Shares in technology firm GB Group (LON:GBG) tumbled 25% to a 10-year low after it issued a surprise sales warning. The company blamed a shortfall in US revenue on ‘higher than expected volume attrition on a few material customers’.
Sales growth to miss forecasts
The company’s technology is used to provide location and identity verification as well as to combat fraud in financial transactions. Over 20,000 companies use its services to power 400 million core identity checks every year.
At its AGM last month, the group said its financial performance in Q1 was ‘in line with the board’s expectations’. It also said performance in its core segments was driven by strong trading in EMEA Identity, supported by continued momentum in GBG Go.
There was no mention of the US business or of any volume attrition among key customers. Today, it revised that view, saying US growth was below plan in Q1 and hadn’t improved in Q2 as hoped.
While its pipeline is strong, the delay between converting opportunities into sales means revenue for FY27 will miss forecasts. The firm now sees top line growth of 1% to 3% rather than the 5% to 6% it previously expected.
For a stock to lose 25% on a marginal downgrade to its sales forecast is quite something. The huge increase in traded volume – which is already more than 10 times yesterday’s level – suggests investors are stampeding for the exit.
We suspect the problem is the suddenness of the change in tone and the ‘revision’ to the AGM statement. Just three weeks ago the firm claimed growth was in line with expectations with Identity and Location ‘comfortably mid-single digit’.
In its FY26 slide deck, the company said the US market had ‘returned to growth’ and it was ‘building a stronger underlying business’. Separately, CEO Dev Dhiman said Q1 progress reinforced the board’s confidence in its ability ‘to deliver accelerated growth in the medium term, as outlined in our recent results’.
Once the dust settles we wouldn’t be surprised if deep value and special situations funds take an interest in GB Group. If the customer attrition isn’t that serious, which we won’t know for a while, today’s tumble could be an opportunity.
