31st Mar 2023 15:46
(Alliance News) - NCC Group PLC on Friday cut annual guidance to an extent that surprised Shore Capital Markets, which was already sceptical about its full-year prospects.
The broker back in January flagged that tricky economic conditions could but pressure on NCC's margin, potentially leading to further earnings consensus downgrades.
"The magnitude of the lowered guidance is still a surprise to us," Shore said, as it lowered the stock to 'hold' from 'buy'.
Cybersecurity firm NCC lowered annual guidance for the financial year ending on May 31, as it faces a "further deterioration in the macro-economic and market environment".
NCC lowered its adjusted operating profit to a range of GBP28 million to GBP32 million, having previously expected GBP47 million.
It warned buying decision delays and cancellations were being exacerbated by tech sector layoffs. Recent turmoil in the banking sector also has hit market confidence, resulting in a "reduced appetite" for spending on technology, NCC said.
Shore analysts added: "We remain mindful of both continuing changing market dynamics in Assurance and Escrow services and potential further pressure on staff attrition in Assurance. So pressure looks set to continue. NCC badly needs stability, in our view, but this does not seem likely over the course of the next year."
The broker said NCC may find itself as a takeover target.
"Is the company potentially set to be 'in play'? We have to say that this is possible given the known long-term potential in cyber services and the cash potential seen in escrow in the move to the cloud," Shore added.
Investment bank Jefferies also noted that NCC's negative update was a surprise.
"The share price has been anticipating weakness, but given the magnitude of the shortfall, the shares are likely to remain under pressure," Jefferies said.
NCC shares were 34% lower at 100.40 pence each in London on Friday afternoon.
By Eric Cunha, Alliance News news editor
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