GB Group on course to hit forecast, despite interim goodwill impairment charge

Interim revenues were static at GB Group, the Chester-based ID verification specialist, and the business also recorded a £57.3m pre-tax loss, against breakeven last year, its half year results to September 30, 2023, showed today.

However, it said it is pleased with the first half performance and on course to deliver forecasts for the full 2024 financial year.

It explained the pre-tax loss as an exceptional non-cash goodwill impairment charge of £54.7m, due to the use of a higher discount rate, driven by the significant increase in central bank interest rates since March 2023, as well as an unusually large foreign exchange gain of £6.3m in the prior year related to the retranslation of intercompany loans. In comparison, the FX gain this year was just £300,000.

Revenues for the period were £132.4m, slightly down from £133.8m the previous year.

Net debt fell from £132.6m last year to £104.8m for the reporting period. Current net debt is approximately £95m.

Despite the macroeconomic conditions, the board hailed a “pleasing first-half performance”.

It said identity and fraud convergence plays to the group’s significant capabilities across regions and sectors, engaging customers with differentiated identity products such as GBG Identity Score and GBG Trust, offering in-depth global identity insights to combat fraud and improve consumer onboarding.

Location is driving innovation with its global address data, deployment of a Global Store Finder tool supporting ‘click and collect’ deliveries and expansion of GB Group’s digital-first platform to 45 countries

The group said it continue to harness advanced AI and machine learning across its solutions to enhance verification accuracy and detect sophisticated fraud threats effectively.

Looking ahead, the board said it is pleased with both the strategic progress achieved and GBG’s first-half financial performance against the backdrop of the continued macroeconomic conditions.

It said its ongoing focus on simplicity and efficiency has delivered a strong profit performance in the half and underpins its FY24 profit expectations, which will benefit from stronger margins in the second half.

The second-half performance to date has been in line with expectations and GBG anticipates that FY24 revenue growth will be broadly in line with current expectations. It said the stabilisation seen in Identity supports its confidence in delivering some year-on-year Identity growth in the latter part of the year.

CEO, Chris Clark, said: “We are pleased with the first half performance, Location and Fraud delivered good growth and transaction volumes within Identity have stabilised. At the same time, our continued focus on structural efficiency savings has already achieved an annualised run-rate reduction in operating expenditure of £10m, while maintaining investment in our differentiated product portfolio.

“While the subdued macroeconomic environment may persist, we continue to expect some year-on-year Identity revenue growth in the latter part of the current year, and I am confident that our strong discipline on cost, good momentum with customer wins and high retention leave GBG very well positioned to deliver our FY24 profit expectations.”

Earlier this month the group announced that Mr Clark intends to step down after seven years in the role, to be replaced next January by Dev Dhiman, who joined the business in November 2020 as managing director, Asia Pacific.

Mr Clark added: “I am particularly pleased that Dev Dhiman will become GBG’s next CEO following my retirement in January. His understanding of our business, markets and culture has delivered excellent results leading our business in APAC and he is the right person to guide GBG through the next phase of its evolution. I wish him, and all our team members, the very best for the future.”

Alasdair Young, a broker with investment bank Panmure Gordon, said: “GBG’s interims contain little by way of surprises.

“A re-rating is still contingent on a reacceleration of growth, and there are encouraging signs here as new logo growth was four per cent, whilst net retention rates have already begun to improve.

“The headwind of cryptocurrency revenues is now all but behind GBG (one per cent run-rate). The all-important Identity division (especially the ‘Internet economy’ customers) has seen a stabilisation of transaction volumes and should see a return to growth in Q4.”