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Shares in NCC Group PLC on Tuesday plunged after it warned lengthening sales cycles would mean modest revenue growth in the current financial year. The Manchester-based cyber security firm said pretax loss widened to £27.5 million in the 16 months to September 30 from £4.3 million in the 12 months to May 31, 2023. NCC, which recently changed its year-end, said revenue rose 28% to £429.5 million in the 16 months from £335.1 million in the 12 months. On a comparable basis revenue fell 3.2% to £324.4 million in the 12 months to May 2024. Adjusted earnings before interest, tax, depreciation and amortisation climbed 32% to £51.6 million in the 16 months from £39.2 million in the 12 months. Gross margin improved to 41.6% from 39.4%. Net debt excluding lease liabilities fell to £45.3 million from £49.6 million. Chief Executive Mike Maddison said the firm has made ‘great progress’ over the past 18 months. ‘Our more focused Cyber Security business returned to growth in the second half to May 2024, with improved sources of recurring revenue with Managed Services performing well, and our Escode business building a track record of growth. We are pleased to see this strategic progress coming through in improved gross margin and adjusted Ebitda - a key priority for the group.’ But Maddison flagged the firm is currently experiencing a ‘lengthening of sales cycles’ in line with the wider market. NCC said clients are looking for higher levels of assurance during their procurement processes, a ‘longer buying cycle’ related to longer-term contracts while security leaders are competing for budget with other spending priorities in their organisations. ‘In the UK, for example, with a general election and then the narrative relating to the new government’s budget, we have seen a relative cooling in buying activity, and a resulting pause in spend. In North America, technology sector spending has not returned to the levels seen during or immediately after the Covid-19 pandemic, however while we are making progress into other verticals which are at a lower spending scale than the tech sector,’ NCC added. In response, shares in NCC plunged 17% to 134.20 pence each in London on Tuesday. Despite this, management expects to deliver profitable growth across both businesses in the current financial year to September 30, 2025, with flat to low single digit revenue growth and modest group adjusted Ebitda gains and remains confident in delivering medium-term financial goals. Panmure Liberum said the outlook to September 2025 is ‘disappointing’, with guidance of flat to low-single digit revenue growth, compared to its forecast of 5.5%. ‘We’d expect downgrades to operating profit of at least 10%,’ the broker said. NCC said the 12-month dividend was maintained at 3.15 pence, while a final dividend of 1.5p was proposed for the four months to September 30. Copyright 2024 Alliance News Ltd. All Rights Reserved.
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