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GB Group's profits jump

The software group reached record levels of revenue and profit
June 30, 2020

GB Group’s (GBG) adjusted operating profit grew by around half in 2020 to £47.9m, ahead of initial market expectations. The identity data intelligence specialist reported that, for the first time, international revenues surpassed domestic, which now account for 56 per cent of the total. 

IC TIP: Hold at 657p

Despite the uncertainty caused by coronavirus, customer churn and levels of insolvency tracked at normal levels. Management did note, however, that some clients are taking longer to settle their invoices and that sales cycles are lengthening. “There are one or two solutions that absolutely have seen a negative impact irrelevant of the customer sector,” said chief executive Chris Clark, citing a weak performance in the group’s UK-based background-check solution ‘KnowYourPeople’ as fewer companies hire new employees.

But the year through to March was upbeat, with record levels of turnover and profit, as well as the highest levels of engagement for customers. The group’s three core solutions – location, identity and fraud – all delivered growth in the year. The Location solution, Loqate, won a number of new customers in Europe and the US, including big names such as Adidas (GR:ADS) and John Lewis Partnership. It has also built on its existing relationship with IBM (US:IBM), securing a five-year contract worth a minimum of $13.5m (£11m).

The group’s identity solution achieved double-digit growth across all main geographies, supported by a deal with Rank Group to install all of its technology across its UK casino estate. The Fraud solution business secured new agreements with First Abu Dhabi Bank and Volkswagen (GR:VOW), among others. 

Management cut net debt by 47 per cent (excluding lease liabilities) from last year's closing level, although it has stuck by its decision to suspend the final dividend. The group took precautionary steps in April following the coronavirus outbreak, including a company-wide pay freeze and pausing all non-essential recruitment. Guidance for the next year remains withdrawn.

Broker Numis forecasts adjusted pre-tax profits of £30.5m and EPS of 12.2p for March 2021, down from £45.7m and 19.2p in 2020. 

GB GROUP (GBG)   
ORD PRICE:657pMARKET VALUE:£ 1.28bn
TOUCH:656-700p12-MONTH HIGH:806pLOW: 465p
DIVIDEND YIELD:NILPE RATIO:75
NET ASSET VALUE:177p*NET DEBT:10.1%**
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201673.49.37.42.08
201787.510.18.22.35
201812013.47.12.65
201914414.77.72.99
202019920.68.8nil
% change+38+40+14-
Ex-div:na   
Payment:na   
*Includes intangible assets of £415m or 213p a share **Includes lease liabilities of £5.7m