Canaccord Genuity upgrades NCC Group to 'buy'

Canaccord said NCC's five-month trading update was "important" in two respects. Firstly, the analysts noted that the update revealed that NCC's underlying trading was ahead of the prior year on a like-for-like revenue basis and secondly, that its recent acquisition of IPM was "trading as expected" and that "integration is progressing to plan".

The Canadian bank also highlighted that, although no specific comment was made WRT year-to-date operating profits were assumed to be "in line with managements' expectations" for the 2022 trading year, with the analysts going as far as to believe that this means underlying earnings were ahead year-on-year.

However, Canaccord also pointed out the change in accounting policy, implemented at the time of the company's 2021 full-year results, and consequently, move its forecasts to below company collated consensus for 2022.

"Our new adj EBIT is £50.m Vs consensus at circa £52.0m. We assume around £6.0m cloud configuration costs, which would have previously been capitalised (offset by £2.0m related amortisation now not present). Additionally, we are unsure which estimates in consensus are pre- and post-IPM integration costs of £2.5m (we exclude these). Net-net, we downgrade both full-year 2022-23 adjusted earnings before interest and tax/earnings per share by circa 8%/5%," said Canaccord, which lowered its target price on the stock from 340.0p to 310.0p.