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GB Group's global position offers revenue accretive pathways

Publication Date: 27 Mar 2019 - By Samuel Smith By Samuel Smith
Actionable
Differentiated

Equity Fundamental Equity EU ex-UK USA UK Technology

GB Group (LON:GBG) is a company which specialises in global identity data intelligence. It offers a series of solutions to help organisations quickly validate and verify the identity and location of their customers. 

Their chief competitive advantage comes from their ability to build products from an unparalleled breadth of data due to their massive network of 200 global partners that gives them the ability to verify the identity of 4.4bn people.

The last financial year (2018) was one of solid growth for GB Group as revenues grew 36.8% and adjusted operating profit shot up 54.7%, thanks to the expanding revenue alongside operating margin expansion from 19% to 22%. 

Diversification and strategy

Additionally, the company’s international diversification improved as well as revenues outside of the UK increased from 31% to 34% during 2018. With over 17,000 customers across 79 countries at the end of 2018, GB Group is truly a global powerhouse in their business. 

Finally, the company’s balance sheet remains very strong. Deferred revenue in the balance sheet (i.e., amounts already invoiced under annual or multi-year contracts which will be recognised in future periods) increased by 48.9%, giving them very visible and reliable cash flows for the near term. The company also holds sizable and increasing cash (£22.8m) and net cash (£13.5m) balances as well. 

These strong numbers were in large part the result of several achievements for the group during the year. The company added Visualise capability to its existing products thanks to its GBG Connexus division.

They also further expanded their global data coverage while progressing in their implementation of GDPR (General Data Protection Regulation) and PCA Predict into the company’s products and services. 

Where from here?

The outlook remains strong thanks to good opportunities to continue growing in their core markets. 

The company’s growth initiatives include (1) increasing product development capacity committed to enhancing experience and involving customers in the product innovation process; (2) attracting and retaining talented employees by simplifying their experience, investing in their leaders, and driving new learning, communications, and collaboration initiatives with employees; (3) maintaining their technological competitive advantages by investing in the continued deployment of micro-services, API standardization, improvements to user interfaces, and exploitation of public cloud services; and (4) integrating their state-of-the-art technology and data into keeping their products and brand name at the top of the industry.

Conclusion: GB Group benefits from the fact that its industry is exploding with the rise of identity counterfeiting as well as remote work and business transactions aided by the mass proliferation of the internet and other communications technology across the globe. 

However, such dynamic growth does attract considerable competition. As a result, it is vital that they effectively execute on their customer service, talent retention and enhancement, and competitive advantage initiatives in order to maintain their strong global positioning in the space. Provided they do so, the stock should continue its strong growth for the foreseeable future, making it a good opportunity to buy while the share price remains down 22% from the highs reached last year.

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

Samuel Smith

 

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