NCC Group Reports Declining Revenue and Profit Amid Market Challenges
Why we think this is bad
The interim results paint a concerning picture for NCC Group. Despite eliminating net debt, the company's core Cyber Security business is experiencing significant headwinds, with revenue declining by 6.6% on a constant currency basis. Adjusted EBITDA has fallen from £25.5m to £21.5m, indicating pressure on profitability. While Escode showed modest growth, it's not enough to offset the overall decline. The company's outlook remains cautious, expecting further revenue decline in Cyber Security for the full year. Cash conversion has also deteriorated significantly. These factors, combined with challenging market conditions and increased competition, suggest a difficult period ahead for NCC Group.
Key Points
- Group revenue declined 4.9% on constant currency basis
- Cyber Security revenue down 6.6%, Escode up 1.8%
- Adjusted EBITDA decreased from £25.5m to £21.5m
- Net debt eliminated, now £0.3m net cash position
- Cash conversion fell from 111.8% to 62.3%
- Outlook: expecting further revenue decline in Cyber Security
- Maintained interim dividend at 1.50p per share
- Challenging market conditions and increased competition noted
- Exploring strategic options for Escode business, including potential sale
- Expect to return to revenue growth in FY26
Summary
NCC Group's interim results reveal a challenging period for the company. Group revenue declined by 4.9% on a constant currency basis, with the core Cyber Security division seeing a 6.6% decrease. While Escode showed modest growth of 1.8%, it wasn't enough to offset the overall decline. Adjusted EBITDA fell from £25.5m to £21.5m, indicating pressure on profitability. The company has successfully eliminated net debt, now reporting a net cash position of £0.3m. However, cash conversion has deteriorated significantly from 111.8% to 62.3%. The outlook remains cautious, with expectations of further revenue decline in Cyber Security for the full year. The company faces challenging market conditions, economic uncertainties, and a highly competitive landscape. While NCC Group expects to return to revenue growth in FY26, the near-term challenges are significant. The Board has maintained an interim dividend of 1.50p per share.