- Recent trading exceeds forecasts
- Profit seen well above target
- Analyst cites turnaround success
Cyber security and software firm NCC Group (NCC) surprised the market with a positive half year trading update and an increase to its financial outlook.
The shares climbed 15p or 10% to a new year-high of 167p, closing the yawning gap in the price after the firm downgraded forecasts 18 months ago due to weakness in the US market.
TRADING ABOVE EXPECTATIONS
For the four months to the end of September, NCC now expects revenue to top its previous estimate of £100 million while adjusted operating profit is seen reaching £6 million against a previous target of £3.5 million.
The firm cited a better-than-expected performance from its cyber security business during what is typically a quiet trading period.
In addition, action to improve the gross margin over the past year has fed through to improved profitability.
‘We continue to simplify our business, aligning ourselves to our client needs in a competitive marketplace, to generate profitable revenue growth and sustainable gross margins’, commented chief executive Mike Maddison.
‘Our transformation journey is ongoing, and we continue to build out our core cyber security capabilities and our separate Escode re-branded business, which both provide future growth opportunities.’
EXPERT VIEW
Shore Capital analyst Martin O’Sullivan said he was ‘encouraged’ by the trading update and the group’s turnaround and growth prospects.
‘Our view remains that chief executive Mike Maddison and chief financial officer Guy Ellis appear to be a stroke of luck for long-time NCC shareholders, sorting out issues that have historically hamstrung the business and stepping up the pace of execution.
‘We shall review our forecast assumptions in due course, also noting the upcoming change of financial year-end from May to September. We reiterate our BUY stance and fair value of 190p (c.25% upside) based on our 2025 forecast of 13x EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortisation).’
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