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Cyber security business admits profits shortfall too big to recover
Thursday 15 Dec 2016 Author: Steven Frazer

Cyber security company NCC (NCC) is having to accept it was too optimistic about its ability to recover a profits shortfall from contract losses and delays in its Assurance business that sparked a shock profit warning on 20 October.

The Manchester-based company now admits that adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the full year to 31 May 2017 will fall within the range of £45.5m to £47.5m.

BN NCC 151216


Some analysts recalculated their forecasts at the time of the warning in October but many did not and are now being forced to take the red pen to estimates. Peel Hunt has slashed its adjusted EBITDA forecasts of £52.7m and £62.7m for this year and next by 12% and 16% respectively, leaving new estimates at £46.5m and £53m.

We said in a website story on 20 October that NCC’s decision to leave guidance for the full year unchanged ‘seems rather unwise,’ and so it now appears. The shares fell around 7% on this latest announcement to 190.5p, having collapsed by 35% on the day of the original warning.

NCC retains a largely positive view on future trading, backed by an ever-increasing number of high profile cyber security breaches. The group’s total forward order book and renewals stood at £112.8m as of 12 December, up 4% on the £108.8m level published on 20 October 2016. ‘These contract cancellations do not reflect any structural change in our Assurance business,’ states NCC chief executive Rob Cotton. (SF)

It’s been a messy few months for NCC but that comes on the back of a particularly strong financial year to 31 May 2016. We continue to side with the more positive analysts. 

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