NCC Group sees full-year profits jump, reiterates guidance

Cyber-security specialist NCC Group reported a jump in full-year profits while reporting faster growth since period end that led it to reiterate its guidance for the next 12 months.

Company boss, Adam Palser, said: "Cyber resilience has never been more of a priority than it is today.

"The connected environment continues to grow thanks to digital transformation and the rapid adoption of cloud technology - which was already underway but has been greatly accelerated by the pandemic - leaving inadequately-secured organisations ever more vulnerable to disruption, fines and, in extreme cases, failure."

The company also said that the integration of Iron Mountain's Intellectual Property Management unit, which was purchased in May, was proceeding as planned.

On a continuing operations basis, sales increased by 2.6% over the 12 months ending on 31 May to reach £270.5m, driving a 37.3% jump in operating profits to £17.3m.

Helping to boost the company's bottom line, its operating profit margins increased by 1.6 percentage points to 6.4%.

Profits before tax registered an even sharper increase of 54.2% to £14.8m.

Weighing on the bottom line were £7.6m of transactions costs associated with NCC's purchase of IPM, offset by a temporary £3m reduction in travel and office usage costs.

NCC also incurred in £5.1m of cloud configuration and customisation costs related to its Securing Growth Together transformation programme.

The company restated its 2020 profits slightly to take into account the adoption in April 2021 of the IFRIC's agenda decision on cloud configuration and customisation costs.

At period end, the company was flush with £48.9m of cash after lease liabilities, marking a sharp turnaround from the £42.4m of debt on its books with which it had finished the prior year.

In May, NCC placed shares for net proceeds of £70.2m to finance the acquisition of Iron Mountain's software resilience unit for $220m (£157m) in cash.

The remainder of the financing came from a $70m term loan, an existing revolving credit facility, and cash on hand.

While touting the "excellent" long-term prospects for the global cyber and software resilience markets, the company said that pandemic disruptions had held cyber spend back during the first half of the year as well as during much of the second half.

Yet "customer buying behaviour showed signs of normalising towards the end of the year."

On the flip-side, in local currency terms, revenue growth accelerated during the first quarter, the company said.

"Q1 orders were ahead YoY and our orders pipeline is robust.

"Consequently, the full year outturn remains in line with management expectations."

Despite anticipating higher revenue growth over the coming year, NCC reported that buying patterns over the summer had experienced "some unanticipated disruption".

Management also reiterated its medium-term objectives of double-digit sales growth in Assurance and "sustainable" growth in Software Resilience.

As of 0910 BST, NCC shares were edging up by 0.48% to 315.0p.