Good morning, everyone, and thank you for joining us today via webcast. It's my pleasure to welcome you to our FY25 half-year financial results presentation. Today, I'm going to start the session by sharing some operational highlights and trading insights for the period. After that, I'll hand over to David Ward, our Group CFO, to take us through the financial results and key metrics. I'll then come back to share more on the initial focus areas, which I outlined in June, that have driven and will continue to drive our priorities in FY25. Finally, we'll then open up the floor for questions. So let's get started. As you all know, the first half of our financial year coincided with continued uncertainties around the macroeconomic environment, global elections, and continued geopolitical instability.
Against that trading backdrop, and still only a short amount of time since we underwent leadership change at GBG, I'm pleased to be able to report that we were able to deliver improved revenue growth at 4.5% and strong profit growth of 21%. The results we are announcing today reflect an awful lot of hard work from everybody at Team GBG and are a testament to the talent and commitment we have in our business. We know there is more to do, but this is a good step forward. A couple of quick highlights from me. Our top-line growth in half one has been driven by good performance in identity and location, fueled by an improving net retention rate and a continuation of new logo wins.
The cost measures we introduced over the last two years, coupled with our continued cost discipline, have allowed us to translate this revenue growth into very strong operating profit for the half. And beyond the numbers, I'm particularly pleased with the progress we have made on the four focus areas, which we outlined back in June. These focus areas have been embraced by the team, and this has translated into the tangible results in terms of operational efficiencies, product innovation, customer centricity, and team engagement, laying foundations for our future growth. But more than the delivery of financial results, as a business, what we do matters, and that's something I am tremendously proud of. In the first half of the year, we've also continued to deliver impact, helping to power the digital economy. We've helped businesses onboard more good customers.
We've helped them prevent fraud, and we've ensured first-time delivery right across the world. We've helped gaming customers navigate the peaks of Euro 2024, ensuring that on any given day, more than 200,000 of their consumers were able to transact online seamlessly. And as we speak, our teams are gearing up for Black Friday and Cyber Monday, where we're prepared for more than 6,000 transactions to flow through our address verification platform every single second to support a global peak in online commerce. If you imagine a world where those things are not possible, it only serves to underscore our relevance as a business. Let's turn now to look at the performance of our segments. David will shortly take us through the financial details, and so I instead want to focus on the operational activity that underpins the results he'll speak about.
Let's start under the umbrella of how we help organizations trust their customers. Our largest segment, identity, grew 6% in the first half of the year, building on the momentum we achieved during the fourth quarter of the prior year. Growth in identity was largely driven by improving performance in our EMEA and Americas regions, while our ANZ business continued to perform strongly. In EMEA, our focus on modernizing and expanding the coverage of our international data proposition, together with our unique multi-bureau offering, drove strong growth in key financial services customers such as Remitly and Capital.com, and we were able to win back MoneyGram. In Americas, our investment in building out the account management team has helped improve customer retention. Notably, we renewed our relationship with Square, we scaled our partnership with Boost Mobile, and we broadened the scope of what we do with MoneyLion.
We also saw increasing demand for our documents and biometrics capability, including an important project supporting the onboarding journey for Santander's U.K. banking app as they seek to reduce the size of their branch network and achieve operational efficiencies. And lastly, we've also seen success in some new initiatives we're pursuing, some driven by market development, but others driven by new ways of working. Two examples that stand out. So firstly, how we've been able to help customers capitalize on market changes in Brazil and Peru, where online gaming is coming under regulation. We've helped deliver early wins with customers such as Rush Street Interactive and Superbet and helped them support their safe expansion into LATAM.
Closer to home, we've also had a much greater focus on cross-sell between our location and identity teams in EMEA, and that's resulted in new customer wins, notably with Asia's largest online marketplace, Temu, where we've supported growing cross-border activity. Turning now to fraud, which is our smallest segment. As previously guided, revenue in this segment was down 9% year over year, primarily driven by timing differences in our customer license renewal cycles. Despite this headline, it's been encouraging that the team have continued to sign new customers in our focus markets, whilst also renewing, expanding, and upgrading the existing customer relationships we hold with a very high-quality customer base, as evidenced by J.P. Morgan Mobility Payments in Luxembourg and Bank BTPN in Indonesia. On that basis, together with the forward visibility we have on the pipeline, we expect this segment will return to growth in the second half.
Moving now to how GBG has helped organizations reach their customers wherever in the world they are. In location, the team had another good half year, delivering 9% growth, following the trend they've set over the last three years. Growth was built on strong retention across our large and diverse customer base. For example, we were able to increase our share of wallet with brands such as Foot Locker. We also supported customers whose businesses entered new markets and those who had a need for new products such as our store locator offering. Primark, which has a new focus on Americas and a strategy for in-store returns, was a customer that fell into both of these buckets, and growth was further boosted by new customer wins such as SharkNinja, a consumer electronics brand that's scaling globally and was impressed by the coverage that we enjoy.
Outside of our traditional direct sale channel, we also continue to drive increased partner activity with large partners such as Oracle, where we embed our technology, as well as smaller data distributors such as SmartyStreets. Finally, the team have also built on the momentum they created last year in Asia, expanding our relationships with large cross-border e-commerce players such as Shein across more licensed territories, as well as sealing a landmark new win with Temu, who we now support in 21 markets, following an initial pilot for Germany. As you can appreciate, the opportunity from a volume perspective with these customers is large, but the credibility we've established by working with brands like Temu is leading to more interest in our solution from others such as TikTok Shop, and with that, I'll now hand you over to David to take you through the financial results.
Thank you, Dev, and hello and good morning, everyone. Thank you for joining us. I will now take you through a more detailed review of the financial results for the six-month period to the 30th of September 2024, which I should start by confirming are in line with the trading update that we released five weeks ago. This was a good first half for our financial year, where we continued to build on the positive revenue growth momentum and continued to benefit from the lasting positive impact of the cost-saving and simplification initiatives from last year. We delivered revenue of GBP 136.9 million, representing 4.5% constant currency growth. Dev has already mentioned why, as expected, fraud recorded a decline in the period, but we were very pleased that our other two segments, identity and location, had a combined growth rate of 6.8% in constant currency.
Also, as expected, net revenue retention has continued to improve and is now back above 100%. I have a nice slide providing more detail on NRR for later in the presentation. We delivered a 21% increase in adjusted operating profit to £29 million, and this was a result of the revenue growth, plus was strongly assisted by those cost-saving initiatives that we implemented in the prior year. And finally, the balance sheet continues to strengthen, and we reduced net debt by £9 million since the last year-end. Our net debt to EBITDA ratio is now only marginally above one. I can also confirm that trading since the period end has been in line with our expectations, and therefore, as a result of the strong start to our financial year, we are today reiterating our outlook for the full year.
Now let me provide you with an overview of the income statement. On a reported basis, revenue increased by 3.4% to £136.9 million, and in constant currency terms, that was an increase of 4.5%. Our growth rate isn't yet at the level that we know is possible, but we are making very good progress, and that's a reflection of the dedication and hard work of the whole GBG team. Our gross profit margin improved by 40 basis points over the prior year as we continue to focus on pricing as well as disciplined management of our data and cloud hosting costs. As in prior years, we do expect that gross margin will be a bit higher in the second half of the year due to the relative revenue mix.
Adjusted operating expenses reduced by 1.4%, and that is obviously net of inflation, which has been running at between 4% and 5% for our business. This was as a result of the sharp focus on efficiency and simplification last year, where the benefits are continuing to flow. We continue to focus hard on preserving those efficiencies and not letting complexity creep back in. Last year, we had a small charge for bad debts, or ECL, as they are now called, versus zero in the current period. Bringing that all together, that led to an adjusted operating profit of GBP 29 million, which represents an increase over the prior half year of 21.3% and an adjusted operating profit margin of 21.2%. As expected, our net finance costs decreased over the prior year as a result of the steadily reducing levels of net debt.
There was very little impact, actually, from the reduced interest rates in the first half of the year, but obviously that now will be a factor for the second half of the year after both the U.S. and U.K. central banks have implemented two rate reductions. And finally, on tax, our effective tax rate was only marginally higher than we would expect for the full year at 26.5%. As a result of the combination of the improved growth rate and the growth in adjusted operating profit, together with the reducing finance costs and the inline tax charge, I'm really pleased to be able to report that adjusted diluted earnings per share increased by more than 40% over the same period last year. Across these next two slides, I have more detail and analysis to explain the key dynamics behind our revenue growth and that important improvement in momentum.
Firstly, this chart shows total group revenue over the last three first half periods. As you can see, our constant currency growth has progressed from minus 3.2% to plus 1.8%, and then pleasingly a further improvement to 4.5% in the most recent period. It is clear that the improving trend in NRR is fueling the improving overall growth rate, with NRR having improved 530 basis points over the last 12 months to 100.2%. It is also pleasing to see that the proportion of our growth coming from new customer acquisition has remained strong at 3.8%. As we have previously disclosed, the revenue recognition of our fraud segment can and does occasionally cause some distortion in NRR due to the timing of license renewals and the associated revenue recognition. We do also track this KPI just for the identity and location segments.
This additional chart shows the NRR improvement that we have driven, but this time excluding the fraud segment. You can see here just how steady the net revenue retention improvement curve has been since that low point of December 2022. Since that time, just over 18 months ago, NRR has improved 1,150 basis points. You will remember that from our previous commentary, that the driver behind that drop in NRR during calendar year 2022 was predominantly the reduction in volumes or shrinkage for some of what were our largest identity customers at the time. These were crypto exchanges, fintech businesses, and those internet economy customers that really boomed during the pandemic. In that period, we continued to show a lot of positive sales activity from our teams that, without this significant shrinkage, would have driven solid top-line growth.
So as that shrinkage effect has subsided and faded into the comparatives, we're now able to more easily demonstrate the growth effects of our cross and upselling, as well as the more recent proactive pricing initiatives. And you've already heard from Dev about how we are now doubling down on these opportunities within our existing customer base. In the last 12 months, specifically for identity, where NRR has shown the most significant improvement, there are two areas of focus that I would like to highlight for you today. Firstly, upselling customers to our multi-bureau identity verification solution that provides enhanced match rates and which in turn enables us to charge a higher price point per check.
Plus, the introduction of our enhanced and best-in-class international data, which is facilitating us gaining a larger wallet share from some of our international customers as they deploy GBG identity solutions in more of the geographic markets in which they operate. Both of these initiatives have had a visibly positive impact on NRR, and for both of those opportunities, there is still plenty more runway for further growth. Here we have three further charts on revenue dynamics. Firstly, we show the split of our revenue by type, which shows that the proportion of our revenue coming from the combination of our repeatable or recurring revenue streams, being our subscriptions and consumption, remains strong at 95% of the total.
While there are no hugely significant moves in either of our sector or geography splits, in the six months to 30th of September, we did see relative strength in financial services, and Dev has already mentioned some examples of key customer wins in this space earlier. Plus, we are continuing to see growth driven by our focus on channel partners. That's in both identity and in location. Through the geographic lens, these same sector successes drove relative increases for our UK and Americas revenues. Just for the record, we did not see any increase in revenue from crypto exchanges, with revenue from this sector remaining at around 1% of the total group revenue, and we are not forecasting that contribution to increase. When I presented the income statement a few slides back, that was all on an adjusted basis.
So here, I have a reconciliation of our operating expenses on a statutory or reported basis down to that adjusted basis. Consistent with our presentation in previous periods, our adjusted measure excludes exceptional items, amortization of acquired intangible assets, and share-based payments. For the financial period we are reporting today, there are only two adjusting items, with there being no exceptional charges to report. We have GBP 17.4 million of amortization on acquired intangible assets. That charge is lower than the prior year as we have some assets related to some of our acquisitions further back in time that have now become fully amortized. And the share-based payment charge for the half year was GBP 2.2 million. This was higher than the prior year as the prior period included some credits in respect of share option awards being underwater and therefore not being expected to vest.
And then this chart shows the recent trend in those adjusted operating expenses. As you know, simplification and efficiency has been a big focus for us over the last couple of years, and this chart shows the progress we have made and the tight control we have over these costs. We have not only been able to achieve reported cost savings, but we have also completely mitigated the inflationary cost pressures in the macro environment. As I said a moment ago, while most of the heavy lifting of the cost-saving initiatives happened last year, we have maintained our focus on efficiency this year to ensure that the gains made are not lost and that we don't let complexity creep back into our operations. We continually review our product and technology portfolio and ensure that investment is targeted to the areas where we feel there is the greatest commercial opportunity.
While at the same time, we are also updating some of our operating systems and tools, including embedding more artificial intelligence to drive efficiency. As a result of the progress we've made, Dev and I now feel confident to recycle some of the savings that we have realized into key focus areas that we feel will now ultimately drive faster growth for us in the future. This has included some key product and technology initiatives, as well as sales, marketing, and enablement resources to boost our team in Americas. We do therefore expect our operating expenses to be a little bit higher in the second half of the year versus the first half, but this is all included within our expectations and outlook for the full year.
And then onto the balance sheet and confirmation that our net debt has reduced by a further GBP 9 million to GBP 72 million at the period end. This was despite the payment of the final dividend in respect to the financial year 2024 of GBP 10.6 million and the funding of our employee benefit trust for GBP 1.6 million for the purchase of GBG shares that will one day be used to satisfy share option awards. These impacts were somewhat mitigated by a GBP 5 million translation effect of our US dollar denominated debt that was converted to sterling for our 30th of September balance sheet at a more favorable rate of GBP 1.34.
Cash conversion for the first half of the year was 83.7%, which is a little lower than we would expect for the full year, with some of this due to the timing of bonus payments in respect to the prior year.
Our accrued revenue balance remained broadly flat when compared to the last year end, and this reflected a slight reduction in the portion of the balance related to our fraud segment, offset by an increase in the balance that relates to our channel partner business in location. The reduction in the deferred revenue balance relates to timing differences between the invoicing and usage of customers prepaying for consumption-based subscriptions, as well as an FX translation input. Before I hand back to Dev, I would just like to summarize the key messages of our first half results. We are pleased with our first half performance, where those first signs of growth momentum that we saw in Q4 of the prior year have continued and accelerated, fueled by that all-important and encouraging increase in NRR.
Now that GBG is back to growth, we are clearly demonstrating our strong potential for operating leverage, with a 21% increase in adjusted operating profit and a 42% increase in adjusted diluted earnings per share. The balance sheet continues to strengthen, with our debt leverage now only just above one times EBITDA, and we still have what we expect to be a strongly cash-generative second half of the year in front of us. Therefore, we are pleased to reiterate our outlook for FY25, where we expect to deliver mid-single-digit constant currency revenue growth and high single-digit growth in adjusted operating profit. With that, now back to Dev. Thank you, David. Back in June, I talked about how GBG was a high-quality business. I talked about how we have market-leading positions and strong financial fundamentals that give us the platform to grow it further.
I also shared my initial focus areas as CEO, which will enable us to build on that platform and accelerate growth by capitalizing on the opportunities we have ahead. We're on the right path, and I think we've made good progress in a short space of time, but we're really clear about what we want to deliver in the second half of the year and beyond. Firstly, a quick refresher on the four initial focus areas I spoke about in June. I spoke about how GBG needed to remove complexity. I felt that our complexity had become a speed bump, and it was important we become easier to engage with. I spoke about needing to be globally aligned. Our three core geographies were developing in a similar manner, and we needed to better leverage our size and scale as the market leader.
I talked about driving innovation at pace, using what we have, but also investing in things that will grow our competitive moat further, and lastly, I talked about high performance, improving our execution, in particular in the Americas, but also just more generally being more front-footed in how we position ourselves competitively. As I've already shared, there's been a lot going on, and I could talk for hours about the initiatives that we've got underway, but also those that we're turning our attention to next, but in the spirit of simplicity and in keeping with the time I've got, I'm going to focus in on just a couple of things that have resonated with me to give you a flavor of what's been going on under each pillar. I'm happy to pick up questions around an y other points during the Q&A.
One of the key things we've done when it comes to removing complexity is to simplify our paperwork. We've taken steps to reduce the number of agreements that customers need to sign as they grow their relationship with GBG. This is particularly pertinent for me because when I joined the business back in 2020, I recall seeing how our customers in Australia, where we operate all three of our business segments, would have to sign separate contracts for each of our solutions, often with a different and sometimes with a legacy brand name on each piece of paper. We worked to get that down to a single agreement there, and now we're applying that same principle on a global scale.
Thanks to great work by our legal and privacy teams, today, a new customer of GBG can sign just one legal contract, which contains the relevant terms for all products globally.
That's truly a simpler way of doing business with us. And what's more, this streamlined experience accelerates the sales cycle. It drives upsell, drives cross-sell, and it's also forcing our teams to work together more closely and collaborate. Whilst we'll keep driving home the things we've kicked off in H1, in the second half, we're also going to be focusing here on the consumption experience, essentially making it much easier for customers to discover and try our products, as well as making it quicker for them to get value from our solutions. In location, the team are focused on integrations to e-commerce marketplaces such as WooCommerce and Shopify that would make us the number one choice for developers looking to adopt address verification capability. In identity, the launch of GBG Go will be game-changing.
It will not only drastically simplify the user experience, but will also help customers improve their onboarding by suggesting additional GBG capability that would address any gaps in their workflow. These recommendations essentially hardwire the pedigree and experience we've built over many years into our tech, making it available to customers at the click of a button, and remember, they'll already have signed an agreement that means the upsell journey is far simpler administratively. I saw the beta release of Go a couple of weeks ago, and I was really impressed with the progress that we've made since I last updated you on our plans in June. Since I've taken up the role of CEO, I've continued to stress to our teams the importance of being globally aligned. Leveraging our size and scale is one thing, but this is also about our culture.
When I spoke back in June about the need for an elevator pitch, it may have seemed trivial, but launching it in our business has really helped our teams to understand how they fit together in a single global business, and that togetherness has been shown in the way we've seen collaboration across sales teams, the best example being our identity and location teams in EMEA. In a short space of time, we've not only built clear customer use cases where our capabilities can combine well, but we've also converted some material new business wins, the largest being Temu, who we now support in terms of their location needs, but also their identity needs, and these wins are in turn creating more belief in the opportunity and helping to build the pipeline further.
I've also been really pleased to see the team take the initiative and experiment with new ways of working, trying things like talent swaps, where a salesperson from each segment has been assigned full-time to sit within the other team to educate colleagues on the proposition, support sales conversations, and to help build a repeatable formula. The increased collaboration we're seeing and the buy-in to being a single global business has given me a great deal of encouragement to go a step further. Over the second half of this year, our marketing teams will start the planning process as we move away from fragmented local brands, of which we have at least five, and finally embrace the power of GBG as the brand for our identity fraud business.
As we've already seen with Loqate, focusing in on one brand will deliver commercial benefits in terms of marketing ROI and brand recognition. We've already put a spade in the ground with the acquisition of the domain gbg.com in the summer, which is a far stronger international go-to-market landing page, and I'm confident, based on the conversations I've had with my colleagues, but also with customers, that this will be a welcome step and will help all stakeholders to understand our global value much more quickly. Let's move on now to how we're driving innovation, using our smarts to stand out from the competition, and here, I'm going to stay focused on our identity segment. Let me start by giving you an update on GBG Trust, our proprietary identity network, which is based on the contribution of verification data from our customer base.
In the first half, we've continued to build out the network, and we expect to pass 100 million records in the next few months. The network now also includes document verification data. We've continued to grow the number of contributing customers. We're now up to 762. Our network growth has also increased the value that the solution can deliver, as we're now matching 56% of customer records against it. That's 21% higher than a year ago. Put simply, this means that more than half of new verification requests from users include data points that we have seen before, which gives our customers greater confidence in building trust with consumers or detecting bad actors. Beyond network stats, we continue to collect great customer feedback. A large UK gaming operator shared insights on how strongly the Trust score is correlating to bad actors that they're seeing coming through their business.
A Canadian gaming customer highlighted how trust not only helped improve their match rate by 9%, but it allowed them to prevent a $68,000 fraud attack, and a remittance customer showed recently through a POC that they were seeing a nine and a half times ROI by deploying Trust in their onboarding journey. As we look ahead, we're now getting much more focused on converting pipeline opportunities. In terms of where our focus is for the second half, I've already spoken about my excitement on GBG Go. Clearly, that's about how we simplify the consumption experience, but it's also a big part of our innovation agenda. I'm pleased with the beta release that we launched in September. I'm even more pleased that we've got 10 customers participating in our early adopter program.
But here, I wanted to spend a moment talking about something slightly different, essentially about how we're building out our data insights capability, something that we're going to move to production in the second half. Earlier this year, we pulled together a team of some of our best data scientists and data engineers to help solve a problem. How can we get much more insight into how our customers are using our products? And crucially, how can we spotlight where they can be using them more effectively? Based on the progress we've made in the year to date, we'll soon be able to address this challenge. We'll be able to share data back with customers, which will also benchmark them against their industry peer group on an anonymized basis.
We can then take action to assist our customers in fine-tuning their journey, their rules, or recommend additional GBG capability that would deliver strong ROI in the form of higher onboarding rates and/or lower fraud. Our account management teams will also have access to the same information, and so they can be much more proactive in addressing customer performance issues, and lastly, we should be able to innovate far more quickly, as the things that we're learning through these insights can then be baked into and prioritized in our product roadmaps. Data science has always been a key focus for me throughout my career, and I'm really excited about the potential it can bring to our customers at GBG, and lastly, let's talk about high performance.
Back in June, we described our vision for how we wanted to change the tone and the collective mindset at GBG to have an increased focus on winning, and we've seen proof points already on how that's driving our performance improvement. Our core focus when it comes to addressing performance in the year to date has really been our Americas identity business. I'm encouraged by the progress we've delivered in stabilizing our performance there, but we also know that we have a lot more to do to get to the growth levels which we aspire to and are capable of. We talked earlier about how the Americas contributed to the improved growth rate in our identity segment, but what we didn't describe were some of the changes we've had to make along the way, and they've probably been more significant than I anticipated back in June.
We knew back in June that we needed to focus on rebuilding our account management team. We were not close enough to our customers, and we needed to focus on driving NRR improvements. What we probably didn't know back then was the size of the task around unifying the culture, both within the Americas as well as their perspective of being part of a larger global business. It's fair to say we've had to make more changes to team composition than we probably previously envisioned. Around a third of the team in the Americas have joined our business in the last 12 months, and it's important to note that context when we think about our performance in the market. The significant time I've spent in the US this year, though, has given me conviction it remains our largest opportunity.
While we are better off than when we compare ourselves to 12 months ago, we have more work to do to capitalize on that opportunity. We're on it. In the second half, we're going to strengthen our fundamentals further and evolve the business as it enters the next phase of its turnaround. What does that look like? We'll continue to need to focus on attracting quality talent at all levels of the organization, as well as promoting the great talent we have in our business. We know the GBG opportunity is an attractive one based on the people we've spoken to over the year to date. As we continue to shift to a globally aligned operating model, I also expect that more of our global identity leadership team will be based in the US to help support our execution in that market.
Finally, the focus areas I've already talked about, GBG Go, the unified GBG brand, our data insights capability should all have the greatest impact in the Americas and really help drive the improvement we need to see. Putting all of that together, what will our focus on those areas help to drive? I believe that continued successful execution against our priorities will build a culture that differentiates us and one that is global in keeping with our market position. It will ensure that our solutions are seen as market-leading because they deliver the best results for customers. We've dialed up our innovation, and we've seen the results in customer wins and win-backs, and now we need to amplify our messaging. It will solidify our position as the market leader, but also as a brand that is understood in our industry.
Clearly, this will be much easier when we focus in on just one brand. It will also increase the pace of our execution, driving more urgency in how we respond to the challenge and the opportunity ahead. We're seeing some of this already come through our first half results, but we know there is more benefit to come, and we're staying focused on delivering on that. With that, I'd now like to open the floor to questions, which David has helpfully or kindly agreed to moderate.
We will now go to our question and answer session. To ask a question, please press Star, followed by 1. If you change your mind, please press Star, followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from Tintin Stormont from Deutsche Numis. Your line is now open. Please go ahead.
Morning, guys. A couple of questions for me. First, on the Americas. Obviously, Dev, you've talked about sort of obviously you've seen improved customer retention there, but obviously, there's more to do. Could you give us a sense of what percent of identity is Americas and how far was it from the 6% identity growth overall and therefore sort of getting that back on track or closer to EMEA and ANZ, sort of giving us a sense of kind of what that opportunity looks like? And then secondly, on Temu, could you just give us a bit more color in terms of you've obviously talked about this being a great cross-sell for both location and identity, but just in terms of sort of how competitive it was, why they chose you in terms of potential upside, in terms of rolling out more capability with them? Sure.
Do you want to take the Americas question? I'll take yeah. Good morning, Tintin, and thanks for the questions. I'll take the first one on Americas, and then I'll let Dev come in on the customer question. So on Americas, yeah, as you know, Americas is our largest identity segment, represents about 40% of identity revenue. We don't disclose specific performance for any of the geographies, but what I can say is that we were very pleased. As you heard from the presentation, we were very pleased that identity in Americas did show year-on-year improvement. That put it back into positive territory, but only just. So again, as we said in the presentation, we do think there's further to go, further improvement possible, but it's really pleasing to see that it's back into positive growth territory. Dev?
Yeah. So on Temu, Tintin, morning.
Yeah, as you said, really, really positive, great win for us. The relationship with Temu started back in April, where our focus on cross-border China e-commerce players paid off with them committing to test us in Germany. They were impressed by what they saw. They saw a significant improvement. They were previously using Google. They saw an improvement in their match rates, and therefore then moved on to putting us into production. Since then, we've signed up for another 20 markets. So we're helping them in another 20 markets, which we're now starting to see translate into usage. But what was also really pleasing and slightly different is that in August, we then expanded our relationship into identity. So the use case was really clearly some of the goods that Temu are shipping are need age verification, and they chose us for that.
And the reason, again, they chose us was similar to why they chose us in location, the international pedigree that we bring and the fact that we could provide them coverage over multiple markets that nobody else could do.
Okay. Thank you, Tintin. Great to meet you guys.
Thank you, guys.
Thank you. Our next question is from Nick Dempsey from Barclays. Your line is now open. Please go ahead.
Yeah. Good morning, guys. I've got three questions. So first of all, are there any areas where regime change in the U.S. could be positive or negative for your business? It's a topical one. Second question. So the 83.7% EBITDA cash conversion, I know you've explained some of the timing issues there, but how likely is it that you might be able to climb your way into the 90%-95% range this year?
And I guess, more importantly, how confident are you that you can hit that range next year in FY26? Last question. In fraud, I wonder if you can give an indication of whether FY26 will be a kind of normal year in terms of the renewal cycle or better or worse than normal?
Yeah. Good morning, Nick. Thank you for the three-part question. I think I'll have a go at all of those and then see if Dev wants to add anything. So I might actually take them in reverse order. So fraud, yeah, as we said in the presentation, fraud in the first half did see a decline. That was expected, and that was as a result of just having fewer longer-term renewals scheduled and slated for that period. Actually, the business still performed reasonably well underlying that.
Just a reminder that within the fraud segment that we report, there are actually two businesses, one of which, the performance remained pretty robust, and the other one is the one where we sell software licenses that are on-premise. They give a point-in-time revenue recognition. And as we guided at the start of this year, that was always going to have a tough comparative in this first half. We do expect that business to return to growth in the second half. And at this stage, there's no reason to think that it won't return to its more normal longer-term growth rate beyond this year. Actually, if you remember results a few months ago back in the summer when we reported the full-year results, the fraud business across the last three years has had a CAGR of 15% growth.
A slightly slower year this year is going to only marginally make a dent in that. It's still going to be a double-digit growth business, and that's really how we think about it. So that's fraud. Cash conversion, yes, you're right to highlight. Cash conversion was a bit lower in the first half. We do report it on a rolling 12-month basis. So it was 83.7% to the end of September. That's a bit lower than we would expect, but there's a couple of things that can cause timing differences within that calculation. The first of which is the timing of bonuses and the scale of bonuses and incentives that we generally pay in the first half of the year, but actually reflects performance across the previous full financial year. So that can cause a bit of a dip.
To provide a bit of comfort, we do expect that cash conversion to improve through the second half. So that by the time we get to the year-end and report the rolling 12-month basis, it should be a bit bigger. Actually, just to provide a little fact point behind that, cash conversion to the end of September just for the year to date was a bit higher. That was closer to 85%. By the end of October, actually, we were already north of 90%. Then the final part of the question, regime change. Obviously, it has been a period of uncertainty across that, and Dev referenced it in the presentation. It has been a period of uncertainty for us and lots of businesses with both change in the U.K. and, Dev, more latterly, change in the U.S.
I think actually stability and some decisions is probably overall going to be slightly positive for us. I can't think of anything specific that we can point to at the moment that we're either concerned about or feeling pretty positive about. We have had some questions from investors about what does it mean for crypto? So I will deal with that. Obviously, as you know, we have had some positive times with crypto a few years ago. At the moment, cryptocurrency exchange revenue for us is still only about 1% of total group, and that really hasn't changed for about two years now. It's been pretty consistent at that level. So certainly, we're not expecting or baking into any forecasts any pickup there. So we're largely basing our outlook on more of the same. Yeah.
And I'll just add a couple of things on that last point that if that were to change, clearly, we would think about disclosure a bit differently, having lived through that period. And in terms of talking to U.S. colleagues and customers, there's definitely a positivity in terms of sentiment and feeling, but we're not really seeing that change trading at the moment either. Thank you, Nick. Thanks for your questions.
Thank you. Our next question is from Andrew Ripper from Panmure Liberum. Your line is now open. Please go ahead.
Hi. Morning, everybody. Well done on the results, guys, particularly the cleanliness of the results. Really good to see. I've got three. The main one I wanted to ask was about the NRR and the drivers that you mentioned, Dev, I think, in terms of upselling, the push on multi-bureau. And also, you were talking about international data.
Can you contextualize those in terms of how much further they may have to go? Maybe give us an indication of what proportion of identity customers are multi-bureau today and where that could go. And then on the international data point, I didn't quite get the relevance of that. Can you maybe bring it to life for us a bit better? And then I've got a follow-up after that. Thanks.
Hi. Good morning, Andrew. And appreciate the comments on our cleanliness. Always good. So I think just on your questions on NRR, I guess the first thing I would say, I will hand over to Dev in a moment to add some bit more commercial color to it, but just from a financial perspective, clearly, our improvement in NRR is made up of quite a number of different factors.
I highlighted a couple in the presentation, and I think Dev did as well. But actually, we are actually coming at that from a number of different angles. Clearly, there's upselling for things like multi-bureau and international data, which I'll come back to. But also, we're seeing some improvement from things like increased pricing discipline. That's also helping. We also expect to see this is where, within these numbers, eventually, we would expect to see some level of impact from things like GBG Trust and Go, which, as you know, are still in early phases at the moment. But that's where you would see them. We don't intend to report them separately, and nor would that make any sense, really. They would drive increased consumption. So I think it is a number that we see good potential for further improvement in NRR. Specifically on multi-bureau, actually, we've seen good penetration.
It's been something we've been pleased with, but clearly, there is a lot more to go after. Specifically, more recently, it's an offering we've launched in the U.S. There's a bit more opportunity in the U.S., definitely. On international data, I guess the point we were saying is it's been a real focus for us. It's a real strong point for us in the market that we are particularly strong with customers who have an international customer base. It's been a real focus over the last couple of years to improve that data quality. As a result of that, we've been much more competitive with those customers. Not only have we retained and expanded use with some, I think Dev referenced even a win-back as well of a key customer. Yeah, hopefully, that clarifies what we're talking about on international data. Yeah.
Across both, Andrew, so thanks for the question. Across both, I think the high-level, simplest way to put it is more data equals a better decision, as David talked about. And so if we start with I'll start with multi-bureau, actually. So in the U.K., we're the only provider that has access to all three credit bureaus, which means that as we think about matching customers, we can offer our customers the best possible match rate, which means that they can onboard more customers and reject more fraudulent activity. And again, the selling point to customers is more data, better decisions. On international, a slightly more interesting use case. So what we're finding, if I take someone like Remitly that I talked about in the section earlier, Remitly are really interested to see the performance of our business by market.
And they will often use different providers for France versus Germany versus Spain to get whatever gives them the best possible match rate. What we've really put a focus on in the last six months is getting clearer on our performance by market, assessing areas where more data in a specific market would give us a lift, and then putting that into production with customers. So what we're now seeing is that our match rates in most of the countries that customers care about are really, really strong. And we have opportunities to strengthen those, both in terms of more data, but also in terms of modernizing the platform to make it easier for customers to draw down on that data. Hopefully, that one now makes a bit more sense.
Thanks. Thanks, both of you. And then I just wanted to come back to Americas.
Just in terms of the extensive change there, obviously, you appointed a new MD, I think, for the region at the beginning of the year. Dev, I think in your commentary, you mentioned a third of the team, was it, have joined in the last sort of 12 months or so. I wasn't sure whether you were talking about the whole of the Americas or just the account management function. What's your sort of sense of the sort of the momentum within the business post these changes? I mean, you sort of have a very settled proposition now, and you've got sort of good momentum going into the new calendar year. How do you expect things to sort of evolve from here?
Yeah. I think just to clarify, the comment that I made around a third of the team being new applies to the entire Americas identity fraud team.
Quite a significant number. We're talking about 50-ish people that are new to the business, to put some context around it. I think in that context, I guess the performance maybe looks a bit more resilient than we've described already. I think a couple of points to make. One is where we've had a more stable team, so EMEA, we can see that the operation improvements have driven a stronger growth rate. I guess our thesis is with a more stable, solid team, we should see some of those operational improvements driving increased momentum. Just to be clear, though, despite those changes, we've still pushed on with a number of things. We've talked about rebuilding the account management team. We've launched Salesforce.com into that business. We now have a single CRM, which is driving increased pipeline visibility.
We've launched a pricing initiative that I'm sure David will talk about in more detail. From a product standpoint, we have launched international data into there, building on your last question, and we see a huge amount more opportunity. From a sector perspective, we're getting focused on gaming and how we share best practice there. Un doubtedly, with a stronger, more stable team, some of these operational improvements we expect will have an increased performance lift.
Yeah. Thank you. Just lastly, very briefly, just I wonder if you can be a bit more specific about what you expect cost growth to be year on year in H2, please.
Yeah. I'm not sure we could do that today, Andrew. I think we, as I said in the presentation, I think we do expect some increasing costs across the second half versus the first half.
That's really representing some of the areas where we have been and will continue to recycle some of those savings we made. So it does largely depend on the speed of delivery of those. So yeah, but obviously, as I did say in the presentation, that's all included within our outlook for this year. So that outlook of high single-digit growth in adjusted operating profit would include that.
All right. Thanks for your answers, guys.
Thanks, Andrew.
Thank you. Our next question is from Charlie Brennan from Jefferies. Your line is now open. Please go ahead.
Thanks. Good morning, guys. Just three questions from me. Firstly, Dev, you've talked about higher ambition levels and the scope to do better. Can you actually quantify what good looks like? What are your longer-term growth ambitions for GBG as we stand today? And then two follow-up number questions. Firstly, a clarification.
David, did you say that gross margins may soften slightly in the second half of the year due to business mix? If that's the case, I thought you had a 70%-71% gross margin aspiration. Does that imply pricing pressure in the market or anything like that that we should be aware of? And then lastly, just on accrued income, you called out the two component parts of point-in-time revenue recognition and the revenues coming through your partner channel. Is there any way of stripping out the contribution from the point-in-time revenue recognition? I think most people will feel like pulled-forward revenue recognition is something that we should be aware of. Thank you.
Hi. Good morning, Charlie. And thanks for your questions. So I'll deal with the middle of your three because it's the easiest one to deal with.
No, I think you misheard me or I wasn't clear. No, we expect gross margin in the second half to be slightly higher than the first half. But the extent to which it's higher will just depend on the revenue mix. So hopefully, that takes away any concerns you may have. And actually, on pricing specifically, we've been making some really proactive moves on pricing, which at this stage are still relatively making a small contribution to both margin and NRR, but actually really quite encouraging the progress we've made there. On accrued income, yeah, thank you for the question. Somewhat expected you would ask a question on accrued income. I think we said last year that there was some increase in accrued income related to the point-in-time license recognition for fraud. Most of our fraud customers, as I said, it's really just one part of the fraud segment.
Most of the customers of that, we recognize revenue annually. It's still point-in-time at the point of renewal. But there are some customers where we recognize and actually have an agreement with those customers that spans multi-years. And so the revenue recognition standard does require us to recognize that upfront. And that goes into accrued revenue to the extent we're not yet able to bill it. So pretty standard accounting treatment. We did have some benefit from that last year. And as I said, this year, we're getting much less benefit from it, although there is always a cycle of customers on a renewal. So it's not easy for you to actually quantify it, not from the numbers. But I think you've made an estimate in your notes of £2 million last year, which is probably not too far wrong.
Then I'll hand over to Dev for a comment on the first question. Thanks, Charlie.
I think you make a good point and a good question. The drive in the business needs to be for us to all look forwards and not look backwards and raise our ambition collectively. You asked if we could quantify it. It's difficult to quantify, but maybe I'll give you a couple of anecdotes that spring to mind from our location business. These are probably things that a year ago we probably wouldn't have backed ourselves on. In the last six months, we've signed an agreement with the largest super app in Southeast Asia to partner around how we can bring more location intelligence collectively to that region. That company is called Grab. It's effectively the Uber equivalent of Southeast Asia and has access to the largest consumer market in Asia.
We're really excited about what we might be able to do with them. Secondly, we've made good progress with one of the Magnificent Seven, where, again, a year ago, we probably wouldn't have backed ourselves to be quite so front-footed in our competitive positioning. We didn't do this in the first half, but I'm delighted to say that in just after the first half, we managed to close out an agreement with them again to displace themselves in terms of their location capability. In terms of how that plays into the longer-term ambition, I think hopefully you're getting a sense that my ambition is just that, ambitious. My ambition is for us to accelerate our growth. Where that gets to, still probably too early to say. We talked just recently about uncertainty in the broader macro market, and we're still forming our view of that.
But inevitably, it means an acceleration. Can I just ask a clarification on the accrued income? David, you said there's no way of us externally being able to work out the component parts. But does any of your partner business go through the non-current accrued income line, or can we assume that the non-current is all pulled-forward revenue from multi-year deals? Thank you.
I think it would be fair to say it probably is correct, that piece. But I would say the first assertion is wrong in that actually there is a detailed point around some of how the relationships and commercial arrangements with our location channel partners work. But there will be an element of that in there. But the majority of it will be related to the fra ud business. That's true. Okay. Thank you.
And then just my last question.
I was going to say my last question on this. If we've got accrued income growing every year, is there any impact that we have to bear in mind for cash conversion going forward?
I guess the first thing I'd say, Charlie, is I think there was very little growth in accrued income in the first half of this year. That was, as we said, it was going to be. The extent that it did grow was related to some super channel partners of the location business where, in fact, it's been fantastically successful, actually, and there's been some tremendous names in there. For example, IBM and Oracle, where we are really extending our relationship with those customers. And just the commercial arrangement with them means that accrued income increases slightly. So I'm not going to apologize for that.
That is a fantastic piece of commercial win by the team, but it is something we're watching, and I don't necessarily think it was certainly the bit I think you're concerned about, which is the multi-year license piece. I'm not expecting that to increase, and as we said, we're probably at some level of peak over sort of the renewal cycles, and I'd probably expect it to moderate slightly, although it is quite difficult to predict. I think we probably should move on, Charlie. I appreciate your questions.
Yeah. Thank you.
Thanks.
Thank you. Our next question is from Kai Korschelt from Canaccord. Your line is now open. Please go ahead. Yeah. Great. Thank you. Can you hear me? I hear you fine, Kai. Yeah. Good morning. You can. Perfect. Yeah. Good morning, both. Just a couple of questions from me.
I think the first one, just to kind of follow up on the previous one around the sort of long-term growth potential. Obviously, great to see you guys return to what seems to be a stable growth rate. But I'm just wondering, what do you see as the main inhibitor to the faster growth? So I'm thinking maybe high single digits or low teens. I mean, is it pricing? Is it activity levels, volumes, or competitive pressure? I'm just trying to get a feel for, I guess, needs to happen or what we should look for to see growth accelerate. And I'm sort of thinking more next year rather than short term, perhaps. And then the second one was just around the M&A versus organic growth. You've delivered successfully now.
I'm just wondering, is there any appetite at some point to reengage with M&A or having to deal with some of the complexity and sort of sorting that out as a consequence of prior M&A? Do you perhaps feel organic growth is the way to go?
Thank you. Yeah. Good morning again, Kai. And thanks for your questions. I'll have a go at both of those, and then see if Dev wants to add anything. So on long-term growth, I think Dev talked about some of the initiatives that we've got running. I'm pretty excited about the opportunity they will give us to accelerate growth. I think if you stand back from a big picture, the elements that we think should give us confidence for why growth potential should be higher than 4.5% constant currency growth we recorded in the first half are. Firstly, we've talked a bit about Americas.
Americas is not yet at full potential. I said in the answer to an earlier question, it's back in positive territory, but so I think that clearly could make more of a contribution. We've also talked a bit about fraud. Fraud being a decline in this period is clearly not what we would expect across a longer-term horizon. So those are two things that we expect to change. And I think the third one, big picture, is macro. It continues to be a period of uncertainty, and it continues to be a period where at least some of our sectors that are focused more on the consumer continue to be pretty challenged. So I think those elements for us give us confidence that there is a higher growth rate out there for us.
But as Dev said, I think we'd prefer to stay focused on all of these initiatives and come back to you, hopefully not before too long, but come back to you with a bit of a clearer picture as to the building blocks behind future growth. On M&A, firstly, just to recognize the point you made, which is leverage is improving. We're only just now slightly north of one times EBITDA. And clearly, by the end of the year, we'd expect to be somewhere below one times. I think that gives us a lot of flexibility. But I think the first thing I'd say is, as you've heard from us today, we are very focused on the exciting organic opportunities ahead of us. I think if we think longer term, then it's a market in which M&A does probably represent an inorganic opportunity for us.
But it's not really a short-term focus for us right now. And probably expect us to talk a little bit more about that maybe next year, at least about how we think about it. That's great.
Yeah. Thank you for that.
Thank you. Thank you for the questions.
I think we may have one more. Our next question is from, yep, Julian Yates from Investec. Your line is now open. Please go ahead.
That's great. Thanks for squeezing it in. A couple of quick ones, hopefully. North America, can you tell us a little bit about what your customers are saying? We've heard about internally what's going on. There's a lot of change, obviously. What are your customers saying to that? What has attrition been like within the store base and the sort of volumes in the store base?
I'm trying to understand if you've gone through a pretty difficult period and now stability, you snap back quite quickly as that headwind subsides and the new winds you can see really coming through in the face of it, or if that environment continues maybe in terms of that sort of customer focus. Investments, R&D, trying to understand, do we need to prepare ourselves for a step up in R&D next year, year ahead? It's a fast-moving backdrop. You've alluded to some sensible innovations you're pushing through. Are you happy with where the R&D place is now past your simplification? And the incremental steps from there or will there be a requirement for a step up at some stage?
Thanks, Julian. And good morning. I think I'm going to have a go at the investment question first, and then I'll hand over to Dev.
You may want to make a comment on that and then move on to the customer question. So on R&D, it's an area that, if you remember, we did probably take our closest look at this last year. And that was really quite a significant reprioritization review. So we did quite a lot of work. We closed out some projects that had reached where they needed to get to. We've redirected resources to some of the projects that we thought were more important for us and actually continue to do so. Very pleased with the decisions we took there. So I think we are in a pretty good spot, actually. I think we feel we're investing at about the right level. There are always things that will churn into projects and out of projects.
I think that's one of the things that, when we talk about cost discipline and efficiency, is one of the areas we've continued to stay focused on. But projects are just that. A project starts and finishes, and then that frees up resources to move on to the next project. So I think at the moment, we're okay. We're certainly not signposting a step up in spend for next year. Obviously, to the extent that we get a bit more operating leverage back into the business and to the financial profile, then again, that gives us more flexibility for decisions into the future.
Then yeah, turning to Americas, it's been, I think, now seven or eight trips out there since I took the role. So I think I've got a pretty good handle on customer sentiment.
I think I should start by saying Americas clearly a very competitive market, and so we've got to earn the right to win. I feel good about where we are versus 12 months ago, but as I said, I think we've got a lot more we can achieve before we're at the levels that we both aspire to and are capable of. I think some of the things that are coming through, and maybe there's a question about attrition. Maybe, David, you can talk about NRR specific to Americas, but one of the things that we're finding from customers there is that we haven't really done the best job of explaining to them the benefit of the global proposition, and so quite often, once they've unwound the complexity that we've created, they can see the far more beneficial ways of them to work with us.
So we talked about moving to a single global brand. That means we will no longer go to market in Americas as IDology. We will be GBG. And I think we'll see some increased opportunity off the back of that. I think the other point I would say is we've just been much more focused on getting closer to customers to understand them. So I feel much better about where we're at today because it's based off data points around how customers are using us and plan to use us and what's happening in their businesses. So hopefully, that gives you a bit of color. Yeah. And just specifically on.
Do you feel on that you're losing sort of share in the sense that talking to your customers, are they going sort of else? Yeah. I guess you're not talking to ones that have already gone elsewhere.
But that's sort of the sentiment. Do you feel that that has been the case and you're winning the battle there?
No. I think what we've seen in the period that we're describing here is probably ups and downs in customers, but not in terms of customer count. We've been pretty steady and stable. And that's coming through some of the NRR analysis that we're seeing.
Thanks. Thank you.
Yeah. I think just specifically on the attrition and NRR stats. Sorry. Sorry, Julian. Just one final comment. Just specifically on the attrition and NRR stats, we're not really seeing anything different in the U.S. than we've seen elsewhere. But I would say in terms of the trends, it's just lagging a bit behind the improvement that we've seen in EMEA. So NRR for the Americas business, we don't quote that.
But I can say that it's just lagging a bit further behind. But actually, we can see where and what we need to do to be able to get it back to the levels that we're seeing elsewhere in the business.
Great. Thanks for the clarification.
Thank you. Our last question is from Gautam Pillai from Peel Hunt. The line is now open. Please go ahead.
Great. Congratulations on the results, guys. And thanks for squeezing me in. Quick two questions. First, on the NRR specifically, great to see the improvement. And you do mention that identity and location combined NRR will be close to 10 3%. So is it fair to assume that once the fraud growth normalizes, you're already close to the 10 5% seen historically? And what is the upside scenario in this metric over the long term, please?
The related question to that would be, can you give us an update on the mix of revenues between subscriptions and transactional currently? Thank you.
Yeah. Hi. Good morning, Gautam. Thanks for your question. So NRR, yeah, as I said in the presentation, actually, fraud just because of the dynamics of it, it being point-in-time recognition, or at least some of the businesses, it probably doesn't lend itself very well to the NRR KPI. And probably if we had our time again, maybe we wouldn't include that. I think NRR as a KPI makes a lot more sense for location and identity businesses. So you're absolutely correct. Stronger NRR recovery for identity and location, 112 or 126. I still think there is strong potential for that to continue to improve.
We talked to Dev and I have both talked about Americas, but we've also got lots of other initiatives, including pricing, that are ongoing that I think can continue to contribute back to that. So we're certainly not content with where that is and see further potential regardless of what fraud may contribute to that stat in the future. And then, apologies, your question on the split of revenue. I did say in the presentation that we've got 95% of our revenue is the split between consumption and subscription. That has slightly increased, and that really reflects a little bit less revenue in the last six months from hardware. As you know, we occasionally sell hardware to support the document identity business. And that has continued to be rather sluggish, with some of our customers taking longer to make some of those decisions. They're pretty big CapEx decisions.
So that has continued to be a bit of a drag on the identity number. So as a result, the increase from what we would consider recurring revenues has pushed up from 94%-95%. The breakdown of that between subscriptions and consumption hasn't really changed. But it is something we continue to look at, particularly in the identity business. You'll be aware that in location, we have a slightly higher percentage of subscriptions. And it is something we continue to look at for some of our larger and more stable customers. Actually, some level of pre-commit subscription arrangement may be a good outcome for both us and the customer. So that's something we continue to look at in key instances.
Great. Thank you so much.
Great. Thanks. Thank you. Thank you. Thank you, Richard.
Thank you. This concludes today's Q&A.
So I'll now hand back to Dev for closing remarks.
Thank you. And thanks, everybody, for your time and the keen interest in the questions today. I think just to wrap up, we're really pleased to report a clean period for the first half of the financial year. We've seen improving top-line growth that's been driven by good performance in identity and location, which taken together grew almost 7%. The cost measures of the past two years, together with continued discipline, translated into really strong operating profit for the first half. And beyond the numbers, we've made good progress on our operational focus areas. We're seeing some of that come through the results today, but we think those operational focus areas have a lot more benefit to drive. And that's what David and I are staying focused on together with the rest of the Team GBG.
Thank you all for your time, and speak to you all again soon.
This concludes today's call. You may now disconnect your lines.