Last close As at 05/08/2026
GBP2.22
▲ 1.00 (0.45%)
Market capitalisation
GBP508m
Research: TMT
GB Group (GBG) expects to report underlying revenue growth of 10% y-o-y for H121, with a one-off contract in the US making a material contribution to revenues. Combined with strict cost control this resulted in adjusted operating profit growth of 26% y-o-y and a £32m h-o-h reduction in net debt. With management guidance for revenue well ahead of our and consensus forecasts for FY21, we have upgraded our revenue and EPS forecasts for FY21–23. Despite COVID-19 related pressure on new business in the short-term, we view GBG as well placed to benefit from the accelerated shift in the digitalisation of business processes.
GB Group |
Resilient H1 performance drives upgrades |
H121 trading update |
Software & comp services |
22 October 2020 |
Share price performance
Business description
Next events
Analyst
GB Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
GB Group (GBG) expects to report underlying revenue growth of 10% y-o-y for H121, with a one-off contract in the US making a material contribution to revenues. Combined with strict cost control this resulted in adjusted operating profit growth of 26% y-o-y and a £32m h-o-h reduction in net debt. With management guidance for revenue well ahead of our and consensus forecasts for FY21, we have upgraded our revenue and EPS forecasts for FY21–23. Despite COVID-19 related pressure on new business in the short-term, we view GBG as well placed to benefit from the accelerated shift in the digitalisation of business processes.
Year end |
Revenue (£m) |
EBITA* |
PBT* |
Diluted EPS* |
DPS |
P/E |
03/19 |
143.5 |
32.0 |
31.3 |
15.4 |
3.0 |
56.6 |
03/20 |
199.1 |
47.9 |
45.7 |
17.9 |
0.0 |
48.7 |
03/21e |
199.2 |
44.4 |
42.2 |
16.3 |
6.0 |
53.5 |
03/22e |
213.2 |
46.9 |
45.2 |
17.3 |
3.3 |
50.3 |
03/23e |
234.7 |
51.7 |
50.1 |
19.1 |
3.6 |
45.7 |
Note: *EBITA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
H121 trading better than expected
GBG expects to report H121 revenue of £103m, up 9% y-o-y and up 10% on an organic constant currency basis. The company benefited from a one-off contract in the US Identity business, which is not expected to contribute materially in H221. Adjusted operating profit for H121 is expected to be c £27m, up 26% y-o-y. The adjusted operating margin of c 26% is ahead of the 24.1% FY20 margin. Net debt reduced from £35.0m at the end of FY20 to £2.7m at the end of H121. GBG intends to declare a 3p interim dividend when it reports H121 results and will pay out director bonuses that were accrued in FY20 but deferred to preserve cash.
Positive guidance; estimates upgraded
Management expects full year revenue to be flat to marginally ahead of FY20, which is ahead of consensus (£178.6m per GBG website). We have upgraded our forecasts to reflect the strong performance in H1, which results in normalised EPS upgrades of 47% in FY21e, 21% in FY22e and 12% in FY23e. Although GBG usually only pays one dividend a year, we have assumed it also pays a final dividend this year to compensate for the lack of dividend in FY20.
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 23.7% and revenue growth of c 16% per year from FY24, at the upper end of the group’s revenue and margin targets. Outside of 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 |
176.5 |
199.2 |
12.8% |
0.0% |
189.3 |
213.2 |
12.7% |
7.1% |
208.2 |
234.7 |
12.8% |
10.1% |
Gross profit |
128.3 |
144.8 |
12.8% |
0.4% |
138.2 |
153.5 |
11.1% |
6.0% |
152.0 |
169.0 |
11.2% |
10.1% |
Gross margin |
72.7% |
72.7% |
0.0% |
0.3% |
73.0% |
72.0% |
(1.0%) |
(0.7%) |
73.0% |
72.0% |
(1.0%) |
0.0% |
EBITDA |
34.8 |
48.4 |
38.9% |
(6.5%) |
43.0 |
51.1 |
19.0% |
5.7% |
50.5 |
56.1 |
11.0% |
9.8% |
EBITDA margin |
19.7% |
24.3% |
4.6% |
(1.7%) |
22.7% |
24.0% |
1.3% |
(0.3%) |
24.3% |
23.9% |
(0.4%) |
(0.1%) |
EBITA |
30.8 |
44.4 |
44.0% |
(7.4%) |
38.8 |
46.9 |
21.1% |
5.7% |
46.2 |
51.7 |
12.1% |
10.2% |
EBITA margin |
17.5% |
22.3% |
4.8% |
(1.8%) |
20.5% |
22.0% |
1.5% |
(0.3%) |
22.2% |
22.0% |
(0.1%) |
0.0% |
PBT, normalised |
28.7 |
42.2 |
47.3% |
(7.6%) |
37.0 |
45.2 |
22.1% |
7.0% |
44.5 |
50.1 |
12.5% |
10.8% |
EPS - normalised, diluted (p) |
11.1 |
16.3 |
46.9% |
(9.0%) |
14.3 |
17.3 |
21.4% |
6.4% |
17.1 |
19.1 |
11.6% |
10.1% |
EPS - reported (p) |
1.9 |
7.1 |
282.4% |
(18.9%) |
4.9 |
8.1 |
63.7% |
12.8% |
8.0 |
10.1 |
26.1% |
24.8% |
DPS (p) |
2.0 |
6.0 |
200.0% |
N/A |
2.6 |
3.3 |
26.9% |
(45.0%) |
3.2 |
3.6 |
12.5% |
9.1% |
213.2 |
12.7% |
7.1% |
||||||||||
Net debt/(cash) |
13.2 |
12.0 |
(8.8%) |
(65.2%) |
(8.1) |
(16.6) |
104.9% |
(238.0%) |
(35.4) |
(48.6) |
37.2% |
192.1% |
Net debt/EBITDA |
0.4 |
0.2 |
N/A |
N/A |
N/A |
N/A |
||||||
Divisional forecasts |
||||||||||||
Revenue |
||||||||||||
Identity |
91.9 |
113.3 |
23.2% |
7.5% |
99.8 |
122.3 |
22.6% |
7.9% |
110.5 |
135.5 |
22.6% |
10.8% |
Location |
43.8 |
45.8 |
4.5% |
-8.0% |
47.3 |
49.5 |
4.5% |
8.0% |
53.0 |
55.4 |
4.5% |
12.0% |
Fraud |
34.4 |
33.8 |
(1.9%) |
-4.8% |
37.2 |
36.5 |
(1.9%) |
7.9% |
40.6 |
39.8 |
(2.0%) |
9.2% |
Group |
176.5 |
199.2 |
12.8% |
0.0% |
189.3 |
213.2 |
12.7% |
7.1% |
208.2 |
234.7 |
12.8% |
10.1% |
Adjusted operating profit |
||||||||||||
Identity |
22.1 |
35.9 |
62.5% |
6.6% |
27.4 |
37.0 |
35.0% |
3.3% |
32.1 |
41.0 |
28.1% |
10.8% |
Location |
11.2 |
11.2 |
0.3% |
-23.0% |
13.7 |
13.9 |
0.9% |
23.7% |
15.9 |
15.5 |
(2.4%) |
12.0% |
Fraud |
9.3 |
8.9 |
(3.8%) |
-33.5% |
10.8 |
10.2 |
(5.3%) |
14.2% |
12.2 |
11.1 |
(8.5%) |
9.2% |
Group |
30.8 |
44.4 |
44.0% |
-7.4% |
38.8 |
46.9 |
21.1% |
5.7% |
46.2 |
51.7 |
12.1% |
10.2% |
Adjusted operating margin |
||||||||||||
Identity |
24.0% |
31.7% |
27.5% |
30.3% |
29.0% |
30.3% |
||||||
Location |
25.5% |
24.5% |
29.0% |
28.0% |
30.0% |
28.0% |
||||||
Fraud |
27.0% |
26.5% |
29.0% |
28.0% |
30.0% |
28.0% |
||||||
Group |
17.5% |
22.3% |
20.5% |
22.0% |
22.2% |
22.0% |
||||||
Source: Edison Investment Research
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 |
199,158 |
213,242 |
234,719 |
Cost of Sales |
(20,302) |
(27,092) |
(36,060) |
(54,914) |
(54,370) |
(59,708) |
(65,721) |
||
Gross Profit |
67,166 |
92,610 |
107,444 |
144,187 |
144,788 |
153,535 |
168,998 |
||
EBITDA |
|
|
18,734 |
28,741 |
34,080 |
51,739 |
48,385 |
51,127 |
56,118 |
Operating Profit (before amort. and except.) |
17,006 |
26,311 |
32,031 |
47,945 |
44,395 |
46,947 |
51,739 |
||
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) |
0 |
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 |
20,500 |
22,552 |
27,795 |
||
Net Interest |
(498) |
(508) |
(689) |
(2,218) |
(2,155) |
(1,730) |
(1,630) |
||
Profit Before Tax (norm) |
|
|
16,508 |
25,803 |
31,342 |
45,727 |
42,240 |
45,217 |
50,109 |
Profit Before Tax (FRS 3) |
|
|
10,082 |
13,400 |
14,736 |
20,626 |
18,345 |
20,822 |
26,165 |
Tax |
668 |
(2,746) |
(2,583) |
(3,562) |
(4,403) |
(4,997) |
(6,280) |
||
Profit After Tax (norm) |
13,206 |
20,642 |
24,760 |
35,210 |
32,102 |
34,365 |
38,083 |
||
Profit After Tax (FRS 3) |
10,750 |
10,654 |
12,153 |
17,064 |
13,942 |
15,825 |
19,885 |
||
Ave. Number of Shares Outstanding (m) |
131.6 |
150.6 |
158.1 |
193.6 |
195.1 |
196.4 |
197.7 |
||
EPS - normalised (p) |
|
|
10.0 |
13.7 |
15.7 |
18.2 |
16.5 |
17.5 |
19.3 |
EPS - normalised and fully diluted (p) |
|
9.9 |
13.5 |
15.4 |
17.9 |
16.3 |
17.3 |
19.1 |
|
EPS - (IFRS) (p) |
|
|
8.2 |
7.1 |
7.7 |
8.8 |
7.1 |
8.1 |
10.1 |
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 |
72.7 |
72.0 |
72.0 |
||
EBITDA Margin (%) |
21.4 |
24.0 |
23.7 |
26.0 |
24.3 |
24.0 |
23.9 |
||
Operating Margin (before GW and except.) (%) |
19.4 |
22.0 |
22.3 |
24.1 |
22.3 |
22.0 |
22.0 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
105,653 |
170,284 |
438,683 |
430,219 |
412,229 |
394,148 |
376,969 |
Intangible Assets |
98,753 |
161,372 |
425,646 |
414,505 |
395,505 |
376,505 |
358,505 |
||
Tangible Assets |
2,856 |
4,700 |
4,815 |
9,420 |
10,430 |
11,349 |
12,170 |
||
Other fixed assets |
4,044 |
4,212 |
8,222 |
6,294 |
6,294 |
6,294 |
6,294 |
||
Current Assets |
|
|
48,914 |
61,121 |
76,522 |
95,984 |
113,717 |
143,467 |
179,139 |
Debtors |
30,569 |
37,969 |
54,992 |
66,554 |
71,697 |
76,767 |
84,499 |
||
Cash |
17,618 |
22,753 |
21,189 |
27,499 |
40,089 |
64,769 |
92,710 |
||
Other |
727 |
399 |
341 |
1,931 |
1,931 |
1,931 |
1,931 |
||
Current Liabilities |
|
|
(44,444) |
(56,942) |
(77,030) |
(86,459) |
(88,854) |
(94,923) |
(103,743) |
Creditors |
(36,436) |
(56,100) |
(70,302) |
(80,280) |
(82,675) |
(88,744) |
(97,564) |
||
Contingent consideration |
(7,122) |
(45) |
(5,287) |
(6,179) |
(6,179) |
(6,179) |
(6,179) |
||
Short term borrowings |
(886) |
(797) |
(1,441) |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(15,940) |
(16,711) |
(116,707) |
(94,810) |
(79,075) |
(69,220) |
(59,474) |
Long term borrowings |
(11,499) |
(8,451) |
(85,447) |
(62,139) |
(52,139) |
(48,139) |
(44,139) |
||
Contingent consideration |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(4,441) |
(8,260) |
(31,260) |
(32,671) |
(26,936) |
(21,081) |
(15,335) |
||
Net Assets |
|
|
94,183 |
157,752 |
321,468 |
344,934 |
358,016 |
373,472 |
392,892 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
16,305 |
31,620 |
27,779 |
48,498 |
45,638 |
52,125 |
57,206 |
Net Interest |
(498) |
(545) |
(689) |
(1,768) |
(2,155) |
(1,730) |
(1,630) |
||
Tax |
(2,193) |
(3,247) |
(2,930) |
(6,386) |
(10,138) |
(10,852) |
(12,026) |
||
Capex |
(2,227) |
(2,018) |
(1,625) |
(1,339) |
(2,900) |
(3,000) |
(3,100) |
||
Acquisitions/disposals |
(36,840) |
(70,363) |
(255,101) |
(81) |
0 |
0 |
0 |
||
Financing |
24,755 |
56,668 |
157,339 |
(1,553) |
(2,000) |
(2,000) |
(2,000) |
||
Dividends |
(2,775) |
(3,582) |
(4,049) |
(5,761) |
(5,855) |
(5,864) |
(6,509) |
||
Net Cash Flow |
(3,473) |
8,533 |
(79,276) |
31,610 |
22,590 |
28,679 |
31,941 |
||
Opening net debt/(cash) |
|
|
(8,673) |
(5,233) |
(13,505) |
65,699 |
34,640 |
12,050 |
(16,630) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
33 |
(261) |
72 |
(551) |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(5,233) |
(13,505) |
65,699 |
34,640 |
12,050 |
(16,630) |
(48,571) |
Source: GB Group, Edison Investment Research
|
|
Research: Investment Companies
Aberdeen Latin American Income Fund (ALAI) is managed by Aberdeen Standard Investments’ (ASI’s) global emerging markets equities and emerging market debt teams, providing exposure to both Latin American equities and government debt. The company’s relative performance came under pressure during the coronavirus-led market sell-off earlier in 2020, but is now showing signs of improvement. ALAI’s managers are constructive on the outlook for Latin America over the next 12 months, expecting considerable economic improvement from the Q220 weakness due to the COVID-19 lockdowns, helped by unprecedented monetary and fiscal stimulus in the region.