A NNUAL REPO RT AND
ACC OU NTS 2020
Stock code: GBG
1 Overview
Investment Case
At a Glance
Chairman’s Statement
2 Strategic Report
02
04
07
Market Review
Business Model
Strategy
Key Performance Indicators
Chief Executive’s Review
Finance Review
Principal Risks and Uncertainties
Corporate Responsibility Statement
09
10
12
16
18
21
24
33
3 Governance
Directors & Officers
Letter from the Chairman
Corporate Governance Statement
Audit & Risk Committee Report
Remuneration Committee Report
Annual Report on Remuneration
Nomination Committee Report
Directors’ Report
Section 172 Statement
Statement of Responsibilities
4 Financial Statements
Independent Auditor’s Report
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Changes in Equity
Company Statement of Changes in Equity
Consolidated Balance Sheet
Company Balance Sheet
Consolidated Cash Flow Statement
Company Cash Flow Statement
Notes to the Accounts
Useful Information
72
79
80
81
82
83
84
85
86
131
40
42
43
48
52
59
63
64
67
71
OVERVIEW
GBG is a Global Leader in Identity Data Intelligence
Our solutions help organisations quickly validate and verify the identities and locations
of their customers.
Our products combine an unparalleled breadth of data from over 150 global partners
with GBG’s market-leading technology, used by some of the best-known organisations
around the world - from US e-commerce giants, to Asia’s biggest banks and European
household brands.
Our innovative technology can verify the identities of people globally, helping
organisations to improve digital access and create fast, secure and seamless
customer experiences that build trust.
Highlights
Financial highlights
Revenue
£199.1m
(2019: £143.5m)
Adjusted operating profit
£47.9m
(2019: £32.0m)
Adjusted earnings per share
21.8p
(2019: 18.2p)
Adjusted operating margin
24.1%
(2019: 22.3%)
Strategic and
Operational Highlights
Strong revenue and profit
performance:
− Good growth from all geographies
and GBG’s three core solutions
(Location, Identity and Fraud)
− International revenues now 56% of
the business
− IDology is performing well and
delivering on acquisition objectives
Continued investment in data,
products and technology:
− Increasing breadth and depth of data
in chosen markets
− Enhancement of product portfolio
through internal development and
partnerships
− Enhanced our capabilities in
artificial intelligence, multi-modal
authentication and validation
methods
− Significant progress in the shift to
a globally capable, cloud-based
operational model
Covid-19: early and decisive action:
− Focused on protecting team
members, supporting our customers
and positioning for the future
− Prompt actions taken early to
maintain our organisational capacity
whilst reducing discretionary
spending
− Assisted by a strong balance sheet
with available bank draw down
facilities, good liquidity and a high
proportion of annual recurring licence
revenue
Our Vision
To be the leader in identity data
intelligence.
1,000+
team members in
16 countries
20,000
customers across
over 70 countries
245+
countries and
territories with address
validation capabilities
01
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceFinancial StatementsOverview INVEST MENT CAS E
With over 30 years market experience and a truly innovative and global offering, we help our
customers succeed in the digital economy. GBG’s market leading data, technology and talent
helps our clients onboard customers, protects them from fraud and helps them comply with
regulations by establishing trust.
The Best Data
Our market leading data partnerships differentiate us and build a barrier to entry for others. GBG maintains the highest standards
of data integrity and demands the same of its data and data solution partners.
We apply the insights gained from our client relationships to develop products that make the most of this data. With access to more
than 150 global partners, we have breadth, depth and scope that means we can offer our customers unique access to the most
accurate data. We help our customers to make more intelligent decisions by combining multiple sources to enrich and enhance
their internal data. In turn, this enables them to increase their revenues and improve operational efficiency.
Our commercial data team is focussed on building global scale by researching and contracting new data sources and partners.
They work closely with our global product and technology teams to make sure we continue to be data agnostic – providing the
most relevant blend of data sources, languages and locations to meet customer demands.
The Best Technology
Excellence in technology continues to be the bedrock that our reputation is built upon.
Our global team of technologists comprise over a third of our total workforce. Its focus is to enable and underpin a seamless customer
experience, as well as meeting the ever-increasing demands of scale and reliability.
We have invested in enhancing our leadership capabilities in our three key solution areas of Location, Identity and Fraud. This has
brought new skills and perspectives to the business and fresh thinking to our research and innovation across our products and
platforms.
We continue to enhance our capabilities in artificial intelligence, voice channels and our biometric capability, within our products and
across the group. We have also continued experimenting with new concepts, combining the best ideas from the markets we operate
in.
Our global footprint means we support some of the largest B2C organisations around the world and the considerable scale and volume
that accompanies them. Our products are consumed as software-as-a-service and can also be embedded into our customers' on
premise or cloud solutions, delivering at scale to a global user base.
In the recent unprecedented times, we have seen spikes in volumes that our cloud-based platforms were easily able to accommodate,
due to our investment in modern, scalable infrastructure built on an event-driven, microservices architecture.
The Best People
With over 1,000 people across our global offices, we continue to focus on developing the best and most engaged team. Given recent
global events our focus has been and will continue to be, the health and well-being of our team.
We moved our entire workforce to home-working almost overnight, but given the level of focus our People Plan already had on digital
tools and processes, this was a relatively easy transition and our team have remained effective and engaged.
During these times of change, the alignment of our team to our group goals, as well as their professional development remain as
important as ever and these form our other people priorities for the year ahead.
We are proud that once again our team has recognised our commitment to their success and engagement, with 91% of our global
team recommending GBG as a ‘great place to work’ and another overall increase in our engagement scores using the Gallup best
practice methodology.
02
GBG Annual Report and Accounts 2020 Customer Obsession
We have over 20,000 customers across the globe, and they are at the centre of every decision we make. Our customers range from
small e-commerce shops to the biggest organisations in the world, and each one is equally important to us.
We have made extensive investment to enhance our customer success framework in the past twelve months, and it has had a direct
impact on customer satisfaction levels.
Global Coverage in a Dynamic Market
GBG operates in global markets for location, identity and fraud solutions. The continued expansion of the digital economy fuels our
growth.
We will see significant changes in economic conditions around the world as a result of Covid-19. The nature, scale and timing of
these changes varies depending on the customer vertical, product solution and geography, but we believe the long term trend of an
increasingly digital economy is one that continues.
One constant is that with more consumers accessing goods and services online than ever before, this trend will continue to grow, as
businesses consider it vital to offer a seamless, quick and secure digital service.
As well as helping businesses become more digital, we help them globalise their reach, a huge advantage in an increasingly
competitive environment. Our 30+ years’ market experience helps our clients succeed in the digital economy.
Business Model and Strategy
While market conditions have become more volatile, our long-term strategy remains the same and our business model has allowed us
to adapt.
We remain focused on our core strategic solutions in the areas of Location, Identity and Fraud and to apply our strengths in data,
technology and people to help our customers meet their growth objectives. We have maintained this focus through the Covid-19
disruption by prioritising our teams’ well-being and safety, the service to our customers and the financial strength of our business.
We continue to work closely with and support our customers through these times, prioritising areas where there is greatest need or
additional demand for our services. We have collaborated with our data and technology partners, who play a key part in our success
and we continue to review opportunities for M&A in the longer term.
Our strong financial position, diversified, global blue-chip client list and market leading products allow us to continue our strategy in a
market that continues to show long-term growth.
03
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceFinancial StatementsOverview AT A GL AN CE
What We Do
GBG leads the world in location intelligence, fraud detection and identity verification technology.
We work with some of the best-known organisations, biggest
banks and e-commerce giants across over 70 countries
worldwide. Through organic growth and acquisitions, GBG has
expanded its team to cover sites in 16 countries.
For 30 years, GBG has helped organisations to simply, safely
and securely interact with their customers. By quickly validating
and verifying their customers’ identities and locations, we help
them improve customer journeys, enhance data quality and
reduce fraud.
Our innovative technology puts us at the forefront of the
fast-moving digital economy. From our machine learning and
facial recognition capabilities, to more than 150 global data
partnerships and our self-serve solutions, we make doing
business more efficient.
We can verify the identities of people globally and we are
continually investing in research and development to help our
customers create better digital experiences.
Location
140
MILLION
Times our technology
is used every day
78%
REDUCTION
In address
entry time
50
BILLION
Transactions on our
platform every year
We help businesses reach their customers anywhere in the
world and make a great first impression online, through
accurate and simple registration processes.
Our location intelligence solution, Loqate, enables
organisations to accurately verify customer addresses at the
point of capture, reduce drop-out rates, cart abandonment and
failed deliveries. It also allows businesses to provide exceptional
customer experience and increase conversion rates.
By combining rich global data from location data sets with our
cleansing and enhancing technology, Loqate helps businesses
deliver a personalised experience for the lifetime of the
relationship with their customers in three key ways:
− Geocode and reverse geocode: Enhanced location data
with longitude and latitude coordinates. It provides a better
customer experience while increasing operational efficiency
by providing pinpoint accurate locations.
− Global address validation: Smart capture and address
validation across over 245 countries and territories. Also
making sure our customers meet the requirements of all
recognised postal accreditations. A single, simple-to-use
solution for searching and verifying addresses.
− Email and phone validation: Validating email addresses and
telephone numbers without the need for double keying. This
improves the user experience and makes sure our customers
have the right information for ongoing communications.
Our real-time verification tools help businesses to improve user
experience, increase conversions, reduce failed deliveries or
services and streamline operations.
The installation was so fast and the
usability of the Loqate addressing
tool is second to none. Anyone
looking to improve UX and address
data quality should look to Loqate.
Mark Durrand CTO, TotallyMoney
Who we do it for:
04
GBG Annual Report and Accounts 2020 Starting in the UK, we have grown
both organically and via acquisitions
into a team of over 1,000 across 16
countries
20,000 customers across 70
countries, including the best-known
B2C organisations, biggest banks
and e-commerce giants
More than 30 years'
experience in technology
innovation and at the forefront
of the digital economy
Identity
INTERNATIONAL
REACH
GLOBAL
DATA
UBIQUITOUS
COVERAGE
DIGITAL
LEADERS
Identities verified
globally
Integrated with datasets
across the globe
Covering document
verification in nearly every
country on the planet
In Identity Verification
owing to unrivalled
technical solutions
− Anti-money laundering: We can help monitor transactions
for suspicious activity.
− PEPs and sanctions checks: We use government-issued
data to help businesses identify politically exposed persons,
criminals, sanctioned organisations or terrorists.
− Age verification checks: We help businesses block children
from accessing age-restricted goods online.
− Digital audit trails: All our products offer full audit trails,
so businesses can analyse performance of identity checks,
whilst also demonstrating compliance in real time.
We also provide auditable online background checks, so
businesses can have full transparency on the people they
employ, ensuring they are who they say they are and can be
employed legally. Our employee background checks help cut
costs, reduce errors and meet compliance regulations.
Regulations are constantly changing and consumers
increasingly demand better onboarding experiences,
meaning businesses require fast, compliant identity checks
to help onboard customers as quickly as possible, without
compromise. This is where our Identity solution helps:
− Biometric checks: Liveness detection and facial recognition
capabilities validate a person is who they say they are in
seconds.
− Document validation: Classification and data extraction
of over 4,000 global document types to determine
authenticity, including driving licences, passports and
national ID cards.
− Bank account validation: Validation of individual’s bank
account number and sort code during the registration
process – a silent, seamless check that does not leave a
credit footprint.
Compliance should not be compromised for the sake of
customer experience and the inverse is equally true, but it can
be complicated and difficult to manage. Here are a few ways we
help global organisations manage compliance:
Who we do it for:
Who we do it for:
05
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceFinancial StatementsOverview AT A GL AN CE
Fraud
22%
INCREASE
Year on year
in revenue for fraud
INVESTMENT
IN SKILLS
To grow our technology
and marketing teams
4 NEW STRATEGIC
PARTNERSHIPS
Including Group-IB,
Hi-Core, Emailage
and CredoLab
In summary:
• end to end digital onboarding journey
•
•
enhanced cyber fraud detection – onboarding and
payment/transaction
interexchange of data and intelligence across fraud,
compliance and cyber silos
• enriched data and connectivity with local ecosystem
To help our customers keep up with the complexity in digital
transformation and data deluge, GBG's digital risk management
and intelligence platform unifies digital and data to provide
an end to end integration from cyber to fraud and compliance
digital onboarding to transaction monitoring, ready for SaaS,
mobile and on-premise setups.
GBG's customer-focused analytic hub interexchanges data and
information across vertical and department silos to reduce
repeat financial and cybercrime incursions by fraudsters.
Advanced adaptive and contextual algorithms embedded in
the platform improves fraud detection rates and lowers false
positives.
Structured as a multi-layered defence architecture, customers
are able to plug and play to best of breed modular solutions.
Layered risk defence enhancements, including machine
learning, cyber threat intelligence, identity verification, location
intelligence, device ID, fraud bureaus and any other bespoke
third party calls desired, are ready and available today.
GBG Instinct is a powerful tool for our teams of specialists who can gather,
maintain and analyse important data within a matter of seconds. Bad actors are
becoming increasingly sophisticated so it is essential that we continue to use
technology which keeps up with the rate of innovation.
Javier Delgado Herreros Risk Director for B2B acquisitions at BNP Paribas, in Spain
Who we do it for:
06
GBG Annual Report and Accounts 2020 CHAI RM AN’S STATEM ENT
The past year has been a strong one for GBG. We have delivered on our strategic objectives, achieved record levels of revenue
and profit and earned our best-ever levels of engagement for both team members and customers. The impact of Covid-19 means,
however, that we have little time to celebrate our past success. Instead, we are focussing all our attention and skills on supporting
our team members and customers during this demanding and uncertain time. We are taking actions to make sure our business
remains strong throughout this period and we are confident that we will emerge from this crisis in a position to deliver against our
long-term growth strategy.
Covid-19 Pandemic
On behalf of the Board, I want to say how grateful I am to our team members across the world for their commitment and dedication
during the Covid-19 pandemic. While working remotely, they have maintained high levels of service to our customers as well as
supporting the well-being of their families and colleagues. It is a credit to them and the senior management team that we have been
able to operate so effectively in light of these challenging conditions, putting us in a strong position to maintain the prospects of the
Group. I am justly proud of all their efforts.
The Chief Executive’s report covers in more detail the steps and actions that GBG has taken to carry out its business continuity plans,
ensuring the safety and well-being of our team members and supporting our customers. The Board has been holding virtual meetings
on a weekly basis, where we have received updates from the Executive Directors on a range of matters relating to Covid-19. This is
a very effective forum to make sure that we can continue to meet our obligations to all of our stakeholders. It has also given us the
opportunity to identify and consider any potential challenges and opportunities at an early stage.
We are keenly aware of the challenges posed by the impact of Covid-19 on the global markets we operate in, as well as society at large.
While it is still too early to assess the full impact of the pandemic, I am pleased with the pace of actions we have taken to mitigate the
effects of the pandemic on our team members, customers and the business.
Financial Performance
GBG’s financial performance in the year was again ahead of market expectations. Revenues increased by 38.7 % to £199.1 million
(2019: £143.5 million), with organic revenue growth at constant currency1 of 10.7%. Adjusted operating profit1 increased by 49.7%
to £47.9 million (2019: £32.0 million) and adjusted earnings per share1 rose 19.8% to 21.8 pence (2019: 18.2 pence).
We generated good levels of cash in the year which contributed to a significant improvement in our net debt1 position, down to
£35.0 million from £66.3m in FY19. We enter FY21 in a robust financial position with a strong balance sheet, a cash generative
business model and access to liquidity.
Achievements and Strategic Outlook
During the year we remained focused on the continued strategic development of our three core solutions: Location, Identity and
Fraud. We have been effective in engaging with existing and potential customers, as well as responding to market trends and
developments, while maintaining our long-standing commitment to innovation.
GBG is committed to building market-leading products that meet the evolving needs and requirements of our customers, helping
them to operate securely and compliantly, at the same time as providing a high quality and seamless customer experience.
We have also continued to embrace new concepts, combining the best ideas from the markets we serve. This includes enhancing
our capabilities in artificial intelligence, multi-modal authentication and validation methods including biometrics, voice and images.
The increasing breadth, depth and scope of data in our products means we can offer our customers unique access to the most
accurate information, enabling them to make more intelligent, commercial and risk-based decisions. In turn, this helps them to
increase their revenues and improve operational efficiency.
Following its acquisition in 2019, IDology has integrated well into the Group, contributing significantly to our strategy to enhance
our product capability and to expand geographically. It also further demonstrates our ability to identify, acquire and integrate
businesses that are complementary to our growth strategy and that will increase GBG’s value.
We also welcomed Natalie Gammon to the Board in November 2019. She brings a wealth of relevant experience and we look
forward to the input and insights she will bring.
07
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceFinancial StatementsOverview CHAIR MAN ’S STATEM ENT
At the half year, I indicated that The Information Commissioner’s Office, the data industry regulator in the UK, had announced in
November 2018 that it was conducting audits on a number of companies to understand the use of data in their services. We were
included in this review and we are continuing to work with the Commissioner to continue to improve privacy compliance. We will
keep the market informed of any material developments.
AGM and Dividend
In light of current and anticipated Covid-19 public health guidelines, GBG is asking shareholders to comply with certain
unprecedented but urgent measures for this year's AGM. These measures which follow current best practice which are being taken
to safeguard the safety and well-being of shareholders and other participants and to make the AGM as safe as possible.
As the UK Government has imposed measures restricting public gatherings, anyone seeking to attend the meeting in person
(beyond the two persons designated by the Board as being necessary to form a quorum) will be refused entry to the AGM.
Shareholders wishing to vote on any of the matters of business at the AGM are strongly encouraged to submit their votes in
advance by proxy. Further details and instructions will be detailed in the AGM notice issued to shareholders.
As indicated in our April 2020 trading and Covid-19 update, the Board does not intend to declare a final dividend in respect of
financial year 2020. We have already taken steps to reduce costs and preserve liquidity, including a Group-wide pay freeze, halting
all-but-essential recruitment and deferring Executive Directors’ bonuses. This extra prudent step will help to both preserve
short-term liquidity and provide GBG with additional financial flexibility to support and invest as we come out of the pandemic.
The Year Overall and Outlook
FY2020 has been another successful year in terms of delivering on our strategic priorities and further growth of the Group. Whilst
we are pleased at how GBG has responded to the immediate challenges presented by Covid-19, it still remains unclear how it will
affect GBG in the coming months as each customer, sector and geography are impacted in different ways. However, consumers
are carrying out more transactions online and organisations are responding to this by accelerating their plans to offer seamless,
quick and secure digital services. These are healthy indications that we could see an increasing demand for certain of our services
in the medium-term. We look forward to playing our part in supporting businesses as economies recover from the effects of the
pandemic.
We remain confident in the longer-term prospects of the Group, thanks to a combination of a well-established growth strategy, a
strong balance sheet, significant market opportunity, diversified sectors and customer base and world-class products.
On behalf of the Board, I would like to thank Chris Clark, his Executive Team and all of our team members for their hard work in
achieving the result for 2020. I am very grateful for their commitment and dedication during this difficult time. I would also like to
thank our shareholders and customers for their continued support.
David Rasche
Chairman
1
These measures are defined within note 37 to the Annual Report.
08
GBG Annual Report and Accounts 2020 MARKE T REVI EW
Key Market Trends
Sustained Growth in Digital Commerce
More people than ever before are going online to buy goods and to access services and businesses are relying on digital services to
transact safely and securely.
Organisations with multi-channel offerings have been able to react to this trend quickly, but those that offer a purely manual service
have been forced to digitise.
As a new demographic of people, the previously “under-digital”, become increasingly comfortable with using online services,
businesses need to ensure they continue to provide a simple and easy to use experience.
Increased Focus on Frictionless Onboarding
The need to invest in business growth is increasing as the digital world becomes more and more competitive. In particular, the
ability to onboard customers quickly and accurately, anywhere in the word, supports the global economy getting back on its feet.
This rising long-term demand makes our target markets attractive and drives competitive activity. We see larger competitors
partnering or acquiring technology to link identity and fraud, while niche players and new entrants are attracting investment to
drive innovation.
The competitor activity and customer feedback we see drives our strategy. We continue to focus on our differentiators, linking up
our platforms with our customers at the centre and investing in innovation and marketing.
Ever-increasing Fraud and Data Breaches
With increased online traffic, email volumes and working from home, fraudsters have become ever more opportunistic in targeting
vulnerabilities for both businesses and consumers.
As the opportunities for fraudsters continue to grow, so does the sophistication in methods they use. We live in a data-centric
digital world and anti-fraud measures must reflect this. For any industry, success will come down to smart application and
continued innovation.
Increased levels of online fraud are driving demand for fraud capabilities.
Increase in Regulatory and Compliance Focus
Compliance regulations are becoming more stringent, and this is driving businesses to factor compliance into their technology
purchasing decisions.
While anti-money laundering and counter terrorist financing regulations continue to evolve globally, there is also an emerging drive
towards social responsibility for businesses. This is particularly seen in the financial services and gaming sectors, with a focus on
affordability, age verification and a single view of customer activity.
Money laundering continues to be a major issue in financial markets with many banks receiving significant fines from their
regulators.
Huge fines and potential reputational damage are putting pressure on gaming operators to ensure people are old enough and to
determine whether players can afford to gamble.
In the US, the California Consumer Privacy Act, which allows any California consumer to demand to see information a company has
saved on them, means there is a growing need for identity verification at the point of onboarding new customers.
Covid-19
Covid-19 has upended the identity verification process for many organisations, especially those that relied on face-to-face
verification. This creates new opportunities to demonstrate the value of robust and sustainable identity verification rather than
‘quick-fix’ solutions that are open to compromise.
As an older demographic has embraced digital technology to stay connected with a new confidence in online methods, businesses
will need to continue to simplify and streamline their online experience for new customers.
09
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview BUSINESS MODEL
Customer and Consumer Needs
Our Offer
We support businesses and consumers through the entire
journey, enabling delivery of excellent customer experience
whilst managing fraud, risk and compliance.
Using leading technology to bring together and enhance
consumer data, we offer our customers global, flexible and
long-term solutions.
Validate and verify to let customers quickly and
safely register, and buy products and services
External datasets
IN BRANCH
AT HOME
ON THE MOVE
Enhance and cleanse customer
data to deliver a better
customer experience
Monitor customer
behaviour to
identify fraud
Reconnect with
customers, locate
people, and
investigate fraud
and crime
CONTINUALLY
REVERIFY CUSTOMERS
(where required for compliance)
10
Resources and Capabilities
Our success is underpinned by our core resources
and capabilities
− Global data reach, resulting from partnerships
with public and private sector data partners –
over 150 partnerships
GBG Annual Report and Accounts 2020 Proprietary Software/Algorithms
B2C Clients
Location
Identity
Fraud
Stakeholder Outcomes
Delivering for our customers and their
consumers enables us to create value that
we reinvest and share with our stakeholders.
Customers
We help:
− Spot potential problems
− Increase revenues through more
effective use of technology and
consumer data
− Digitise traditional,
manual processes
− Scale businesses to take advantage
of international growth
Team Members
We offer:
− Interesting and diverse career paths
− Opportunity for
cross-cultural exchange
− Recognition of talent and
personal achievement
Shareholders
We provide high-value return through:
− Profitable, cash-generative growth
− High proportion of
recurring revenue
− 8 year adjusted EPS CAGR of 24%
20,000
customers across over 70
countries integrating our
technology into their
services and operations.
− These partnerships provide compliant access to
diverse datasets, for example, credit reference
agencies, electoral rolls, passport and national
ID registrars, postal services, retail consumer
data and social media – over 375 datasets
− International identity document verification
including passports, driving licences and
national ID card – 4,000+ documents
− Global address validation confirming the
address really exists – 245+ countries and
territories
− Highly skilled and motivated team that actively
promote GBG
11
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview STRATEGY
Key objectives
Our achievements in 2019-20
Our focus for 2020-21
− Be a trusted and strategic partner for our
customers. Engage with them regularly to
provide expert advice and proactive support for
delivering success.
− Be customer-obsessed. Put the customer first in
all areas of the business and take action based
on customer feedback.
− Be customer-centred. Simplify our portfolio into
three core areas of Location, Identity and Fraud.
Join up our propositions around customer use
cases to maximize the number of GBG products
that can offer value to our customers.
− Be personal in our approach to global
customers. Continue to develop our sales
and service models to deliver the appropriate
customer experience.
− Once again, we received and acted upon record numbers of
customer feedback, resulting in another consecutive year of
improvements across our customer experience measures.
− We have improved our use of technology across customer and
operations in order to bring customer feedback closer to our
people and ensure it is actioned.
− Our Global Helpdesk is now operational 24/7 for many of our
customers and partners.
− Our Customer Success teams have helped our customers meet
their business challenges with new product offers and solutions.
− Our Customer Success Managers are working with customers to address challenges they have from Covid-19 and to adapt our services to their
− Progress with our rollout of new technology and tools that simplify the customer experience for our customers and internal team members.
− Support product and platform improvements through insight and customer feedback, making sure that our roadmaps are relevant for customers.
− Increase the number of customers who have access to our 24/7 helpdesk and provide increased ability for customers to “self-serve” for product
changing needs.
support.
− Ensure all our teams prioritise the customer, and their service levels, during this period of uncertainty.
− Attract and retain the best and most engaged
− This year we have continued our commitment to our people.
− Our People focus for the year ahead will be on 3 things:
people within the technology sector by building
a recognised, innovative and trusted employer
brand.
We have grown our headcount to 1,050 increasing the size and
geographic spread of our teams across the globe.
− We have also continued our focus on developing the skills and
experience of our team to meet the demands of the business.
As a result, we conducted approximately 20,000 hours of
professional development training, and almost 100 of our team
were either promoted or undertook and internal development
job moves. We also continue to improve support through best
practice policies, such as our new and fully inclusive approach to
‘family friendly’.
− Overall, our People Plan has once again ensured we have
outstanding engagement across the business with 92% of the
team actively participating in our engagement surveys and
improvement planning, and 91% recommending GBG as a ‘great
place to work’.
• Keeping our team safe and secure – helping them to do their best
• Continue to focus on their professional development
• Ensure clear understanding of expectations and alignment with group goals
− Deliver trusted, compelling and innovative
− We have enhanced our global technology Senior Leadership
− We continue to explore new ways of working, and are considering the opportunities Technology will play in a post Covid-19 world.
technology solutions for our global customers
and teams.
− Develop and deliver collaborative roadmaps
with products centred around the global
customer needs.
− Ensure our customers, GBG and its team
members remain safe, secure and compliant in
all that we do.
− Enable worldwide scale with technology that
facilitates collaborative remote working for
team members, supports engagement, and
helps us to maintain our culture.
Team with Chief Technology Officers for Identity, Location and
Fraud and appointed a Chief Engineer to pursue operational
excellence.
− We have made good progress with collaborative Product and
Technology strategies, making more product enhancements
than ever before. For example, we have expanded the global
reach of our products and integration with partners, such as
what3words and SecureBank and saw volumes match those of
Black Friday.
− Our new Identity Solution brings together our identity product
suite, cross-references the discreet identity check outcomes and
triangulates the results for a more robust identity check.
− We continue to focus on trust and security and to embrace and
retain our ISO certifications, as well as other market relevant
standards (e.g. PCI/DSS).
− An independent audit recognised our Cyber Security
enhancements this year and we will keep investing in this area to
keep pace with changing threats.
− We mobilised our workforce with minimum disruption as
Covid-19 spread. We are encouraging engagement through
a series of informal activities and remote learning and
development.
− Balancing time spent on research and innovation versus product delivery is a persistent challenge. We have made good progress developing a
Machine Learning capability across our products, including a next-generation Artificial Intelligence-based address parser.
− We have also made significant progress executing our Cyber Security Strategy across our Global Security Operations Centre and InfoSec teams. This
extends to best practice controls around our products and partners.
− Our Chief Engineer and our Head of Performance, Programs and Quality, will support our focus on operational excellence. Both will ensure we have
the right methods, people and tooling in place.
Customers
People
Technology
12
GBG Annual Report and Accounts 2020 Key objectives
Our achievements in 2019-20
Our focus for 2020-21
Customers
− Be a trusted and strategic partner for our
customers. Engage with them regularly to
− Once again, we received and acted upon record numbers of
customer feedback, resulting in another consecutive year of
provide expert advice and proactive support for
improvements across our customer experience measures.
− Be customer-obsessed. Put the customer first in
operations in order to bring customer feedback closer to our
all areas of the business and take action based
people and ensure it is actioned.
− We have improved our use of technology across customer and
delivering success.
on customer feedback.
− Our Global Helpdesk is now operational 24/7 for many of our
− Be customer-centred. Simplify our portfolio into
customers and partners.
− Our Customer Success teams have helped our customers meet
their business challenges with new product offers and solutions.
three core areas of Location, Identity and Fraud.
Join up our propositions around customer use
cases to maximize the number of GBG products
that can offer value to our customers.
− Be personal in our approach to global
customers. Continue to develop our sales
and service models to deliver the appropriate
customer experience.
− Our Customer Success Managers are working with customers to address challenges they have from Covid-19 and to adapt our services to their
changing needs.
− Progress with our rollout of new technology and tools that simplify the customer experience for our customers and internal team members.
− Support product and platform improvements through insight and customer feedback, making sure that our roadmaps are relevant for customers.
− Increase the number of customers who have access to our 24/7 helpdesk and provide increased ability for customers to “self-serve” for product
support.
− Ensure all our teams prioritise the customer, and their service levels, during this period of uncertainty.
People
− Attract and retain the best and most engaged
− This year we have continued our commitment to our people.
people within the technology sector by building
a recognised, innovative and trusted employer
We have grown our headcount to 1,050 increasing the size and
geographic spread of our teams across the globe.
brand.
− Our People focus for the year ahead will be on 3 things:
• Keeping our team safe and secure – helping them to do their best
• Continue to focus on their professional development
• Ensure clear understanding of expectations and alignment with group goals
Technology
− Deliver trusted, compelling and innovative
− We have enhanced our global technology Senior Leadership
technology solutions for our global customers
Team with Chief Technology Officers for Identity, Location and
and teams.
Fraud and appointed a Chief Engineer to pursue operational
− Develop and deliver collaborative roadmaps
excellence.
with products centred around the global
− We have made good progress with collaborative Product and
− We continue to explore new ways of working, and are considering the opportunities Technology will play in a post Covid-19 world.
− Balancing time spent on research and innovation versus product delivery is a persistent challenge. We have made good progress developing a
Machine Learning capability across our products, including a next-generation Artificial Intelligence-based address parser.
− We have also made significant progress executing our Cyber Security Strategy across our Global Security Operations Centre and InfoSec teams. This
extends to best practice controls around our products and partners.
− Our Chief Engineer and our Head of Performance, Programs and Quality, will support our focus on operational excellence. Both will ensure we have
the right methods, people and tooling in place.
customer needs.
− Ensure our customers, GBG and its team
members remain safe, secure and compliant in
all that we do.
− Enable worldwide scale with technology that
facilitates collaborative remote working for
team members, supports engagement, and
helps us to maintain our culture.
− We have also continued our focus on developing the skills and
experience of our team to meet the demands of the business.
As a result, we conducted approximately 20,000 hours of
professional development training, and almost 100 of our team
were either promoted or undertook and internal development
job moves. We also continue to improve support through best
practice policies, such as our new and fully inclusive approach to
‘family friendly’.
− Overall, our People Plan has once again ensured we have
outstanding engagement across the business with 92% of the
team actively participating in our engagement surveys and
improvement planning, and 91% recommending GBG as a ‘great
place to work’.
Technology strategies, making more product enhancements
than ever before. For example, we have expanded the global
reach of our products and integration with partners, such as
what3words and SecureBank and saw volumes match those of
Black Friday.
− Our new Identity Solution brings together our identity product
suite, cross-references the discreet identity check outcomes and
triangulates the results for a more robust identity check.
− We continue to focus on trust and security and to embrace and
retain our ISO certifications, as well as other market relevant
standards (e.g. PCI/DSS).
− An independent audit recognised our Cyber Security
enhancements this year and we will keep investing in this area to
keep pace with changing threats.
− We mobilised our workforce with minimum disruption as
Covid-19 spread. We are encouraging engagement through
a series of informal activities and remote learning and
development.
13
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview STRATEGY
Key objectives
Our achievements in 2019-20
Our focus for 2020-21
Brand
− Evolve our positioning and messaging to provide
clearer understanding of the value GBG provides
our core audience groups, across our key
markets.
− We have continued to position GBG as an industry expert on key
issues by building relationships with targeted media across the
globe, resulting in media coverage in globally recognised titles
including CNBC, Wired, The Financial Times and Forbes.
Products
− Using knowledge gained from our customers
and markets, we’ll provide helpful and insightful
content ensuring we continue to be positioned
as leaders and our audience groups understand
the importance of data verification technology.
− Align our product roadmaps to the customer
problem and deliver high-quality products that
differentiate us from our competitors.
− Run regular customer workshops to drive
integrated, customer-obsessed product
development.
− Deliver joint product and technology strategies
with aligned targets linking to overall Group
strategies.
− Continue to increase our focus on being a truly
data-driven organisation. Make sure we are able
to measure and report on product adoption
and usage, to enable better-informed decisions
regarding product lifecycle management.
− We delivered the first iteration of a single developer experience,
to improve the ease-of-integration through documentation and
sample code.
− In Location, we have worked with technology to deliver a new
underlying platform, that supports the continuing growth in
global traffic and feature breadth that the market requires.
− We have delivered the Identity Solution, a single customer on-
boarding experience for identity and document verification, as
well as 11 new global data item checks.
− In Fraud, we have delivered new versions of our flagship
products; Instinct and Predator, as well as Orchestration and
Machine Learning modules to improve fraud detection accuracy.
− We are adapting our messaging and campaigns to reflect changed Covid-19 priorities, with particular focus on partner webinars and digital
marketing activities.
− Our global marketing team continues to grow across all core regions, with two clear priorities: enable revenue growth and brand positioning.
The newly formed digital team is enabling us to excel in these objectives.
− With strong growth in Asia Pacific across a large regional split, we need a strong marketing presence. The team is aligned to the business goals and
helping us gain even greater insight into our customers and helping drive growth in this key region.
− We are increasing our focus on tactical packaging and pricing to adapt to changed buying behaviours resulting from Covid-19.
− Maintain a focus on User and Customer experience within our products and platforms.
− Focus on data-driven insights, reporting and product adoption techniques.
− Deliver improved data-ingestion model to speed up testing and implementation of data partners.
− Privacy and security by design throughout the product development lifecycle.
− Continue to retire legacy products to focus on our strategic goals.
14
GBG Annual Report and Accounts 2020 Key objectives
Our achievements in 2019-20
Our focus for 2020-21
Brand
− Evolve our positioning and messaging to provide
− We have continued to position GBG as an industry expert on key
clearer understanding of the value GBG provides
issues by building relationships with targeted media across the
our core audience groups, across our key
globe, resulting in media coverage in globally recognised titles
markets.
including CNBC, Wired, The Financial Times and Forbes.
− Using knowledge gained from our customers
and markets, we’ll provide helpful and insightful
content ensuring we continue to be positioned
as leaders and our audience groups understand
the importance of data verification technology.
Products
− Align our product roadmaps to the customer
− We delivered the first iteration of a single developer experience,
problem and deliver high-quality products that
to improve the ease-of-integration through documentation and
differentiate us from our competitors.
sample code.
− Run regular customer workshops to drive
− In Location, we have worked with technology to deliver a new
integrated, customer-obsessed product
development.
underlying platform, that supports the continuing growth in
global traffic and feature breadth that the market requires.
− Deliver joint product and technology strategies
− We have delivered the Identity Solution, a single customer on-
with aligned targets linking to overall Group
boarding experience for identity and document verification, as
strategies.
well as 11 new global data item checks.
− Continue to increase our focus on being a truly
− In Fraud, we have delivered new versions of our flagship
data-driven organisation. Make sure we are able
products; Instinct and Predator, as well as Orchestration and
Machine Learning modules to improve fraud detection accuracy.
to measure and report on product adoption
and usage, to enable better-informed decisions
regarding product lifecycle management.
− We are adapting our messaging and campaigns to reflect changed Covid-19 priorities, with particular focus on partner webinars and digital
marketing activities.
− Our global marketing team continues to grow across all core regions, with two clear priorities: enable revenue growth and brand positioning.
The newly formed digital team is enabling us to excel in these objectives.
− With strong growth in Asia Pacific across a large regional split, we need a strong marketing presence. The team is aligned to the business goals and
helping us gain even greater insight into our customers and helping drive growth in this key region.
− We are increasing our focus on tactical packaging and pricing to adapt to changed buying behaviours resulting from Covid-19.
− Maintain a focus on User and Customer experience within our products and platforms.
− Focus on data-driven insights, reporting and product adoption techniques.
− Deliver improved data-ingestion model to speed up testing and implementation of data partners.
− Privacy and security by design throughout the product development lifecycle.
− Continue to retire legacy products to focus on our strategic goals.
15
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview KEY PER F ORMA N C E INDI CATO RS
The Board monitors the Group’s progress against its strategic objectives and the financial performance of the Group’s operations
on a regular basis. Performance is assessed against the strategy and budgets using financial and non-financial measures.
The following details the principal Key Performance Indicators (‘KPIs’) used by the Group, giving the basis of calculation and the source of
the underlying data. A summary of performance against these KPIs is given below. Non-Statutory measures are defined within note 37.
The Group uses the following primary measures to assess the performance of the Group and its propositions.
KPIs
F in ancial
KPIs:
Revenue
and Organic
Revenue Growth
at Constant
Currency
Definition
Why this measure is important
Performance
Revenue and revenue growth are used for internal
performance analysis to assess the execution of our
strategies. Organic growth is also measured, although
the term ‘organic’ is not a defined term under IFRS and
may not, therefore, be comparable with similarly titled
measures reported by other companies. Organic growth
is defined by the Group as year-on-year continuing
revenue growth, excluding acquisitions (until the date of
their anniversary) and will be reported at each reporting
interval. Organic growth is measured on a constant
currency basis to remove the impact of changes in
exchange rates.
Revenue and revenue growth are used for internal performance
analysis to assess the execution of our strategies.
Organic growth is also measured, although the term ‘organic’ is not a
defined term under IFRS and may not, therefore, be comparable with
similarly titled measures reported by other companies.
Adjusted
Operating Profit
Adjusted operating profit means profits before
amortisation of acquired intangibles, share-based
payment charges, exceptional items, net finance costs
and tax.
This is used by management for internal performance analysis and
to assess the execution of our strategies. Management believe that
this adjusted measure is a more appropriate metric to understand the
underlying performance of the Group.
Adjusted EBITDA
Adjusted EBITDA means operating profit before
depreciation, amortisation, share-based payment
charges and exceptional items.
This is used by the Group for internal performance analysis to assess
the execution of our strategies. Management believe that this adjusted
measure is a more appropriate metric to understand the underlying
performance of the Group.
Earnings Per
Share and
Earnings per
Share growth
Net Debt/Cash
Earnings per share is calculated as basic earnings per
share from continuing operations on both an adjusted
and unadjusted basis. Earnings per Share growth is
calculated as the growth in year on year earnings per
share on both an adjusted and unadjusted basis.
This is calculated as cash and cash equivalent balances
less outstanding external loans. Unamortised loan
arrangement fees are netted against the loan balance
in the financial statements but are excluded from the
calculation of net debt/cash.
Cash Conversion
This is calculated as cash generated from operations
in the Consolidated Cash Flow Statement, adjusted
to exclude cash payments for exceptional items, as a
percentage of Adjusted EBITDA.
This measures the profitability of the Group relative to the number
of shares in issue, and is therefore an important measure for our
shareholders.
This is monitored to measure our net external debt liabilities against
the available headroom on our debt facilities.
This is used by the Group to monitor our ability to turn profit into cash.
Deferred Income
Deferred income, which is included in our Consolidated
Balance Sheet within Trade and Other Payables, is the
amount of invoiced business in excess of the amount
recognised as revenue.
This is an important internal measure for the business and represents
the amount that we will record as revenue in our Consolidated
Statement of Comprehensive Income in future periods. Trends may
vary as business conditions change.
International
Revenue as a
Percentage of
Total Revenue
The revenue from our international operations (i.e.
outside of the United Kingdom) as a percentage of our
total revenue.
Non-financial KPIs:
This is an important internal measure for the Group to assess progress
towards expanding our international operations.
Employee
Engagement
The business undertakes twice yearly engagement
survey, measuring if employees feel they have a voice
and that the business is able to respond to issues.
Employee engagement is a key focus area for the business in order
to retain and grow what we believe is some of the best talent in our
industry.
16
GBG Annual Report and Accounts 2020
Performance against KPIs
A summary of the Group’s progress in achieving its objectives, as measured against KPIs, is set out below. Non-Statutory measures
are defined within note 37.
KPIs
Fin anc ia l
KPIs:
Revenue
and Organic
at Constant
Currency
Definition
Why this measure is important
Performance
Revenue and revenue growth are used for internal
Revenue and revenue growth are used for internal performance
performance analysis to assess the execution of our
analysis to assess the execution of our strategies.
Revenue Growth
strategies. Organic growth is also measured, although
the term ‘organic’ is not a defined term under IFRS and
may not, therefore, be comparable with similarly titled
Organic growth is also measured, although the term ‘organic’ is not a
defined term under IFRS and may not, therefore, be comparable with
measures reported by other companies. Organic growth
similarly titled measures reported by other companies.
Revenue growth 1
38.7%
19.9%
Organic revenue growth
at constant currency
Organic revenue growth
Fraud organic growth at
constant currency
Identity organic growth at
constant currency
Location organic growth at
constant currency
9.3%
10.7%
8.7%
10.3%
24.3%
15.8%
11.5%
5.4%
13.6%
6.8%
2019 2020
2019 2020
2019 2020
2019 2020
2019 2020
2019 2020
Adjusted operating profit (£'000)
Adjusted operating profit %
2019
2020
Adjusted EBITDA (£’000)
2019
2020
32,031
34,080
47,945
2019
2020
Adjusted EBITDA %
2019
2020
51,739
22.3%
24.1%
23.7%
26.0%
Earnings per share – basic
Earnings per share – adjusted basic
Earnings per share growth – basic
Earnings per share growth – adjusted basic
2019
2020
7.7p
2019
8.8p
2020
18.2p
2019
8.5%
21.8p
2020
14.3%
2019
2020
18.9%
19.8%
Net (Debt)/Cash (£'000)
2019
(66,252)
2020
(35,001)
Cash Conversion
This is calculated as cash generated from operations
This is used by the Group to monitor our ability to turn profit into cash.
Cash conversion %
2019
2020
Deferred Income
Deferred income, which is included in our Consolidated
This is an important internal measure for the business and represents
Deferred Income (£'000)
2019
2020
International Revenue %
2019
2020
Employee Engagement %
2019
2020
36,637
38,414
44.7%
55.9%
92.7%
95.2%
>90%
>90%
17
is defined by the Group as year-on-year continuing
revenue growth, excluding acquisitions (until the date of
their anniversary) and will be reported at each reporting
interval. Organic growth is measured on a constant
currency basis to remove the impact of changes in
exchange rates.
Adjusted
Adjusted operating profit means profits before
Operating Profit
amortisation of acquired intangibles, share-based
This is used by management for internal performance analysis and
to assess the execution of our strategies. Management believe that
payment charges, exceptional items, net finance costs
this adjusted measure is a more appropriate metric to understand the
and tax.
underlying performance of the Group.
Adjusted EBITDA
Adjusted EBITDA means operating profit before
This is used by the Group for internal performance analysis to assess
depreciation, amortisation, share-based payment
the execution of our strategies. Management believe that this adjusted
charges and exceptional items.
measure is a more appropriate metric to understand the underlying
performance of the Group.
Earnings Per
Share and
Earnings per
Share growth
Earnings per share is calculated as basic earnings per
This measures the profitability of the Group relative to the number
share from continuing operations on both an adjusted
of shares in issue, and is therefore an important measure for our
and unadjusted basis. Earnings per Share growth is
calculated as the growth in year on year earnings per
share on both an adjusted and unadjusted basis.
shareholders.
Net Debt/Cash
This is calculated as cash and cash equivalent balances
This is monitored to measure our net external debt liabilities against
less outstanding external loans. Unamortised loan
the available headroom on our debt facilities.
arrangement fees are netted against the loan balance
in the financial statements but are excluded from the
calculation of net debt/cash.
in the Consolidated Cash Flow Statement, adjusted
to exclude cash payments for exceptional items, as a
percentage of Adjusted EBITDA.
Balance Sheet within Trade and Other Payables, is the
the amount that we will record as revenue in our Consolidated
amount of invoiced business in excess of the amount
Statement of Comprehensive Income in future periods. Trends may
recognised as revenue.
vary as business conditions change.
The revenue from our international operations (i.e.
This is an important internal measure for the Group to assess progress
outside of the United Kingdom) as a percentage of our
towards expanding our international operations.
International
Revenue as a
Percentage of
Total Revenue
total revenue.
Non -fi na nc ial KP Is :
Employee
Engagement
The business undertakes twice yearly engagement
Employee engagement is a key focus area for the business in order
survey, measuring if employees feel they have a voice
to retain and grow what we believe is some of the best talent in our
and that the business is able to respond to issues.
industry.
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview
CHIEF EXECUTI VE’S R EV IEW
As you might imagine, our current focus and attention is on Covid-19. That said, I think it is important to acknowledge how
strongly GBG performed in the year ending March 2020. We delivered record revenue and profit, ahead of market expectations,
while also making strong progress against our key strategic objectives. This has strengthened GBG and gives us the confidence
to face the challenges and embrace the opportunities ahead. Before addressing aspects of our performance, achievements and
strategic progress in 2020, I will cover the actions we have taken in response to the Covid-19 pandemic.
Covid-19
The Covid-19 crisis had a limited financial impact on FY20, as it escalated towards the end of our financial year. As we said in our
Covid-19 update in April 2020, our priorities have been to protect our team members and to support their health and well-being; to
look after our customers; and to make our business secure, both financially and operationally. We took a number of swift actions,
including:
− Achieving a smooth transition to full remote working for all of our global teams within a few days of local lockdowns being
announced. Although our team members are already used to working from outside of the office, we have taken extra steps to
enhance the way we engage with them and support them through the challenges of a sustained time in isolation.
− We took prudent and decisive action early in the process to preserve liquidity and reduce discretionary costs. This included an
immediate Group-wide pay freeze, as well as pausing all non-essential recruitment. We are carefully assessing project spend and are
restricting it to those areas critical to the long-term success of GBG. We have also deferred the payment of the accrued bonus for
GBG’s Executive Directors and we will not declare a final dividend in respect of the 2020 financial year.
− We formed a Covid Team in mid-March, drawn from the Group’s senior management. The team met daily to assess the range of
issues impacting GBG. They scoped and rapidly put in place a plan of action, assigning activities and responsibilities. The team
continues to meet regularly each week to monitor progress and to consider whether to adapt and/or flex the plan of action in light
of ongoing developments.
− Within the first week of being established, the Covid Team received daily statistics on usage volumes of all of our services together
with updates on network service availability. This data has been provided throughout the period to identify trends and to support
our activities.
− We have held a virtual Board meeting each week. The Board’s regular agenda covers: team members; customers; financial health;
operations; governance; and opportunities.
Although the impact of Covid-19 on GBG has not been as marked as with many other organisations, the full effect on the business is
still unfolding. We are seeing different levels of impact depending on the customer vertical, product solution and geography.
In addition to the steps we have taken to reduce discretionary costs, we have been mindful also of our wider obligations to do the
right thing to support our team members, customers and other stakeholders. We want to make sure that we are all well-placed to
deal with whatever lies ahead as the world adapts to the impact of Covid-19. With that in mind, we will continue to invest in areas
that support this longer-term objective.
Overview
The strong financial performance in 2020 means GBG continues to have the capability and resources to make important
investments across the Group to support further growth. We are committed to developing and launching additional world-class
products, improving how we take these products to market and recruiting and developing the very best people.
Market Drivers
With over 30 years’ market experience, as well as a suite of products that are truly innovative and global, we help our customers to
benefit and succeed in the digital economy by interacting safely and securely with their consumers.
Our growth has been achieved by delivering innovative digital solutions to businesses around the world, helping them provide a
frictionless customer experience, reduce online fraud and meet increasingly stringent compliance regulations. This is driven by:
18
GBG Annual Report and Accounts 2020 − Continuing growth in e-commerce, particularly in mobile
− Increasing levels of fraud and data breaches
− A continued rise in the cost and complexity of local compliance requirements for a number of sectors we serve globally
− Consumers expecting simple, fast and safe online journeys
While it is too early to draw definitive conclusions on the impact of Covid-19, initial observations indicate that many of these drivers
might well accelerate. For example, before Covid-19, many organisations had not yet fully digitalised their systems. Now, we are
seeing customers speeding up the digitalisation of their offerings. We are helping them to address the opportunities and threats
posed by the pandemic to make things easier, faster and more convenient for their customers and to protect and/or reinvent their
business models. We are an essential partner on this journey, helping our customers establish trust in their digital operations.
Strategic Focus Areas
Our strategic focus is on expanding internationally through three complementary but, in most cases today, distinct solutions that
underpin all our propositions: Location, Identity and Fraud. Each solution contributed to the strong performance in the period. We
are pleased to see that revenues from our international operations continue to form a major part of our growth – up from 45% to
56% of our total business.
In the current rapidly changing environment, our sector, product and geographical diversification lets us align our developments
and resources with evolving customer demand and market trends. We continue to invest and strengthen the capabilities and skills
of our teams to meet the growing needs of our customers around the world, especially as their own consumers are speeding up the
pace at which they access services using mobile and online technologies. We are committed to supporting our customers as they
develop their solutions to meet the demands being made of them, while also making sure that these developments are safe and
secure, protecting their consumers from fraud and meeting regulatory requirements.
Corporate Transactions
IDology has performed strongly. It has now met a key objective of the acquisition – to help us to secure our goal of providing
leading identity data intelligence solutions globally by increasing the scope and coverage of one of our core propositions in North
America, a key geography.
We are also making significant progress in our strategic objective to have a business of scale for all of our solution areas of
Location, Identity and Fraud in our key regions.
Our financial position at the year-end, together with the steps we have taken to conserve our cash resources and protect access to
debt financing, means that we continue to have the means and ability to consider acquisitions and investments when they arise.
This gives us the option to increase the pace of our go to market initiatives and/or broaden our geographic reach and product
capabilities.
Scale Through Technology
This year, under the stewardship of a new global technology leadership team, we have significantly advanced the technology
and cyber defences underpinning our customer propositions and operations. We made it a strategic priority to shift to a globally
capable, cloud-based operational model. We have begun to realise key platform capabilities that will deliver the scale, agility and
compliance requirements demanded by our international customer base.
Growth: New Business and International Expansion
We have seen a good performance across all of our solution areas and geographies in terms of: winning new logos; additional
business from existing customers; and customer retention. This includes:
19
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview CHIEF EX ECUTI VE’S R EVI EW
− Location solution: Loqate secured a number of new customers in the year across Europe and USA. This included Adidas and Wish,
together with John Lewis Partnership and GNC, which we secured in the first half of FY20. In addition, it secured a five-year contract
with IBM towards year-end that both extended and expanded our existing relationship, worth a minimum of $13.5million.
− Identity solution: new business wins supported double-digit growth across all our main geographies. This included a deal with Rank
Group in the UK to install our technology across their UK casino estate. Other new business wins in the year include PayPal, Adyen
and Sky in addition to William Hill Group, announced at the half year.
− Fraud solution: in addition to building on our successes in the Asia Pacific region, we also saw encouraging growth in the year in
EMEA. This was supported by new agreements in the second half of the year with First Abu Dhabi Bank and Volkswagen Payments
S.A., along with an extension of our relationship with Arval, a subsidiary of BNP Paribas Fortis, to provide our Fraud solutions across
another three European countries.
− Upsell and Cross-sell: we continue to see growth from existing customers increasing their use and number of services they take from
GBG. Examples include Flexi Group in Australia now taking all our Identity and Fraud services in Australia and Domestic and General
taking our Location and Identity services in the UK.
Team Members
Our global team now has over 1,000 people working in 16 countries. I want to thank each of them for their dedication and
professionalism over the last 12 months and through the very recent period in particular. They have delivered against the key priorities
we set and we have entered our new financial year in good shape as a result.
I was also very pleased that our employee engagement survey, completed in March 2020, recorded its best result. We saw an
improvement on last year’s high score and an even higher response rate. We continue to have more than 90% of the global team who
would recommend GBG as a great place to work.
Current Trading, Guidance and Outlook
Our operational performance in FY20, along with the recent actions we have taken to conserve cash, have helped place us in as
optimal a position as we could hope, to withstand the impacts of the pandemic.
Given the global impact of Covid-19, we have been encouraged by some countercyclical opportunities. These have, to a certain extent,
helped soften the impact of reduced underlying activity in some parts of our business in the first quarter of FY21 trading. Although
it is still early in the pandemic, customer churn and levels of insolvency are at normal levels although we have started to see some
customers taking more time to settle their invoices. There has been little impact on our suppliers. We have continued to win new
business, although sales cycles are, understandably, lengthening.
It is not possible to predict how long the effects of the disruption caused by the pandemic will last. While the Group has a high level
of annual recurring licence revenue, which provides good visibility, the full impact on volume-based sales are harder to predict. This
means we do not yet have sufficient visibility to provide guidance for the year ending 31 March 2021.
Despite what is happening to global economies, our drivers for growth remain the same and in some cases are more important as
businesses have needed to adapt to new norms. We have confidence that the Group is well-positioned to face what might be ahead
of us, thanks to a combination of our market-leading solutions, a diversified customer base and revenues not being reliant on a single
customer or sector. Fundamentally, I believe that our long-term prospects in a post-Covid-19 environment remain as attractive as
before.
Chris Clark
Chief Executive Officer
20
GBG Annual Report and Accounts 2020 FIN AN CE R EVIEW
Principal Activities and Business Review
The principal activity of GB Group plc (‘GBG’) and its subsidiaries (together ‘the Group’) is the provision of identity data intelligence
services. GBG helps organisations simply, safely and securely transact with their customers. Through the application of our
proprietary technology, our vision is to be the leader in identity data intelligence, informing business decisions between people and
organisations globally.
The performance of the Group is reported by segment, reflecting how we run the business and the economic characteristics of
each segment. In order to reflect how the Group is presenting its lines of business to its stakeholders going forward, the naming
and structure of the operating segments were amended with effect from 1 April 2019. Going forward ‘Fraud, Risk & Compliance’ has
been separated into two new segments – ‘Identity’ and ‘Fraud’. The ‘Location & Customer Intelligence’ segment has been renamed
as ‘Location’.
The Group results are set out in the Consolidated Statement of Comprehensive Income and explained in this Finance Review. A
review of the Group’s business and future development is contained in the Chairman’s Statement, the Chief Executive’s Statement
and this Finance Review.
Covid-19
Management has taken decisive action to reduce discretionary costs and preserve liquidity during the uncertainty during this
period. These actions included an immediate Group-wide pay freeze and a pausing of all non-essential recruitment. Project spend is
being carefully assessed and restricted to those areas critical to the long-term success of GBG. Executive Directors’ bonus payments
accrued for the year to 31 March 2020 have been deferred and as stated below, there will be no final dividend for 2020. An optional
£10.0 million loan repayment that was planned for March 2020 was not made until May 2020 to ensure that the directors had been
able to better assess the impact Covid-19 was likely to have on future cashflows.
Review of the Business
The Group uses adjusted figures as key performance indicators in addition to those reported under IFRS, as adopted by the
European Union and IFRIC. Adjusted figures exclude certain non-operational or exceptional items, which is consistent with prior
year treatments. Adjusted measures are marked as such when used and are explained in note 37.
Revenue
Adjusted operating profit
Adjusted operating profit/revenue
Share-based payments charge
Amortisation of acquired intangibles
Operating profit before exceptional items
Exceptional items
Operating profit
Net finance costs
Profit before tax
Total tax charge
Profit for the year
Dividend per share
Adjusted earnings
Basic weighted average number of shares ('000)
Basic earnings per share (pence)
Adjusted basic earnings per share (pence)
2020
£’000
199,101
47,945
24.1%
(4,541)
(19,008)
24,396
(1,552)
22,844
(2,218)
20,626
(3,562)
17,064
Nil
42,165
193,631
8.8
21.8
2019
£’000
143,504
32,031
22.3%
(2,287)
(10,316)
19,428
(4,003)
15,425
(689)
14,736
(2,583)
12,153
2.99
28,759
158,052
7.7
18.2
Change
£’000
55,597
15,914
1.8%
(2,254)
(8,692)
4,968
2,451
7,419
(1,529)
5,890
(979)
4,911
n/a
13,406
35,579
1.1
3.6
Change
%
38.7
49.7
7.9
98.6
84.3
25.6
61.2
48.1
221.9
40.0
37.9
40.4
n/a
46.6
22.5
14.3
19.8
Following the significant acquisitions over the past couple of years, the focus during the current year was to ensure these
acquisitions were successfully integrated into the Group, as well as continued investment in the existing businesses to drive
sustainable organic growth. Both the newly acquired businesses delivered profitable growth during the year.
This period of integration has been successful and meant that when the Covid-19 outbreak occurred, the business as a whole was
able to adapt quickly to minimise the impact on operations. The profitable growth and continued high cash generation during
the year means that the Group’s balance sheet and financing ability remain strong, underpinning the Group’s ability to navigate
successfully through the uncertainty caused by Covid-19.
21
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview FINA NCE REVIEW
Adjusted operating profit for the year increased by 49.7 per cent to £47.9 million, reflecting:
− Revenue growth of 38.7 per cent to £199.1 million. This increase included organic growth of 10.7 per cent on a constant currency
basis (10.3 per cent on a reported basis).
− The adjusted operating profit margin increased from 22.3 per cent to 24.1 per cent, notwithstanding significant continued
investment for growth made over the course of the year.
Adjusted EBITDA
Adjusted EBITDA was £51.7 million (2019: £34.1 million), consisting of adjusted operating profit of £47.9 million (2019: £32.0
million), depreciation (including right-of-use assets) of £3.6 million (2019: £1.5 million) and amortisation of purchased software
and internally developed software of £0.2 million (2019: £0.5 million). Adjusted EBITDA has increased by £2.1 million due to
the adoption of IFRS 16 as rent expenses previously within operating costs are now split between depreciation and interest, and
therefore not part of the EBITDA calculation.
Amortisation of Acquired Intangibles
The charge for the year of £19.0 million (2019: £10.3 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 increased charge in the year is due to the full year impact of the acquisitions of VIX Verify and IDology in the prior year. As
IDology, which is the largest acquisition the Group has made, completed towards the end of the prior year, this accounted for £9.0
million of the current year increase.
Exceptional Items
Exceptional costs of £1.6 million (2019: £4.0 million) were incurred by the Group in the year and have been detailed in note 7 to
the accounts. The principal reason for the decrease compared to prior year is that £3.7 million was incurred on acquisition related
costs last year, compared to less than £0.1 million in the current year. £0.9 million of the charge relates to an increase in contingent
consideration in relation to IDology, as detailed in the tax section below.
Net Finance Costs
The Group has incurred net finance costs for the year of £2.2 million (2019: £0.7 million), the increase being interest on the new
long-term loan which was taken out in February 2019. Also included within net finance costs is £0.2 million for interest on lease
liabilities following the adoption of IFRS 16 in the year.
Taxation
The total tax charge of £3.6 million (2019: £2.6 million) includes £4.8 million of current tax payable on the Group’s profits in the
year (2019: £4.6 million). Included within the total tax charge is a credit of £0.8 million related to the increase in the deferred tax
asset for pre-acquisition losses within IDology. The benefit of this asset is payable to the former shareholders of IDology and so
there is a corresponding cost within exceptional items to reflect the increase in the contingent consideration liability.
Dividend
As communicated in the Pre-Close Trading Update on 22 April 2020, following the Covid-19 outbreak, the directors do not intend
to declare a final dividend in respect of the 2020 financial year. This prudent step helps both preserve short term liquidity and also
provides additional financial flexibility to support and invest in the business as we come out of the Covid-19 pandemic.
Earnings Per Share
The earnings per share analysis in note 13 cover four measures:
− basic earnings per share (profit attributable to equity holders);
− diluted earnings per share (adjusting for the dilutive effect of share options);
− adjusted basic earnings per share (adjusted operating profit less net finance costs and tax); and
− adjusted diluted earnings per share (adjusted operating profit less net finance costs and tax adjusting for the dilutive effect of
share options).
Basic earnings per share increased by 14.3 per cent from 7.7 pence to 8.8 pence reflecting the higher operating profit although
offset by higher number of shares in issue. Adjusted earnings (adjusted operating profit less net finance costs and tax) was
£42.2 million (2019: £28.8 million) resulting in a 19.8 per cent increase in adjusted basic earnings per share from 18.2 pence to
21.8 pence.
22
GBG Annual Report and Accounts 2020 The basic weighted average number of shares at 31 March 2020 increased to 193.6 million (2019: 158.1 million), primarily due to
the placing of 39.0 million shares to part fund the IDology acquisition in February 2019.
Cash Flows
Group operating activities before tax payments and exceptional items generated £49.3 million of cash and cash equivalents (2019:
£31.6 million) representing Adjusted EBITDA to cash conversion ratio of 95.2 per cent (2019: 92.7 per cent). Operating cash flows
continued to be strong and the Group continually monitors its measures of cash generation and collection, especially during the
Covid-19 outbreak to assess the recoverability of receivables.
The cash generated from operations enabled debt repayments of £24.9 million to be made during the year, with leverage reducing
to 0.68 from 1.94 in 2019. Further detailed analysis of this movement is included in the Consolidated Cash Flow Statement.
Post year-end a further loan repayment of £10.0 million has been made.
Acquisitions
As detailed in note 36, contingent consideration of £5.2 million in respect of the deferred tax losses in IDology was recognised as a
measurement period adjustment. During the current year the liability increased by £0.8 million due to the CARES Act permitting the
losses to be carried back to periods when the tax rate was higher. A further increase of £0.1 million to the liability was recognised
due to movements in exchange rates.
A payment due in relation to the IDology acquisition, completed in February 2019, was made during the current financial year. This
payment of £86,000 based on the final working capital position was included within the contingent consideration liability at 31
March 2019 at a value of £79,000. The variance was due to exchange rate fluctuations between the acquisition date and the final
payment date.
Deferred Income
Deferred income at the end of the year increased by 4.9 per cent to £38.4 million (2019: £36.6 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 timing of invoicing for multi-year contracts within the Asia Pacific business meant that their
deferred revenue balance decreased by 48%. Excluding Asia Pacific in both periods the deferred balance increased by 8.5 per cent.
The deferred income 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. Deferred income is determined
by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing and new business
linearity within a reporting period.
Treasury Policy and Financial Risk
The Group’s treasury operation is managed within formally defined policies and reviewed by the Board. The Treasury Policy was
updated during the year and this review also led to the establishment of a Treasury Committee. 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 Group finances its activities principally with cash, short-term deposits and borrowings but has the ability to draw down up
to £47.5 million of further funding from a revolving credit facility that is in place. 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 invested
through the use of short-term deposits, with the objective of reasonable interest rate returns while still providing the flexibility to
fund ongoing operations when required. It is not the Group’s policy to engage in speculative activity or to use complex financial
instruments.
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 which are described in note 27 to the accounts.
Approved by the Board on 30 June 2020.
Dave Wilson
Chief Financial Officer & Chief Operating Officer
23
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview PR IN CIPAL RISKS AN D UN CERTAINT I E S
Risk Management – Identifying and Managing Risk
An essential element of how we run GBG is our approach to risk management. This helps us to deliver long-term stakeholder value
whilst protecting our business, people, assets, capital and reputation. We consider risk assessment and control to be fundamental
to achieving our strategic objectives.
We have established an ongoing process for identifying, evaluating and managing the significant risks that we face and the
effectiveness of the related controls. This process is reviewed every six months by the Audit & Risk Committee, who report their
findings to the Board. BDO LLP were appointed in November 2019 to provide GBG with an outsourced internal audit arrangement.
BDO’s initial scope of work included conducting a strategic review of the Group’s risk management and internal controls process
and also the Group’s cyber security controls. The work was conducted and completed during the final quarter of the financial year
and the recommendations will be incorporated into our ongoing risk review process.
Coronavirus (Covid-19)
We anticipate that the key risk themes of 2020, described in our risk profile, will continue to be a focus in 2021, but in addition
would highlight that the financial and operational impacts of Covid-19 are moving at pace. GBG has strong business continuity
plans to accommodate operational impacts and these have been invoked to address the needs of the business and also the
requirements of the relative government guidance in the countries in which we operate.
We are taking special measures to support our people and their well-being during the pandemic. Almost all of our team members
are now working from home – some of our colleagues in China and Malaysia have now returned to the office. We have also put a
strong emphasis on communications to keep our team members connected and informed. This has included a weekly CEO webinar
update, managers keeping in regular touch with their teams by video and conference calls together with using our Group intranet to
provide support information and to share experiences between the regions. As has been the case in China and Malaysia, any return
to our office locations will be carefully considered in respect of the best interests of our team members, risk assessments being
conducted in line with local guidance and best practice and detailed briefings to team members on the return to office procedures.
GBG has conducted thorough assessments of the potential impact of Covid-19 on the Group’s principal risks from a strategic,
commercial and operational perspective. This has ensured that the business can provide the appropriate response in the short-term
to our team members and customers in order to support our plans to position ourselves regarding our longer-term sustainability
and viability.
At the start of the crisis we established a Covid Team, chaired by the CEO and supported by members of the Group’s Executive Team.
The Covid Team established a number of work streams, each headed by a team leader, to help us coordinate our response to the
impact of Covid-19 across our business. These work streams covered are: Team Members, Customers, Financial Health, Operations,
Governance and Opportunities.
The Covid Team has met regularly every week to discuss issues and concerns, to receive updates from the work stream team
leaders and, where required, to quickly approve decisions. The Board receives weekly updates and briefings on our response to
Covid-19 so that they can assess the business issues and make critical decisions quickly. In recent weeks, the scope of the Crisis
Team’s work has included planning for a wider relaxation of the lockdown restrictions around the world and to ensure the business
is prepared, as fully as possible, to support our team members, customers and other stakeholders.
Prior to the pandemic taking effect, our business model already featured: the ability of all of our teams to work remotely and
securely; a diverse portfolio so that we were not overly reliant on a particular customer, market or geography; and market leading
products and services that support organisations during upturns and downturns. Having these features in place, in addition to
taking immediate and appropriate steps to preserve GBG’s cash position, has meant that we have been able to respond positively
to the early challenges presented by the pandemic although the full effect on the business is still uncertain. However, we will not be
complacent and are monitoring the situation and potential exposures as matters develop and in turn have a range of further plans
to put into action should this be required.
24
GBG Annual Report and Accounts 2020 Framework – Risk and Control Structure
The Board
GBG’s Board has overall responsibility for the Group’s risk management framework. The framework is not designed to eliminate
risk but define and manage the type of risk and level of exposure we are prepared to take in pursuit of our strategic objectives to
ensure decisions taken align with the Group’s risk appetite. The Board reviews the recommendations made to it by the Audit & Risk
Committee.
Audit & Risk Committee
The Committee regularly monitors the principal risks and uncertainties identified by our risk assessment processes, along with the
strategies developed and the actions we have taken, wherever possible, to mitigate them. Our risk identification, assessment and
reporting is supported by GBG’s Executive Management, through the Executive Team, who continually review the effectiveness of
our system of risk management and internal controls.
Internal Controls Team
The Group’s Internal Controls Team assesses current risks, reviews and monitors the controls that mitigate those risks; and
identifies potential new risks to the Group. It reports to the Chief Executive Officer and the Chair of the Audit & Risk Committee on
matters of internal control and risk assessment.
The Executive Team
Each member of our Executive Team is responsible for the management of the specific risks within their own business unit. They
also report into the Internal Controls Team where they collectively review and monitor specific risks, agree mitigation actions and
update risk scores.
Internal and External Auditors
The Group’s internal and external auditors have responsibility to review and assess the Group’s risk management and internal
controls process and to report their findings and recommendations to the Audit & Risk Committee.
Key Elements of the Control Framework
The Board is responsible for maintaining and reviewing the effectiveness of our risk management activities, from a strategic,
financial and operational perspective. These activities are designed to identify and manage, rather than eliminate, the risk of failure
to achieve business objectives or to successfully deliver our business strategy.
Risks are owned and managed within the business, and reviewed formally by our first line business and second line Internal
Controls Team at least every six months. They review risks and controls, including those relating to information security, regulatory
compliance and business continuity. The results of these reviews feed into our reporting cycle. Our key element of the risk control
framework are as follows:
Internal Controls
Our internal controls system facilitates the management of risks that could impact upon our ability to meet our objectives.
We acknowledge that the system is simply a means to mitigate, rather than eliminate risk. In addition to the Internal Controls
Coordinator having periodic 1:1 meetings during the year with risks owners to review their risk portfolio and actions taken, the
Internal Controls Team meets formally twice a year to carry out an in-depth risk review. In this review, Executives from across the
business are required to collectively identify and assess risks specific to the business and review and monitor controls. The team
scores risks based on qualitative and quantitative information including an assessment of impact. The meetings are chaired by the
Internal Controls Coordinator who collates the results and manages the risk register, which holds all of the risk scores.
Risk Management
The Internal Controls Coordinator presents the results of the Group’s risk reviews and the risk register to the Audit & Risk
Committee. They are responsible for regularly monitoring and assessing our risk management functions and reports directly to the
CEO on all matters of internal control and risk assessment. The Audit & Risk Committee of the Board monitors and provides robust
challenge on, through the reports provided by the Internal Controls Team, the controls which are in force and any perceived gaps
in the control environment. The Audit & Risk Committee also considers and determines relevant action in respect of any control
issues raised by the Internal Controls Coordinator or the external auditor or the internal auditor. The Committee also sets the review
programme for the internal auditor.
25
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview PR IN CIPAL RI SKS AND UNC ER TA INT I ES
Financial Reporting Process
GBG’s management team and the specialists within our Finance Team are responsible for ensuring the appropriate maintenance
of financial records and processes to ensure that all information is relevant, reliable and compliant with the applicable laws
and regulations. They are also responsible for ensuring that the Board and GBG’s advisers receive such information in a timely
manner. The financial statements are reviewed by our management team to ensure that the Group’s results and financial position
is appropriately reflected. Our Audit & Risk Committee challenges, reviews and approves the release of all financial information
published.
Strategic & Financial Planning
We have an established budgeting and strategic planning process, whereby we assess our competitive position and goals, taking
account of the strategic risks faced. This strategy is translated into financial plans with clear milestones and performance indicators
and these are regularly reviewed and assessed by the Board.
Performance Management
Our performance against the strategic plan is closely monitored by a formal monthly reporting process and by the attendance of
the relevant Executive Directors at monthly Executive Team meetings and, when required, at bi-monthly Board meetings.
Capital Investment
We have in place a clear process for the approval of capital expenditure, which includes a detailed appraisal of the benefits of the
proposed investment and any associated key risks. Board approval is required on material capital expenditure matters and the
process is detailed in a formal set of matters reserved for the Board approval.
Health & Safety
We have established health and safety standards and benchmarks, our performance meeting these standards is closely monitored.
In light of the evolving requirements flowing from the Covid-19 pandemic, the focus of our activities in this area will be in relation to
creating and maintaining safe working environments for all our team members.
26
GBG Annual Report and Accounts 2020 Strategic Review
Our Risk Profile
Our risk identification processes has two main strands:
− A bottom-up approach at a business unit and central services unit level. This identifies the risks that threaten a unit or units
which the business manages. To give us visibility of issues across the business, we consolidate these risks at the regional and
global level, and escalate to the Risk Management Committees.
− A top-down approach at a Group level. This identifies the principal risks that threaten the delivery of our strategy.
The diagram below summarises our principal risk profile and trends in the threat levels.
Principal Risk Profile
Impact
Key
Inability to Meet New Product Development
and Scalability Challenges
Ineffective Succession Planning and
Skills Retention
Non-supply by Major Supplier
Loss of Intellectual Property
Likelihood
Covid-19
Cyber Attack
Failure to Comply with Regulations and Laws and/or
Changes in Regulatory Environment & Enforcement
Loss of Data and Systems through Ineffective
Disaster Recovery & Business Continuity Plans
Increasing Competition and Global Reach
GBG Annual Report and Accounts 2020
27
GovernanceFinancial StatementsOverview PR IN CIPAL RI SKS AND UNC ER TA INT I ES
Risk Appetite and Principal Risks
The Board is responsible for setting the level of risk and our associated risk appetite to ensure we focus appropriately on the risks
we face. We identify and assess the impact of risks to the business under four key headings – financial, strategic, operational and
knowledge. For each risk, the likelihood is identified and the impact is assessed using quantitative and qualitative information.
The significant risks and uncertainties we face are set out below together with a summary of the control measures and mitigations
employed. Notwithstanding these actions, due to the pace and nature at which risks evolve, we remain vigilant in addressing
these areas of concern and developing our control measures. In addition, we have also included detail in the table to show specific
Covid-19 mitigations and actions that have been taking place.
The Board is very much aware that as a public company, reputational damage is a risk and as such is a key concern. The potential
effects to our reputation are not under-estimated by the Board and whilst the following commentary is not specific in detailing
reputational damage as an identified risk, its impact is a major, over-arching consideration across our risk portfolio.
Risks
Description
Mitigation
Failure to Comply
with Regulations and
Laws and/or Changes
in Regulatory
Environment &
Enforcement
− Within the markets we operate, legislation
changes on a regular basis and the
interpretation of existing laws can also
change, creating ever-tightening standards.
This will often require additional human and
financial resources and the provision of new
assets and systems.
− We are committed to responding positively
to regulatory change to ensure compliance
could affect the pricing for, or adversely
affect the revenue from, the services the
Group offers.
− We also acknowledge that we are required
to maintain a number of accreditations
and registrations to meet a number of
contractual and statutory obligations.
− We are aware of increasing international
regulation in respect of data handling and
privacy in the geographies in which we
operate.
− We have a dedicated Legal, Governance, Health and Safety,
Privacy & Information Security Teams who are collectively
responsible for monitoring changes to legislation and ensuring
compliance in each area. Indeed, we continue to invest and have
increased the number and skills levels of the respective teams in
the past year.
− We have established procedures which we invoke when
presented by material issues and changes (such as Covid-19,
Brexit and regulatory challenge) involving: bringing together a
senior team; assessing the issue and scoping a plan of action;
assigning activities; and monitoring progress and developments.
There is also a process for keeping the Board informed and
seeking its advice and feedback and for escalating matters.
− We have access to a range of external legal advisors, globally.
− We have a global intranet through which we advise, train and
provide ongoing development to all of our team members
globally about our policies which provides us with the means
to ensure ongoing compliance with regulatory obligations
including those required by data protection and privacy laws.
Our processes allow monitoring to ensure that all team members
undertake the necessary training which can be evidenced to
regulators and customers where needed.
− We will continue to invest in training of team members in data
handling and privacy best practices.
In progress
− During this pandemic our priorities have been to protect our
team members and to support their health and well-being,
to look after our customers and to secure our business both
financially and operationally.
− In addressing these priorities, Covid-19 has led to additional
legislation in the jurisdictions in which we operate covering
health and safety, finance and governance. There are various
work streams with our Covid Team to consider changes in
legislation and guidance and, in conjunction with our professional
advisers, ensure that we have assimilated the various information
to understand and comply with the requirements. This focus
will be maintained as lockdown restrictions are eased globally
and governments implement further initiatives to support their
citizens and economies.
− As indicated elsewhere in this report, in November 2018 The
Information Commissioner’s Office, the data industry regulator
in the UK, announced that it was conducting audits on a number
of companies to understand the use of data in their services.
GBG was included in this review and continues to engage with
the Commissioner as part of that review. We will keep the market
informed of any material developments.
28
GBG Annual Report and Accounts 2020 Risks
Description
Mitigation
Increasing
Competition and
Global Reach
− We operate within increasingly competitive
markets and intensified competition could
lead to pricing pressures.
− A reduction in the rate at which we add new
customers may decrease the size of our
market share if clients choose to receive
services from other providers.
Non-supply by
Major Supplier
− Some of our data and infrastructure is
sourced from third party suppliers and
partners. The removal from the market by
one or more of these third party suppliers
or interruption in supply could quickly and
adversely affect our operations and result in
the loss of revenue or additional expenditure.
.
− Our business development and product functions track
the activities of our competitors and this insight is used by
management to quickly adapt our go-to-market strategy.
− We always seek to differentiate ourselves from the competition
and have increased our focus on product marketing, pricing and
packaging to support this.
− We continue to enhance our product portfolio through a mix of
internal development, partnering and acquisition.
− We maintain a strong focus on our core target markets within
Europe, North America and APAC and work with partners to
extend our reach in our chosen verticals.
− Our acquisition strategy has opened up new markets and
territories enabling cross sale as well as leveraging opportunities
to increase the size of our customer base within established
markets. We remain vigilant to further acquisition opportunities
to develop further our strategic aims.
In progress
− We have maintained our activities in relation to our product
development roadmap and have also set up teams to review
potential new developments to support our existing and potential
customers as they respond to the pandemic.
− We have taken some immediate action to preserve our short-
term liquidity and to provide additional financial flexibility to
support and invest as GBG comes out of the Covid-19 pandemic.
We have also conducted extensive stress testing of our balance
sheet, cash and access to draw down facilities to support the
Board assessment of ongoing liquidity requirements to support
its operations and potential investments.
− Also, our Covid Team has workstreams covering the assessment
of threats and opportunities of competitor activity in our
markets.
− Our Product, Data and Technology Teams work strategically to
prevent over reliance on any one key supplier, having multiple
suppliers and other such mitigations where required.
− Suppliers are carefully selected to minimise risk of supplier failure
or insolvency.
− We ensure our team members are aware of supplier requirements
or restrictions to minimise the risk of loss of a supplier due to a
breach of contractual obligations.
In progress
− In support of our work taken prior to the pandemic, as part of
our Covid-19 business continuity plan (“BCP”) process, we have
conducted further and more immediate risk assessments and
checks of our key suppliers BCPs to assess their preparedness
and ability to meet GBG’s ongoing requirements during the
pandemic. The list was prioritised to deal with our most critical
suppliers initially and work has continued in assessing those
suppliers further down the priority.
29
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview PR IN CIPAL RISKS AN D UN CERTAINT I E S
Risks
Cyber Attack
Description
Mitigation
− Given the nature of our business, the threat
of unauthorised or malicious attacks on
our IT systems is an ongoing risk. The risk
of a cyber attack such as denial of service
attacks, phishing, data theft and disruptive
software campaigns is constantly evolving
and becoming increasingly sophisticated.
− We have cyber insurance in place and have established policies
to protect the Group against a cyber attack and any security
breaches, which is headed up by our Chief Information Security
Officer.
− The Group’s Information Security capability has been
strengthened during the year to provide additional support and
expertise.
− Cyber risk continues to be an ever increasing threat and the
Group’s strategy ensures continuing improvements in developing,
maturing and testing our defences.
− We will continue to develop our InfoSec awareness programme
with all of our team members to raise the knowledge of cyber
risk and information security and use our global intranet
training programme to ensure that all team members undergo
training and development on cyber threats and good IT business
practices.
− Penetration testing is conducted via an approved third-party
specialist.
In progress
− GBG has been diligent in maintaining the scope of review and
monitoring of cyber threats. We are keenly aware of the increase
in Covid-19 relating phishing and fraud attempts and have dealt
with these issues proactively including an awareness campaign
to update all of our team members to supplement prior training
given.
− Our global business continuity programme covers policies and
procedures for the key components of each of the businesses’
operating units. During the latter part of the 2020 financial year,
the Group instigated a comprehensive review of our business
continuity programme to ensure that the programme continues
to meet the needs of the Group as we continue to grow in size,
diversity and complexity.
− Disaster recovery requirements and network security are regularly
reviewed, back-ups are maintained in databases and data centres
including off-site provisions. These policies and programmes are
subject to annual review and audit.
− We engage and undertake due diligence with our data partners
and suppliers to ensure vulnerabilities are identified and
mitigated against.
− Risk analysis and mitigation processes relating to products and
services that we either provide or consume. These are fed into a
risk matrix where we track treatment plans against each risk.
In progress
− As part of our increased monitoring of this risk area, the Covid
Team receives daily reports on usage volumes of all of our
services together with network service availability updates. This
data has been provided throughout the period to identify trends
and to support our activities.
− We carry out extensive research and market analysis around the
viability of a product before the development phase is initiated
and have increased the involvement of customers throughout the
process.
− We have increased the investment in our product development
teams, ensuring that development meets both tactical and
strategic business objectives. We continuously improve our
development skills, processes and platforms to ensure that
GBG adopts best practice and can address at pace potential
challenges and opportunities.
In progress
− A work stream of the Covid Team is to assess potential
opportunities and developments to support our customers to
address new challenges and working practices as a result of
Covid-19.
Loss of Data and
Systems Despite
Disaster Recovery &
Business Continuity
Plans
− We have an understandable reliance on
our IT systems and people. In the event of
an incident affecting business continuity,
we would initiate our business continuity
plans; however, the loss of key components
as a result of the incident could affect the
Group’s operations and result in additional
expenditure.
Inability to Meet New
Product Development
and Scalability
Challenges
− In order to maintain a competitive
advantage, we invest significant amounts of
resource into our product development.
− The development of all new technologies and
products involves risk, including the product
being more expensive, or taking longer to
develop than originally planned; the market
for the product being smaller than originally
envisaged or that the product fails to reach
the production stage.
− It is also imperative that our developments
have the ability to scale as the business
grows both in size and complexity.
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GBG Annual Report and Accounts 2020 Risks
Description
Mitigation
Loss of Intellectual
Property
Ineffective Succession
Planning and Skills
Retention
− We generally protect our proprietary
application software products and services
by licensing rights to use the applications
rather than selling or licensing the computer
source code.
− In addition to checking and auditing our
customers’ use of GBG’s intellectual property,
we also rely on trademark, copyright, patent
and other intellectual property laws to
establish and protect our proprietary rights
in these products and services. However,
there is a risk that our proprietary rights
could be challenged, limited, invalidated or
circumvented.
− Our people are key to our success. We
acknowledge that we operate in very
competitive markets and that the skills that
our people possess are attractive to other
employers. Not having the right people and
skills could impact negatively on our ability to
service our customers and grow the business.
− It is important that we maintain high levels of
employee engagement to ensure that we are
able to retain and attract the best talent.
− All of our contracts include provisions to protect the proprietary
rights of the Group. GBG’s legal function also ensures that such
rights are protected during any negotiation with customers or
suppliers.
− Where appropriate, we register trademarks globally and work
closely with external advisors to ensure that the businesses’
rights are safeguarded in all territories in which we operate.
− GBG has also invested increasing resource to improve proactivity
in conducting audits on customer compliance with licensing
obligations.
In progress
− Where appropriate, we have allowed some flexibility in our terms
when dealing with our customers as we look to support them
during this time. However, this amenability in terms has not
extended to any compromise in the protection of intellectual
property rights of GBG and our third party data suppliers.
− We invest in developing the skills and abilities our people across
of our locations and geographies.
− We offer competitive total benefits packages (compensation and
benefits) and these are reviewed and benchmarked regularly.
− Employee engagement is monitored formally every six months
through a Group-wide survey and the results are used to focus on
improvement activities.
− We monitor attrition rates by business function and location in
order to identify issues and, where necessary, take restorative
action.
In progress
− We acknowledge that we operate in a highly competitive
talent market and as a result we have ensured that during the
pandemic that we have continued to provide high levels of
support and consideration to our team members’ well-being and
ongoing development. In light of Covid-19, the Board and the
Remuneration Committee have discussed a range of proposals
and potential actions to support these initiatives in order to
maintain our ability to retain and attract talent needed by the
business.
Emerging Risks
As indicated at the start of this report, GBG’s risks are continually reviewed and reassessed with escalation and reporting to the
Board. The process considers all relevant internal and external factors, and is designed to capture those risks which are current but
have not yet fully crystallised, as well as those which are expected to crystallise in future periods.
As a result of Covid-19, a further key and emerging risk to the Group’s strategy is the impact of the pandemic on the geo-political
and macro-economic environment. We already had risk review processes in place to address matters relating to downturn in
economies and political change in the jurisdiction in which we operate (including Brexit). The precise duration and depth of the
downturn is uncertain, but our focus is, and will continue to be, in managing emerging risks associated to the disruption to our
business by Covid-19.
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GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview PR IN CIPAL RI SKS AND UNC ER TA INT I ES
Viability Statement
Our business model and strategic priorities are key to the Board’s assessment of the Group’s prospects. We continuously review these
alongside forecasts and budgets in order to have a clear view, so far as is possible, on the viability of the Group over the medium term.
The Board’s assessment of viability is influenced by the businesses’ current and projected performance against financial and non-
financial KPIs and an analysis of principal risks within the Group’s risk assessment framework. In the current year this assessment has
included detailed consideration of the potential impact of Covid-19 on viability.
There are a variety of different time horizons relevant to assessing our prospects. Management currently forecasts as part of the
business planning process and capital investment cycle over a varying period. A detailed bottom-up model is used to budget the
business for a period of one-year in advance and a top down model for a period of five years.
We have continued to use a three-year timeline when considering viability because we believe to forecast across the entire group for a
period longer than this with any significant level of certainty is difficult. Current market volatility and uncertainty in light of the Covid-19
outbreak only serves to reinforce this view.
In assessing the viability, the Board has considered the following:
− GBG operates across diverse sectors and has an extensive global presence which provides mitigation from over-reliance on key
geographic markets;
− GBG products support businesses operating in an online world;
− GBG has strong cost control mechanisms; and
− There is considerable headroom available to us in our cash reserves and revolving credit facility agreement. This has been tested
through stress testing, reverse stress testing and sensitivity analysis as part of the Going Concern review detailed in note 2.2.
Having considered all of the above factors, we have a reasonable expectation that the Group will continue in operation and meet our
liabilities as they fall due over the next three-year period.
We acknowledge that this assessment is subject to uncertainties outside of our control and accordingly, the viability of the Group
cannot be guaranteed.
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GBG Annual Report and Accounts 2020 COR POR ATE RESP ONSI BIL ITY STAT EM E NT
Introduction
I am pleased to introduce this report, which provides an overview of our approach to corporate responsibility (“CR”), by discussing the
governance, social and environmental issues we believe to be most relevant to our business and stakeholders, as well as providing
a comprehensive update on activity throughout the year. Whilst current terminology usually refers to environmental, social and
governance (“ESG”), we have purposefully reordered these indicators on the basis of their relative materiality to our business. At GBG,
our Board has overall responsibility of CR, with developments and initiatives being led by myself, supported by the Executive Team.
CR practices are deeply embedded in our day-to-day activities and are integral to our business model and strategy.
We passionately believe in the fundamental importance of effectively managing governance, social and environmental risks and
harnessing opportunities and are committed to continuous improvement of CR practices. In order to provide our stakeholders with
sufficient levels of transparency on these topics, we are always looking at ways of optimising our reporting and I am pleased to provide
a higher level of detail in this report. We are, however, mindful of the fact that this is an ongoing process. We are cognisant of the
benefits of using measurable indicators and targets in reporting on our CR activities and are carefully considering the most appropriate
metrics in the context of our strategy, business model and most material issues.
Recognising the importance of CR to our business, we have created a global set of key principles and policies that act as a framework
to enable a consistent approach for GBG to fulfil our purpose to: establish trust between businesses and their customers; to work and
act responsibly; empower, prioritise and protect our people; create broader societal value and protect the environment. We are acutely
aware of the different markets and contexts in which we operate and, therefore, have taken the decision to decentralise some elements
of CR decision making to local teams to enable maximum impact and to facilitate greater agility against the backdrop of shifting
requirements in global and local markets. This enables us to act nimbly and adjust to changing policies, laws and practices, whilst
maintaining a resilience at Group-level which is underpinned by our overarching approach.
The polices relating to our framework have been updated and expanded during the year to keep pace with changing developments and
initiatives. Revisions to the policies also take into account feedback received from our team members, investors, regulators and our
customers.
As detailed elsewhere in this Annual Report, our primary focus during the Covid-19 pandemic has been on the health and well-being of
our team, who look after our customers who in turn support our business. At an early stage during the pandemic we made a range of
decisions to protect our people and to look after our customers and other stakeholders in order to secure the long-term prospects and
value of the business. GBG has been quick to adapt to the changing working environment with our team members working effectively
remotely and with a strong focus on employee engagement. Managers have been encouraged to keep in regular touch with their
teams by video and conference calls, together with using our Group intranet to provide support information and to share experiences
between the regions.
A key factor in our ability to operate our Group business continuity plan effectively has been our team members’ ability to work
remotely and flexibly as well as the cohesiveness of our global teams – these have been areas of specific focus and development
by GBG prior to the pandemic. Our continued strong engagement with customers, suppliers and investors has also led to increased
levels of confidence amongst our stakeholders, reinforcing their belief in GBG’s ability to operate with strength and integrity during the
pandemic and to emerge from this crisis with the ability to continue to execute on our long-term growth strategy.
Governance
As a Group, and more specifically a Board, we believe that good corporate governance is essential for building a successful and
sustainable business in the long-term interests of all GBG stakeholders. It is our view that trust, responsibility and ethics are the
cornerstones of an effective organisation and we actively promote a culture of honesty, integrity, trust, and respect across the business.
We look to uphold human rights, encourage diversity and equality, and promote good governance. All of GBG’s team members are
expected to operate in a responsible manner and key elements of the procedures we have in place to engender trust and facilitate
ethical practices are covered in this statement. These are all underpinned by our Code of Conduct, which is publicised and promoted to
all team members, with access and training provided on the Group intranet, Be/developed.
Corporate Governance
The Board ensures that the highest standards of corporate governance are practiced throughout the Group and that it conducts
itself in the best interests of the Group’s many stakeholders. In September 2018, we adopted the 2018 Quoted Companies Alliance
Corporate Governance Code (the ‘QCA Code’) as the basis of our governance framework and we have complied in full with the QCA
Code. A comprehensive account of our compliance and corporate governance activities is detailed in our Corporate Governance
Statement on pages 43 to 47.
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GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview CORPOR ATE RESP ON SI BIL ITY STAT EM E NT
Ethical Practices
The Board takes ultimate responsibility for ethical issues throughout the Group and seeks to lead by example. As a Group, we are
committed to continuously improving our practices to ensure that slavery and human trafficking are not taking place in any part
of our business or supply chain. We expect the same commitment from our suppliers, contractors and business partners and have
adopted a policy on Modern Slavery, setting out the standards we expect from our stakeholders, that is reviewed each year. A copy
of our Modern Slavery Statement is regularly shared with our team members and is available at www.gbgplc.com. All new starters
are required to review and confirm their understanding of our Modern Slavery statement as part of their online induction process.
It is our policy to conduct business in an honest and ethical manner. We take a zero-tolerance approach to bribery and corruption
and are committed to acting professionally, fairly and with integrity in all our business dealings and relationships wherever we
operate and implementing and enforcing effective systems to counter bribery. Through our Anti Corruption and Bribery Policy we
provide guidance on acceptable behaviour, give team members examples of what would constitute bribery and encourage the
reporting of any suspected bribery activities through our independent whistleblowing channel.
As a public company, with shares traded on the London Stock Exchange, a diverse range of institutions and individuals choose to
invest in GBG and they expect to do so with the confidence that others are not trading in our shares with inside information that
is not yet publicly available, otherwise known as insider trading. The Group operates a ‘Dealing Code’ to ensure that Directors and
team members do not abuse and do not place themselves under suspicion of abusing inside information and that they comply with
their obligations under the Market Abuse Regulations.
We have adopted a policy to uphold all laws relevant to countering tax evasion and prevent persons associated with GBG and its
subsidiary companies from engaging in the criminal facilitation of tax evasion in the UK or in a foreign country. The policy outlines
the procedure that must be followed should a team member suspect a breach of the policy.
We do not tolerate behaviour which contravenes our Code of Conduct, or which could result in reputational damage to the
business. We encourage team members to raise concerns without fear of reprisals and provide clear reporting lines for instances
of fraud, bribery, bullying, unfair or unethical treatment and unsafe working practices. We have an externally-provided, 24/7
whistleblowing hotline to enable team members to report in complete confidence from anywhere in the world any unethical
practices or concerns. The hotline provides access to local operators who provide a wider scope of support in local languages
of those countries in which our teams operate. The whistleblowing procedure, which is communicated to all team members via
the intranet to ensure that it is widely available and properly communicated, contains a clear structure to process any reported
incidents and is overseen by the Audit Committee, with the Chair holding ultimate responsibility. No issues were reported during the
year.
Data Privacy & IT Security
Our business model is built upon our ability to engender trust with our data partners, the businesses using our products and end
consumers, therefore we consider our duty to be a responsible data custodian as one of our most material issues and central to our
CR strategy. As our highest governing body, the Board has oversight of this responsibility.
We recognise our responsibility to think carefully about how data is processed and used in order to uphold a high standard of data
ethics within the business and to enable the same amongst our customers. We prioritise ethical data practices and have several
controls, systems and approaches to ensure confidence in our business, including:
− Evidence of provenance when data sourcing
− Ability to demonstrate how and where data is being processed and that this is conducted on a lawful basis
− Fair and transparent approach to all algorithms and technology
In our view, privacy is a fundamental human right and, therefore, we acknowledge our responsibility to safeguard data security
at every step of the supply chain – from our data providers to our customers and their end-consumers. Our overarching aim is to
protect both information and systems from malicious or accidental data loss, damage or abuse.
Acting as a custodian of customer identity data for some of the largest organisations in the world, GBG aims to set the highest
standards of information security and in so doing has developed an Information Security Management System (‘ISMS’) to meet
the requirements of the ISO27001 standard. The ISMS aims to safeguard our systems and networks from unauthorised access,
compromise and or/disclosure of data to protect the confidentiality, integrity and availability of information resources and assets
held by GBG and its customers.
34
GBG Annual Report and Accounts 2020 A number of penetration tests are conducted across GBG products, including the completion of a Global Threat Assessment
(RedTeam) exercise across the entire business. Vulnerability scanning takes place at least monthly with all cloud environments, in
addition to being subjected to a continuous security test (‘CST’) service. GBG has invested in and implemented technologies such as
DarkTrace and Exabeam – both of which use machine learning and user behaviour analytics to identify any abnormal behaviour on
our networks.
Internal and external audits and risk assessments are conducted as part of GBG’s policy of continuous improvement and also to
providing assurance of the currency and effectiveness of its information security policies, processes, systems and networks.
We are committed to collecting, processing and analysing data compliantly, in line with data privacy legislation and, as a global
company, this covers many jurisdictions and laws, such as the General Data Protection Regulation (‘GDPR’) in the EU and California
Consumer Privacy Act (‘CCPA’) in North America. We work closely with our data partners to ensure that the data we source is
compliant with applicable legislation. We have an extensive framework of policies and procedures to follow, which are all available
to GBG team members through our intranet, to ensure we always do the right thing for our customers and individuals. These
include our Data Protection Policy, which is designed to ensure that we address the broad range of risks to our corporate, supplier
and customer information. All such procedures are housed within an overarching framework called ‘be/compliant’, with four key
principles, which are continuously promoted to ensure we interact with data appropriately:
− “We will ensure we know what we can do with data and if unsure, we will ask”
− “We will be clear about how we are going to use data”
− “We will ensure we protect the data we hold/process”
− “We will ensure compliance both individually and as a team”
GBG is committed to ensuring that all team members are fully aware of their responsibilities in relation to data protection and
security. Mandatory training modules are in place and all team members can access these via be/developed. These modules are
reviewed in line with any legislative changes or on an annual basis (whichever is soonest).
With a data network spanning over 150 partners worldwide, we are acutely aware of the onus on us to source data in a responsible
manner and through our data sourcing and privacy teams endeavour to ensure that we can maintain our high credentials in this
area through:
− carrying out supplier due diligence before data is used and on-boarded
− ongoing monitoring of supplier credentials to ensure continued compliance with relevant laws and regulations
− maintaining effective account management with suppliers and reviews of the currency and accuracy of data sources
In support of these security and data activities, GBG is a member of the International Association of Privacy Professionals (‘IAPP’)
and we have implemented the One Trust Privacy Management Software to further support our global privacy management
obligations.
Further details relating to assessment and mitigation actions for the risks associated with data privacy and information security are
detailed in the Principal Risks and Uncertainties Report on pages 24 to 32.
Social
Our team members are central to the long-term success of GBG and we look to attract and retain ‘the best and most engaged
people’. We prioritise effective employee engagement as well as investing in the development of our people, and we aim to cultivate
a strong, committed, and innovative culture within a diverse and inclusive workforce. We are also continually considering ways of
maximising positive societal contributions of both our own business and that of our customers.
Equality & Diversity
We strongly believe that diversity throughout the Group is a driver of success and recognise it has significant benefits. By focussing
on diversity, we believe GBG can be a more effective, successful and profitable company as well as continuing to be considered a
great place to work by our team members.
Diversity provides us access to a greater range of talent, not just the talent that belongs to a particular world-view or ethnicity or
some other restricting definition. Our employment, training and career development policies and practices promote equality of
opportunity regardless of gender, sexual orientation, age, marital status, education, disability, race, religion or other beliefs and
ethnic or national origin. We aim to encourage a culture in which all team members have the opportunity to develop as fully as
possible in accordance with their individual abilities and the needs of the Group and continue to look at ways that we broaden
diversity throughout the Group.
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We have taken a number of proactive steps to promote diversity and equality within GBG under our Group-wide initiative,
be/yourself. Launched two years ago this initiative supports a range of activities in our focus areas of:
− Nationality, race, religion and location
− Sexual identities, inclusive of LGBT+ definitions and gender fluidity
− Experience and age
− Gender and addressing imbalances in our business, our industry and our communities
We have a dedicated manager appointed as Head of Diversity & Inclusion who is supported by a team of volunteers (be/yourself
champions) from around the business to support every team member to feel comfortable in being themselves - meaning that
everyone is treated as equal and with respect. Through be/yourself, it is our objective to support and promote an inclusive and
diverse culture at GBG through a range of activities to seek views, raise awareness and provide opportunities for learning and
sharing knowledge. Activities during the year have included promoting and celebrating: International Women’s Day, various
International Pride events, and diversity/women in tech.
In line with the UK Government requirement, in March 2020 we published our third Gender Pay Gap Report, available on our
website at www.gbgplc.com/about-us/gender-pay-report. Since sharing the reports with our team and reflecting our data in
previous years, we have seen an increase in interest and conversations around gender, remuneration, opportunity and what actions
we are undertaking to address these areas. We actively encourage engagement on these topics to ensure we understand our team
member’s sentiments, gain insight into areas they believe we should concentrate on and share our plans and activities.
Whilst we have adopted a more targeted focus on this issue, we have yet to see a significant improvement in our overall statistics.
This reinforces our initial views that this process represents a continual journey of improvements and that we must consistently
work to bring about the reforms we seek, whist recognising this is not achievable instantaneously. Presently women comprise 36%
of our total workforce and 43% of our Board of Directors (37% and 33% respectively for 2019).
As a global business we aim to continue to focus on identifying candidates who can support our ambition to improve the overall
diversity of the GBG team.
Communications with team members
With over 1,050 team members (2019: 985) in 16 countries around the world (the vast majority of whom are in permanent
positions), we believe in the importance of successful internal communications and strongly feel that all our team members should
have a voice within the Group. By focusing on and listening to employee feedback, facilitated by twice yearly employee engagement
surveys, we aim to be able to respond to any issues which might impact engagement and/or employee satisfaction before any
problems emerge and have found this to be a very successful programme to date. This year, our employee engagement survey
recorded its best level of team member engagement, improving on last year’s high score and with a higher response rate.
We continue to have over 90% of the global team who would recommend GBG as a great place to work.
We communicate with our team members on a regular basis, keeping them informed of business performance, initiatives, and
developments. This is achieved through annual workshop-style events at our key locations and live monthly CEO webinars which
due to Covid-19, are now held on a weekly basis. In addition to this, our business units provide high-level updates, briefings and
webinars.
We utilise an intranet platform called ‘be/connected’ which has been active since August 2017 and is now the central hub for Group
and customer news, as well as for internal social networking. On average, it is visited by 50% of team members daily and 90% of
the business monthly. We have been increasing the focus on live, in-person panels and events, including CEO roundtables across
multiple locations, special Q&A panels to mark specific occasions (such as International Women’s Day and Pride), thereby providing
team members with the chance to engage with senior management and thought leaders in a more intimate setting.
Demonstrating its significance to the Group, successful employee engagement is used as a metric to reward senior management
within the business.
36
GBG Annual Report and Accounts 2020 Engagement with team members and Covid-19
We recognise the importance for our team members to feel that they work at a business which really values them. By maintaining
integrity with a strong culture, we believe we have been able to demonstrate to our team members how much GBG genuinely cares
for them and is dedicated to investing in them. With the onset of the Covid-19 pandemic and with our entire global team working
from home, we quickly implemented a number of changes that have been incredibly valuable in ensuring that we can continue to
communicate effectively with our team members and maintain our culture of inclusivity and engagement.
We recognise that in times like this, there is no such thing as superfluous internal communications, particularly as each
engagement initiative is unlikely to receive full take up. By maintaining regular, transparent communications with our team
members we have sought to ensure strong engagement throughout the crisis. Initiatives and actions during this time have included:
− a weekly CEO webinar update to all team members with a live Q&A session to respond to questions and issues in real-time;
− managers have been proactive in keeping in regular touch with their teams and team members by video and telephone calls;
establishing an area on our Group intranet to provide specific Covid-19 related support information and guidance documents
and to enable our team members to share experiences between the regions; and
− We have taken steps to highlight access to what resources are available to support our team members who may be struggling.
Team member training and development
Working in a highly regulated sector, training and development is of vital importance to the successful running of our business. We
also consider it an important way of delivering value to and inspiring our team members, advancing our strategy and maintaining a
great place to work. We prioritise employee training and ensure that all our people have the support required to not only maintain
compliance but also achieve best practice wherever possible.
GBG has an internal training platform, ‘be/developed’, which provides all our team members around the world with a large variety
of learning content ranging from data privacy and information security training, employee development and management best
practice. This year over 19,873 hours has been spent learning by our team members through ‘be/developed’ (2019: 17,498 hours).
GBG also supports professional development of team members to achieve recognised and accredited qualifications in areas across
the business including information technology, marketing, legal and finance – helping to develop the careers and prospects of our
current and future specialists.
Recognition and incentives
We have continued to promote the Group Vision Objectives and Strategies (‘VOS’) Awards throughout the year. The awards not only
link to the Group values of Quality, Innovation, Excellence, Trust and Respect but are also attributed to the five key segments of the
Group’s VOS – People, Products, Customer, Technology and Brand. The VOS Awards encourage individuals within the business to
nominate their fellow team members deserving recognition, with the winners announced every quarter. Quarterly winners are then
further recognised annually when a financial award is made to the overall winner for the year.
In addition, we operate an annual sales incentive initiative to recognise members of our sales teams who have performed
exceptionally throughout the financial year, along with other supporting, non-sales members of our team. Other areas of the
business have developed their own systems of recognition, including the ‘Customer Star’ and ‘Technology Star’ awards and smaller
scale regional or business unit specific sales initiatives.
Everyone at GBG is also given the opportunity to share in the Group’s performance through GBG’s Save-As-You-Earn (‘SAYE’) Share
Option Scheme (the ‘Scheme’). The scheme is open to all team members (except for China where there are challenges in respect of
personal share ownership) which gives team members the option to apply to save up to £250 (or foreign currency equivalent) per
month for a period of three or five years and to purchase shares in GBG at a discounted rate (except in territories where offering
shares at discount is prohibited).
We had a fantastic response to the Scheme launched in 2019 with nearly half of team members globally taking up the offer. During
the year, the Remuneration Committee of the Board agreed that GBG would a launch an international SAYE annually, instead of
every two years as currently operated, and we are pleased to report that, despite the Covid-19 pandemic, we will still be launching
the 2020 SAYE scheme later this year alongside the maturity of two running Schemes that were launched in 2015 and 2017.
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GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview CORPOR ATE RESP ON SI BIL ITY STAT EM E NT
Health & safety and well-being
We are committed to the effective management of health and safety and to protecting the well-being of our team members. We
have a Health and Safety Policy, which details key standards, systems and procedures and we provide training and guidance to all
employees and especially those with specific duties and responsibilities such as fire wardens and first aiders. We also supplement
our activities with sharing best practice and guidance updates with team members.
All accidents and near misses, whether they result in absence from work or not, are reported with remedial action identified and
implemented to prevent reoccurrence. There have been no reportable accidents within the last year, only minor incidents. Our
external health and safety consultants provide GBG with annual audits and guides us on all health and safety matters.
We also provide an Employee Assistance Programme (“EAP”) for all team members, irrespective of location. The EAP grants team
members access to confidential help with issues such as health, financial support, family matters or other problems which may lead
to worry and anxiety. This is available to everyone in the business via a support line which is open 24 hours a day, 7 days a week,
365 days a year.
Across GBG, we have ‘Pulse Teams’ which promote and support any local initiatives and events that are designed to improve the
employee experience at GBG. This includes health and well-being events to promote healthier lifestyles and practices and mental
health awareness.
As detailed above, we acted decisively in response to the outbreak of Covid-19 to prioritise our team members’ safety and well-
being. As has been the case in China and Malaysia, any return to our office locations is carefully considered in respect of the
best interests of our team members. Risks are assessed in line with local guidance and best practice together with ensuring that
team members receive detailed information and briefings before they return to the office so they are aware of the processes and
procedures.
Working environments
We continue to invest in improving the working environment for our teams, creating innovative spaces which inspire our people
to collaborate more readily and increase personal efficiency. We listen to our people and endeavour to incorporate their needs
wherever practical. The Group has a flexible working policy to facilitate an optimal work/life balance and support those with families
and other needs or commitments outside of work; we also encourage working from home where possible. In the past year we
have moved to new workspaces in Canberra and New York and we continue to invest in technologies which ensure that our team
members can work just as productively regardless of where they are.
Society
We believe it is our ability to establish trust between businesses and their customers that places us at the heart of the global digital
economy.
Our customers need innovative digital solutions to grow, reduce online fraud and meet increasingly stringent compliance
regulations. GBG offers practical solutions and tools to enable organisations to engender trust with their customers, help them
to mitigate ethical risk within their own business and keep principled practices at the heart of their business models. We take our
responsibilities seriously in terms of sourcing, securing and protecting data as well as ensuring its ethical usage. Beyond the clear
ethical benefits to our customers of using our products and services, many have very specific, inherent societal benefits including
providing criminal records checks to organisations who need to vet those working with vulnerable people, ensuring that age
restricted products and services are not offered to children and providing data tools to police forces to assist in the prevention and
detection of crime.
Community support
As a worldwide business, we apply a global and strategic approach to community support and look to ensure a consistent and
meaningful contribution to a specific societal issue on an annual basis; in 2020, we chose children. Employee contribution is central
to our community support programmes and we encourage volunteering and personal involvement in causes that matter to our
workforce. This not only advances our sustainability goals but also contributes to our wider strategic objectives as we believe that
volunteering has the capacity to engender cooperation and engagement, as well as encouraging a different way of thinking and
working together.
In addition to this, we have invested time in looking at longer-term schemes to help support communities around the world.
Some examples include science, technology, engineering and mathematics (‘STEM’) in the UK, beach cleaning and soup kitchen
volunteering in the United States, volunteering at shelters and youth support centres in Singapore and Malaysia.
38
GBG Annual Report and Accounts 2020 Environment
We are conscious of our duty to use resources responsibly and to minimise any environmental impacts of our business activities.
This is not only the right thing to do but has also been identified as an issue that our employees care about.
As an office-based operator using leased facilities, our environmental impact is relatively low compared with other sectors.
However, we believe that it is our ability to enable our customers to make improvements to their services that have an
environmentally advantageous impact (as well as operational and financial benefits) which arguably represents our capacity to
make the most impact on a global scale.
We comply with all relevant environmental legislation and have clear objectives to reduce energy consumption and waste
production within our office environments. In the UK, an assessment (carried out by an external consultant) was submitted by
the Company to the Environment Agency under the Energy Savings Opportunity Scheme (‘ESOS’), which confirmed that GBG is
compliant with the standard in the UK, with only four minor recommendations (all of which have been addressed).
The scope of the ESOS assessment was designed to ensure GBG’s compliance with the legislation by:
− calculating and presenting GBG’s energy consumption in the UK for the period 1 June 2018 to 31 May 2019;
− identifying the building energy consumption and grey fleet use in the areas of significant consumption;
− considering available routes to ESOS compliance; and
− presenting the results of ESOS compliant energy audits for the areas of significant energy consumption.
Our ESOS report calculated that emissions of 494 tonnes of CO2 (2,006,498 kWh) were in respect of direct emissions from
combustion of fuel (diesel and petrol) and operations of facilities. The external consultants calculated the levels using billing
information for our properties and details of expenses from team members claiming mileage for business travel. The exercise
identified a small number of energy savings opportunities. We adhere to the recommendations of this scheme and continue to drive
further improvements in all of our locations, where possible. Further details of this assessment are included on our website.
As a global business, travel is required for certain team members, however, we will continue to actively promote video conferencing
as an alternative and aim to reduce unnecessary travel wherever possible. In order to conserve energy, we have installed light
sensors as well as air conditioning and heating timers in our offices. We currently have centralised printing in each office and
encourage minimal printing with a recommendation to move to paperless wherever possible.
We take our responsibility to use resources in a responsible manner seriously and have a ‘reduce, reuse and recycle’ policy. We
actively promote recycling of technology and office consumables by providing recycling points in each of our offices. Although we
do not use a materially large amount of water, given the office-based nature of our business, we look to limit its usage through the
use of electrical sensors.
The full extent of changes to office working and business travel that will arise as a result of the Covid-19 are not yet certain. We will
seek to review and update our initiatives and plans relating to our environmental impact when there is more clarity and visibility on
how these can be implemented and measured effectively.
Chris Clark
Chief Executive Officer
39
GBG Annual Report and Accounts 2020GovernanceFinancial StatementsStrategic ReviewOverview DIRECTORS A ND OFFIC ER S
David Rasche
Chairman (Aged 70)
Appointed to the Board in September 2010
A
R
N (Chair)
David has over 45 years’ IT industry experience with over 35 years at Board level in the software and services sectors. He was the
founder of SSP Holdings Limited, which became one of the largest specialist insurance software houses in the world. David has chaired
and advised businesses in both the public and private markets and has overseen numerous acquisitions and disposals over the last
30 years. He is a strong believer in lifelong learning, has a diploma in company direction and is the longest serving member of the
Vistage executive learning organisation in the UK. David invests in and mentors some smaller technology businesses and is Chairman
to Chatta, a learning software company. He also chairs a family property and investment company and a family charitable trust. He was
Yorkshire Business Leader of the Year in 2008 and the Grant Thornton QCA Chairman of the Year in 2009. In March 2020, David won
The Sunday Times FTSE AIM Non-Executive Director Award in recognition of his stewardship and contribution at GBG.
Chris Clark
Chief Executive Officer (Aged 51)
Appointed to the Board in April 2017 as Chief Executive
N
Before joining GBG Chris was Managing Director at Experian for 5 years where he was responsible for the UK & EMEA. Experian
gave Chris first-hand knowledge of the Identity Data Intelligence market. Chris previously worked at BT for 20 years, running several
technology businesses across the globe. Chris has lived and worked in the USA, Europe and Asia, as well as the UK and has significant
international experience. Chris has a passion for and a strong track record of team member engagement and customer focus.
Dave Wilson
Chief Financial Officer & Chief Operating Officer (Aged 58)
Appointed to the Board in October 2009
N
Having joined GBG as Finance Director, Dave has a strong background in managing business growth. He has worked in technology,
media and telecoms for over 40 years, with over 30 years at board level. Previously holding international and operational board level
positions with companies including Eazyfone (brand Envirofone.com), Codemasters, Fujitsu and Technology plc. Dave was named
Finance Director of the Year at the 2013 Grant Thornton Quoted Company Awards and Finance Director of the Year at the 2015 FD
Awards.
Nick Brown
Group Managing Director (Aged 59)
Appointed to the Board in April 2017
Nick has been a member of GBG’s Executive Team since joining the business in 2007. Nick is currently responsible for managing the
operating businesses of GBG on a global basis. Prior to joining GBG Nick held senior management positions at Sage plc, Microsoft
UK and Fujitsu Services in the UK.
40
GBG Annual Report and Accounts 2020 N
(Chair)
Charmaine Carmichael
Non-Executive Director (Aged 49)
Appointed to the Board in January 2014
N
A R
Charmaine brings global digital, hardware and software expertise to GBG. As a Partner at BCG Digital Ventures, she leads the digital
insurance practice across the world and financial services for Europe. Charmaine is an Independent Non-Executive Director and
committee Chairperson at Blue Prism PLC and was a Non-Executive Director of Avanti plc, a global satellite provider. She is
co-founder and Chairperson of BuzzGroup (Insuretech) as well as a founder, board member and trustee of The Marketing Academy,
a not-for-profit organization promoting USA, UK and Australian talent in digital, marketing and advertising. Additionally, Charmaine
holds a CEO position at Plan B Consulting Limited, which invests in early stage digital start-ups. Previously, Charmaine was Global
Senior Vice President at Nokia as well as the Managing Director and Vice President, EMEA at Research In Motion (BlackBerry). She
also led Wayra, one of the world’s largest digital accelerators and was a Non-Executive director of Wayra UnLtd, a joint venture
between the U.K. Government and Telefonica.
Liz Catchpole
Non-Executive Director (Aged 55)
Appointed to the Board in September 2017
A
(Chair)
R N
Liz is an Independent Non-Executive Director and Chair of the Audit Committee at Investec Wealth & Investment where she is also a
member of the Risk, Remuneration and Nomination Committees, Independent Non-Executive Chair of the architectural and design
practice TP Bennett and an Independent Non-Executive Director, Chair of Audit Committee and also member of Risk, Remuneration
and Nomination Committees of British Gas. Liz has over 20 years of executive Board level experience gained primarily in the insurance,
business services and property sectors. Liz has previously held Non-Executive positions at FTSE listed bwin.party, Bournemouth Water,
The University of Law and Be Living Holdings (formerly Willmott Residential). Her career started in insurance with a subsidiary of GE
Capital where she worked for almost 17 years. Liz is a chartered certified accountant and holds an MBA from Cranfield University.
Natalie Gammon
Non-Executive Director (Aged 42)
Appointed to the Board in November 2019
A R
Natalie has over 20 years of global technology, commercial and operational experience with a demonstrable track record of successful
digital, strategic and transformational change programmes in both private equity and blue-chip companies. Natalie was previously
Group Chief Information Officer for FNZ UK and more recently Chief Cloud Officer for Finastra Ltd. In addition to undertaking an
advisory role at a number of technology start-ups, Natalie is also an Independent Non-Executive Director of Masthaven Bank Ltd and
an Independent Member of the Audit Committee of the National Trust.
John-Henri Constantin FCIS
Group Company Secretary & General Counsel (Aged 53)
John joined GBG in 1994 as Assistant Company Secretary, becoming Deputy Company Secretary and in 2002 was appointed Group
Company Secretary & General Counsel. With over 20 years’ experience of working within a listed company environment he leads the
Group’s legal, administration, corporate governance and compliance operations. John has been a Fellow of the Institute of Chartered
Secretaries and Administrators (FCIS) since 2007.
Committees: Secretary to all Committees
Committee membership key:
Audit & Risk A
Remuneration R
Nomination N
41
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance LETTE R F ROM THE CHA IR MAN
Dear Shareholder
In September 2018, we adopted the 2018 Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’) as the basis of our
governance framework. Through this statement, we will report how we have complied in full with the QCA Code.
As a Board, we believe that practising good corporate governance is essential for building a successful and sustainable business
in the long-term interests of all GBG stakeholders. Our commitment to corporate governance and promoting a culture of honesty,
transparency and respect to all members of GBG has let us build a healthy corporate culture throughout the Group.
We are just as committed to responsible and ethical practices when we make any business decisions, whether on the Board or in day-
to-day operations. This is particularly important to us as an acquisitive business; as we acquire more global companies, we recognise
we need to maintain and monitor our culture.
With that in mind, we work hard to make sure that all of the Group’s businesses (whether newly acquired or longstanding) are in
step with our strategy, people processes and internal controls. We do this through strategy workshops and training and by involving
managers in our risk assessments and internal control meetings. This approach means our Executive Team can report to the Board
on progress and any issues that need addressing. You can find more information on our culture and Group policies in our Corporate
Responsibility Statement on pages 33 to 39.
As Chairman, it is my responsibility, working with my Board colleagues, to ensure we follow the highest standards of corporate
governance throughout the Group and to manage the Board in the best interests of the Group’s many stakeholders. It is also my
responsibility to communicate with shareholders and make sure the Board knows about any shareholder concerns.
New Board members
Last year we reported that we had started the process of searching for an additional Non-Executive Director. I am pleased to report that
since then, we have appointed Natalie Gammon as an independent Non-Executive Director with effect from 19 November 2019. There
is more information on Natalie’s appointment in the Nomination Committee Report on page 63.
Year in summary
The last few weeks of the financial year (and in the weeks since the start of the new financial year to date) have seen the Board focus on
the effects of the Covid-19 pandemic on the Group. As a Board, we have adapted our usual working practices to accommodate remote
working and have prioritised additional weekly Board meetings to ensure the appropriate attention is given to address the various
challenges that have come with the pandemic. The Board already receives its meeting papers electronically using a secure document
portal. In addition to maintaining our standards of Corporate Governance and dealing with the effects of Covid-19, we wanted to give
some insight into the other areas that the Board has worked on this year. These can be found on the following page.
Annual General Meeting (AGM)
In light of current and anticipated public health guidelines, GBG is asking shareholders to comply with certain unprecedented but
urgent measures for this year's AGM. These recommendations are designed to enable participation by shareholders in the business of
the AGM, while balancing health and safety considerations.
Under measures imposed by the UK Government in response to the Covid-19 outbreak, there are restrictions on public gatherings. As
a result, shareholders will not be permitted to attend the AGM in person. Anyone seeking to attend the meeting in person (beyond the
two persons designated by the Board as being necessary to form a quorum) will be refused entry. The Board is taking these measures
to safeguard the health of shareholders and other participants and to make the AGM as safe as possible.
Shareholders wishing to vote on any of the matters of business at the AGM are therefore strongly encouraged to submit their votes in
advance by proxy using one of the methods referred to in the Notice of AGM. Shareholders should appoint the chair of the AGM as their
proxy to ensure that their vote is counted. Further details and instructions are set out in the Notice of AGM.
If shareholders have any questions or matters of concern in connection with the business of the meeting they may email GBG’s
Company Secretary (john.constantin@gbgplc.com) and we will endeavour to provide a prompt response.
David Rasche
Chairman
42
GBG Annual Report and Accounts 2020 CORPOR ATE G OV ER NANCE STATE ME NT
Summary of Board Activity
Further information
Governance
− Reviewed developments to corporate governance reporting and made necessary changes
− Took part in annual internal evaluation of the Board & Committees
− Appointed an internal auditor
− Approved our 2019 Modern Slavery Statement
− Received an update on AIM obligations & market from NOMAD
− Review of the Board, Executive Team and Committees’ Terms of Reference
People
Page 42 Corporate
Governance Statement
Page 46 Corporate
Governance Statement
Page 49 Audit and Risk Report
− Considered Board & Group diversity and approved the appointment of an additional female
Non-Executive Director
− Continued discussions on succession planning
− Discussed and approved developments to the Share Save Scheme to offer more inclusivity
and encourage more take-up from team members
− Discussed the results of our annual employee engagement survey and put in place action
plans to deal with any issues we identified
− Discussed the findings of our Gender Pay Gap Report
Pages 63 Nomination
Committee Report
Page 37 Corporate
Responsibility Statement
Page 36 Corporate
Responsibility Statement
Page 36 Corporate
Responsibility Statement
Strategy
− Held our annual strategy meeting to discuss our ongoing vision, the direction of our
business and our strategic priorities
− Received and reviewed reports from the Executive Team on progress against strategic
objectives, as well as risk management and operational matters
− Reviewed key risks that may threaten our strategy, such as cyber risk and data privacy
Principal Risks and
Uncertainties Report
Financial
− Agreed with the Executive Team the activities and focus in lieu of approving the 20/21
budget given the uncertainties presented by Covid-19
− Considered the impact of the Covid-19 on the going concern status of the Group and
Note 2.2
conducted various stress tests against a number of scenarios to test resilience of the Group
cash forecasts
− Reviewed and approved the half and full-year announcements and the 2020 Annual Report
and Accounts
− Approved updates to Treasury Policy and discussed legislative changes to accounting
regulations
− Approved LTIP, Share Match and Share Save schemes (during the 2020 financial year and
Remuneration Report
before the effects of Covid-19 impacted)
43
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance CORPOR ATE G OV ER NA NCE STATE ME NT
We have set out this year’s statement using the ten principles from the QCA Code.
Deliver Growth
1. Establish a strategy and business model which promote long-term value for shareholders
Our vision is to be the leader in identity data intelligence, informing business decisions between people and organisations
globally. Our strategy is to create and maintain unique online products and services that give our customers added value and are
strong enough to let us create new markets and win new business. We achieve this by investing in people, business and product
development and applying innovation, quality and excellence in everything we do.
Our strategy, business model and business operations are in the Strategic Review of this Annual Report on pages 9 to 15.
The Executive Team, led by the Chief Executive, is responsible for recommending the Group’s strategy to the Board, based
on the interests of our shareholders, customers, employees and other stakeholders. The Board is fully involved in discussing
and developing our strategy and business model with the Executive Team before we implement it. The Executive Team is then
responsible for putting the strategy into action and managing the business day-to-day.
As they follow our strategy and operational plans, the Executive and Management teams will usually face day-to-day challenges that
we see as our principal risks and uncertainties. We have agreed steps to mitigate them and we always look to follow these steps
whenever the risks appear. You can find more details of our internal control and risk management process on pages 24 to 32.
We believe that our AIM listing is still valuable to our shareholders in the long term. It gives us access to capital markets, flexibility
to make acquisitions, the ability to incentivise and reward management through share schemes and a regulatory environment
appropriate to the size of the Group.
Our progressive dividend policy and share performance over the last five years are also indicators of long-term value for our
shareholders, although the Board took the decision to not declare a final dividend in respect of financial year 2020 due to the
Covid-19 pandemic. Further information relating to this can be found in the Chairman’s Statement on page 8. You can see total
shareholder return in the Remuneration Committee Report on page 62.
2. Seek to understand and meet shareholder needs and expectations
We keep in regular touch with existing and potential new shareholders to report strategy and progress and understand what they
need and expect. You can find more on how we do this on the Investor section of our website:
https://www.gbgplc.com/investors
3. Take into account wider stakeholder and social responsibilities and their implications for long-term success
We work constantly to strengthen our relationships with our stakeholders as this helps us make better business decisions and
deliver on our commitments. We take our corporate social responsibilities seriously. That means maintaining effective working
relationships with stakeholders, including our people, partners, customers, suppliers and regulatory authorities. There is more
detail on how we do this in our Corporate Responsibility Statement on pages 33 to 39, as well as in the Investor section of our
website: www.gbgplc.com/investors. This is also set out in the Directors Report through our Section 172 Statement on pages 68
to 70.
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
Risk management and controls
Our main corporate objective is to maximise long-term value to all of our stakeholders. Our Directors recognise that creating this
value is the reward for taking business risks. The Board’s policy on risk management covers all significant business risks to the
Group, including financial, operational and compliance risks that could be barriers to achieving our business objectives.
We base our regular and exceptional reporting to management and the Board on monitoring risk and control processes across
headline risk areas and other business-specific risk areas. We have designed our risk assessment and reporting criteria to give the
Board a consistent, Group-wide perspective of the key risks. Regular reports to the Board include an assessment of how likely risks
are to materialise and the impact they would have if they did, as well as what steps we are taking to mitigate risk and how effective
these are.
The Board has overall responsibility for our approach to assessing risk and systems of internal control and for monitoring how
effective they are. Any system of internal control has inherent limitations. The system is designed to manage risks rather than
eliminate them. It provides only reasonable and not absolute assurance against material misstatement or loss and flags any new
and material risks to the Board.
44
GBG Annual Report and Accounts 2020 The Board believes risk assessment and control, with an acceptable risk/reward profile, is fundamental to achieving our corporate
objectives. We confirm that there is an ongoing process to identify, evaluate and manage the significant risks the Group faces and
the effectiveness of related controls.
You can see a summary of the principal risks and uncertainties facing the Group, as well as what we do to mitigate them, on pages
24 to 32.
Budgets
For the 2020 financial year, GBG completed its annual, comprehensive budgeting process which the Board reviewed and approved.
During the 2020 financial year the Board received regular reports on our results, compared with both budget and the previous year.
The budgeting process for the 2021 financial year was well progressed by March 2020, however, the events of Covid-19 and the
uncertainties this placed on agreeing any meaningful and accurate budget meant that the final review and approval process was
postponed. Instead, the Board receives weekly updates from the Executive Directors on the financial performance of the Group
(including, but not limited to, revenue, growth and cash) in order to monitor progress, trends and assessment of the Group banking
covenants. The Board will commence a budgeting process as soon as circumstances and certainty in our markets improve to
support this exercise.
The Board has undertaken a rigorous and in-depth assessment of GBG’s financial position and outlook and has adopted the going
concern principle in preparing these financial statements, as described in note 2.2 of the accounts.
Insurance
We have comprehensive insurance cover against material loss or claims against GBG. We are also covered for actions taken against
the Directors because of their roles. Each year, we review the sums we insure and what type of cover we have.
Maintain a Dynamic Management Framework
5. Maintain the Board as a well-functioning, balanced team led by the Chair
The Board is made up of the Non-Executive Chairman, David Rasche; three Executive Directors, Chris Clark, Dave Wilson and Nick
Brown; and three Non-Executive Directors, Liz Catchpole, Charmaine Carmichael and Natalie Gammon. In the Board’s opinion, Liz,
Charmaine and Natalie are independent in character and judgement. The Board has considered David Rasche’s length of service
and is confident that he is still independent in character and judgement, however, in line with best practice he will be subject to
annual re-election.
The Executive Directors all work full-time for the Group. The Non-Executive Directors work part-time, alongside other commitments
outside of GBG. A summary of these commitments appears in their biographies on pages 40 to 41. In the Chairman’s opinion,
having consulted with the other directors, each member of the Board gives the right amount of time to fulfil their responsibilities.
All the Directors are elected by shareholders at the first AGM after they have been appointed to the Board. They then put themselves
up for re-election at least once every three years, in line with our Articles of Association. To see which Directors are looking to be
reappointed at the 2020 AGM, see the Directors’ Report on pages 64 to 66 and the Notice of AGM. The service agreements for each
of the Directors are available from our registered office in Chester.
The Board has a formal schedule of matters reserved for it to decide on, which is available on our website. The Board meets
regularly to review trading performance, review risks, make sure we have enough funding, set and monitor strategy, examine major
business opportunities and report to shareholders.
Our approved annual calendar of Board meetings makes sure the Board meets regularly at scheduled times. Besides these, the
Board also meets to deal with urgent business whenever needed and is provided with all relevant information in advance. For
example, the full Board has met on a weekly basis since the onset of the Covid-19 pandemic. The Non-Executive Directors have also
met during the year without the Executive Directors and Chairman.
45
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance CORPOR ATE G OV ER NA NCE STATE ME NT
In the year to 31 March 2020, the Board met 9 times. The table below shows what proportion of meetings each member attended.
Percentage Attendance
David
Rasche
100%
Chris
Clark
100%
Dave
Wilson
100%
Nick
Brown
100%
Charmaine
Carmichael
100%
Liz
Catchpole
100%
Natalie
Gammon*
100%
* Natalie joined GBG in November 2019 and her attendance is based on the number of meetings since her start date.
In response to the Covid-19 pandemic, the Board has been meeting weekly since 24 March 2020 and receives update reports from the
Executive Directors on matters relating to our people, financial health, customers, operations, governance and competitors. There has
been full attendance of the Directors at these meetings.
6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
We have included the Directors’ biographies on pages 40 to 41, showing their experience and skills, along with their Committee
memberships. The Board is satisfied that it currently has the right balance of experience, skills, independence and expertise for the
business. Each member of the Board understands the need to maintain their skills, which includes roles and experience with other
boards and organisations as well as formal training.
During the year, the Directors received business updates and have had full access to the Company Secretary and external advisors
(including GBG’s auditor, NOMAD and remuneration consultants) on corporate governance matters.
GBG appointed Liz Catchpole as its Senior Independent Director (the ‘SID’) to give shareholders another channel of communication and
to be an intermediary for the other Directors where they need it. All Directors can get independent professional advice on the Group’s
affairs, at the Group’s expense, though no Director did so this year.
Led by the SID, the Non-Executive Directors meet without the Chair at least once a year to appraise the Chair’s performance. The SID is
also available to deputise for the Chairman at meetings or events.
To help keep the Board and the company stable, the SID may intervene at stressful times and work with the Chairman and other
Directors and/or shareholders to deal with significant issues.
The Chairman regularly meets the Chief Executive and other Directors to discuss progress and how the Board is performing. Each
Board member is ultimately responsible for their professional development and keeping their skills and knowledge up to date.
7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
Evaluations
Every year, we ask each Board member to complete an online questionnaire as part of our Board evaluation process. This is a chance
to comment and suggest improvements. The responses go to the Chairman in a detailed report and actions go to the Board to discuss
and take forward.
The Board gets external evaluation of its performance at least every three years.
Last year we reported that Springboard had run an evaluation of the Board in February and March 2019. The process involved detailed
questionnaires and observing the Board in action to assess it, as well as the Committees and make sure it is fully equipped to give the
Group the support it needs.
The areas they highlighted to focus on were mainly ones the Board had already pinpointed in its development road map, including:
1.
improved visibility of management succession and capacity planning
2.
further use of external advisors and appoint an internal auditor
3. Board composition and balance
46
GBG Annual Report and Accounts 2020 Since then, we have taken steps to improve our reviews of succession planning from operational and strategic standpoints. Also, we
now have a larger panel of advisors for corporate transactions and have appointed BDO LLP as GBG’s internal auditor. We have also
strengthened the make-up of the Board with an additional Non-Executive Director. The Board is committed to continual improvement
and further development of its processes, policies and procedures.
As well as evaluating the Board and its Committees, we evaluate individual Directors through peer-group meetings. The Non-Executive
and Executive Directors monitor, evaluate and appraise each other’s performance. The Non-Executive Directors also meet at least once
a year to appraise the Chair’s performance.
The appraisal process lets the Board see whether a Director is contributing effectively and showing commitment to the role. Under
the process, the Chairman or Chief Executive Officer takes up any performance issues with the individual Director and the Chairman
assesses whether they need any training and development.
The Chairman also regularly meets with the Chief Executive Officer and the other Directors outside of the Board meetings to discuss
progress and performance of the Group and the Board.
Appointments to the Board
We fill vacancies on the Board after evaluating candidates with the right balance of skills, knowledge and experience. We assess
whether or not to use recruitment consultants on a case-by-case basis. New Directors receive a formal induction covering guidance
about the workings of the Board and its Committees and also meet with senior managers of the Group for detailed information and
presentations on Group strategy, products and services. We appointed Natalie Gammon as a Non-Executive Director this year and this
induction process detailed above was followed.
8. Promote a corporate culture that is based on ethical values and behaviours
Information on our corporate culture, values and behaviours is in our Chairman’s Letter on page 42 and in our Corporate Responsibility
Report on pages 33 to 38.
9. Maintain governance structures and processes that are fit for purpose and support good decision making by the Board
You can find information on how we comply with this principle in the Investors section of our website, as well as in the Audit & Risk
Committee Report on pages 48 to 51, the Nomination Committee Report on page 63 and the Remuneration Committee Report on
pages 52 to 60.
10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other
relevant stakeholders
It is the Chairman’s responsibility to:
− communicate with shareholders and make sure that the Board knows about any concerns
− make sure members of the Board, particularly the Non-Executive Directors, understand major shareholders’ views about the
Group
− make sure the Board keeps its integrity and effectiveness.
It is very important to us to communicate regularly with our various stakeholder groups in a clear, fair and accurate way. We update
our website regularly, particularly the Investors section and users can register for emails about our announcements.
Our main ways of communicating with shareholders are the Annual Report and Accounts, full-year and half-year announcements,
the AGM and GBG Investor Roadshows.
You can read our financial reports and AGM Notices for the past five years on our website.
We announce the results of voting on all AGM resolutions shortly after the AGM itself. We also post a more detailed analysis of
voting at general meetings on our website. This includes any actions we would propose to take as a result where at least 20 percent
of shareholders voted against a resolution.
As part of our programme of keeping investors informed, we also held our capital markets event in 2019, focussing on the GBG
Identity solution area. Here, we discussed our strategic direction and highlighted how we are winning in a multi-billion dollar global
market by expanding into new geographies and sectors, focussing on the end-to-end customer lifecycle and using M&A to enhance
capability and reach. Copies of the video presentation and support material of the event (and past events) can be found on the
Investor section of our website.
47
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance AU DIT & R ISK COMM ITTE E REPO RT
Dear Shareholder
On behalf of your Board, I am pleased to present the Audit & Risk Committee Report for the year ended 31 March 2020.
The Committee oversees GBG’s financial reporting process on behalf of the Board. Our management has primary responsibility for
the financial statements and for maintaining effective internal control over financial reporting. The Committee’s role is to challenge
the Group’s Executive Management and auditor on:
− internal control and risk management systems;
− the processes and best practice for implementing policies;
− providing additional detail and explanation on each area of the audit report;
− the independence and skills of the external auditor; and
− the potential impact of developments in audit practice and international accounting standards and whether or not the planning
for such developments is effective.
The Board is confident that the Committee has sufficient recent financial experience, relevant to the sector in which the Group
operates with myself as Chair being a Chartered Certified Accountant and chairing the audit committees of other boards. We have
access to the financial expertise of the Group and its auditor and can seek professional advice at the Company’s expense if needed.
Accounts that are fair, balanced and understandable
We review the accounting principles, policies and practices adopted for preparing public financial information and we examine
documentation relating to the Annual Report, Interim Report, preliminary announcements and other related reports. We are
satisfied that the Annual Report is fair, balanced and provides the information necessary for shareholders to assess the Group’s
position and performance, as well as its business model and strategy.
Liz Catchpole
Audit & Risk Committee Chair
Key Responsibilities
The role of the Committee is to be responsible for:
− maintaining the integrity of the financial statements and other formal announcements relating to the Group’s financial
performance, challenging and reviewing the significant financial reporting judgements contained in them;
− considering the requirements and impact of new accounting standards;
− reviewing the controls that are in force to maintain the integrity of the financial information that we report to shareholders;
− considering and reviewing the effectiveness of the Group’s systems of internal control and risk management including, but not
limited to, the financial reporting process and the Group’s principal risks & uncertainties;
− reviewing key policies including those concerning revenue recognition and treasury;
− reviewing the effectiveness, scope and objectivity of the external audit process including assessing the outcomes and findings of
the work performed by the external auditor;
− developing, implementing and monitoring policy for engaging the Group’s external auditor to supply non-audit services;
− assessing the going concern and viability statements, reviewing the assumptions made by management, providing feedback to
management and challenging the scenarios modelled (especially in light of challenges and uncertainties created by Covid-19);
− reporting to the Board on any matters that need action or improvement and making recommendations for the steps to be taken;
and
− reporting to the Board on how the Committee has discharged its responsibilities throughout the year.
48
GBG Annual Report and Accounts 2020 Percentage Attendance
(2 meetings)
David
Rasche
100%
Charmaine
Carmichael
100%
Liz
Catchpole
100%
Natalie
Gammon*
100%
Note: this year’s meetings were attended by invitation by the Executive Directors, Company Secretary, external auditors, internal auditors (at our November
2019 meeting) and management.
*Natalie joined GBG in November 2019 and her attendance is based on the number of meetings since her start date.
Report on the work of the Committee
Covid-19
The Committee has and continues to consider the potential impact of the Covid-19 pandemic on the financial position, cashflows and
liquidity of the Group, particularly in relation to the preparation of the Group’s financial statements on a going concern basis. Appropriate
and rigorous stress testing against a range of potential and extreme scenarios has been undertaken to support the assessment of the
business as a going concern. The Committee provided input to and challenge of this review process. The Group’s going concern and
viability statements are set out on pages 66 & 32 and these set out the approach taken and the conclusions made. The Committee has also
reviewed and challenged the Group’s other Covid-19 risk assessment activities covering its operational, people, customer and information
security areas. An update on its review is set out in the Principal Risks and Uncertainties Report on pages 24 to 32.
Annual Report & Accounts
The Committee reviewed the audited consolidated financial statements in the Annual Report and discussed it with the external auditor and
management. Our rigorous challenges and discussions focussed on the quality, not just the acceptability, of the accounting principles, as
well as the reasonableness of significant judgments, the clarity of disclosures in the financial statements, particularly in reference to the
impact of Covid-19 and the effectiveness of internal control over financial reporting.
Outside of the formal Committee meetings, I also meet with the external auditor, the internal auditor and with individual members of
the Group’s Management and Finance Team. This was principally to discuss the risks and challenges faced by the business and, most
importantly, how these were being addressed.
External Audit
Last year I reported that we had approved and carried out a rigorous and competitive tender process. The Committee unanimously
agreed to propose a resolution at the 2019 Annual General Meeting to reappoint EY as external auditors, which was duly passed.
Following the audit tender process, we approved EY’s terms of engagement, scope of work and the process for the interim review
and the annual audit. We also reviewed, challenged and agreed the audit fee proposals and approval for non-audit services fees,
tenure and audit partner rotation (based on best practice and professional standards within the United Kingdom). I have been
in regular contact with the audit senior partner at EY during the year and since the year-end to discuss, amongst other things,
progress of this year’s audit and specific actions required in response to the Covid-19 pandemic.
Internal Audit
Last year I reported on the progress we had made in the search for an independent external assurance provider and I am pleased
to report that we have since appointed BDO LLP to conduct our internal audit. During the year they completed an engagement
assessing our overall Risk Management Framework and also commenced a review of our Cybersecurity policies and procedures.
The completion of the Cybersecurity review requires travel to our international subsidiaries and, therefore, this element of its review
has had to be postponed until travel restrictions have been lifted following the Covid-19 outbreak. Since the end of the year, I have
been in contact with BDO to discuss progress and status of our internal audit programme. In addition, the Audit Committee has also
met with BDO and GBG’s Management Team to review and challenge the review reports produced by BDO LLP and management’s
responses.
The internal audit plan for the year to 31 March 2021 will be finalised once there is greater visibility on developments and impacts
associated with Covid-19.
49
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance AU DIT & RISK C OMM ITTE E R EPO RT
Non-audit Services
Last year we reported that in the coming year the only non-audit service to be provided by EY would be the review of the Group’s half-
year results. With the exception of specific pieces of tax related work with our overseas subsidiaries which had already commenced at
the date of that report, EY did not perform any other non-audit services during the year. KPMG LLP were appointed as Group Tax Advisor
during the year which included taking over the remaining overseas tax services from EY. It is expected that EY will not perform any non-
audit services (except for the review of the half-year results and covenant compliance review) in the coming year.
The tax engagements which concluded during the current year were not considered material with total fees of £10,000, equivalent
to 3% of the total amount paid to EY in the year. To demonstrate EY’s independence and objectivity, they undertook their standard
independence procedures in relation to those engagements. Except for this work conducted by EY, all other tax engagements are
undertaken by KPMG LLP.
We have included further details of the non-audit fees in note 6 to the financial statements. EY were selected for these tasks due to their
alignment with work carried out under the audit.
Advisor Independence
The Board ensures external advisors remain independent by having separate firms (non-EY) carrying out financial due diligence
relating to acquisitions, tax matters and acquisition advisory.
The Committee has and will continue to assess the independence, tenure and quality of the external auditor at least once a year
and in addition to requiring both verbal and written confirmation of the auditor’s independence. EY has confirmed that there are no
relationships between themselves and the Group that could have a bearing on their independence.
Whistleblowing Policy
We have carried out an annual review of our whistleblowing policy to ensure that it is still appropriate for a Group of our size and
the geographies in which we operate and we are satisfied that it is. We receive monthly reports from our external whistleblowing
hotline provider and can confirm that no concerns have been raised during the year.
Anti-tax Evasion Policy
In light of the Criminal Finance Act 2017, the Group adopted and as in place a policy to uphold all relevant laws that counter tax
evasion. This policy has been added to the Group’s ‘Code of Conduct’ and published on our intranet.
Internal Controls and Risk Management
Our corporate objective is to maximise long-term stakeholder value. As we work towards this objective, our Directors recognise that
creating value is the reward for taking business risks. The Board’s policy on risk management covers all significant business risks
to the Group, including financial, operational and compliance risks that could be barriers to achieving our business objectives. We
regularly monitor risk and control processes across headline risk areas and other business-specific risk areas, providing the basis for
regular and exception reporting to management and the Board.
The risk assessment and reporting criteria are designed to provide the Board with a consistent, Group-wide perspective of the key
risks. The reports to the Board, which are submitted at least every six months, include an assessment of how likely risks are to
happen and the impact if they did happen, as well as our risk mitigation initiatives and how effective these are.
The Board has overall responsibility for the Group’s approach to assessing risk and systems of internal control and for monitoring
how effective they are. There are limitations inherent in any system of internal control. The system is designed to manage risks
rather than eliminate them. It provides only reasonable and not absolute assurance against material misstatement or loss.
The Board considers risk assessment and control, within an acceptable risk/reward profile, to be fundamental to achieving our
corporate objectives. There is an ongoing process to identify, evaluate and manage the significant risks faced by the Group and
the effectiveness of related controls. We review the process at least every six months and then report our findings to the Board in
accordance with the Financial Reporting Council’s guidance on internal control.
During the year, the Internal Controls Team met to assess current risks and to review and monitor the controls that currently
mitigate those risks. In addition, to ensure that the Group’s risk management processes continued to address the ever-changing
threats to business in general and GBG specifically (such as new cyber-threats, changes in regulation) the Internal Controls
Coordinator (Company Secretary) and his team also met with individual risk owners outside of the Internal Controls Team meetings
process. This was in order to discuss any internal and external developments to their specific risk areas and to assess whether any
50
GBG Annual Report and Accounts 2020 review of their risk profile (such as additional mitigation actions) needed to be made. Feedback from these meetings was discussed
at the Group’s larger internal control meeting in June 2020. This meeting was originally due to take place at the end of March but
with the disruption and challenges caused by Covid-19, the meeting was postponed whilst the team dealt with the more immediate
issues of enacting GBG’s business continuity plans and the associated activities of protecting the business and its various interests.
At the reconvened meeting, all risk owners discussed proposed changes to the risk register and any potential new risks to the
Group.
The Internal Controls Coordinator chairs the meetings to collate and present the results of the risk reviews to the Committee. This
allows the Committee to monitor the controls that are in force and identify any gaps in the control environment. The Committee
also determines whether any action is needed in respect of any control issues raised by the Internal Controls Coordinator or the
external auditor.
The Internal Controls Coordinator monitors and assesses the Group’s risk management functions on a regular basis and reports
directly to the Chief Executive Officer on matters of internal control and risk assessment.
You can find more information on the Group’s principal risks, along with any mitigating factors, on pages 24 to 32.
The Group’s Internal Controls Coordinator, Executive Management and external auditor have satisfied the Board that there is an
ongoing process to identify, evaluate and manage the significant risks faced by the Group. This process has been operational during
the year and is in accordance with the Financial Reporting Council's guidance on risk and internal control.
Board-level Reporting on Risk Management and Internal Control
This year, we have reviewed reports from the external auditor and executive management relating to internal control, financial
reporting, risks and risk management and presented those reports to the Board. This process is reviewed on a quarterly basis to
make sure the risks included in the bi-annual reports are valid and relevant.
We have provided the Board with an independent assessment of the Group’s financial position, accounting affairs and internal
control systems.
The Audit Committee has also met with both the internal and external auditor without management being present.
Effectiveness Review of the Committee
The Committee’s effectiveness was reviewed during the year as part of the annual internal review of the Board and its Committees. I
am pleased to report that the review concluded that the Committee continued to discharge its duties effectively.
Terms of Reference
The terms of reference of the Audit & Risk Committee, including its role and the authority delegated to it by the Board, were
reviewed and updated during the year and details are available on the Group’s website www.gbgplc.com/investors. In accordance
with its terms of reference, the Committee has reported to the Board as to how it has discharged its responsibilities throughout the
year.
Liz Catchpole
Audit & Risk Committee Chair
51
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance REMUN ERATION COMMI TTEE R EPO R T
An nual Statement from the Chair o f t he Re mu ne ra t io n C o m m itt ee
Information Not Subject to Audit
This report is for the year ended 31 March 2020. It sets out the remuneration policy and the remuneration details for the Executive and
Non-Executive Directors of the Company. As an AIM-quoted company, the information provided is disclosed to fulfil the requirements
of AIM Rule 19. Complying with AIM Rule 26, GBG complies with the Quoted Companies Alliance Corporate Governance Code.
Although GBG is not required to comply with Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008, the Company is committed to achieving both high governance standards and a simple and effective
remuneration structure. The following information is unaudited except where stated.
Dear Shareholder
I am pleased to present the Directors’ Remuneration Report for the year ended 31 March 2020, in keeping with last year’s structure,
the Report has been separated into three sections: the Annual Statement; the Directors’ Remuneration Policy; and the Director’s
Annual Report on Remuneration - which describes how the policy has been implemented throughout the year and looks ahead to
2020-21. This year we present the remuneration policy in a table as we did last year to provide clarity and simplicity in line with best
practice amongst AIM companies.
The Committee is primarily responsible for determining and recommending to the Board the policy for the remuneration and
employment terms of the Executive Directors. The Committee is also responsible for the review of and making recommendations
to the Board in relation to share incentive plans and performance related pay schemes and their associated targets, as well as
employee benefit structures across the Group. In discharging its duties, the Remuneration Committee considers the wider economy,
the market in which the Company operates and the overall performance of the Company.
An advisory resolution will be put to shareholders at the AGM on 10 August 2020, asking them to consider and approve this Report.
A similar resolution was put to the 2019 AGM and was supported by 98.28% of the votes cast.
We firmly believe that our remuneration policy effectively rewards and incentivises our Executive and Senior Management Team in
pursuit of the Company’s strategic aims and that these incentives align with long-term stakeholder value creation.
Appointment of an Additional Non-Executive Director & Transition of the Chair of the Remuneration Committee
We are pleased to welcome Natalie Gammon as a member of the Remuneration Committee following her appointment as a
Non-Executive Director to the Board in November 2019. The Committee now comprises of the Company’s four independent Non-
Executive Directors. The brief for Natalie’s recruitment included her taking on the responsibility of the Chair of the Remuneration
Committee at a mutually convenient time after her appointment. It is proposed that Natalie takes up the position of Chair of the
Remuneration Committee at the conclusion of the Company’s AGM and thereafter I will continue to serve as a member of the
Remuneration Committee.
52
GBG Annual Report and Accounts 2020 The Committee at a Glance
The number of Remuneration Committee meetings held during the year was two, details of attendance is set out below:
Number of Meetings and Percentage Attendance
(2 meetings)
Charmaine
Carmichael
100%
David
Rasche
100%
Liz
Catchpole
100%
Natalie
Gammon
100%
* Natalie Gammon joined GBG in November 2019 and her attendance is based on the number of meetings attended since her start date
The Committee has discharged its responsibilities throughout 2019-20 by:
− considering and approving bonus measure & KPIs;*
− considering and approving Executive salary increases;*
− approving Executive bonuses earned during the 2018-19 year but awarded this year;*
− considering and approving share matching awards for Executive Directors;*
− considering and approving the exercise and sale of Executive Directors share awards;*
− reviewed and implemented a Malas & Clawback Policy and a Minimum Shareholding Policy; and
− reviewed and considered the Company’s LTIP structure to ensure that it remains appropriate and effective in supporting the
Company’s growth strategy and aligned with shareholders’ interests.*
Note *: These matters were agreed prior to the impact of the Covid-19 pandemic.
Impact of Covid-19 on Remuneration Decisions
Despite the positive performance of the Company during 2019-20, the full effect of the Covid-19 pandemic on the business is still
unfolding and the duration of the crisis is still unknown. A number of actions have been approved by the Board since March in order
to conserve cash and preserve short-term liquidity as well as providing financial flexibility to support and invest as GBG navigates
through the pandemic.
It has been agreed to implement an immediate Group-wide pay freeze, pausing of all non-essential recruitment and deferring bonus
payments earned by the Executive Directors in respect of 2019-20. In addition, annual bonus targets for 2021-21 have not been
established. With annual bonus payments deferred, the ability for Executive Directors to participate in the share match scheme
is restricted. The Committee will keep 2020-21 annual bonus and long-term incentive awards under review with a view to setting
targets and making awards later in the year and as circumstances unfold, the Committee will consider how best to make long-term
incentive awards to Executive Directors during 2020-21.
Performance and Decisions on Remuneration Taken During 2019-20
Company Performance
Despite some modest impact to revenues during Q4 as a result of Covid-19, GBG has continued to meet the Board’s growth
expectations throughout the year, with revenue increasing by 38.7% and organic growth of 10.7% on a constant currency basis.
However, despite the positive performance of the Company, as announced in our Trading update in April 2020, the full effect of the
Covid-19 pandemic on the business is still unknown. A number of actions have been approved by the Board in order to conserve
cash and preserve short-term liquidity and are detailed above.
53
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance REMUN ERATION COMMI TTEE R EPO R T
An nual Statement from the Chair o f t he Re mu ne ra t io n C o m m itt ee
Annual Bonus
In light of this year’s strong performance and targets being met, annual bonuses to the CEO, CFO & COO and the Group Managing
Director totalling 143.4%, 123.4% and 123.4% of their respective salaries was earned. However, and as detailed above, in light of
the issues and uncertainties caused by Covid-19 the payment of these bonuses has been deferred and the Committee will keep the
matter of potential payment under review during FY21 in light of future developments.
Share Awards Granted, Vested and Exercised During the Year
On 27 September 2019, share match awards were made to the CEO, CFO & COO and Group Managing Director under the Company’s
share matching scheme following their reinvestment of salary and bonus in purchasing shares in GBG. Further details of the awards
are set out under the section entitled Long Term Incentive Awards on page 60. A summary of the share matching scheme is set out
in the remuneration policy table on pages 56 and 57.
Share match awards granted to the CFO & COO and the Group Managing Director on 8 September 2016, which were subject to a
demanding three-year EPS growth targets, vested during the year. Following strong performance, these awards vested at 99.25% of
maximum. Further details regarding the EPS targets are set out in the remuneration policy table on pages 56 and 57.
Throughout the year, the Remuneration Committee approved the exercise and sale of the Directors’ share options subject to the
minimum shareholding policy. Details of the number of shares sold and subsequent holdings can be found on page 61.
Engagement with Shareholders
Early in our 2019/20 financial year, we consulted with major shareholders in relation to a number of aspects of executive
remuneration for the year ahead. This consultation was referred to in our 2019 annual report. As noted above, in light of the current
situation in respect of Covid-19, payment of the Executive Directors bonuses accrued during FY19/20 has been deferred. The
Committee will keep the matter of potential payment under review during FY21 in light of future developments.
Committee Evaluation
Following an external evaluation of the Board and its Committees, the results of which were reported in last year’s annual report and
accounts, the Company Secretary has worked alongside the Remuneration Committee and GBG’s Management Team to improve
the flow of information between the Committee and the Board.
Looking forward to financial year 2020-2021
GBG has always recognised the need to report in an open and transparent manner and align with shareholder and stakeholder
expectations. The policy table on pages 56 and 57 sets out how annual bonus and long-term incentives operate under the
remuneration policy with some information on the historic parameters.
We trust you will find this Report to be informative and transparent and we look forward to receiving your support. We are
committed to and encourage open dialogue with our shareholders and are pleased to hear feedback. Further information regarding
our engagement with stakeholders can be found in our Section 172 Statement on pages 67 to 70.
Charmaine Carmichael
Remuneration Committee Chair
54
GBG Annual Report and Accounts 2020 Remuneration Policy
Our remuneration policy is formulated to attract and retain high-calibre executives and motivate them to develop and implement our
business strategy in order to optimise long-term stakeholder value. It is the intention that this policy should conform to best practice
standards and that it will continue to apply for 2020 and subsequent years, subject to ongoing review as appropriate. The policy is
framed around the following key principles:
− total rewards will be set at levels that are sufficiently competitive to enable the recruitment and retention of high-calibre
executives;
− total incentive-based rewards will be earned through the achievement of demanding performance conditions consistent with
shareholder interests;
− incentive plans, performance measures and targets will be structured to operate soundly throughout the business cycle;
− the design of long-term incentives will be prudent and will not expose shareholders to unreasonable financial risk;
− in considering the market positioning of reward elements, account will be taken of the performance of the Group and of each
individual Executive Director; and
− reward practice will conform to best practice standards as far as reasonably practicable.
When formulating the scale and structure of remuneration levels the Remuneration Committee considers market rates, drawn
from external market data, for the level of remuneration offered to directors of similar type and seniority in other companies
whose activities are similar to GBG. In addition, we also consider the pay and employment conditions of our team members when
determining Directors’ remuneration. Where appropriate we seek advice from external consultants and the services of h2glenfern
Limited were retained during the year. No Director was involved in deciding the level and composition of their own remuneration.
Each Executive Director’s remuneration package consists of basic salary, bonus, share options, health and car benefits, prolonged
disability insurance and pension contributions. An appropriate balance is maintained between the fixed and performance related
remuneration elements. The details of individual components of the remuneration packages and service contracts are outlined in the
table below.
Bonus and share option awards to Executive Directors are subject to clawback and malus provisions. In addition, Executive Directors
are required within 5 years of their appointment to build, and thereafter maintain, a minimum level of share ownership in GBG shares.
Details of the minimum shareholding policy is detailed in the table below.
This part of the report sets out the remuneration policy with regard to the Executive Directors. The policy on each element of
remuneration and how it operates, is detailed in the table below.
55
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance REMUN ERATION COMMI TTEE R EPO R T
Element
Link to remuneration
policy/strategy
Base salary
To attract and retain high-
calibre executives.
Key features/Operation
Reviewed annually, changes effective
from 1st June. Executive Director’s
experience, responsibilities and
performance taken into consideration.
Performance is assessed both from an
individual and business perspective.
Benefits
To provide an attractive
package alongside basic
salary to attract and retain
executives.
Benefits include but are not limited to
private medical insurance, fuel benefit
and dental insurance. Cash in lieu of
benefits is provided for car allowances.
Pensions
To provide market competitive
arrangements.
Performance
related bonus
To incentivise achievement
of company profit targets
and other near-term strategic
objectives.
Long term
incentives
(Share
matching
plan)
To align executives to the
interests of shareholders
and to incentivise long-term
financial performance.
The company contributes to executives’
existing personal pension schemes.
Cash payments in lieu of pension are
available in the event an executive
has exceeded their personal pension
allowance.
Based on performance against targets
related to financial and individual KPIs
agreed at the start of the year.
No formal deferral requirement.
Executive Directors can re-invest up
to 80% of their bonus in the Share
Matching Plan. In the past, Executive
Directors have reinvested large
proportions of their bonus in shares.
Participants may purchase shares up
to a maximum aggregate value of 80%
of the amount of their bonus and/or
20% of their annual salary (‘Investment
Shares’). All of these amounts are net
of the employee’s national insurance
and income tax paid.
In consideration, the Company
grants an option to allot a number
of matching shares in proportion to
the Investment Shares acquired on a
grossed up for income tax basis.
Potential
value
Effective 1 April
2019:
CEO salary:
£504,300.
COO & CFO salary:
£294,175.
GMD Salary:
£294,175.
The potential
value of medical
insurance benefits
is limited by the
terms of the policy.
CEO: 17.5% on
basic salary.
COO & CFO: 12.5%
on basic salary.
GMD: 12.5% on
basic salary.
Payments capped
at 150% of salary
for the CEO and
130% of salary for
the CFO & COO and
GMD.
Matching shares
awarded are
capped at up
to three times
the number of
Investment Shares
purchased by the
participant.
Prior to 31 March
2018: 2.0x
matching rate.
For years ended 31
March 2018 and 31
March 2019: 1.75x
matching rate.
For year ended 31
March 2020: 2.0x
matching rate.
Performance metrics
None.
None.
None.
EPS growth targets and non-
financial KPIs aligned to strategic
objectives. These include
improving employee engagement,
increasing GBG’s Net Promotor
Scores and increasing organic
growth.
For the executives the maximum
pay out for the EPS growth target
is currently 130% of base salary
for the CEO and 110% of base
salary CFO & COO and GMD.
The maximum pay out for all
executives for the individual KPIs
is currently 20% of base salary.
Adjusted EPS growth condition
measured over three financial
years.
For awards made up to year
ended 31 March 2019, the range
of lower level growth targets for
options is between 10% and 15%.
The range of upper level growth
targets for is between 22.5%
and 25%. Straight line vesting
between target ranges.
For the award made during the
year ended 31 March 2020, 25%
of the award will vest if 10% EPS
CAGR is achieved over three
consecutive financial years with
full vesting being applied where
a level of 17.5% EPS CAGR is
achieved.
56
GBG Annual Report and Accounts 2020 Element
Shareholding
guideline
Link to remuneration
policy/strategy
Incentivises executives to
achieve the Company’s long-
term strategy and create
sustainable stakeholder value.
Aligns with shareholder
interests.
Key features/Operation
Target value to be achieved over five
years:
− CEO – 200% of salary
− CFO & COO – 150% of salary
− GMD – 150% of salary
Until the shareholding guideline has
been achieved, executives must retain
at least half of vested LTIP awards
beyond those needing to be sold to
cover tax liabilities and exercise costs.
Potential
value
Performance metrics
n/a
n/a
Performance Share Plan ("PSP")
The company operates a PSP for all team members. When adopted, the Company stated that it was the intention at present that
awards would be made to team members below the level of Executive Director. No awards to Executive Directors have been made
to date. The plan was approved at the 2018 AGM. Awards are subject to a three-year EPS performance condition. Employees can be
granted awards of nil cost options with an aggregate value on date of grant of up to 100% of base salary. The awards are subject to
malus and clawback.
Consideration of Employment Conditions Elsewhere in the Group
The Committee considers pay and conditions of team members throughout the Group when determining remuneration.
The Committee considers the relationship between Executive Director rewards and broader changes to UK team members’
remuneration. Whilst the company does not formally consult with team members as part of the process, the Board seeks
feedback from employee surveys and takes a general view on employee remuneration into account when determining executive
remuneration.
Shareholder Consultation
The Company welcomes dialogue with its shareholders over matters of remuneration and will seek the views of its significant
shareholders if and when any major policy changes and decisions are being planned. The Chairman of the Remuneration
Committee is available for contact with institutional investors concerning the Company’s approach to remuneration. The annual
Report on Remuneration will be put to an advisory vote at the coming AGM.
57
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance REMUN ERATION COMMI TTEE R EPO R T
Service Contracts
The service contracts and letters of appointment of the Directors include the following terms:
Executive Directors
Chris Clark
Dave Wilson
Nick Brown
Non-Executive Directors
Charmaine Carmichael
David Rasche
Liz Catchpole
Natalie Gammon
Date of contract
1 April 2017
1 October 2009
3 April 2017
3 January 2020
1 September 2019
1 September 2017
19 November 2019
Unexpired term
(months) or rolling contract
Rolling Contract
Rolling Contract
Rolling Contract
Notice period
(months)
6
6
6
9
5
5*
7
1
1
1
1
* Liz Catchpole has a 3-year fixed term contract which commenced on 1 September 2017. In accordance with GBG’s Articles of Association, her subsequent reappointment is
subject to shareholder approval at an Annual General Meeting.
There are no special provisions for compensation in the event of loss of office. The Remuneration Committee considers the
circumstances of individual cases of early termination and determines compensation payments accordingly.
Non-Executive Directors
The Chairman and the other Non-Executive Directors’ remuneration comprise only of fees. The Chairman’s fee is approved by the
Board on the recommendation of the Remuneration Committee. The other Non-Executives’ fees are approved by the Board on
the recommendation of the Chairman and CEO. The Non-Executive Directors are not involved in any decisions about their own
remuneration. Non-Executive directors receive a base fee and can earn extra fees for holding the position of Committee Chair or
Senior Independent Director.
In line with the Group-wide pay freeze, no increase in Non-Executives fees for 2020-21 has been proposed or agreed. The fees for
the Non-Executives effective are presented in the table below:
Position
Non-Executive Chair
Non-Executive Director
Committee Chair
Senior Independent Director
2019-20 Fee
£145,000
£55,000
£7,100
£7,600
2020-21 Fee
£145,000
£55,000
£7,100
£7,600
58
GBG Annual Report and Accounts 2020 AN NUA L REPORT ON R EM UNE RATI O N
Introduction
This Annual Report on Remuneration sets out information about the remuneration of the Directors of the Company, for the period
ended 31 March 2020.
Information subject to audit
Directors’ Remuneration
2020
Executives
Chris Clark
Dave Wilson
Nick Brown
Non-Executives
David Rasche
Charmaine Carmichael
Liz Catchpole
Natalie Gammon
Salaries / Fees
£’000
504
294
294
Cash in lieu of
benefits in kind
£’000
103
14
12
Benefits in
kind
£’000
–
–
–
Bonuses
£’000
723
363
363
Pension
£’000
–
37
37
144
60
68
20
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020 Total
£’000
1,330
708
706
144
60
68
20
Note: Executive Directors' bonus payments accrued for FY20 have been deferred due to the Covid-19 pandemic.
2019
Executives
Chris Clark*
Dave Wilson*
Nick Brown*
Non-Executives
David Rasche
Charmaine Carmichael
Liz Catchpole
Salaries / Fees
£’000
491
287
287
Cash in lieu of
benefits in kind
£’000
96
14
12
Benefits in
kind
£’000
2
2
2
135
51
59
–
–
–
–
–
–
Bonuses
£’000
608
355
355
–
–
–
Pension
£’000
–
36
36
–
–
–
2019 Total
£’000
1,197
694
692
135
51
59
Details of cash in lieu of benefits in kind and benefits in kind are disclosed above.
Note: Chris Clark, having reached the maximum level permitted for a personal pension, receives a direct payment in lieu of his pension entitlement, which was £90,352
(2019: £84,000). This figure is included in the column entitled ‘Cash in lieu of benefits in kind’ in the Director’s Remuneration table above.
Information not subject to audit
Annual Bonuses
As detailed earlier in this report, bonuses have been earned by the Executive Directors based on the performance of the Company
in the year to 31 March 2020. Due to the Covid-19 pandemic the Board approved a number of actions in order to conserve cash and
short-term liquidity. Executive Director bonuses accrued during the year have been deferred and the Committee will keep the matter
of potential payment under review during FY21 in light of future developments.
Despite the decision to defer the payment, the Committee has set out below how the bonus was achieved and the quantum
calculated.
The details of the Executive Bonus Scheme 2019-20 are set out below and includes details of the annual bonus targets, threshold and
maximum levels and bonuses paid to each Executive Director. Bonuses were earned based on the achievement of a range of financial
and non-financial targets as follows:
− EPS growth targets where the maximum pay out for the achieving the target was capped at 130% of base salary for the CEO and
110% of base salary for the CFO & COO and Group MD; and
− achieving non-financial key performance indicators (KPIs), aligned to our strategic objectives and covering: improvements
in employee engagement; increasing GBG’s Net Promotor Scores (NPS); as well as increasing level of organic growth. The
maximum bonus that could be earned by the Executive Directors for achieving these targets was capped at 20% of base salary.
59
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance ANNUAL REPORT ON R EM UNE RATI O N
EPS growth
Bonus awarded
Executive
Directors
Chris Clark
Dave Wilson
Nick Brown
Budget 22.43p
per share
40 %
40 %
40 %
Max 24.32p
per share
130 %
110 %
110 %
Achievement
of KPIs %
20 %
20 %
20 %
Total max
bonus %
150 %
130 %
130 %
EPS target
achieved %
130%
110%
110%
KPI target
achieved %
13.33%
13.33%
13.33%
% of salary
143.34%
123.34%
123.34%
£’000
£723
£363
£363
Long Term Incentive Awards
Share match awards granted to the CFO & COO and the Group Managing Director on 8 September 2016, which were subject to a
demanding three-year EPS growth targets, vested during the year. Following strong performance, these awards vested at 99.25% of
the maximum.
In addition, the second tranche of 200,000 compensatory options awarded to Chris Clark vested on 1 April 2019, the second
anniversary of the grant date, were exercised during the year.
Following the investment of the Executive Directors in acquiring shares in the Group in 2019-20, share matching awards over
206,136, 125,226 and 122,721 shares were made on 27 September 2019 to Chris Clark, Dave Wilson and Nick Brown respectively.
The amount of their investment was grossed up for income taxes and the match rate of 2.0 times deemed investment applied.
The Share Matching Awards are subject to a three-year adjusted EPS compound annual growth performance condition. 25% of the
award will vest if 10% EPS CAGR is achieved over three consecutive financial years with full vesting being applied where a level of
17.5% EPS CAGR is achieved.
The CFO & COO also exercised a market value option awarded to him on 30 July 2010 (prior to the adoption of the share match
scheme). The share option was subject to achieving compound annual growth in EPS over a three-year period of at least 20 per
cent. The option vested fully on the third anniversary of the date of the award as the maximum target was achieved and was
exercised in line with the terms of the award which required the option to be exercised before the tenth anniversary of the award.
As part of his recruitment package, Chris Clark, was awarded an option over 1,000,000 shares (“Incentive Option”) on joining
GBG on 1 April 2017. The exercise price of 293p was set as the closing share price on the day before his appointment. The award
will vest in three equal tranches three, four and five years from grant subject to an adjusted EPS compound annual growth rate
with vesting commencing from zero at 16.25% and increasing on a straight-line basis to full vesting at 26.25%. Based on GBG’s EPS
performance, 72.3% of the first tranche of Chris Clark’s Incentive Option has vested.
Share matching awards over 113,208 and 119,917 shares were made on 5 February 2018 Dave Wilson and Nick Brown respectively
following their investment in acquiring shares in the Group. The amount of their investment was grossed up for income taxes and
the match rate of 2.0 times deemed investment applied. The Share Matching Awards were subject to a three-year adjusted EPS
compound annual growth performance condition with vesting commencing from zero at 10% and increasing on a straight-line basis
to full vesting at 22.5%. Based on GBG’s EPS performance, these awards have fully vested.
60
GBG Annual Report and Accounts 2020 Information subject to audit
Directors’ Interest in the Group’s Share Option Schemes
Option
Exercise Price
(p)
293.00
293.00
2.50
2.50
2.50
Dave Wilson
Executive Directors
Chris Clark
Share Option
Scheme
SOS
SOS
Comp
SMP
SMP
Granted During
Financial Year
–
–
–
–
206,136
206,136
–
–
–
–
–
125,266
125,266
–
–
–
–
122,721
122,721
Key: SOS: Share option plans adopted in or prior to 2010 SMP: Share matching plan Comp: Compensatory share option award
Exercised During
Financial Year
–
–
(200,000)
–
–
(200,000)
(211,164)
(159,177)
(129,783)
–
–
–
500,124
(190,595)
(117,103)
–
–
–
(307,698)
Lapsed During
Financial Year
–
–
–
–
–
–
–
–
(981)
–
–
–
(981)
–
(885)
–
–
–
(885)
At 31 March
2019
10,238
989,762
200,000
128,853
–
1,328,853
211,164
159,177
130,764
113,208
125,379
–
739,692
190,595
117,988
119,917
125,376
–
553,876
At 31 March
2020
10,238
989,762
–
128,853
206,136
1,334,989
–
–
–
113,208
125,379
125,226
363,813
–
–
119,917
125,376
122,721
368,014
SOS
SMP
SMP
SMP
SMP
SMP
SMP
SMP
SMP
SMP
SMP
Nick Brown
25.75
2.50
2.50
2.50
2.50
2.50
2.50
2.50
2.50
2.50
2.50
Date
Exercisable
2020-27
2020-27
2018-20
2021-22
2022-23
2013-20
2017-25
2019-20
2020-21
2021-22
2022-23
2017-18
2019-20
2020-21
2021-22
2022-23
Notes:
Share Option Scheme Details are provided in relation to the Directors’ Interests in each Share Option Scheme offered.
Further information about the general terms of the share option schemes we offer can be found on pages 55 to 57 of this
Remuneration Report and note 29 to the accounts.
The aggregate gains made on the exercise of options during the year was £5,936,428 (2019: £2,461,461).
Information not subject to audit
At 31 March 2020, our quoted share price on the London Stock Exchange was 582p and the lowest and highest prices during the
year ended 31 March 2020 were 474p and 800p on 23 March 2020 and 6 January 2020, respectively.
Directors’ Interests
Set out below are the beneficial interests of the Directors and their families in the share capital of the Group at the beginning and
end of the year.
Ordinary shares of 2.5p
David Rasche
Chris Clark
Dave Wilson
Nick Brown
Charmaine Carmichael
Liz Catchpole
Natalie Gammon
31 March 2020
699,333
273,050
170,122
500,000
27,937
12,195
–
1 April 2019
903,525
128,524
354,337
992,196
27,937
12,195
n/a
There have been no other changes to Directors’ interests in the shares of the Group from the end of the year to 30 June 2020. Full
details of the Directors’ interests in the shares and options of the Group are contained in the Register of Directors’ Interests, which is
open to inspection.
In accordance with the calculations set out in GBG’s Shareholding Policy, based on the closing share price at 7 June 2019 of
581p, the value of Chris Clark, Dave Wilson and Nick Brown’s shareholding represented 315%, 336% and 988% of their salaries,
respectively and as such their holdings met those required under the Shareholding Guideline.
61
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance ANNUAL REPORT ON R EM UNE RATI O N
Shareholder Return Graph
The graph below shows the percentage change in total shareholder return for each of the last five financial years compared to the
FTSE Techmark (All Share) index.
The FTSE Techmark (All Share) was selected as it represents a broad equity index in which the Group can be compared against.
400
350
300
250
200
%
150
100
50
0
-50
-100
2015
2016
2017
2018
2019
2020
GBG
FTSE Techmark (All-Share)
Remuneration in 2020-21
Salary
In the light of Covid-19, the salaries of the Executive Directors have not been increased in line with the Group-wide pay freeze.
Pay across the company will be kept under review as the situation unfolds.
Benefits
There will be no change to the benefits for the Executive Directors in the year commencing 1 April 2020.
Annual Bonus
In the light of Covid-19 and the uncertainty of the outlook, no targets have yet been set. The Committee will keep this under
review and later in the year will consider targets and how the annual bonus for Executive Directors may operate during FY21.
Long Term
Incentives
As circumstances unfold, the Committee will later in the year consider how best it may make long term incentive awards,
including determining performance conditions, to the Executive Directors.
The fees for Non-Executive Directors will not increase for the year commencing 1 April 2020 in line with the Group-wide pay
freeze as a result of Covid-19.
Non-Executive
Director
Remuneration
62
GBG Annual Report and Accounts 2020
NOMIN AT ION CO M MITTE E RE POR T
Dear Shareholder
On behalf of your Board, I am pleased to present the Nomination Committee Report for the year ended 31 March 2020.
Report on the work of the Committee
Appointments to the Board
When I wrote to you last year, we had started the process of searching for an additional Non-Executive Director. I am delighted
to report that we welcomed Natalie Gammon to the Board in November 2019. Natalie has over 20 years of global technology,
commercial and operational experience. She also has a track record of successful digital, strategic and transformational change
programmes in both private equity and blue-chip companies. Her excellent technical skills and knowledge have added to the Board’s
competencies in a valuable way and we welcome her insight and input as GBG continues to grow and develop.
We continue to monitor the balance of skills and experience on the Board as well as its independence, diversity and knowledge.
Diversity, Equality & Gender
Diversity is important when we appoint someone new to the Board, or across the Group. We make sure our recruitment processes
do not discriminate against existing team members and applicants. The Group’s team members have a broad range of skills,
backgrounds and experience, reflecting both the type of industry we are in and the places where we operate.
We are committed to equal opportunities in every part of our business and we promote team members on merit. We recruit, train,
promote and retain skilled and motivated people regardless of gender, age, marital status, disability, sexual orientation, race and
religion, or ethnic or national origin. In line with this, we also promote a culture of openness and responsibility in our business.
We want to increase the number of women across all levels of our organisation. As a global business we always consider our success
against our overall people diversity. Part of our significant growth in the last 12 months has been outside of the UK. As a result of this
we have seen an increase in women in senior roles across the Group.
We have reflected that some of the change can only be made by taking slow steps. We will continue to promote our culture of
diversity as we endeavour to create a more gender and inclusive organisation that is representative of our ambitions.
There is more information in our Corporate Responsibility Statement on pages 33 to 38.
David Rasche
Nomination Committee Chair
Percentage of Attendance
( 1 meeting)
David
Rasche
100%
Chris
Clark
100%
Dave
Wilson
100%
Charmaine
Carmichael
100%
Liz
Catchpole
100%
The Nomination Committee is made up of members drawn from the Board as and when the Committee needs them. The table shows everyone who served
on the Committee during this financial year.
Role and Responsibilities
The primary role and responsibilities of the Committee are to:
− ensure that appropriate procedures are in place to nominate and select candidates for appointment to the Board, particularly in
terms of the balance of skills, experience, independence and knowledge of the Board; and
− make recommendations to the Board about new appointments, re-electing Directors, succession planning and Board
composition, particularly the benefits of diversity on the Board, including gender.
The Nomination Committee’s terms of reference, including its role and the authority the Board delegates to it, are on the Group’s
website: www.gbgplc.com/investors
63
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance DIRECTORS’ REPOR T
The Directors present their report, together with the audited accounts in relation to the Group activities for the year ended 31 March 2020.
In accordance with s414c of the Companies Act 2006, certain matters that would otherwise be required in the Directors Report is
included in the Strategic Review or elsewhere in this document as indicated in the table below and is incorporated into this report
by reference.
Statutory Information
Appointment and Reappointment of Directors
Biographical Details of the Directors
Change of Control
Directors’ Indemnities
Directors’ Interests
Directors’ Responsibility
Disclosure of Information to the Auditor
Employment Policies and Employee Engagement
Employees with Disabilities
Environmental Reporting
Going Concern
Independent Auditor
Results and Dividends
Research and Development Activities
Restrictions on the Transfer of Securities
Rights Attached to Shares
Risk Management
Risk Appetite and Principal Risks
Share Capital Structure
Significant Related Party Agreements
Substantial Shareholders
Statement of Corporate Governance
Voting Rights & Ordinary Shares
Section
Directors’ Report
Corporate Governance Statement
Directors’ Report
Directors’ Report
Annual Report on Remuneration
Statement of Responsibilities
Directors’ Report
Corporate Responsibility Statement & Directors’ Report
Corporate Responsibility Statement
Corporate Responsibility Statement
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Audit & Risk Committee Report
Principal Risks and Uncertainties
Directors’ Report
Note 32 to the Accounts
Directors’ Report
Corporate Governance Statement
Directors’ Report
Page
65
40 to 41
66
65
61
71
66
33 to 39 and 65
33 to 39
33 to 39
66
66
64
66
65
65
48 to 51
24 to 32
64
125
64
42 to 47
65
Financial Results and Dividend
The Group’s financial results, risk management objectives and policies are discussed in the Finance Review on pages 21 to 23 and within
note 25. The Board does not intend to declare a final dividend in respect of financial year 2020. This prudent step helps both preserve
short term liquidity and also provides additional financial flexibility to support and invest as GBG comes out of the Covid-19 pandemic.
Substantial Shareholders
We have been notified of the following interests in the ordinary share capital, representing 3% or more of our issued share capital. Details
of substantial shareholders is regularly published and updated on our website. The position as at 31 March 2020 is detailed below:
Substantial Shareholder
Kames Capital
Octopus Investments
Capital Research Global Investors
Aberdeen Standard Investments (Standard Life)
Ninety One
Canaccord Genuity Wealth Mgt
Kabouter Mgt
Hargreaves Lansdown Asset Mgt
Janus Henderson Investors
No. of Shares Owned at 31 March 2020
14,095,672
13,744,681
9,530,000
9,490,029
7,472,695
6,736,608
6,607,452
6,364,444
6,191,060
Percentage of Shares Owned at 31 March 2020
7.26
7.08
4.91
4.89
3.85
3.47
3.40
3.28
3.19
As at 1 June 2020, the Company has not received any notification, in accordance with the Disclosure and Transparency Rules, of
any changes to interests in the ordinary share capital of the Company, representing 3 per cent or more of the Company’s issued
share capital since 31 March 2020.
Additional Information for Shareholders
The following provides the additional information required for shareholders as a result of the implementation of the Takeovers
Directive into UK law.
Share Capital Structure
At 31 March 2020, the Group’s issued share capital comprised:
Ordinary shares of 2.5p each
64
No.
194,193,861
£’000
4,855
% of Total
Share Capital
100%
GBG Annual Report and Accounts 2020 Restrictions on Transfers of Securities
There are no restrictions on the transfer of ordinary shares in the Company other than:.
− certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws and market
requirements relating to close periods); and
− pursuant to the internal policies of the Company whereby certain team members of the Company require the approval of the
Company to deal in the Company's securities.
We are also not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and for
voting rights.
Voting Rights and Ordinary Shares
Ordinarily, voting at a General Meeting of the Group is on a show of hands with every holder of ordinary shares present in person and
entitled to vote shall have one vote and on a poll, every member present in person or by proxy and entitled to vote shall have one
vote for every ordinary share held. The notice of the General Meeting specifies deadlines for exercising voting rights either by proxy
notice or present in person or by proxy in relation to resolutions to be passed at the General Meeting. All proxy votes are counted
and the numbers for, against or withheld in relation to each resolution are announced at the AGM and the results are released as an
announcement after the meeting. However, in light of current and anticipated public health guidelines we will be changing certain
aspects of this process for this year’s Annual General Meeting (AGM). In order to comply with UK Government guidance on public
gatherings and being mindful of the well-being of our shareholders and GBG’s team members, GBG is asking shareholders to comply
with certain unprecedented but urgent measures for this year's AGM. As a result, shareholders will not be permitted to attend the
AGM in person. Shareholders wishing to vote on any of the matters of business at the AGM will be encouraged to submit their votes in
advance by proxy using one of the methods referred to in the Notice of AGM.
Articles of Association
The Company’s Articles of Association may only be amended by a special resolution at a General Meeting of the shareholders. This
year the Company is proposing certain change to its Articles of Association for approval by shareholders at the forthcoming Annual
General Meeting (“AGM”). Details are contained within the notice to the AGM.
Directors and Their Interests
The names and brief biographical details of each Director as at the date of this report are set out on pages 40 to 41.
The Directors who have served during the year ended 31 March 2020 and details of their interests in the share capital and share
options are set out in the Report on Directors’ Remuneration on page 61.
Appointment and Reappointment of Directors
Directors are reappointed by ordinary resolution at a General Meeting of the shareholders The Board can appoint a director but
anyone so appointed must be reappointed by an ordinary resolution at the next General Meeting.
Directors who have held office for more than three years since their last appointment are eligible for re-election by rotation at the
next AGM. Any Non-Executive Director who is considered by the Board to be independent who has served on the Board for at least
nine years or more will be subject to annual re-election. In 2020 this applies to David Rasche (as he has served on the Board since
September 2010) and he will be seeking re-election at this year’s AGM.
In accordance with the Articles of Association, Natalie Gammon, having been appointed to the Board on 19 November 2019, will,
being eligible, stand for election at the next AGM. In addition, a third of the Board are required to stand for election, therefore, Chris
Clark, Chief Executive Officer, will be retiring by rotation and seeking reappointment by the Group’s shareholders.
The Directors confirm that, having conducted the board performance evaluation process, Natalie Gammon, Chris Clark and David
Rasche continue to contribute effectively and demonstrate commitment to their roles. In addition, the Board has considered David
Rasche’s length of service and is confident that he remains independent in both character and judgement. Details of their notice
periods and service agreements are detailed in the Report on Directors’ Remuneration on page 58.
Directors’ Indemnities
The Directors have been indemnified against liability in respect of proceedings brought by third parties, subject to the conditions set out
in the Companies Act 2006. Such qualifying third party indemnity provisions remain in force at the date of approving this Directors’ Report.
Workforce Policies and Employee Engagement
We are committed to the investment in our team at all levels to ensure a culture of continuous improvement. In order to attract and
retain a high calibre of employees we provide various employee benefit packages, including share options schemes, in order to align
our team members’ interests with the long-term strategic objectives of the Group. We are committed to our equality and diversity
polices and seek regularly feedback and engagement from our team members. Further information regarding our work policies and
65
GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance DIRECTORS’ REPOR T
engagement can be found on pages 33 to 39. Information regarding GBG’s activities to promote diversity is contained within the
Nomination Committee report on page 63.
Change of Control
Within the Group’s revolving credit facility, the lender has the right to demand immediate payment of any outstanding balances
upon a change of control of the Group following a takeover bid.
The Group does have an agreement with a data supplier which, if the Group were acquired by a competitor of that data supplier,
would allow it to terminate its agreement with the Group. The data supplier would however, continue to be bound to service
arrangements with the Group’s clients existing on the date of termination.
Upon a change of control, share options may be exercised within six months of the time when the change of control takes effect
and any subsequent conditions at the offer process have been satisfied.
There are no agreements between the Group and its Directors or employees providing for compensation for loss of office or
employment (whether through resignation, purported redundancy or otherwise) that could occur due to a takeover bid.
Proposed Resolutions for the Annual General Meeting
Details of business to be conducted at this year’s AGM to be held on 10 August 2020, are contained in the Notice of the Annual
General Meeting which will be communicated to shareholders separately. It is the opinion of the Directors that the passing of these
resolutions is in the best interest of the shareholders. .
Research and Development Activities
Research and development activities continues to be a high priority with the development of new products and maintaining the
technological excellence of existing products. During the year ended 31 March 2020, approximately 38% (2019: 40%) of our global
team were employed in technology activities. This figure is lower than previous years due to GBG’s growth which has brought the
overall figure down.
Auditor
A resolution proposing the re-appointment of Ernst & Young LLP as auditor to the Group will be put to the shareholders at the AGM.
Disclosure of Information to Auditor
The Directors who were members of the Board at the time of approving the Directors’ Report are listed on pages 40 to 41. Having
made enquiries of fellow Directors and of the Group’s auditor, each Director confirms that:
− to the best of their knowledge and belief, there is no information relevant to the preparation of their report of which the Group’s
auditor are unaware; and
− they have taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information
and to establish that the Group’s auditor are aware of that information.
Section 172 Statement
Our Section 172 statement can be found on pages 67 to 69.
Environmental Reporting
We comply with all relevant environmental legislation and have clear objectives to reduce energy consumption and waste
production within our office environments. Details of our carbon reporting is set out in the Corporate Responsibility report on pages
33 to 39.
Going Concern
In light of the unique and wide-ranging impact of the Covid-19 outbreak, the Group has carried out a robust and diligent going
concern analysis. Full details of this analysis are set out in note 2.2 to the Annual Report.
Following consideration of the base case forecasts, and the range of downside and reverse stress test scenarios, the Directors have
a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.
Therefore, the Directors continue to adopt the going concern basis of accounting in preparing the consolidated financial statements.
By Order of the Board
John Constantin FCIS
Company Secretary & General Counsel
30 June 2020
66
GBG Annual Report and Accounts 2020 SECT IO N 172 STATEM ENT
The Board is aware of and understands its duties under Section 172 of the Companies Act 2006 (“Section 172”) and that engaging
with our diverse stakeholder base is key to successfully managing GBG.
Section 172 requires a director of a company to act in the way he or she considers, in good faith, would most likely promote the
success of the company for the benefit of its members as a whole. In doing this, section 172 requires a director to have regard,
among other matters, to the:
− likely consequences of any decisions in the long term;
− interests of the company’s employees;
− need to foster the company’s business relationships with suppliers, customers and others;
− the impact of the company’s operations on the community and environment;
− desirability of the company maintaining a reputation for high standards of business conduct; and
− need to act fairly as between members of the company.
This statement intends to set out how the Directors, both individually and collectively, have had regard to the above factors when
undertaking their duties during the year.
At GBG we recognise the importance of engaging with stakeholders to help inform our strategy and Board decisions. We also
acknowledge that every decision the Board has made will not necessarily result in a positive outcome for all of our stakeholders.
However, by giving consideration to key stakeholder groups and aligning activities with our strategic objectives, culture and values,
we aim to act fairly, transparently and in the best interests of the Company over the long term.
The Board, our Executive Team and the leadership of our business units and central service teams make decisions with a long-
term view in mind and with the highest standards of conduct in line with Group policies and good corporate governance. Key and
material decisions are carefully considered with regard to the likely consequences on all stakeholders and, where appropriate, these
matters are discussed with the affected stakeholder group so that their views and feedback is understood and factored into the
decision process.
Reports are regularly made to the Board by the business units and our central services teams about the strategy, performance and
key decisions taken which provides the Board with assurance that proper consideration is given to stakeholder interests in decision-
making and also that the Board is consulted on those matters and decisions that require it’s support and approval.
Details of the Group’s key stakeholders and how we engage with them are set out below.
Team Members
Our people are key to our success and we want them to be successful both as individuals and in the teams they operate. We are
very proud of the culture we have across the Group and the way that our team members work and collaborate together to create
a unique environment that our colleagues would overwhelmingly recommend GBG as a great place to work. We support this
culture by engaging with our team members through regular surveys, a monthly CEO webinar with a live Q&A session, awards for
outstanding performance in supporting our core values, annual kick-off seminars to provide in-depth detail of our strategy and
objectives, encouraging and supporting a range of team building events. If team members have concerns they also have access to a
confidential, whistleblowing hotline that operates internationally. We support a number of initiatives and activities that focus on the
health and well-being of our people, diversity and inclusion, personal development opportunities and charitable activities within the
communities where we work. Other factors, such as employee attrition, are also monitored closely to identify potential trends and
issues.
The Board receives regular reports about a range factors and issues affecting our team members to ensure that appropriate
consideration is given and early action taken where necessary. The Board also regularly considers matters and initiatives as part of
its commitment to promote diversity and equality across all of our teams.
Investors
We rely on the support of shareholders and their opinions are important to us. We advocate transparency, best practice and high
levels of governance to ensure the investor community has the information it requires to make informed judgements about GBG.
We have many lines of dialogue with our shareholders from regular investor presentations, capital market events, results webcasts
and the Annual General Meeting. Discussions with shareholders cover a wide range of topics including financial performance,
strategy, outlook and governance matters. The Chairman and Committee chairs also engage with institutional investors to discuss
developments and proposals such Group remuneration policies and the auditor tender process conducted last year.
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GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance SEC TI ON 1 72 STATEM ENT
Shareholder feedback is proactively sought. Along with details of movements in our shareholder base, this information is regularly
reported to and discussed by the Board and their views are considered as part of GBG’s governance reviews and decision-making.
Customers
Our ambition is to deliver world leading products and outstanding service to our customers. We build strong lasting relationships
with our customers and spend considerable time understanding their needs and views, listening to how we can improve our
products for them. This activity is supported by an annual Voice of the Customer Survey. In addition to quantifying a net promoter
score to gauge how we are performing against other companies and sectors we also receive feedback from our customers providing
us with key intelligence about what we are doing right and, more importantly, where we can improve. We use this knowledge
to inform our decision-making for areas such as supporting product development initiatives and making improvements in our
interactions to make us easier to do business with.
The Board considers this and other information in challenging the decisions of the Executive Team when reviewing the Group’s
strategy and customer initiatives.
Suppliers
The quality of the product and services we deliver to our customers is heavily influenced by the careful management of our key
supplier relationships. Alongside seeking new suppliers to enhance our business and to provide resilience, we also recognise the
importance of our existing supplier relationships. Developing these long-term relationships builds trust and support within a
partnership environment.
Bankers
GBG’s business is reliant on having access to debt facilities from a number of banking sources to allow it to fund its activities
especially in respect of supporting acquisitions where access to this funding can improve capital structure, the chances of success
and pace of completion. We actively engage with our bankers to secure optimum rates and terms whilst also providing them with
information about the Group’s prospects and governance, thereby securing a long-term relationship, built on trust and mutual
benefit.
The Board receives regular reports on the Group’s debt financing position, covenant cover and borrowing rates. The Board is
required to approve any material changes in the facilities and terms, in addition to approving changes of our lender portfolio. The
day-to-day account management relationship of GBG’s lenders is delegated to the CFO and the Group’s Treasury Management team.
Government and Regulators
We are keenly aware of our obligations and duties to the regulatory environments in which we operate globally. Key to ensuring that
we maintain high levels of confidence across our all of our stakeholders is that we operate totally compliantly. Therefore, key areas
of focus for the business are compliance with laws and regulations, especially in relation to data privacy, accounting standards,
health and safety and governance. We actively engage with regulators as and when required. For example, as we indicated at the
half year, The Information Commissioner’s Office, the data industry regulator in the UK, announced in November 2018 that it was
conducting audits on a number of companies to understand the use of data in their services. GBG was included in this review and
we continue to work with the Commissioner on its review.
The Board places particular importance on being updated on legal and regulatory developments and takes these into account when
considering its responsibility and in the actions it takes.
Communities
We engage with the communities where we operate by supporting local and international charities in raising funds and
encouraging team members to volunteer and participate in activities that support these local causes. This includes our annual
support of the GBG challenge, a global event which sees team members from all our locations completing some form of challenge
in order to raise money for their chosen charity.
Covid-19 Pandemic Considerations
The Board has increased certain focus on section 172 matters as a result of the Covid-19 pandemic. The Board receives weekly
updates and briefings on GBG’s response to Covid-19 so that it can assess the business issues and make critical decisions quickly. It
has a fixed agenda for these meetings reflecting the work streams of the Covid Team that was established at the start of the crisis.
These work streams cover our: Team Members, Customers, Operations (including suppliers) and Governance (including investors).
68
GBG Annual Report and Accounts 2020 GBG has conducted thorough assessments of the potential impact of Covid-19 on the Group’s principal risks. This has ensured that
the business can provide the appropriate response in the short-term to our team members, customers and business in order to
support our plans to position ourselves for longer-term sustainability and viability.
We are taking actions to ensure our business remains strong throughout this period to ensure that we are able to execute on our
long-term growth strategy, which will benefit of all of our stakeholders.
We are taking special measures to support our people and their well-being during the pandemic as they work remotely. We have
placed a strong emphasis on communications to keep our team members connected and engaged through a weekly CEO live
webinar update. Managers keep in regular touch with their teams by video and conference calls and using our Group intranet to
provide support information and to share experiences between the regions. We have also consulted with them on plans to return
to our office locations as and when local lock-down restrictions are eased. As has been the case in China and Malaysia, any return
to our office locations will be carefully considered in respect of the best interests of our team members, risk assessments being
conducted in line with local guidance and best practice and detailed briefings to team members on the return to office procedures.
We have been in contact with our customer base to offer support and also to understand their particular requirements and
challenges to see how our products can meet their changed needs as a result of the pandemic and to understand what product
improvements might help. We have engaged with our suppliers to verify that their business continuity plans are robust so that they
will continue to provide GBG with the products and services we need. We have also continued to pay our suppliers in accordance
with agreed terms and have not sought to delay or refuse payment of valid invoices.
We have also engaged with our institutional shareholders and bankers to keep them informed of the actions we have taken in
response to the pandemic and to answer questions they have about GBG.
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GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance SEC TI ON 1 72 STATEM ENT
Key Decisions Made
Many of the decisions that a board makes are by their very nature commercial in confidence matters. It should be noted that GBG
did not undertake any acquisitions or disposals during the year. The Board has operated effectively during the year and has made a
wide range of decisions. To illustrate this, set out below is a selection of some strategic decisions made by the Board (and that we
can share) along with the stakeholder factors that the Board considered in reaching the decision.
Decision:
Impact:
Stakeholder Consideration:
Issue
Covid-19
Pandemic
In making these decisions the long-term
interests of stakeholders, especially our
team members, investors, customers,
suppliers and bankers, were keenly
considered.
The Board’s view was that GBG would be
better placed as a result of these steps
to deal with the range of challenges and
opportunities posed as the world adapts
to the impact of Covid-19.
Additionally, the Board also considered
the importance in securing the support
of its bankers by demonstrating GBG’s
longer-term credentials in order to ensure
continued access to debt funding.
The Board considered the impact of the
appointment on the Board’s balance
and skills set, how the position would
support the Executive Team in having a
Non-Executive Director with additional,
specific technical skills.
The interests of our investors were also
considered as we had received feedback
about at increasing the size of the Non-
Executive Directors’ representation on the
Board.
In addition to considering benefits
to team members, the Board also
considered the potential impact of this
decision on investors in respect of the
long-term effect of share dilution and
share scheme headroom limits.
The changing environment
caused by Covid-19 required
the Board to quickly approve
and support a range of
decisions to conserve cash
and preserve liquidity,
including: an immediate
Group-wide pay freeze;
suspending the dividend
and deferring the bonus
payments accrued by the
Executive Directors.
The beneficial effects of
these actions were factored
into the review that the
Board conducted as part of
an extensive stress test of
GBG’s balance sheet, cash
and access to draw down
facilities.
The output of this review
has enabled the Board to
give appropriate assurances
about GBG’s going concern,
viability and banking
covenants.
Appointment
of a New Non-
Executive Director
As detailed in the
Nomination Committee
Report, Natalie Gammon
was appointed to the Board
in November 2019. The
decision on appointment
was proposed by the
Nomination Committee and
approved by the Board.
It was agreed that Natalie’s
appointment was key to
adding a director with
specific technical skills and
knowledge to support the
Board’s competencies and
provide valuable insight and
input as GBG continues to
grow and develop.
Award of share
save options to all
team members on
an annual basis
During the year, the Board
approved the award of share
options on an annual basis
under the Group’s share save
scheme to all of GBG’s team
members.
Our vision is to have “the
best and most engaged
team members” so that
they contribute towards
GBG’s success. The Board
firmly believes this decision
will have a positive impact,
not only in engaging and
rewarding GBG’s team
members, but also aligning
their interests with that of
our long- term investors.
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GBG Annual Report and Accounts 2020 STATE M EN T O F RESPONSIBI LITIES
Directors’ Responsibility Statement
The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with
applicable United Kingdom law and those International Financial Reporting Standards (‘IFRS’s) as adopted by the European Union.
The Directors are required to prepare Group and Company financial statements for each financial year which present fairly the
financial position of the Group and Company and the financial performance and cash flows of the Group and Company for that
period. In preparing the financial statements the Directors are required to:
− select suitable accounting policies in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’
and then apply them consistently;
− present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
− make judgements and estimates that are reasonable and prudent;
− provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the Group’s and the Company’s financial
position and financial performance; and
− state that the Group and Company have complied with IFRSs, subject to any material departures disclosed and explained in the
financial statements.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on The Group’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility Statement by Management
We confirm that to the best of our knowledge:
a. the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit and loss of The Group and the undertakings included in the consolidation taken as
a whole; and
b. the Annual Report includes a fair review of the development, performance and position of The Group and the undertakings
included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that it faces.
By order of the Board
C G Clark
Director
D J Wilson
Director
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GBG Annual Report and Accounts 2020Strategic ReviewFinancial StatementsOverviewGovernance INDEPEN DENT AU DI TOR ’S R EPO RT
TO THE MEMBERS OF GB GROUP PLC
Opinion
In our opinion:
− GB Group plc’s group financial statements and parent company financial statements (the “financial statements”) give a true and
fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2020 and of the group’s profit for the year
then ended;
− the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
− the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act; and
− the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of GB Group plc which comprise:
Group
Consolidated Balance Sheet as at 31 March 2020
Consolidated Statement of Comprehensive Income for the year then ended
Consolidated Statement of Changes in Equity for the year then ended
Consolidated Cash Flow Statement for the year then ended
Parent company
Company Balance Sheet as at 31 March 2020
Company Statement of Changes in Equity for the year then ended
Company Cash Flow Statement for the year then ended
Related notes 1 to 36 to the financial statements, including a summary of
significant accounting policies
Related notes 1 to 36 to the financial statements, including a summary of
significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards to the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report below. We are independent of the group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
− the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
− the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are authorised for issue.
Overview of our audit approach
Key audit matters
Audit scope
− Revenue recognition
− Impact of Covid-19
− We performed an audit of the complete financial information of four components and audit procedures on specific balances for
a further six components.
− The components where we performed full or specific audit procedures accounted for 100% of Pre-tax income adjusted for
exceptional costs, 99% of Revenue and 100% of Total assets.
Materiality
− Overall group materiality of £1,108,000 which represents 5% of pre-tax income adjusted for exceptional costs.
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GBG Annual Report and Accounts 2020 Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Key observations communicated to
the Audit Committee
Based upon the audit procedures
performed, we conclude that
revenue has been appropriately
recorded in the period in accordance
with the requirements of IFRS 15
Revenue Recognition
Risk
Our response to the risk
Revenue recognition
(Revenue 2020: £199.1m, 2019: £143.5m)
Refer to Accounting policies (page 86) and Note
3 of the Consolidated Financial Statements
(page 100).
The number and nature of ways in which
the business contracts with its customers
increases the risk of inappropriate revenue
recognition. As the business expands by
acquisition, there is a risk that revenue
recognition policies no longer reflect all of
the Group’s revenue streams and recognition
is not in compliance with IFRS 15 Revenue
Recognition.
There is a risk that revenue is recorded
incorrectly around the year end date. This cut
off risk manifests itself through the risk of
management override by processing invalid
journals to revenue as part of the year-end
financial statement close consolidation
process and also specifically within the
processing of transactions. The various ways
in which revenue is contracted for can be
grouped into two types of revenue stream as
follows:
Licence based
− Revenue recognised is not in line with
contractual arrangements (price, duration,
classification)
Usage based
− Inaccurate usage data/costs are used as a
basis to recognise revenue
Our audit procedures included:
− Understanding the revenue processes for licence based and
usage based revenue streams;
− Identification and walkthrough of key controls over revenue
processes for licence based and usage based revenue
streams;
Licence based
− For a sample of sales recognised in March and April 2020
we recalculated the revenue recognised by inspecting
the licence price, duration and classification as per the
signed customer contracts and agreeing completion of
performance obligations to supporting documentation.
Usage based
− For a sample of sales recognised in March and April 2020
we agreed sales prices to signed customer contracts and
vouched usage data to usage reports.
− We assessed the completeness and accuracy of the usage
reports by vouching a sample to supplier invoices.
Procedures across both revenue streams:
− For a sample of credit notes raised in March and April 2020
across both revenue streams we assessed their impact on
the value of revenue recognised and whether the revenue in
the period was fairly stated.
− We agreed any consolidation journals affecting revenue to
supporting documentation to ensure they were valid. We
also checked consistency with those tested in the prior year
consolidation.
− We performed an overall analytical review on revenue by
month compared to budget and prior year on an individual
sub-stream basis to identify, understand and corroborate
any unusual fluctuations, considering any contradictory
evidence.
− We identified key contracts across the Group and
considered and challenged whether revenue had been
recognised correctly in accordance with IFRS 15 by
considering performance obligations under each key
contract and obtaining evidence of achievement of those
obligations by GBG, including review of management’s
accounting papers where available.
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GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements INDEPEN DENT AU DI TOR ’S R EPO RT
TO THE MEMBERS OF GB GROUP PLC
Key observations communicated to
the Audit Committee
Going concern
We reported to the Audit Committee
that, based on testing performed,
we concur with management that
the going concern assumption
adopted in the 2020 financial
statements is appropriate.
We reviewed management’s
disclosure and considered that
they appropriately describe the
risks associated with GBG’s ability
to continue to operate as a going
concern.
Other areas
We agree that the key other areas
of accounting impact of Covid-19
have been appropriately accounted
for and disclosed in the financial
statements.
Risk
Our response to the risk
Impact of Covid-19
Refer to Chairman’s statement (pages 7 to 8),
CEO review (pages 18 to 20), Principal Risks
and Uncertainties (pages 24 to 32), Audit
and Risk Committee Report (pages 48 to 51),
Section 172 Statement (pages 67 to 70) and
Note 2 Accounting policies (page 86).
Going concern
Uncertainties arise from the recent Covid-19
outbreak and their impact on the Group’s
ability to continue as a going concern. Details
are given within Note 2 to the financial
statements.
Given the unprecedented impact of Covid-19
on all businesses and the macro-economic
environment, accurate forecasting of
prospective financial information and the
development of credible future scenarios is
challenging and may have a wide range of
potential impacts on the Group’s ability to
continue as a going concern. For GBG the two
key risk considerations are:
− Not having sufficient cash to meet their
liabilities as they fall due; and
− Breaching either of the two covenants
within the group Revolving Credit Facility
(RCF) agreement (see note 2 for details)
which, without intervention, would lead to
the immediate requirement to repay the
outstanding balance.
Management have revised their forecasts to
reflect the impact of Covid-19, which serves
as the base case for the going concern
assessment. Further downside scenarios have
been assessed based on the principal risks
and uncertainties facing the Group and their
potential impact on revenue, profitability
and cashflows, as well as reverse stress
testing to identify by how much revenue must
reduce in order for one of the covenants to
be breached within the next 12 months. The
results of this analysis have been compared to
the available liquidity and financial covenant
compliance, during the going concern period
to 30 June 2021. Based upon this assessment
management consider the going concern
assumption remains appropriate.
Other areas
Given the significance of Covid-19 on the
economy, management’s impact assessment
was expanded to consider other accounting
implications. Note 2 of the financial
statements includes significant accounting
estimates relating to the impairment of
goodwill and provision for impairment of
financial assets, where the level of estimation
uncertainty has increased as a result of
the Covid-19 pandemic. There is a risk that
given the current challenges in establishing
accurate forecasts, as a result of Covid-19,
asset impairments are not identified and
recorded in a timely manner.
Going concern
We have identified and walked through the process followed by
management to prepare the revised forecasts.
We have assessed the reasonableness of all key assumptions,
namely performance of revenue, EBITDA and cash conversion
This has been performed by:
− checking the arithmetical accuracy of management’s model;
− assessing the historical forecasting accuracy of the group
by comparing actual revenue and EBIDTA to forecast for the
previous 2 accounting periods;
− considering the forecast revenue versus previous prior year
revenues realised to ensure a sufficient level of prudence in
the forecasts given the inherent uncertainty;
− comparing the reduction in forecast revenue to reports from
analysts and expected revenue trends to industry forecasts
for the software and technology sector and by customer
sector base including the impact of Covid-19;
− assessing the feasibility of cost reductions assumed within
the model, including the timing and quantum, by comparing
them to operational actions taken by management;
− comparing current trading performance to management’s
Covid-19 forecast by obtaining the latest available
management accounts to identify any issues with current
trading and cashflows;
− comparing cash conversion assumptions used in the
forecasts to historic actuals to assess their reasonableness;
and
− checked for consistency of the forecasts with other areas of
the audit including impairment assessment.
Confirmed the availability of the RCF by comparing to the
underlying agreement and reperformed management’s forecast
covenant ratio compliance calculations to check for breaches of
each covenant ratio throughout the going concern period under
the base case scenario presented by management;
Recalculated the results of the reverse stress test performed by
management to determine the impact of reasonably possibly
fluctuations in key assumptions on the Group’s available
liquidity and covenant compliance;
Identified the further mitigating actions available to the Group
including further cost reductions, and considered the feasibility
of management being able to execute such mitigating actions,
when considering the likelihood of the reverse stress testing
scenario; and
Reviewed the appropriateness of management’s going concern
disclosure in describing the risks associated with its ability
to continue to operate as a going concern for a period of at
least 12 months from the date of approval of the Financial
Statements.
Other areas
We audited management’s impairment of assets analysis,
confirming that the base forecasts were consistent with those
audited as part of the going concern assessment.
We performed additional sensitivity testing using the sensitivity
analysis performed in the going concern assessment, when
determining whether a reasonably possible change could give
rise to an impairment adjustment.
We compared the forward looking information used by
management, in their provision for impairment of financial
assets, to changes in cash collection since the outbreak of the
Covid-19 pandemic.
In the prior year, our auditor’s report included a key audit matter in relation to accounting for business combinations. In the current year there were no
acquisitions and therefore no associated key audit matter in this area.
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GBG Annual Report and Accounts 2020 An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope
for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We
take into account size, risk profile, the organisation of the group and changes in the business environment when assessing the level
of work to be performed at each entity.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative
coverage of significant accounts in the financial statements, we selected all ten reportable components within the Group.
Of the ten components identified, we performed an audit of the complete financial information of four components (“full scope
components”) which were selected based on their size or risk characteristics. For six components (“specific scope components”), we
performed audit procedures on specific accounts within those components that we considered had the potential for the greatest
impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 100% (2019: 100%) of the Group’s Pre-tax income
adjusted for exceptional costs, 99% (2019: 100%) of the Group’s Revenue and 100% (2019: 100%) of the Group’s Total assets. For
the current year, the full scope components contributed 96% (2019: 65%) of the Group’s Pre-tax income adjusted for exceptional
costs, 88% (2019: 86%) of the Group’s Revenue and 90% (2019: 95%) of the Group’s Total assets. The specific scope components
contributed 4% (2019: 35%) of the Pre-tax income adjusted for exceptional costs, 11% (2019: 13%) of the Group’s Revenue and
10% (2019: 5%) of the Group’s Total assets. The audit scope of these components may not have included testing of all significant
accounts of the component but will have contributed to the coverage of significant accounts tested for the Group.
The charts below illustrate the coverage obtained from the work performed by our audit teams.
Profit before
tax and exceptional
costs
91% Full scope
components
9% Specific scope
components
Revenue
88% Full scope
components
11% Specific scope
components
Total assets
89% Full scope
components
11% Specific scope
components
Changes from the prior year
We identified the following scope changes in the current year audit:
− IDology Inc. has been assigned full scope. In the prior year this was assigned specific scope, with full audit procedures performed
on the purchase price allocation at acquisition.
− PCA Inc. has been assigned specific scope. In the prior year this was assigned full scope however due to its size in the current
year, in comparison to other components, a specific scope was considered sufficient in the context of coverage achieved across
the Group.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each
of the components by us, as the primary audit engagement team, or by component auditors from other EY global network firms
operating under our instruction. Of the four full scope components, audit procedures were performed on two of these directly by
the primary audit team and two by a component team. For the six specific scope components the work was performed on three
components by the primary audit team and the remaining three by a component team where we determined the appropriate level
of involvement to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group
as a whole.
The primary team interacted regularly with the component team where appropriate during various stages of the audit, reviewed key
working papers and were responsible for the scope and direction of the audit process. This, together with the additional procedures
performed at Group level, gave us appropriate evidence for our opinion on the Group financial statements.
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GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements INDEPEN DENT AU DI TOR ’S R EPO RT
TO THE MEMBERS OF GB GROUP PLC
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our
audit procedures.
We determined materiality for the Group to be £1,108,000 (2019: £947,000), which is 5% of Pre-tax income adjusted for
exceptional costs (2019: 5% of Pre-tax income adjusted for exceptional costs). We believe that Pre-tax income adjusted for
exceptional costs provides us with a key performance measure of management and is what the users of the financial statements are
most interested in. The increase in materiality in the current year is primarily due to the full year effect of the prior year IDology Inc.
acquisition.
− Profit before tax – £20,626,000
Starting
basis
Adjustments
− Exceptional costs – £1,552,000
Materiality
− Total – £22,178,000
− Materiality of £1,108,000 (5% of materiality basis)
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement
was that performance materiality was 50% (2019: 75%) of our planning materiality, namely £554,000 (2019: £703,000). We set
performance materiality at this reduced level compared to prior year due to our past experience on the audit indicated a higher risk
of misstatements, both corrected and uncorrected.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based
on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that
component. In the current year, the range of performance materiality allocated to components was £55,000 to £359,000 (2019:
£18,000 to £561,000).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £55,000 (2019:
£47,000), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of
other relevant qualitative considerations in forming our opinion.
76
76
GBG Annual Report and Accounts 2020 Other information
The other information comprises the information included in the annual report, set out on pages 2 to 71, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in
this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
− the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
− the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
− adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
− the parent company financial statements are not in agreement with the accounting records and returns; or
− certain disclosures of directors’ remuneration specified by law are not made; or
− we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Directors’ Responsibility Statement set out on page 71, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic
alternative but to do so.
77
77
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements INDEPEN DENT AU DI TOR ’S R EPO RT
TO THE MEMBERS OF GB GROUP PLC
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Jenn Hazlehurst
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Liverpool
30 June 2020
Notes:
1
The maintenance and integrity of the GB Group Plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the
web site.
2
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
78
78
GBG Annual Report and Accounts 2020 CON SOL IDAT ED STATEM ENT O F
COMPR EHENS IVE I NCO ME
YEAR ENDED 31 MARCH 2020
Revenue
Cost of sales
Gross profit
Operating expenses before amortisation of acquired intangibles, equity-settled share-based payments
and exceptional items
Operating profit before amortisation of acquired intangibles, equity-settled share-based payments
and exceptional items (adjusted operating profit)
Amortisation of acquired intangibles
Equity-settled share-based payments charge
Exceptional items
Group operating profit
Finance revenue
Finance costs
Profit before tax
Income tax charge
Profit for the year attributable to equity holders of the parent
Other comprehensive income:
Exchange differences on retranslation of foreign operations (net of tax)1
Total comprehensive income for the year attributable to equity holders of the parent
Earnings per share
– basic earnings per share for the year
– diluted earnings per share for the year
– adjusted basic earnings per share for the year
– adjusted diluted earnings per share for the year
Note
3
16
29
7
3, 9
10
11
13
2020
£’000
199,101
(54,914)
144,187
2019
£’000
143,504
(36,060)
107,444
(96,242)
(75,413)
47,945
(19,008)
(4,541)
(1,552)
22,844
143
(2,361)
20,626
(3,562)
17,064
6,756
23,820
8.8p
8.7p
21.8p
21.4p
32,031
(10,316)
(2,287)
(4,003)
15,425
31
(720)
14,736
(2,583)
12,153
(3,702)
8,451
7.7p
7.6p
18.2p
17.9p
1 Upon disposal of a foreign operation, the element associated to the disposed foreign operation will be recycled to the Income Statement
79
79
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements CONS OLI DATED STATEM ENT
OF CHAN GES IN EQUITY
YE AR ENDED 31 MARCH 2020
Balance at 1 April 2018
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Issue of share capital
Share issue costs
Share-based payments charge
Tax on share options
Equity dividend
Balance at 31 March 2019 (as reported)
Impact of measurement period adjustments
Balance at 31 March 2019 (as restated prior
to IFRS 16 adoption)
IFRS 16 transition adjustment
Balance at 31 March 2019 (after IFRS 16
adoption)
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Issue of share capital
Share-based payments charge
Tax on share options
Equity dividend
Balance at 31 March 2020
Note
21
21
29
12
2.3
2.4
21
29
12
Equity
share
capital
£’000
3,817
–
–
–
1,004
–
–
–
–
4,821
–
4,821
–
4,821
–
–
–
34
–
–
–
4,855
Share
premium
£’000
104,814
–
–
–
159,609
(3,274)
–
–
–
261,149
–
261,149
–
261,149
–
–
–
499
–
–
–
261,648
Capital
redemption
reserve
£’000
3
–
–
–
–
–
–
–
–
3
–
Foreign
currency
translation
reserve
£’000
891
–
(3,702)
(3,702)
–
–
–
–
–
(2,811)
8
3
–
3
–
–
–
–
–
–
–
3
(2,803)
–
(2,803)
–
6,756
6,756
–
–
–
–
3,953
Merger
reserve
£’000
6,575
–
–
–
–
–
–
–
–
6,575
–
6,575
–
6,575
–
–
–
–
–
–
–
6,575
Retained
earnings
£’000
40,594
12,153
–
12,153
–
–
2,287
738
(4,049)
51,723
–
Total
equity
£’000
156,694
12,153
(3,702)
8,451
160,613
(3,274)
2,287
738
(4,049)
321,460
8
51,723
(446)
321,468
(446)
51,277
17,064
–
17,064
–
4,541
779
(5,761)
67,900
321,022
17,064
6,756
23,820
533
4,541
779
(5,761)
344,934
80
80
GBG Annual Report and Accounts 2020 COMPA NY STATEM ENT
OF CHA NG ES IN EQUITY
YEAR ENDED 31 MARCH 2020
Balance at 1 April 2018
Profit for the period
Total comprehensive income for the period
Issue of share capital
Share issue costs
Share-based payments charge
Tax on share options
Equity dividend
Balance at 31 March 2019 (as reported)
IFRS 16 transition adjustment
Balance at 31 March 2019 (after IFRS 16
adoption)
Profit for the period
Total comprehensive income for the period
Issue of share capital
Hive-up adjustment
Share-based payments charge
Tax on share options
Equity dividend
Balance at 31 March 2020
Note
21
21
29
12
2.4
21
16
29
12
Equity
share
capital
£’000
3,817
–
–
1,004
–
–
–
–
4,821
–
4,821
–
–
34
–
–
–
–
4,855
Share
premium
£’000
104,814
–
–
159,609
(3,274)
–
–
–
261,149
–
261,149
–
–
499
–
–
–
–
261,648
Merger
reserve
£’000
6,575
–
–
–
–
–
–
–
6,575
–
6,575
–
–
–
–
–
–
–
6,575
Capital
redemption
reserve
£’000
3
–
–
–
–
–
–
–
3
–
3
–
–
–
–
–
–
–
3
Other
reserves
£’000
4,543
–
–
–
–
–
–
–
4,543
–
4,543
–
–
–
(54)
–
–
–
4,489
Retained
earnings
£’000
38,737
7,275
7,275
–
–
2,287
738
(4,049)
44,988
(253)
44,735
23,271
23,271
–
–
4,541
779
(5,761)
67,565
Total
equity
£’000
158,489
7,275
7,275
160,613
(3,274)
2,287
738
(4,049)
322,079
(253)
321,826
23,271
23,271
533
(54)
4,541
779
(5,761)
345,135
81
81
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements Note
2020
£’000
14
15
16
11
19
20
21
21
31
31
31
31
22
23
25
11
22
23
24
36
4,653
4,767
414,505
6,294
430,219
128
66,554
1,803
27,499
95,984
526,203
4,855
261,648
6,575
3
3,953
67,900
344,934
62,139
3,713
1,016
787
27,155
94,810
–
2,012
40,641
37,627
6,179
–
86,459
181,269
526,203
Restated 1
2019
£’000
4,815
–
425,646
8,222
438,683
341
54,992
–
21,189
76,522
515,205
4,821
261,149
6,575
3
(2,803)
51,723
321,468
85,447
–
528
1,184
29,548
116,707
1,441
–
33,508
35,453
5,287
1,341
77,030
193,737
515,205
CONS OLI DATED BAL ANC E SHEET
AS AT 31 MARCH 2020
Assets
Non-current assets
Property, plant and equipment
Right of use assets
Intangible assets
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Current tax
Cash and short-term deposits
Total assets
Equity and liabilities
Capital and reserves
Equity share capital
Share premium
Merger reserve
Capital redemption reserve
Foreign currency translation reserve
Retained earnings
Total equity attributable to equity holders of the parent
Non-current liabilities
Loans
Lease liabilities
Provisions
Deferred revenue
Deferred tax liability
Current liabilities
Loans
Lease liabilities
Trade and other payables
Deferred revenue
Contingent consideration
Current tax
Total liabilities
Total equity and liabilities
1
Refer to note 2.3.
Approved by the Board on 30 June 2020
C G Clark
Director
Registered in England number 2415211
D J Wilson
Director
82
82
GBG Annual Report and Accounts 2020 COMPA NY BALA N C E SHEET
AS AT 31 MARCH 2020
Note
2020
£’000
Restated 1
2019
£’000
Assets
Non-current assets
Property, plant and equipment
Right of use assets
Intangible assets
Investments
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Current tax
Cash and short-term deposits
Total assets
Equity and liabilities
Capital and reserves
Equity share capital
Share premium
Merger reserve
Capital redemption reserve
Other reserves
Retained earnings
Total equity attributable to equity holders of the parent
Non-current liabilities
External loans
Intercompany loans
Lease liabilities
Deferred revenue
Provisions
Deferred tax
Current liabilities
Trade and other payables
Deferred revenue
Lease liabilities
Contingent consideration
Current tax
Total liabilities
Total equity and liabilities
1
Refer to note 2.3.
During the year the Company made a profit £23,271,000 (2019: £7,275,000).
Approved by the Board on 30 June 2020
C G Clark
Director
Registered in England number 2415211
D J Wilson
Director
14
15
16
18
11
19
20
21
21
31
31
31
31
22
22
23
25
11
24
23
36
3,447
2,098
133,289
303,483
3,867
446,184
124
41,290
1,212
15,031
57,657
503,841
4,855
261,648
6,575
3
4,489
67,565
345,135
62,139
4,156
1,978
467
843
4,474
74,057
47,747
30,019
704
6,179
–
84,649
158,706
503,841
3,803
–
139,139
303,476
3,094
449,512
338
35,899
–
7,791
44,028
493,540
4,821
261,149
6,575
3
4,543
44,988
322,079
85,447
–
–
863
395
5,020
91,725
46,464
27,193
–
5,287
792
79,736
171,461
493,540
83
83
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements CONS OLI DATED C ASH FLOW STAT EM E NT
YE AR ENDED 31 MARCH 2020
Note
9
10
14
15
16
36
29
25
36
14
16
9
10
21
21
22
22
23
12
20
2020
£’000
20,626
(143)
2,361
1,760
1,850
19,192
260
971
4,541
–
213
(5,725)
2,592
48,498
(6,386)
42,112
(86)
(1,199)
(140)
5
143
(1,277)
(1,911)
490
–
–
(24,914)
(2,043)
(5,761)
(34,139)
6,696
(386)
21,189
27,499
2019
£’000
14,736
(31)
720
1,544
–
10,821
46
–
2,287
(25)
58
(9,904)
7,527
27,779
(2,930)
24,849
(255,107)
(1,453)
(172)
6
31
(256,695)
(720)
160,613
(3,274)
110,447
(32,807)
–
(4,049)
230,210
(1,636)
72
22,753
21,189
Group profit before tax
Adjustments to reconcile Group profit before tax to net cash flows
Finance revenue
Finance costs
Depreciation of plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Loss on disposal of plant and equipment and intangible assets
Fair value adjustment on contingent consideration
Share-based payments
Increase/(decrease) in provisions
Decrease in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Income tax paid
Net cash generated from operating activities
Cash flows from/(used in) investing activities
Acquisition of subsidiaries, net of cash acquired
Purchase of plant and equipment
Purchase of software
Proceeds from disposal of property, plant and equipment
Interest received
Net cash flows used in investing activities
Cash flows (used in)/from financing activities
Finance costs paid
Proceeds from issue of shares
Share issue costs
Proceeds from new borrowings
Repayment of borrowings
Repayment of lease liabilities
Dividends paid to equity shareholders
Net cash flows (used in)/from financing activities
Net increase/(decrease) in cash and cash equivalents
Effect of exchange rates on cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
84
84
GBG Annual Report and Accounts 2020 COMPA NY C ASH FLOW STATEM EN T
YEAR ENDED 31 MARCH 2020
Company profit before tax
Adjustments to reconcile Company profit before tax to net cash flows
Finance costs
Depreciation of plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Loss on disposal of plant and equipment
Fair value adjustment on contingent consideration
Dividends received recognised within income statement
Share-based payments
Decrease in inventories
Decrease in provisions
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Income tax paid
Net cash generated from operating activities
Cash flows from/(used in) investing activities
Acquisition of subsidiary undertakings
Dividends received
Purchase of plant and equipment
Purchase of software
Proceeds from disposal of plant and equipment
Net cash flows from/(used in) investing activities
Cash flows (used in)/from financing activities
Finance costs paid
Proceeds from issue of shares
Share issue costs
Proceeds from new borrowings
Repayment of borrowings
Repayment of lease liabilities
Dividends paid to equity shareholders
Net cash flows (used in)/from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Note
14
15
16
36
29
25
36
14
16
21
21
22
22
23
12
20
2020
£’000
24,659
2,200
1,214
675
5,720
256
971
(16,604)
4,271
214
–
(4,325)
3,069
22,320
(3,678)
18,642
(86)
16,604
(452)
(140)
3
15,929
(1,884)
490
–
4,156
(23,500)
(832)
(5,761)
(27,331)
7,240
7,791
15,031
2019
£’000
9,078
642
1,125
–
6,116
47
–
–
2,287
61
(25)
(4,548)
4,074
18,857
(1,674)
17,183
(256,348)
2,464
(1,214)
(167)
–
(255,265)
(642)
160,613
(3,274)
110,447
(32,000)
–
(4,049)
231,095
(6,987)
14,778
7,791
85
85
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
1. Corporate Information
GB Group plc (‘the Company’) and its subsidiaries (together ‘the Group’) provide identity data intelligence products and services helping organisations
recognise and verify all elements of an individual’s identity at key interactions in their business processes. The nature of the Group’s operations and its
principal activities are set out in the Business Model.
The Company is a public company limited by shares incorporated in the United Kingdom and is listed on the London Stock Exchange with its ordinary shares
traded on the Alternative Investment Market. The company registration number is 2415211. The address of its registered office is The Foundation, Herons
Way, Chester Business Park, Chester, CH4 9GB. A list of the investments in subsidiaries, including the name, country of incorporation, registered office
address and proportion of ownership interest is given in note 18.
These consolidated financial statements have been approved for issue by the Board of Directors on 30 June 2020.
The Company’s financial statements are included in the consolidated financial statements of GB Group plc. As permitted by section 408 of the Companies
Act 2006, the profit and loss account of the Company is not presented.
2. Accounting Policies
2.1 Basis of Preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’s) as adopted by the European Union
and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have
been prepared under the historical cost convention, modified in respect of the revaluation of financial assets and liabilities at fair value. A summary of the
significant accounting policies is set out below.
The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 31 March 2020 and the Group
and Company have applied the same policies throughout the year.
2.2 Going Concern
The assessment of going concern relies heavily on the ability to forecast future cashflows over the going concern assessment period which covered through
to 30 September 2021. Although GBG has a robust budgeting and forecasting process, the current economic uncertainty caused by the Covid-19 pandemic
means that additional sensitivities and analysis have been applied to test the going concern assumption under a range of downside and stress test
scenarios. The following steps have been undertaken to allow the Directors to conclude on the appropriateness of the going concern assumption:
a) Understand what could cause GBG not to be a going concern
b) Consider the current customer and sector position, liquidity status and availability of additional funding if required
c)
Board review and challenge the base case forecast produced by management including comparison against external data sources available and potential
downside scenarios
Perform reverse stress tests to assess under what circumstances going concern would become a risk – and assess the likelihood of whether they could
occur
d)
e) Examine what mitigating actions would be taken in the event of these stress test scenarios
f) Conclude upon the going concern assumption
a) Understand what could cause GBG not to be a going concern
The potential scenarios which could lead to GBG not being a going concern are considered to be:
− Not having sufficient cash to meet our liabilities as they fall due and therefore not being able to provide services to our customers, pay our employees or
meet financing obligations.
− A non-remedied breach of the financial covenants within the Group Revolving Credit Facility (RCF) agreement (detailed in note 22). Under the terms of the
agreement this would lead to the outstanding balance becoming due for immediate repayment. These covenants are:
–
–
Leverage – consolidated net borrowings (outstanding loans less current cash balance) as a multiple of adjusted consolidated EBITDA for the last 12
months, assessed quarterly in arrears, must not exceed 3.00:1.00
Interest cover - adjusted consolidated EBITDA as a multiple of consolidated net finance charges, for the last 12 months , assessed quarterly in arrears,
must not fall below 4.00:1.00
b) Consider the current customer and sector position, liquidity status and availability of additional funding if required
In assessing the impact of Covid-19 it is important to consider the rate of growth prior to the pandemic so that the percentage impact can be put in context.
Organic growth at constant currency in the current year to 31 March 2020 was 10.7%, and was 11.5% in the year to 31 March 2019. Analyst consensus prior
to Covid-19 showed expected organic growth in the year to 31 March 2021 of 10.9%.
GBG does not have a high customer concentration risk with no individual customer generating more than 2% of Group revenue. The Group’s customers
operate in a range of different sectors which reduces the risk of a downturn in any particular sector. The financial services sector accounts for the largest
percentage of customers, particularly within the Fraud and Identity segments, and there has not been a downturn in demand for these services since the
pandemic began.
GBG does have exposure to customers in sectors that have had a more direct impact from Covid-19 such as Travel & Leisure, Employment Agencies &
Training and Sporting Activities. However these sectors in total account for less than 6% of Group revenue and as noted above there are no single customers
across the Group that are a material credit risk on their own.
As a global company GBG operates in different countries and therefore is less exposed if particular countries recover from Covid-19 at different rates or
suffer second waves of the pandemic. The breakdown of our revenue by country is shown in note 4.
There are also macro dynamics supporting the increased use of GBG products and services, both in general and within the context of the Covid-19
pandemic, such as:
86
86
GBG Annual Report and Accounts 2020 2. Accounting Policies CONTINUED
− continued compliance requirements globally
− the ongoing existence of fraud globally, with Covid-19 giving fraudsters new opportunities, leading to increased cyber security risks and therefore
demand for GBG anti-fraud solutions
− continued digitisation and rise of online versus physical transactions in both consumer and business to business settings;
− speed and quality of customer onboarding being a key differentiator, which is enhanced through the use of GBG’s software
GBG is not reliant upon any one supplier to provide critical services either to support the services we provide to our customers or to our internal
infrastructure. For these critical services, such as the provision of data, contingency plans exist in the event of supplier failure to be able to move to an
alternative supplier with minimal disruption to customers or the wider business.
Operating cashflow before tax and exceptional items (note 37)
Adjusted EBITDA (note 37)
Cash conversion %
Cash
Loans (excluding unamortised loan fees)
Net Debt
Leverage
31 March 2020
£’000
49,279
51,739
95.2%
27,499
(62,500)
(35,001)
0.68
31 March 2019
£’000
31,582
34,080
92.7%
21,189
(87,441)
(66,252)
1.94
Variance
£’000
17,697
17,659
2.5%
6,310
24,941
31,251
1.26
At 31 March 2020 the net debt position of the Group was £35.0 million, a decrease of £31.3 million since 31 March 2019. On 26 May 2020 the Company
repaid £10.0m of the outstanding revolving credit facility liability. At 31 May 2020 the net debt position had improved to £20.5m.
During the year to 31 March 2020 GBG remained highly cash generative with an EBITDA to operating cash ratio of 95.2%.
The RCF has a maximum level of £110 million and therefore there is committed available headroom of £47.5 million which could be drawn down for working
capital purposes if required. There are no mandatory debt repayments on the RCF required to be made until February 2022 when the agreement expires and
the full outstanding balance is due.
c)
Board review and challenge the base case forecast produced by management including comparison against external data sources available and
potential downside scenarios
Uncertainty around the scale, timing and impact of Covid-19 means it is impossible to give meaningful guidance for profits in the year ahead. Management
have used the internal and external information available in addition to their industry knowledge to produce the base case forecast. This base case
forecast focuses on the impact of a potential decline in revenue against the year to 31 March 2020, as this is the component of the income statement that
management has the least control over. The decline in revenue would result in a decrease in cost of sales and therefore in order to keep generating cash the
remaining gross margin needs to be sufficient to cover the overhead base.
Management notes that analyst forecasts published after the Covid-19 outbreak estimate a decline in GBG revenue of between 7.6% and 12.8% in the year to
31 March 2021 compared to the prior year, with the consensus position being a decline of 10.3% which would be £175 million on a constant currency basis.
While this is what we assumed, this is not a forecast, just an assumption for going concern.
The overhead base is the component of the income statement management has most control over with the majority of being people related costs. The
base case forecast takes account of the cash preservation measures already taken which include cancellation of the dividend, recruitment frozen for all
but essential hires, group-wide pay freeze, deferral of Executive Director bonuses for the year to 31 March 2020 and savings in travel. These measures will
save cash of approximately £22m in the year to 31 March 2021, with £15m of these being operating cost savings (all excluding the dividend). No further
reductions in operating expenditure are factored into this base case forecast.
Although a number of external economic forecasts suggest a return to overall GDP growth by Spring 2021 across each of the key territories GBG operates
in, for prudence it has been assumed that the revenue position in the base case forecast at 31 March 2021 will remain throughout the year to 31 March 2022
(i.e. that year will see flat revenue). This provides robustness in the forecast in the event of a significant second wave of the pandemic.
This base case forecast showed continued significant headroom in the covenant compliance tests and sufficient liquidity to maintain operations. The base
case forecast model was then adjusted to reflect a range of possible downside scenarios across different sectors and geographies, and under each of these
the covenant compliance and liquidity position did not result in any risk to going concern.
Relative to the base case forecast produced by management there have not been any adverse variances in the overall trading performance since the year-end.
d)
Perform reverse stress tests to assess under what circumstances going concern would become a risk – and assess the likelihood of whether they could
occur
The base case forecast model was then further adjusted to establish at what point a covenant breach would occur without further mitigating actions. A
covenant breach would occur before the available cash resources of the Group are fully exhausted and therefore the focus of the reverse stress test was
on covenant compliance. In making this assessment it was assumed that management had reduced operating expenses by 20% which is the level that
is considered possible without causing significant disruption to business operations. These savings would primarily be linked to people costs, net of any
related redundancy costs.
With a 20% operating expenses saving introduced in Q3 of FY21 it would take a revenue decline of 42% for a covenant breach to occur (33% without any
operating expenses savings). This breach would be as at 30 June 2021 although even at this point it would only take a net debt improvement of £400,000
or EBITDA increase of £130,000 to remedy this breach. With the assumption of revenue being flat during the year to 31 March 2022 the breach would be
remedied by 30 September 2021.
Based on the current trading performance and through reference to external market data a decline of anywhere near 42% is considered by the Directors to
be highly unlikely. If this became even a remote possibility then deeper cost cutting measures would be implemented well in advance of a covenant breach
as well as consideration of a range of other mitigation actions detailed in the next section.
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2. Accounting Policies CONTINUED
e) Look at what mitigating actions could be taken in the event of these reverse stress test scenarios
In the very unlikely event of the reverse stress test case scenario above a breach of covenants would occur on 30 June 2021 unless further mitigation steps
were taken. Detailed below are the principal steps that would be taken (prior to the breach taking place) to avoid such a breach occurring:
− Make deeper cuts to overheads, primarily within the sales function if the market opportunities had declined to this extent. It would only take a reduction
of 0.1% of overheads (based on the 31 March 2020 level) to increase EBITDA to remedy a covenant breach of £130,000.
− Request a delay to UK Corporation Tax, Employment Tax or Sales Tax payments under the HMRC ‘Time to Pay’ scheme. This would be in addition to the
deferral of VAT payments announced by the UK Government on 20 March 2020. This announcement has meant that VAT which would have been due by
the Group between 20 March 2020 and 30 June 2020 is not due until 31 March 2021. In the year to 31 March 2020 Corporation Tax payments averaged
£900,000 per quarter, Employment Tax payments (including employee taxes) were approximately £1.2 million per month and Sales Tax payments were
£2.5 million per quarter.
− Draw down on the £30 million Accordion facility within the Group’s banking agreement. This facility is subject to credit approval from the syndicate banks.
− Request a covenant waiver or covenant reset from our bank syndicate. Even under this stress test scenario the forecast is that the Group would only be in
breach for one quarter (quarter ending 30 June 2021) before returning to covenant compliance the following quarter. The business would still be EBITDA
positive at this point and the directors have a reasonable expectation of achieving a temporary covenant waiver from the banks if needed.
− Raise cash through an equity placing. Under its Articles of Association GBG has the right to raise cash through an equity placing up to 10% of its market
valuation at the date of the placing. Even factoring in a discount being applied to the share price, on the basis that the level of extra cash needed to
remedy a breach at 30 June 2021 would be £400,000, the Directors are confident that funding well in excess of this level could be raised.
− Disposal of part of the business.
f) Conclude upon the going concern assumption
Following consideration of the base case forecast and reverse stress test scenario, the Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the foreseeable future. Therefore, the Directors consider it appropriate to adopt the going
concern basis of accounting in preparing the consolidated financial statements.
2.3 Prior Year Measurement Period Adjustment
Under IFRS 3 Business Combinations there is a measurement period of no longer than twelve months in which to finalise the valuation of the acquired assets
and liabilities. During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognised at the acquisition date to reflect
new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of
the amounts recognised as of that date. During the measurement period, the acquirer shall also recognise additional assets or liabilities if new information
is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and
liabilities as of that date.
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, as set out in note 35.
The impact of the measurement period adjustments have been applied retrospectively, meaning that the results and financial position for the year to 31
March 2019 have been restated as follows:
Impact on the statement of financial position of the Group as at 1 April 2019:
Assets
Property, plant and equipment
Intangible assets
Investments
Deferred tax assets
Current assets
Total assets
Equity
Share capital and share premium
Other reserves
Foreign currency translation reserve
Retained earnings
Total equity
Liabilities
Interest-bearing loans and borrowings
Trade payables and other liabilities
Contingent consideration
Provisions
Current tax
Deferred tax
Total liabilities
88
88
As previously
reported
£’000
Impact of
measurement
period
adjustments
£’000
Including
measurement
period
adjustments
£’000
4,815
420,137
411
8,222
76,404
509,989
265,970
6,578
(2,811)
51,723
321,460
86,888
70,145
79
528
1,341
29,548
188,529
–
5,509
(411)
–
118
5,216
–
–
8
–
8
–
–
5,208
–
–
–
5,208
4,815
425,646
–
8,222
76,522
515,205
265,970
6,578
(2,803)
51,723
321,468
86,888
70,145
5,287
528
1,341
29,548
193,737
GBG Annual Report and Accounts 2020 2. Accounting Policies CONTINUED
Impact on the statement of financial position of the Company as at 1 April 2019:
Assets
Property, plant and equipment
Intangible assets
Investments
Deferred tax assets
Current assets
Total assets
Equity
Share capital and share premium
Other reserves
Retained earnings
Total equity
Liabilities
Interest-bearing loans and borrowings
Trade payables and other liabilities
Contingent consideration
Provisions
Current tax
Deferred tax
Total liabilities
As previously
reported
£’000
Impact of
measurement
period
adjustments
£’000
Including
measurement
period
adjustments
£’000
3,803
139,139
298,268
3,094
44,028
488,332
265,970
11,121
44,988
322,079
85,447
74,520
79
395
792
5,020
–
–
5,208
–
–
5,208
–
–
–
–
–
5,208
–
–
–
166,253
5,208
3,803
139,139
303,476
3,094
44,028
493,540
265,970
11,121
44,988
322,079
85,447
74,520
5,287
395
792
5,020
171,461
2.4 Changes to Accounting Policies
The following new IFRS standards relevant to the Group and Company have been adopting in these financial statements:
(i) IFRS 16 Leases: The Group and Company has adopted IFRS 16 ‘Leases’ with a date of initial application of 1 April 2019. IFRS 16 ‘Leases’ replaces IAS 17
‘Leases’, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases- Incentives and SIC-27 Evaluating the substance of
transactions involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosures of
leases and requires lessees to account for most leases under a single on-balance sheet model.
The Group and Company has adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 April
2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised in retained
earnings at the date of initial application. Comparatives are not restated under this method of adoption. The lease liability is calculated at the present
value of remaining future payments using the related incremental borrowing rates at 1 April 2019.The right-of-use asset is calculated from the lease
commencement date, as if IFRS 16 had always been applied using the incremental borrowing rates at 1 April 2019. The Group and Company also elected
to use transition expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at
the date of initial application. The Group and Company also elected to use the recognition exemptions for lease contracts that, at the commencement
date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts for which underlying asset is
of low value (‘low value assets’).
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NOT ES TO THE AC CO UNTS
2. Accounting Policies CONTINUED
Impact on the statement of financial position of the Group as at 1 April 2019:
Assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Investments
Deferred tax assets
Current assets
Total assets
Equity
Share capital and share premium
Other reserves
Retained earnings
Total equity
Liabilities
Interest-bearing loans and borrowings
Lease liabilities
Trade payables and other liabilities
Provisions
Current tax
Deferred tax
Total liabilities
As previously
reported
£’000
Impact of
measurement
period
adjustments
£’000
Including
measurement
period
adjustments
£’000
4,815
–
420,137
411
8,222
76,404
509,989
265,970
3,767
51,723
321,460
86,888
–
70,224
528
1,341
29,548
188,529
–
5,166
–
–
326
–
5,492
–
–
(446)
(446)
–
6,076
(327)
–
–
189
5,938
4,815
5,166
420,137
411
8,548
76,404
515,481
265,970
3,767
51,277
321,014
86,888
6,076
69,897
528
1,341
29,737
194,467
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.
Impact on the statement of financial position of the Company as at 1 April 2019:
Assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Investments
Deferred tax assets
Current assets
Total assets
Equity
Share capital and share premium
Other reserves
Retained earnings
Total equity
Liabilities
Interest-bearing loans and borrowings
Lease liabilities
Trade payables and other liabilities
Provisions
Current tax
Deferred tax
Total liabilities
90
90
As previously
reported
£’000
Impact of
measurement
period
adjustments
£’000
Including
measurement
period
adjustments
£’000
3,803
–
139,139
298,268
3,094
44,028
488,332
265,970
11,121
44,988
322,079
85,447
–
74,599
395
792
5,020
166,253
–
2,773
–
–
60
–
2,833
–
–
(253)
(253)
–
3,406
(320)
406
–
–
3,086
3,803
2,773
139,139
298,268
3,154
44,028
491,165
265,970
11,121
44,735
321,826
85,447
3,406
74,279
395
792
5,020
169,339
GBG Annual Report and Accounts 2020
2. Accounting Policies CONTINUED
Summary of new accounting policies
Set out below are the new accounting policies of the Group, which are consistent with the Company, upon adoption of IFRS 16:
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets
are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-
of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made on or before the commencement
date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the
recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are
subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for
terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a
rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate
implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest
and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease
term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease
term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition
exemption to leases of office equipment that are considered of low value (i.e. below £5,000). Lease payments on short-term leases and leases of low-value
assets are recognised as an expense on a straight-line basis over the lease term.
Significant judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is
reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
Amounts recognised in the statement of financial position and in the consolidated statement of
comprehensive income
Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the year:
As at 1 April 2019
Additions
Disposals
Depreciation expense
Interest expense
Payments
Foreign currency adjustment
As at 31 March 2020
Right-of-use assets
Other
equipment
£’000
16
–
–
(10)
–
–
1
7
Property
£’000
5,150
1,837
(115)
(1,840)
–
–
(272)
4,760
The lease liabilities as at 1 April 2019 can be reconciled to the operating lease commitments as of 31 March 2019 as follows:
Operating lease commitments as at 31 March 2019
Less: discounting of future lease commitments
Discounted operating lease commitments at 1 April 2019
Less: Commitments relating to leases of low value assets
Add: Payments in optional extension periods not recognised as at 31 March 2019
Lease liabilities as at 1 April 2019
Lease liabilities
Total
£’000
6,076
1,878
(299)
–
245
(2,043)
(132)
5,725
Total
£’000
5,166
1,837
(115)
(1,850)
–
–
(271)
4,767
Group
£’000
5,307
(361)
4,946
(6)
1,136
6,076
Company
£’000
2,450
(149)
2,301
(1)
1,106
3,406
Weighted average incremental borrowing rate as at 1 April 2019
4.01%
3.47%
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2. Accounting Policies CONTINUED
(ii)
Amendment to IAS 28 ‘Long Term Interests’: the amendments are intended to clarify that an entity applies IFRS 9 ‘Financial Instruments’ to long-term
interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not
applied. The amendments are to be applied retrospectively for financial years beginning on or after 1 January 2019.
(iii) IFRIC 23 ‘ Uncertainty over Income Tax Treatments’: the IASB issued IFRIC 23 ‘Uncertainty over Income Tax Treatments’ which is effective for financial
years beginning on or after 1 January 2019 and is intended to clarify when and how to apply the recognition and measurement requirements of IAS 12
‘Income Taxes’ when there is uncertainty over income tax treatments.
(iv) Amendment to IFRS 9 ‘Prepayment Features with Negative Compensation’: the amendments are intended to clarify how IFRS 9 ‘Financial Instruments’
classifies particular prepayable financial assets. In addition, the amendment intended to clarify an aspect of accounting for modification of financial
liabilities. The amendments are to be applied retrospectively for fiscal years beginning on or after 1 January 2019.
Apart from IFRS 16, none of these pronouncements has had any impact for amounts recognised in these financial statements.
2.5 Significant Accounting Policies
The Group and Company financial statements are presented in pounds Sterling and all values are rounded to the nearest thousand pounds (£’000) except
where otherwise indicated.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 March each year.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:
− power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
− exposure, or rights, to variable returns from its involvement with the investee; and
− the ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority
of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee,
including:
− the contractual arrangement with the other vote holders of the investee;
− rights arising from other contractual arrangements; and
− the Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements
of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the
subsidiary.
Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from
the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of Other Comprehensive Income (‘OCI’) are attributed to the equity holders of the parent of the Group and to the non-
controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components
of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.
Business Combinations
The Group uses the acquisition method of accounting to account for business combinations of entities not under common control. The consideration
transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at
the acquisition date.
Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as a
financial liability within the scope of IFRS 9 ‘Financial Instruments: Recognition and Measurement’ is measured at fair value with the changes in fair value
recognised in the statement of profit or loss.
If a business combination is achieved in stages, the acquisition date fair value of the Group’s previously held investment in the acquiree is remeasured to fair
value at the acquisition date with any resultant gain or loss recognised through profit or loss.
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GBG Annual Report and Accounts 2020 2. Accounting Policies CONTINUED
Group Companies
On consolidation, the assets and liabilities of foreign operations are translated into pounds Sterling at the rate of exchange prevailing at the reporting
date and their statements of profit or loss are translated at average exchange rates for the period. The exchange differences arising on translation for
consolidation are recognised in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognised in
profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the
acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.
Foreign Currencies
The Group’s consolidated financial statements are presented in pounds Sterling, which is also the parent company’s functional currency. For each entity the
Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The
Group uses the direct method of consolidation and on disposal of a foreign operation, the gain or loss that is reclassified to profit or loss reflects the amount
that arises from using this method.
Transactions and Balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date the transaction
first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated
as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in OCI until the net investment is disposed of, at which
time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also
recorded in OCI.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is
determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on
the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised
in OCI or profit or loss, respectively).
Impairment of Assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual
impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of
an asset’s or cash generating unit’s (‘CGU’s) fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds
its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. Impairment losses of continuing operations are recognised in the Statement of Comprehensive Income in those expense categories
consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only on assets other
than goodwill if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.
If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit
or loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on
a systematic basis over its remaining useful life.
Investment in Subsidiaries
Investments in subsidiaries are held at cost, less provision for impairment.
– over 3 to 10 years
– over 50 years
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated to write off cost less
estimated residual value based on prices prevailing at the balance sheet date on a straight-line basis over the estimated useful life of each asset as follows:
Plant and equipment
Freehold buildings
Freehold land is not depreciated.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may
not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to
their recoverable amount.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use
of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount
of the item) is included in the Statement of Comprehensive Income in the year the item is derecognised.
Residual values and estimated remaining lives are reviewed annually.
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Intangible Assets
Goodwill
Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment
losses. Goodwill already carried in the balance sheet at 1 April 2004 or relating to acquisitions after that date is not amortised. Goodwill is reviewed for
impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill is allocated to the CGU expected to benefit from the synergies. Impairment is determined by assessing
the recoverable amount of the CGU, including the related goodwill. Where the recoverable amount of the CGU is less than the carrying amount, including
goodwill, an impairment loss is recognised in the Statement of Comprehensive Income. The carrying amount of goodwill allocated to a CGU is taken into
account when determining the gain or loss on disposal of the unit, or an operation within it. Goodwill disposed of in this circumstance is measured on the
basis of the relative values of the operation disposed of and the portion of the CGU retained.
Research and Development Costs
Research costs are expensed as incurred. An intangible asset arising from development expenditure on an individual project is recognised only when the
Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its
ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the availability to measure
reliably the expenditure during the development. Following the initial recognition of the development expenditure, the cost model is applied requiring the
asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure capitalised is amortised on a straight-
line basis over 2 to 4 years.
Acquired Intangibles
Separately identifiable intangible assets such as patent fees, licence fees, trademarks and customer lists and relationships are capitalised on the balance
sheet only when the value can be measured reliably, or the intangible asset is purchased as part of the acquisition of a business. Such intangible assets are
amortised over their useful economic lives on a straight-line basis.
Separately identified intangible assets acquired in a business combination are initially recognised at their fair value. Intangible assets are subsequently
stated at fair value or cost less accumulated amortisation and any accumulated impairment losses. Amortisation is recognised in the Consolidated
Statement of Comprehensive Income on a straight-line basis over the estimated useful life of the asset. The carrying value of intangible assets is reviewed for
impairment if events or changes in circumstances indicate the carrying value may not be recoverable.
Estimated useful lives typically applied are as follows:
Software technology assets
Brands and trademarks
Non-compete agreements
Customer relationships
– over 2 to 5 years
– over 2 to 3 years
– over 3 to 5 years
– over 10 years
Acquired Computer Software Licences
Acquired computer software licences comprise computer software licences purchased from third parties, and also the cost of internally developed software.
Acquired computer software licences are initially capitalised at cost, which includes the purchase price (net of any discounts and rebates) and other directly
attributable costs of preparing the asset for its intended use. Direct expenditure including employee costs, which enhances or extends the performance of
computer software beyond its specifications and which can be reliably measured, is added to the original cost of the software.
Costs associated with maintaining the computer software are recognised as an expense when incurred. Computer software licences are subsequently
carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line
method over their estimated useful lives of 3 to 5 years.
The amortisation period and amortisation method of intangible assets other than goodwill are reviewed at least at each balance sheet date. The effects of
any revision are recognised in profit or loss when the changes arise.
Inventories
Inventories are valued at the lower of cost or net realisable value (net selling price less further costs to completion), after making due allowance for obsolete
and slow moving items. Cost is determined by the first in first out (‘FIFO’) cost method.
Financial Assets
Initial Recognition and Measurement
Financial assets are classified at initial recognition and subsequently as measured at amortised cost, fair value through other comprehensive income (OCI),
and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business
model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or
loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient
are measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely
payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an
instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model
determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
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Subsequent Measurement
For purposes of subsequent measurement, financial assets are classified in four categories::
− Financial assets at amortised cost (debt instruments)
− Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
− Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
− Financial assets at fair value through profit or loss
The Group only has financial assets falling into the first two categories above and as such has only included the policy for these two below.
Financial Assets at Amortised Cost (Debt Instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met:
− The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows
And
− The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are
recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost includes trade receivables.
Financial Assets Designated at Fair Value Through 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.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from
the Group’s consolidated statement of financial position) when:
− The rights to receive cash flows from the asset have expired
Or
− The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the
asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
Impairment of Financial Assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on
the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted
at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are
provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which
there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of
the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit
risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its
historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
The Group recognises loss allowances for expected credit losses (ECL) on financial assets measured at amortised cost. Loss allowances for trade receivables
are always measured at an amount equal to lifetime ECL. ECL are a probability-weighted estimate of credit losses. An assessment of ECL is calculated using
a provision matrix model to estimate the loss rates to be applied to each trade receivable category. ECL are discounted at the effective interest rate of the
financial asset. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. The gross
carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider
a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts
in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
In the current year an additional management overlay to the ECL calculation has been applied as detailed in note 27.
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Trade and Other Receivables
Trade receivables, which generally have 14 to 60 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectable
amounts. A provision is made against a trade receivable only when there is objective evidence that the Group may not be able to recover the entire amount
due under the original terms of the invoice. The carrying amount of the receivable is reduced through the use of a provision for doubtful debts account.
Impaired debts are derecognised when they are assessed as uncollectable.
Cash and Short-Term Deposits
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity date of three
months or less.
For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of any outstanding bank
overdrafts.
Borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate (‘EIR’) method.
Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement of profit or loss.
Trade and Other Payables
Trade and other payables are initially recognised at fair value and subsequently recorded at amortised cost using the EIR method.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where
the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate
asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Comprehensive Income
net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting
is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Dilapidation Provisions
A dilapidation provision is recognised when there is an obligation to restore property to its original state at the end of the leasehold period. The provision
is estimated as the cost of restoration at the balance sheet date, with the corresponding entry recognised in property plant and equipment. Depreciation is
charged in line with the remaining leasehold period.
Pensions
The Group does not have a contributory pension scheme. Payments are made to individual private defined contribution pension arrangements.
Contributions are charged in the Statement of Comprehensive Income as they become payable.
Revenue Recognition
Revenue is stated net of value-added tax, rebates and discounts and after the elimination of intercompany 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. Please see Judgements –
Revenue Recognition below for further detail.
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(A) Software licences
Revenue from software licences is recognised when control is considered to have passed to the customer. Control can pass either at a point in time or over
time depending on the performance obligations under the contract as further described below.
Web-service Hosted Software Solutions
The performance obligation is to provide the customer a right to access the software throughout the licence period for which revenue is recognised over the
licence period.
On-premise installation or data disk - Location segment
The performance obligations can include the provision of a software licence, data sets, updates to those data sets during the licence period and support and
maintenance. There are instances where customers are provided a data set to use with their own software rather than the Group’s.
The Group’s software has no standalone value to the customer without the data as there is nothing to apply the algorithms to. The data file cannot be
accessed outside of the software so has no standalone value (unless under the circumstance where it has been licenced for use on the customer’s system).
As a result, the software and the data are considered one performance obligation as the customer cannot benefit from one without the other.
Customers are given a right to use the software and data as it exists at the point in time the licence is granted, for which revenue is recognised at the point in
time the customer can first use and benefit from it.
A proportion of the transaction price is allocated to the provision of data updates and support and maintenance, which are considered separate
performance obligations. This is either based on the stand-alone selling price for those services or, where the Group does not have a history of stand-alone
selling prices for a particular software licence, a cost plus mark-up approach is applied.
Data disk – Fraud segment
The performance obligations can include the licence to use specific data sets, updates to those data sets during the licence period and support and
maintenance.
The performance obligations over the period of the licence are satisfied by the provision of disk files to the customer in the same format on a monthly basis
to ensure that the customer has access to the most relevant information throughout the contract period. This meets the series guidance under IFRS 15
paragraph 22: “a promise to transfer to the customer a series of distinct goods or services that are substantially the same and that have the same pattern of
transfer”. Accordingly, the revenue for the full licence period is recognised over the contractual term.
(B) Transactional
A number of GBG SaaS solutions provide for the provision of transactional identity data intelligence services with customer paying only for the number of
searches they perform. The performance obligation is to provide this identity check and revenue in respect of those solutions is recognised based on usage.
Customers are either invoiced in arrears for searches performed or make a prepayment giving them the right to a specific number of searches.
Where customers make a prepayment, which entitles them to perform a specific number of transactions over an agreed contract period, once this period
has expired any unused transactions are forfeited. Based on a review of historic forfeitures an estimate is made of the expected percentage of transactions
that will remain unused over their contracted life. This percentage is applied such that revenue for expected forfeitures is recognised at in proportion to the
pattern of transactions performed by the customer.
(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 consist 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.
(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.
Where the Group completes performance obligations under a contract with a customer in advance of invoicing the customer, the value of the accrued
revenue is initially recognised as a contract asset.
Any contract assets are disclosed within the trade and other receivables in the Consolidated Balance Sheet.
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
deferred income within 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 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. Where the Group is acting as an agent revenue is recorded at a net amount
reflecting the margin earned.
The Group acts as a principal if it controls a promised good or service before transferring that good or service to the customer. Where the Group is acting as
a principal, revenue is recorded on a gross basis.
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.
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(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).
For contracts for which the Group has decided there is a series of distinct goods and services that are substantially the same and have the same pattern of
transfer where revenue is recognised over time, the modification will always be treated under either a) or b). However, d) may arise when a contract has a
part termination and a modification of the remaining performance obligations.
The facts and circumstances of any contract modification are considered individually as the types of modifications will vary contract by contract and may
result in different accounting outcomes.
(G) Interest income
Revenue is recognised as interest accrues using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial instrument to its net carrying amount.
(H) Presentation and Disclosure Requirements
The Group has disaggregated revenue recognised from contracts into contract type (Licences, Transaction and Services) as management believe this
best depicts how the nature, amount, timing and uncertainty of the Group’s revenue and cash flows are affected by economic factors. The Group has also
disclosed information about the relationship between the disclosure of disaggregated revenue and revenue information disclosed for each reportable
segment. Refer to note 4 for the disclosure on disaggregated revenue.
Operating Profit
Operating profit is profits after amortisation of acquired intangibles, equity-settled share-based payments and exceptional items but before finance revenue,
finance costs and tax.
Exceptional Items
The Group presents as exceptional items on the face of the Statement of Comprehensive Income those material items of income and expense which,
because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better
the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.
Dividends
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are
approved by the Company’s shareholders.
Share-based Payment Transactions
Employees (including Directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services in
exchange for shares or rights over shares (‘equity-settled transactions’).
Equity-settled Transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value
is determined by an external valuation specialist using a binomial model. In valuing equity-settled transactions, no account is taken of any performance
conditions, other than conditions linked to the price of the shares of GB Group plc (‘market conditions’) and non-vesting conditions, if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or
service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘the vesting date’). The cumulative
expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired
and the Group’s best estimate of the number of equity instruments that will ultimately vest. The Statement of Comprehensive Income charge or credit for a
period represents the movement in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market or non-vesting condition,
which are treated as vesting irrespective of whether or not the market or non-vesting conditions were satisfied, provided that all other vesting conditions are
satisfied.
Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an
expense is recognised over the remainder of the new vesting period for any modification which increases the total fair value of the share-based payment
arrangement, or is otherwise beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award
is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it was
granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected in the computation of earnings per share (note 13).
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Finance Costs
Finance costs consist of interest and other costs that are incurred in connection with the borrowing of funds. Finance costs are expensed in the period in
which they are incurred.
Finance costs also include the amortisation of bank loan arrangement fees, interest on long-service award liabilities and interest on lease liabilities.
Taxes
Current Tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, by the reporting date, in the
countries where the Group operates and generates taxable income.
Deferred Income Tax
Deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities included in the financial statements
and the amounts used for tax purposes that will result in an obligation to pay more, or a right to pay less or to receive more tax, with the following
exceptions:
− No provision is made where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction which is not a
business combination that at the time of the transaction affect neither accounting nor taxable profit.
− No provision is made for deferred tax that would arise on all taxable temporary differences associated with investments in subsidiaries and interests
in joint ventures, where the timing of the reversal of temporary differences can be controlled and it is probable that the temporary difference will not
reverse in the foreseeable future.
− Deferred tax assets are recognised only to the extent that the Directors consider that it is probable that there will be suitable taxable profits from which
the future reversal of the underlying temporary differences and unused tax losses and credits can be deducted.
− Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which the asset is realised or liability
settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
New Accounting Standards and Interpretations not Applied
The IASB and IFRIC have issued the following Standards and Interpretations with an effective and adoption date after the date of these financial statements:
International Accounting Standards (IAS/IFRS)
IFRS 3
IFRS 9 & 7 IAS 39
IAS 1, IAS 8
Definition of a business – Amendments to IFRS 3
Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39 and IFRS 7
Definition of Material – Amendments to IAS 1, IAS 8
Effective date
1 January 2020
1 January 2020
1 January 2020
2.6 Judgements and Key Sources of Estimation Uncertainty
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets
and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means
that actual outcomes could differ from those estimates.
In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the
amounts recognised in the financial statements:
Estimates
Impairment of Goodwill
The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated earlier in note 2. Determining
whether goodwill is impaired requires an estimation of the value in use and/or the estimated recoverable amount of the asset derived from the business,
or part of the business, CGU, to which the goodwill has been allocated. The value in use calculation requires an estimate of the present value of future cash
flows expected to arise from the CGU, by applying an appropriate discount rate to the timing and amount of future cash flows.
Management are required to make judgements regarding the timing and amount of future cash flows applicable to the CGU, based on current budgets and
forecasts, and extrapolated for an appropriate period taking into account growth rates and expected changes to sales and operating costs. In making these
estimates management have reflected the uncertainty due to Covid-19 by assessing the sensitivity of the assets to a wider range of changes in the key inputs
to consider if an impairment would arise within these ranges.
Management estimate the appropriate discount rate using pre-tax rates that reflect current market assessments of the time value of money and the risks
specific to the business or the individual CGU.
An analysis of the Group’s goodwill and the assumptions used to test for impairment are set out in note 17.
Impairment of Investments in Subsidiary Undertakings
The Group tests for impairment of investments where there are indicators that the carrying value exceeds the recoverable value.
In order to perform this assessment, management are required to make estimates regarding the timing and amount of future cash flows applicable to the
subsidiary, based on current budgets and forecasts, and extrapolated for an appropriate period taking into account growth rates and expected changes to
sales and operating costs. Management estimate the appropriate discount rate using pre-tax rates that reflect current market assessments of the time value
of money and the risks specific to the business.
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Share-based Payments
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which
they are granted. Judgement is required in determining the most appropriate valuation model for a grant of equity instruments, depending on the terms
and conditions of the grant. Management are also required to use judgement in determining the most appropriate inputs to the valuation model including
expected life of the option, volatility and dividend yield. The assumptions and models used are disclosed in note 29.
Provisions
The Group provides for the costs of restoring property to its original state at the end of the leasehold period on right of use assets. Management are required
to estimate these costs using market information regarding the costs to restore at the balance sheet date.
Allowance for Impairment Losses on Credit Exposures
The Group apply the IFRS 9 simplified lifetime expected credit loss approach in calculating expected credit losses (ECL). Under this method ECL provisions
are determined using a combination of historical experience and forward-looking information based on management judgement. The Covid-19 pandemic
has introduced unprecedented economic uncertainty which increases the likelihood of a higher level of ECL, but there is no historical comparative evidence
to draw upon to build the impact of this pandemic into the normal ECL model used.
The Group has responded by calculating an additional level of provision to overlay the normal ECL calculation. This overlay has been based on management
estimates taking into account an analysis of trade receivables broken down into customer sectors, using internal and external forecasts to assess the sectors
which are likely to see the biggest impact of the pandemic, and comparing cash receipts received post year-end for customers in these sectors against
historical averages. The impact of the overlay is detailed in note 27.
Judgements
Revenue Recognition
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.
Deferred Tax Assets
The amount of the deferred tax asset included in the balance sheet of the Group is recognised only to the extent that it is probable that future taxable profits
will be available against which the asset can be utilised. A deferred tax asset is recognised when it has become probable that future taxable profit will allow
the deferred tax asset to be recovered. Recognition, therefore, involves management judgement regarding the prudent forecasting of future taxable profits
of the business including considering appropriate levels of risk. At the balance sheet date, management has forecast that the Group would generate future
taxable profits against which certain decelerated tax losses, tax losses and other temporary differences could be relieved. Within that forecast, management
considered the total amount of tax losses available across the Group and the relative restrictions in place for loss streaming and made a judgement not to
recognise deferred tax assets on losses of £15,084,000 (2019: £16,367,000). The total amount of deferred tax assets that management had forecast as
available at the year-end based on these forecasts and estimates was lower than the previous year due to the element related to IDology transferring to a
current tax asset. The carrying value of the recognised deferred tax asset at 31 March 2020 was £6,294,000 (2019: £8,222,000) and the unrecognised
deferred tax asset at 31 March 2020 was £5,123,000 (2019: £3,166,000). Further details are contained in note 11.
3. Revenue
Revenue disclosed in the Consolidated Statement of Comprehensive Income is analysed as follows:
Licence
Transactional
Services
Revenue
Finance revenue
Total revenue
2020
£’000
71,543
112,079
15,479
199,101
143
199,244
2019
£’000
75,002
56,191
12,311
143,504
31
143,535
Significant changes in contract balances
Contract assets predominantly relate to software licence services, where revenue recognition for on premise arrangements occurs as the solution is
transferred to the customer, whereas the invoicing pattern is often annually over the contract period. Contract assets recognised during the year totalled
£6.0m (2019: £3.1m). The contract asset balance for work completed but not invoiced on satisfaction of a performance obligation, unwinds over the
contract term. Contract assets are transferred to receivables when the right to consideration becomes unconditional, or conditional over the passage of
time.
Revenue recognised in the year of £35.4m (2019: £28.3m) was included in the opening contract liability. Cash received in advance not recognised as revenue
in the year was £30.4m (2019: £33.4m).
100
100
GBG Annual Report and Accounts 2020 4. Segmental Information
In order to reflect how the Group is presenting its lines of business to its stakeholders going forward, the naming and structure of the operating segments
were amended with effect from 1 April 2019. Going forward ‘Fraud, Risk & Compliance’ has been separated into two new segments – ‘Identity’ and ‘Fraud’.
The ‘Location & Customer Intelligence’ segment has been renamed as ‘Location’. Accordingly, the comparative segmental reporting has been represented.
The Group’s operating segments are internally reported to the Group’s Chief Executive Officer as three operating segments: Location, Identity and Fraud.
Included within ‘Unallocated’ is the revenue and profit of the marketing services business (previously within Location & Customer Intelligence), as well as
group operating costs such as compliance, finance, legal, people team, information security, directors’ remuneration and PLC costs.
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.
Information on segment assets and liabilities is not regularly provided to the Group’s Chief Executive Officer and is therefore not disclosed below.
Year ended 31 March 2020
Licence
Transactional
Services
Total revenue
Adjusted operating profit
Amortisation of acquired intangibles
Share-based payments charge
Exceptional items
Operating profit
Finance revenue
Finance costs
Income tax charge
Profit for the year
Year ended 31 March 2019
Licence
Transactional
Services
Total revenue
Adjusted operating profit
Amortisation of acquired intangibles
Share-based payments charge
Exceptional items
Operating profit
Finance revenue
Finance costs
Income tax expense
Profit for the period
Geographical Information
United Kingdom
United States of America
Australia
Others
Total
1
Refer to note 2, 3.
Fraud
£’000
33,563
–
1,943
35,506
13,444
(477)
–
–
12,967
Identity
£’000
7,135
95,489
2,784
105,408
33,626
(14,171)
–
–
19,455
Location
£’000
Unallocated
£’000
30,845
16,590
2,356
49,791
14,552
(3,999)
–
–
10,553
–
–
8,396
8,396
(13,677)
(361)
(4,541)
(1,552)
(20,131)
143
(2,361)
(3,562)
Total
£’000
71,543
112,079
15,479
199,101
47,945
(19,008)
(4,541)
(1,552)
22,844
143
(2,361)
(3,562)
17,064
(Represented)
Fraud
£’000
27,644
–
1,490
29,134
9,029
(792)
–
–
8,237
(Represented)
Identity
£’000
12,137
45,459
633
58,229
15,219
(4,372)
–
–
10,847
(Represented)
Location
£’000
35,221
10,732
320
46,273
16,683
(4,662)
–
–
12,021
(Represented)
Unallocated
£’000
–
–
9,868
9,868
(8,900)
(490)
(2,287)
(4,003)
(15,680)
31
(720)
(2,583)
(Represented)
Total
£’000
75,002
56,191
12,311
143,504
32,031
(10,316)
(2,287)
(4,003)
15,425
31
(720)
(2,583)
12,153
Revenues from
external customers
Non-current assets
2020
£’000
87,814
52,386
19,063
39,838
199,101
2019
£’000
79,368
20,525
10,241
33,370
143,504
Underlying
2019*
£’000
2020
£’000
126,945
259,558
37,374
48
423,925
Restated 1
2019
£’000
138,157
252,461
39,789
54
430,461
The geographical revenue information above is based on the location of the customer.
Non-current assets for this purpose consist of plant and equipment and intangible assets and excludes the deferred tax asset.
101
101
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
5. Operating Profit
This is stated after charging/(crediting):
Research and development costs recognised as an operating expense
Other Technology related costs recognised as an operating expense
Total Technology related costs recognised as an operating expense
Depreciation of property, plant and equipment (note 14)
Depreciation of right of use assets (note 15)
Expense relating to short term leases
Expense relating to low value leases
Expected credit losses of trade receivables (note 27)
Amortisation of intangible assets (note 16)
Foreign exchange loss/(gain)
6. Auditor’s Remuneration
Audit of the financial statements1
Other fees to auditor - other assurance services
- tax compliance services
- tax advisory services
1 £159,000 (2019: £136,000) of this relates to the Company.
7. Exceptional Items
Acquisition related costs
Costs associated with team member reorganisations
Fair value adjustments to contingent consideration (note 36)
Foreign exchange movement on contingent consideration (note 36)
2020
£’000
16,821
13,043
29,864
1,760
1,850
447
5
2,532
19,192
69
2020
£’000
262
72
–
10
344
2020
£’000
26
555
829
142
1,552
2019
£’000
10,370
13,284
23,654
1,544
–
–
–
852
10,821
(35)
2019
£’000
266
25
2
21
314
2019
£’000
3,747
256
–
–
4,003
Acquisition related costs of £26,000 (2019: £3,747,000) include legal and professional advisor costs directly attributable to the transactions and exclude
operating or integration costs relating to an acquired business. In the current year these costs related to final costs in relation to the acquisition of IDology
Inc. in the prior year in addition to costs relating to potential acquisitions that were either aborted or are not complete at the date of these financial
statements. Due to the size and nature of these costs, management consider that they would distort the Group’s underlying business performance. In the
prior year these costs included £449,000 in relation to VIX Verify and £2,391,000 in relation to IDology Inc.
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.
As detailed in note 36, 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 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 as it arose outside of the 12 month hindsight period permitted for adjustments to the
acquisition accounting.
The contingent liability related to these tax losses is based on the US Dollar value of the losses. As a result the liability was retranslated at the balance sheet
date with a loss of £142,000 being treated as an exceptional item.
The tax impact of the exceptional costs was £969,000 (2019: £77,000). The largest element of this is the increase in the deferred tax asset of £829,000
related to the IDology tax losses.
102
102
GBG Annual Report and Accounts 2020
8. Staff Costs and Directors’ Emoluments
a) Staff Costs
Wages and salaries
Social security costs
Other pension costs
Group
Company
2020
£’000
55,320
6,590
2,473
64,383
2019
£’000
45,935
5,318
2,007
53,260
2020
£’000
33,000
4,469
1,668
39,137
2019
£’000
31,392
4,352
1,486
37,230
Included in wages and salaries is a total charge of share-based payments of £4,541,000 (2019: £2,287,000) which arises from transactions accounted for
as equity-settled share-based payment transactions.
The average monthly number of employees during the year within each category was as follows:
Group
Company
Technology
General and administration
Sales and marketing
b) Directors’ Emoluments
Wages and salaries
Pension
Bonuses
Aggregate gains made by Directors on the exercise of options
The remuneration for the highest paid Director was as follows:
Wages and salaries
Bonus
2020
No.
395
120
507
1,022
2019
No.
356
108
420
884
2020
No.
226
97
364
687
2020
£’000
1,513
74
1,449
3,036
5,936
2020
£’000
607
723
1,330
2019
No.
227
42
388
657
2019
£’000
1,438
72
1,318
2,828
2,467
2019
£’000
589
608
1,197
The highest paid Director has reached the maximum level permitted for a personal pension plan and receives a direct payment in lieu of his pension entitlement,
which was £90,353 (2019: £84,000). The number of share options granted during the year for the highest paid Director was 206,136 (2019: 128,853) and the
number of share options exercised during the year was 200,000 (2019: 200,000).
9. Finance Revenue
Bank interest receivable
10. Finance Costs
Bank interest payable
Interest on long service award
Amortisation of bank loan fees
Lease liability interest
2020
£’000
143
143
2020
£’000
1,911
13
192
245
2,361
2019
£’000
31
31
2019
£’000
613
9
98
–
720
103
103
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements
NOT ES TO THE AC CO UNTS
11. Taxation
a) Tax on Profit
The tax charge in the Consolidated Statement of Comprehensive Income for the year is as follows:
Current income tax
UK corporation tax on profit for the year
Amounts underprovided/(overprovided) in previous years
Foreign tax
Deferred tax
Origination and reversal of temporary differences
Amounts underprovided/(overprovided) in previous years
Impact of change in tax rates
Tax charge in the Statement of Comprehensive Income
b) Reconciliation of the Total Tax Charge
The profit before tax multiplied by the standard rate of corporation tax in the UK would result in a tax charge as explained below:
Consolidated profit before tax
Consolidated profit before tax multiplied by the standard rate of corporation tax in the UK of 19% (2019: 19%)
Effect of:
Permanent differences
Non-taxable income
Rate changes
Utilisation of losses
Prior year items
Research and development tax relief
Patent Box relief
Share option relief
Recognition of unrecognised deferred tax assets
Effect of higher taxes on overseas earnings
Total tax charge reported in the Statement of Comprehensive Income
2020
£’000
2,760
120
1,903
4,783
(2,625)
876
528
(1,221)
3,562
2020
£’000
20,626
3,919
347
(489)
(1,283)
(14)
996
(880)
(545)
9
–
1,502
3,562
2019
£’000
2,765
(292)
2,158
4,631
(1,868)
26
(206)
(2,048)
2,583
2019
£’000
14,736
2,800
1,094
(11)
(120)
–
(266)
(492)
(460)
(67)
(698)
803
2,583
The Group is entitled to current year tax relief of £811,398 (2019: £1,023,000), calculated at a tax rate of 19% (2019: 19%), in relation to the statutory
deduction available on share options exercised in the year.
104
104
GBG Annual Report and Accounts 2020 11. Taxation CONTINUED
c) Deferred Tax – Group
Deferred Tax Asset
The recognised and unrecognised potential deferred tax asset of the Group is as follows:
Decelerated capital allowances
Share options
Long service award
Accrued bonuses
Provision for bad debt
Other temporary differences
Leases
Capital losses
Trading losses
The movement on the deferred tax asset of the Group is as follows:
Opening balance – as reported
IFRS 16 transition adjustment
Opening balance – restated
Acquired on acquisition
Foreign currency adjustments
Origination and reversal of temporary differences
Impact of change in tax rates
Recognised
2020
£’000
1,259
1,848
233
522
368
1,420
429
–
215
6,294
2019
£’000
1,283
1,627
234
728
205
497
–
–
3,648
8,222
Unrecognised
2020
£’000
–
–
–
–
–
–
–
429
2,866
3,295
2020
£’000
8,222
326
8,548
–
11
(2,265)
–
6,294
2019
£’000
–
–
–
–
–
–
–
384
2,782
3,166
2019
£’000
4,453
–
4,453
3,955
(73)
24
(137)
8,222
The deferred tax asset has been recognised to the extent it is anticipated to be recoverable out of future taxable profits based on profit forecasts for the
foreseeable future. The utilisation of the unrecognised deferred tax asset in future periods will reduce the future tax rate below the standard rate.
The Group has unrecognised deductible temporary differences of £15,084,000(2019: £16,367,000) and unrecognised capital losses of £2,257,000
(2019: £2,257,000).
Deferred Tax Liability
The deferred tax liability of the Group is as follows:
Intangible assets
Land and buildings
Leases
Accelerated capital allowances
The movement on the deferred tax liability of the Group is as follows:
Opening balance
IFRS 16 transition adjustment
Opening balance – restated
Acquisition of intangibles in subsidiaries
Foreign currency adjustments
Origination and reversal of temporary differences
Impact of change in tax rates
2020
£’000
26,553
186
277
139
27,155
2020
£’000
29,548
189
29,737
–
713
(3,823)
528
27,155
2019
£’000
29,378
108
–
62
29,548
2019
£’000
8,260
–
8,260
23,913
(359)
(1,923)
(343)
29,548
105
105
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
11. Taxation CONTINUED
d) Deferred Tax – Company
Deferred Tax Asset
The recognised and unrecognised potential deferred tax asset of the Company is as follows:
Decelerated capital allowances
Share options
Long service award
Provision for bad debt
Other temporary differences
Leases
Capital losses
Trading losses
The movement on the deferred tax asset of the Company is as follows:
Opening balance – as reported
IFRS 16 transition adjustment
Opening balance – restated
Origination and reversal of temporary differences
Recognised
2020
£’000
1,259
1,839
105
308
310
46
–
–
3,867
2019
£’000
1,283
1,627
100
84
–
–
–
–
3,094
Unrecognised
2020
£’000
–
–
–
–
–
–
429
2,866
3,295
2020
£’000
3,094
59
3,153
714
3,867
2019
£’000
–
–
–
–
–
–
384
2,782
3,166
2019
£’000
3,404
–
3,404
(310)
3,094
The deferred tax asset has been recognised to the extent it is anticipated to be recoverable out of future taxable profits based on profit forecasts for the
foreseeable future. The utilisation of the unrecognised deferred tax asset in future periods will reduce the future tax rate below the standard rate. The
Company has unrecognised deductible temporary differences of £15,084,000 (2019: £16,367,000) and unrecognised capital losses of £2,257,000 (2019:
£2,257,000).
Deferred Tax Liability
The deferred tax liability of the Company is as follows:
Intangible assets
Land and buildings
The movement on the deferred tax liability of the Company is as follows:
Opening balance
Origination and reversal of temporary differences
Impact of change in tax rates
2020
£’000
4,362
112
4,474
2020
£’000
5,020
(1,014)
468
4,474
2019
£’000
4,912
108
5,020
2019
£’000
6,319
(1,179)
(120)
5,020
e) Tax Losses
The Group has carried forward trading losses at 31 March 2020 of £15,591,000 (2019: £30,561,000). To the extent that these losses are available for offset
against future trading profits of the Group, it is expected that the future effective tax rate would be below the standard rate. There were also capital losses
carried forward at 31 March 2020 of £2,257,000 (2019: £2,257,000), which should be available for offset against future capital gains of the Group to the
extent that they arise.
f) Change in corporation tax rate
A reduction in the UK corporation tax rate to 17% (from 19%) with effect from 1 April 2020 was enacted in the Finance Act 2016. The deferred tax assets and
liabilities as at 31 March 2019 were based on this rate.
In the UK Budget on 11 March 2020 it was announced that the rate would remain at 19%, with this change substantively enacted on 17 March 2020. The
deferred tax assets and liabilities at 31 March 2020 are therefore based on the 19% rate.
106
106
GBG Annual Report and Accounts 2020 12. Dividends Paid and Proposed
Declared and paid during the year
Final dividend for 2019 (paid in 2020): 2.99p (2018 (paid in 2019): 2.65p)
Proposed for approval at AGM (not recognised as a liability at 31 March)
Final dividend for 2020: 0p (2019: 2.99p)
2020
£’000
2019
£’000
5,782
4,049
–
5,766
£21,000 was received during the year relating to a refund for dividends not claimed from previous years. The total net cash impact of dividends during the
year was therefore £5,761,000.
13. Earnings Per Ordinary Share
Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the basic weighted average number of ordinary
shares in issue during the year.
Profit attributable to equity holders of the Company
2020
pence per
share
8.8
2020
£’000
17,064
2019
pence per
share
7.7
2019
£’000
12,153
Diluted
Diluted earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
Basic weighted average number of shares in issue
Dilutive effect of share options
Diluted weighted average number of shares in issue
Profit attributable to equity holders of the Company
2020
No.
193,630,621
3,144,641
196,775,262
2019
pence per
share
7.6
2019
No.
158,051,687
2,754,605
160,806,292
2019
£’000
12,153
2020
pence per
share
8.7
2020
£’000
17,064
Adjusted
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.
Adjusted operating profit
Less net finance costs
Less tax
Adjusted earnings
Basic
2020
pence per
share
24.8
(1.1)
(1.9)
21.8
Diluted
2020
pence per
share
24.4
(1.1)
(1.9)
21.4
2020
£’000
47,945
(2,218)
(3,562)
42,165
Basic
2019
pence per
share
20.3
(0.4)
(1.7)
18.2
Diluted
2020
pence per
share
19.9
(0.4)
(1.6)
17.9
2019
£’000
32,031
(689)
(2,583)
28,759
107
107
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
14. Property, Plant and Equipment
Group
Cost
At 1 April 2018
Acquired on acquisition
Additions
Disposals
Foreign currency adjustment
At 31 March 2019
Acquired on acquisition
Additions
Disposals
Foreign currency adjustment
At 31 March 2020
Depreciation and impairment
At 1 April 2018
Provided during the year
Disposals
Foreign currency adjustment
At 31 March 2019
Provided during the year
Disposals
Foreign currency adjustment
At 31 March 2020
Net book value
At 31 March 2020
At 31 March 2019
At 1 April 2018
Company
Cost
At 1 April 2018
Additions
Disposals
At 31 March 2019
Additions
Disposals
At 31 March 2020
Depreciation and impairment
At 1 April 2018
Provided during the year
Disposals
At 31 March 2019
Provided during the year
Disposals
At 31 March 2020
Net book value
At 31 March 2020
At 31 March 2019
At 1 April 2018
108
108
Land and
buildings
£’000
Plant and
equipment
£’000
1,251
–
–
–
–
1,251
–
–
–
1,251
20
22
–
–
42
19
–
–
61
1,190
1,209
1,231
6,943
231
1,453
(51)
(35)
8,541
1,653
(881)
(94)
9,219
3,474
1,522
(46)
(15)
4,935
1,741
(875)
(45)
5,756
3,463
3,606
3,469
Land and
buildings
£’000
Plant and
equipment
£’000
1,233
–
–
1,233
–
–
1,233
2
22
–
24
19
–
43
1,190
1,209
1,231
4,927
1,214
(2)
6,139
858
(872)
6,125
2,444
1,103
(2)
3,545
1,195
(872)
3,868
2,257
2,594
2,483
Total
£’000
8,194
231
1,453
(51)
(35)
9,792
1,653
(881)
(94)
10,470
3,494
1,544
(46)
(15)
4,977
1,760
(875)
(45)
5,817
4,653
4,815
4,700
Total
£’000
6,160
1,214
(2)
7,372
858
(872)
7,358
2,446
1,125
(2)
3,569
1,214
(872)
3,911
3,447
3,803
3,714
GBG Annual Report and Accounts 2020 15. Right of use assets
Group
Cost
At 31 March 2019
Adoption of IFRS 16 (see note 2.4)
Additions
Disposals
Foreign currency adjustment
At 31 March 2020
Depreciation and impairment
At 31 March 2019
Adoption of IFRS 16 (see note 2.4)
Provided during the year
Disposals
Foreign currency adjustment
At 31 March 2020
Net book value
At 31 March 2020
At 31 March 2019
At 1 April 2018
Company
Cost
At 31 March 2019
Adoption of IFRS 16 (see note 2.4)
Additions
Disposals
At 31 March 2020
Depreciation and impairment
At 31 March 2019
Adoption of IFRS 16 (see note 2.4)
Provided during the year
At 31 March 2020
Net book value
At 31 March 2020
At 31 March 2019
At 1 April 2018
Right of use
assets
£’000
–
8,840
1,837
(295)
(265)
10,117
–
3,674
1,850
(180)
6
5,350
4,767
–
–
Right of use
assets
£’000
–
4,691
–
–
4,691
–
1,918
675
2,593
2,098
–
–
Total
£’000
–
8,840
1,837
(295)
(265)
10,117
–
3,674
1,850
(180)
6
5,350
4,767
–
–
Total
£’000
–
4,691
–
–
4,691
–
1,918
675
2,593
2,098
–
–
Further detail regarding the impact of the transition to IFRS 16 has been given in note 2.4 of the financial statements.
The underlying class of assets and their net book values are leasehold property (Group £4,760,000, Company £2,093,000) and equipment (Group £7,000,
Company £5,000).
109
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GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
16. Intangible Assets
Group
Customer
relationships
£’000
Software
technology
£’000
Non-
complete
clauses
£’000
Total
acquired
intangibles
£’000
45,926
(1,078)
73,212
–
–
118,060
–
118,060
2,075
–
–
120,135
10,869
22
5,779
–
16,670
(77)
12,231
–
28,824
91,311
101,390
101,390
35,057
15,673
(249)
17,224
–
–
32,648
–
32,648
527
–
–
33,175
7,257
29
4,105
–
11,391
(43)
5,723
–
17,071
16,104
21,257
21,257
8,416
1,066
(79)
4,391
–
–
5,378
–
5,378
194
–
(695)
4,877
614
2
432
–
1,048
18
1,054
(695)
1,425
3,452
4,330
4,330
452
Cost
At 1 April 2018
Foreign currency adjustment
Additions – business combinations
Additions – purchased software
Disposals
At 31 March 2019 - as reported
Additions – measurement period 1
As at 31 March 2019 – as restated
Foreign currency adjustment
Additions – purchased software
Disposals
At 31 March 2020
Amortisation and impairment
At 1 April 2018
Foreign currency adjustment
Amortisation during the year
Disposals
At 31 March 2019
Foreign currency adjustment
Amortisation during the year
Disposals
At 31 March 2020
Net book value
At 31 March 2020
At 31 March 2019 - restated 1
At 31 March 2019 - as reported
At 1 April 2018
1
Refer to note 2
Acquisition
Data Discoveries Holdings Limited
Advanced Checking Services
Capscan Parent Limited
TMG.tv Limited
CRD (UK) Limited
DecTech Solutions Pty Ltd
CDMS Limited
Loqate Inc
ID Scan Biometrics Limited
Postcode Anywhere (Holdings) Limited
VIX Verify Global Pty Limited
IDology Inc
Purchased
software
£’000
Internally
developed
software
£’000
Goodwill
£’000
116,497
(2,625)
178,651
–
–
292,523
5,509
298,032
5,230
–
–
303,262
2,118
30
–
172
(67)
2,253
–
2,253
1
183
(259)
2,178
1,195
–
(5)
–
468
–
(20)
–
–
1,638
– 2
– 162
–
–
1,802
–
62,665
(1,406)
94,827
–
–
156,086
–
156,086
2,796
–
(695)
158,187
18,740
53
10,316
–
29,109
(102)
19,008
(695)
47,320
110,867
126,977
126,977
43,925
303,262
298,032
292,523
116,497
376
615
615
923
Total
£’000
183,051
(4,001)
273,478
172
(67)
452,633
5,509
458,142
8,027
183
(1,513)
464,839
21,647
48
10,821
(20)
32,496
(100)
19,192
(1,254)
50,334
414,505
425,646
420,137
161,404
1,771
–
–
–
–
1,771
–
1,771
–
–
(559)
1,212
1,712
–
37
–
1,749
–
22
(559)
1,212
–
22
22
59
Carrying Value
of Customer
Relationship
£’000
47
26
746
276
286
1,564
1,656
1,165
2,448
17,613
5,620
59,864
91,311
Remaining
Amortisation
Period
Years
1.25
1.33
1.58
2.58
3.58
4.08
4.58
5.08
6.25
7.08
8.50
8.83
Intangible assets categorised as ‘other acquisition intangibles’ include assets such as non-compete clauses and software technology.
Goodwill arose on the acquisition of GB Mailing Systems Limited, e-Ware Interactive Limited, Data Discoveries Holdings Limited, Advanced Checking
110
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GBG Annual Report and Accounts 2020 16. Intangible Assets CONTINUED
Services Limited (‘ACS’), Capscan Parent Limited, TMG.tv Limited, CRD (UK) Limited, DecTech Solutions Pty Ltd, CDMS Limited, Loqate Inc., ID Scan
Biometrics Limited, Postcode Anywhere (Holdings) Limited, VIX Verify Global Pty Limited and IDology Inc. Under IFRS, goodwill is not amortised and is tested
annually for impairment (note 16).
Customer
relationships
£’000
Software
technology
£’000
Non-
complete
clauses
£’000
Total
acquired
intangibles
£’000
Goodwill
£’000
Purchased
software
£’000
Internally
developed
software
£’000
Company
Cost
At 1 April 2018
Additions – purchased software
Transfer from investments1
Disposals
At 31 March 2019
Additions – product development
Hive-up adjustment2
Disposals
At 31 March 2020
Amortisation and impairment
At 1 April 2018
Amortisation during the year
Disposals
At 31 March 2019
Reclassification
Amortisation during the year
Disposals
At 31 March 2020
Net book value
At 31 March 2020
At 31 March 2019
At 1 April 2018
26,078
–
–
–
26,078
–
(54)
–
26,024
207
2,776
–
2,983
102
2,878
–
5,963
20,061
23,095
25,871
7,818
–
–
–
7,818
–
–
–
7,818
96
2,599
–
2,695
(102)
2,498
–
5,091
2,727
5,123
7,722
461
–
–
–
461
–
–
(194)
267
10
279
–
289
–
162
194
257
10
172
451
34,357
–
–
–
34,357
–
(54)
(194)
34,109
313
5,654
–
5,967
–
5,538
(194)
11,311
78,154
–
31,961
–
110,115
2,098
167
–
(67)
2,198
–
–
–
183
–
(259)
110,115 2,122
–
–
–
–
–
–
–
–
1,170
425
(20)
1,575
–
171
–
1,746
376
623
928
Total
£’000
116,962
167
31,961
(67)
149,023
183
(54)
(1,012)
148,140
3,788
6,116
(20)
9,884
–
5,720
(753)
14,851
2,353
–
–
–
2,353
–
–
(559)
1,794
2,305
37
–
2,342
–
11
(559)
1,794
22,798
28,390
34,044
110,115
110,115
78,154
–
11
48
133,289
139,139
113,174
1
2
A transfer between investments and goodwill has been made as the directors consider that this better reflects the nature of the non-current assets following hive-ups that
occurred in previous years.
This is a correction to the opening acquired cost in respect of the hive-up of IDScan Biometrics Limited in the year to 31 March 2018. The other side to this entry is within
‘Other Reserves’ within equity.
Acquisition
ID Scan Biometrics Limited
Postcode Anywhere (Holdings) Limited
Carrying Value
of Customer
Relationship
£’000
2,448
17,613
20,061
Remaining
Amortisation
Period
Years
6.25
7.08
Goodwill arose on the acquisition of ID Scan Biometrics Limited and Postcode Anywhere (Holdings) Limited. Under IFRS, goodwill is not amortised and is
tested annually for impairment (note 17).
111
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GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
17. Impairment Testing of Goodwill
Goodwill acquired through business combinations has been allocated for impairment testing purposes to seven CGUs as follows:
− Fraud Unit (represented by the Fraud operating segment excluding the CAFs Unit)
− Identity Unit (represented by the Identity operating segment excluding the IDology Unit and the VIX Verify Unit)
− Location Unit (represented by the Location operating segment excluding the Loqate Unit)
− CAFs Unit (part of the Fraud operating segment)
− Loqate Unit (part of the Location operating segment)
− VIX Verify Unit (part of the Identity operating segment)
− IDology Unit (part of the Identity operating segment)
− e-Ware Interactive Unit (included in Other operating segment)
− Transactis Unit (included in Other operating segment)
Where there are no indicators of impairment on the goodwill arising through business combinations made during the year they are tested for impairment no
later than at the end of the year.
Carrying Amount of Goodwill Allocated to CGUs
Fraud Unit
Identity Unit
Location Unit
CAFS Unit
Loqate Unit
VIX Verify Unit
IDology Unit
e-Ware Interactive Unit
Transactis Unit
2020
£’000
3,040
37,586
53,992
12,922
7,731
14,171
173,239
79
502
303,262
2019
£’000
3,040
37,586
53,992
14,261
7,393
15,639
160,031
79
502
292,523
Key Assumptions Used in Value in Use Calculations
The Group prepares cash flow forecasts using budgets and forecasts approved by the Directors covering a five-year period and an appropriate extrapolation
of cash flows beyond this using a long-term average growth rate. The long-term average growth rate is not greater than the average long-term retail growth
rate in the territory where the CGU is based (UK – 1.8%; USA – 1.8%; Australia – 2.5%).
The key assumptions for value in use calculations are those regarding the forecast cash flows, discount rates and growth rates. The Directors estimate
discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the individual CGU. Growth
rates reflect long-term growth rate prospects for the economy in which the CGU operates.
Fraud Unit
Identity Unit
Location Unit
CAFS Unit
Loqate Unit
Vix Verify Unit
Idology Unit
e-Ware Interactive Unit
Transactis Unit
2020
2019
Pre-tax
WACC
%
Growth rate
(in perpetuity)
%
10.7%
10.7%
10.7%
14.3%
12.8%
14.3%
12.8%
10.7%
10.7%
1.8%
1.8%
1.8%
2.5%
1.8%
2.5%
1.8%
–
–
Pre-tax
WACC
%
10.4%
10.4%
10.4%
15.1%
11.3%
–
–
10.4%
10.4%
Growth rate
(in perpetuity)
%
1.8%
1.8%
1.8%
2.8%
1.8%
–
–
–
–
In the case of the Fraud CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the
CGU by £67,869,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
− a reduction of 96% in the forecast profit margins; and
− any absolute increase in the pre-tax weighted average cost of capital would have £nil impact on headroom.
In the case of the Identity CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the
CGU by £90,251,000. The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:
− an absolute increase of 23.2% in the pre-tax weighted average cost of capital from 10.7% to 33.9%; or
− a reduction of 71% in the forecast profit margins.
In the case of the Location CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of
the CGU by £138,799,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
− an absolute increase of 28.4% in the pre-tax weighted average cost of capital from 10.7% to 39.1%; or
− a reduction of 72% in the forecast profit margins.
112
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GBG Annual Report and Accounts 2020 17. Impairment Testing of Goodwill CONTINUED
In the case of CAFs CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU
by £23,013,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
− an absolute increase of 19.0% in the pre-tax weighted average cost of capital from 14.3% to 33.3%; or
− a reduction of 64% in the forecast profit margins.
In the case of Loqate CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the CGU
by £26,379,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
− an absolute increase of 65.4% in the pre-tax weighted average cost of capital from 12.8% to 78.2%; or
− a reduction of 77% in the forecast profit margins.
In the case of the VIX Verify CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of
the CGU by £7,498,000. The sensitivities which result in the recoverable amount equalling the carrying value can be summarised as follows:
− an absolute increase of 6.9% in the pre-tax weighted average cost of capital from 14.3% to 21.2%; or
− a reduction of 35% in the forecast profit margins.
In the case of the IDology CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of the
CGU by £81,374,000. The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:
− an absolute increase of 5.2% in the pre-tax weighted average cost of capital from 12.8% to 18.0%; or
− a reduction of 32% in the forecast profit margins.
In the case of the e-Ware Interactive CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying
value by £20,000 (2019: £165,000). In assessing the future recoverable amounts, forecast cash flows are assumed for the current contract value only on
the basis that the recoverable amount is associated with only a single remaining customer attributable to that acquisition. Since the value in use of the
e-Ware Interactive CGU is based on a single client, its loss or a significant reduction in its cash flow would cause the carrying value of the unit to exceed its
recoverable amount:
− a reduction of 20% in the forecast profit margins, and
− any absolute increase in the pre-tax weighted average cost of capital would have £nil impact on headroom.
In the case of the Transactis CGU, the annual impairment review as at 31 March 2020 indicated that the recoverable amount exceeded the carrying value of
the CGU by £1,792,000. The sensitivities, which result in the recoverable amount equalling the carrying value, can be summarised as follows:
− an absolute increase of 52.6% in the pre-tax weighted average cost of capital from 10.7% to 63.3%; or
− a reduction of 45% in the forecast profit margins.
Based on the impairment reviews performed no impairment has been identified.
18. Investments
Company
At 1 April
Acquisition of subsidiary undertakings
Capital investment in subsidiary undertaking
Transfer to goodwill and intangibles1
At 31 March – as reported
Acquisition of subsidiary undertakings (measurement period adjustment) 2
At 31 March – as restated
Provision for impairment
At 1 April
Charge for the year3
At 31 March
Net book value
At 31 March
2020
£’000
305,940
7
–
–
–
–
305,947
2,464
–
2,464
2019
£’000
76,310
235,744
20,639
(31,961)
300,732
5,208
305,940
–
2,464
2,464
303,483
303,476
1
2
3
A transfer between investments and goodwill has been made as the directors consider that this better reflects the nature of the non-current assets following hive-ups that
occurred in previous years.
Refer to note 2.3
The impairment charge for the year of £2,464,000 was following a dividend from Loqate Inc. which was recognised in the Company income statement.
Refer to note 2.3 for details of the measurement period adjustment impacting the Group.
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GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
18. Investments CONTINUED
The Company accounts for its investments in subsidiaries using the cost model. The Company holds 100% of the ordinary share capital of all investments as follows:
Name of company
Capscan Parent Limited
Capscan Limited 1
Data Discoveries Holdings Limited
Data Discoveries Limited 1
Managed Analytics Limited 1
Fastrac Limited 1
e-Ware Interactive Limited
GB Information Management Limited
GB Datacare Limited
GB Mailing Systems Limited
Citizensafe Limited
TelMe.com Limited
Farebase Limited
TMG.tv Limited
CRD (UK) Limited
Postcode Anywhere (Holdings) Limited
Postcode Anywhere (Europe) Limited
Postcode Anywhere (North America) Limited
PCA Predict Inc.
GBG (Australia) Holding Pty Ltd
GBG (Australia) Pty Ltd 1
VIX Verify Global Pty Ltd 1
GBG (Malaysia) Sdn Bhd 1
GBG DecTech Solutions S.L 1
迪安科 1
Proportion
of voting
rights and
shares held
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Loqate Inc.
Loqate Limited 1
IDology Inc.
ID Scan Biometrics Limited
IDscan Research Bilisim Teknolojileri Sanayi Ve
Ticaret Limited Sirketi
100%
UAB IDscan Biometrics R&D
Safer Clubbing At Night Network (Scan Net) Ltd 100%
Transactis Limited 1
100%
Inkfish Limited 1
100%
VIX Verify Pty Ltd 1
100%
GreenID Limited 1
100%
Registered office address
Country of
incorporation
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
National Registered Agents Inc., 106 Greentree Drive, Suite 101, Dover
United States
DE 19904
Co Sec Consulting Pty Ltd, 59 Gipps Street, Collingwood, VIC 3066
Co Sec Consulting Pty Ltd, 59 Gipps Street, Collingwood, VIC 3066
Level 3, 20 Bond Street, Sydney NSW 2000
Level 7 Menara Millenium, Jalan Damanlela Pusat Bandar, Damansara
Heights, 50490 Kuala Lumpur, Wilayah Persekutuan
08002-Barcelona, Edifici The Triangle, 4th Floor, Placa de Catalunya,
Barcelona, Spain
Room 1714, Building 4, China Investment Center, No.9 Guangan Road,
Fengtai District, Beijing, China
United States
805 Veterans Blvd Ste 305, Redwood City CA 94063
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United States
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
Turkey
2018 Powers Ferry Rd, Atlanta, GA 30339, USA
Australia
Australia
Australia
Malaysia
Mersin Universitesi Çiftlikköy Kampüsü, Teknopark İdari Bina No: 106
Yenişehir – Mersin
Kauno m. Kauno m. I. Kanto g. 18-4B Lithuania
Lithuania
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
United Kingdom The Foundation, Herons Way, Chester Business Park, Chester CH4 9GB
Australia
New Zealand
China
Spain
Mastersoft Group Pty Ltd 1
Mastersoft (New Zealand) Ltd 1
DataSan Pty Ltd 1
VIX Verify International Pty Ltd 1
VIX Verify Singapore Pte Ltd 1
VIX Verify SA (Pty) Ltd 1
PT Fraud Solutions Indonesia 1
100%
100%
100%
100%
100%
100%
100%
Australia
New Zealand
Australia
Australia
Singapore
South Africa
Indonesia
Co Sec Consulting Pty Ltd, 58 Gipps Street, Collingwood, Victoria 3066, Australia
Moore Stephens Markhams Wellington Limited, Level 11 Sovereign House, 34-42
Manners Street, Wellington 6011, New Zealand
Co Sec Consulting Pty Ltd, 58 Gipps Street, Collingwood, Victoria 3066, Australia
Moore Stephens Markhams Wellington Limited, Level 11 Sovereign House, 34-42
Manners Street, Wellington 6011, New Zealand
Co Sec Consulting Pty Ltd, 58 Gipps Street, Collingwood, Victoria 3066, Australia
Co Sec Consulting Pty Ltd, 58 Gipps Street, Collingwood, Victoria 3066, Australia
C/O S.S. Corporate Management Pte. Ltd, 138 Cecil Street, #12-01A Cecil Court,
069538 Singapore
C/O Eversheds Sutherland, 3rd Floor, 54, Melrose Boulevard, Melrose Arch,
Melrose North, 2196, Johannesburg, South Africa
Satrio Tower, Lt .16, Jl.Prof.Dr. Satrio, Blok C4 No 5 RT. 7/RW.2 Kel. Kunnigan
Timur, Kec. Setiabudi Jakarta Selatan- 12950
The Company accounts for its non-listed equity investments as financial assets designated at fair value through OCI. The Company holds the following non-
listed equity investment:
Name of company
Payfone Inc.1,2
Proportion
of voting
rights and
shares held
0.32%
Country of
incorporation
United States
Registered office address
215 Park Avenue South New York, NY 10003 United States
held indirectly.
held at zero value following measurement period adjustment detailed in note 2.3.
1
2
114
114
GBG Annual Report and Accounts 2020 19. Trade and Other Receivables
Trade receivables
Prepayments
Accrued income
1
See note 2.3
20. Cash
Cash at bank and in hand
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.
21. Equity Share Capital
Authorised
194,193,861 (2019: 192,850,117) ordinary shares of 2.5p each
Issued
Allotted, called up and fully paid
Share premium
Number of shares in issue at 1 April
Issued on placing
Issued in relation to intangible asset acquisition
Issued on exercise of share options
Number of shares in issue at 31 March
Share Capital
£’000
2020
Share Premium
£’000
1 April
Consideration received on share placing
Share issue costs
Fair value of assets received on acquisition of
intangible asset
Consideration received on exercise of share
options
Number of shares in issue at 31 March
4,821
–
–
–
34
4,855
261,149
–
–
Group
Company
2020
£’000
52,496
7,855
6,203
66,554
Restated 1
2019
£’000
46,114
5,731
3,147
54,992
2020
£’000
36,993
3,847
450
41,290
2019
£’000
31,586
3,788
525
35,899
Group
Company
2020
£’000
27,499
2019
£’000
21,189
2020
£’000
15,031
2019
£’000
7,791
2020
£’000
4,855
4,855
261,648
266,503
2020
No.
192,850,117
–
7,352
1,336,392
194,193,861
2019
£’000
4,821
4,821
261,149
265,970
2019
No.
152,668,698
39,024,390
1,157,029
192,850,117
Total
£’000
265,970
–
–
Share Capital
£’000
3,817
976
–
2019
Share Premium
£’000
104,814
159,367
(3,274)
Total
£’000
108,631
160,343
(3,274)
43
43
456
261,648
490
266,503
–
28
4,821
–
–
242
261,149
270
265,970
During the year to 31 March 2020, 7,352 shares were issued as final consideration in relation to the purchase of an intangible asset. The fair value of the
asset was £43,000.
115
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GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
22. Loans
Bank loans
In April 2014, the Group secured an Australian Dollar three-year term loan of AUS$10,000,000. The debt bears an interest rate of +1.90% above the
Australian Dollar bank bill interest swap rate (‘BBSW’). This term loan was extended during the prior year from its original maturity of April 2017 to
November 2019. This loan was repaid in full during the current financial year.
In October 2018, the Group drew down £10,000,000 from its existing revolving credit facility agreement in order to part fund the acquisition of VIX Verify.
This drawdown took the borrowing on that facility to £17,000,000 at that date.
In February 2019, the Group refinanced its existing revolving facility and the total facility was increased to £110,000,000, with a further £30,000,000
accordion option. The facility now expires in February 2022. The existing liability of £17,000,000 was repaid at the point of the refinancing with a
simultaneous drawdown of £101,000,000 (net increase of £84,000,000), which was used to part fund the IDology acquisition. A further repayment of
£15,000,000 was made in March 2019.
During the current financial year there have been no further drawdowns on this facility. Repayments totalling £23,500,000 have been made during the year.
The debt bears an initial interest rate of LIBOR + 1.50%. This interest rate is subject to an increase of 0.25% should the business exceed certain leverage
conditions.
Opening bank loan
New borrowings (net of arrangement fee)
Repayment of borrowings
Amortisation of loan fees
Foreign currency translation adjustment
Closing bank loan
Analysed as:
Amounts falling due within 12 months
Amounts falling due after one year
Analysed as:
Amounts falling due within 12 months
Amounts falling due after one year
Intercompany loans
Opening intercompany loan
New borrowings
Repayment of borrowings
Foreign currency translation adjustment
Closing intercompany loan
Analysed as:
Amounts falling due within 12 months
Amounts falling due after one year
Group
Company
2020
£’000
86,888
–
(24,914)
192
(27)
62,139
2019
£’000
9,248
110,447
(32,804)
–
(3)
86,888
2020
£’000
85,447
–
(23,500)
192
–
62,139
–
62,139
62,139
1,441
85,447
86,888
–
62,139
62,139
62,500
(361)
62,139
87,441
(553)
86,888
62,500
(361)
62,139
Group
2020
£’000
–
–
–
–
–
2019
£’000
–
–
–
–
–
Company
2020
£’000
4,156
–
–
–
4,156
–
–
–
– –
–
4,156
–
4,156
2019
£’000
7,000
110,447
(32,000)
–
–
85,447
–
85,447
85,447
86,000
(553)
85,447
2019
£’000
–
–
–
–
–
–
–
–
Interest is charged on intercompany loans at a rate of 3.5% per annum. The loans are unsecured, and repayable within 2 years.
116
116
GBG Annual Report and Accounts 2020 23. Lease liabilities
At 1 April
On transition to IFRS 16
Additions
Disposals
Accretion of interest
Payments
Foreign currency adjustment
Analysed as:
Amounts falling due within 12 months
Amounts falling due after one year
Group
Company
2020
£’000
–
6,076
1,878
(299)
245
(2,043)
(132)
5,725
2,012
3,713
5,725
2019
£’000
–
–
–
–
–
–
–
–
–
–
–
2020
£’000
–
3,407
–
–
107
(832)
–
2,682
704
1,978
2,682
Amounts recognised in the Balance Sheet and in the Statement of Changes in Equity have been disclosed within note 2.4.
24. Trade and Other Payables
Group
Company
Trade payables
Amounts owed to subsidiary undertakings
Other taxes and social security costs
Accruals
25. Provisions
Provisions can be analysed as follows:
Dilapidation provision (see below)
Long service award (see note 26)
Dilapidation provision
At 1 April
Utilised during the year
Provided in year
Closing balance
2020
£’000
10,403
–
5,299
24,939
40,641
Group
2020
£’000
465
551
1,016
–
–
465
465
2019
£’000
8,687
–
3,375
21,446
33,508
2019
£’000
–
528
528
25
(25)
–
–
2020
£’000
6,670
20,622
4,751
15,704
47,747
421
422
843
–
–
421
421
This provision relates to the estimated cost of restoration work required upon termination of leasehold property agreements. The estimated level of
provision required was reassessed during the year which has led to the recognition of additional provisions being recognised.
Company
2020
£’000
2019
£’000
2019
£’000
–
–
–
–
–
–
–
–
–
–
–
2019
£’000
3,842
23,952
2,888
15,782
46,464
–
395
395
25
(25)
–
–
117
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GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements
NOT ES TO THE AC CO UNTS
26. Long Service Award
The Group provides long service awards, providing employees with a benefit after they attain a set period of service with the Group, for example 10 or 20
years. For these benefits, IAS 19 requires a liability to be held on the Group’s balance sheet.
At 1 April
Past service cost
Service cost
Benefits taken
Actuarial (gain)/loss during the year
Net interest charge
At 31 March
Group
2020
£’000
528
–
100
(21)
(69)
13
551
2019
£’000
–
349
102
–
68
9
528
Company
2020
£’000
395
–
74
(21)
(36)
10
422
2019
£’000
–
261
76
–
51
7
395
The following table lists the inputs to the valuation of the long service award for the years ended 31 March 2020 and 31 March 2019.
Discount rate (%)
Salary increases (%)
Employee turnover (% probability of leaving depending on age)
2020
2.2
3.0
2 – 20%
2019
2.4
3.5
2% – 20%
27. Financial Instruments and Risk Management
The Group's activities expose it to a variety of financial risks including: market risk (including foreign currency risk and cash flow interest rate risk), credit
risk, liquidity risk and capital management. The Group's overall risk management programme considers the unpredictability of financial markets and seeks
to reduce potential adverse effects on the Group's financial performance. The Group does not currently use derivative financial instruments to hedge foreign
exchange exposures.
Credit Risk
Credit risk is managed on a Group basis except for credit risk relating to accounts receivable balances which each entity is responsible for managing. Credit
risk arises from cash and cash equivalents, as well as credit exposures from outstanding customer receivables. Management assesses the credit quality
of the customer, taking into account its financial position, past experience and other factors. For those sales considered higher risk, the Group operates a
policy of cash in advance of delivery. The Group regularly monitors its exposure to bad debts in order to minimise exposure. Credit risk from cash and cash
equivalents is managed via banking with well-established banks with a strong credit rating.
Covid-19 Assessment
The single largest impact on the Group’s credit risk profile is the emergence of the Covid-19 pandemic. The implications of the Covid-19 pandemic are wide
spread and the duration and impact of the pandemic is unknown. Given the uncertainty and evolving nature of the pandemic, it is has not been possible
to fully reflect the anticipated economic impacts in the underlying assumptions in a mechanistic approach. The Group has responded by calculating an
additional level of provision to overlay the normal ECL calculation. This overlay has been based on management judgement taking into account an analysis
of trade receivables broken down into customer sectors, using internal and external forecasts to assess the sectors which are likely to see the biggest impact
of the pandemic, and comparing cash receipts received post year-end for customers in these sectors against historical averages.
The maximum exposure to credit risk at the reporting dates is the carrying value of each class of financial assets as disclosed below:
Group
Company
2020
£’000
56,561
(4,065)
52,496
Restated 1
2019
£’000
48,241
(2,127)
46,114
2020
£’000
40,712
(3,719)
36,993
2019
£’000
33,319
(1,733)
31,586
Trade receivables
Allowance for unrecoverable amounts
1
See note 2.3
118
118
GBG Annual Report and Accounts 2020 27. Financial Instruments and Risk Management CONTINUED
Expected credit loss allowance for trade receivables
The Group applies the IFRS 9 simplified approach to measuring expected credit loses which uses a lifetime expected loss allowance for all trade receivables
and contract assets. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and days past
due. The provision rates are based on days past due, historical information relating to counterparty default rates and external credit ratings where available.
The following table provides an analysis of the Group’s credit risk exposure on trade receivables using a provision matrix to measure expected credit losses.
Group - 31 March 2020
Gross carrying amount
Expected credit loss
Company - 31 March 2020
Gross carrying amount
Expected credit loss
Group - 31 March 2019
Gross carrying amount
Expected credit loss (restated1)
Company - 31 March 2019
Gross carrying amount
Expected credit loss
Trade receivables
Current
£’000
31,638
921
< 30 days
£’000
30 - 60 days
£’000
11,073
286
4,151
221
Days past due
61 - 90 days
£’000
2,610
239
Trade receivables
Current
£’000
21,283
875
< 30 days
£’000
30 - 60 days
£’000
8,690
265
3,323
192
Days past due
61 - 90 days
£’000
1,774
188
> 90 days
£’000
7,089
2,398
> 90 days
£’000
5,642
2,199
Trade receivables
Current
£’000
28,724
658
< 30 days
£’000
9,336
115
30 - 60 days
£’000
4,171
277
Days past due
61 - 90 days
£’000
1,597
13
> 90 days1
£’000
4,413
1,182
Trade receivables
Current
£’000
20,240
574
< 30 days
£’000
6,796
35
30 - 60 days
£’000
1,600
167
Days past due
61 - 90 days
£’000
1,435
7
> 90 days
£’000
3,248
950
Set out below is the movement in the allowance for expected credit losses of trade receivables:
Year ended 31 March 2020
Group
Company
Balance at 1 April
Acquired on acquisition 1
Increase in provision
Covid-19 provision
Write-offs
Release
Foreign exchange
1
See note 2.3
2020
£’000
2,127
–
2,208
731
(600)
(407)
6
4,065
Restated 1
2019
£’000
1,344
78
852
–
(151)
–
4
2,127
2020
£’000
1,733
–
2,158
608
(525)
(255)
–
3,719
The amount disclosed in note 5, relates to the increase in provision, Covid-19 provision and the amount released in the year.
Total
£’000
56,561
4,065
Total
£’000
40,712
3,719
Total
£’000
48,241
2,127
Total
£’000
33,319
1,733
2019
£’000
1,165
–
704
–
(136)
–
–
1,733
119
119
GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements
NOT ES TO THE AC CO UNTS
27. Financial Instruments and Risk Management CONTINUED
Foreign Currency Risk
The Group's foreign currency exposure arises from:
− Transactions (sales/purchases) denominated in foreign currencies;
− Monetary items (mainly cash receivables and borrowings) denominated in foreign currencies; and
− Investments in foreign operations, whose net assets are exposed to foreign currency translation.
The Group has currency exposure on its investment in a foreign operation in Australia and partially offsets its exposure to fluctuations on the translation into
Sterling by holding net borrowings in Australian Dollars. In terms of sensitivities, the effect on equity of a 10% increase in the Australian Dollar and Sterling
exchange rate would be an increase of £5,324,000 (2019: £3,555,000 increase). The effect on equity of a 10% decrease in the Australian Dollar and Sterling
exchange rate net of the effect of the net commercial investment hedge in the foreign operation would be a decrease of £4,356,000 (2019: £2,908,000
decrease).
The Group has currency exposure on its investment in a foreign operations in the United States of America. In terms of sensitivities, the effect on equity of
a 10% increase in the US Dollar and Sterling exchange rate would be an increase of £1,084,000 (2019: £1,109,000 increase). The effect on equity of a 10%
decrease in the US Dollar and Sterling exchange rate would be a decrease of £887,000 (2019: £907,000 decrease).
The exposure to transactional foreign exchange risk within each company is monitored and managed at both an entity and a Group level. The following table
demonstrates the sensitivity of the Group’s foreign currency exposure on the net monetary position at 31 March 2019:
Foreign Currency Exposure
Change in rate
Effect on profit before tax (£'000s)
Change in rate
Effect on profit before tax (£'000s)
USD Rate
EUR Rate
AUD Rate
MYR Rate
+10%
£(519)
-10%
£655
+10%
£(12)
-10%
£37
+10%
£(439)
-10%
£538
+10%
£(125)
-10%
152
The Group’s exposure to foreign currency changes for all other currencies is not material.
Cash Flow Interest Rate Risk
The Group has financial assets and liabilities, which are exposed to changes in market interest rates. Changes in interest rates impact primarily on deposits
and loans by changing their future cash flows (variable rate). Management does not currently have a formal policy of determining how much of the Group's
exposure should be at fixed or variable rates and the Group does not use hedging instruments to minimise its exposure. However, at the time of taking new
loans or borrowings, management uses its judgement to determine whether it believes that a fixed or variable rate would be more favourable for the Group
over the expected period until maturity. In terms of sensitivities, the effect on profit before taxation of an increase/decrease in the basis points on floating
rate borrowings of 25 basis points would be £110,000 (2019: £110,000).
Liquidity Risk
Cash flow forecasting is performed on a Group basis by the monitoring of rolling forecasts of the Group's liquidity requirements to ensure that it has
sufficient cash to meet operational needs and surplus funds are placed on deposit and available at very short notice. The maturity date of the Group's loans
are disclosed in note 22.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments and includes contractual
interest payments:
On
demand
£’000
–
–
–
10,403
10,403
On
demand
£’000
–
–
8,687
8,687
Less than
12 months
£’000
–
6,179
2,012
30,238
38,429
Less than
12 months
£’000
1,441
5,208
24,503
31,152
1 to 5
years
£’000
62,139
–
3,713
–
65,852
1 to 5
years
£’000
85,447
–
–
85,447
Total
£’000
62,139
6,179
5,725
40,641
114,684
Total
£’000
86,888
5,208
33,190
125,286
Year ended 31 March 2020
Loans (note 22)
Contingent consideration (note 36)
Lease liabilities (note 23)
Trade and other payables (note 24)
Year ended 31 March 2019
Loans (note 22)
Contingent consideration (note 36) - restated1
Trade and other payables (note 24)
1
See note 2.3
120
120
GBG Annual Report and Accounts 2020 27. Financial Instruments and Risk Management CONTINUED
Capital Management
The Group manages its capital structure in order to safeguard the going concern of the Group and maximise shareholder value. The capital structure of
the Group consists of debt, which includes loans disclosed in note 22, cash and cash equivalents and equity attributable to equity holders of the Company,
comprising issued capital, reserves and retained earnings.
The Group may maintain or adjust its capital structure by adjusting the amount of dividend paid to shareholders, returning capital to shareholders, issuing
new shares or selling assets to reduce debt.
In order to achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it meets financial covenants attached
to borrowings. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches
in the financial covenants of any borrowings in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2020 and 31 March 2019.
Financial instruments: Classification and Measurement
Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the Group at 31 March:
Financial assets:
Trade and other receivables
Total current
Total
Financial liabilities:
Lease liabilities
Loans
Total non-current
Trade and other payables
Lease liabilities
Loans
Contingent consideration- restated1
Total current
Total
1
Refer to note 2.3
2020
2019
Loans and
receivables
£’000
Fair value
profit or loss
£’000
Loans and
receivables
£’000
Fair value
profit or loss
£’000
52,496
52,496
52,496
3,713
62,139
65,852
40,641
2,012
–
–
42,653
108,505
–
–
–
–
–
–
–
–
6,179
6,179
6,179
46,114
46,114
46,114
–
85,447
85,447
33,508
–
1,441
–
34,949
120,396
–
–
–
–
–
–
–
–
–
5,287
5,287
5,287
All financial assets and liabilities have a carrying value that approximates to fair value. The Group does not have any derivative financial instruments.
Financial Assets
Trade and other receivables exclude the value of any prepayments or accrued income. Trade and other payables exclude the value of deferred income.
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Trade receivables are non-interest bearing and are generally on
14 to 60 day terms.
Financial Liabilities
The Group has a three year revolving credit facility agreement expiring in February 2022 which is subject to a limit of £110,000,000. The facility bears an
initial interest rate of LIBOR +1.50%.
The facilities are secured by way of an all asset debenture.
The Group is subject to a number of covenants in relation to its borrowings which, if breached, would result in loan balances becoming immediately
repayable. These covenants specify certain maximum limits in terms of the following:
− Leverage
− Interest cover
At 31 March 2020 and 31 March 2019, the Group was not in breach of any bank covenants.
121
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GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
27. Financial Instruments and Risk Management CONTINUED
Financial liabilities: interest bearing loans and borrowings
Financial liabilities
Current interest bearing loans and borrowings
AUD$10,000,000 secured bank loan
Total current interest-bearing loans and borrowings
Non-current interest bearing loans and borrowings
£110,000,000 revolving credit facility
Total non-current interest bearing loans and borrowings
Total interest bearing loans and borrowing
Interest rate
%
Maturity
2020
£’000
2019
£’000
BBSW+1.9
Nov 2019
LIBOR + 1.5
Feb 2022
–
–
62,139
62,139
62,139
1,441
1,441
85,447
85,447
86,888
Fair values of financial assets and liabilities
The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of inputs used in making measurements of fair value.
The fair value hierarchy has the following levels:
− Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
− Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
− Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
For financial instruments that are recognised at the fair value on a recurring basis, the Group determines whether transfers have occurred between levels in
the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
At 31 March 2020
Financial liability at fair value through profit and loss
Contingent consideration (note 36)
At 31 March 2019 (restated)
Financial liability at fair value through profit and loss
Contingent consideration restated (note 2.3)
Valuation
Technique
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Present value of
expected future
cash flow
Valuation
Technique
Present value of
expected future
cash flow
–
Level 1
£’000
–
Level 2
£’000
6,179
Level 3
£’000
6,179
Total
£’000
–
–
5,287
5,287
28. Changes in liabilities arising from financing activities
1 April 2019
(as reported)
£’000
Transition to
IFRS 16
£’000
1,441
–
85,447
–
86,888
–
352
–
5,724
6,076
Cash
flows
£’000
(1,414)
(2,043)
(23,500)
–
(26,957)
Foreign
exchange
movement
£’000
Other
movement
£’000
(27)
26
–
(158)
(159)
–
2,841
192
(2,895)
138
New
leases
£’000
–
836
–
1,042
1,878
31 March
2020
£’000
–
2,012
62,139
3,713
67,864
Current liabilities
Interest bearing loans
Lease liabilities
Non-current liabilities
Interest bearing loans
Lease liabilities
Total liabilities arising from
financing activities
Other movement in interest bearing loans represents amortisation on loan fees.
Other movement in lease liabilities includes interest and the reclassification of non-current lease liabilities to current lease liabilities.
122
122
GBG Annual Report and Accounts 2020
28. Changes in liabilities arising from financing activities CONTINUED
Current liabilities
Interest bearing loans
Non-current liabilities
Interest bearing loans
Total liabilities arising from financing activities
1 April 2018
£’000
797
8,451
9,248
Cash
flows
£’000
–
77,637
77,637
Foreign
exchange
movement
£’000
Other
movement
£’000
New
leases
£’000
31 March
2019
£’000
3
–
3
641
(641)
–
–
–
–
1,441
85,447
86,888
Other movement represents the reclassification of non-current interest bearing loans to current interest bearing loans.
29. Share-based Payments
Group and Company
The Group operates Executive Share Option Schemes under which Executive Directors, managers and staff of the Company are granted options over shares.
Executive Share Option Scheme
Options are granted to Executive Directors and employees on the basis of their performance. Options are granted at the full market value of the Company’s
shares at the time of grant and are exercisable between three and ten years from the date of grant. The options vest on the third anniversary of the grant
subject to the Company’s earnings per share (‘EPS’) growth being greater than the growth of the Retail Prices Index (‘RPI’) over a three-year period prior to
the vesting date. There are no cash settlement alternatives.
Executive Share Option Scheme (Section C Scheme)
Options are granted to Executive Directors and employees on the basis of their performance. Options are granted at the full market value of the Company’s
shares at the time of grant and are exercisable between three and ten years from the date of grant. The percentage of an option that will vest and be
capable of exercise will depend on the performance of the Company. A minimum of 50% of the options will vest when the Total Shareholder Return (‘TSR’)
performance of the Company, as compared to the TSR of the FTSE Computer Services Sub-Sector over a three-year period, matches or exceeds the median
company. The percentage of shares subject to an option in respect of which that option becomes capable of exercise will then increase on a sliding scale so
that the option will become exercisable in full if top quartile performance is achieved.
Executive Share Option Scheme (Section D Scheme)
Options are granted to Executive Directors and employees on the basis of their performance. Options are granted at the full market value of the Company’s
shares at the time of grant and are exercisable between three and ten years from the date of grant. The vesting of awards under the Section D Scheme is
subject to the achievement of a normalised EPS growth at an annual compound rate of 20% over the performance period. The base year for the purposes
of the EPS target will be the financial year of the Company ended immediately prior to the grant of the award. The performance period will be the three
financial years following the base year. Section D Scheme options will only become exercisable to the extent they have vested in accordance with the EPS
target.
Share Matching Plan
In the year ended 31 March 2012, the Remuneration Committee introduced the Share Matching Plan. Participants who invest a proportion of their annual
cash bonus in GBG shares can receive up to a multiple of their original investment in GBG shares, calculated on a pre-tax basis. Any matching is conditional
upon achieving pre-determined Adjusted EPS growth targets set by the Remuneration Committee for the following three years. Share Matching Plan options
will only become exercisable to the extent they have vested in accordance with the Adjusted EPS target.
Compensatory Options
In the year ended 31 March 2018, the Remuneration Committee granted Compensatory Options to the Chief Executive of the Company, as compensation
for lost earnings and shares from his previous employer. The Compensatory Options vest in equal tranches over a period of 12 and 24 months, on each
anniversary of the date of grant, provided he still holds the position of CEO of GBG on the respective dates. The Compensatory Options are valid for a period
of 12 months from the vesting date.
GBG Sharesave Scheme
The Group has a savings-related share option plan, under which employees save on a monthly basis, over a three or five year period, towards the purchase
of shares at a fixed price determined when the option is granted. This price is usually set at a 20% discount to the market price at the time of grant. The
option must be exercised within six months of maturity of the savings contract, otherwise it lapses.
Performance Share Plan (PSP)
The Group operates a PSP for all employees, but it is intended that awards are made to senior management staff below the executive director level. The plan
was approved at the 2018 AGM. Awards are subject to a three-year EPS performance condition. Employees can be granted awards of nil cost options with an
aggregate value on date of grant of up to 100% of base salary. The awards are subject to malus and clawback.
The charge recognised from equity-settled share-based payments in respect of employee services received during the year is £4,541,000 (2019:
£2,287,000). Of this amount £4,271,000 (2019: £2,287,000) related to the Company.
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NOT ES TO THE AC CO UNTS
29. Share-based Payments CONTINUED
The following table illustrates the number and weighted average exercise prices (‘WAEP’) of, and movements in, share options during the year.
Outstanding as at 1 April
Granted during the year
Forfeited during the year
Cancelled during the year
Exercised during the year
Expired during the year
Outstanding at 31 March
Exercisable at 31 March
2020
No.
4,626,400
1,807,066
(78,046)
(13,541)
(1,336,392)
–
5,005,487
10,000
2020
WAEP
147.84p
150.95p
301.55p
333.57p
36.56p1
–
175.77p
275.00p
2019
No.
4,997,800
1,069,965
(270,320)
(11,461)
(1,157,029)
(2,555)
4,626,400
2,601,043
2019
WAEP
148.39p
227.43p
201.84p
272.00p
52.94p2
163.00p
147.84p
76.15p
1
2
The weighted average share price at the date of exercise for the options exercised is 598.45p
The weighted average share price at the date of exercise for the options exercised is 518.97p
For the shares outstanding as at 31 March 2020, the weighted average remaining contractual life is 5.4 years (2019: 4.7 years).
The weighted average fair value of options granted during the year was 417.31p (2019: 440.40p). The range of exercise prices for options outstanding at the
end of the year was 2.5p - 544.0p (2019: 2.8p – 481.0p).
The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model, taking into account the terms and
conditions upon which the options were granted. The following table lists the inputs to the model for the years ended 31 March 2020 and 31 March 2019.
Dividend yield (%)
Expected share price volatility (%)
Risk-free interest rate (%)
Lapse rate (%)
Expected exercise behaviour
Market-based condition adjustment (%)
Expected life of option (years)
Exercise price (p)
Weighted average share price (p)
2020
0.5 – 0.8
30 – 35
0.2 – 1.1
5.0 –10.0
See below
48.00
2.3 – 5.2
2.5 – 544.0
598.45
2019
0.5 – 0.6
35
0.7 – 1.1
5.0
See below
48.00
2.3 – 6.5
2.50 – 462.0
518.97
Other than the Matching Scheme, LTIP and SAYE options, it is assumed that 50% of options will be exercised by participants as soon as they are 20% or
more "in-the-money" (i.e. 120% of the exercise price) and the remaining 50% of options will be exercised gradually at the rate of 10% per annum each year
they remain at or above the 20% "in-the-money".
For the Matching Scheme, LTIP and SAYE options, it is assumes these are exercised at the earliest opportunity in full (i.e. Vesting Date) since the exercise
price is a nominal amount and is therefore not expected to influence the timing of a participant’s decision to exercise the options.
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.
30. Profit Attributable to Members of the Parent Company
The parent company’s profit for the financial year ended 31 March 2020 was £23,271,000 (2019: £7,275,000). As permitted by Section 408 of CA 2006, the
profit and loss account of the parent company is not presented.
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GBG Annual Report and Accounts 2020 31. Description of Reserves
Equity Share Capital
The balance classified as share capital includes the nominal value on issue of the Company’s equity share capital, comprising 2.5p ordinary shares.
Share Premium
The balance classified as share premium includes the excess proceeds over the nominal amount received on the issue of the Company’s equity share capital.
Costs associated with the issue of new share capital have been offset against this balance.
Merger Reserve
The balance on the merger reserve represents the fair value of the consideration given in excess of the nominal value of the ordinary shares issued in the
acquisition of GB Mailing Systems by the issue of shares.
Capital Redemption Reserve
The balance classified as capital redemption reserve includes the nominal value of own shares purchased back by the Company and subsequently cancelled.
Other Reserve
The balance represents the profit from the date of acquisition to the date of hive-up into the Company of ID Scan Biometrics Limited and Postcode Anywhere
(Holdings) Limited, offset by amortisation of the identified intangibles and unwinding of the associated deferred tax liabilities.
32. Related Party Transactions
Transactions entered into and trading balances outstanding at 31 March are as follows:
Group
There were no transactions entered into, or outstanding at 31 March 2020 or 31 March 2019.
Company
Subsidiaries:
2020
2019
Invoices to
related parties
£’000
Invoices from
related parties
£’000
Net amounts
owed to/(by)
related parties
£’000
19,418
2,360
8,435
3,130
23,347
21,983
Terms and Conditions of Transactions with Related Parties
Sales and balances between related parties are made at normal market prices. Outstanding balances with entities other than subsidiaries are unsecured,
interest free and cash settlement is expected within 30 days of invoice. Terms and conditions for transactions with subsidiaries are the same, with the
exception that balances are placed on intercompany accounts with no specified credit period. During the year ended 31 March 2020, the Group has not
made any provision for doubtful debts relating to amounts owed by related parties (2019: £nil).
Compensation of Key Management Personnel (including Directors)
Short-term employee benefits
Post-employment benefits
Fair value of share options awarded
33. Contingent liability
Group
2020
£’000
2,962
74
2,416
5,452
2019
£’000
3,290
72
1,826
5,188
The Information Commissioner’s Office, the data industry regulator in the UK, announced in November 2018 that it was conducting audits on a number of
companies to understand the use of data in their services. GBG was included in this review and is working with the Commissioner to continue to improve its
privacy compliance. We will keep the market informed of any material developments.
34. Subsequent events
On 26 May 2020, the Company repaid £10.0m of the outstanding revolving credit facility liability.
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35. Business Combinations
There were no new business combinations within the year ended 31 March 2020.
Under IFRS 3 ‘Business Combinations’ there is a measurement period of no longer than twelve months in which to finalise the valuation of the acquired
assets and liabilities. During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognised at the acquisition
date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the
measurement of the amounts recognised as of that date. During the measurement period, the acquirer shall also recognise additional assets or liabilities if
new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of
those assets and liabilities as of that date.
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, as set out in the table
below:
Assets
Technology intellectual property
Customer relationships
Non-compete agreements
Investments1
Plant and equipment
Deferred tax asset
Trade and other receivables2
Cash
Trade and other payables
Corporation tax liability
Deferred tax liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Total purchase consideration transferred
Purchase consideration:
Cash
Deferred consideration3
Total purchase consideration
Provisional
fair value
recognised on
acquisition
£’000
Adjustments
during
measurement
period
£000
Final fair
value
recognised on
acquisition
£’000
16,076
65,976
4,360
419
152
3,955
4,436
1,033
(1,993)
(81)
(21,733)
72,600
163,143
235,743
235,664
79
235,743
–
–
–
(419)
–
–
118
–
–
–
–
301
5,509
5,208
–
5,208
5,508
16,076
65,976
4,360
–
152
3,955
4,554
1,033
(1,993)
(81)
(21,733)
72,299
168,652
240,951
235,664
5,287
240,951
1
2
The adjustment to the investment balance relates to a non-listed equity investment where there is uncertainty over the recoverability of the investment balance.
The adjustment to trade and other receivables is an increase in the carrying value following cash receipts against receivables that had been impaired in the provisional fair
values.
3 Under the terms of the acquisition agreement 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. Following assessment of the period over which these losses are expected to be utilised, the liability to the sellers has been recognised as
contingent consideration.
The impact of the measurement period adjustments have been applied retrospectively, meaning that the results and financial position for the year to 31
March 2019 have been restated as detailed in note 2.3.
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GBG Annual Report and Accounts 2020 35. Business Combinations CONTINUED
Acquisitions in the year ended 31 March 2019
Group
Acquisition of IDology Inc.
On 13 February 2019, the Group acquired 100% of the voting shares of IDology Inc. (‘IDology’), a US-based provider of identity verification and fraud
prevention services, for a total consideration of £240,951,000. The acquisition of IDology provides a strong foothold for Identity Verification and Fraud
Prevention in North America, a key growth region for the Group. The Consolidated Statement of Comprehensive Income includes the results of IDology for
the two month period from the acquisition date.
The provisional and final fair values are detailed at the start of this note.
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included in cash flows from operating activities)
Net cash acquired with the subsidiary
Cash paid
Acquisition of subsidiaries, net of cash acquired (included in cash flows from investing activities)
Net cash outflow
(2,391)
1,033
(235,664)
(234,631)
(237,022)
The fair value of the acquired trade receivables amounts to £2,772,000. The gross amount of trade receivables is £2,928,000 with a provision of £156,000
(adjusted to £38,000 during the measurement window).
The goodwill recognised above is attributed to intangible assets that cannot be individually separated and reliably measured from IDology due to their
nature. These items include the capability for synergies from bringing the businesses together, combining propositions and capabilities that will help
the business achieve accelerated consolidated growth from both cross-sell and up-sell. None of the goodwill is expected to be deductible for income tax
purposes.
The transaction costs of £2,391,000 associated with this acquisition have been expensed and are included in exceptional items in the Consolidated
Statement of Comprehensive Income and are part of operating cash flows in the Cash Flow Statement.
From the date of acquisition, IDology has contributed £4,284,000 of revenue and operating profits of £1,890,000 to the Group. If the combination had
taken place at the beginning of the period, the Group revenue and operating profits would have been £173,212,000 and £28,529,000, respectively.
Acquisition of VIX Verify Pty Limited
On 23 October 2018, the Group acquired 100% of the voting shares of VIX Verify Pty Limited (‘VIX Verify’), an Australian provider of identity verification
and location intelligence software, for a total consideration of £20,639,000. The acquisition of VIX Verify brings additional scale to the Group’s identity
verification and location intelligence solutions in Australia and New Zealand, two markets where the Group currently provides fraud detection solutions to
customers. The Consolidated Statement of Comprehensive Income includes the results of VIX Verify for the six month period from the acquisition date.
The provisional fair value of the identifiable assets and liabilities of VIX Verify as at the date of acquisition was:
Assets
Technology intellectual property
Customer relationships
Non-compete agreements
Plant and equipment
Trade and other receivables
Cash
Trade and other payables
Deferred tax liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Total purchase consideration transferred
Purchase consideration:
Cash
Total purchase consideration
Provisional
fair value
recognised on
acquisition
£’000
1,148
7,236
31
79
2,565
208
(3,956)
(2,180)
5,131
15,508
20,639
20,639
20,639
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GBG Annual Report and Accounts 2020Strategic ReviewGovernanceOverviewFinancial Statements NOT ES TO THE AC CO UNTS
35. Business Combinations CONTINUED
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included in cash flows from operating activities)
Net cash acquired with the subsidiary
Cash paid
Acquisition of subsidiaries, net of cash acquired (included in cash flows from investing activities)
Net cash outflow
(449)
208
(20,639)
(20,431)
(20,880)
The fair value of the acquired trade receivables amounts to £965,000. The gross amount of trade receivables is £1,004,000 with a provision of £39,000.
The goodwill recognised above is attributed to intangible assets that cannot be individually separated and reliably measured from VIX Verify due to their
nature. These items include the capability for synergies from bringing the businesses together, combining propositions and capabilities that will help
the business achieve accelerated consolidated growth from both cross-sell and up-sell. None of the goodwill is expected to be deductible for income tax
purposes.
The transaction costs of £449,000 associated with this acquisition have been expensed and are included in exceptional items in the Consolidated Statement
of Comprehensive Income and are part of operating cash flows in the Cash Flow Statement.
From the date of acquisition, VIX Verify has contributed £7,672,000 of revenue and operating profits of £1,333,000 to the Group. If the combination had
taken place at the beginning of the period, the Group revenue and operating profits would have been £153,555,000 and £17,171,000, respectively.
36. Contingent Consideration
Group and Company
At 1 April
Recognition on the acquisition of subsidiary undertakings2
Recognition on the acquisition of subsidiary undertakings – measurement period adjustment
Foreign exchange - realised
Foreign exchange - unrealised 2
Settlement of consideration
At 31 March
Analysed as:
Amounts falling due within 12 months
Amounts falling due after one year
At 31 March
2020
£’000
5,287
829
–
7
142
(86)
6,179
6,179
–
6,179
2019
£’000
45
79
5,2081
–
–
(45)
5,287
5,287
–
5,287
1
2
See note 2.3
Included in Consolidated Cash Flow Statement within fair value adjustment on contingent consideration line totalling £971,000.
The amount recognised on acquisition of subsidiary undertakings in the year to 31 March 2020 is in respect of IDology as detailed within note 7.
The contingent consideration at 31 March 2020 is in respect to the pre-acquisition tax losses within IDology Inc. As and when GBG receives a cash benefit
from these losses, either through a reduction in tax payments or through a tax refund, an amount equal to this cash benefit is due to the sellers.
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37. Alternative Performance Measures
Management assess the performance of the Group using a variety of alternative performance measures. In the discussion of the Group’s reported operating
results, alternative performance measures are presented to provide readers with additional financial information that is regularly reviewed by management.
However, this additional information presented is not uniformly defined by all companies including those in the Group’s industry. Accordingly, it may not
be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts
calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures are not defined under IFRS and are therefore
termed ‘non-GAAP’ measures and should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
The Group’s income statement and segmental analysis separately identify trading results before certain items. The directors believe that presentation of the
Group’s results in this way is relevant to an understanding of the Group’s financial performance, as such items are identified by virtue of their size, nature
or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and assists in
providing a meaningful analysis of the trading results of the Group. In determining whether an event or transaction is presented separately, management
considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Examples of charges or credits meeting the above
definition and which have been presented separately in the current and/or prior years include amortisation of acquired intangibles, share-based payments
charges, acquisition related costs and business restructuring programmes. In the event that other items meet the criteria, which are applied consistently
from year to year, they are also presented separately.
The following are the key non-GAAP measures used by the Group:
Organic Growth
Organic growth is defined by the Group as year-on-year continuing revenue growth, excluding acquisitions which are included only after the first anniversary
following their purchase.
Constant Currency
Constant currency means that non-Pound Sterling revenue in the comparative period is translated at the same exchange rate applied to the current year
non-Sterling revenue. This therefore eliminates the impact of fluctuations in exchange rates on underlying performance.
Group revenue
Revenue from acquisitions up to their first anniversary
Organic revenue
Constant currency adjustment
Organic revenue at constant currency
2020
£’000
199,101
(40,807)
158,294
–
158,294
2019
£’000
143,504
–
143,504
(500)
143,004
Adjusted Operating Profit
Adjusted operating profit means operating profit before amortisation of acquired intangibles, share-based payment charges and exceptional items.
Operating profit
Amortisation of acquired intangibles
Share-based payment charges
Exceptional items
Adjusted Operating Profit
Adjusted EBITDA
Adjusted EBITDA means Adjusted Operating Profit before depreciation and amortisation of non-acquired intangibles.
Operating profit
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of non-acquired intangibles
Adjusted EBITDA
2020
£’000
22,844
19,008
4,541
1,552
47,945
2020
£’000
47,945
1,760
1,850
184
51,739
Growth
%
38.6%
(28.3%)
10.3%
0.4%
10.7%
2019
£’000
15,425
10,316
2,287
4,003
32,031
2019
£’000
32,031
1,544
-
505
34,080
Adjusted Earnings
Adjusted earnings represents Adjusted Operating Profit less net finance costs and income tax charges. Refer to note 13 for calculation.
Adjusted Earnings Per Share (‘Adjusted EPS’)
Adjusted EPS represents adjusted earnings divided by a weighted average number of shares in issue, and is disclosed to indicate the underlying profitability
of the Group. Refer to note 13 for calculation.
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37. Alternative Performance Measures CONTINUED
Earnings per Share growth
This is calculated as the growth in year on year earnings per share on both an adjusted and unadjusted basis.
Net Debt/Cash
This is calculated as cash and cash equivalent balances less outstanding external loans. Unamortised loan arrangement fees are netted against the loan
balance in the financial statements but are excluded from the calculation of net cash/debt.
Cash and cash equivalents
Loans on balance sheet
Unamortised loan arrangement fees
External Loans
Net (Debt)/Cash
2020
£’000
27,499
62,139
361
62,500
(35,001)
2019
£’000
21,189
86,888
553
87,441
(66,252)
Cash Conversion %
This is calculated as cash generated from operations in the Consolidated Cash Flow Statement, adjusted to exclude cash payments for exceptional items, as
a percentage of Adjusted EBITDA
Cash generated from operations before tax payments (from Consolidated Cash Flow Statement)
Total exceptional items
Non-cash exceptional items
Cash generated from operations before tax payments and exceptional items paid
Adjusted EBITDA
Cash Conversion %
2020
£’000
48,498
1,552
(771)
49,279
51,739
95.2%
2019
£’000
27,779
4,003
(200)
31,582
34,080
92.7%
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GBG Annual Report and Accounts 2020 USEFU L I NF ORM ATION
Website
The Investors section of the Company’s website, www.gbgplc.com/investors, contains detailed information on news, press releases, key financial
information, annual and interim reports, share price information, dividends and key contact details. Our share price is also available on the London Stock
Exchange website. The following information is a summary and readers are encouraged to view the website for more detailed information.
Dividend Reinvestment Plan
The Company offers a Dividend Reinvestment Plan that enables shareholders to reinvest cash dividends into additional shares in the Company. Application
forms can be obtained from Equiniti.
Share Scams
Shareholders should be aware that fraudsters may try and use high pressure tactics to lure investors into share scams. Information on share scams can be
found on the Financial Conduct Authority’s website, www.fca.org.uk/scams
Financial Calendar 2020
Annual General Meeting
Announcement of 2020 half year results
Shareholder Enquiries
10 August 2020
December 2020
GBG’s registrar, Equiniti, are able to deal with any enquiries relating to your shareholding, such as a change of name or address or a replacement of a
share certificate. Equiniti’s Shareholder Contact Centre can be contacted by telephone on 0371 384 2367 (international callers: +44 121 415 7047) between
8.30am and 5.30pm Monday to Friday, excluding public holidays in England and Wales. You can also access details of your shareholding and a range of
other shareholder services by registering at www.shareview.co.uk.
Company Secretary &
Registered Office
John Constantin
GB Group plc
The Foundation, Herons Way
Chester Business Park
Chester
CH4 9GB
United Kingdom
(Registered in England & Wales,
Number 2415211)
T: +44 (0)1244 657333
E: enquiries@gbgplc.com
W: www.gbgplc.com
Nominated Advisor
and Broker
Peel Hunt LLP
Moor House
120 London Wall
London
EC2Y 5ET
Auditor
Ernst & Young LLP
20 Chapel Street
Liverpool
L3 9AG
Solicitors
Squire Patton Boggs (UK) LLP
1 Spinningfields
1 Hardman Square
Manchester
M3 3EB
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
131
GBG Annual Report and Accounts 2020 NOT ES
132
132
GBG Annual Report and Accounts 2020 GBG
The Foundation
Herons Way
Chester Business Park
Chester
CH4 9GB
United Kingdom
www.gbgplc.com