After the market closed last night NCC Group (LON:NCC) made an announcement that could be quite important to the recovery of this cyber security and software escrow business.
NCC Group is trusted to protect and secure its customers’ critical assets and is used by Governments and major corporations glbally.
It is an information assurance business that is headquartered in Manchester.
With some 2,200 employees across Europe, North America, and Asia Pacific, NCC harnesses their collective insight, intelligence, and innovation to deliver cyber resilience solutions for both public and private sector clients globally.
Its service areas cover software escrow and verification, cyber security consulting and managed services, and the business has over 15,000 clients worldwide.
A couple of years ago the group suffered some setbacks after customers delayed or cancelled buying decisions, especially from its North American markets.
However, since then the group has been undergoing something of a transformation which could well see very big prospects ahead.
Latest Results
Yesterday the group announced its results for the year to end May, showing revenues down slightly to £324.4m (£335.1m), while adjusted pre-tax profits were up 33% at £13.8m (£10.4m), lifting earnings to 3.5p (2.8p) which do not cover the dividend of 4.7p (4.7p) per share.
CEO Mike Maddison stated that:
“The Group’s transformation journey is progressing well and is already delivering results; however, work continues.
We have enhanced our capabilities in Cyber and diversified our routes to market, developed differentiated brands and implemented a global resourcing and scheduling model enabled by a new delivery and operating centre.
We have made this strategic progress whilst successfully reducing our operating costs and improving our gross margin.”
Analyst View
Analyst Bob Liao at Zeus Capital has a 167p a share base case scenario, with 245p as an upside scenario – they currently trade at 145p, valuing the group at £455m.
For the current year to end May 2025 the broker goes for £352.6m revenues, £26.1m profits, earnings of 6.3p and a slightly increased dividend of 4.8p per share.
His estimates for 2026 are for £379.9m turnover, £34.1m profits, 8.2p of earnings and a 4.9p dividend.
Last Night’s Disposal News
The group has agreed to sell its Fox Crypto business to CR Group Nordic for some £66m, cash on completion in October.
Group net debt at 31 May 2024 was £38.5m, so the expected net proceeds of about £62m will clear Group net debt and facilitate organic and inorganic growth in the group’s Cyber Security business.
The disposal represents a continuation of the group’s transformation strategy to simplify the business and create a more focused Cyber Security business.
The company notes that both its Cyber and Escode businesses provide the benefit of a portfolio effect to the overall group performance with clear future growth opportunities to enhance shareholder value.
In My View
These shares, now 145p, are undervalued considering the transformation now underway, which will be aided by the clearance of debt with added working capital, giving it the ability to use its shares in strategic M&A propositions.