Having reassured the market last month about its performance for the year ended in March, GB Group (AIM: GBG) has announced a significant acquisition and a placing.
The identity data intelligence expert is making the complementary acquisition of PCA Predict, which is a leading UK provider of address validation services. It has over 9,000 customers, mainly in the SME market which it provides with a self-serve, easy-to-use, cloud-based software platform. Typical users are e-commerce companies who use the service to populate the full customer address fields at the checkout when a postcode is entered.
GBG’s core offerings tend to be high-end, data-rich services aimed at larger enterprise customers. Rather than cloud-based SaaS products like PCA Predict, they are installed on-premise and tend to solve compliance problems rather than improve customer relationship management. So there should be some cross-selling opportunities where these different client bases intersect. GBG can also take the PCA product overseas since the software is readily applicable to non-UK markets – management estimate the addressable market at a $1 billion. On the cost savings side there will be scope to reduce data provision fees.
The placing raised £58 million and was around twice subscribed. The rest of the £74 million purchase price will be paid in cash. The exit p/e looks to be around 17.5 times and the deal will enhance GB Group’s earnings by ‘high single digits’. Although it’s a relatively large deal for GB, PCA is UK based and in a very familiar field, so it shouldn’t be much of a distraction.
As observed in our piece last month, GB Group shares seem to be breaking upwards after a lengthy sideways consolidation. The stock rarely looks cheap, so the earnings enhancement is welcome. On the new forecasts, the shares are trading on a current year p/e of 30.