Last close As at 05/08/2026
GBP2.22
▲ 1.00 (0.45%)
Market capitalisation
GBP508m
Research: TMT
GB Group (GBG) has sold its marketing services business to HH Global Group for an undisclosed amount. This was not an area of focus for GBG and has been in managed decline for several years. Just before Christmas, GBG boosted its Fraud business with the acquisition of fraud investigation automation software from HooYu for £4m in equity. We have revised our forecasts to reflect the disposal and acquisition, leading to small upgrades to our EPS forecasts. Both deals emphasise the company’s strategy to focus on Identity, Location and Fraud.
GB Group |
Reflecting recent M&A activity |
Disposal of business |
Software & comp services |
19 January 2021 |
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) has sold its marketing services business to HH Global Group for an undisclosed amount. This was not an area of focus for GBG and has been in managed decline for several years. Just before Christmas, GBG boosted its Fraud business with the acquisition of fraud investigation automation software from HooYu for £4m in equity. We have revised our forecasts to reflect the disposal and acquisition, leading to small upgrades to our EPS forecasts. Both deals emphasise the company’s strategy to focus on Identity, Location and Fraud.
Year end |
Revenue (£m) |
EBITA* |
PBT* |
Diluted EPS* |
DPS |
P/E |
03/19 |
143.5 |
32.0 |
31.3 |
15.4 |
3.0 |
54.5 |
03/20 |
199.1 |
47.9 |
45.7 |
17.9 |
0.0 |
46.9 |
03/21e |
198.7 |
45.0 |
43.4 |
16.7 |
6.0 |
50.2 |
03/22e |
212.5 |
47.9 |
46.8 |
17.9 |
3.3 |
46.9 |
03/23e |
235.4 |
53.7 |
52.8 |
20.0 |
3.6 |
41.9 |
Note: *EBITA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Selling non-core marketing services business
GBG has sold its marketing services business to HH Global Group Limited for an undisclosed amount (we estimate minimal proceeds). GBG reported this business within Unallocated revenues – in H121 revenues were £1.5m (1.5% of group revenue) and the operating loss was £0.5m. We were factoring in a decline in revenues with a similarly declining cost base, resulting in an operating loss forecast for FY21–23 for the business. We have stripped these out of our forecasts.
Recent acquisition of fraud business
On 14 December, GBG announced that it had acquired the Investigate 2020 subsidiary of HooYu in exchange for 447k GBG shares worth £4m. The business is being integrated into the Fraud division and will be marketed as GBG Investigate. Assuming this is a start-up business, we have reflected this in the Fraud division’s cost base. Overall, we increase our normalised diluted EPS forecasts by 1.4% in FY21, 0.5% in FY22 and 0.9% in FY23.
Valuation: Premium rating reflects growth potential
GBG trades at a premium to the UK software and IT services sectors and at the upper end of its ID management peer group on a P/E basis, reflecting its strong growth outlook (post COVID-19), high recurring revenues and strong balance sheet. Our reverse DCF analysis estimates the current share price is factoring in operating margins of 22.6% and revenue growth of c 16% per year from FY24, at the upper end of the group’s revenue and margin targets. Outside of faster than expected COVID-19 recovery, triggers for upside could include successful cross-selling from recent acquisitions, adoption of GBG’s combined identity/location solution and in the medium term, accretive acquisitions.
Changes to forecasts
Exhibit 1: Changes to forecasts
£m |
FY21e |
FY22e |
FY23e |
|||||||||
Old |
New |
Change |
Y-o-y |
Old |
New |
Change |
Y-o-y |
Old |
New |
Change |
Y-o-y |
|
Revenues |
199.2 |
198.7 |
(0.2%) |
(0.2%) |
215.0 |
212.5 |
(1.1%) |
6.9% |
237.4 |
235.4 |
(0.8%) |
10.8% |
Gross profit |
143.4 |
143.1 |
(0.2%) |
(0.8%) |
154.8 |
153.0 |
(1.1%) |
6.9% |
170.9 |
169.5 |
(0.8%) |
10.8% |
Gross margin |
72.0% |
72.0% |
0.0% |
(0.4%) |
72.0% |
72.0% |
0.0% |
0.0% |
72.0% |
72.0% |
0.0% |
0.0% |
EBITDA |
48.3 |
49.0 |
1.4% |
(5.3%) |
51.7 |
52.1 |
0.8% |
6.3% |
57.3 |
58.0 |
1.2% |
11.4% |
EBITDA margin |
24.3% |
24.7% |
0.4% |
(1.3%) |
24.1% |
24.5% |
0.5% |
(0.1%) |
24.2% |
24.6% |
0.5% |
0.1% |
EBITA |
44.3 |
45.0 |
1.5% |
(6.1%) |
47.5 |
47.9 |
0.8% |
6.5% |
53.0 |
53.7 |
1.3% |
11.9% |
EBITA margin |
22.3% |
22.7% |
0.4% |
(1.4%) |
22.1% |
22.6% |
0.4% |
(0.1%) |
22.3% |
22.8% |
0.5% |
0.2% |
PBT |
42.7 |
43.4 |
1.6% |
(5.1%) |
46.4 |
46.8 |
0.9% |
8.0% |
52.1 |
52.8 |
1.3% |
12.8% |
EPS - normalised, diluted (p) |
16.5 |
16.7 |
1.4% |
(6.7%) |
17.8 |
17.9 |
0.5% |
7.1% |
19.8 |
20.0 |
0.9% |
12.0% |
EPS - reported (p) |
7.3 |
7.5 |
3.5% |
(14.4%) |
8.5 |
8.7 |
1.4% |
14.8% |
10.8 |
11.1 |
2.0% |
27.8% |
DPS (p) |
6.0 |
6.0 |
0.0% |
N/A |
3.3 |
3.3 |
0.0% |
(45.0%) |
3.6 |
3.6 |
0.0% |
9.1% |
Net debt/(cash) |
15.5 |
15.4 |
(0.5%) |
(55.5%) |
(14.0) |
(14.2) |
1.1% |
(192%) |
(47.3) |
(47.9) |
1.2% |
237.4% |
Net debt/EBITDA |
0.3 |
0.3 |
N/A |
N/A |
N/A |
N/A |
||||||
Divisional forecasts |
||||||||||||
Revenue |
||||||||||||
Identity |
115.8 |
115.8 |
0.0% |
9.8% |
125.8 |
125.8 |
0.0% |
8.7% |
139.4 |
139.4 |
0.0% |
10.8% |
Location |
50.2 |
50.2 |
0.0% |
-2.5% |
54.2 |
54.2 |
0.0% |
8.0% |
60.7 |
60.7 |
0.0% |
12.0% |
Fraud |
30.1 |
30.1 |
0.0% |
-15.1% |
32.5 |
32.5 |
0.0% |
7.7% |
35.3 |
35.3 |
0.0% |
8.8% |
Group |
199.2* |
198.7* |
(0.2%) |
-0.2% |
215.0 |
212.5 |
(1.1%) |
6.9% |
237.4 |
235.4 |
(0.8%) |
10.8% |
Adjusted operating profit |
||||||||||||
Identity |
37.2 |
37.2 |
0.0% |
10.5% |
38.1 |
38.1 |
0.0% |
2.6% |
42.2 |
42.2 |
0.0% |
10.8% |
Location |
14.3 |
14.3 |
0.0% |
-4.5% |
15.2 |
15.2 |
0.0% |
6.3% |
17.0 |
17.0 |
0.0% |
12.0% |
Fraud |
6.9 |
6.7 |
(2.6%) |
-50.2% |
9.1 |
8.4 |
(7.1%) |
26.2% |
9.9 |
9.5 |
(3.6%) |
13.0% |
Group |
44.3 |
45.0 |
1.5% |
-6.1% |
47.5 |
47.9 |
0.8% |
6.5% |
53.0 |
53.7 |
1.3% |
11.9% |
Adjusted operating margin |
||||||||||||
Identity |
32.1% |
32.1% |
30.3% |
30.3% |
30.3% |
30.3% |
||||||
Location |
28.4% |
28.4% |
28.0% |
28.0% |
28.0% |
28.0% |
||||||
Fraud |
22.8% |
22.2% |
28.0% |
26.0% |
28.0% |
27.0% |
||||||
Group |
22.3% |
22.7% |
22.1% |
22.6% |
22.3% |
22.8% |
||||||
Source: Edison Investment Research. Note: *Includes minor contributions from unallocated revenues.
Exhibit 2: Financial summary
£'000s |
2017 |
2018 |
2019 |
2020 |
2021e |
2022e |
2023e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
87,468 |
119,702 |
143,504 |
199,101 |
198,750 |
212,503 |
235,421 |
Cost of Sales |
(20,302) |
(27,092) |
(36,060) |
(54,914) |
(55,650) |
(59,501) |
(65,918) |
||
Gross Profit |
67,166 |
92,610 |
107,444 |
144,187 |
143,100 |
153,002 |
169,503 |
||
EBITDA |
|
|
18,734 |
28,741 |
34,080 |
51,739 |
49,005 |
52,100 |
58,020 |
Operating Profit (before amort. and except.) |
17,006 |
26,311 |
32,031 |
47,945 |
45,037 |
47,946 |
53,671 |
||
Acquired intangible amortisation |
(4,022) |
(7,885) |
(10,316) |
(19,008) |
(18,900) |
(18,900) |
(17,900) |
||
Exceptionals |
(1,410) |
(2,143) |
(4,003) |
(1,552) |
(93) |
0 |
0 |
||
Share of associate |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Share based payments |
(994) |
(2,375) |
(2,287) |
(4,541) |
(4,995) |
(5,495) |
(6,044) |
||
Operating Profit |
10,580 |
13,908 |
15,425 |
22,844 |
21,049 |
23,551 |
29,727 |
||
Net Interest |
(498) |
(508) |
(689) |
(2,218) |
(1,655) |
(1,105) |
(855) |
||
Profit Before Tax (norm) |
|
|
16,508 |
25,803 |
31,342 |
45,727 |
43,382 |
46,841 |
52,816 |
Profit Before Tax (FRS 3) |
|
|
10,082 |
13,400 |
14,736 |
20,626 |
19,394 |
22,446 |
28,872 |
Tax |
668 |
(2,746) |
(2,583) |
(3,562) |
(4,655) |
(5,387) |
(6,929) |
||
Profit After Tax (norm) |
13,206 |
20,642 |
24,760 |
35,210 |
32,970 |
35,599 |
40,140 |
||
Profit After Tax (FRS 3) |
10,750 |
10,654 |
12,153 |
17,064 |
14,739 |
17,059 |
21,942 |
||
Ave. Number of Shares Outstanding (m) |
131.6 |
150.6 |
158.1 |
193.6 |
195.4 |
197.1 |
198.4 |
||
EPS - normalised (p) |
|
|
10.0 |
13.7 |
15.7 |
18.2 |
16.9 |
18.1 |
20.2 |
EPS - normalised and fully diluted (p) |
|
9.9 |
13.5 |
15.4 |
17.9 |
16.7 |
17.9 |
20.0 |
|
EPS - (IFRS) (p) |
|
|
8.2 |
7.1 |
7.7 |
8.8 |
7.5 |
8.7 |
11.1 |
Dividend per share (p) |
2.4 |
2.7 |
3.0 |
0.0 |
6.0 |
3.3 |
3.6 |
||
Gross Margin (%) |
76.8 |
77.4 |
74.9 |
72.4 |
72.0 |
72.0 |
72.0 |
||
EBITDA Margin (%) |
21.4 |
24.0 |
23.7 |
26.0 |
24.7 |
24.5 |
24.6 |
||
Operating Margin (before GW and except.) (%) |
19.4 |
22.0 |
22.3 |
24.1 |
22.7 |
22.6 |
22.8 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
105,653 |
170,284 |
438,683 |
430,219 |
411,001 |
392,947 |
375,798 |
Intangible Assets |
98,753 |
161,372 |
425,646 |
414,505 |
390,981 |
371,931 |
353,881 |
||
Tangible Assets |
2,856 |
4,700 |
4,815 |
9,420 |
10,502 |
11,497 |
12,398 |
||
Other fixed assets |
4,044 |
4,212 |
8,222 |
6,294 |
9,519 |
9,519 |
9,519 |
||
Current Assets |
|
|
48,914 |
61,121 |
76,522 |
95,984 |
81,460 |
112,198 |
150,148 |
Debtors |
30,569 |
37,969 |
54,992 |
66,554 |
71,550 |
76,501 |
84,752 |
||
Cash |
17,618 |
22,753 |
21,189 |
27,499 |
4,411 |
30,198 |
59,897 |
||
Other |
727 |
399 |
341 |
1,931 |
5,499 |
5,499 |
5,499 |
||
Current Liabilities |
|
|
(44,444) |
(56,942) |
(77,030) |
(86,459) |
(86,292) |
(91,994) |
(101,089) |
Creditors |
(36,436) |
(56,100) |
(70,302) |
(80,280) |
(82,089) |
(87,791) |
(96,886) |
||
Contingent consideration |
(7,122) |
(45) |
(5,287) |
(6,179) |
(4,203) |
(4,203) |
(4,203) |
||
Short term borrowings |
(886) |
(797) |
(1,441) |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(15,940) |
(16,711) |
(116,707) |
(94,810) |
(46,413) |
(36,727) |
(26,981) |
Long term borrowings |
(11,499) |
(8,451) |
(85,447) |
(62,139) |
(19,833) |
(16,002) |
(12,002) |
||
Contingent consideration |
0 |
0 |
0 |
0 |
(458) |
(458) |
(458) |
||
Other long term liabilities |
(4,441) |
(8,260) |
(31,260) |
(32,671) |
(26,122) |
(20,267) |
(14,521) |
||
Net Assets |
|
|
94,183 |
157,752 |
321,468 |
344,934 |
359,756 |
376,424 |
397,877 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
16,305 |
31,620 |
27,779 |
48,498 |
42,844 |
52,851 |
58,864 |
Net Interest |
(498) |
(545) |
(689) |
(1,768) |
(1,454) |
(936) |
(855) |
||
Tax |
(2,193) |
(3,247) |
(2,930) |
(6,386) |
(10,412) |
(11,242) |
(12,676) |
||
Capex |
(2,227) |
(2,018) |
(1,625) |
(1,339) |
(2,900) |
(3,000) |
(3,100) |
||
Acquisitions/disposals |
(36,840) |
(70,363) |
(255,101) |
(81) |
(2,089) |
0 |
0 |
||
Financing |
24,755 |
56,668 |
157,339 |
(1,553) |
(1,037) |
(2,000) |
(2,000) |
||
Dividends |
(2,775) |
(3,582) |
(4,049) |
(5,761) |
(5,855) |
(5,886) |
(6,534) |
||
Net Cash Flow |
(3,473) |
8,533 |
(79,276) |
31,610 |
19,097 |
29,787 |
33,699 |
||
Opening net debt/(cash) |
|
|
(8,673) |
(5,233) |
(13,505) |
65,699 |
34,640 |
15,422 |
(14,196) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
33 |
(261) |
72 |
(551) |
121 |
(169) |
0 |
||
Closing net debt/(cash) |
|
|
(5,233) |
(13,505) |
65,699 |
34,640 |
15,422 |
(14,196) |
(47,895) |
Source: GB Group, Edison Investment Research
|
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