Last close As at 06/08/2026
GBP2.22
▲ 1.00 (0.45%)
Market capitalisation
GBP508m
Research: TMT
Headline revenue growth of 19% reflects a full half contribution of ID Scan and a pickup in organic growth to 12% across the year driven by the excellent performance from the higher margin international services. The mix effects of this growth resulted in EBIT of £17m, 4% ahead of our forecasts, and a 1.1pp improvement in the operating margin.
Written by
GB Group |
Pickup in H2 organic growth as expected |
Trading update |
Software & comp services |
20 April 2017 |
Share price performance
Business description
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Headline revenue growth of 19% reflects a full half contribution of ID Scan and a pickup in organic growth to 12% across the year driven by the excellent performance from the higher margin international services. The mix effects of this growth resulted in EBIT of £17m, 4% ahead of our forecasts, and a 1.1pp improvement in the operating margin.
Year end |
Revenue (£m) |
EBIT* |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/16 |
73.4 |
13.4 |
13.2 |
8.2 |
2.1 |
38.4 |
0.7 |
03/17e |
89.0 (87.5**) |
16.6 (17.0**) |
15.9 |
9.4 |
2.2 |
33.5 |
0.7 |
03/18e |
105.0 |
19.6 |
19.0 |
10.6 |
2.5 |
29.7 |
0.8 |
03/19e |
118.1 |
22.9 |
22.3 |
12.1 |
2.8 |
26.0 |
0.9 |
Note: *EBIT, PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Reported or implied by trading statement.
FY17 operating profits ahead
GBG’s trading update indicates revenue grew by 19% in FY17 with underlying organic growth for the period of 12% (adjusted for revenue in FY16 related to the recovery of start-up costs from Gov.uk/verify), which implies a slight pick-up in organic growth in the second half (11% organic growth reported in H117). While the revenue growth rate was slightly behind our forecast (21%), operating profits of £17m were ahead of our £16.6m forecast. The operating margin was up 1.1pp y-o-y to 19.4%, which is ahead of our forecast of 18.6% and despite the £2m investment into Gov.uk/verify services, due to an excellent performance of the higher margin international services.
Strong growth from international operations
The strong growth in international markets was driven in particular by the ID verification and fraud management services (+26%) as well as the address intelligence services (Loqate, 41% growth) and ID Scan, acquired in July 2016, which is performing in line with expectations. However, as in H117, the ID engagement solutions continue to underperform and the group has launched a review of this service.
Valuation: Premium P/E justified by performance
We will review our revenue-margin mix following publication of the full year results on 6 June; we do not expect to make any material changes at the operating level for FY18e. GBG is in a strong position; it reported net cash of £5.2m at the year end and has access to a £50m credit facility, the market for data and capabilities remains fragmented internationally and GBG has a good track record in making earnings accretive acquisitions. On an FY18 (March) P/E of 30x, dropping to 26x in FY19, the group’s strong growth prospects are already being reflected to a degree. However, the rating is in line with the wider cyber security peer set and we believe it is justified by the consistently strong organic performance, while the prospect of further earnings enhancing acquisitions could drive further upside.
Exhibit 1: Financial summary
£000s |
2014 |
2015 |
2016 |
2017e |
2018e |
2019e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
41,835 |
57,283 |
73,401 |
89,000 |
105,000 |
118,125 |
Cost of Sales |
(14,473) |
(16,448) |
(17,606) |
(20,888) |
(17,246) |
(18,553) |
||
Gross Profit |
27,362 |
40,835 |
55,795 |
68,112 |
87,754 |
99,572 |
||
EBITDA |
|
|
7,849 |
11,844 |
14,772 |
18,774 |
22,300 |
25,975 |
Operating Profit (before amort. and except.) |
7,164 |
10,790 |
13,428 |
16,574 |
19,600 |
22,900 |
||
Acquired intangible amortisation |
(1,110) |
(1,986) |
(2,501) |
(2,540) |
(2,540) |
(2,540) |
||
Exceptionals |
(1,080) |
(1,629) |
(94) |
(1,200) |
0 |
0 |
||
Share of associate |
(159) |
(10) |
0 |
0 |
0 |
0 |
||
Share based payments |
(747) |
(971) |
(1,245) |
(1,600) |
(1,700) |
(1,699) |
||
Operating Profit |
4,068 |
6,194 |
9,588 |
11,234 |
15,360 |
18,661 |
||
Net Interest |
(79) |
(266) |
(270) |
(657) |
(592) |
(592) |
||
Profit Before Tax (norm) |
|
|
7,085 |
10,524 |
13,158 |
15,917 |
19,008 |
22,308 |
Profit Before Tax (FRS 3) |
|
|
3,989 |
5,928 |
9,318 |
10,577 |
14,768 |
18,069 |
Tax |
(474) |
(1,127) |
(178) |
(3,502) |
(4,182) |
(4,908) |
||
Profit After Tax (norm) |
5,597 |
8,314 |
10,395 |
12,416 |
14,636 |
16,954 |
||
Profit After Tax (FRS 3) |
3,515 |
4,801 |
9,140 |
7,076 |
10,586 |
13,161 |
||
Average Number of Shares Outstanding (m) |
109.6 |
119.1 |
122.7 |
127.8 |
133.0 |
133.6 |
||
EPS - normalised (p) |
|
|
5.1 |
7.0 |
8.5 |
9.7 |
11.0 |
12.7 |
EPS - normalised and fully diluted (p) |
|
4.8 |
6.7 |
8.2 |
9.4 |
10.6 |
12.1 |
|
EPS - (IFRS) (p) |
|
|
3.2 |
4.0 |
7.4 |
5.5 |
8.0 |
9.9 |
Dividend per share (p) |
1.7 |
1.9 |
2.1 |
2.2 |
2.5 |
2.8 |
||
Gross Margin (%) |
65.4 |
71.3 |
76.0 |
76.5 |
83.6 |
84.3 |
||
EBITDA Margin (%) |
18.8 |
20.7 |
20.1 |
21.1 |
21.2 |
22.0 |
||
Operating Margin (before GW and except.) (%) |
17.1 |
18.8 |
18.3 |
18.6 |
18.7 |
19.4 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
26,985 |
51,238 |
59,364 |
94,424 |
99,484 |
96,319 |
Intangible Assets |
23,329 |
45,296 |
54,113 |
88,573 |
93,883 |
91,193 |
||
Tangible Assets |
1,519 |
2,829 |
2,234 |
2,834 |
2,584 |
2,109 |
||
Other fixed assets |
2,137 |
3,113 |
3,017 |
3,017 |
3,017 |
3,017 |
||
Current Assets |
|
|
23,775 |
33,186 |
36,189 |
52,471 |
59,200 |
78,879 |
Debtors |
11,929 |
17,408 |
23,774 |
35,536 |
43,251 |
50,663 |
||
Cash |
11,846 |
15,778 |
12,415 |
16,935 |
15,949 |
28,216 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(17,861) |
(30,784) |
(32,559) |
(41,621) |
(46,836) |
(51,748) |
Creditors |
(17,861) |
(24,305) |
(30,927) |
(39,989) |
(45,204) |
(50,116) |
||
Contingent consideration |
0 |
(5,733) |
(1,050) |
(1,050) |
(1,050) |
(1,050) |
||
Short term borrowings |
0 |
(746) |
(582) |
(582) |
(582) |
(582) |
||
Long Term Liabilities |
|
|
(2,066) |
(7,506) |
(6,593) |
(17,751) |
(14,851) |
(14,851) |
Long term borrowings |
0 |
(3,643) |
(3,160) |
(14,318) |
(11,418) |
(11,418) |
||
Contingent consideration |
0 |
(895) |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(2,066) |
(2,968) |
(3,433) |
(3,433) |
(3,433) |
(3,433) |
||
Net Assets |
|
|
30,833 |
46,134 |
56,401 |
87,523 |
96,997 |
108,599 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
9,355 |
11,684 |
13,397 |
14,874 |
19,800 |
23,475 |
Net Interest |
(79) |
(266) |
(282) |
(657) |
(592) |
(592) |
||
Tax |
65 |
(337) |
(248) |
(3,502) |
(4,182) |
(4,908) |
||
Capex |
(1,144) |
(2,011) |
(1,762) |
(2,700) |
(2,300) |
(2,450) |
||
Acquisitions/disposals |
(1,443) |
(18,672) |
(12,263) |
(37,100) |
(8,000) |
0 |
||
Financing |
416 |
10,954 |
790 |
25,000 |
0 |
0 |
||
Dividends |
(1,632) |
(1,955) |
(2,277) |
(2,553) |
(2,812) |
(3,258) |
||
Net Cash Flow |
5,538 |
(603) |
(2,645) |
(6,638) |
1,914 |
12,267 |
||
Opening net debt/(cash) |
|
|
(6,308) |
(11,846) |
(11,389) |
(8,673) |
(2,035) |
(3,949) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
146 |
(71) |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(11,846) |
(11,389) |
(8,673) |
(2,035) |
(3,949) |
(16,216) |
Source: GB Group (historics), Edison Investment Research (forecasts)
|
|
Research: Energy & Resources
SDX Energy has grown significantly over the past 12 months. To some degree, the full year results of 24 March 2017 are less relevant as an indicator of current operations of the company. The January acquisition of Circle Oil’s Moroccan and Egyptian assets and current drilling of South Disouq stand to add to the production assets of Meseda and North West Gemsa, from which SDX produced 2.1kboe/d in 2016. SDX is in good health, holding $18m in cash as of March and has material new cash flows from the Moroccan gas production. Newsflow from South Disouq will remain the near-term catalyst and could be transformational if successful. We have adjusted our valuation, leaving an updated full NAV of 57p/share.