GB Group plc made a loss before tax of £118.8 million in the last financial year as it wrote off £122.2m of intangible assets.
The identity data intelligence specialist said continuing macroeconomic headwinds in the second half of the year had affected its business in the United States.
GBG scaled rapidly in North America with a $300m cash acquisition of IDology in 2019 followed by a £547m swoop for Acuant in 2021. Under financial rules, companies must assess the fair value of intangible assets acquired in a deal – goodwill – and review this on an annual basis.
The London-listed company, which is headquartered in Chester, has determined that the intangible value acquired during the two deals is now far lower than previously suggested, leading to the impairment charge of £122.2m.
“The group did not fully meet the financial objectives we set ourselves at the start of the year, primarily through the difficult trading conditions in our identity business in the Americas which represents the combination of the IDology and Acuant acquisitions,” it stated.
“This group of cash-generating units was tested for impairment for the 30th September 2022 half-year review, based on the information at that time, and the conclusion was that there was no impairment under the base case or sensitised models.
“However, as reported in the trading update in February 2023, the trends that had been impacting our identity business in the Americas continued into the second half of the year. Furthermore, we also saw incremental lengthening of sales cycles and project delays due to macroeconomic uncertainty which impacted some customer contracts that had been included in the FY23 forecast.
“As a result, the cashflows used in the year-end impairment assessment were lower than those at the half-year; consequently, the outcome of the impairment review was a non-cash, exceptional impairment charge of £122.2m, which represents approximately 19% of the pre-impairment carrying value of £644.1m.”
Total group revenue for the year ended 31st March 2023 increased to £278.8m from £242.5m in the prior year.
Adjusted operating profit – not taking into account the impairment charge – increased by £1m to £59.8m.
GB Group plc made a loss before tax of £118.8 million in the last financial year as it wrote off £122.2m of intangible assets.
The identity data intelligence specialist said continuing macroeconomic headwinds in the second half of the year had affected its business in the United States.
GBG scaled rapidly in North America with a $300m cash acquisition of IDology in 2019 followed by a £547m swoop for Acuant in 2021. Under financial rules, companies must assess the fair value of intangible assets acquired in a deal – goodwill – and review this on an annual basis.
The London-listed company, which is headquartered in Chester, has determined that the intangible value acquired during the two deals is now far lower than previously suggested, leading to the impairment charge of £122.2m.
“The group did not fully meet the financial objectives we set ourselves at the start of the year, primarily through the difficult trading conditions in our identity business in the Americas which represents the combination of the IDology and Acuant acquisitions,” it stated.
“This group of cash-generating units was tested for impairment for the 30th September 2022 half-year review, based on the information at that time, and the conclusion was that there was no impairment under the base case or sensitised models.
“However, as reported in the trading update in February 2023, the trends that had been impacting our identity business in the Americas continued into the second half of the year. Furthermore, we also saw incremental lengthening of sales cycles and project delays due to macroeconomic uncertainty which impacted some customer contracts that had been included in the FY23 forecast.
“As a result, the cashflows used in the year-end impairment assessment were lower than those at the half-year; consequently, the outcome of the impairment review was a non-cash, exceptional impairment charge of £122.2m, which represents approximately 19% of the pre-impairment carrying value of £644.1m.”
Total group revenue for the year ended 31st March 2023 increased to £278.8m from £242.5m in the prior year.
Adjusted operating profit – not taking into account the impairment charge – increased by £1m to £59.8m.
GBG, which floated in 1993, has a market cap of £651m. Its share price is around 258p, its lowest level since 2016, having hit a high of more than 950p in 2021.
“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 Chris Clark, CEO.
“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 FY24, since our update in February, there has been no material change in market conditions. Uncertainty remains; however, we still expect some gradual revenue acceleration in the latter part of the year.
“The board is confident that GBG will deliver its FY24 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.”
GBG, which floated in 1993, has a market cap of £651m. Its share price is around 258p, its lowest level since 2016, having hit a high of more than 950p in 2021.
“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 Chris Clark, CEO.
“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 FY24, since our update in February, there has been no material change in market conditions. Uncertainty remains; however, we still expect some gradual revenue acceleration in the latter part of the year.
“The board is confident that GBG will deliver its FY24 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.”