GlobalData growth strategy off to a solid start

Results for Global Data (DATA) gave investors a first look at how the company is delivering on its “growth optimisation plan” launched in 2020. The aim of the plan was straightforward. Management wanted to attract new customers, increase prices and cross-sell to its existing customer base. The outcome was reasonably acceptable, although 8 per cent organic revenue growth was just below its stated aim of 10 per cent annual growth.

Despite the increased investment needed for the 2020 plan – operating costs only increased 3 per cent to £125mn. The small increases in costs was due to a “significant amount of growth and product development investment". Adjusted profit margin increased 2 percentage points to 34 per cent.

Due to the asset-light nature of the software business, which provides data analytics, cash conversion is strong at 94 per cent. This was a slight drop from last year due to the exceptional costs associated with its acquisitions. These included a drug pricing data business from IHS Markit and automotive and agribusiness information company LMC.

The acquisitions totalled £96.7m and were funded by a £124mn increase in borrowings. Net debt excluding lease liabilities therefore jumped significantly to £178mn from £58mn last year. Despite this management was still confident enough to increase the final dividend by 14 per cent.

Invoiced forward revenue was up 16 per cent which is good news for the coming year. FactSet consensus is for sales to rise to £213mn next year, which is 12.5 per cent annual growth. However, the forward PE ratio of 37.5 looks expensive just as cost inflation makes it increasingly tricky to charge higher prices to its clients. Hold.

Last IC View: Hold, 870p, 29 Jul 2019