Cyber security group NCC (NCC) offers peace of mind to its clients - but investors may be sleeping fitfully. The group's shares slumped nearly 10 per cent in the three days preceding these strong first-half results after it unveiled a pricey acquisition and pushed back the rollout of its '.trust' domain.
Relentless cyber attacks targeting the likes of Sony and Microsoft have fuelled demand for cyber security and website testing, sending sales up a fifth at NCC's assurance division. Similarly, revenues rose 4 per cent at its escrow division, which securely stores companies' critical software data. Excluding one-off costs and a £1.9m operating loss at its nascent domain services division, the upshot was a 14 per cent increase in NCC's operating profit to over £14m.
NCC's .trust initiative, best described as a gated online community, has divided investors. Transitioning clients has been complex and time-consuming: NCC now plans to launch .trust at the end of February and expects its domain services division to break even in 2016. Moreover, it thinks hefty investments in the project could inflate capital spending and operating costs combined by 14 per cent this year to £9.5m.
Nonetheless, the group's outlook remains strong: total orders and renewals for this year are up 11 per cent. Broker Canaccord Genuity forecasts full-year pre-tax profit of £25m, giving EPS of 9.1p, rising to £32.5m and 11.8p in 2016 (from £25.3m and 9.3p in 2013).
| NCC (NCC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 203p | MARKET VALUE: | £424m | |
| TOUCH: | 203-205p | 12-MONTH HIGH: | 234p | LOW: 170p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 41p* | NET DEBT: | 37% | |
| Half-year to 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 54.0 | 11.1 | 4.2 | 1.14 |
| 2014 | 62.3 | 10.6 | 4.0 | 1.30 |
| % change | +15 | -5 | -5 | +14 |
Ex-div: 29 Jan Payment: 27 Feb *Includes intangible assets of £118m, or 57p a share | ||||
