GB Group posts preliminary year end results
07 June 2006 | 1544 views | 0
Source: GB Group
GB Group is today pleased to announce preliminary results for the year ended 31 March 2006.
HighlightsStrong growth with Group revenues up by 14% to £12.8m (2005: £11.2m)Revenue from DataAuthentication, which markets URU, GB's joint offering with BT, increased threefold to £1.9m (2005: £0.6m)Number of customers for URU almost doubled to 105 (2005: 59) and transaction volumes increased threefold to 572,000 in the last quarter (2005: 172,000)Investment in international identity verification services to be advanced in line with demand from existing customersDataIntegrity and DataSolutions delivered an improved profit performance compared to last yearCash balances at 31 March remained strong at £6.7m (2005: £6.7m)Proposed full year dividend of 0.75p, an increase of 50% (2005: 0.5p), based on strong performance and Board confidence of future prospects
This has been a significant year for the Group. DataAuthentication has established itself as a leading provider of electronic solutions for age and ID verification in an exciting market with considerable future opportunities. Positive progress has also been made in DataIntegrity and DataSolutions.
To reflect the Board's confidence in the present position and the momentum of the business, an increased dividend for the full year of 0.75p per ordinary share (2005: 0.5p per ordinary share) will be proposed at the Annual General Meeting to be held in July.
The market for electronic identity verification continues to grow apace and the rate of adoption of electronic forms of identity verification is accelerating. DataAuthentication, whose current principal offering is URU, increased its revenue three-fold compared to last year. The investment which funded this growth, and which was increased significantly compared to the previous year, was generated entirely by DataIntegrity and DataSolutions.
The number of URU clients has increased and now totals 105, compared to 59 this time last year, and the size and strategic importance of its new clients is steadily increasing. As a result, the volume of transactions was 47% higher in the second half of the year compared to the first half.
The traditional services offered by DataIntegrity and DataSolutions had a positive year delivering revenue and profitability marginally ahead of the previous year against a background of increasing competition. These markets are mature, and in order to improve our position we are taking a number of innovative steps, as mentioned in the Chief Executive's Review.
Overall, the Group had a positive performance. Although a small loss was generated, the investment in DataAuthentication was significantly higher than last year and like-for-like performance was improved. In addition, cash balances at the year end were £6.7 million (2005: £6.7 million) after taking account of the dividend of £404,000 paid during the year.
Richard Law, the Chief Executive, his executive management team and all our employees are to be congratulated on their hard work and their achievements this past year.
The quality of our business continues to improve in line with the significant investment we are making, and the business has real and substantial potential.
J L Walker-Haworth
CHIEF EXECUTIVE'S REVIEW
I am pleased to report an excellent year of progress which saw Group revenue increase by 14% and our strategy to lead the market for electronic age and ID verification gather momentum. Revenue for URU, our joint service with BT, increased threefold during the year. In addition, a further £0.5 million of revenue, representing payments in advance for the service, was carried forward into the current year. Competition continued to be keen for the services of DataIntegrity and DataSolutions, although efficient operations ensured that the results produced were ahead of the previous year.
Strong revenue growth in DataAuthentication has been driven both by the effectiveness of the URU service in preventing identity fraud and by the growth in the market for electronic age and Identity checks.
In a recent piece of research conducted on behalf of GB by Manchester Business School, it was estimated that the market for electronic identity checks in the UK will grow to over 300 million electronic checks per annum by 2010 and be worth over £200 million. It is GB's aim to secure a significant share of this market together with BT.
Our strategy to achieve this is to continue to provide the most effective service based on GB's ID3 technology (previously GB Authenticator) which is combined with BT's delivery infrastructure and has proved to be extremely reliable, robust and scaleable.
Our success to date is reflected in the growth of the number of clients using URU and the growth in the transactional volumes being processed by those clients. Transactional volumes increased from 172,000 transactions per quarter to 572,000 per quarter over the course of the year ended 31 March 2006. This figure excludes one-off batch re-verification jobs which generated additional revenue. This pleasing growth has been achieved by focusing on our three core sectors of OnIine Gaming, Mobile Telecommunications and Financial Services and has continued into the current year.
URU dominates the Online Gaming sector for the provision of age and identity verification solutions. 75% of the Top 20 'Online Gaming Power 50' UK organisations (including Partygaming, Cassava, Betfair and Sporting Bet) are URU clients.
URU is the market leader in the provision of electronic identity verification solutions to the Mobile Telecommunications sector. URU clients include O2, and since introducing URU, O2 has seen customer disconnection levels, fall significantly.
In the Financial Services sector, encouraging progress to date includes the first deployment of URU by a number of major retail banks which now utilise it in niche applications.
Our range of clients, particularly those in Online Gaming, have a need to verify individuals connecting to their services from overseas and, to meet this demand, we have allocated resource in the coming year to extend our service in order to verify American and certain European nationals.
We remain on target to achieve cash breakeven in DataAuthentication, before investment in international developments, by the end of the year ending 31 March 2007 and thereafter DataAuthentication is expected to be cash generative.
DataIntegrity and DataSolutions
GB's traditional services, DataIntegrity and DataSolutions which operate in established, competitive and challenging markets, produced turnover and profitability marginally ahead of last year. GB is creating innovative enhancements to its existing offerings, the first of which is the recently launched 4C-UK service, GB's lifestage data service.
This service enables organisations to foresee the principal lifestage changes that affect the spending patterns and behaviour of their customers. The first component of the service is "Pre-Homemovers" which accurately predicts when individuals will move home and enables supplier organisations to tailor proactively their customer service and retention strategies in order to minimise the impact for their customers. Pre-Homemovers data is derived from property searches conducted in the final stages of home conveyancing and is exclusive to GB.
During the coming year, an online web delivery service will offer our clients online access to both existing and new services. This method of delivery, successfully utilised by the URU service, has already demonstrated that clients are comfortable with and will embrace online technology which offers secure and reliable services. This further investment in product development is required to provide differentiation and protect our existing markets.
DataAuthentication has had considerable success to date and long term it represents an exceptional opportunity for the Group.
Our business remains in very good shape and our balance sheet and cash balances remain strong. In the coming year, our investment in the Group's traditional services, together with the investment in international opportunities in DataAuthentication as well as the infrastructure to ensure that our growth can continue is expected to result in net cash outflow. As a guide, however, cash balances should not fall below £5 million during the course of the current year, and strong cash generation is expected in the following year.
The year ahead is planned to be a step change for GB and I continue to be excited by the Group's future prospects and opportunities.
R A Law
BUSINESS AND FINANCIAL REVIEW
The Group has had an impressive year, building a leading position through DataAuthentication as a provider of electronic solutions for age and ID verification in the UK and maintaining the underlying position of DataIntegrity and DataSolutions in keenly competitive, established markets.
During the year, Group revenue was 14% higher than the previous year at £12.8 million (2005: £11.2 million). The value of non-returnable amounts invoiced to clients, in the period, was £13.3 million (2005: £11.2 million), £0.5 million(2005: nil) of which was carried over to future periods. This growth in revenue and amounts invoiced was generated principally by DataAuthentication.
The Group invested an additional £868,000 in DataAuthentication compared to the previous year. This additional investment was partially offset by greater profitability from DataIntegrity and DataSolutions. Exceptional items of £58,000 (2005: £321,000) associated with staff reorganisation costs were incurred, leaving an operating loss of £570,000 (2005: £134,000).
The Group financial highlights of the year were as follows:
- GB's investment in DataAuthentication was increased by £868,000 to £1.6 million (2005: £767,000). The investment principally relates to sales, marketing and product development costs
- DataAuthentication invoiced amounts were £2.4 million (2005: £600,000) and recognised revenue was £1.9 million (2005: £600,000)
- Combined revenue generated by DataIntegrity and DataSolutions was marginally higher than the previous year at £10.9 million
- Other operating expenses for the Group were £1.2 million higher than the previous year as a result of the increased investment in sales, marketing and development costs in DataAuthentication
- Exceptional items relating to staff reorganisation costs of £58,000 were expensed in the year, compared to one-off exceptional items of £321,000 in the previous year
- On a like-for-like comparison, before investment in DataAuthentication, the operating results of the Group was £432,000 better than the previous year
- Finance revenue from bank interest earned during the year was £302,000 (2005: £280,000) and the loss before taxation was £268,000 (2005: £146,000 profit)
- The loss for the year attributable to equity holders was £242,000 (2005: £255,000 profit) after taking account of the increased investment in DataAuthentication of £868,000 compared to last year
Revenue for the Group showed strong growth principally as a result of increased DataAuthentication revenues. DataAuthentication revenues for the year were £1.9 million (2005: £600,000) and combined revenues from DataIntegrity and DataSolutions were £10.9 million (2005: £10.6 million).
Gross Profit and Cost of Sales
The gross profit margin for the Group for the year was 55% (2005: 58%). This was principally as a result of the growth in revenue generated by DataAuthentication, as a proportion of Group revenue. GB shares revenue from DataAuthentication with BT which is classified as a cost of sale and, consequently, DataAuthentication has a lower underlying gross margin than the revenue generated by DataIntegrity and DataSolutions.
Other Operating Expenses before Exceptional Items
Other operating expenses, excluding exceptional items, were £7.6 million (2005: £6.4 million). However, the mix of expenditure changed compared to the previous year as follows:
- DataAuthentication's costs increased by £1.2 million to £2.0 million, due primarily to sales, marketing and development costs
- Operating costs with respect to DataIntegrity and DataSolutions remained in line with the previous year at £5.5 million
The operating loss was £570,000 (2005: £134,000 loss) and finance revenue earned during the year was £302,000 (2005: £280,000) resulting in a loss before tax of £268,000 (2005: £146,000 profit).
The Group provided for taxation credits of £12,000 (2005: £103,000) with respect to research and development tax credits. The figures for 2005 were higher due primarily to the incorporation of a prior year credit adjustment in relation to 2004 in addition to the tax credits for 2005. Research and development tax credits are reclaimed on "pure" research and development projects and consequently, claims for tax credits vary from year to year in relation to the life cycles of development projects.
The Group has recognised a deferred tax asset of £360,000 (2005: £346,000).
At 31 March 2006, the Group had potential deferred tax assets of £7.2 million(2005: £6.8 million) of which £360,000 (2005: £346,000) had been recognised.
In accordance with IAS 12, trading losses carried forward were £20.2 million (2005: £19.8 million) and capital losses were £2.3 million (2005: £2.3 million).
The Board of Directors will propose a final ordinary dividend of 0.75 pence per share, amounting to £618,000 (2005: £404,000). As a result of the implementation of International Financial Reporting Standards, dividends are now recognised in the accounts in the year in which they are paid, or in the case of a final dividend when approved by the shareholders. The amount recognised in the 2006 accounts, as described in note 11, is the final ordinary dividend for the year ended 31 March 2005.
The final ordinary dividend with respect to the year ended 31 March 2006, if approved, will be paid on 28 July 2006 to ordinary shareholders whose names were on the register on 1 July 2006.
Amounts Transferred From Reserves
The amount transferred from reserves is £447,000 (2005: £37,000) after accounting for the previous year's dividend of £404,000 (2005: £398,000) which was paid during the year ended 31 March 2006.
Balance Sheet and Liquidity
Explanations of the most significant items in the Balance Sheet during the year are as follows:
The carrying value of goodwill at 31 March 2006 was £6.5 million (2005: £6.5 million). In accordance with IAS 36 "Impairment of Assets", goodwill is tested annually for impairment and no impairment was required.
Trade and Other Receivables
The value of trade and other receivables increased by £688,000 to £2.9 million at 31 March 2006, compared to the same date last year. This was principally as a result of an increase in the level of trade receivables, which increased as a result of higher invoiced amounts in the final quarter of the year compared to the same quarter in the previous year.
The net result is that cash and cash equivalents reduced by £2,000 (2005: £110,000) during the year. Further analysis of these movements are included in the Consolidated Cashflow Statement.
Cash and Cash Equivalents
At 31 March 2006, the Group held cash and short term deposit balances of £6.7 million (2005: £6.7 million) and in accordance with the Group's treasury policy, all funds are placed with major UK clearing banks and building societies.
Trade and Other Payables
The value of trade and other payables has increased by £972,000 to £3.3 million at 31 March 2006, compared to the same period last year. The principal reason for this is an increase in accruals and deferred income. The value of deferred income has increased by £493,000 compared to the same period last year and is as a result of the deferral of amounts invoiced in relation to DataAuthentication revenues in accordance with IAS 18. Revenue is recognised on these contracts by reference to the stage of completion and accordingly, any upfront payments are spread.
Treasury Policy and Financial Risk
The Group's treasury operation is managed within formally defined policies which are reviewed by the Board. The Group finances its activities with cash and short-term deposits. 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 maximising fixed interest rate returns whilst still providing the flexibility to fund on-going operations when required. It is not the Group's policy to engage in speculative activity or to use complex financial instruments.
International Financial Reporting Standards (IFRS)
The Group's conversion to IFRS was communicated to shareholders in the 2005 interim report. As previously advised, the change in reporting regime has not changed the fundamentals of the Group's businesses and the actions required of management to maintain and improve shareholder value.
Group Finance Director