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NCC improves working capital

The group’s net debt declined significantly during the year
July 25, 2019

NCC’s (NCC) full-year results to May 2019 offered a broadly improved story from that of six months ago, when the cyber-security group told of weaker UK growth and a much lower cash conversion ratio.

IC TIP: Hold at 173p

Assurance – the larger of NCC’s two businesses – saw revenue growth of 9.7 per cent overall to £213m, buoyed by a 23.4 per cent increase in North America, and 12.9 per cent within the rest of the world – albeit tempered by a 1.1 per cent dip in British sales.

Meanwhile, the escrow business endured a 2.8 per cent fall in sales to £38m – with growth across the pond partially offsetting declines elsewhere. UK underperformance stemmed from a weak sales team not selling sufficient contracts. Sales headcount here is up by half, with total escrow revenue expected to stabilise before returning to growth.

The big news was NCC’s cash conversion rate, which increased from 58 per cent at the half year to 110 per cent, thanks to better processes across both payables and receivables. Management explained that it “mobilised the entire firm” – exemplified by the sales team looking for better payment terms.

Peel Hunt expects adjusted EPS of 10.1p for the year to May 2020, up from 9.2p in FY2019.

NCC (NCC)    
ORD PRICE:173pMARKET VALUE:£ 482m
TOUCH:171-173p12-MONTH HIGH:228pLOW: 112p
DIVIDEND YIELD:2.7%PE RATIO:35
NET ASSET VALUE:76p*NET DEBT:10%
Year to 31 MayTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201513421.48.03.50
20162099.42.53.98
2017215-44.8-17.04.65
2018 (restated)23311.74.44.65
201925117.84.94.65
% change+8+52+11-
Ex-div:05 Sep   
Payment:04 Oct   
*Includes intangible assets of £231m, or 83p a share