Identity management software specialist GB Group has had a busy morning – half year results and the announcement of an agreement to purchase Capscan Parent Ltd, a provider of customer registration and address management software. This proposed deal comes hard on the heels of two other acquisitions made during the first half of the year, as the company works on building out its core competency (see GB Group in attractive but increasingly crowded space).
Capscan is a good fit with the rest of the GB Group portfolio, particularly its Customer Registration offerings, because an individual’s postal address is an important item of identity data in many business transactions. GB Group will pay £11.2m cash for Capscan (who had revenues of £6.8m for YE March 31 2011 and adjusted EBITDA of £1.2m) and is placing additional shares to raise c£8m pounds to help pay for the purchase, with the balance coming from its cash reserves (£4.2m at the end of September). Capscan is expected to be earnings enhancing in its first full year as part of GB Group. Regent acted for Capscan in this transaction.
As it indicated in its pre-announcement last month, revenue for the first half (ending September 30 2011) was up 7% to £12.4m but profit (before exceptional items, interest, share-based payments and tax) was just £1m, although that represented a 36% rise. The increases were largely due to the effects of the two acquisitions, which fed into the DataAuthentication and DataSolutions parts of the business. The DataAuthentication unit, with 14% growth, was the driver and delivered £5.8m revenue. The DataSolutions unit forms a larger part of the operation (H1 revenue of £6.6m) but growth was just 2%. The company expects the second half to be better, enabling it to meet full year expectations.
The company is not romping ahead despite being in an area where demand is rising so the acquisitions are central to strengthening the portfolio, and in its efforts to put some distance between GB Group and its competitors. The identify management market has the feel of one where vendors have to acquire or be acquired.