Buoyant GB Group confident of beating analysts’ forecasts

Dev Dhiman

Chester-based ID verification specialist, GB Group, said its adjusted operating profit for the year is expected to be slightly ahead of the top end of current analyst expectations of £60.2m, with a range of £58.8m to £61m.

In a trading update today for the year to March 31, 2024,the board said it was pleased with the group’s performance and expects to report revenue of £277.3m – a circa 2.7% improvement on constant currency basis – driven by growth accelerating in Identity during the fourth quarter as anticipated.

As anticipated, improved fourth quarter growth of approximately five per cent on a constant currency basis was primarily driven by an acceleration in Identity, as a result of improving trends in the Americas and EMEA.

Growth in Location remained solid, while growth in sales of software licenses in Fraud slowed following two years of higher growth.

Strong cash generation in the second half has reduced net debt to around £81m, which was better than current analyst expectations.

Looking to fiscal year 2025, the group expects mid single digit revenue growth on a constant currency basis, which will drive high single digit growth in adjusted operating profit, as a result of the operational efficiency gains achieved in 2024.

CEO, Dev Dhiman, said: “I am proud of our achievements during FY24 reflecting the focus and effort of the entire GBG team. While continuing to support our customers around the world, we have also improved our ability to drive profitable growth by driving simplification throughout the business.

“We have begun the new financial year with good operational momentum, and our confidence in FY25 is underpinned by the group’s strong fourth quarter performance. By prioritising competitive differentiation and a high performance culture, we will ensure GBG capitalises on the exciting market opportunity presented by an increasingly digital world.”

The group expects to publish its annual accounts on Tuesday, June 11, 2024.

Alasdair Young, an analyst with investment bank Panmure Gordon, retained his ‘Buy’ call on GB’s shares after this morning’s update.

He said: “GBG’s trading update is positive. Aided by a combination of softer comps and improving net retention rates, growth has reaccelerated to five per cent in Q4, while profits and cash are slightly ahead of expectations.

“We also point to a better-than-expected mix, with the all-important Identity division returning to growth offsetting some weakness in Fraud – a trade we are more than willing to make.

“Notwithstanding a poor year and overpaying for Acuant at the top of the Tech cycle – we continue to see a high likelihood of additional write-downs – we believe GB Group remains a good company, and today’s update hints at early signs of a reacceleration.

“Contrary to market concerns, we do not believe the business is losing market share (slowdown driven by a reduction in upsell as opposed to increasing customer churn). With a blue-chip client base, bid activity shouldn’t be ruled out either.”

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