Gb Group Regulatory News (GBG)

GB GROUP PLC

(the "Group" or the "Company")

Half Yearly Report

GB Group plc, the identity management specialist, is pleased to announce its half year results for the period ended 30 September 2012.

Highlights

·; First complete 6 months of trading for the three acquired businesses demonstrates the increased scale and profitability of GB Group.

·; Group revenues increased by 44% to £17.7m (2011: £12.3m1)

o DataAuthentication, which provides identity verification services, revenues grew by 26% to £7.3m (2011: £5.8m1)

o DataSolutions, which provides identity-based marketing solutions, revenues grew by 60% to £10.5m (2011: £6.6m1)

·; Adjusted operating profit2 increased by 58% to £1.5m (2011: £0.95m1), £0.1m ahead of the trading update issued in October 2012.

·; The Group remains highly cash generative, with operating cash flow before working capital movements increasing by 52% to £1.5m (2011: £0.95m).Cash balances at the period end were £5.8m (2011: £4.2m), after £1.5m of dividend payments.

·; Two new territories, China and Argentina, added to the Group's international hub, ID3Global, bringing total number of geographies in which GB can offer identity verification services to 16 (2011: 7).

·; Acquisition activity continued post period end, with acquisition of TMG.tv Limited, the UK's second largest criminal Records Bureau ("CRB") umbrella organisation for up to £3m in November 2012.

·; Positive outlook for the year and beyond.

Note 1: the 2011 comparison figures for revenue and adjusted operating profit are restated in accordance with the prior period restatement as disclosed in both the 2012 Interim Report and the 2012 Annual Report and Accounts.

Note 2: adjusted operating profit means operating profits before share of associate investment result, share based payment charges, amortisation of acquired intangibles, acquisition related costs and reorganisation costs.

Richard Law, CEO, commented,"As online and cross-border trading continues to increase, we remain confident that there is a corresponding demand for our identity management services which are designed to "enable" online business and make it safe and easy for consumers and businesses. GB Group is meeting this demand through its existing range of excellent services and through the additional capability we have acquired as a result of four acquisitions successfully completed over the last 18 months. These are exciting times for GB Group and I believe that our prospects are positive."

For further information, please contact:

Editors' Notes

Who is GB Group?

The most successful organisations recognise the value of understanding your individual identity - who you are, what you need and what you like. GB Group combines this concept of identity with technology to create an environment of trust so that organisations can connect, communicate and transact with consumers safely, responsibly and profitably. We call this Identity Management.

GB Group has four complementary Identity Management offerings:

·; ID Verification, which provides the ability to verify consumers' identities remotely, without the physical presentation of documentation, in order to combat ID fraud, money laundering and restrict access to under age content, purchases and gambling

·; ID Customer Registration, which includes software and services for quick and accurate customer registration and validation of records

·; ID Engagement Services, which provides database services so our clients can better understand, target and retain their customers and offers accurate and up-to-date identity information for their contact strategies

·; ID Tracing Services, which provides the largest and most accurate picture of the UK's population and properties in order to locate and contact the right individual, first time

This enables our clients to make informed business decisions based on a thorough knowledge of consumer identity and behaviour, leading to more effective communication and interaction with the customer.

GB Group is listed on the London Stock Exchange (GBG). For more information, please visit GB Group's website: www.gb.co.uk

GB Group - because identity matters® 

·; Solid trading performance for the six months to 30 September, in line with market expectations:

o Revenue up 44% to £17.7 million (2011: £12.3 million);

o Organic Revenue up 14% to £13.4 million (2011: £11.7 million);

o Adjusted Operating Profit* up 57% to £1.50 million (2011: £0.95 million);

o Adjusted Basic EPS† of 1.4p (2011: 1.1p);

·; Group cash balances up 22% to £5.8 million (2011: £4.8 million).

·; Deferred revenue balances of £4.9 million (2011: £2.4 million). These balances represent revenue to be released to the Income Statement over contract terms in accordance with the Group's accounting policies.

·; Dividend increased 7.8% to 1.375p per share (2011: 1.275p per share).

Note*: adjusted operating profit means profits before share of associate investment result, share based payment charges, amortisation of acquired intangibles, acquisition related costs and reorganisation costs.

Note†: adjusted earnings per share is calculated before share of associate investment result, share based payment charges, amortisation of acquired intangibles, acquisition related costs and reorganisation costs.

The Board reports that the Group has performed in line with market expectations with growth coming from both our organic activities and our acquired businesses.

These results include a full six months of trading for the acquired Data Discoveries, Advanced Checking Services (ACS) and Capscan businesses and whilst growth compared to the same period in 2011 has been mainly through acquisition, it is encouraging to note that year-on-year, organic revenue growth was 14%.

Results

The Group's DataAuthentication and the DataSolutions businesses generated revenue well ahead of last year by 26% and 60% respectively.

Group revenues for the period grew 44 per cent. to £17.7 million (2011: £12.3 million1) with a 57 per cent. increase in adjusted operating profit2 to £1.5 million (2011: £0.95 million1). This profit result is £0.1 million ahead of the trading update statement that the Company issued on 29 October 2012.

The Group continues to be highly cash generative with operating cash flow before working capital movements increasing by 52% to £1.5 million (2011: £1.0 million). At 30 September 2012, the Group had cash balances of £5.8 million (2011: £4.2 million) after payment of £1.5 million in respect of the final dividend in August 2012.

Overall profit after the deduction of non-cash items and exceptional costs3 was £0.6 million (2011: £0.7 million).

Acquisition Activity

On 5 November 2012, GB Group announced the acquisition of TMG.tv Limited ("TMG CRB"), the UK's second largest Criminal Records Bureau ("CRB") umbrella organisation. As previously announced, this acquisition will enable the Group to access the growing market for online CRB disclosure checks which is consistent with our core proposition of enabling organisations to connect, communicate and transact with individuals safely, responsibly and profitably.

DataAuthentication

DataAuthentication provides the electronic ID verification component of GB Group's identity management offerings. With the acquisition of TMG CRB, this division will also have the capability to serve the employee screening market, a growing business area in the UK.

In a strong first half performance, DataAuthentication saw revenues grow by 26% to £7.3 million (2011: £5.8 million).

Good strategic progress has also been made in the half year with the addition of new country services for the identity verification of individuals from Argentina and China. Further services for other countries are expected to be added before the end of the current financial year and we are investing in the development of our new international identity verification service, ID3 Global.

DataSolutions

DataSolutions which provides identity-based marketing solutions (ID Customer Registration, ID Marketing Services and ID Tracing software and services), made good progress demonstrated by overall revenue growth of 60% to £10.5 million (2011: £6.5 million).

Outlook

Our products and services are successfully meeting the needs of our clients, helping them to develop profitable and robust relationships with their customers.

The further development of our identity management product and service portfolio, through the strategic addition of TMG CRB, now provides the Group with the capacity to address new markets and will provide our clients with the additional ability to make safer recruitment decisions more quickly and more efficiently.

We expect the strong performance to continue for the remainder of the year. Looking further ahead, we are encouraged by the growth expected in our markets and believe we are well positioned to exploit this market expansion over the coming years.

Note 1: the 2011 comparison figures for revenue and adjusted operating profit are restated in accordance with the prior period restatement as disclosed in both the 2012 Interim Report and the 2012 Annual Report and Accounts.

Note 2: adjusted operating profit means operating profits before share of associate investment result, share based payment charges, amortisation of acquired intangibles, acquisition related costs and reorganisation costs.

Note 3: non-cash items are the amortisation of acquired intangible assets, share-based payment charges and the share of associate investment result. Exceptional items are those costs associated with the rationalisation of acquired businesses together with fees related to acquisition activities.

1. CORPORATE INFORMATION

The interim condensed consolidated financial statements of GB Group plc ('the Group') for the six months ended 30 September 2012 were authorised for issue in accordance with a resolution of the directors on 26 November 2012. 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 2012 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 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 2012. The financial information for the preceding year is based on the statutory accounts for the year ended 31 March 2012. 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 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 2012, 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.

Prior period restatements

As reported in the Group's annual financial statements for the year ended 31 March 2012, as a consequence of the acquisition of similar businesses during the 2012 year and cognisant of the evolving nature of accounting standards concerning revenue recognition, the Group took the opportunity to re-examine all revenue recognition policies throughout the Group and assess whether the applications of its policies were the most appropriate to take the enlarged business forward and to better align with the approach that future accounting standards are likely to take. Consequently, the 30 September 2011 balance sheet along with the 2011 Interim Consolidated Statement of Comprehensive Income have been restated as a result of a reassessment of the most appropriate proportions of revenue that are spread over the contract duration for certain software licences where there is an online delivery component. This following table shows the impact of this adjustment to the Consolidated Statement of Comprehensive Income and the Consolidated Balance Sheet:

The impact on profit for the six months ended 30 September 2011 was a reduction of £99,000. The impact on net assets at 30 September 2011 was a reduction of £1,324,000.

The impact on the 2011 basic and diluted earnings per share was a decrease of 0.1p and 0.1p per share respectively.

3. 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.

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; disaster recovery and business continuity; new product development; and intellectual property risk. These risks and uncertainties facing our business were reported in detail in the 2012 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. EXCEPTIONAL ITEMS

Exceptional costs of £266,000 in the six months ended 30 September 2012 included £154,000 of costs associated with staff reorganisations along with £112,000 of professional fees related to Company's acquisition related activities.

6. SEGMENTAL INFORMATION

The Group's operating segments are internally reported to the Group's Chief Executive Officer based on two separable areas grouped into two operating segments: DataAuthentication - which provides electronic identity verification services and DataSolutions - which provides identity capture, tracing, maintenance and analysis services. The Directors believe that the best measure of performance of those segments is operating profit before finance revenue and income tax as shown below.

All revenues and all non-current assets are derived from UK operations. Segment results include items directly attributable to either DataAuthentication or DataSolutions.

Unallocated items for the six months to 30 September 2012 represent Group head office costs (£364,000), exceptional costs (£266,000), Group finance income (£1,000), Group income tax (£95,000) and share-based payments charge (£201,000). Unallocated items for the six months to 30 September 2011 represent Group head office costs (£260,000), exceptional costs (£170,000), amortisation of acquisition intangibles (£22,000), Group finance income (£17,000), Group income tax (£16,000) and share-based payments charge (£41,000). Unallocated items for the year ended 31 March 2012 represent Group head office costs (£435,000), share of associate investment (£24,000), exceptional costs (£676,000), Group finance income (£18,000), Group finance costs (£34,000), Group income tax credit (£1,094,000) and share-based payments charge (£137,000).

Information on segment assets and liabilities is not regularly provided to the Group's Chief Executive Officer and is therefore not disclosed below.

7. TAXATION

Taxation on profit on ordinary activities