I am always encouraged when I see companies upping their market guidance, it is always so positive and indicates that better is to come.
That is just the case with this people-powered, tech-enabled global cyber security and software escrow business, which last Thursday issued its Trading Update for the four-month period to the end of this month.
The NCC Group started life in June 1999, when the National Computing Centre sold its commercial divisions to its existing management team.
It floated on AIM in July 2004, raising £38.1m and gaining a £55.4m capitalisation, it has subsequently grown both organically and through strategic acquisitions.
Operating globally, NCC today is a cyber and software resilience business spread across multiple sectors, geographies and technologies.
The £526m capitalised group’s 2,200 employees help to assess, develop and manage cyber threats across what is an increasingly connected society, helping to make the world safer and more secure.
They advise global technology, manufacturers, financial institutions, critical national infrastructure providers, retailers and governments on the best way to keep businesses, software and personal data safe.
Driven by a collective purpose to create a more secure digital future, c. 2,200 colleagues across Europe, North America, and Asia Pacific harness their collective insight, intelligence, and innovation to deliver cyber resilience solutions for both public and private sector clients globally.
With decades of experience and a rich heritage, NCC Group is committed to developing sustainable solutions that continue to meet client's current and future cyber security challenges.
Mike Maddison CEO said:
"We have seen the benefit to gross margin from the actions we took over 12 months ago to align our global delivery and operational headcount.
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.
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 to continue to enhance shareholder value."
The group, which is in the process of changing its year-end from May to September, therefore extending the current trading period to 16 months, in last Thursday’s Update stated that:
“Our previous guidance for the Period outlined that we expected overall revenue to be in the region of c.£100m and adjusted operating profit of c.£3.5m (four months ending 30 September 2023: c.£1m adjusted operating loss).
Following our August close process, we are pleased to have experienced better-than-expected performance in our Cyber Security division during this historically quieter trading period of the calendar year.
This has resulted in increased expectations for the Period, with overall revenue expected to be in the region of £104m, representing c.4% growth versus the equivalent period in 2023, and Group adjusted operating profit expected to be approximately £6m.”
Upon the statement, analyst Bob Liao at Zeus Capital, now expects further outperformance.
“We believe NCC represents a well-managed turnaround story that should yield good earning outperformance and multiple expansion over the next couple of years.
We forecast NCC outperforms FY25 and FY26 Adj EBITDA expectations by mid-high single digit percentages (Base Case).
These forecasts still assume revenue growth and margins remain below management’s medium-term ambitions.
If performance reaches management’s ambitions (Upside Scenario), then we could see Adj EBITDA being c. 30% higher than consensus in FY26E.
Based on our upside scenario, we calculate the shares could be worth 245p.”
The group’s shares, which are now trading at 167p, offer some significant upside over the next few months, especially as more signs of the successful turnaround by its Management carry on shining through.
Ahead of the extended period results, being announced on Tuesday 10th December, with a certain confidence I now set a Target Price on the group’s shares at 208p.
(Profile 02.01.20 @ 229p set a Target Price of 300p*)
(Profile 16.09.2024 @ 167p set a Target Price of 208p)
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