Canaccord Genuity moves GB Group to 'buy'

Canaccord Genuity stated that yesterday's FY24 results gave it further confidence that growth was sustainably re-accelerating. GB Group has seen "consistent sequential growth improvements" over the last 12 months to a roughly 5% FY24 exit-rate on the back of improving trends in its largest segment, identity, which was expected to continue this year.

The Canadian bank noted that further down the profits and loss and cash flow statements, a sequential improvement in gross margins from 69% in H124 to 71% in H2, plus well-flagged cost savings, drove underlying operating margins to 22.3%, up approximately 200 basis points year-on-year.

Canaccord also highlighted that unlevered free cash flow of £43.0m/£35.0m after interest payments grew almost 50% year-on-year despite a roughly £5.0m net working capital outflow.

"The recent multi-year growth and EPS downgrade cycles should now be in the rear-view mirror, with key metrics such as organic growth, EPS (CGe 15% FY24-27 CAGR) and ROCE inflecting. As GBG re-builds investor confidence, the shares' discount to peers should further narrow," said Canaccord.

Reporting by Iain Gilbert at Sharecast.com