NCC's (NCC) shares took a dive after half-year numbers revealed weaker UK revenues and a significant squeeze in the cash conversion ratio from 72 per cent to 33 per cent. Management now expects full-year adjusted operating profits of £34m, down from house brokers Peel Hunt and Jefferies' prior estimates of £35.3m and £34.9m, respectively.
Revenues for the assurance segment might have risen by 9.7 per cent to £107m – buoyed by a 20 per cent increase in US sales to £37.7m – but the UK performance was hindered by "softer demand" in the risk management and governance business, as well as resource shortages in the technical security consulting business and a planned reduction of third-party resales. Meanwhile, Escrow revenues fell 1.6 per cent to £18.9m, notwithstanding US growth of 10.5 per cent, as UK sales dipped 4.4 per cent to £12.9m.
NCC’s net operating cash flow also plunged to £6.6m – stemming from lower working capital after a short-term rise in trade receivables and a reduction in trade payables, but this is expected to reverse by the year-end.
Jefferies forecasts adjusted pre-tax profits of £32.5m and EPS of 9.2p for FY2019 (from £29.5m and 8.2p in FY2018).
| NCC (NCC) | ||||
| ORD PRICE: | 141.3p | MARKET VALUE: | £393m | |
| TOUCH: | 141.1-141.8p | 12-MONTH HIGH: | 230p | LOW: 141p |
| DIVIDEND YIELD: | 3.3% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 75p* | NET DEBT: | 22% | |
| Half-year to 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 117 | 5.5 | 1.4 | 1.5 |
| 2018 | 126 | 8.7 | 2.4 | 1.5 |
| % change | +8 | +58 | +71 | - |
| Ex-div: | 7 Feb | |||
| Payment: | 28 Feb | |||
| *Includes intangible assets of £239m, or 86p a share | ||||
