Identity and data intelligence services provider GB Group (LON: GBG) reports its full year figures on Tuesday. GB Group is getting some lockdown benefits from additional online traffic in certain areas, but travel and leisure are areas where activity has slumped. These are important sectors for the business.
The most important information in the results will be an indication of how trading has progressed in the new financial year. First quarter volumes will be important. They may have been boosted by refunds activity.
A 2019-20 pre-tax profit of around £43m is estimated, but a further decline is expected this year to a figure that could be lower than the 2018-19 pre-tax profit figure of £31.4m.
No final dividend is being paid in order to conserve cash. The pace of the recovery in activity will be important in deciding when dividends can restart.
Net debt should be below £40m by the end of March 2020. GB Group acquired US-based identity verification business IDology for an enterprise value of $300m (£231m) during the period. A share issue raised £160m at 410p a share to go towards financing the deal. A debt facility of £110m was secured to provide the rest of the cash.
Georgia-based IDology generates more than two-thirds of its revenues from financial services clients. IDology is also a higher margin business than the existing operations. The two firms have already been working together prior to the deal. There should be cross-selling opportunities.
The IDology acquisition will mean that international revenues will be nearly as high as those generated in the UK.
Cash generation should continue to be strong and net debt is expected to fall to £20m by next March. However, clients may have problems with working capital, and this could delay payments to the company. There is also a concern that some clients may not have the financial strength to continue trading.
Longer-term, though identification services are required for the online sector.
In the middle of March, non-executive director David Rasche invested £99,000 in GB Group through the purchase of 19,100 shares at an average of 518.86p each. The share price is back up to 684p. That is still around 40 times estimated 2019-20 earnings.
Given the uncertainty the shares appear fully valued.