NCC Group confident after year of mixed trading

Cyber security and resilience specialist NCC Group said in an update on Thursday that it expected like-for-like revenue for the year just ended to be in line with the prior year at constant currency, representing reported growth of around 5%.

The London-listed firm said assurance revenues for the 12 months ended 31 May were also expected to be consistent with the prior year at constant currency, with reported growth of around 5%.

It said the first half of the year saw growth of about 11% at constant currency, or reported growth of 18%, for assurance revenues.

However, in the second half, there was a decline of around 10% at constant currency and 7% on a reported basis, primarily driven by a reduction in spending by North American technology clients and, to a lesser extent, by global professional services in the UK.

Those reductions were previously announced in March.

Global professional services experienced growth of around 10% at constant currency and 19% on a reported basis in the first half.

However, there was a decline of about 3% at constant currency and 2% reported for the full year.

In the second half, NCC said global professional services witnessed a decline of about 16% at constant currency and 13% on a reported basis.

On the other hand, global managed services achieved growth of 11% at constant currency and 13% reported in the first half of the financial year.

The full-year saw growth of about 12% at constant currency and 15% on a reported basis.

In the second half, global managed services experienced growth of 14% at constant currency, and reported growth of approximately 18%.

The software resilience segment showed a decline in like-for-like revenue of 0.4% at constant currency and 6% reported.

In the first half, there was a decline of 1.6% at constant currency, but reported growth of 6.8%.

However, the second half witnessed growth of around 0.6% at constant currency and 5% on a reported basis.

The board said the new leadership team, appointed in November, had started delivering momentum and consistency in quarterly growth, as well as implementing price rises and realising contributions estimated as part of the May 2022 operational review.

NCC Group said unaudited group adjusted EBIT was expected to be within the range announced in March, at approximately £28.5m.

The board said that was being driven by a reduction in North America and UK cyber security revenue expectations, as it indicated in March.

Its adjusted EBIT figure included strategic costs of about £2.5m for the 2023 financial year, with a portion of the initially-estimated £5m being deferred into 2024.

The net debt of NCC Group, excluding IFRS 16, was estimated to be around £50m.

It said it maintained strong cash conversion, and anticipates an expected leverage excluding IFRS 16 of 1.4x.

“Since launching the next chapter of our strategy in February, the group has taken a number of strategic steps as we create a more agile and resilient business, improve profitability and deliver shareholder value,” said chief executive officer Mike Maddison.

“We have fortified our leadership team with high-calibre appointments in key areas, accelerated the diversification of our client base across our fastest growing sectors, secured our new global delivery centre in Manila, which will open ahead of schedule in September 2023, and we will soon complete the rebrand of our software resilience business, with work on the cyber security brand progressing well.

“While the more challenging market conditions we announced in our March trading update have impacted the 2023 outturn, we are confident about the medium-term growth drivers for cyber and that progress on strategic actions will position the business to deliver greater growth and profitability in the current financial year and beyond.”

At 0918 BST, shares in NCC Group were up 0.34% at 87.3p.

Reporting by Josh White for Sharecast.com.