20th Oct 2016 09:01
LONDON (Alliance News) - NCC Group PLC sent pre-Halloween shivers down the spines of investors on Thursday, losing a third of its market value as a result.
NCC provides software escrow and verification, cyber security consulting and managed services. It said that, while it remains on track to meet expectations in its current financial year, problems in is Assurance business in the first four months will mean its results are more heavily weighted to the second half than previously had been envisaged.
NCC was the worst performer in the FTSE 250 on Thursday, against stiff competition from Keller Group PLC and Senior PLC. NCC shares wee down 35% to 226.30 pence.
In the four months to the end of September, NCC said revenue grew 36% year-on-year to GBP79.6 million. Stripping out foreign exchange translation and acquisition contributions, organic revenue was up 21%.
NCC said its Assurance and Escrow units were both strong in the period, despite the first four months typically being the quietest of the company's financial year, to the end of May.
However, NCC said it did experience some setbacks in its Assurance arm, including three large contract cancellations, which were unrelated, a large contract deferral and some difficulties in renewing managed security services contracts.
These issues have caused a "significant erosion of margin", NCC said, adding it is working to "remediate" these issues.
Fox-IT, the Dutch cyber security firm that NCC bought for EUR133.3 million in November, continues to be slowly integrated into the business, NCC said. However, the "lumpy nature" of the product revenue Fox-IT generates and a large contract deferral related to "complex government relationships" is making the integration process more challenging.
NCC said it remains on track to met its expectations for the full year, but said the setbacks in the Assurance unit will mean its results are more weighted to the second half than in the past. It added it does remain "too early to quantify" the likely impact of the contract cancellations, deferrals and renewal difficulties on its results.
This caused serious jitters for investors in NCC, which has been performing well. In July, announcing its annual results for the year to the end of May, NCC reported strong trading across the business and hiked its dividend.
"Overall, we continue to make good progress across the business with strong organic growth. However, we have been hit by a number of unrelated adverse developments in the Assurance division that will have an impact on profitability between the first and second half of the financial year," Rob Cotton, NCC's chief executive, said Thursday.
"Despite this, we will continue with our measured acquisition strategy and anticipate acquiring additional boutique cyber security consultancies over the next few months," he added.
By Sam Unsted; [email protected]; @SamUAtAlliance
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