Embargoed until 7.00 a.m.

11 June 2024

GB GROUP PLC

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

 

Results for the year ended 31 March 2024

 

FY25 outlook reiterated; positive momentum continues

 

GB Group plc, (AIM: GBG), the experts in global identity and location software, today announces its audited results for the financial year ended 31 March 2024.

 

Financials	FY24	FY23
Revenue	£277.3m	£278.8m
Constant currency revenue1	£277.3m	£270.1m
Adjusted operating profit1	£61.2m	£59.8m
Adjusted operating profit excluding FX gain	£61.4m	£56.8m
Adjusted operating margin ex FX gain	22.1%	20.4%
Operating (loss)2	(£41.4)m	(£112.4)m
(Loss) before tax	(£50.4)m	(£118.8)m
Adjusted diluted earnings per share3	15.1p	16.4p
Diluted (loss) per share	(19.2)p	(47.5)p
Net debt1	(£80.9)m	(£105.9)m
Final dividend per share	4.20p	4.00p

¹Defined within note 19 to the results. ²Exceptional costs of £59.6m include a £54.7million non-cash goodwill impairment charge as reported at the half-year results (FY23: Exceptional costs of £127.2 million included a £122.2m non-cash goodwill impairment charge) as explained further within the financial review and note 13 to the results. ³ Defined within note 10 to the results.

 

Dev Dhiman, CEO, commented:

"This is my first set of results since taking the role of Chief Executive and I am pleased to report a more positive trading momentum. My first few months have focused on our teams, customers and business partners across GBG. This has reinforced my confidence in our competitive differentiation and our market opportunity. I believe we have opportunities to build on our momentum and capitalise on the strong and attractive structural growth drivers in the market. 

 

The time I have spent with our key stakeholders has informed our focus areas around simplicity; being globally aligned; driving a performance culture and differentiation through innovation. I am looking forward to working with everyone across GBG to deliver on these priorities. In doing so, we will ensure that GBG continues to help our 20,000+ customers grow, by giving them the intelligence to make the best decisions, when it matters most.

 

GBG plays an important role in protecting consumers and businesses from fraud while enabling our customers to reach and build trust with their customers. And we will continue to play this critical and increasingly relevant role over the long term for the benefit of all of our stakeholders."

 

Financial summary

·      Final results are in line with the trading update released on 23 April 2024 ·      On a reported basis, revenue decreased by 0.5%. On a constant currency basis, growth was 2.7% ‒    Growth accelerated to 5.0% in the final quarter of the year, driven by improved trends in Identity Americas and EMEA ·      Strong focus on simplification and cost-effectiveness throughout the Group which delivered £10 million of annualised savings with a £8.8 million in-year benefit ‒    Adjusted operating profit of £61.4 million, up 8.0% excluding net gains from foreign exchange ‒    On a reported basis, operating loss of £41.4m, caused by the £54.7 million exceptional non-cash goodwill impairment charge that was recognised in the first half ·      Strong cash conversion of 90.6% (FY23: 67.3%) led to a reduction in net debt to £80.9 million (31 March 2023: £105.9 million) ·      The Board is recommending a final dividend per ordinary share of 4.20p, up 5% (FY23: 4.00p)

FY25 outlook reiterated ·    The new financial year has begun in-line with our expectations, with improved momentum in Identity and Location continuing from the final quarter of FY24 ·    For the year as a whole, we expect mid-single-digit revenue growth on a constant currency basis, which will drive high single-digit growth in adjusted operating profit given the operational efficiency gains achieved in FY24

 

Clear on our focus areas

·      Simplicity: A series of initiatives are underway to make it easier for customers and partners to engage and operate with GBG covering a brand refresh, sales and organisational structure ·      Being globally aligned: An important area of strategic progress since January has been our drive towards greater alignment through the implementation of a global operating model ·      Driving a performance culture: We are working towards delivering a high-performance culture where everyone is hungry to win, determined to outperform our competition, and to celebrate our success ·      Differentiation through innovation: Continued to drive innovation that enhances our leadership in the identity fraud and location intelligence markets including solutions such as GBG Trust, while our investments in AI are delivering increased performance across our portfolio

Notable customer successes ·      Location: Supporting e-commerce expansion for high-street brands, while capturing growing demand from our large and diverse customer and partner base including HelloFresh, Aldi, Santander and Reltio ·      Identity: AIG, Floa, Tide and Sumup are among a diverse group of customers utilising the breadth of our solutions, while in US Gaming we have had success with ESPNBET and Bally's   ·      Fraud: Our fraud monitoring solutions were chosen by large financial institutions in Southeast Asia, and demand in Europe for our fraud investigation capabilities included UK Companies House

Results presentation Management will host an in-person presentation this morning at 0930hrs GMT for sell-side analysts and institutional investors. If you would like to attend in person, please contact: GBG@teneo.com  To register to view the event live online, please use the following link: https://www.investis-live.com/gb-group/663caee77e7bb30d0033f88b/tseer This will be available on-demand via our investor website along with the materials shortly after the event.

For further information, please contact: GBG Dev Dhiman, CEO & David Ward, CFO Richard Foster, Investor Relations   +44 (0) 1244 657333 +44 (0) 7816 124164 Numis (Nominated Adviser and Corporate Broker) Simon Willis & Joshua Hughes +44 (0) 0207 260 1000 Barclays (Corporate Broker) Robert Mayhew & Stuart Jempson +44 (0) 207 623 2323 Teneo (Financial PR) James Macey White & Matt Low +44 (0) 20 7260 2700 GBG@teneo.com   Website www.gbgplc.com/investors   About GBG GBG is the leading expert in global identity and location. In an increasingly digital world, GBG helps businesses grow by giving them intelligence to make the best decisions about their customers, when it matters most.   Every second, our global data, agile technology, and expert teams, power over 20,000 of the world's best-known organisations to reach and trust their customers.                 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 X @gbgplc.

Chief Executive Officer's review

I wanted to use this first opportunity as CEO to update you on our performance in FY24, and then outline my thoughts on GBG today together with our focus areas as the Group evolves.

Summary

In an increasingly digital world, GBG exists to help businesses and organisations grow by giving them the intelligence to make the best decisions about their customers, when it matters most. We are consistently set apart by our global reach and our ability to serve industry-specific solutions across a range of sectors. Our combination of global data, agile technology, and expertise, powers over 20,000 organisations, including the best-known global brands. We help those organisations to reach and trust their customers across a number of the most attractive markets globally, which are underpinned by favourable structural trends - providing GBG with a long-term, sustainable runway of growth.   

Reflecting on FY24, we are pleased to have successfully executed our financial plan for the year. Our strategic progress on simplification and cost-effectiveness delivered £10 million of annualised savings enabling GBG to be a more resilient and profitable business with the capacity to capitalise on our future growth opportunities. As expected, our overall growth in FY24 remained constrained by two significant headwinds to our transactional volumes; first, the subdued macroeconomic conditions impacted consumer demand, and second, changes in consumer behaviours within the internet economy.

While macroeconomic conditions remain subdued, we have seen our growth trajectory improve during the second half of FY24 resulting from a partial reacceleration in Identity as consumer behaviour normalised and I am encouraged by the operational momentum that we now carry into FY25. Net revenue retention (NRR) improved by 580 basis points to 98.1% and we were also pleased with a further improvement in revenue growth generated from new customers. Our high absolute customer retention rate and our flexible business model featuring high levels of repeatable revenue means we are well-placed as business confidence returns, both through improved top-line growth and the operating leverage arising from the cost savings we delivered.  

Strong strategic progress has also been delivered this year. We launched innovative products that further enhance our leadership in the identity fraud market, such as GBG Trust and Score to optimise the onboarding journey. In Location, we scaled up the deployment of our AI-parsing and deep-learning technology to seventeen more countries to increase our industry-leading performance in emerging markets. More broadly, a greater emphasis on collaboration and global alignment is ensuring that we can appropriately leverage our scale and expertise for commercial success. This includes strengthening our Americas Identity business in go-to-market, sales enablement and product to more effectively pursue the large market opportunity, and we are pleased by the improvement seen in that business as a result of our actions to date.   

In summary, we are pleased with the financial and strategic progress delivered in FY24, particularly the stronger final quarter in Identity. Our achievements demonstrate the focus, tenacity and effort of the GBG team during the year and I thank them all for their hard work and dedication to our customers. I am excited about what we will achieve together in FY25.  

Financial results overview

Both revenue and adjusted operating profit are in line with the trading update released on 23 April 2024.

Group revenue of £277.3 million grew by 2.7% on a constant currency basis. This reflects improving net revenue retention (NRR) of 98.1% compared with 92.3% in FY23 and a further improvement in revenue growth generated from new customers won in the last 12 months to 4.6% (FY23: 4.5%). 

Despite our high levels of absolute customer retention, revenue growth opportunities continued to be impacted by transaction volume demand linked to the two specific headwinds mentioned earlier which impacted our year-on-year comparison. However, as consumer behaviour normalised, the headwinds related to certain internet economy customers abated as we moved through the year, and it was pleasing to see growth accelerate to 5.0% in the final quarter of FY24 driven by our Americas and EMEA identity businesses.

As a result of the subdued macroeconomic environment in which to drive top-line growth, we have been particularly focused on execution to drive the Group's profitability. These initiatives to deliver increased simplicity and cost-effectiveness have balanced delivering growth in returns for shareholders and the need to invest and optimise our core solutions in a competitive market. We have made excellent progress with these initiatives, which began during FY23 and have achieved an annualised run-rate reduction in operating expenditure of £10 million. This has contributed to an adjusted operating profit growth, excluding net gains on foreign exchange, of 8.0% to £61.4 million, with our operating profit margin on that basis expanding by 170bps to 22.1%.

On a reported basis there was an operating loss of £41.4m, caused by the £54.7 million exceptional non-cash goodwill impairment charge that was recognised in the first half.

Our cash conversion normalised at 90.6% (FY23: 67.3%) which contributed to a good reduction in the Group's net debt to £80.9 million at 31 March 2024 (31 March 2023: £105.9 million) and net debt to EBITDA leverage below 1.3x as expected. While our near-term capital allocation priority is to use cash generation to reduce net debt, the Board remains committed to a disciplined approach to capital allocation that focuses on delivering long-term shareholder value. As a result of our strong cash performance and its confidence in GBG's enduring market opportunity, the Board recommends a final dividend per share of 4.20 pence (FY23: 4.00 pence per share), which represents a year-on-year increase of 5.0%.

Our segmental performance

Location (29% of the Group's revenues)

Location had another good year; revenue was up 7.3% on a constant currency basis to £81.1 million as the business continued to perform resiliently. We successfully mitigated the impact of softer transactional volumes from our e-commerce customers by driving go-to-market activity on expanding the relevant use cases into a diverse sector and geographic footprint such as financial services, utilities, telecoms and via channel partners.  

Notable customer success:

·      Capturing growing demand from our large and diverse customer and partner base, including HelloFresh, Aldi, Santander and Reltio

·      Supporting retail customers such as New Balance, Kurt Geiger, Neiman Marcus and Marc Jacobs

·      Facilitating the customer checkout journey for some of Asia's largest e-commerce marketplaces to enhance address accuracy as they experience growing cross-border demand

Identity (56% of the Group's revenues)

Revenue of £156.1 million represents a small 0.7% decline on a constant currency basis, in line with our expectations for Identity this year. A strong performance in our APAC identity business driven by financial services and partner activity in Australia was offset by tough prior-year comparatives for the first three quarters of the year in the Americas, reflecting the trends discussed earlier. As expected, year-on-year growth accelerated by mid-single-digits in the fourth quarter as a result of improving trends in both our EMEA and Americas businesses. Our absolute customer retention rate remained strong in a period when usage volumes remained subdued, and we are pursuing a more globally aligned approach to cross-sell/up-sell opportunities that leverages the competitive differentiation of our solutions to deliver improved onboarding success, identity fraud detection and customer return on investment.

Notable customer success:

·   Demonstrating an increased focus on identity fraud detection, Floa chose our mobile fraud signal solution with an upsell to our fraud monitoring capabilities and, Tide selected our Multibureau and Trust solutions

·   Customers leveraging our global expertise include AIG, Atlantic Lottery, Currencies Direct and SumUp who all utilised our expanded international data coverage while investment platform, Webull, chose GBG as its end-to-end onboarding partner in EMEA and APAC

·   In the Americas gaming, where changes in regulation continue to create opportunity for GBG, we had success with customers such as ESPNBET and Bally's

Fraud (15% of the Group's revenues)

Revenue for our fraud prevention, detection and investigation solutions grew by 7.8% at constant currency to £40.2 million. This was underpinned by licence renewals, upgrades and new business wins with leading financial institutions in this segment's core Southeast Asia and EMEA markets, albeit sales of software licences slowed in the final quarter of FY24 after two strong years of growth. In these markets, our solutions have an established reputation and play a critical part in our customer's compliance ecosystems, helping them monitor rapidly evolving fraud threats and comply effectively with new regulatory standards.

Notable customer success:

·      Agreements for our fraud monitoring solutions in Indonesia include Bank Syariah and Bank Ina Digital and in Thailand with TMBThanachart Bank and Kiatnakin Phatra Bank

·      Nordic-focused Express Bank who upgraded to our fraud compliance platform

·      Robust demand for our specialist fraud investigation capabilities in the UK includes emerging use cases working with one of the UK's leading transport firms to support revenue protection on its network and supporting UK Companies House with investigations related to new Economic Crime legislation

 

Our focus areas

GBG is a high-quality business with a proven track record of delivering profitable growth and a reputation for addressing our customers' complex identity challenges. Through our expertise and innovation, we have developed strong competitive differentiation that underpins our leadership positions across our markets.

Since becoming CEO at the end of January, my interactions with our team, our customers and partners has reinforced why I'm excited about GBG's strategic position in a growing market. That said, I recognise there is scope for performance improvement, and my overriding objective is to improve the organic growth rate for the business. This has directly informed our initial focus areas:

Simplicity: We believe our success will have its foundation in being a simple and efficient organisation and we were pleased that cost initiatives executed in FY24 delivered £10 million of annualised savings. Building on this, simplicity will support our push to be globally aligned, to develop better innovation, and to drive a performance culture. By operating simply, we will drive change to make GBG easier to work with, easier to understand, and easier to prosper within.

We have structured global teams to better focus on our priorities, and we will continue to simplify our product portfolio to optimise our investments to increase the effectiveness and innovation of our solutions. We are also streamlining commercial processes, making it easier for customers to engage with us, with a key example being a brand refresh. This is designed to enable our teams to communicate our value proposition more clearly to key stakeholders, creating a richer understanding of who we are and what we offer.

Being globally aligned: While our Location business has been run globally for some time, we are continuing to drive towards greater alignment through the implementation of a global operating model for our Identity Fraud activities. In our core regions, we are often solving similar complex challenges and there is still further opportunity to work more closely with greater consistency to become a stronger and faster organisation that stands out in all the markets we serve.

We are bringing our identity and fraud capabilities closer together, with our Chief Product Officer leading a more centralised approach to development and innovation. By exploiting our size and scale as one of the largest providers in the market, we will leverage common identity fraud platforms and capabilities to serve our customers worldwide through localised solutions. We are also benefiting from being more commercially effective by managing key suppliers and reducing duplication of investment with a build-once approach. An example is being able to offer our customers increased performance by delivering our improved international data sets, developed in our EMEA Identity business, to customers around the world.

A newly created role of Head of Market Development is focused on leading our global go-to-market strategy and sales enablement across our Identity Fraud activities working closely with our regional leaders. This approach will improve effectiveness and pace across our sales and marketing cycle. We are already seeing the benefits of this approach in our Americas Identity business.

Driving a performance culture: As we make progress towards building a simpler and more efficient organisation focused on growth, we expect to create momentum across the business that enhances the experience for our customers and builds on a culture that differentiates us. Across all areas of the Group, we will increase the emphasis on performance delivery from the significant talent within the GBG team, which has seen over 130 team members promoted this year to expanded roles. We have also implemented a high-performance development programme for key sales and product leaders globally and embedded performance initiatives that celebrate the collaborative success of the team.

GBG has always had a strong focus on team member engagement, and this will not change as we evolve. Our latest Gallup survey resulted in 90% of the team recommending GBG as a great place to work (FY23: 93%) with a total participation rate of 92%. We did expect to see a moderation in this score versus the prior year given the level of change and focus on efficiency during the last 12 months. Strong team engagement is directly correlated with satisfied customers, and we were particularly pleased to see our latest Net Promoter Score (NPS) of 50, our highest to date and a 19% increase year on year in a period when we expanded our NPS monitoring globally.

Differentiation through innovation: Meeting the evolving needs of customers will be crucial in maintaining our competitive advantage and accelerating our growth through value-added activities that increase the intelligence provided to support a customer's decision-making. Our GBG Score solution is facilitating discussions with customers to understand the confidence they can place in their current onboarding journey. This complements GBG Trust, our proprietary identity fraud network to stop fraud at the point of onboarding. Customers across sectors have contributed more than 50 million identity records into the network to help onboard consumers more quickly, differentiate their journey based on a 'trust' score and share insight on bad actors.

We have extensive experience deploying AI and machine learning. Advances in technology and our product portfolio, such as the Trust network, mean AI will continue to be a key focus. Product highlights include new computer vision and machine learning models within our document & biometric capabilities, delivering a 4.5x improvement in match rate performance as well as enhancements to our document tamper detection. We also improved our location intelligence using deep learning models and data parsing to increase match results by up to 17% in emerging markets. At the same time as we make significant progress enhancing extensive AI capabilities to augment our products, we are extending its use across our broader business operations for improved productivity to provide an exceptional end-to-end customer experience from setup to support.

Outlook and summary

GBG is a high-quality business with market-leading positions in the key sectors and geographies we operate. We have good momentum to continue our journey of building one of the largest identity and location players in the market through the evolution of our strategy to concentrate and exploit the most attractive market growth opportunities, with a relentless focus on delivering shareholder value.

Our focus on identity onboarding supports our customers in managing this critical stage of a customer lifecycle to help them grow and build long-term trusted relationships. Products such as GBG Trust reinforce our strength in this market as the digital transformations of our customers progress and the world continues to face exponential growth in the threat of fraud. 

The new financial year has begun in-line with our expectations, with improved momentum in Identity and Location continuing from the final quarter of FY24. The Board is confident GBG will deliver mid-single-digit revenue growth, on a constant currency basis, which will drive high single-digit growth in adjusted operating profit. As we look further forward, the Board remains confident that GBG has the market position, technology leadership and business model to capitalise upon the significant growth opportunities ahead, delivering significant and sustainable shareholder value.

 

Dev Dhiman

Chief Executive Officer

On behalf of the Board

10 June 2024

 

Financial review

We are pleased that we were able to successfully execute our financial plan for the year. We had a strong focus on simplification and cost-effectiveness and as a result have delivered structural savings that we expect will benefit GBG into the future. Our continued focus on growth initiatives led to us achieving the acceleration in year-on-year growth in quarter four that we had expected and built into our plan. This improved revenue growth of approximately 5.0%, on a constant currency basis, was primarily driven by an acceleration in the Identity segment, as a result of improving trends in the Americas and EMEA. This gives us positive momentum going into the new financial year.

Revenue growth opportunities in FY24 continued to be impacted by the general macroeconomic conditions which has suppressed consumer demand and business confidence leading to lower transactional volumes for GBG. However, some of the more specific headwinds the Group faced in the previous year, relating to changes in consumer behaviours driving demand reductions in the internet economy and particularly fintech businesses, somewhat abated from the fourth quarter of the year. 

In FY24 we delivered constant currency revenue growth of 2.7% and as a result of the sharp focus on simplification and efficiencies, we recorded our highest ever level of adjusted operating profit.

GBG's mix of commercial models and resilient customer retention continues to support strong cash generation and good forward visibility due to our high levels of repeatable revenue, with 57.5% (FY23: 56.7%) from subscriptions and 94.8% (FY23: 93.7%) of revenue coming from the combination of subscriptions and consumption.

This focus on driving simplicity and efficiency has enabled GBG to prioritise the disciplined investment required to optimise our core solutions in a competitive market, while at the same time deliver growth in returns for shareholders. These initiatives, which began during FY23, have achieved an annualised run-rate reduction in operating expenditure of £10 million and helped deliver an improved adjusted operating profit margin of 22.1%, which was ahead of the reported FY23 margin of 21.5%. This was despite inflationary pressures and the FY23 margin benefiting from an unusually large FX gain primarily from the retranslation of intercompany loans. Excluding gains and losses on foreign exchange, the FY24 adjusted operating profit margin was still 22.1%, against 20.4% in the prior year.

Our financial position and balance sheet is strong and in FY24 cash conversion returned to more normal levels at 90.6% (FY23: 67.3%). By the end of the year GBG's net debt had reduced to £80.9 million from £105.9 million at the previous year end. The net debt to EBITDA ratio reduced to 1.27 times (FY23: 1.68 times).  As we enter the new financial year, we remain focused on cash generation and further repayment of debt.

Revenue and gross margin

Revenue declined on a reported basis by 0.5% but after adjusting for changes in foreign exchange rates, the constant currency revenue growth in FY24 was 2.7%. More detail on revenue performance in each of our operating segments is included in the Chief Executive Officer's Review.

We were particularly pleased with the level of revenue growth attributable to new customers won in the last 12 months which has increased to 4.6% (FY23: 4.5%) and as expected, Net Revenue Retention (NRR) of 98.1% has improved compared to the prior year (92.3%). In FY24 we have seen a reduction in the NRR associated with Fraud segment, which is more susceptible to short-term fluctuations in NRR as contracts are generally larger and revenue timing dependant on renewal dates. NRR, excluding the Fraud segment, increased from 91.1% to 99.0%.

Gross margin for the year of 70.1% was a small reduction against the prior year when the gross margin was 71.0%. This reflects the revenue mix in the year both across our segments but also between direct and partner channels, in addition to an increase in cloud hosting costs. In the second half of the year the revenue mix, along with a focus on cloud hosting optimisation, resulted in gross margin of 71.0%, compared to 69.2% in the first half.

 

Operating profit and cost management

On a reported basis, there was an operating loss of £41.4 million (FY23: loss of £112.4 million), principally due to the goodwill impairment charge of £54.7 million recognised at the half year (FY23: £122.2 million).

Adjusted operating profit was £61.2 million (FY23: £59.8 million), which represents a margin of 22.1% (FY23: 21.5%) and an 8% increase over FY23, excluding the £3 million foreign exchange gain in the prior year.

This improvement reflects a tight focus on cost efficiency and simplification of our business, combined with disciplined prioritisation of investment to capitalise on our long-term market opportunities.

Despite the general inflationary pressures of the markets in which we operate, our adjusted operating expenses were £8.8 million or 6.3% lower than the prior year. We managed headcount tightly and carefully considered our team member recruitment and the replacement of leavers. This, together with targeted redundancies, led to an 8% reduction in our average headcount over the course of the year. 

We also completed a review of our physical office footprint reducing commitments and costs meaningfully to reflect the hybrid working environment of our teams as well the changes we have implemented over the last few years to our geographical footprint, particularly for our technology teams.

Total spend on technology decreased to £46.5 million (FY23: £54.0 million), which represents a reduction of 13.9%. We achieved this through strict prioritisation of technology projects to ensure our teams are focused on fewer projects and ones of highest opportunity for GBG as well as further resource offshoring to lower cost locations.

These cost saving initiatives underpinned our profit delivery in FY24 but have also enabled some level of re-investment into a small number of key product development activities to ensure we maintain our competitive differentiation and are positioned to achieve our short, medium and long-term goals.

Normalised and exceptional items

Amortisation of acquired intangibles

The charge for the year of £39.4 million (FY23: £42.8 million) represents the non-cash cost of amortising separately identifiable intangible assets including technology-based assets and customer relationships that were acquired through business combinations. The decreased charge in FY24 is due to the impact of some intangibles becoming fully amortised during the year, in addition to changes in exchange rates.

Share-based payments

During FY24 3.9 million (FY23: 3.3 million) new share option awards were granted to directors and team members across the Group, including through the GBG Sharesave scheme. This increase was due to the share price being comparatively lower in FY24 leading to a greater number of shares being awarded for any given value.

The charge for the year of £3.5 million (FY23: £2.3 million) has increased as FY23 included a credit due to a change in the assumption for the percentage of awards expected to vest based on EPS and TSR performance.

 

Impairment of goodwill

As required under IFRS, the Group conducts an annual impairment review of goodwill and intangible assets. This review compares the carrying value on the Group's balance sheet of those assets against the present value of the future cashflows they are expected to generate.

As reported in our half year results for the six months ended 30 September 2023, significant increases to central bank interest rates since 31 March 2023 resulted in the post-tax discount rate used in our assessment and applied to the US cashflows increasing from 9.2% at 31 March 2023 to 9.9%. This resulted in an exceptional non-cash goodwill impairment charge of £54.7 million. More detail can be found in note 13.

Other exceptional items

In addition to the goodwill impairment charge, other exceptional costs of £4.9 million (FY23: £5.0 million) were incurred by the Group in the year and have been detailed in note 6. Broadly, these exceptional charges arose in support of our initiatives to achieve future operational simplification and efficiency.

The most significant elements were the exit costs for a number of team members which totalled £4.0m as part of this group wide review; and £0.7m of integration costs as we finalised projects to align systems from the Acuant acquisition.

Net finance costs

The Group incurred net finance costs for the year of £9.0 million (FY23: £6.4 million). The increase is due to the annualised impact of the significant increases in the Secured Overnight Financing Rate (SOFR) interest rate during FY23 (from 0.3% to 4.8%), upon which the Group's loan facility interest rate is linked. SOFR continued to increase until July 23 and has remained around the 5.3% level throughout the rest of FY24.

Strong cash generation has enabled the Group to reduce net debt by £25.0 million and making repayments against the loan facility will continue to be a focus during FY25.

Taxation

The total tax credit of £1.8 million (FY23: £1.0 million charge) includes £8.8 million of current tax payable on the Group's taxable profits and losses in the year (FY23: £12.9 million), offset by a deferred tax credit of £10.6 million (FY23: £11.9 million).

The reported effective tax rate for the Group has moved from negative 0.8% in FY23 to 3.6% in FY24.

The adjusted effective tax rate, which excludes the impact of amortisation of acquired intangibles, share-based payments and exceptional items increased from 21.3% to 25.2%. The majority of this increase is due to UK statutory tax rate increasing from 19% to 25% from 1 April 2023.

The tax rate attributable to US State taxes has fallen and largely this is due to changes in the calculation method for some US States. GBG Americas has significant deferred tax assets that have been revalued at the lower tax rate resulting in a tax charge that is fully recognised as a discrete item in the year to 31 March 2024.

The Group expects its future adjusted effective tax rate to be approximately 25%.

Earnings per share

Basic earnings per share improved from a loss of 47.5 pence to a loss of 19.2 pence reflecting the reduction in the non-cash goodwill impairment charge.

Adjusted earnings (adjusted operating profit less net finance costs and adjusted tax) decreased to £39.0 million (FY23: £42.1 million) due to the higher net finance cost and higher adjusted tax charge. This resulted in a 7.7% decrease in adjusted diluted earnings per share from 16.4 pence to 15.1 pence.

The basic weighted average number of shares at 31 March 2024 increased minimally to 252.6 million (FY23: 252.2 million), due primarily to the full year impact of shares issued during the prior year.

 

Deferred and accrued revenue

Deferred revenue at the end of the year decreased by 2.1% to £55.3 million (FY23: £56.5 million).

This balance principally consists of contracted licence revenues and profits that are payable up front but recognised over time as the Group's revenue recognition criteria are met. The deferred revenue balance does not represent the total contract value of any future unbilled annual or multi-year, non-cancellable agreements as the Group more typically invoices customers in annual or quarterly instalments. The deferred revenue balance at any point in time is determined by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing, FX rates and new business linearity within a reporting period.

Accrued revenue at the end of the year increased by £6.9 million to £14.5 million (FY23: £7.6 million). This increase was primarily due to timing differences with several larger contracts, mostly in the Fraud and Location segments, signed or renewed during the year where the revenue recognition profile is different to the invoicing profile.

Cash flows

Group operating activities before tax payments and exceptional items generated £57.8 million of cash (FY23: £42.5 million) representing an Adjusted EBITDA to operating cash conversion ratio of 90.6% (FY23: 67.3%). Following the specific and non-recurring factors impacting cash conversion during the prior year, the operating cash conversion has returned to a level more consistent with previous years and GBG's medium-term guidance.

During the year to 31 March 2024, net repayments against the RCF were £23.0 million, resulting in outstanding balances of $129 million (FY23: $149 million) and £nil (FY23: £7 million).

Overall, our net debt at 31 March 2024 decreased to £80.9 million. This was despite the £10.1 million full year dividend payment, £1.2 million payment of contingent consideration related to the Cloudcheck acquisition and exceptional cash costs of £5.4 million. Offsetting these costs were a positive £1.8 million retranslation impact from the conversion of the non-sterling denominated cash and debt into pound sterling and a £1.3 million receipt following the sale of an owned property during the year.

Further detailed analysis of this movement is included in the consolidated cash flow statement .

We were pleased to obtain approval for the exercise of the second of the one-year extension options on the existing revolving credit facility. Extending the length of the facility through to July 2027 provides a platform to support investment in organic growth and potential future M&A activity.

Dividend

At the AGM, the Board of Directors will propose a final ordinary dividend of 4.20 pence per share (FY23: 4.00 pence), amounting to £10.6 million (FY23: £10.1 million).

If approved, this will be paid on 2 August 2024 to ordinary shareholders whose names appear on the register of members at the close of business on 21 June 2024. The Group continues to operate a Dividend Reinvestment Plan, allowing eligible shareholders to reinvest their dividends into GBG shares.

In proposing the FY24 final dividend amounting to £10.6 million, the Directors have assessed each of the components of equity at 31 March 2024 and assessed how much of each component is considered distributable in accordance with applicable guidance. The Company has assessed that £86,739,000 of Merger Reserve recognised upon the acquisition of Acuant Intermediate Holding Corp is considered to be a realised profit, as a realised loss has been recognised on the impairment of the related asset - being the investment in GBG (US) Holdings LLC.

Therefore, the Directors consider that there are sufficient distributable reserves available at 31 March 2024 for the declaration of this dividend.

 

Treasury policy and financial risk

The Group's treasury operation is managed by a Treasury Committee within formally defined policies and reviewed by the Board. The Treasury Committee meets on a regular basis to review cash flow forecasts, covenant compliance, exposure to interest rate and foreign currency movements and make recommendations to the Board based on these reviews.

The Treasury Committee receives weekly cash information to monitor liquidity across the Group and ensure that significant cash outflows, such as acquisition payments, dividends and loan repayments, could be made without exposing the Group to undue risk.

The Group finances its activities principally with cash, short-term deposits and borrowings but has the ability to draw down up to £72.8 million of further funding from a committed revolving credit facility. Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group's operating activities. Surplus funds of the Group are used to repay the RCF, whilst ensuring that a suitable operational level of cash is retained.

The Group is exposed to a variety of financial risks including: market risk (including foreign currency risk and cash flow interest rate risk), credit risk and liquidity risk. It is not the Group's policy to engage in speculative activity or to use complex financial instruments.

Approved by the Board on 10 June 2024

 

David Ward

Chief Financial Officer

10 June 2024

 

 

Consolidated statement of profit or loss

Year ended 31 March 2024

 

 

			2024				2023
	Note	Before	Normalised and			Before	Normalised and
		exceptional items £000	exceptional items1 £000		Total £'000	exceptional items £000	exceptional items1 £000	Total £'000
Revenue	3, 4	277,325	-		277,325	278,810	-	278,810
Cost of sales		(82,805)	-		(82,805)	(80,994)	-	(80,994)
Gross profit		194,520	-		194,520	197,816	-	197,816
Operating expenses		(132,386)	(102,548)		(234,934)	(141,235)	(172,246)	(313,481)
Net (loss)/gain on foreign exchange		(162)	-		(162)	3,022	-	3,022
(Increase)/decrease in expected credit losses of trade receivables		(775)	-		(775)	214	-	214
Operating profit/(loss)		61,197	(102,548)		(41,351)	59,817	(172,246)	(112,429)
Finance income	3, 7	262	-		262	636	-	636
Finance costs	8	(9,297)	-		(9,297)	(7,037)	-	(7,037)
Profit/(loss) before tax		52,162	(102,548)		(50,386)	53,416	(172,246)	(118,830)
Income tax credit/(charge)	9	(13,155)	14,958		1,803	(11,354)	10,390	(964)
Profit/(loss) after tax for the year attributable to equity holders of the parent		39,007	(87,590)		(48,583)	42,062	(161,856)	(119,794)
Earnings per share	10
- basic earnings per share for the year		15.4p			(19.2p)	16.7p		(47.5p)
- diluted earnings per share for the year		15.1p			(19.2p)	16.4p		(47.5p)

 

¹ Normalised items include: amortisation of acquired intangibles £39,447,000 (2023: £42,758,000) and share-based payment charges £3,488,000 (2023: £2,313,000). Exceptional items total £59,613,000 (2023: £127,175,000) (see note 6).

 

The accompanying notes are an integral part of this consolidated statement of profit or loss.