Cyber security consultancy NCC (NCC) has said its results for the year to 31 May will be ‘comfortably ahead’ of market expectations, sparking a significant rally in the share price.

Shares in the Manchester-based business surged nearly 13% in early trading on Tuesday to 197.4p, their highest since early March.

FIRST CUTS WERE THE DEEPEST

Consensus expectations had been pitched at adjusted operating profit of £22.3 million on £243 million of revenue having been reeled-in after a warning in mid-March. That was sparked by a substantial impact on its Asia-Pacific business as the coronavirus pandemic took its toll on the region, plus delays to projects across its global operations.

But the depth of the forecast cuts now looks too ‘overcooked’, said one analyst this morning. Revenues are said to be higher than fiscal 2019’s £251 million, although adjusted operating profits will be lower than the £33.7 million chalked-up.

‘We assumed the worst for NCC,’ said Peel Hunt today, but ‘with Covid-19 having increased the threat surface, NCC will benefit from strong tailwinds into 2022,’ said the broker.

Peel Hunt still anticipates revenue attrition this year, to 31 May 2021.

ROLLING WITH THE PUNCHES

NCC has seen delays, cancellations, and disruption to its business operations across its regional operations, but client support has continued with the company switching to remote working enabled through systems and infrastructure investment, pointed out Shore Capital.

Importantly, NCC resisted the temptation to cut business investment, a decision that looks likely to pay-off in the months ahead, supported by recurring and repeatable revenues.

While profit growth is likely to lag revenue recovery, ‘this [ongoing investment] seems sensible given the inherent market opportunity within cyber security, which we expect will stand to benefit following the rapid adoption of new remote working solutions,’ said Megabuyte’s James Preece.

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Issue Date: 23 Jun 2020