NCC slips into losses but remains confident after strategic review

NCC Group, the IT security and escrow specialist, reported a big swing to losses for the full year but held its dividend and presented the results of a strategic review.

Although group revenue for the year to 31 May rose 17% to £244.5m, or 3% at the organic level excluding acquisitions and currency effects, the company lost £53.4m at the operating level versus a £11.4m profit last time.

Interest expenses and financing costs meant a £55.3m loss before tax and a basic loss per share of 20.4p.

Following the difficulties endured last year when it lost of a couple of major contracts and the previous year's two profit warnings and a change of leadership, new executive chairman Chris Stone initiated the review.

Some of the effects of the challenges of the last year were seen in one-off charges taken in these results, with £71m including intangible write downs of £62m mainly on the acquisitions of Fox-IT and Accumuli.

However net debt was trimmed to £43.7m from the £48.8m at the half-year and the total dividend was maintained at 4.65p per share with final dividend of 3.15p per share.

Stone said the financial year was very challenging and while the business has outgrown some of its processes and controls, the review has identified the business's unique opportunity: "leading positions in growing global markets, customers who value us and our exceptionally skilled workforce. But, we need to change how we organise ourselves and improve our internal business processes".

He felt the business most notable strengths were the significant organic growth on offer in its core segments and its strong balance sheet.

Stone will reposition NCC to focus on stronger growth and look to recover margins, while also improving internal business processes.

The Escrow business is to be retained as it is seen as offering the group stability, with Assurance offering strong growth opportunities, though its Web Performance and Software Testing units have been identified as non-core activities and will be sold off.

"The cyber security theme (or 'golden thread') that runs through the Assurance division represents a unique set of competencies and capabilities that we can leverage to deliver greater customer value in a highly complex and fragmented market. Our sector and application specific product offerings are leading edge and our solutions capabilities are valued and sought after," Stone said.

Looking forward, he saw "significant upside opportunities and material value creation", once this "transitional period" has been navigated.