Acquisitions boost NCC’s revenues

IT security firm NCC Group has said that trading for a four month period between June and October 18 will show that revenues (including new acquisitions) have increased by around a third and that its trading performance is in line with expectations.

The Manchester company said that despite the lack of activity in the economy its assurance division increased sales by 51%, including contributions from acquisitions. The firm’s own ethical security testing business, NSG Secure, grew its order book by 14% to £9m.

“The market for high quality ethical security testing continues to be buoyant,” the company said. “Although this business performance remains satisfactory, recruitment of the highest quality testers is slowing the rate of growth.”

It described the acquisition of US-based iSEC Partners earlier this month as “a notable strategic development”.

“It is the group’s long term aim to become a leading provider in the international security testing and assurance market as this sector continues to grow and consolidate rapidly.  The order book that comes with the business is currently at £2m from a wealth of blue chip clients.”

The company added that SDLC, the business acquired in April,  has found that its margins have come under pressure as a result of increasing competition, which it said would have a knock-on effect of the price it eventually pays for the business as an element of the £15m price tag was based on future performance.

Meanwhile, NCC’s escrow division increased revenues by 8%. It also announced plans to increase prices for its escrow contracts from November for new clients and from January for contract renewals. As a result, it is forecasting sales for the year to May 31, 2011 to increase to £15.2m (2010: £14.6m).

However, the company said that its traditional security advisory business would be wound down. The division, which contributed £200,000 worth of profit and £6m of revenue in the year to May, has become “sub-scale” following recent acquisitions by its assurance division.

It said that the advisory business will break even on £2m worth of revenues this year, but added that closing the business will lead to a one-off exceptional cost of £950,000 – of which around half will be paid out in cash.

It added that the iSEC deal has increased net debt to £22.2m, and that interest rates on its new £35m revolving credit facility and £2m overdraft have increased to 2% above LIBOR.

“Overall, NCC Group is on course to show good revenue growth and profitability for the full year remains in line with the board’s expectations,” the company said.