GB Group's share price fell 3p to 19p on news of its results for the six months to the end of September 2009. The difficulty was not the interim results because, on a like-for-like basis, operating profits rose from £73,000 to £245,000 when a 2008 settlement of licence arrears is ignored. The problem is the current half year because in its electronic data authentication division one of its top 10 clients has stopped selling Sim cards to youths (who needed to have their backgrounds checked), while another has reduced risk filtering by half - although GB is still undertaking that reduced workload. In contrast, e-tracing UK residents performed well in the first half and reported an operating profit of £120,000 in place of a £300,000 loss.
Unfortunately, tracing people for debt agencies and utilities is a mature business. The growth is in data authentication because 80 per cent of identity checks are still undertaken manually and GB expects a big switch to electronic identification over the next five years. So the company needs to scale-up but, unfortunately, the industry is dominated by quoted giant Experian, followed by a US-owned business and a UK private company. GB believes, however, that there are smaller fry it can snap up and that's why it's hanging onto a cash pile.
Not surprisingly, brokers are not impressed by the results announcement and have reduced full-year forecasts for adjusted profits from £1.8m to £800,000 on sales down over £2m to £21.9m. A full-year dividend of 1.15p may, however, still be paid because of the cash reserves.
GB GROUP (GBG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 19p | MARKET VALUE: | £16.3m | |
| TOUCH: | 18.5-19.5 | 12-MONTH HIGH: | 25.25p | LOW: 16.75p |
| DIVIDEND YIELD: | 6.1% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 14p* | CASH: | £4.28m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£000) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 11.7 | 521 | 0.6 | nil |
| 2009 | 10.5 | 341 | 0.4 | nil |
| % change | -10 | -35 | -33 | – |
Computer services. * Including intangible assets of £6.58m, or 8p a share. | ||||
