Acquisitions fuelled top line of cyber security specialist NCC (NCC) in the first half. That helped to hide the impact of three major contract losses, which weighed on the group's share price at the end of 2016. Sales contributions from the three new businesses, bought since November 2015, added to an 18 per cent organic growth rate, which drove reported revenue up strongly. However, as expected, margins took a hit, stunting adjusted cash profit growth to 15 per cent, compared with the 18 per cent reported last year.
The problem lies in the assurance sector, where client losses and issues surrounding some contract renewals has "had a marked impact", according to management. Operating profit fell slightly in the period and margins are not expected to recover quickly. In contrast, the escrow division continues to perform well. Although a considerably lower revenue contributor, it continues to support cash generation, which stands at a handy 103 per cent of operating profit.
NCC plans to use its healthy balance sheet to continue its acquisition strategy, which has proved particularly fruitful outside of the UK. Overseas revenue now makes up over half of the group total, largely thanks to an exceptional performance in the US.
Broker Peel Hunt expects adjusted pre-tax profit of £36.1m and EPS of 9.2p for the financial year to May 2017 (from £37m and 11.2p in FY2016).
NCC (NCC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 199.3p | MARKET VALUE: | £551m | |
| TOUCH: | 199-199.5p | 12-MONTH HIGH: | 377p | LOW: 170p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 105 | |
| NET ASSET VALUE: | 100p* | NET DEBT: | 18% | |
| Half-yearto 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 93.5 | 7.5 | 2.6 | 1.5 |
| 2016 | 126 | 7.4 | 2.0 | 1.5 |
| % change | +35 | -2 | -23 | - |
Ex-div: 26 Jan Payment: 24 Feb *Includes intangible assets of £335m, or 121p a share | ||||
