Last close As at 06/08/2026
GBP2.22
▲ 1.00 (0.45%)
Market capitalisation
GBP508m
Research: TMT
GB Group (GBG) expects to report revenue and adjusted operating profit for FY22 well ahead of our and consensus forecasts having seen a strong performance across all three divisions in H222. We have raised our forecasts to reflect this strength, with EPS upgrades of 5.4% for FY22, 1.9% for FY23 and 1.6% for FY24. In our view, there is a widening discrepancy between the company’s growth potential and its valuation.
GB Group |
Strong H2 performance drives upgrades |
FY22 trading update |
Software & comp services |
21 April 2022 |
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 revenue and adjusted operating profit for FY22 well ahead of our and consensus forecasts having seen a strong performance across all three divisions in H222. We have raised our forecasts to reflect this strength, with EPS upgrades of 5.4% for FY22, 1.9% for FY23 and 1.6% for FY24. In our view, there is a widening discrepancy between the company’s growth potential and its valuation.
Year end |
Revenue (£m) |
Adj. operating profit* (£m) |
PBT* |
Diluted EPS* |
DPS |
P/E |
03/20 |
199.1 |
47.9 |
45.7 |
17.9 |
0.0 |
31.9 |
03/21 |
217.7 |
57.9 |
56.7 |
22.4 |
6.4 |
25.5 |
03/22e |
242.0 |
58.0 |
56.3 |
20.5 |
3.5 |
27.8 |
03/23e |
300.5 |
72.1 |
68.9 |
20.5 |
3.6 |
27.8 |
03/24e |
336.7 |
80.7 |
78.1 |
22.8 |
3.7 |
25.1 |
Note: *Adjusted operating profit, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
H222 performance ahead of expectations
GBG expects to report FY22 revenue of £242m (versus our forecast of £234m) and adjusted operating profit of at least £58m (our forecast £55m), equating to a 24% operating margin (our forecast 23.6%). Excluding the £13m revenue contributed by Acuant (bought November 20201) and Cloudcheck (bought end January), the business saw organic constant currency revenue growth of c 10.5% in FY22. Excluding revenues related to the US stimulus programme (which made a substantial contribution in FY21 and to a lesser extent in H122), underlying revenue growth was c 15%. GBG noted that pro forma revenue for FY22 (including Acuant and Cloudcheck for 12 months) was £275m. Year-end net debt stood at £107m; the company repaid $40m of the $210m debt drawn down for the Acuant acquisition. At the time of the acquisition, GBG had identified the potential for c £5m in cost and revenue synergies combined and has already implemented £3m of this.
Upgrading estimates
GBG noted that it has limited exposure to Russia/Ukraine/Belarus (less than 0.5% of FY22 revenue). We have upgraded our forecasts to reflect the better-than-expected outturn in FY22. We also upgrade our FY23 and FY24 forecasts, factoring in revenue growth within GBG’s organic growth target of 12–14% and maintaining our 24% operating margin forecasts. This results in upgrades to our normalised diluted EPS forecasts of 5.4% for FY22, 1.9% for FY23 and 1.6% for FY24.
Valuation: Not fully capturing growth potential
GBG is trading at a small premium to identity management peers but at a discount to higher-growth, lower-profitability identity access management and cybersecurity peers. However, our reverse DCF calculates that the share price is factoring in only 4.7% revenue growth from FY25, well below the double-digit growth rate GBG has consistently achieved. Considering that Acuant is expected to grow faster than the original GBG, this appears overly conservative. Using a 12% growth rate (the lower end of management guidance) from FY25 would imply a value per share of 943p.
Changes to forecasts
Exhibit 1: Changes to forecasts
£m |
FY22e |
FY23e |
FY24e |
|||||||||
old |
new |
change |
y-o-y |
old |
new |
change |
y-o-y |
old |
new |
change |
y-o-y |
|
Revenues |
234.0 |
242.0 |
3.4% |
11.2% |
295.7 |
300.5 |
1.6% |
24.2% |
332.0 |
336.7 |
1.4% |
12.1% |
Gross profit |
168 |
174 |
3.4% |
14.2% |
212.9 |
216.4 |
1.6% |
24.2% |
239.0 |
242.5 |
1.4% |
12.1% |
Gross margin |
72.0% |
72.0% |
0.0% |
1.9% |
72.0% |
72.0% |
0.0% |
0.0% |
72.0% |
72.0% |
0.0% |
0.0% |
EBITDA |
58.8 |
61.7 |
4.8% |
0.4% |
74.7 |
76.0 |
1.7% |
23.3% |
83.6 |
84.8 |
1.4% |
11.6% |
EBITDA margin |
25.1% |
25.5% |
0.3% |
(2.7%) |
25.3% |
25.3% |
0.0% |
(0.2%) |
25.2% |
25.2% |
(0.0%) |
(0.1%) |
Adjusted operating profit |
55.1 |
58.0 |
5.2% |
0.1% |
70.8 |
72.1 |
1.8% |
24.4% |
79.5 |
80.7 |
1.5% |
11.9% |
Adjusted operating margin |
23.6% |
24.0% |
0.4% |
(2.6%) |
24.0% |
24.0% |
0.0% |
0.0% |
24.0% |
24.0% |
0.0% |
(0.0%) |
PBT |
53.5 |
56.3 |
5.3% |
(0.6%) |
67.6 |
68.9 |
1.9% |
22.4% |
76.9 |
78.1 |
1.6% |
13.3% |
EPS - normalised, diluted (p) |
19.4 |
20.5 |
5.4% |
(8.5%) |
20.1 |
20.5 |
1.9% |
(0.0%) |
22.4 |
22.8 |
1.6% |
11.1% |
EPS - reported (p) |
8.9 |
9.9 |
11.8% |
(28.1%) |
13.3 |
13.7 |
3.0% |
38.5% |
15.9 |
16.3 |
2.3% |
18.6% |
DPS (p) |
3.5 |
3.5 |
0.0% |
(45.3%) |
3.6 |
3.6 |
0.0% |
2.9% |
3.7 |
3.7 |
0.0% |
2.8% |
Net debt/(cash) |
106.6 |
107.4 |
0.8% |
N/A |
59.0 |
58.2 |
(1.4%) |
(45.8%) |
8.2 |
6.1 |
(25.6%) |
(89.5%) |
Net debt/EBITDA (x) |
1.8 |
1.7 |
0.8 |
0.8 |
0.1 |
0.1 |
||||||
Divisional forecasts |
||||||||||||
Revenue |
||||||||||||
Identity |
135.6 |
138.7 |
2.3% |
8.3% |
189.8 |
189.8 |
0.0% |
36.9% |
216.9 |
215.5 |
(0.6%) |
13.5% |
Location |
66.2 |
70.4 |
6.3% |
18.0% |
71.5 |
75.7 |
5.8% |
7.5% |
78.0 |
83.3 |
6.8% |
10.0% |
Fraud |
32.1 |
32.9 |
2.3% |
15.6% |
34.3 |
35.0 |
2.0% |
6.5% |
37.1 |
38.0 |
2.4% |
8.5% |
Group |
234.0 |
242.0 |
3.4% |
11.2% |
295.7 |
300.5 |
1.6% |
24.2% |
332.0 |
336.7 |
1.4% |
12.1% |
Adjusted operating profit |
||||||||||||
Identity |
53.8 |
54.9 |
2.0% |
14.9% |
68.9 |
68.7 |
(0.3%) |
25.2% |
78.1 |
77.6 |
(0.7%) |
12.9% |
Location |
23.2 |
24.7 |
6.6% |
26.9% |
24.3 |
26.0 |
6.7% |
5.0% |
25.7 |
27.7 |
7.8% |
6.8% |
Fraud |
9.6 |
9.9 |
2.3% |
85.0% |
10.3 |
10.2 |
(1.4%) |
3.0% |
10.4 |
10.6 |
2.4% |
4.7% |
Other |
-31.5 |
-31.5 |
0.0% |
-32.7 |
-32.7 |
0.0% |
-34.7 |
-35.2 |
1.4% |
|||
Group |
55.1 |
58.0 |
5.2% |
0.1% |
70.8 |
72.1 |
1.8% |
24.4% |
79.5 |
80.7 |
1.5% |
11.9% |
Adjusted operating margin |
||||||||||||
Identity |
39.7% |
39.6% |
36.3% |
36.2% |
36.0% |
36.0% |
||||||
Location |
35.0% |
35.1% |
34.0% |
34.3% |
33.0% |
33.3% |
||||||
Fraud |
30.0% |
30.0% |
30.0% |
29.0% |
28.0% |
28.0% |
||||||
Group |
23.6% |
24.0% |
24.0% |
24.0% |
24.0% |
24.0% |
||||||
Source: Edison Investment Research
Exhibit 2: Financial summary
£'000s |
2017 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
||
March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||||
Revenue |
|
|
87,468 |
119,702 |
143,504 |
199,101 |
217,659 |
241,999 |
300,520 |
336,742 |
Cost of Sales |
(20,302) |
(27,092) |
(36,060) |
(54,914) |
(65,096) |
(67,760) |
(84,146) |
(94,288) |
||
Gross Profit |
67,166 |
92,610 |
107,444 |
144,187 |
152,563 |
174,239 |
216,374 |
242,454 |
||
EBITDA |
|
|
18,734 |
28,741 |
34,080 |
51,739 |
61,410 |
61,650 |
76,016 |
84,814 |
Operating Profit (before amort. and except.) |
17,006 |
26,311 |
32,031 |
47,945 |
57,896 |
57,966 |
72,126 |
80,741 |
||
Acquired intangible amortisation |
(4,022) |
(7,885) |
(10,316) |
(19,008) |
(17,671) |
(18,500) |
(18,500) |
(18,500) |
||
Exceptionals |
(1,410) |
(2,143) |
(4,003) |
(1,552) |
448 |
(5,000) |
0 |
0 |
||
Share of associate |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Share based payments |
(994) |
(2,375) |
(2,287) |
(4,541) |
(5,170) |
(5,687) |
(6,256) |
(6,881) |
||
Operating Profit |
10,580 |
13,908 |
15,425 |
22,844 |
35,503 |
28,779 |
47,370 |
55,360 |
||
Net Interest |
(498) |
(508) |
(689) |
(2,218) |
(1,240) |
(1,648) |
(3,205) |
(2,666) |
||
Profit Before Tax (norm) |
|
|
16,508 |
25,803 |
31,342 |
45,727 |
56,656 |
56,318 |
68,921 |
78,075 |
Profit Before Tax (FRS 3) |
|
|
10,082 |
13,400 |
14,736 |
20,626 |
34,263 |
27,131 |
44,165 |
52,694 |
Tax |
668 |
(2,746) |
(2,583) |
(3,562) |
(7,385) |
(5,848) |
(9,519) |
(11,358) |
||
Profit After Tax (norm) |
13,206 |
20,642 |
24,760 |
35,210 |
44,481 |
45,054 |
52,380 |
58,556 |
||
Profit After Tax (FRS 3) |
10,750 |
10,654 |
12,153 |
17,064 |
26,878 |
21,283 |
34,646 |
41,336 |
||
Ave. Number of Shares Outstanding (m) |
131.6 |
150.6 |
158.1 |
193.6 |
195.2 |
215.0 |
252.6 |
254.1 |
||
EPS - normalised (p) |
|
|
10.0 |
13.7 |
15.7 |
18.2 |
22.8 |
21.0 |
20.7 |
23.0 |
EPS - normalised and fully diluted (p) |
|
9.9 |
13.5 |
15.4 |
17.9 |
22.4 |
20.5 |
20.5 |
22.8 |
|
EPS - (IFRS) (p) |
|
|
8.2 |
7.1 |
7.7 |
8.8 |
13.8 |
9.9 |
13.7 |
16.3 |
Dividend per share (p) |
2.4 |
2.7 |
3.0 |
0.0 |
6.4 |
3.5 |
3.6 |
3.7 |
||
Gross Margin (%) |
76.8 |
77.4 |
74.9 |
72.4 |
70.1 |
72.0 |
72.0 |
72.0 |
||
EBITDA Margin (%) |
21.4 |
24.0 |
23.7 |
26.0 |
28.2 |
25.5 |
25.3 |
25.2 |
||
Operating Margin (before GW and except.) (%) |
19.4 |
22.0 |
22.3 |
24.1 |
26.6 |
24.0 |
24.0 |
24.0 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
105,653 |
170,284 |
438,683 |
430,219 |
394,564 |
934,994 |
918,486 |
902,071 |
Intangible Assets |
98,753 |
161,372 |
425,646 |
414,505 |
377,663 |
916,163 |
897,713 |
879,313 |
||
Tangible Assets |
2,856 |
4,700 |
4,815 |
9,420 |
6,937 |
8,867 |
10,809 |
12,794 |
||
Other fixed assets |
4,044 |
4,212 |
8,222 |
6,294 |
9,964 |
9,964 |
9,964 |
9,964 |
||
Current Assets |
|
|
48,914 |
61,121 |
76,522 |
95,984 |
85,653 |
109,242 |
144,216 |
176,102 |
Debtors |
30,569 |
37,969 |
54,992 |
66,554 |
58,617 |
65,340 |
81,140 |
90,920 |
||
Cash |
17,618 |
22,753 |
21,189 |
27,499 |
21,135 |
38,002 |
57,175 |
79,281 |
||
Other |
727 |
399 |
341 |
1,931 |
5,901 |
5,901 |
5,901 |
5,901 |
||
Current Liabilities |
|
|
(44,444) |
(56,942) |
(77,030) |
(86,459) |
(90,000) |
(102,310) |
(125,712) |
(140,247) |
Creditors |
(36,436) |
(56,100) |
(70,302) |
(80,280) |
(86,338) |
(98,558) |
(121,960) |
(136,495) |
||
Contingent consideration |
(7,122) |
(45) |
(5,287) |
(6,179) |
(3,662) |
(3,752) |
(3,752) |
(3,752) |
||
Short term borrowings |
(886) |
(797) |
(1,441) |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(15,940) |
(16,711) |
(116,707) |
(94,810) |
(25,961) |
(165,916) |
(128,894) |
(90,733) |
Long term borrowings |
(11,499) |
(8,451) |
(85,447) |
(62,139) |
0 |
(145,370) |
(115,370) |
(85,370) |
||
Contingent consideration |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(4,441) |
(8,260) |
(31,260) |
(32,671) |
(25,961) |
(20,545) |
(13,523) |
(5,362) |
||
Net Assets |
|
|
94,183 |
157,752 |
321,468 |
344,934 |
364,256 |
776,011 |
808,097 |
847,193 |
CASH FLOW |
||||||||||
Operating Cash Flow |
|
|
16,305 |
31,620 |
27,779 |
48,498 |
72,631 |
62,370 |
83,618 |
89,569 |
Net Interest |
(498) |
(545) |
(689) |
(1,768) |
(1,211) |
(1,641) |
(3,205) |
(2,666) |
||
Tax |
(2,193) |
(3,247) |
(2,930) |
(6,386) |
(14,205) |
(11,264) |
(16,541) |
(19,519) |
||
Capex |
(2,227) |
(2,018) |
(1,625) |
(1,339) |
(738) |
(3,250) |
(3,400) |
(3,550) |
||
Acquisitions/disposals |
(36,840) |
(70,363) |
(255,101) |
(81) |
2,545 |
(466,000) |
0 |
0 |
||
Financing |
24,755 |
56,668 |
157,339 |
(1,553) |
3,476 |
297,635 |
(2,483) |
(2,607) |
||
Dividends |
(2,775) |
(3,582) |
(4,049) |
(5,761) |
(5,883) |
(6,677) |
(8,815) |
(9,121) |
||
Net Cash Flow |
(3,473) |
8,533 |
(79,276) |
31,610 |
56,615 |
(128,826) |
49,174 |
52,106 |
||
Opening net debt/(cash) |
|
|
(8,673) |
(5,233) |
(13,505) |
65,699 |
34,640 |
(21,135) |
107,369 |
58,195 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
33 |
(261) |
72 |
(551) |
(840) |
322 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(5,233) |
(13,505) |
65,699 |
34,640 |
(21,135) |
107,369 |
58,195 |
6,089 |
Source: GB Group, Edison Investment Research
|
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Research: Industrials
Strong H2 trading – especially in South Africa – causes us to raise our Norcros FY22 estimates to new record levels. Management anticipates further progress in FY23. We make only mix changes to our EBIT forecasts beyond FY22 at this stage. Ahead of the FY22 results, valuation multiples are already attractive in our view.