NCC Group tumbles on poor UK performance

NCC Group dived on Thursday after declines in the UK and Europe drove a reduction in escrow revenue after business was held back by softer demand in risk management and governance.

The IT assurance services specialist and escrow provider reported that the Escrow division's revenue for the six months ended 30 November fell slightly to £18.9m, a drop of 2% compared to the same period a year earlier, as 11% growth in the US was offset by 4.4% and 5.3% declines in the UK and Europe, respectively.

However, overall revenue increased by 8% to £126.0m, on the back of a 20% jump in sales from the US assurance business to £37.7m.

The overall assurance division, which provides 85% of group revenue, reported 9.7% year-on-year growth in revenue to £107.1m as the success of business across the Atlantic cancelled out poor UK growth of just 1.1%.

Adam Palser, chief executive of NCC Group, said: "We are pleased with the progress we have made, with continued growth in our core Assurance division and a particularly strong performance in the US, the world's largest cyber market. While profits from our Escrow division fell slightly, our experience in the US has given us confidence that we can re-energise the growth of this business."

The London-listed company declared an unchanged interim dividend of 1.5 pence per share and had cash and cash equivalents of £15.5m as at 30 November, up from £13.4m at the same point the year before.

NCC also reported adjusted Ebit of £14.8m, up 7.2% year-on-year, though the board had previously expected this figure to remain unchanged throughout its 2019 financial year.

"The new team is now focused on accessing the resources to enable the group to fully capitalise on its growth potential, with retention and recruitment a key priority. We expect to deliver full year adjusted EBIT of around £34m, while our longer term growth prospects remain excellent," said Palser.

Shore Capital remained confident in the company as overall revenue growth supported the broker's full-year expectations but commented that the Escrow business had been "weaker" than anticipated and subsequently reduced its full year EBITA forecast for NCC by approximately £2.8m to £34.0m

"The outlook for NCC’s services remains robust to us for Assurance, though we note a slower start to the current H2 period with retention and recruitment cited as issues to be addressed. We also look for continued stability in Escrow. NCC continues to occupy a key strategic position in the provision of essential services in IT security, in our view," said a note from the broker.

NCC Group's shares were down 22.24% at 141.10p at 1223 GMT.