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In the current threatening environment, cyber security expert NCC is going to be a winner, writes Mark Watson-Mitchell.
It is a wicked old world out there. Just ask Donald Trump! You do not know where the threats are coming from – I am not talking about impeachment but instead of cyber warfare.
I am sure that we have all had doubt in our minds whenever we get unusual e-mails or internet links showing up on our computer screens – just who is looking at us, who is soaking up our information, our private files, our intimate details – it can get scary for the uninitiated.
We just buy protection software and pray that it bars intruders – of course our unsophisticated systems are easy meat for professional hackers.
So, let us consider our risks when multiplied thousands of times, in fact probably millions of times, for companies large and small.
Multi-national corporations need cover, so too do countries, governments, military etc, the list is endless and the risks to their existence is enormous.
Even more so when countries involve themselves in the affairs of others, whether for pure knowledge or for evil intent.
It is an international playground but one where NCC Group (LON:NCC) is a global expert in cyber security and risk mitigation.
NCC was spun out of the National Computing Centre way back in June 1995, when the management team bought its commercial operations and set up the new company. Since then its expansion has been widespread and steady, limited only by its organic and acquired growth limits.
Understanding the risks that the current threat landscape offers for organisations could not be more important.
And that is where NCC comes into the frame. It has world leading experts who use their unrivalled knowledge to fight such threats. The group’s technical depth and strategic vision helps organisations identify, assess, mitigate and respond to the risks they face.
Not only is the group involved in cyber security, but it is a big player in software escrow.
Software escrow is an agreement between three parties that ensures the availability of business-critical software for customers, while protecting the intellectual property rights ownership of the suppliers. Source codes are deposited in the company’s secure vaults.
Over the last 30 years the company has become a world leading software escrow provider, with more than 18,000 customers and 7,000 technology suppliers, protecting more than 12,000 software applications.
From the group’s headquarters in Manchester, it controls operations in 35 offices across the world, employing over 2,000 people and servicing its 15,000 clients globally.
At the AGM in end-September the group stated that trading was in line with expectations and its three-year transformation programme was progressing to time and budget to create the next version of the NCC Group.
The group has the aim to maximise sustainable and profitable growth by being a sought-after, full-spectrum adviser in cyber security to clients across the globe.
The group will be announcing its interim results for the six months to end-November on 23 January.
Brokers estimate that for this current year to end-May 2020, the group’s revenue could have grown to £275m and pre-tax profits to £26m. That would give earnings of almost 8p and a dividend of 4.8p per share.
For the coming year, brokers anticipate £300m of sales, profits of £32m, earnings of 9.7p and a 5p per share dividend.
Even further out to May 2022, forecast sales of £325m, profits of £36m and earnings of 10p per share make the shares of this £640m group look an interesting counter, now 229p.
Obvious to regular readers, this rating is far, far higher than I would normally touch; however, in the current threatening environment NCC is going to be a winner.
I set an end 2020 target price of 300p.