Canaccord lowers GB Group to 'hold'

Canaccord said it had expected GB to exceed "too-conservative" 2021 full-year consensus expectations, but assumed it would be announced around the "usual" post-close time in mid-April.

The Canadian bank, which dropped its target price on the stock from 1,085.0p to 860.0p, stated last Thursday's pre-release from GB implied a "strong" second-half performance, with organic revenue growth likely clocking in around 7-9% and a more than 30% operating profit beat as adjusted underlying earning margins were expected to be roughly 24.5%, broadly in line with last year.

However, going into the 2022 trading year, Canaccord pointed to "multiple headwinds", such as a likely reversal of the £14.0m one-off benefit from the US PPP stimulus program, foreign exchange headwinds from a weakening US dollar and its recent MarServices disposal.

In Canaccord's view, these headwinds will lead to only broadly flat sales and earnings per share this year.

"Even assuming 10% organic underlying growth, we believe these factors are likely to mute revenue and EPS expansion this year," said Canaccord, which did acknowledge that M&A could be "the wild card" in its scenario, but stated it would "cross that bridge when we come to it".