enabled the Group to lead this emerging sector and we consider that GB is well placed to address this growing market which, despite difficult market conditions, we believe has considerable revenue potential.'

For further information, please contact:

GB Group plc	01244 657333
Richard Law, Chief Executive
Weber Shandwick Financial  Ian Bailey Nick Oborne Clare Perks	020 7067 0700
Website	www.gb.co.uk

Notes to Editors

About GB Group plc

GB believes that identity matters.  Specialising in understanding consumer identity, GB enables its clients to make more informed business decisions and to communicate and interact more effectively with its customers through a deeper understanding of their identity and behaviour. Utilising its proprietary technology, GB can protect, predict and provide information that is used to maximise customer value for some of the UK's largest organisations.

GB offers solutions that assist organisations to capitalise on the value of their customers at every point of contact. 

GB has three complementary offerings: 

• Identity Capture and Maintenance (DataIntegrity) - providing accurate contact information 

• Identity Verification (DataAuthentication) - combating identity fraud, money laundering and under-age gambling 

• Identity Analysis (DataSolutions) - understanding, targeting and retaining profitable customers  

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

Overview

GB has continued to make good progress in the six months ending 30 September 2008.

The growth in half year revenues of 43% compared to the same period last year and resulted in our second consecutive half year of profitability. In the 12 months since the Group moved into profitability, profits before tax of £1.0 million have been generated compared with a loss of £1.6 million in the previous 12 months.

GB's growth has been driven by the move away from paper-based, manual methods of age and identity verification to the online electronic methods provided by our identity verification services, URU™ and ID3® Check.  It is our aim to simplify web-based transactions by making it easier and safer for consumers and organisations to prove identity and so do business together online. This corresponds with the move towards greater use of the internet.  

GB's Results

GB's performance for the six months ending 30 September 2008 was in line with the expectations set out in our interim trading update issued on 9 October 2008 and was as follows:

• The Group generated a profit before tax of £0.5 million (2007: £1.0 million loss).

• Like-for-like* revenue increased by 43% to £11.3 million (2007: £7.9 million).

• GB's balance sheet remains strong. Cash balances at 30 September 2008 were £4.2 million (2007: £4.08 million) after the payment of GB's increased final dividend of 1p per share in July 2008 amounting to £0.85 million.

• Revenue in October 2008 was approximately 20% ahead of the same month last year.

*    Like-for-like revenue excludes revenue of £0.35 million from a one off settlement for licence arrears in the first quarter of 2008. The profit associated with this settlement was £0.33 million.

DataAuthentication

Revenue in DataAuthentication during the first half of the year increased to £6.4 million (2007: £2.8 million). Growth came from both new clients and increased volume usage from existing clients.

New clients have increased the number of live DataAuthentication clients to 249 from 223 at the start of the financial year whilst individual verifications (excluding one-off batch verifications) increased to 5.1 million from 2.2 million for the same period last year.

In the Financial Services sector, we continue to add new clients such as FCE Bank plc, who offer financial products across all the Ford Motor Company brands in the UK.  We are also seeing existing URU clients, such as Lloyds TSB, now utilising URU in wider applications, such as their call centres, in order to further protect their businesses from the increasing levels of fraud in the market.

We have continued to extend our existing market leading position in Online Gaming, as well as Mobile Telecommunications, where we have added new clients including Victor Chandler, a major provider of online gaming both in the UK and in Europe.

We are developing opportunities in emerging electronic markets, such as online retailing, and in recruitment services, where we have recently entered into agreements with ASOS, the UK's largest online fashion and beauty store, and Adecco, the global leader in human resource solutions, to provide them both with our full range of identity verification services.

Our international verification service ID3-Check, which allows organisations to verify individuals across multiple countries via a single online portal, continues to be a key service differentiator against our competitors. We are pleased to report that continued developments of our international service have included recently entering into an important data agreement with Schufa (one of Germany's leading credit reference agencies) for the supply of German identity data to further enhance our ID3-Check offering.

DataIntegrity and DataSolutions

The identity based marketing and tracing services provided by DataIntegrity and DataSolutions generated like for like revenues of £4.9 million (2007: £5.1 million) in the first six months of the year.

Our aim of securing future revenue through online transaction services, rather than disc-based products, was reinforced during the year with the launch of an enhanced version of e-Trace, our online tracing product, which has been specifically tailored to meet the growing need of organisations seeking to reduce levels of bad debts.  

In addition, we continue to develop our presence in, and the opportunities for, the identity management market by aligning our established identity based marketing and tracing services of DataIntegrity and DataSolutions with the identity verification services provided by DataAuthentication. This enables our clients to gain a much improved and deeper understanding of their customers' identity and behaviours.

Our Outlook

GB has demonstrated significantly improved profitability and cashflow in the first half of the year compared to the same period last year.  

Our focus on the identity management market has enabled the Group to lead this emerging sector and we consider that GB is well placed to address this growing market which, despite difficult market conditions, we believe has considerable revenue potential.

JL Walker-Haworth

Chairman

26 November 2008

CONSOLIDATED INCOME STATEMENT

For the six months ended 30 September 2008

	Note		Unaudited 6 months to 30 September		Unaudited 6 months to 30 September			Audited Year to 31 March
			2008		2007			2008
			£'000		£'000			£'000
Revenue
- excluding exceptional item			11,334		7,915			19,365
- exceptional item	3		350		-			-
			11,684		7,915			19,365
Cost of sales			(5,966)		(4,122)			(9,893)
Gross profit			5,718		3,793			9,472
Other operating expenses			(5,312)		(4,905)			(10,152)
Operating profit/(loss)			406		(1,112)			(680)
Finance revenue			115		136			242
Profit/(loss) before tax			521		(976)			(438)
Income tax (expense)/credit			(32)		-			40
Profit/(loss) for the period attributable to equity holders of the parent			489		(976)			(398)
Profit/(loss) per share	7
- basic profit/(loss) for the period			0.6p		(1.2)p			(0.5)p
- diluted profit/(loss) for the period			0.6p		(1.2)p			(0.5)p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                                                                                                                                                   For the six months ended 30 September 2008

	Note		Equity share  capital		Merger reserve		Capital redemption reserve		Retained earnings			Total equity
			£'000		£'000		£'000		£'000			£'000
Balance at 1 April 2007			5,617		6,575		3		(223)			11,972
Loss for the period			-		-		-		(976)			(976)
Total income and expense for the period			-		-		-		(976)			(976)
Exercise of options			66		-		-		-			66
Cost of share-based payments			-		-		-		61			61
Equity dividend	8		-		-		-		(632)			(632)
Balance at 30 September 2007			5,683		6,575		3		(1,770)			10,491
Profit for the period			-		-		-		578			578
Total income and expense for the period			-		-		-		578			578
Cost of share-based payments			-		-		-		164			164
Balance at 1 April 2008			5,683		6,575		3		(1,028)			11,233
Profit for the period			-		-		-		489			489
Total income and expense for the period			-		-		-		489			489
Exercise of options			179		-		-		-			179
Cost of share-based payments			-		-		-		141			141
Equity dividend	8		-		-		-		(845)			(845)
Balance at 30 September 2008			5,862		6,575		3		(1,243)			11,197

CONSOLIDATED BALANCE SHEET

As at 30 September 2008

	Note		Unaudited As At 30 September		Unaudited As At 30 September		Audited As At 31 March
			2008		2007		2008
			£'000		£'000		£'000
ASSETS
Non-current assets
Property, plant and equipment	9		948		1,082		987
Intangible assets			6,604		6,669		6,642
Deferred tax asset			400		360		400
			7,952		8,111		8,029
Current assets
Trade and other receivables			4,870		2,917		5,351
Cash and short-term deposits			4,220		4,078		4,309
			9,090		6,995		9,660
TOTAL ASSETS			17,042		15,106		17,689
EQUITY AND LIABILITIES
Capital and reserves
Equity share capital			5,862		5,683		5,683
Merger reserve			6,575		6,575		6,575
Capital redemption reserve			3		3		3
Retained earnings			(1,243)		(1,770)		(1,028)
Total equity attributable to equity holders of the parent			11,197		10,491		11,233
Current liabilities
Trade and other payables			5,813		4,615		6,456
Current tax			32		-		-
TOTAL LIABILITIES			5,845		4,615		6,456
TOTAL EQUITY AND LIABILITIES			17,042		15,106		17,689

CONSOLIDATED CASH FLOW STATEMENT                                                                                                                        For the six months ended 30 September 2008

			Unaudited 6 months to 30 September 2008		Unaudited 6 months to 30 September 2007		Audited Year to 31 March 2008
			£'000		£'000		£'000
Group profit/(loss) before tax			521		(976)		(438)
Adjustments to reconcile Group profit/(loss) before tax to net cash flows
Interest income			(115)		(136)		(242)
Depreciation of property, plant and equipment			173		168		341
Amortisation of intangible assets			38		32		69
Share-based payments			141		61		225
Decrease/(increase) in receivables			481		835		(1,599)
(Decrease)/increase in payables			(643)		(514)		1,327
Net cash generated/(consumed) from operating activities			596		(530)		(317)
Cash flows from investing activities
Purchase of property, plant and equipment			(134)		(142)		(220)
Expenditure on product development			0		(33)		(43)
Interest received			115		136		242
Net cash flows from investing activities			(19)		(39)		(21)
Cash flows from financing activities
Proceeds from issue of shares			179		66		66
Dividends paid to equity shareholders			(845)		(632)		(632)
Net cash flows from financing activities			(666)		(566)		(566)
Net decrease in cash and cash equivalents			(89)		(1,135)		(904)
Cash and cash equivalents at the beginning of period			4,309		5,213		5,213
Cash and cash equivalents at the end of period			4,220		4,078		4,309

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The interim condensed consolidated financial statements of GB Group plc ('the Group') for the six months ended 30 September 2008 were authorised for issue in accordance with a resolution of the directors on 26 November 2008. GB Group plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded on the London Stock Exchange.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

Basis of Preparation

These interim condensed consolidated financial statements for the six months ended 30 September 2008 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

The interim condensed consolidated financial statements do not constitute statutory accounts as defined in section 240 of the Companies Act 1985 and therefore do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 March 2008. The financial information for the preceding year is based on the statutory accounts for the year ended 31 March 2008. These accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. These accounts did not require a statement under either section 237(2), or section 237(3) of the Companies Act 1985.

Accounting Policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2008, 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.

International Financial Reporting Interpretations Committee (IFRIC)		Adoption date
IFRIC 12	Service Concession Arrangements	1 April 2008
IFRIC 14	IAS 19 The Limit on Defined Benefit Assets, Minimum Funding Requirements and Their Interaction	1 April 2008

3. EXCEPTIONAL ITEMS

The £350,000 exceptional item is related to back-dated revenues which resulted from a licence dispute that was settled on 28 May 2008.

4. RISKS & UNCERTAINTIES

Management identifies and assesses risks to the business using an established control model. The Group has a number of exposures which can be summarised as follows: regulatory risk resulting from regulatory developments; changes in the Group's competitive position; non-supply by a major supplier; and disaster recovery and business continuity. These risks and uncertainties facing our business were reported in detail in the 2008 Annual Report and Accounts and all of them are monitored closely by the Group. There have been no significant changes in the Group's risk and uncertainty factors during the review period, nor are any expected to for the remainder of the year. 

5. SEGMENT INFORMATION

All of the revenue, profits/(losses), operating assets and liabilities relate to the Group's principal business activity which is continuing, being the development, sale and support of business application software and services. This represents a single segment. Revenue is stated net of value added tax. Revenue and operating profit/(loss) arise principally in the United Kingdom.

6. CYCLICALITY

Due to the cyclicality of our software renewal business, higher renewals in the second half traditionally result in the Group's performance being biased towards the second half of the year. 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. PROFIT/(LOSS) PER ORDINARY SHARE

Basic

Basic profit/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the basic weighted average number of ordinary shares in issue during the period.

Unaudited 6 months to 30 September 2008

Unaudited 6 months to 30 September 2007

Audited Year to 31 March 2008

pence per share

£'000

pence per share

£'000

pence per share

£'000

Profit/(loss) attributable to equity holders of the parent

0.6

489

(1.2)

(976)

(0.5)

(398)

Diluted

Diluted profit/(loss) per share amounts are calculated by dividing the profit/(loss) for the period attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period 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. 

Unaudited 6 months to 30 September 2008

Unaudited 6 months to 30 September 2007

Audited Year to 31 March 2008

pence per share

£'000

pence per share

£'000

pence per share

£'000

Profit/(loss) attributable to equity holders of the parent

0.6

489

(1.2)

(976)

(0.5)

(398)

Where a loss has been reported for a period, the loss and weighted average number of ordinary shares used for calculating the diluted loss per share are identical to those used for the basic loss 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 IAS 33 Earnings per Share.

		30 Sept 2008		30 Sept 2007		31 March 2008
		No.		No.		No.
Basic weighted average number of shares in issue		84,647,183		84,073,515		84,264,385
Dilutive effect of share options		1,316,703		-		-
Diluted weighted average number of shares in issue		85,963,886		84,073,515		84,264,385

8. DIVIDENDS PAID AND PROPOSED

		Unaudited 6 months to 30 Sept 2008		Unaudited 6 months to 30 Sept 2007		Audited Year to 31 March 2008
		£'000		£'000		£'000
Declared and paid during the period
Final dividend for 2008: 1.00p per share (2007: 0.75p per share)		845		632		632
Proposed for approval at AGM (not recognised as a liability at 31 March 2008)
Final dividend for 2008: 1.00p per share		-		-		845

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. PROPERTY, PLANT AND EQUIPMENT & INTANGIBLE ASSETS

During the six months ended 30 September 2008, the Group acquired property, plant and equipment with a cost of £134,000 (2007: £142,000). There was no expenditure on product development for the six months ended 30 September 2008 (2007: £33,000).

No disposals were made in the six months ended 30 September 2008 (2007: £Nil).

10. SHARE-BASED PAYMENT

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.

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.

During the six months ended 30 September 2008, the following share options were granted to executive directors, managers and staff of the Company.

Scheme		Date		No. of options		Exercise price
Executive Share Option Scheme		26 June 2008		455,220		33.25p
Executive Share Option Scheme - Section C		26 June 2008		794,780		33.25p
GB Sharesave Scheme		1 September 2008		749,931		27.60p

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 six months ended 30 September 2008.

Dividend yield (%)				2.90 - 3.00
Expected share price volatility (%)				45.00
Risk-free interest rate (%)				4.40 - 5.10
Lapse rate (%)				5.00
Expected exercise behaviour				See below
Market-based condition adjustment (%)				48.00
Expected life of option (years)				3.0 - 5.0

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'.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11. RELATED PARTY TRANSACTIONS

Compensation of key management personnel (including directors)

		Unaudited 6 months to 30 Sept 2008		Unaudited 6 months to 30 Sept 2007		Audited Year to 31 March 2008
		£'000		£'000		£'000
Short-term employee benefits		140		222		549
Post-employment benefits		19		22		44
Share-based payments		11		5		5
		170		249		598

12. SHARE CAPITAL

During the period 848,364 (2007: 708,634) ordinary shares of 2.5p were allotted on the exercise of share options for an aggregate cash consideration of £179,000 (2007: £66,000). 

Responsibility Statement by Management

We confirm that to the best of our knowledge: 

a) The condensed set of financial statements have been prepared in accordance with IAS 34;

b) The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c) The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). 

By order of the Board

RA Law

Director

  Independent Review Report to GB Group plc

Introduction 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2008 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and the related explanatory notes 1 to 12. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' 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 half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union. 

Our Responsibility 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

Ernst & Young LLP

Manchester

26 November 2008

 

END

 

 

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