Identity division sees GB Group swing to operating loss

Digital location, identity verification, and fraud prevention technology specialist GB Group reported an improvement in revenue in its final results on Thursday, while swinging to an operating loss.

The AIM-traded firm said its statutory revenue reached £278.8m for the 12 months ended 31 March, up 15% year-on-year, while pro-forma constant currency revenue was 3.7% higher on an organic basis at £279.8m.

It said the growth was primarily driven by double-digit expansions in both the location and fraud segments, while the identity segment faced challenges in the post-pandemic internet economy.

Adjusted operating profit came to £59.8m for the year, marking a slight increase of 1.7% from the prior period.

The adjusted operating profit margin was 21.5%, while foreign exchange gains accounted for £3m of the company’s operating profit.

GB Group reported an operating loss of £112.4m for the 2023 financial year, however, swinging from an operating profit of £23.4m in 2022.

The board put the loss down to a non-cash exceptional goodwill impairment charge of £122.2m against the identity business in the Americas, encompassing the IDology and Acuant acquisitions.

Losses before tax totalled £118.8m, in contrast to a profit before tax of £21.7m in 2022.

Adjusted diluted earnings per share were recorded at 16.4p, a decrease from the prior fiscal year's 20.2p, while the company swung to a diluted loss per share of 47.5p, from diluted earnings per share of 6.9p a year earlier.

Net assets totalled £694.1m at year-end, down from the 2022 figure of £787.1m, while net debt narrowed slightly to £105.9m, from £107m.

The company said it remained focused on generating cash to further reduce its debt during the 2024 financial year.

GB Group’s board recommended a final dividend of 4p per share, reflecting a 5% increase compared to the prior year's final distribution of 3.81p.

“GBG continued to make important strategic progress and operational improvements that will have long-term benefits; however, we were impacted by unexpectedly deep post-pandemic corrections in some end markets,” said chief executive officer Chris Clark.

“These corrections were largely felt in the internet economy, notably by cryptocurrency and fintech customers primarily in our Identity business in the Americas, as flagged in our February trading update.

Looking ahead to the 2024 financial year, since our update in February, there has been no material change in market conditions.”

Clark said uncertainty remained, although the company still expected some “gradual” revenue acceleration in the latter part of the year.

“The board is confident that GBG will deliver its 2024 profit expectations assisted by a group-wide focus on efficiency.

“The business is well-placed to benefit from structural growth, including the increasing proliferation and sophistication of fraud through the advent of generative AI, capitalising on the breadth of its capabilities and global reach to deliver our mid-term growth targets.”

At 1028 BST, shares in GB Group were down 10.68% at 256p.

Reporting by Josh White for Sharecast.com.