REG - GB Group PLC - Half-year trading update

GBAnnouncement

20/10/2022 07:01

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RNS Number : 4582D  GB Group PLC  20 October 2022

 Embargoed until 7.00 a.m.  Thursday, 20 October 2022

GB GROUP PLC

("GBG", "Group" or the "Company")

Half-year trading update

·      Growth in revenue and adjusted operating profit, despite tough H1
comparators driven by cryptocurrency volumes last year

·      Full year expectations remain unchanged despite macro-economic
uncertainty; assisted by FX benefits

·      Continued good progress with Acuant integration, delivering an
acceleration in our solutions alongside planned cost and revenue synergies

·      Planned new year capital markets event will expand on our
enhanced capabilities and our strategy to capitalise on the structural
opportunity in our markets

GBG, (AIM: GBG) the experts in digital location, identity verification and
fraud software, provides an update on its trading performance for the six
months to 30 September 2022, ahead of releasing its half-year results on
Tuesday, 29 November 2022.

Overview and performance update

The Group expects to report first half revenue of £133.8 million(1) (1H FY22:
£109.2 million), representing growth of approximately 22.5%. Growth in the
half year included contributions from the recently acquired Acuant and
Cloudcheck businesses. This more than offsets a tough prior period comparative
that included a c.£8.8 million benefit from unusually high and non-repeating
transaction volumes driven by the US stimulus project and cryptocurrency
trading.

On a pro forma basis(2), which for H1 FY22 includes the pre-acquisition
revenue but excludes the non-repeating revenue noted above, growth in the
current period was approximately 10%. H1 FY23 has experienced volatile foreign
currency movements, particularly pound sterling versus the US dollar. This
caused a favourable effect on the translation of GBG's significant US dollar
denominated revenue, contributing approximately 6.5% to the reported
period-on-period pro forma revenue growth.

Our Location and Fraud segments both performed well with double-digit constant
currency growth. In Location, successful cross-sell/up-sell initiatives and
increased pricing compensated for lower volumes seen from some eCommerce
customers. In Fraud we gained new customers and secured important renewals in
APAC and EMEA. There is good momentum in these segments as we enter the second
half.

Our Identity segment was particularly impacted by the reduction in activity
from cryptocurrency and 'gig-economy' fintech customers in the Americas.
Cryptocurrency revenues normalised from the prior year's exceptional levels,
but at lower volumes than we had expected, and we anticipate this impact will
continue in the second half. Our wider regions and sectors continued to
perform well, and we are encouraged by the pipeline of opportunities to offset
this impact over the next six months.

We are pleased with our progress to integrate Acuant. Although revenue
comparatives are impacted in the period by its own exposure to the reduction
in cryptocurrency and fintech volumes, Acuant has enabled cross sell to
existing GBG customers and has a good pipeline of new opportunities to support
its growth in H2. Our teams have worked at pace to realise the anticipated
product and technology benefits throughout the group and as previously
announced we have delivered all planned cost synergies. By combining our US
sales teams, we are now driving efficiency and accelerating entry into new
market segments and expect to see the early benefits of this approach in the
second half. Encouraging cross sell opportunities for Acuant products are also
being pursued in both APAC and EMEA.

Operating profit

We continue to make disciplined investment in the business to maintain our
market leading position and to capitalise on the significant long term growth
opportunities. The Group's adjusted operating profit margin in the first half
is expected to be approximately 21%. We expect that the margin will improve in
the second half of the year as revenues are traditionally stronger and we
close some of the significant opportunities in our pipeline.

 

Balance sheet

GBG has a strong cash generative business model and this has enabled further
repayment against the $210 million of debt drawn to finance the Acuant
acquisition. Total repayments of $45 million have now been made resulting in
an outstanding balance of $165 million. However, on a sterling basis, net debt
at 30 September 2022 increased to £132.6 million, reflecting a £22.2 million
retranslation impact since the year end from the conversion of the US dollar
denominated debt into pound sterling. The first half also saw the impact of
the £9.6 million dividend payment and £2.5 million used for on-market share
purchases related to a newly created Employee Benefit Trust. We will continue
to use our strong cash generation to paydown debt in the second half of the
year.

Outlook

The Board remains positive about the long-term prospects for GBG. The ongoing
digitalisation of global economies continues to drive demand for digital
identity and fraud solutions, despite periodic softness in subsectors such as
fintech and cryptocurrency. The Group's strategy to create global capability
that can be adapted to localised regulatory environments has been enhanced by
the addition of Acuant's globally relevant products.  This model will allow
GBG to deploy products quickly and generate significant upsell and cross-sell
opportunities across the geographies we operate in.

As we look forward to the second half of the year, which typically sees a
greater revenue weighting, growth is expected to accelerate as we execute our
strong pipeline of new business across our diverse geographic footprint and
customer sectors. Despite the macroeconomic conditions the Board's expectation
for the full year remains unchanged and, given the long-term structural growth
drivers at work in our markets, the Board remains highly confident in the
long-term opportunities ahead.

Chris Clark, GBG's CEO, commented:

"I am proud of the way that the GBG team have delivered excellent service and
support for our customers despite the challenging economic backdrop over the
past six months.

Good progress has been made against our long-term growth strategy, which
continues to focus on bringing together our market-leading Location, Identity
and Fraud solutions to address the needs of the digital world. We are pleased
with how Acuant has strengthened our competitive positioning and customer
proposition and remain confident it will make a valuable contribution going
forward.

GBG has evolved as a business over the past eighteen months and is now one of
the world's leading pure-play identity software providers. Details will be
shared at our half year results in November for a Capital Markets event that
will take place early in 2023 for investors and analysts. The event will
include an update on Acuant and further detail on how we are capitalising on
the structural growth opportunities in front of us."

Notes

(1))1H FY23 reported revenue impacted by a £1.1 million deferred revenue
'haircut', a required acquisition accounting adjustment related to the
purchase of Acuant.(

2)) 1H FY22 pro forma underlying revenue of £122.2 million consists of
£109.2 million reported revenue, £21.8 million of net revenue from M&A,
less c.£8.8 million of non-repeating revenue which includes £1.8 million of
exceptional cryptocurrency volume related to Acuant in the pre-acquisition
period.

 

 

For further information, please contact:

 GBG

 Chris Clark, CEO & David Ward, CFO              +44 (0) 1244 657333

 Richard Foster, Investor Relations              +44 (0) 7816 124164

 Numis (Nominated Adviser and Corporate Broker)  +44 (0) 0207 260 1000

 Simon Willis & Joshua Hughes

 Barclays (Corporate Broker)                     +44 (0) 0207 029 8000

 Stuart Jempson & Anusuya Nayar Gupta
 Tulchan Communications LLP (Financial PR)       +44 (0) 20 7353 4200

 James Macey White & Matt Low                    GBG@tulchangroup.com

 Website                                         www.gbgplc.com/investors

About GBG

We are the experts in digital location, identity and managing fraud risk and
compliance. Helping organisations across the globe eliminate customer friction
and fraud from their digital experiences. GBG develop and deliver digital
identity, address verification, fraud prevention and compliance software to
businesses globally.

Through the combination of the latest technology, the most accurate data and
our unrivalled expertise, GBG helps organisations ranging from start-ups to
the largest consumer and technology brands in the world deliver seamless
experiences, so their customers can transact online with greater
confidence.

To find out more about how we help our customers establish trust with their
customers visit www.gbgplc.com (http://www.gbgplc.com) and follow us on
LinkedIn and Twitter @gbgplc.

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