Gb Group Regulatory News (GBG)

GB GROUP PLC

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

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2020

Navigated first half well, supported by shift to digital and good strategic execution

GB Group plc (AIM: GBG), the global identity data intelligence specialist, announces its unaudited results for the six months ended 30 September 2020.

Financial highlights

Chris Clark, CEO, commented:

"Our positive performance in the first six months is testament to the hardworking team at GBG. I am immensely proud of our dedicated team members who have adapted well to new conditions while continuing to support our customers in the opportunities and challenges they face.

We have delivered good results driven by accelerated growth from some of our existing customers as they extend their use of digital services and encouragingly, customer contract renewal rates continue to be in line with prior years. Although we saw the rate of new contracts slowdown in some geographies and sectors, we successfully won new business against our competitors throughout H1.

By managing spend and cash during the period and through our highly cash-generative business model, GBG's net debt position has improved by over £32 million since the start of the financial year. This is a strong endorsement of GBG's business model.

Clearly the broader implications of COVID-19 mean that uncertainty continues to be a dominant trend for all businesses around the world. However, GBG is well positioned as digital acceleration is now even more a necessity for all companies. For the consumer facing businesses we serve, key to their success will be making sure they know who and where their customers are. We will continue to invest organically and through acquisition for additional capabilities to meet these needs and drive long-term growth for GBG."

Notes:

1 These measures are defined within note 22 to the Interim Accounts.

2 Refer to note 2 the Interim Accounts for details of the restatement. The figures as at 31 March 2020 and 31 March 2019 remain as presented in the 2020 Annual Report and Accounts.

3 Growth percentages are calculated by reference to the actual unrounded figures in the primary financial statements and so might not tie directly to the rounded figures in the table if recalculated.

Operational highlights and outlook

- Ends -

For further information, please contact:

Presentation and webcast

GBG management will be hosting an analyst presentation today (8 December 2020) at 09.00 a.m. GMT. To register for the webcast please use the following link:

https://webcasting.brrmedia.co.uk/broadcast/5fb80bfe3945e074b6f956ef

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

About GBG

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

Our market-leading technology, data and expertise help our customers improve digital access, deliver a seamless experience and establish trust, so that they can transact quickly, safely and securely with their customers online. 

Headquartered in the UK and with over 1,000 team members across 16 countries, we work with 20,000 customers in over 70 countries. Some of the world's best-known businesses rely on GBG to provide digital services and keep the economy moving, from US e-commerce giants to Asia's biggest banks and European household brands.

To find out more about how we help our customers establish trust with their customers, visit www.gbgplc.com and follow us on LinkedIn and Twitter @gbgplc. 

CHAIRMAN'S STATEMENT

At the start of the COVID-19 pandemic we made two important decisions - to take swift and decisive action to protect our team members and the business, also to continue to execute our growth strategy and make the important investments that will support our future development. The result of these actions is a business that is in good shape.

We have had a strong period for renewals. Growth from existing customers has been encouraging and we have delivered the data, product and technology projects that will maintain our competitive advantage for years to come. We go into the second half with a robust balance sheet following another period of excellent cash generation, which helped to reduce net debt significantly.

Reflecting this strong first half performance and confidence in the outlook, I am pleased to announce that we are resuming dividend payments by declaring an interim dividend of 3 pence per share.

I am particularly pleased to report that our team members remain highly engaged and have continued to provide exceptional service while adapting to new ways of working - no mean feat given the current circumstances and uncertainties.

Financial performance

Revenue and adjusted operating profit are in line with the performance detailed in the pre-close trading update issued on 22 October 2020. Total revenue for the period grew by 9.8% at £103.5 million (2019: £94.3 million) On a constant currency basis, organic revenues increased by 10.4% (2019: 16.8%). 

Increased revenue, combined with disciplined cost management and natural cost savings such as travel, resulted in a 24.5% (2019: 119.2%) increase in adjusted operating profit to £26.8 million (2019: £21.6 million). Growth was underpinned by a strong performance in the USA from a specific one-off customer project, which is not expected to continue into the second half of the year.

Profit after tax increased by 110.3% (2019: 94.8%) to £11.8 million (2019: £5.6 million) after taking account of £11.2 million of costs associated with the amortisation of acquired intangibles, share-based payments and exceptional items (2019: £11.9 million). Of these costs, £11.0 million (2019: £11.6 million) were non-cash items.

Our strong trading performance, effective cash management and highly cash-generative business model has seen net debt balances at the half year reduce to £2.7 million (2019: £53.8 million). This includes repayment of borrowings in the period of £27.5 million. Overall, we have seen a £32.3 million improvement in net debt since the start of the financial year and this trend has continued into the current quarter's trading period.

GBG continues to have a high EBITDA to cash conversion ratio. Group operating activities before tax payments generated £44.2 million of cash and cash equivalents (2019: £23.8 million) with an adjusted EBITDA to cash conversion ratio of 154.9% (2019: 103.3%).

Interim Dividend

The Board has declared an interim dividend of 3 pence per share. This is as a result of the prudent steps taken at the start of the pandemic to preserve liquidity, combined with the strong first-half performance and confidence in the outlook for the business. In line with the timetable of previous dividend awards, the payment date will be 21 January 2021. This timing reflects the effects of the Christmas holiday and an appropriate window of time for those shareholders that have elected for DRIP (dividend reinvestment plan) to make their wishes known.

As investors will be aware, GBG has consistently paid a final dividend for the last 17 years. However, due to uncertainties presented by COVID-19 earlier in the year, we suspended declaring and paying a final dividend for FY20. This interim dividend in effect reinstates our progressive dividend policy and whilst we are hopeful that continued progress this year and beyond will enable GBG to maintain future dividends, such decisions, as always, will remain subject to Group performance, cashflow and the economic environment.

As indicated at the time of the trading update in October 2020, we have also released the Executive Directors' bonuses accrued in FY20. I am pleased to report that the Executive Directors have all indicated that they will use much of their bonus award to make market purchases of GBG's shares and participate in the share matching option scheme operated for GBG's Executive Directors.

Achievements and strategic developments

The increasing pace of business digitalisation programmes shows the scale of opportunity for companies who can effectively trade via online channels. To be successful however, they must satisfy consumers and regulators who rightly expect an online experience that is not only smooth, secure and safe, but that also frustrates those seeking to benefit from the increasing opportunities for financial crime and fraud.

GBG helps businesses meet these demands through focusing on three complementary solution areas: Location, Identity and Fraud. As digitalisation accelerates, we believe that there is increasing customer interest in unifying these capabilities, moving from providing individual products towards holistic solutions for customers' digital operations.

Our market leadership depends on our access to data, the quality of the software technology we layer upon it and the products we package that up in. During the period we made progress in extending machine learning capabilities across our Fraud solutions, enabling greater accuracy to determine fraud probability, resulting in a significant uplift in fraud detection for our customers. Within Identity, we have successfully integrated a number of our global identity verification solutions using international datasets. This has increased the reach for US clients who use our IDology solution and strengthens our document and biometric capabilities for our customers based in Australia and New Zealand. We have also launched our 'Affordability Check' in the UK to help gaming operators protect vulnerable players from gambling beyond their means.

GBG has also continued to invest in evolving our underpinning technology. We have developed our cloud native platform to manage high scale transactional demand and strengthened our user experience (UX) design system. We have also been able to accelerate innovation and delivery by investing in our core Technology Centres of Excellence (in such areas as machine learning, agile practices and UX). These bring together our collective global experience, best practice and intellectual property.

This is all with the objective of ensuring our products are clearly differentiated, constantly available, easy to deploy and delivering real value to our customers.

Acquisitions & Investments

Given the early stage and fragmented nature of the marketplace, inorganic growth continues to play an important part in our strategy. We have a clear track record of successfully identifying, acquiring and integrating complementary businesses.

During the period we made a US$3.0m investment into Credolabs, taking an 11% stake in an exciting Singapore-based business. Credolabs uses AI (artificial intelligence) to help institutions make lending decisions for applicants without depending on traditional credit bureau data. Having worked in a go-to-market partnership with Credolabs, we are confident that a closer collaboration will enhance GBG's digital on-boarding solution and allow us to serve new fintech and neobank market segments.

We continue to consider acquisitions and partnerships as they arise enabled by our strong balance sheet, high levels of cash generation and access to liquidity.

People

The whole GBG team has worked exceptionally well during the COVID-19 crisis. I want to extend my thanks and that of the Board to all of our talented and enthusiastic team members for their sterling efforts and continued dedication.

We continue to support our people, customers, developments and systems despite the ongoing challenges. Whilst a very limited number of our team members have returned to our offices on a voluntary basis, in countries and jurisdictions where it is safe and permitted to do so, the majority are still working remotely. Our team's well-being is our priority and we have enacted a range of initiatives to support them and their families during this time.

During the period we have continued to recruit selectively whilst maintaining exceptional engagement scores; approximately 90% of our team members would recommend GBG as a great place to work. This is similar to the levels reported six months ago despite the impact of COVID-19 largely falling in this period and reflects the significant efforts of GBG's managers to maintain our team members' motivation and morale.

Regulation

As indicated in previous statements, 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, including GBG, to understand the use of data in their services. I am pleased to report that we continue to work collaboratively with the Commissioner's Office as it strives to improve privacy compliance and will keep the market informed of any material developments.

Outlook

Recent developments, notably in the search for a vaccine to COVID-19, are a cause of hope and optimism, but the pace of economic recovery remains uncertain.

For the moment, COVID-19 impacts our customers in different ways depending on their vertical, product solution and geography. Whilst we believe that our market diversification is a source of strength, we remain focused on what is in our control. Therefore, we continue to direct our efforts to providing a safe and effective work environment for our team members, allowing them to complete and deliver projects that will support the roll out of future products and services. These results demonstrate that this approach can maintain financial strength and competitive advantage, even against the backdrop of COVID-19.

To that end and reflecting growing confidence, we will deepen investment in the initiatives required for future growth through reinvesting operational leverage in the second half. We similarly maintain an active and prudent approach to acquisitions, looking to identify opportunities that can accelerate either our technology roadmap or geographical expansion.

Although we approach the near-term with cautious optimism, we can look to the future with confidence. It seems likely that many of those who have become accustomed to the online experience - from grocery shopping to banking - will continue to prioritise digital channels. To win and maintain these customers, businesses must be able to overcome one of the primary challenges of ecommerce: providing a frictionless customer experience without sacrificing security and compliance. This is what GBG does.

On this basis we remain confident in our expectations that Group revenue for the full year will be marginally ahead of FY20 on an underlying basis and that we are well positioned for future growth.

David Rasche

Chairman

Interim Consolidated Statement of Changes in Equity

1 See note 2 for details of restatement

1 See note 2 for details of restatement

1. CORPORATE INFORMATION

The interim condensed consolidated financial statements of GB Group plc ('the Group') for the six months ended 30 September 2020 were authorised for issue in accordance with a resolution of the directors on 8 December 2020. 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 2020 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.

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 2020. The financial information for the preceding year is based on the statutory financial statements for the year ended 31 March 2020. 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.

Going Concern

In light of the Covid pandemic, an extensive review of the going concern assumption was conducted prior to the approval of the 31 March 2020 Annual Report. This review has been updated for the results for the six months of FY21, results which have been ahead of those forecast during the year-end review in terms of revenue, profit and cash generation.

The actual revenue performance for the six months showed organic growth at constant currency of 10.4%. The going concern model at the year-end was based on a market consensus position of a decline of 10.3% and so the performance in the first half of the year has been significantly ahead of this. Growth was underpinned by a strong performance in the USA from a specific one-off customer project, which is not expected to continue into the second half of the year. In addition to the revenue (and profit) performance GBG has been able to convert this into cash and reduce the net debt level. The cash conversion % for the first half was 154.9% compared to 103.3% in the same period in 2019. The rolling 12-month cash conversion % was 121.5% at 30 September 2020 compared to 95.2% at 31 March 2020 and 94.0% at 30 September 2019. This is also ahead of the assumptions used in the going concern model for the 31 March 2020 year-end.

The base case model has been updated at the half-year for the actuals to 30 September 2020 and the latest forecasts through to 31 March 2022 based on the same underlying growth assumptions as the year-end. This update takes into account the continuing nature of the pandemic, in addition to reflecting the expected payment of an interim dividend in January 2021 of approximately £5.9 million and the 2020 Executive Director bonus of £1.7 million. Under the updated base case and a range of potential downside scenarios, the Group continues to have significant liquidity and financial covenant headroom under its debt facilities.

The model was then adjusted to assess what level of decline in revenue would be required to result in a covenant breach. This shows that it would take a decline of 43% to result in a breach of covenants, which would occur as at 30 September 2021 (in the year-end model it took a decline of 42% to result in a breach as at 30 June 2021).

Based on the current trading performance and through reference to current market consensus, a decline of anywhere near 43% is considered by the Directors to be highly unlikely. If this became even a remote possibility, then certain cash conservation measures in management's control would be implemented well in advance of the breach. This includes either not declaring or reducing future final dividend payments, pay and recruitment freezes, withdrawing bonuses and reductions to the payroll cost base. In addition, the range of mitigating actions detailed in the 2020 Annual Report remain available, albeit these are not within management's control. This includes, for example, accessing the £30 million Accordion facility within the Group's banking agreement, requesting a delay to UK tax payments, raising cash through an equity placing and disposal of part of the business.

In assessing going concern the Directors have also considered the requirement to refinance the Revolving Credit Facility. At present this facility expires in February 2022, although positive discussions have already been held with the syndicate banks about exercising a one-year extension option available within the agreement, which would take it to February 2023. The Group is not able to formally request this extension until 13 December 2020. For the purpose of the going concern assessment the cashflow forecast was extended through to March 2022. This shows that the Group would have sufficient cash to be able to repay the current outstanding balance on the loan facility in February 2022, in the unlikely situation that either an extension or alternative financing was not in place. A persistent revenue decline of over 20% throughout the whole period to February 2022 would need to happen for there to be a risk of non-payment and this is prior to certain cash conservation mechanisms in management's control, as set out above. On this basis management consider it remote that the repayment of the Revolving Credit Facility could not be made should it be necessary.

Following review of future forecasts and applying reasonable and extreme 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.

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 2020. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. The following amendment applies for the first time, however it does not have an impact on the interim consolidated financial statements of the Group.

Amendments to IFRS 3: Definition of a business

The amendment to IFRS 3 does not have any impact in the interim financial statements of the Group, however the amendment will be adopted in the accounting policies of the Group for future acquisitions.

Investments

During the 6 month period ended 30 September 2020, the Group invested in shares of a non-connected company, CredoLab Pte Ltd. The investment has been accounted for as a financial instrument on the basis that the Group does not have control, joint control or significant influence over the entity.

Financial assets designated at fair value through other comprehensive income (OCI) (equity instruments)

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

The Group elected to classify irrevocably its non-listed equity investments under this category.

Prior Period Restatements

Refinement of IFRS 16

Since the September 2019 interim financial statements were produced, the Group refined its assessment of the impact of IFRS 16 'Leases' with the finalised adjustments fully reflected in the March 2020 Annual Report and Accounts. The impact of IFRS 16 on adoption has changed since reported at September 2019 to incorporate a revised valuation of lease assets and liabilities due to an updated assessment on the valuation of lease incentives and dilapidations. The September 2019 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 2019 and 1 April 2020 remain as presented in the 2020 Annual Report and Accounts.

The impact of the unwinding of refinement of IFRS 16 on the 6-month period income statement is an increase in profit of £73,000, representing a change in depreciation (decrease in charge of £60,000) and interest (decrease in charge of £13,000). Foreign exchange differences through other comprehensive income were a loss of £62,000. There is also an increase in opening retained earnings of £546,000, which represents the difference between the adjustment to opening retained earnings at 1 April 2019 presented at 30 September 2019, compared to that presented in the annual financial statements 31 March 2020.

Measurement period restatement

In the year to 31 March 2019 GBG completed two acquisitions, the measurement periods for which ended during the year to 31 March 2020.

No further adjustments were identified to the provisional fair values in respect of the acquisition of VIX Verify Pty Limited.

In respect of the acquisition of IDology Inc. adjustments to the provisional fair values were made during the measurement period, detailed in the March 2020 Annual Report and Accounts within which the adjustments were fully reflected. The adjustments impacted the position at 31 March 2019, and thus the position at 30 September 2019 which has been restated.

A revaluation of the contingent consideration at 30 September 2019 has resulted in a £209,000 charge to the income statement. This has been recognised in exceptional items (see note 4). The revaluation of the goodwill at 30 September 2019 resulted in a credit of £209,000 which has been recognised through the statement of other comprehensive income. Therefore, the overall impact to equity is nil.

The impact of these prior period restatements is presented below:

30 September 2019

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 2020.

As detailed in note 11, during the current period the Group made an investment in CredoLab Pte Ltd. Management have had to apply judgement to assess the appropriate accounting treatment for this investment.

Under IAS 28 Investments in Associates and Joint Ventures: "If an entity holds, directly or indirectly (e.g. through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the entity holds, directly or indirectly (e.g. through subsidiaries), less than 20 per cent of the voting power of the investee, it is presumed that the entity does not have significant influence, unless such influence can be clearly demonstrated."

This investment represents approximately 10% of the shareholding in CredoLab. Under the above guidance this would indicate the investment should be accounted for as a financial asset under IFRS 9 Financial Instruments. However, judgement was required to assess whether the board seat held by GBG gave the Group the power to participate in financial and operating policy decisions. On the basis that this seat is held in an observer capacity only and does not provide a vote on board matters, management has determined that the Group does not have significant influence and therefore the investment has been recognised as a financial asset under IFRS 9.

3. 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: Covid-19; failure to comply with regulations and laws; increasing competition and lack of global reach; non-supply by a major supplier; cyber-attack; loss of data systems despite disaster recovery & business continuity plans; 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 2020 Annual Report and Accounts and all of them are monitored closely by the Group.

Brexit

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 continue to 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 disruption to occur to our suppliers and customers as a result of challenges in their own organisations and supply chains.

At this time, although the outcome of the current Brexit negotiations and post-Brexit arrangements still remains uncertain, we have taken the necessary steps to address those areas that we need to in relation to the Government's guidance of the new rules that will apply from 1 January 2021. We will continue to monitor the situation and manage the practical implications as they occur.

COVID-19 pandemic

The situation with the COVID-19 pandemic is dynamic as businesses globally adjust to the next phases and the implications of a potential vaccine. The impact of COVID-19 pandemic on our customers still varies depending on geography, customer vertical and Group solution. Forecasting the short-term impact of COVID-19 pandemic remains challenging. This is due to the varying nature of lockdowns in our key geographic markets, shifting government stimulus programmes and general economic headwinds presenting difficulties in determining demands for our services. Given experience to date, the Group is confident that the its diverse customer base will continue to be a buffer against any significant revenue impact caused by COVID-19 pandemic.

The Group continues to prioritise the well-being of its team members and supporting its customers. The Group's Board and Executive Team are focused on the addressing the challenges posed by the COVID-19 pandemic by remaining proactive in monitoring the changing landscape of the situation and reacting dynamically to challenges through a range of initiatives.

A further update on the impact of Covid-19 is included within the Chairman's Statement.

4. EXCEPTIONAL ITEMS

Costs associated with team member reorganisations relate to exit costs of personnel leaving the business on an involuntary basis, either as a result of integrating acquisitions or due to reorganisations within our operating divisions. Due to the nature of these costs, management deem them to be exceptional in order to better reflect our underlying performance. Exit costs outside of these circumstances are treated as an operating expense.

During the period to 30 September 2020 £79,000 (2019: £nil) has been recognised as an impairment expense relating to the goodwill in the e-Ware Interactive cash generating unit. The carrying value of the goodwill following the impairment is £nil.

Acquisition related costs of £85,000 (2019: £nil) include legal and professional advisor costs directly attributable to completed and potential acquisitions that were either aborted or are not complete at the date of these financial statements. These costs exclude operating or integration costs relating to an acquired business. In the current year these costs related to the investment in Credolabs. Due to the size and nature of these costs, management consider that they would distort the Group's underlying business performance.

Under the terms of the IDology Inc acquisition the sellers are entitled to the benefit of the tax losses of the business at the date of the acquisition as and when GBG utilises them to reduce cash tax payments. On acquisition GBG recognised a Deferred Tax Asset (DTA) in relation to these losses which were expected to be utilised in future years and so the valuation of the DTA was based on the prevailing federal tax rate of 21%. An equivalent contingent consideration liability reflects that the benefit of this DTA is due to the sellers.

On 27 March 2020 in the United States the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress and signed into law by President Trump. This Act includes the entitlement for tax losses to now be carried back for up to five years. As the tax rate in the United States in the period 2014-2018 was 35% the value of these losses has increased. GBG has recorded an increase in the value of the DTA related to this new law with the benefit recognised within the income tax charge in the income statement (the DTA was then reclassified to a current tax asset as a cash refund is now available). The increase in the liability to the sellers has been recognised as an exceptional item in the year to 31 March 2020 (£829,000) as it arose outside of the 12 month hindsight period permitted for adjustments to the acquisition accounting.

In the period to 30 September 2020, a previously unrecognised payroll tax credit in the State of Georgia of £747,000 has been recognised, with a corresponding credit being recognised in exceptional items. Previously there was uncertainty over the Group's eligibility to this credit, but this has now been confirmed. As and when the Group receives the benefit of this asset an equivalent amount is due to the sellers of IDology. On this basis the contingent consideration liability has been increased by £747,000 with a corresponding exceptional item charge.

The contingent consideration liability is based on the US Dollar value of the losses and deferred tax asset. As a result, the liability was retranslated at the balance sheet date with a gain of £176,000 (30 September 2019: loss of £209,000 which is a restatement of the reported comparative as detailed in note 2) being treated as an exceptional item.

1 See note 2 for details of the restatement.

5. SEGMENTAL INFORMATION

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, as well as group operating costs such as compliance, finance, legal, people team, information security, directors' remuneration and PLC costs. Group operating costs were £6.0 million in the 6 months to 30 September 2020 (2019: £5.6 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.

The amendments to the presentation of the segmental information for the year ended 31 March 2020 and the six months ended 30 September 2019 is due to the evolution in the go-to-market strategy of the Datacare part of the business, and the subsequent change in how this is reported internally. Previously Datacare was included within the Unallocated segment whereas it is now presented in Location. The values that have been represented in the six months to 30 September 2019 are as follows: revenue £1.0m, adjusted operating profit £0.1m and the values that have been represented in the year to 31 March 2020 are as follows: revenue £1.7m, adjusted operating profit £0.4m.

6. TAXATION

The Group calculates the period income tax expense using a best estimate of the tax rate that would be applicable to the expected total earnings for the year ending 31 March 2021.

The table below shows the impact on the effective rate of tax of significant non-cash tax transactions: