NCC warns on profits, expects job cuts

NCC Group tumbled on Thursday after the cyber security firm warned on profits, saying that market headwinds were impacting current trading and that it expects to cut jobs.

The company said that since the start of the second half of the year, it has experienced a lengthening of the sales cycle, which is leading to delays in buying decisions, work commencement and therefore revenue recognition, particularly in North America and the UK.

NCC said it’s also experiencing lower attrition, resulting in a higher-than-planned headcount.

"As a result of the current market conditions, we are experiencing a reduction in our utilisation rates and attrition," it said. "We are therefore accelerating the implementation of our strategy and reshaping the business, with a proposed reduction in headcount in the near term."

The company proposed a global headcount reduction of around 7%, which will give rise to a material one-off implementation cost of around £4m in the second half.

Due to the macroeconomic backdrop, and the savings arising from the actions to reshape the business, NCC now expects FY23 adjusted operating profit to be around £52m - versus consensus expectations of £56m to £57m - and for group revenues to rise year-on-year by only single digits.

For the six months to 30 November 2022, pre-tax profit rose 22.6% to £10.3m, while revenues were up 17.7% to £176.6m.

Chief executive Mike Maddison said: "The group has delivered solid, double-digit growth in the first half of the year, building on our technical expertise and track record working with the world's leading brands and Government organisations.

"Despite the very evident global economic headwinds we are confident that the next chapter of our strategy will deliver a business positioned to fully capitalise on increasingly complex cyber challenges, and one that will be resilient in dynamic markets."

At 0900 GMT, the shares were down 9.9% at 166.16p.