Gb Group Regulatory News (GBG)

GB GROUP PLC

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

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2019

Strategy drives strong financial and operational performance

GB Group plc (AIM: GBG), the global identity data intelligence specialist, announces its unaudited results for the six months ended 30 September 2019.

Financial highlights

Organic revenue

* The results for H1 in the last financial year have been adjusted in this announcement to be consistent with the refinements made for IFRS 15 in the 2019 Annual Report. The adjustment reflects revenue phasing under IFRS 15. The impact of this adjustment re-aligns revenue in the 6 months to 30 September 2018 only and does not impact the reported results for the full year to 31 March 2019. See note 2 to the interim financial statements for further details.

Chris Clark, CEO, commented:

"I am pleased with the progress we have made against our strategic objectives in the first six months, which has seen us deliver good growth. This was driven by a strong organic performance (helped in part by the accelerated timing of some contracts for our Fraud division), the successful integrations of our acquisitions and ongoing investment to support our differentiation.

We had a strong organic growth performance across each of our three key solutions of Location, Identity and Fraud across our core geographies. This performance has also been supported by the successful integrations of VIX Verify and IDology and we are excited about our future prospects and how these businesses will develop and strengthen our propositions.

So far the second half of the year has begun in line with our expectations and we remain confident in meeting full year market consensus."

Operational highlights and outlook

Notes:

† Adjusted operating profit means profit before amortisation of acquired intangibles, share-based payments, exceptional items, interest and tax. This measure is not defined under IFRS but Management believe that this Alternative Performance Measure (APM) is a more appropriate metric to understand the underlying performance of the Group. For more details see "Alternative Performance Measures" in the Interim Consolidated Financial Statements.

‡ Adjusted earnings per share is defined as adjusted operating profit less net finance costs and tax divided by the basic weighted average number of ordinary shares of the Company.

†† Net (debt)/cash means cash and short-term deposits less loans (excluding unamortised loan arrangement fees).

- Ends -

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Presentation and webcast

GBG management will be hosting an analyst presentation today (26 November 2019) at 09.00 a.m. GMT at the London Stock Exchange, 10 Paternoster Sq., London EC4M 7LS.

Shortly following the presentation, an archived webcast will be available on the Investors page of the Company's website.

About GBG

GBG offers a series of solutions that help organisations quickly validate and verify the identity and location of their customers.

Our innovative technology leads the world in location intelligence and fraud detection. Our products are built on an unparalleled breadth of data obtained from over 200 global partners which helps us to verify the identity of 4.4 billion people globally.

Our headquarters are in the UK and we have over 1,000 team members across 16 countries. We work with clients in 72 countries including some of the best-known businesses around the world, ranging from US e-commerce giants to Asia's biggest banks and European household brands.

To find out more about how we help our clients establish trust with their customers, visit www.gbgplc.com, follow us on Twitter @gbgplc, or read more in our newsroom: www.gbgplc.com/newsroom

Chairman's Statement

GBG performed well in the first half of the year. We are making good progress in executing our strategy for growth and remain committed to making the investments that will help us develop further in the future.

Financial performance

Revenue and adjusted operating profit are both £0.6 million ahead of the performance detailed in the pre-close trading update issued on 24 October 2019.

Total revenue for the period was up 62% at £94.3 million - reflecting our recent acquisitions, which supplemented our underlying trading across our key solution areas within Location, Identity and Fraud. On a constant currency basis, organic revenues have increased by 17%. Our organic growth was complemented by the successful integrations of VIX Verify and IDology and the favourable timing of some contracts for our Fraud division, which were completed in the first six months.

Adjusted operating profit of £21.5 million represents an increase of 119% on last year, again driven by strong organic growth and our recent acquisitions.

Profit after tax was £5.7 million (2018: £2.9 million) after taking account of £11.7 million of costs associated with the amortisation of acquired intangibles, share-based payments and exceptional items (2018: £6.1 million). Of these costs, £11.4 million (2018: £5.0 million) were non-cash items.

Our balance sheet remains strong. At 30 September 2019, our net debt balance was £53.8 million (2018: £18.6 million net cash) as the acquisitions of VIX Verify and IDology in the second half of the last financial year were supported by debt. Net debt levels have improved by £12.5 million since 31 March 2019, including a £10.4 million repayment of borrowings in the period. Net assets increased to £337.9 million (2018: £157.6 million).

Compared to 30 September 2018, revenue deferred to future periods is up by £4.6 million to £32.8 million, an increase of 16%.

GBG has a high EBITDA to cash conversion ratio. Group operating activities before tax payments generated £23.8 million of cash and cash equivalents (2018: £10.4 million) and an adjusted EBITDA to cash conversion ratio of 104% (2018: 105%).

Achievements and strategic developments

Our customers rely on our digital solutions to transact safely and securely online and growth in demand is driven by increasing levels of online fraud and ever more stringent compliance regulations.

We have continued to develop our international capabilities, focusing on our strengths in Location, Identity and Fraud and prioritising our core markets of Europe, North America and APAC. By putting this focus on our international strategy, it is pleasing to note that GBG's international revenues are now higher than the UK for the first time - this has been a strategic aim of GBG for a number of years.

Loqate, our location business, performed well with new customer wins including: John Lewis Partnership (a GBG Connexus customer) in Europe; GNC in North America; China Minsheng Bank (a long standing GBG fraud customer) and Bank of Beijing in APAC. We have continued to enrich our global data portfolio, including a partnership with NavInfo Europe to provide address data for mainland China.

Demand from the financial services and gaming sectors has driven strong growth for our identity business. We have seen more business from existing customers and have won new customers such as William Hill, KPMG and Totesport. We also launched a number of new data sources such as the UK Educational and Indian Driving Licences datasets to further improve match rates and broaden coverage. Investment in SDKs (software development kits) and additional data sources remains a priority.

In the fraud space we have built on existing commercial relationships and won new customers in Europe with BNP Paribas, Arval and Standard Life. In the APAC region we have extended business with AmBank in Malaysia and Citi in Indonesia and Taiwan.

The Information Commissioner's Office, the data industry regulator in the UK, announced in November 2018 that it was conducting audits on a number of companies to understand the use of data in their services. GBG was included in this review and we are working with the Commissioner to provide information and clarify the role some of our products play in the data ecosystem. We will keep the market informed of any material developments.

Acquisitions

Last year we acquired VIX Verify and IDology (our largest acquisition to date). The priority for the first half of this year has been their integration into the Group and I am pleased to report good progress.

VIX Verify is performing well, growing with key accounts such as TabCorp and HSBC and winning new business including Victoria University and KC Securities. We are also developing business opportunities in our identity and fraud portfolios with joint accounts such as FlexiGroup.

IDology has maintained good momentum with its existing clients in the financial and technology sectors and has won new clients such as NextGate in the health sector. We have invested in additional business development resource and have a strong pipeline of deals. Our commitment to product innovation is reflected by the enhancement of features and refinement of machine learning techniques and we have also completed and launched the integration of GBG Loqate's data into IDology's ExpertID solution.

People

Gallup conducted our latest global employee survey in September 2019. 92% of all of our employees completed the survey and our employee engagement scores were at a new high, with 91% of team members saying that they would recommend GBG as a great place to work. We are all naturally very pleased with these results and our managers will use the response data and Gallup's benchmarking to improve our employee experience.

We have strengthened our talent with key hires across our three core regions (covering sales, marketing, product & technology). We are also rolling out internal programmes to ensure GBG has a rich pool of high potential talent for the future.

Outlook

It has been a good start to the year with strong organic performance in each of our three key solutions and across each of our core geographies. GBG has a strong management team supported by a diverse group of highly engaged and talented employees. Our acquisitions are integrating well and will strengthen the GBG customer proposition and help grow the business further. Consequently, your Board remains confident about meeting full-year consensus for revenue and profit.

David Rasche

Chairman

Interim Consolidated Statement of Changes in Equity

# See note 2

Interim Consolidated Balance Sheet

# See note 2

# See note 2

1. CORPORATE INFORMATION

The interim condensed consolidated financial statements of GB Group plc ('the Group') for the six months ended 30 September 2019 were authorised for issue in accordance with a resolution of the directors on 25 November 2019. GB Group plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded on the Alternative Investment Market (AIM) of 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 2019 have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.

The interim condensed consolidated financial statements are presented in the Group's functional currency of pounds Sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

Following review of future forecasts and applying reasonable sensitivities, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, the Board continues to adopt the going concern basis in preparing the interim financial statements.

The interim condensed consolidated financial statements do not constitute statutory financial statements as defined in section 435 of the Companies Act 2006 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 2019. The financial information for the preceding year is based on the statutory financial statements for the year ended 31 March 2019. These financial statements, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. These financial statements did not require a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

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 2019, except for the adoption of new standards effective for the Group from 1 April 2019. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Prior Period Restatement

Since the September 2018 interim financial statements were produced, the Group refined its assessment of the impact of IFRS 15 'Revenue from Contracts with Customers' with the finalised adjustments fully reflected in the March 2019 Annual Report and Accounts. The September 2018 figures in these interim accounts have been restated to reflect the phasing of these refinements on the first half results. The figures as at 1 April 2018 and 1 April 2019 remain as presented in the 2019 Annual Report and Accounts. The impact of the refinements on the September 2018 figures is presented below:

* as reported in the 31 March 2019 Annual Report

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued)

New standards, amendments and interpretations adopted by the Group

The Group has applied IFRS 16 'Leases' for the first time in these interim results. The nature and effect of these changes are described below.

IFRS 16 'Leases' supersedes IAS 17 'Leases', IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the substance of transactions involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosures of leases and requires lessees to account for most leases under a single on-balance sheet model.

The Group has adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 April 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised in retained earnings at the date of initial application. Comparatives are not restated under this method of adoption. The lease liability is calculated at the present value of remaining future payments using the related incremental borrowing rates at 1 April 2019. The right-of-use asset is calculated from the lease commencement date, as if IFRS 16 had always been applied using the incremental borrowing rates at 1 April 2019. The Group also elected to use transition expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option ('short-term leases'), and lease contracts for which underlying asset is of low value ('low value assets').

The effect of adoption IFRS 16 is as follows:

Impact on the statement of financial position as at 1 April 2019:

Impact on the interim consolidated statement of comprehensive income for the six months ended 30 September 2019:

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued)

Impact on the interim consolidated cash flow statement as at 30 September 2019:

Summary of new accounting policies

Set out below are the new accounting policies of the Group upon adoption of IFRS 16:

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made on or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.

The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below £5,000). Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

Significant judgement in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued)

Amounts recognised in the statement of financial position and in the consolidated statement of comprehensive income

Set out below, are the carrying amounts of the Group's right-of-use assets and lease liabilities and the movements during the period:

The lease liabilities as at 1 April 2019 can be reconciled to the operating lease commitments as of 31 March 2019 as follows:

Judgements and Estimates

Full details of significant accounting judgements, estimates and assumptions used in the application of the Group's accounting policies can be found in the Annual Report and Accounts for the year ended 31 March 2019.

3. CYCLICALITY

The profile of our software licence renewal dates has historically resulted in profitability in this area of the business being higher in the second half of the year.

4. RISKS AND 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: failure to comply with regulations and laws; increasing competition and lack of global reach; non-supply by a major supplier; loss of data systems despite disaster recovery & business continuity plans; cyber attack; inability to meet new product development and scalability challenges; loss of intellectual property; and ineffective succession planning and skills retention. These risks and uncertainties facing our business were reported in detail in the 2019 Annual Report and Accounts and all of them are monitored closely by the Group.

The outcome of the UK referendum on EU membership has caused uncertainty in both the political and economic environments in which we operate. Although headquartered in the UK, GBG has an established presence internationally, which comprises over half of our Group revenues. We believe our global infrastructure will assist the Group in its response to the ultimate changes in trading arrangements between the UK and the EU. Our business model means that we are comparatively well-placed to manage the consequences of the result and of its effect on the economic environment. However, there is the potential for our costs to increase, for example, through any changes required to our systems to reflect new taxes; regulatory risk to increase as a result of any future divergence with the EU regime; and supplier disruption to occur as a result of challenges in suppliers' own organisations and supply chains. At this time, the outcome of Brexit negotiations and post-Brexit arrangements remains unclear and as such, like all companies, we continue to monitor the situation and manage the practical implications as they occur.

5. EXCEPTIONAL ITEMS

Costs associated with staff reorganisations in both years primarily relate to exit costs of personnel leaving the business on an involuntary basis due to reorganisations within our operating divisions as a result of integrating acquisitions. Due to the nature of these costs, management deem them to be exceptional in order to better reflect our underlying performance.

Acquisition related costs of £898,000 in the prior six month period include, but are not limited to, those incurred in relation to the acquisition of VIX Verify Global Pty Ltd. Such costs include those directly attributable to the transaction and exclude operating or integration costs relating to an acquired business, and due to the size and nature of these costs, management consider that they would distort the Group's underlying business performance. The acquisition related costs for the year to 31 March 2019 included £2.4 million in relation to the acquisition of IDology Inc. in February 2019.

6. SEGMENTAL INFORMATION

In order to reflect how the Group is presenting its lines of business to its stakeholders going forward, the naming and structure of the operating segments were amended with effect from 1 April 2019. Going forward 'Fraud, Risk & Compliance' has been separated into two new segments - 'Identity' and 'Fraud'. The 'Location & Customer Intelligence' segment has been renamed as 'Location'. Accordingly, the comparative segmental reporting has been restated.

The Group's operating segments are internally reported to the Group's Chief Executive Officer as three operating segments: Location, Identity and Fraud. Included within 'Unallocated' is the revenue and profit of the marketing services business (previously within Location & Customer Intelligence), as well as group operating costs such as compliance, finance, legal, people team, information security, directors' remuneration and PLC costs. Group operating costs were £5.6 million in the 6 months to 30 September 2019 (2018: £4.9 million).

The measure of performance of those segments that is reported to the Group's Chief Executive Officer is adjusted operating profit, being profits before amortisation of acquired intangibles, equity-settled share-based payments, exceptional items, net finance costs and tax, as shown below.

6. SEGMENTAL INFORMATION (continued)