NCC (NCC), a cyber security specialist that counts Microsoft among its client base, revealed a 13 per cent increase in half-year adjusted operating profit midway through a three-year restructuring initiative. However, there were mixed outcomes for the group's two business segments.
“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.
NCC (NCC) | ||||
ORD PRICE: | 208p | MARKET VALUE: | £578m | |
TOUCH: | 206-208p | 12-MONTH HIGH: | 236p | LOW: 112p |
DIVIDEND YIELD: | 1.8% | PE RATIO: | 42 | |
NET ASSET VALUE: | 74p** | NET DEBT: | 25%** |
Half-year to 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2018 | 126 | 8.70 | 2.40 | 1.50 |
2019 | 133 | 9.00 | 2.40 | 1.50 |
% change | +5 | +3 | - | - |
Ex-div: | 6 Feb | |||
Payment: | 6 Mar | |||
*Includes intangible assets of £227m, or 81.6p a share. **Includes intangible assets of £30.6m. |