NCC plunges into the red, but confident of medium term prospects

Mike Maddison

NCC Group, the Manchester-based global cyber security specialist, warned the current fiscal year will be one of “considerable change” after it plunged into the red.

Announcing its annual results for the year to May 31, 2023, today, it revealed a 6.4% increase in revenues, to £335.1m, but a pre-tax loss of £4.3m was a significant turnaround from the previous year’s £31m pre-tax profit.

The final dividend remains the same, at 3.15p per share.

NCC said the swing into the red was due to increased finance costs of £2.5m driven by an rise in borrowing following the IPM acquisition, and an increase in base interest rates.

It also cited the recognition of Individually Significant Items (SIs) of £14.7m, of which £9.8m related to the impairment of North American Goodwill within the Assurance (Cyber Security) business.

It said Assurance (Cyber Security) revenues were in line with the prior year at constant currency at £270.8m.

The group pointed to continued strong cash conversion of around 103%. Net debt, excluding leases, was £49.6m, down from £52.4m, and, during December 2022, the group secured a new four-year £162.5m multi-currency revolving credit facility.

Current trading is in line with expectations, and the board said it expects 2024 to be a period of considerable change for the group, targeting a modest improvement in group adjusted operating profit in both the Assurance (Cyber Security) and Software Resilience businesses.

It has identified various cost efficiencies across Assurance (Cyber Security) and corporate functions, as announced in the June 2023 trading update, and is on track to meet these.

The board said it is confident that continued execution of its strategy will deliver double-digit revenue growth and mid-teens operating profit margins from FY26 onwards.

Chief executive, Mike Maddison, said: “While the market conditions we announced in our March trading update have impacted our FY23 revenue performance and profitability, we are confident about the medium term growth drivers for cyber security and that continued progress on strategic actions will position the business to deliver greater growth and profitability in the years ahead.

“I am pleased to report that since the launch of our Next Chapter strategy in February 2023, the group has delivered foundational components of strategic change to create a more agile and resilient business, improve profitability and deliver shareholder value.

“We have fortified our leadership team in key areas with high calibre individuals with deep cyber industry expertise, accelerated the diversification of our client base across our fastest growing sectors, launched our new global delivery and operations centre in Manila and will reveal today a new distinct brand for our Software Resilience business, which will give us a clearer, simpler proposition with which to increase our presence in this market.”

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