Last close As at 06/08/2026
GBP2.22
▲ 1.00 (0.45%)
Market capitalisation
GBP508m
Research: TMT
GB Group (GBG) expects to report strong revenue and profit growth for H120, with exceptional organic growth boosted by recent acquisitions. Constant currency organic growth of 18% is ahead of the company’s double-digit target, boosted to a large extent by the signing of contracts in the Fraud division that had been expected in H2. Management expects to meet FY20 consensus estimates, implying a stronger weighting to H1 revenues and profits than in previous years. We maintain our forecasts.
GB Group |
FY20 outlook confirmed |
H120 trading update |
Software & comp services |
25 October 2019 |
Share price performance
Business description
Next events
Analyst
GB Group is a research client of Edison Investment Research Limited |
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GB Group (GBG) expects to report strong revenue and profit growth for H120, with exceptional organic growth boosted by recent acquisitions. Constant currency organic growth of 18% is ahead of the company’s double-digit target, boosted to a large extent by the signing of contracts in the Fraud division that had been expected in H2. Management expects to meet FY20 consensus estimates, implying a stronger weighting to H1 revenues and profits than in previous years. We maintain our forecasts.
Year end |
Revenue (£m) |
EBIT* |
PBT* |
Diluted EPS* |
DPS |
P/E (x) |
03/18 |
119.7 |
26.3 |
25.8 |
13.5 |
2.7 |
44.7 |
03/19 |
143.5 |
32.0 |
31.3 |
15.4 |
3.0 |
39.1 |
03/20e |
192.6 |
44.0 |
40.7 |
16.4 |
3.4 |
36.6 |
03/21e |
213.9 |
48.4 |
45.5 |
18.4 |
3.8 |
32.8 |
Note: *EBIT, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Impressive revenue and profit growth in H120
GBG expects to report H120 revenues of £93.7m, equating to year-on-year growth of 64%. Stripping out the impact of currency and the Vix Verify (October 2018) and IDology (February 2019) acquisitions, organic revenues were 18% higher. Management noted that GBG achieved organic growth in each of its three core products and across all target geographies. Expected adjusted operating profit of £20.9m is 138% higher y-o-y with a margin of 22.3% (FY20e 22.9%). The company reduced net debt from £65.7m at the end of FY19 to £53.8m at the end of H120.
Full-year expectations maintained
Management expects to achieve consensus expectations for FY20 revenues (£195.5m) and profit (£45.0m), noting that H1 benefited from contracts in the Fraud division that were pulled forward from H2 to H1. H120 revenues make up 48.7% of our FY20e forecast, compared to 40%/44%/43% contributions to full year revenues in H119/18/17 respectively, reflecting the accelerated signing of these contracts.
Valuation: Factoring in strong, profitable growth
The stock responded strongly to this update (+14% on the day), returning to the level it was trading at after the Identity capital markets day in July. The stock trades at a premium to the UK software sector and towards the top end of its ID management peer group on a P/E basis, reflecting its strong growth outlook and high recurring revenues. Our reverse DCF analysis estimates the current share price is factoring in operating margins of c 24.5% and revenue growth of c 13% pa from FY23, slightly ahead of the group’s revenue and margin targets. Triggers for upside from the current share price could include accretive acquisitions, successful cross-selling from recent acquisitions and adoption of GBG’s combined identity/location solution.
Exhibit 1: Financial summary
£'000s |
2015 |
2016 |
2017 |
2018 |
2019 |
2020e |
2021e |
2022e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||||
Revenue |
|
|
57,283 |
73,401 |
87,468 |
119,702 |
143,504 |
192,626 |
213,889 |
237,321 |
Cost of Sales |
(16,448) |
(17,606) |
(20,302) |
(27,092) |
(36,060) |
(52,164) |
(55,707) |
(61,765) |
||
Gross Profit |
40,835 |
55,795 |
67,166 |
92,610 |
107,444 |
140,462 |
158,182 |
175,556 |
||
EBITDA |
|
|
11,844 |
14,772 |
18,734 |
28,741 |
34,080 |
46,241 |
50,662 |
55,352 |
Operating Profit (before amort. and except.) |
10,790 |
13,428 |
17,006 |
26,311 |
32,031 |
44,020 |
48,355 |
52,955 |
||
Acquired intangible amortisation |
(1,986) |
(2,501) |
(4,022) |
(7,885) |
(10,316) |
(19,300) |
(17,100) |
(16,500) |
||
Exceptionals |
(1,629) |
(94) |
(1,410) |
(2,143) |
(4,003) |
0 |
0 |
0 |
||
Share of associate |
(10) |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Share based payments |
(971) |
(1,245) |
(994) |
(2,375) |
(2,287) |
(2,516) |
(2,767) |
(3,044) |
||
Operating Profit |
6,194 |
9,588 |
10,580 |
13,908 |
15,425 |
22,204 |
28,487 |
33,411 |
||
Net Interest |
(266) |
(270) |
(498) |
(508) |
(689) |
(3,280) |
(2,880) |
(2,580) |
||
Profit Before Tax (norm) |
|
|
10,524 |
13,158 |
16,508 |
25,803 |
31,342 |
40,740 |
45,475 |
50,375 |
Profit Before Tax (FRS 3) |
|
|
5,928 |
9,318 |
10,082 |
13,400 |
14,736 |
18,924 |
25,607 |
30,831 |
Tax |
(1,127) |
(178) |
668 |
(2,746) |
(2,583) |
(3,974) |
(5,378) |
(6,474) |
||
Profit After Tax (norm) |
8,314 |
10,395 |
13,206 |
20,642 |
24,760 |
32,184 |
35,925 |
39,796 |
||
Profit After Tax (FRS 3) |
4,801 |
9,140 |
10,750 |
10,654 |
12,153 |
14,950 |
20,230 |
24,356 |
||
Average Number of Shares Outstanding (m) |
119.1 |
122.7 |
131.6 |
150.6 |
158.1 |
193.1 |
193.5 |
194.0 |
||
EPS - normalised (p) |
|
|
7.0 |
8.5 |
10.0 |
13.7 |
15.7 |
16.7 |
18.6 |
20.5 |
EPS - normalised and fully diluted (p) |
|
6.7 |
8.2 |
9.9 |
13.5 |
15.4 |
16.4 |
18.4 |
20.3 |
|
EPS - (IFRS) (p) |
|
|
4.0 |
7.4 |
8.2 |
7.1 |
7.7 |
7.7 |
10.5 |
12.6 |
Dividend per share (p) |
1.9 |
2.1 |
2.4 |
2.7 |
3.0 |
3.4 |
3.8 |
4.3 |
||
Gross Margin (%) |
71.3 |
76.0 |
76.8 |
77.4 |
74.9 |
72.9 |
74.0 |
74.0 |
||
EBITDA Margin (%) |
20.7 |
20.1 |
21.4 |
24.0 |
23.7 |
24.0 |
23.7 |
23.3 |
||
Operating Margin (before GW and except.) (%) |
18.8 |
18.3 |
19.4 |
22.0 |
22.3 |
22.9 |
22.6 |
22.3 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
51,238 |
59,364 |
105,653 |
170,284 |
435,195 |
416,474 |
399,967 |
384,069 |
Intangible Assets |
45,296 |
54,113 |
98,753 |
161,372 |
421,747 |
402,047 |
384,547 |
367,647 |
||
Tangible Assets |
2,829 |
2,234 |
2,856 |
4,700 |
4,815 |
5,794 |
6,787 |
7,789 |
||
Other fixed assets |
3,113 |
3,017 |
4,044 |
4,212 |
8,633 |
8,633 |
8,633 |
8,633 |
||
Current Assets |
|
|
33,186 |
36,189 |
48,914 |
61,121 |
76,404 |
112,767 |
147,458 |
186,187 |
Debtors |
17,408 |
23,774 |
30,569 |
37,969 |
54,874 |
73,198 |
81,278 |
90,182 |
||
Cash |
15,778 |
12,415 |
17,618 |
22,753 |
21,189 |
39,228 |
65,839 |
95,664 |
||
Other |
0 |
0 |
727 |
399 |
341 |
341 |
341 |
341 |
||
Current Liabilities |
|
|
(30,784) |
(32,559) |
(44,444) |
(56,942) |
(73,432) |
(89,375) |
(95,062) |
(101,824) |
Creditors |
(24,305) |
(30,927) |
(36,436) |
(56,100) |
(71,912) |
(87,855) |
(93,542) |
(100,304) |
||
Contingent consideration |
(5,733) |
(1,050) |
(7,122) |
(45) |
(79) |
(79) |
(79) |
(79) |
||
Short term borrowings |
(746) |
(582) |
(886) |
(797) |
(1,441) |
(1,441) |
(1,441) |
(1,441) |
||
Long Term Liabilities |
|
|
(7,506) |
(6,593) |
(15,940) |
(16,711) |
(114,995) |
(104,995) |
(100,995) |
(96,995) |
Long term borrowings |
(3,643) |
(3,160) |
(11,499) |
(8,451) |
(85,447) |
(75,447) |
(71,447) |
(67,447) |
||
Contingent consideration |
(895) |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(2,968) |
(3,433) |
(4,441) |
(8,260) |
(29,548) |
(29,548) |
(29,548) |
(29,548) |
||
Net Assets |
|
|
46,134 |
56,401 |
94,183 |
157,752 |
323,172 |
334,871 |
351,367 |
371,437 |
CASH FLOW |
||||||||||
Operating Cash Flow |
|
|
11,684 |
13,397 |
16,305 |
31,620 |
27,779 |
43,859 |
48,269 |
53,211 |
Net Interest |
(266) |
(282) |
(498) |
(545) |
(720) |
(3,280) |
(2,880) |
(2,580) |
||
Tax |
(337) |
(248) |
(2,193) |
(3,247) |
(2,930) |
(3,974) |
(5,378) |
(6,474) |
||
Capex |
(2,011) |
(1,762) |
(2,227) |
(2,018) |
(1,625) |
(2,800) |
(2,900) |
(3,000) |
||
Acquisitions/disposals |
(18,672) |
(12,263) |
(36,840) |
(70,363) |
(255,101) |
0 |
0 |
0 |
||
Financing |
10,954 |
790 |
24,755 |
56,668 |
157,339 |
0 |
0 |
0 |
||
Dividends |
(1,955) |
(2,277) |
(2,775) |
(3,582) |
(4,049) |
(5,766) |
(6,501) |
(7,331) |
||
Net Cash Flow |
(603) |
(2,645) |
(3,473) |
8,533 |
(79,307) |
28,039 |
30,611 |
33,825 |
||
Opening net debt/(cash) |
|
|
(11,846) |
(11,389) |
(8,673) |
(5,233) |
(13,505) |
65,699 |
37,660 |
7,049 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
146 |
(71) |
33 |
(261) |
103 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(11,389) |
(8,673) |
(5,233) |
(13,505) |
65,699 |
37,660 |
7,049 |
(26,776) |
Source: GB Group, Edison Investment Research
|
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