Half Yearly Report

GB GROUP PLC

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

Half Yearly Report

GBGroup, the identity intelligence specialist announces its unaudited results for the six months ended 30 September 2013.

Highlights - Financial

· Good trading performance for the six months to 30 September:

o Adjusted†† revenue growth of 12% to £18.1 million (2012 adjusted††: £16.2 million)

o Both divisions, Identity Proofing and Identity Solutions, contributing to revenue growth

o Adjusted operating profit† growth of 70% to £2.6 million (2012: £1.5 million)

o 165% increase in profit before tax to £1.3 million (2012: £0.5 million)

o Adjusted basic earnings per share of 2.3p (2012: 1.4p)

· Group cash balances of £6.0 million (2012: £5.8 million) after payment of a £1.6 million dividend and net cash payments of £1.4 million for acquisitions.

· Adjusted†† organic revenue growth was 3%, however, deferred revenue balances for release in the second half and future periods increased by 18% (£0.9 million) to £5.8 million (2012: £4.9 million).

· CRD (UK) Limited, whose acquisition in July 2013 extended the Identity Proofing businesses, has shown good revenue growth.

Highlights - Operational

· Encouraging growth in our international services.

· First phase of the new ID3Global service launched in mid-September.

· International verification capabilities extended into five more countries - GBG can now provide verification services on over 3.6 billion individuals.

· Newer and more powerful versions of market leading tracing and investigation services, Etrace6 and IQ6, launched during the period.

· Matchcode, GBG's improved international address, telephone and email validation service also launched during the period.

Richard Law, CEO, commented, "I am very pleased with our performance in the first half and GBG has progressed strategically as planned. Our forward momentum is positive and we continue to invest in the development of our products, services and team to maintain this. New versions of our principal tracing and verification services were released at the end of the period under review and we are confident of increased organic growth in the second half of the year and beyond.

Notes:

†  Adjusted operating profit means profits before share of results from associates, interest, tax, share based payment charges, amortisation of acquired intangibles and exceptional items.

†† Adjusted Results Analysis

During the previous financial year, GBG restructured its commercial relationship with BT which meant that ID Verification margins under the revised agreement are higher in absolute terms but revenues are reduced in the current financial year. For ease of comparison, the revenue for the comparative period has been adjusted to show the true underlying growth.

Statutory results

Adjusted††results

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Notes to Editors

About GBGroup

The most profitable and successful organisations recognise the value of understanding the individual identity of their customers and employees. GBG combines this concept of identity with technology to create an environment of trust, so that organisations can employ people and connect, communicate and transact with consumers, safely and responsibly.

We call this Identity Intelligence.

GBG's solutions include:

Register & Verify - International software and services for quick and accurate customer registration; and the verification of identities of individuals & businesses remotely.

Cleanse & Engage - Innovative software and services which provide accurate and up-to-date identity information to deliver improved intelligent customer contact strategies.

Employ & Comply - Thorough background checks through online verification and authentication of individuals enabling organisations to safeguard, recruit and engage with confidence.

Trace & Investigate - Leading software and services which provide the most accurate and up-to-date picture of the UK's population, properties and businesses to quickly locate, investigate and contact the right individual, first time.

- Ends -

CHAIRMAN'S STATEMENT

I am very pleased to report that GBG has made strong financial and strategic progress in the first half of the year. Recent strategic reviews lead the board to believe that we will continue to grow our business in several sectors over the coming months and years. We are delivering high quality and important products and services to our domestic and international clients and we are continuing to invest in the development of key global platforms for both of our businesses. This creates real value for ourselves and our clients and together with our strategic acquisitions adds capabilities that further differentiate us from our competition.

Results

GBG has performed in line with market expectations with growth coming from both our organic activities and our acquired businesses.

Group revenues for the period grew 12 per cent. on an adjusted basis to £18.1 million (2012 adjusted: £16.2 million1) with a 70 per cent. increase in adjusted operating profit2 to £2.6 million (2012: £1.5 million). This profit result is £0.3 million ahead of the guidance given in the trading update statement that the Group issued on 17 October 2013. These results also include a full six months of trading for the acquired TMG business and three months of trading from the acquired CRD business.

As envisaged, revenue growth compared to the first half of last year has been mostly through acquisition with organic revenues increasing by a modest 3%, due in part to the application of the Group's revenue recognition policies. However, deferred revenue into the balance sheet for release in the second half and future periods increased by a further 18% (£0.9 million) to £5.8 million (2012: £4.9 million). In addition to the increased value within deferred income, our existing businesses were managed more efficiently and so the majority of the profit uplift experienced in the first half came from increased organic margins.

The Group continues to be highly cash generative with operating cash flow before working capital movements increasing by 89% to £2.8 million (2012: £1.5 million). At 30 September 2013, the Group had cash balances of £6.0 million (2012: £5.8 million) after the payment of £1.6 million in respect of the final dividend and £1.4 million for acquisitions.

Net profit after the deduction of non-cash items, exceptional costs3 and taxation was 100% higher than the previous year at £1.2 million (2012: £0.6 million).

Identity Proofing (IDP)

The Identity Proofing business, which provides domestic and international electronic ID verification and people checking solutions, made good strategic progress in the year to date with the first phase launch of ID3global, GBG's new identity verification solution, taking place in mid-September. ID3global brings together our UK and international electronic identity verification offerings through a single portal or API, and we will continue to roll this out in the second half of the year.

We have also been able to expand our verification capabilities into Brazil, India, Mexico, Spain and Belgium, meaning that GBG can now verify individuals in countries accounting for over 3.6 billion people worldwide. Further services for other countries are expected to be added before the end of the current financial year.

IDP also had a good first half financial performance and saw its revenues grow (on an adjusted1 basis) by 24% to £7.1 million (2012 adjusted1: £5.7 million). With the acquisition of CRD (UK) Limited in July 2013, GBG became the largest criminal records disclosure umbrella provider in the UK.

GBG restructured its commercial relationship with BT last year in relation to the Technology & Supply and Distribution Agreements established in 2004. The renegotiated commercial terms of these agreements now mean that although GBG no longer receives a royalty for the use of its technology we no longer pay BT a proportion of the revenue associated with the transactions for clients served through ID3global. The net effect is that revenue associated with the Technology & Supply Agreement has reduced but at the same time, lower costs under the Distribution Agreement have been negotiated and, accordingly, overall margins have increased.

Identity Solutions (IDS)

The Identity Solutions business, which provides domestic and international identity-based registration, tracing and engagement solutions, made solid progress in growing both its revenues and profitability. Overall its revenue grew 5% to £11.0 million (2012: £10.5 million) and adjusted operating profit increased by 72% to £1.9 million (2012: £1.1 million).

IDS continued to build upon its existing successful products and services with the launch of new versions of two of its flagship solutions. In the Trace & Investigate space it launched ETrace6 and IQ6, which are newer, more powerful versions of its market leading services that allow clients to search for, investigate and contact individuals quickly and responsibly. These services combine multiple datasets to give the most comprehensive current and historic view of UK individuals.

Within ID Registration, we have seen the release of the new Matchcode service, currently the only solution that validates UK and global postal and email addresses, as well as mobile and landline telephone numbers across more than 240 countries or territories worldwide - all through a single interface. Additional powerful features include the ability to transliterate data (translating multiple language character sets for improved functionality for international applications) and to append important geographical information (geo-codes).

Market Overview

We continue to see a growing demand for electronic international identity intelligence solutions as the opportunities to buy, sell and outsource in the online world increase. Businesses now have access to billions of new customers and additional revenue streams that were previously inconceivable. Those able to seize the opportunities for international trade and take full advantage of developing markets will gain a competitive edge over their rivals.

In order to maximise on these opportunities, organisations will need to be able to combat fraud, financial crime and money laundering in order to protect their business interests and reputation as they develop and expand their online presence. At the same time, they need to gain in-depth views of their customers for better decision making and more effective sales and marketing across international borders. GBG is very well placed to support the present and developing international demands of both its existing and potential clients through its suite of award winning and innovative offerings.

Outlook

The growing potential business and market opportunities make this a very exciting time for the Group. We remain committed to a growth strategy of investing in our businesses both organically and through strategic acquisition and we will continue to explore further opportunities to drive this strategy forward. We also remain committed to investing in the development of our products and service portfolios and add capacity to develop new markets both domestically and internationally. These results show that GBG remains firmly on its path to deliver improved operating performance and we are confident of achieving second half profits in line with current expectations, which in turn underpins our confidence in our future performance.

Note 1: the 2012 comparison figures for revenue and gross profit have been adjusted and re-presented to make a more meaningful comparison following the restructuring of its commercial relationship with BT in the current year which resulted in a reduction in revenues but higher margins.

Note 2: adjusted operating profit means operating profits before share of associate investment result, share based payment charges, amortisation of acquired intangibles and exceptional items.

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

1. CORPORATE INFORMATION

The interim condensed consolidated financial statements of GB Group plc ('the Group') for the six months ended 30 September 2013 were authorised for issue in accordance with a resolution of the directors on 25 November 2013. GB Group plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded on the Alternative Investment Market (AIM) of the London Stock Exchange.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

Basis of Preparation

These interim condensed consolidated financial statements for the six months ended 30 September 2013 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

The interim condensed consolidated financial statements do not constitute statutory accounts as defined in section 435 of the Companies Act 2006 and therefore do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 March 2013. The financial information for the preceding year is based on the statutory accounts for the year ended 31 March 2013. These accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. These accounts did not require a statement under either section 498(2), or section 498(3) of the Companies Act 2006.

Accounting Policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2013, except for the adoption of new Standards and Interpretations noted below. Adoption of these Standards and Interpretations did not have any effect on the financial position or performance of the Group.

3. CYCLICALITY

Due to the cyclicality of our software renewal business, higher renewals in the second half traditionally result in the Group's performance being biased towards the second half of the year.

4. RISKS & UNCERTAINTIES

Management identifies and assesses risks to the business using an established control model. The Group has a number of exposures which can be summarised as follows: regulatory risk resulting from regulatory developments; changes in the Group's competitive position; non-supply by a major supplier; disaster recovery and business continuity; new product development; and intellectual property risk. These risks and uncertainties facing our business were reported in detail in the 2013 Annual Report and Accounts and all of them are monitored closely by the Group. There have been no significant changes in the Group's risk and uncertainty factors during the review period, nor are any expected to for the remainder of the year.

5. REVENUE

During the previous financial year, the Group restructured its commercial relationship with BT which meant that ID Verification revenues are reduced in the current financial year, although margins under the revised agreement are higher in absolute terms. For ease of comparison, the revenue for the comparative period has been adjusted to illustrate the true underlying growth as follows:

Statutory results

Adjusted†† results

6. EXCEPTIONAL ITEMS

Exceptional costs of £152,000 in the six months ended 30 September 2013 included £104,000 of costs associated with staff reorganisations, £85,000 of professional fees related to Company's acquisition related activities and a £37,000 release of deferred consideration associated with an acquisition made in a previous financial year.

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

7. SEGMENTAL INFORMATION

The Group's operating segments are internally reported to the Group's Chief Executive Officer based on two separable areas grouped into two operating segments: Identity Proofing Division- which provides ID Verification and ID PeopleSafe services and Identity Solutions Division - which provides ID Registration, ID Engagement and ID Trace & Investigate services. Performance of those segments is reported to the Group's Chief Executive Officer as operating profit before finance revenue and income tax as shown below.

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

Unallocated items for the six months to 30 September 2013 represent Group head office costs (£401,000) and exceptional costs (£152,000). Unallocated items for the six months to 30 September 2012 represent Group head office costs (£364,000) and exceptional costs (£266,000). Unallocated items for the year ended 31 March 2013 represent Group head office costs (£504,000) and exceptional costs (£409,000).

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

7. SEGMENTAL INFORMATION (continued)

8. TAXATION

Taxation on profit on ordinary activities