NCC Group meets half-year expectations

Cybersecurity and software company NCC Group said in an update on Thursday that it achieved its half-year revenue, gross margin and profitability targets, with an adjusted operating profit of £4.8m.

The London-listed firm added that the figure, adjusted using its previous measurement method, equated to £10.2m.

Within the cybersecurity sector, technical assurance services (TAS) showed signs of stability, as first half revenue only declined by 4.7% compared to the previous half-year.

However, on a year-on-year basis, TAS revenue decreased by 28.6%, or by 31.7% at actual rates, due to challenges experienced in the third quarter of 2023.

Meanwhile, managed services (MS) revenue continued to grow, with a constant currency increase of 17.3%, or 15.4% at actual rates.

The consulting and implementation (C&I) segment remained on par with the prior period, and a new leader was recruited for the area.

Digital forensics and incident response (DFIR) saw strong constant currency growth of 32.8%, primarily driven by the increasing incidents of Ransomware.

NCC Group addressed gross margin issues in the first quarter of the 2024 financial year, resulting in improved TAS utilisation in the second quarter, rising to 76%, up from about 60% in the first quarter and the final three months of 2023.

That, the board said, led to a positive impact on first-half cybersecurity gross margin, showing an increase of 0.7% points compared to the second half of 2023.

In the software escrow business Escode, NCC said it saw continued growth, with constant currency revenue year-on-year growth of 6.2%, driven by increased verification revenues and contracted price increases.

The client retention rate remained stable at around 93%.

NCC also highlighted its strategic progress and cost efficiencies, emphasising its ability to attract top talent globally and realising £5m in cost efficiencies within gross margin and overheads for the 2024 financial year.

Looking ahead, NCC said it was confident about its outlook and trading performance.

While TAS, a significant part of its cyber business, had less forward visibility due to the nature of the service, the company's second-quarter revenue exit rate provided confidence in second-half performance, supported by strong revenue growth in managed services.

Additionally, Escode was expected to achieve low single-digit revenue growth in the second half.

The company said it had decided not to restart the strategic review of Escode.

It added that the strategic actions taken, including cost base efficiencies, positioned NCC Group well to meet its full-year expectations.

“The group delivered a first-half financial performance in line with expectations while continuing to transform the business at pace,” said chief executive officer Mike Maddison.

“We are emerging as a stronger, more resilient organisation, driven by our new executive team and colleagues.

“I'm delighted to see Escode go from strength to strength and in cyber I'm confident we've turned a corner with the technical assurance services market stabilising.”

Maddison added that the company was continuing to see predicted demand increasing in other areas central to its strategy, particularly managed services.

“Looking ahead, we are well placed for sustainable long-term growth as we deliver on our purpose to create a more secure digital future.”

At 1410 GMT, shares in NCC Group were down 3.15% at 126.87p.

Reporting by Josh White for Sharecast.com.