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GB Group reports full year results

Source: GB Group

Preliminary Results for the Year Ended 31 March 2005.

Highlights:


  • URU (GB DataAuthentication division's joint service with BT) achieved strong growth within its key target markets of Online Gaming, Financial Services and Mobile Telecommunications. The number of subscribers to the service at 31 May 2005 was 59 (1 subscriber at 31 March 2004).
  • Turnover from URU increased significantly to £600,000 (2004: £6,000)
  • The existing business, comprising of GB's DataIntegrity and DataSolutions operations, generated operating profits, before exceptional items, £186,000 ahead of last year.
  • Exceptional, non-recurring costs were in line with expectations at £321,000.
  • Operating loss, after goodwill but before exceptional items, was in line with expectations at £242,000 (2004: £123,000) and included increased investment in URU of £354,000.
  • The existing business continues to be strongly cash generative and, as planned, funded the cash investment in URU.
  • Cash balances were £6.7m at the year end (2004: £6.9m).
  • Dividend of 0.5p per ordinary share maintained.

    John Walker-Haworth, Chairman, commented:

    "This year is one of significance for the Group, particularly in relation to the growth of our DataAuthentication business and, as explained more fully in the Chief Executive's Report, GB has a clear strategy to develop this further. From an initial assessment of the growth experienced to date, your Board is increasingly confident that there are substantial and profitable opportunities in this new market and is deploying appropriate resources to enhance the Group's position.

    As in previous years, the profitability of our DataIntegrity and DataSolutions operations will be weighted towards the second half of the year in line with contract renewals, however, during the year as a whole, we expect the cash flow from these businesses to continue to fund the greater part of our investment in our DataAuthentication business and in particular URU.

    Your Board looks to the current year ahead with confidence and optimism."

    CHAIRMAN'S STATEMENT

    The Group has made very positive progress throughout the year, both in consolidating its position in its existing markets and quickly moving towards a leading position in the emerging 'electronic identity verification' market with the URU service which has been developed by GB's DataAuthentication division in collaboration with BT. I am pleased to report that this major new initiative, which has involved a significant investment in financial and management resources, has been managed within our financial plans for the year and has not prevented us from achieving profit improvement within our existing business.

    Revenue from the DataAuthentication division grew strongly during the year in line with the increase in subscriptions to the URU service. At 31 May 2005, 59 business clients had been installed as subscribers of the service, including clients such as Betfair, TD Waterhouse and O2. This early success provides URU with valuable endorsements within our target markets of Online Gaming, Financial Services and Mobile Telecommunications.

    URU is addressing a market which is growing fast and where prospects are excellent. Our relationship with BT means that together, we have the commercial and technical infrastructure to continue to establish a strong market position for URU in the UK and the expertise and resource to develop URU into a service capable of expanding internationally.

    The profitability of the existing DataIntegrity and DataSolutions operations increased compared to the previous year as a result of continued focus on improving margins and the introduction of efficiencies. The markets in which our existing businesses operate are mature and although competition is keen, these businesses are of high quality and accordingly have good prospects.

    Overall, the Group's performance for the year was in line with expectations and, as planned, we were able to fund the development of URU from the cash flow from our existing business.

    I am pleased to report, therefore, that the Group's financial position remains strong and cash balances at 31 March 2005, after taking account of the dividend of £398,000 paid during the year, were £6.7 million (2004: £6.9 million). As a result of the Group's continued financial strength and its prospects, the Directors will propose the payment of a maintained dividend of 0.5p per ordinary share (2004: 0.5p) at the Annual General Meeting to be held in July.

    With respect to the current year, in the period to the end of May, sales in the DataAuthentication division have continued to grow in line with the take up of URU. The performance of our existing business is marginally ahead of the same period last year and we remain pleased with progress.

    This year is one of significance for the Group, particularly in relation to the growth of our DataAuthentication business and, as explained more fully in the Chief Executive's Report, GB has a clear strategy to develop this further. From an initial assessment of the growth experienced to date, your Board is increasingly confident that there are substantial and profitable opportunities in this new market and is deploying appropriate resources to enhance the Group's position.

    As in previous years, the profitability of our DataIntegrity and DataSolutions operations will be weighted towards the second half of the year in line with contract renewals, however, during the year as a whole, we expect the cash flow from these businesses to continue to fund the greater part of our investment in our DataAuthentication business and in particular URU.

    The GB team, led by Richard Law, has continued to work well and effectively during the past year. All of our employees are to be congratulated on the part they have played, and are continuing to play, in improving the overall quality of our business. Your Board looks to the current year ahead with confidence and optimism.

    J L Walker-Haworth

    Chairman


    CHIEF EXECUTIVE'S REVIEW

    Overview

    The Group continued to make good progress throughout the year. GB's DataAuthentication division has achieved pleasing growth in revenue as a result of increased sales of URU, its joint service with BT. In addition, GB's existing DataIntegrity and DataSolutions divisions continued to operate effectively and efficiently, albeit in increasingly competitive markets.

    The highlights of the year were as follows:

    Revenue in the DataAuthentication division grew throughout the year and accelerated towards the end of the year reaching £450,000 in the second half of the year, up from £150,000 in the first half, as a result of both higher subscriber numbers to URU and higher usage of the service by those subscribers. Revenue for the full year was £600,000 (2004: £6,000).

    The DataAuthentication division has continued to successfully develop its Authenticator technology on which URU is based and has increased the breadth of data which URU accesses. In October 2004, GB entered into an agreement with Aristotle Inc. of the USA for the inclusion of international identity data into URU. As a result of these and other joint initiatives with BT, URU has established a strong position in the markets in which it is focusing its efforts and is now the market leader for the provision of identity verification service in the Online Gaming sector.

    As expected, the Group made a small operating loss, before exceptional costs, of £242,000 (2004: £123,000) after taking account of significantly increased investment in URU. The combined profitability of GB's existing DataIntegrity and DataSolutions operations, however, improved compared to the previous year by £186,000.

    Combined turnover from the DataIntegrity and DataSolutions businesses was lower than in the previous year principally as a result of the decision to discontinue low margin third party software sales, taken in March 2004, and also as a result of increased competition. The decision to discontinue third party software sales had a positive impact on profitability.

    The overall quality of the Company and its prospects were significantly improved during the year.

    DataAuthentication Division

    A year ago, the problems associated with the ability of criminals to commit identity fraud and to launder money were already well known. Since then, new problems, such as the need to verify that online gamblers are of the legal age, have started to emerge. The scale of these problems has increased as a result of both the significant growth in the volume of transactions conducted over the telephone and the internet and the ability of fraudsters to obtain high quality, false identity documents.

    URU, the DataAuthentication division's principle offering, is an effective solution addressing these problems and is capable of providing instantaneous assurance of an individual's true identity without the individual being present or the need for paper based proofs. It does this by combining GB's Authenticator search engine and decision making software and GB's access to a comprehensive range of identity data together with BT's high capacity web services delivery.

    The number of subscribers for URU is now 59, spread principally across the key target sectors of Online Gaming, Financial Services and Mobile Telecommunications. URU has developed a strong position in each of these sectors and in Online Gaming we now believe URU to be the UK market leader.

    In the current year, increased regulation in our markets, such as the Gambling Act which was introduced in April 2005 and now makes age verification checks an obligation for all UK based gambling businesses, is expected to result in the continued development of the market.

    Although the take up of electronic identity verification is increasing, the number of checks performed using electronic methods comprises only a small proportion of the total potential market and the majority of identity checks are still performed manually. It is GB's aim in the year ahead to lead the development of the market for electronic identity verification in the UK and to implement our plans for taking electronic identity verification into international markets in the future.

    In order to achieve this aim and continue the strong growth in revenues, we plan to increase investment beyond that anticipated at this stage last year. This investment will be used to develop further the functionality and efficacy of the Authenticator technology, to acquire more international data and increase our sales and marketing resource.

    Our work to develop an international identity verification service is already showing early signs of success. In April 2005, GB entered into a contract with NETeller Plc, the leading provider of electronic wallet services, to develop a version of the URU service for the verification of their customers in the UK and Europe. Our expectations for the growth of the international market in the current year are modest, however this development is an important indication that an international market for electronic identity verification exists.

    In summary, the Directors are very encouraged by the progress made by the DataAuthentication division in this growing and exciting market and in particular its work with BT to develop and market URU. We believe that our investment plans in the current year will enable us to continue to exploit the significant potential of this opportunity.

    DataIntegrity and DataSolutions Divisions

    GB's existing DataIntegrity and DataSolutions operations produced operating profits, before exceptional costs, £186,000 ahead of the previous year. Exceptional costs, associated with the amalgamation of GB's two locations and the consolidation of a number of functions, are in line with the expectations set out in our statement at the half-year.

    The DataIntegrity and DataSolutions operations continue to be businesses of high quality. A large proportion of the turnover from these businesses is derived under long-term contracts or contracts which renew annually. In the current year, the markets served by these businesses are expected to remain challenging, however, the efficiencies flowing from the merger of our two locations, which took place during the last year, together with new product and service offerings, will help to offset these competitive pressures.

    Our assessment of these businesses is that they should be capable of maintaining profitability in the current year and indications during the first two months of the year support this view. Our priority in the current year is to provide high quality, innovative products to our clients and to continue to provide excellent customer service, and in so doing, continue to remain competitive.

    Management and People

    The Executive Management Team has been strengthened during the year with the promotion of Rob Laurence to Managing Director of our DataAuthentication division. Rob has been, and continues to be, responsible for building GB's DataAuthentication business which incorporates the URU service.

    In addition, a number of new managers have been recruited to strengthen further our team of dedicated and talented professionals.

    Summary

    The Group continues to make good progress. The DataAuthentication division has worked well with BT to establish an impressive client base for URU and the service now has a proven track record and is showing exciting growth. During the current year it is our objective to secure a strategic position in the market for electronic identity verification which is capable of yielding material future benefit to the Group.

    The prospects for our existing DataSolutions and DataIntegrity operations remain positive and these businesses are expected to continue to be both profitable and cash generative during the current year.

    Overall, we expect the increased investment in our DataAuthentication division to exceed our cash-flow from the existing businesses in the current year. The amount of this net investment will be largely dependent on how quickly the market develops and accordingly, how quickly we expand our resource and infrastructure. As a guide, however, the estimate based on our current plans is that cash balances should not fall below £5.5 million during the course of the year.

    These are exciting times for GB and I am pleased by our progress and encouraged by our prospects.

    R A Law

    Chief Executive

Related Companies

GB Group

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Keywords

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External | what does this mean?
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.

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