GB Group's (LON:GBGP) trading has remained robust in H1. Backing out a £3.5m perpetual licence, underlying organic growth was 12%, consistent with our FY estimates and last year. We leave our estimates unchanged, although the perpetual licence will mean that the year will be less significantly H2 weighted than usual. A strong recurring revenue profile (c 70% in FY17), robust organic growth prospects and an accretive acquisition strategy all justify a premium rating.
Robust H1 performance
GB Group’s trading update flags that trading has remained robust in H1. Revenues of £52.6m are up 40% y-o-y, which factors in the contribution from PCA (acquired on 9 May 2017), a full six-month contribution from ID Scan (acquired on 9 June 2016) and a £3.5m licensing deal. Stripping out the acquisitions, the underlying organic growth rate was 17%. If we were to treat the perpetual licence as a three-year term, spreading payments across the years, the underlying growth rate would be c 12%, in line with last year and our estimates. All acquisitions – GBG DecTec, GBG Loqate, ID Scan and PCA Predict – are reported to have had strong first halves. Adjusted H1 operating profit is expected to be in excess of £10m, substantially ahead of last year’s £5.2m, leaving our FY estimates of £23.3m well supported.
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