Last close As at 07/08/2026
GBP2.22
▲ 1.00 (0.45%)
Market capitalisation
GBP508m
Research: TMT
GB Group expects to report FY19 revenues, adjusted operating profit and net debt ahead of consensus expectations. The recent acquisitions have integrated and performed well, providing much of the upside to forecasts. We have upgraded our FY19 earnings forecasts to reflect the better trading performance in H2 and lower net debt in FY20 and FY21.
GB Group |
International expansion drives strong H2 |
FY19 trading update |
Software & comp services |
17 April 2019 |
Share price performance
Business description
Next events
Analysts
GB Group is a research client of Edison Investment Research Limited |
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GB Group expects to report FY19 revenues, adjusted operating profit and net debt ahead of consensus expectations. The recent acquisitions have integrated and performed well, providing much of the upside to forecasts. We have upgraded our FY19 earnings forecasts to reflect the better trading performance in H2 and lower net debt in FY20 and FY21.
Year end |
Revenue (£m) |
EBIT* (£m) |
PBT* |
Diluted EPS* |
DPS |
P/E |
03/17 |
87.5 |
17.0 |
16.5 |
9.9 |
2.4 |
55.7 |
03/18 |
119.7 |
26.3 |
25.8 |
13.5 |
2.7 |
40.8 |
03/19e |
143.3 |
31.7 |
30.8 |
15.1 |
3.0 |
36.2 |
03/20e |
192.8 |
44.1 |
40.3 |
16.1 |
3.3 |
34.1 |
Note: *EBIT, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY19 ahead of expectations
GB Group’s year-end trading update confirmed that the business saw strong trading in H219 to finish the year ahead of our and consensus expectations for revenue and adjusted operating profit. Revenues grew 19.7% y-o-y to £143.3m, 4.1% ahead of our £137.7m forecast. Adjusting revenues to reflect the perpetual licence signed in FY18 and for constant currency, underlying organic revenue growth was 11.3%. Adjusted operating profit of £31.7m (22.1% margin) is 15% ahead of our £27.5m forecast (20.0% margin). Net debt was also better than forecast, closing the year at £66.3m versus our £71.6m estimate.
Upgrading FY19e EPS by 15.8%
Based on the underlying organic growth rate disclosed by GBG, we estimate that the bulk of the revenue upside came from acquisitions. We had been conservative with our H219 estimates, reflecting potential integration risk. We have revised our forecasts to reflect better than expected contributions from Vix Verify and IDology resulting in a better overall operating margin. We leave our FY20 and FY21 EPS forecasts unchanged at this point as we have already factored in growth in acquisition-based revenues and organic growth similar to FY19. We reduce our FY20 and FY21 net debt forecasts to reflect the better position at the end of FY19.
Valuation: Factoring in strong growth
On an FY20e EV/EBITDA multiple of 24.0x and P/E multiple of 34.1x, the stock trades at a premium to the UK software sector. Looking at more directly relevant sub-sectors, including global peers, the stock trades more in line with cyber-security peers, with similar levels of forecast profitability and growth. We believe this premium rating is warranted, considering the group’s historical track record of profitable growth and strong cash generation, combined with the opportunity from structural growth in identity data intelligence services and the potential for accretive acquisitions.
Changes to forecasts
Exhibit 1: Changes to estimates
£m |
FY19e |
FY19e |
|
FY20e |
FY20e |
|
FY21e |
FY21e |
|
|
old |
new |
change |
old |
new |
change |
old |
new |
change |
||
Revenues |
137.7 |
143.3 |
4.1% |
192.8 |
192.8 |
0.0% |
214.3 |
214.4 |
0.0% |
|
Gross profit |
104.1 |
109.2 |
4.9% |
140.5 |
140.6 |
0.0% |
158.4 |
158.5 |
0.1% |
|
EBITDA |
30.2 |
34.4 |
13.9% |
46.9 |
46.9 |
0.0% |
51.4 |
51.4 |
0.0% |
|
EBITDA margin |
21.9% |
24.0% |
2.1% |
24.3% |
24.3% |
0.0% |
24.0% |
24.0% |
0.0% |
|
EBITA |
27.5 |
31.7 |
15.3% |
44.1 |
44.1 |
0.0% |
48.5 |
48.5 |
0.0% |
|
EBITA margin |
20.0% |
22.1% |
2.1% |
22.9% |
22.9% |
0.0% |
22.6% |
22.6% |
0.0% |
|
PBT |
26.6 |
30.8 |
15.8% |
40.3 |
40.3 |
0.0% |
45.0 |
45.0 |
0.0% |
|
EPS – normalised, diluted (p) |
13.1 |
15.1 |
15.8% |
16.1 |
16.1 |
0.0% |
17.9 |
17.9 |
0.0% |
|
EPS – reported (p) |
3.1 |
5.2 |
67.7% |
12.2 |
12.2 |
0.0% |
14.4 |
14.4 |
0.0% |
|
Net debt |
71.6 |
66.3 |
-7.3% |
47.9 |
42.7 |
-10.9% |
22.4 |
16.9 |
-24.3% |
|
Net debt/EBITDA (x) |
2.4 |
1.9 |
1.0 |
0.9 |
0.4 |
0.3 |
||||
Source: Edison Investment Research
Exhibit 2: Financial summary
£000s |
2015 |
2016 |
2017 |
2018 |
2019e |
2020e |
2021e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
57,283 |
73,401 |
87,468 |
119,702 |
143,300 |
192,754 |
214,354 |
Cost of Sales |
(16,448) |
(17,606) |
(20,302) |
(27,092) |
(34,057) |
(52,200) |
(55,824) |
||
Gross Profit |
40,835 |
55,795 |
67,166 |
92,610 |
109,243 |
140,554 |
158,530 |
||
EBITDA |
|
|
11,844 |
14,772 |
18,734 |
28,741 |
34,375 |
46,919 |
51,429 |
Operating Profit (before amort. and except.) |
10,790 |
13,428 |
17,006 |
26,311 |
31,700 |
44,062 |
48,481 |
||
Acquired intangible amortisation |
(1,986) |
(2,501) |
(4,022) |
(7,885) |
(8,100) |
(7,300) |
(6,100) |
||
Exceptionals |
(1,629) |
(94) |
(1,410) |
(2,143) |
(9,830) |
0 |
0 |
||
Share of associate |
(10) |
0 |
0 |
0 |
0 |
0 |
0 |
||
Share based payments |
(971) |
(1,245) |
(994) |
(2,375) |
(2,500) |
(2,750) |
(3,025) |
||
Operating Profit |
6,194 |
9,588 |
10,580 |
13,908 |
11,270 |
34,012 |
39,356 |
||
Net Interest |
(266) |
(270) |
(498) |
(508) |
(863) |
(3,780) |
(3,480) |
||
Profit Before Tax (norm) |
|
|
10,524 |
13,158 |
16,508 |
25,803 |
30,838 |
40,282 |
45,001 |
Profit Before Tax (FRS 3) |
|
|
5,928 |
9,318 |
10,082 |
13,400 |
10,408 |
30,232 |
35,876 |
Tax |
(1,127) |
(178) |
668 |
(2,746) |
(2,165) |
(6,591) |
(7,893) |
||
Profit After Tax (norm) |
8,314 |
10,395 |
13,206 |
20,642 |
24,423 |
31,501 |
35,101 |
||
Profit After Tax (FRS 3) |
4,801 |
9,140 |
10,750 |
10,654 |
8,243 |
23,641 |
27,984 |
||
Average Number of Shares Outstanding (m) |
119.1 |
122.7 |
131.6 |
150.6 |
157.8 |
193.2 |
193.9 |
||
EPS - normalised (p) |
|
|
7.0 |
8.5 |
10.0 |
13.7 |
15.5 |
16.3 |
18.1 |
EPS - normalised and fully diluted (p) |
|
6.7 |
8.2 |
9.9 |
13.5 |
15.1 |
16.1 |
17.9 |
|
EPS - (IFRS) (p) |
|
|
4.0 |
7.4 |
8.2 |
7.1 |
5.2 |
12.2 |
14.4 |
Dividend per share (p) |
1.9 |
2.1 |
2.4 |
2.7 |
3.0 |
3.3 |
3.8 |
||
Gross Margin (%) |
71.3 |
76.0 |
76.8 |
77.4 |
76.2 |
72.9 |
74.0 |
||
EBITDA Margin (%) |
20.7 |
20.1 |
21.4 |
24.0 |
24.0 |
24.3 |
24.0 |
||
Operating Margin (before GW and except.) (%) |
18.8 |
18.3 |
19.4 |
22.0 |
22.1 |
22.9 |
22.6 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
51,238 |
59,364 |
105,653 |
170,284 |
416,823 |
409,416 |
403,218 |
Intangible Assets |
45,296 |
54,113 |
98,753 |
161,372 |
406,955 |
398,675 |
391,595 |
||
Tangible Assets |
2,829 |
2,234 |
2,856 |
4,700 |
5,656 |
6,529 |
7,411 |
||
Other fixed assets |
3,113 |
3,017 |
4,044 |
4,212 |
4,212 |
4,212 |
4,212 |
||
Current Assets |
|
|
33,186 |
36,189 |
48,914 |
61,121 |
81,795 |
114,463 |
143,073 |
Debtors |
17,408 |
23,774 |
30,569 |
37,969 |
48,487 |
61,481 |
68,370 |
||
Cash |
15,778 |
12,415 |
17,618 |
22,753 |
32,909 |
52,584 |
74,304 |
||
Other |
0 |
0 |
727 |
399 |
399 |
399 |
399 |
||
Current Liabilities |
|
|
(30,784) |
(32,559) |
(44,444) |
(56,942) |
(67,015) |
(75,609) |
(77,474) |
Creditors |
(24,305) |
(30,927) |
(36,436) |
(56,100) |
(66,218) |
(74,812) |
(76,677) |
||
Contingent consideration |
(5,733) |
(1,050) |
(7,122) |
(45) |
0 |
0 |
0 |
||
Short term borrowings |
(746) |
(582) |
(886) |
(797) |
(797) |
(797) |
(797) |
||
Long Term Liabilities |
|
|
(7,506) |
(6,593) |
(15,940) |
(16,711) |
(106,711) |
(102,711) |
(98,711) |
Long term borrowings |
(3,643) |
(3,160) |
(11,499) |
(8,451) |
(98,451) |
(94,451) |
(90,451) |
||
Contingent consideration |
(895) |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(2,968) |
(3,433) |
(4,441) |
(8,260) |
(8,260) |
(8,260) |
(8,260) |
||
Net Assets |
|
|
46,134 |
56,401 |
94,183 |
157,752 |
324,892 |
345,559 |
370,106 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
11,684 |
13,397 |
16,305 |
31,620 |
24,145 |
42,519 |
46,405 |
Net Interest |
(266) |
(282) |
(498) |
(545) |
(863) |
(3,780) |
(3,480) |
||
Tax |
(337) |
(248) |
(2,193) |
(3,247) |
(2,165) |
(6,591) |
(7,893) |
||
Capex |
(2,011) |
(1,762) |
(2,227) |
(2,018) |
(2,650) |
(2,750) |
(2,850) |
||
Acquisitions/disposals |
(18,672) |
(12,263) |
(36,840) |
(70,363) |
(254,708) |
0 |
0 |
||
Financing |
10,954 |
790 |
24,755 |
56,668 |
160,446 |
0 |
0 |
||
Dividends |
(1,955) |
(2,277) |
(2,775) |
(3,582) |
(4,049) |
(5,724) |
(6,462) |
||
Net Cash Flow |
(603) |
(2,645) |
(3,473) |
8,533 |
(79,844) |
23,674 |
25,720 |
||
Opening net debt/(cash) |
|
|
(11,846) |
(11,389) |
(8,673) |
(5,233) |
(13,505) |
66,339 |
42,664 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
146 |
(71) |
33 |
(261) |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(11,389) |
(8,673) |
(5,233) |
(13,505) |
66,339 |
42,664 |
16,944 |
Source: GB Group, Edison Investment Research
|
|
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