Gb Group Regulatory News (GBG)

GB GROUP PLC

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

HALF YEAR RESULTS FOR SIX MONTHS ENDED 30 SEPTEMBER 2018

International expansion and organic growth drive revenue.

GBG on track to meet full-year expectations.

GB Group plc (AIM: GBG), the global identity data intelligence specialist, announces its unaudited results for the six months ended 30 September 2018.

Financial highlights

Underlying Revenue and Operating Profit*

Chris Clark, CEO, commented:

"We've made pleasing progress over the period, balancing good organic revenue growth across the business with strategic investments in our products, technology and people to maintain competitive advantage.

"This strategy is delivering positive results. Our key focus areas of Identity Verification, Location Intelligence and Fraud, Risk and Compliance have all performed well. The Location Intelligence business (now operating under the solution brand of Loqate) has made good strategic progress, with strong growth in North America during the period and will be the focus of a capital markets update next month.

"Looking at the big picture, with good customer gains in the faster-growth markets in Asia, the rich potential in the USA and steady progress in Europe, there's a lot to be pleased about. We're continuing to deliver on our strategy of growing the business both organically and through acquisitions and in October we acquired VIX Verify in Australia and New Zealand. We are on track to meet our full-year revenue and profit expectations."

Operational highlights and outlook

Notes:

† Adjusted operating profit means profits before amortisation of acquired intangibles, share-based payments, exceptional items, net finance costs and tax. This is a non-GAAP or Adjusted Performance Measure (APM) which is a KPI used both internally and by the majority of our stakeholders . See "Alternative Performance Measures" in the Interim Consolidated Financial Statements for further details.

†† Net cash/(debt) means cash and short-term deposits less loans.

‡ 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.

- Ends -

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Presentation and live webcast

A presentation for analysts and investors will be held at 9.00am today at 99 Bishopsgate, London, EC2M 3XD.

The presentation will be webcast live and on demand at the following website: https://www.investis-live.com/gb-group/5bf3dbe2b1ff7f12004fe121/gbnv

About GBG

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

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

GBG is headquartered in the UK, with over 900 team members across 18 countries. We work with clients in 79 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.

Find out more about how we help our clients establish trust with their customers at www.gbgplc.com, by following us on Twitter @gbgplc or visiting our newsroom: www.gbgplc.com/newsroom.

CHAIRMAN'S STATEMENT

In the first six months of the year GBG has continued to perform well. We are delivering on our strategic objectives and making the investments that will help us grow further in the future. We are also increasing our brand recognition in the expanding global identity data intelligence market.

Financial performance

Our trading in the first half of the year is in line with the pre-close trading update we issued in October.

Revenue grew by 9% year-on-year on a reported basis. At the underlying level, GBG's organic revenue growth was 11%. As mentioned in October's trading update, the organic revenue growth during the same period last year included £3.5m from the sale of a perpetual licence to a leading European bank. Normally these kind of transactions are fully-delivered over a three-year period, payable in annual instalments. If this had been the case for this particular transaction then our revenue recognition policy would have recognised only one third of the total amount. This means first half revenues for 2017 would have been £50.3 million (the basis for underlying growth) rather than the reported £52.6 million.

At the headline level, adjusted operating profits† were £8.8 million (2017: £10.4 million). However, on an underlying basis, when compared to last year (2017 underlying: £8.1 million), this represents an increase of 8%.

Profits after tax were £2.0 million (2017: £2.4 million) after taking account of £6.1 million of costs associated with the amortisation of acquired intangibles, share-based payments and exceptional items (2017: £6.6 million). Of these costs, £5.0 million (2017: £5.7 million) were non-cash items.

Our balance sheet is strong. Revenue deferred to future periods is up by £4.3 million to £28.0 million and net assets increased to £157.8 million (2017 £149.2 million).

GBG continues to be cash generative and cash balances at 30 September 2018 were £27.5 million (2017: £17.9 million). Group operating activities before tax payments generated £10.4 million of cash and cash equivalents (2017: £10.5 million) and an adjusted EBITDA to cash conversion ratio of 106 per cent (2017: 92 per cent). Net cash balances were £18.6 million (2017: £4.1 million).

Achievements and strategic developments

We have continued to make significant progress developing our international product lines. Our customers are looking for innovative digital solutions to reduce online fraud and meet increasingly stringent compliance regulations. These themes present an important opportunity for us and we are putting them at the centre of our strategy and our execution.

During the first half of the year our Identity Verification services grew as customers such as Coinbase, Stripe and Western Union increased their usage of our international data sets. We saw a shift to digital access from on-premise scanners in our document verification services, which we expect to continue and contribute to future deferred income balances.

Our international Fraud, Risk and Compliance products also maintained strong growth, particularly in Malaysia, Indonesia and China. We will continue to adapt these products to improve our fraud detection services and address our customers' compliance needs.

Our Location Intelligence business, which was rebranded in the year as Loqate, has made progress and saw good growth in the first half of the year. We have continued to win new business in Germany, including contracts with Hugo Boss, Canyon Bikes and Aldi. We are also pleased to report several new business wins in the USA including Kohl's, Abercrombie & Fitch and Ralph Lauren. As a result, we will be expanding our US East Coast team.

We are seeing strong growth through our partnership with Canada Post which provides its AddressComplete solution to Canadian businesses by white-labelling GBG's leading address capture technology. This is in line with a broader focus on partners including IBM, Oracle, Pitney Bowes and Reltio.

Acquisitions

Shortly after the period end, GBG acquired VIX Verify, a market-leading provider of identity verification and location intelligence solutions to the Australian and New Zealand markets. VIX Verify has a high-quality customer base in sectors like Financial Services and Gaming, where GBG has complementary strengths and products. This acquisition gives us a stronger presence in Australia. The immediate focus will be on its domestic market, but there is the product range and capability to extend further into Asia.

With synergies, we expect the transaction to be earnings accretive in the first 12 months of consolidated GBG ownership.

People

I'm pleased that we have achieved our highest ever employee engagement scores, with 89% of team members saying at the end of this first half year that they would recommend GBG as a great place to work. This reflects the people focus we outlined in our annual report, including training for people managers and improving our workplaces.

Since the beginning of the financial year, we have recruited a number of new people to GBG with a particular focus on strengthening our product and development teams. In addition, we welcome 74 new people from VIX Verify, who will bring their talent and expertise to key areas of the business.

Outlook

We have made good strategic and operational progress in the first half of the year and we are building on that by keeping our focus on delivering growth both organically and through strategic acquisitions. We are pleased to see positive momentum thanks to a number of big customer wins. Our business is weighted to the second half of the year and the Board is confident that we will meet our full year expectations for both revenue and profit growth.

1. CORPORATE INFORMATION

The interim condensed consolidated financial statements of GB Group plc ('the Group') for the six months ended 30 September 2018 were authorised for issue in accordance with a resolution of the directors on 27 November 2018. 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 2018 have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The annual financial statements of the company are prepared in accordance with IFRSs as adopted by the European Union.

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

After making appropriate enquiries, 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 report.

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 2018. The financial information for the preceding year is based on the statutory financial statements for the year ended 31 March 2018. 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

Except where disclosed below, 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 2018.

New standards, amendments and interpretations adopted by the Group

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 consolidated financial statements for the year ended 31 March 2018, except for the adoption of new standards effective for the Group from 1 April 2018. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The Group applies, for the first time, IFRS 15 'Revenue from Contracts with Customers' and IFRS 9 'Financial Instruments' that require restatement of previous financial statements. As required by IAS 34, the nature and effect of these changes are disclosed below.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The principles in IFRS 15 must be applied using the following 5 step model:

1. Identify the contract(s) with a customer

2. Identify the performance obligations in the contract

3. Determine the transaction price

4. Allocate the transaction price to the performance obligations in the contract

5. Recognise revenue when or as the entity satisfies its performance obligations

The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued)

The Group adopted IFRS 15 using the modified retrospective method of adoption but there were no material adjustments required to the accounts. The following summarises the Group's accounting policy for revenue based on the principles of IFRS 15 for the current reporting period onwards. The Group's adoption of IFRS 15 did not have any material impact on the policies and practices that were in effect within the Group.

Revenue Recognition

Revenue is stated net of value-added tax, rebates and discounts and after the elimination of inter-company transactions within the Group.

The Group operates a number of different businesses offering a range of products and services and accordingly applies a variety of methods for revenue recognition, based on the principles set out in IFRS 15.

Revenue is recognised to represent the transfer of promised services to customers in a way that reflects the consideration expected to be received in return. Consideration from contracts with customers is allocated to the performance obligations identified based on their standalone selling price and is recognised when those performance obligations are satisfied and the control of goods or services is transferred to the customer, either over time or at a point in time.

In determining the amount of revenue and profits to record, and related balance sheet items (such as contract assets, contract liabilities, accrued income and deferred income) to recognise in the period, management is required to form a number of judgements and assumptions. These may include an assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised. These judgements are inherently subjective and may cover future events such as the achievement of contractual milestones.

For contracts with multiple components to be delivered, management may have to apply judgement to consider whether those promised goods and services are (i) distinct - to be accounted for as separate performance obligations; (ii) not distinct - to be combined with other promised goods or services until a bundle is identified that is distinct or (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer.

At contract inception the total transaction price is determined, and the Group allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied. Because of the bespoke nature of some solutions, judgement is sometimes required to determine and estimate an appropriate standalone selling price.

(a) Software Licences (Annual or Perpetual)

Software licences are primarily accounted for as a single performance obligation, with revenue being recognised when delivery to the customer takes place. Software licences are distinguished between on-premise software licences (where revenue is recognised at a point in time based on delivery) and web-service hosted software solutions (where revenue is spread over the period that the service is available to the customer). The adoption of IFRS 15 did not have an impact on the timing of revenue recognition against the Group's previous treatment.

(b) Transactional

A number of GBG SaaS solutions provide for the provision of transactional identity data intelligence services. Revenue in respect of those solutions is recognised in the period in which the service is provided. The adoption of IFRS 15 did not have an impact on the timing of revenue recognition against the Group's previous treatment.

(c) Rendering of Services

Revenue from the rendering of services is recognised over time by reference to the stage of completion. Stage of completion of the specific transaction is assessed on the basis of the actual services provided as a proportion of the total services to be provided. Where the services consisted of the delivery of support and maintenance on software licence agreements it is generally considered to be a separate performance obligation and revenue is recognised on a straight-line basis over the term of the support period. The adoption of IFRS 15 did not have an impact on the timing of revenue recognition against the Group's previous treatment.

(d) Contract assets and contract liabilities

Costs to obtain a contract in the Group typically include sales commissions and under IFRS 15 certain costs such as these are deferred as Contract Assets and are amortised on a systematic basis consistent with the pattern of transfer of the goods or services to which the asset relates. As a practical expedient, these costs are expensed if the amortisation period to which they relate is one year or less. Any contract assets are disclosed within the trade and other receivables in the Consolidated Balance Sheet. This is consistent with the previous application of such costs by the Group and consequently IFRS 15 did not have a material impact on the recognition of contract assets.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued)

Where the Group receives a short-term prepayment or advance of consideration prior to completion of performance obligations under a contract with a customer, the value of the advance consideration received is initially recognised as a contract liability in liabilities. Revenue is subsequently recognised as the performance obligations are completed over the period of the contract (i.e. as control is passed to the customer). Contract liabilities are presented in line with trade and other payables in the Consolidated Balance Sheet.

(e) Principal versus agent

The Group has arrangements with some of its customers whereby it needs to determine if it acts as a principal or an agent as more than one party is involved in providing the goods and services to the customer. The Group acts as a principal if it controls a promised good or service before transferring that good or service to the customer. The Group is an agent if its role is to arrange for another entity to provide the goods or services. Factors considered in making this assessment are most notably the discretion the Group has in establishing the price for the specified good or service, whether the Group has inventory risk and whether the Group is bears the responsibility for fulfilling the promise to deliver the service or good.

This assessment of control requires some judgement in particular in relation to certain service contracts. An example is the provision of certain employment screening services where the Group may be assessed to be agent or principal dependent upon the facts and circumstances of the arrangement and the nature of the services being delivered.

Where the Group is acting as a principal, revenue is recorded on a gross basis. Where the Group is acting as an agent revenue is recorded at a net amount reflecting the margin earned.

(f) Contract Modifications

Although infrequent, contracts may be modified for changes in contract terms or requirements. These modifications and amendments to contracts are always undertaken via an agreed formal process. Contract modifications exist when the amendment either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group's measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one of the following ways:

a. Prospectively as an additional separate contract;

b. Prospectively as a termination of the existing contract and creation of a new contract;

c. As part of the original contract using a cumulative catch up; or

d. As a combination of b) and c).