Profits jump at GlobalData

The year 2023 was one of strong growth for GlobalData (DATA). The Aim-traded group increased organic sales by 7 per cent, which caused operating profit to jump by 32 per cent to £73.7mn. The benefits of GlobalData’s business model are on full display here: given the largely fixed cost base, profits swell rapidly as demand picks up. 

2024 also seems to be progressing well – and visibility is good given that 79 per cent of revenue comes from subscriptions. Invoiced forward revenue is up by 4 per cent while ‘visible revenue’ more broadly – which includes contracted revenue that has not yet been invoiced and sales expectations from renewing clients – is even stronger, meaning overall visibility is up 6 per cent on an underlying basis. 

Management is now targeting high single to double-digit organic revenue growth for 2024 and a 45 per cent adjusted Ebitda margin. Margins reached 41 per cent in 2023. 

Debt remains a concern for investors. Net leverage currently sits at 2.2 times, and finance costs jumped by 83 per cent to £32.2mn last year, which in turn weighed on free cash flow (GlobalData’s free cash flow conversion sank from 87 per cent to 76 per cent between 2022 and 2023).

Private equity firm Inflexion – which intends to take a 40 per cent stake in GlobalData’s healthcare business – could transform the debt pile into £184mn of net cash, however, which would be used to fuel acquisitions and internal investment. The deal has also prompted transparency improvements: from now on, the group will report on three divisions – healthcare, consumer and technology – as opposed to lumping them all into one, fairly impenetrable, sales bucket. 

Broker Panmure Gordon stressed that the Inflexion deal has not yet completed, and precise timings are vague. Even without Inflexion’s interest, however, we like GlobalData’s recurring revenue streams, proprietary data and defensive attributes. Its forward price/earnings ratio also looks reasonable at 20.4 times, given the group’s growth potential and the prices fetched by its UK and US peers. 

Last IC view: Buy, 162p, 10 Aug 2023