NCC shows incremental improvement

“We had a little bit of a softer quarter one than we would have liked,” said chief executive Adam Palser, as the group’s pipeline of orders grew but conversion to sales slowed. 

Assurance, the larger of NCC’s two businesses, increased sales by 6.7 per cent. Having recently invested in sales and delivery capacity, management now expects double-digit assurance growth and margin improvement through the second half as restructuring measures start to generate tangible benefits.

It is worth noting that the cash conversion ratio increased to 74.5 per cent from 58 per cent a year earlier, which helped facilitate a sizeable reduction in net debt, which was down by more than half on a like-for-like basis to £20.8m.

Revenue at the software escrow business fell by 2.6 per cent, which management attributed to lower contract sales and phasing of verification testing. That said, significant escrow revenue remains under contract and in the pipeline, both on software hosted on-premise and through the cloud. The group’s sales orders increased by 28.6 per cent to £149m. 

Consensus forecasts collated by Bloomberg show adjusted EPS of 10.2p for the May 2020 year-end, rising to 11.8p in FY2021.