The share price of GB (GBG) reflects a substantial degree of goodwill – in every sense. The identity and data intelligence specialist delivered half-year adjusted operating profit of £10.4m, a doubling of the 2016 half-year comparative. Despite this, the share price was largely unmoved, although given the 89 per cent increase over the past 12 months, it seems investors have already bought into the group’s growth story.
That narrative is bound up with the rise of digitalised global commerce and the inherent security and financial risks that it poses. So investors will take encouragement from the 36 per cent increase in international revenue, including £3.5m from the sale of a perpetual licence to a leading European bank. This global development reflects the influence of acquired assets, notably fraud detection outfit GBG DecTech, and it’s been given added impetus through the May deal to acquire address validation service PCA Predict.
The group’s international reach has been enhanced through new business wins from the likes of LEGO and KBC Ireland, while closer to home the group’s services are now being employed by NFU Mutual and Sky. Performance has been encouraging across Asia-Pacific and EMEA, but strong opportunities are arising in the US, according to analysis from investment house Berenberg, “where the combination of PCA Predict and GBG’s existing technologies has resulted in opportunities with a number of leading US-based fashion retailers”.
Geographies aside, performance has also benefited from improved quality of earnings; a trend has been established whereby earnings are being supported by an increased proportion of higher-margin products in the business mix.
A 68 per cent increase in the level of intangible assets and £3.8m in amortisation charges provide testament to the level of M&A activity, but the balance sheet remains in good trim, with deferred revenue up 53 per cent and a net cash inflow of £9.9m at the operating level, against £3.6m at the 2016 half year.
Peel Hunt gives adjusted profit of £22.5m for the March 2018 year-end, leading to EPS of 11.9p, against £16.5m and 12.8p in FY2017.
| GB (GBG) | ||||
| ORD PRICE: | 424p | MARKET VALUE: | £647m | |
| TOUCH: | 424-425p | 12-MONTH HIGH: | 458p | LOW: 228p |
| DIVIDEND YIELD: | 0.6% | PE RATIO: | 48 | |
| NET ASSET VALUE: | 98p* | NET CASH: | £4.1m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 37.5 | 1.6 | 1.0 | nil |
| 2017 | 52.6 | 3.5 | 1.6 | nil |
| % change | +40 | +125 | +60 | - |
| Ex-div: | - | |||
| Payment: | - | |||
| *Includes intangible assets of £168m, or 110p a share | ||||
