NCC shares tank on poor outlook as sales cycles lengthen

(Sharecast News) - Shares in NCC tanked on Tuesday despite the Manchester-based cybersecurity and software services firm delivering in-line annual results, as investors focused on the outlook statement, which pointed to a lengthening of sales cycles in recent months. The company, which reported results for the 16 months to 30 September following the financial year-end change from May, said it expected flat to low-single digit revenue growth in the year ending September 2025, with a "modest" adjusted EBITDA improvement.

"In line with the wider market, the group has recently seen a lengthening of sales cycles, in particular across the Cyber business, compared to H2 to May 2024 and also the four-month period to September 2024," the company said.

According to analyst Martin O'Sullivan from Shore Capital, consensus estimates had pencilled in 12% adjusted EBITDA growth for the new fiscal year, so "we would expect slightly negative reaction in the shares this morning".

As such, the stock was down nearly 17% at 135p by 0924 GMT.

NCC reported adjusted EBITDA of £51.6m the 16-month period, up 31.6% from £39.2m for the previous financial year (12 months to 31 May 2023), as revenues increased 28.2% to £429.5m from £335.1m.

When comparing comparable results to adjust for the new year-end, adjusted EBITDA was 59.3% higher at £49.7m, though revenues were up just 1.7% at £329.2m.

Chief executive Mike Maddison said NCC had 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."