Infosec firm NCC Group launches review over crap financials

Misses full-year forecast by, oh, only 20 per cent

Cybersecurity firm NCC Group has launched a strategic review after issuing a profit warning.

The company announced on Tuesday that the performance of its assurance division will be significantly lower than anticipated. This will hit its overall financial results for the full year ending 31 May, 2017.

NCC now expects that the full year adjusted EBITDA will be approximately 20 per cent below the £45.5m-47.5m range forecast on 13 December, 2016.

"The rate of sales growth and subsequent delivery in the assurance division in the third quarter to date has been lower than had been anticipated in both security consulting and software testing and web performance," NCC said in a statement. "The reduction in expected sales and profitability in the third quarter has been seen in the UK, mainland Europe and North America."

Sales are normally higher in the fourth quarter but any increases are highly likely to be offset by the shortfall in the rest of the year, NCC warned. Longer term NCC hopes to bring in extra sales as firms seek to achieve compliance with the General Data Protection Regulation ahead of the May 2018 deadline.

NCC's escrow division remains on course for reaching its sales target but the deterioration in sales by the assurance division has prompted NCC to initiate a review of its operating strategy. The review will be led by the board, supported by externally appointed consultants, and expected to come out with preliminary findings before NCC announces its results in July 2017.

"NCC Group continues to firmly believe that the Assurance Division has significant growth prospects which it is determined to capture once the Group has reviewed its existing strategy and operations," the firm concluded.

NCC shares were down a quarter from 126.50p overnight to 97p in London trading at the time of publication.

NCC Group's chairman Paul Mitchell last month said he would be stepping down in May as the firm revealed it had been hit by the cancellation of three large contracts and the deferral of a fourth. The firm hasn't indicated the root source of the problem. Speculation among analysts suggests it might be down to issues with renewing government contracts attached to forensics and incident response outfit Fox-IT, a November 2015 acquisition.

Last October NCC said the "lumpy nature of its product revenues and a large contract deferral allied to complex government relationships" made integrating Fox-IT into its business "challenging". ®

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