July 8, 2011 7:37 am

High-profile hacking attacks to benefit NCC

NCC Group would benefit from digital security concerns after a string of high-profile attacks, the ethical hacking specialist said, as it announced strong earnings growth for the year to May.

NCC Group full-year results to May
Sales Pre-tax profit Earnings per share Dividend
£71m £12.8m 24.3p 13p
↑49% ↓1.5% ↑13% ↑21%

“We’ve got probably the best piece of marketing and advertising you could ever imagine, which is the hacking world moving ... into out-and-out war,” said Rob Cotton, chief executive. “The marketplace is the best it’s ever been.”

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About two-thirds of NCC Group’s revenue came from its assurance division, which tests the security of websites and performs forensic investigations after hacking attacks. The division’s turnover rose 87 per cent to £46.1m ($73.6m), helped by two acquisitions.

Companies including Visa and MasterCard, as well as state agencies such as the CIA and the UK’s Serious Organised Crime Agency have suffered cyberattacks in the past year. Sony enlisted NCC Group’s help after hackers stole more than 70m user records, a person close to NCC Group said.

Group revenue rose 49 per cent to £71m, with adjusted profit up 21 per cent to £17.3m. But pre-tax profit was down slightly at £12.8m (£13m).

There was slower growth in the high-margin escrow business, which holds source codes for companies in case the provider ceases to support their software. Its revenue rose only 8 per cent to £24.9m.

Mr Cotton blamed this on underperformance in the UK escrow operations, in part because of high staff turnover among sales executives, who were not being properly “looked after”. Senior managers in the division had been “underperforming”, and had now been replaced, he added.

Analysts were unperturbed by the weaker performance in that division, expecting it to be boosted by the takeover of the US company Escrow Associates, and focusing on the potential for rapid growth in the assurance business.

“They have had a number of issues with personnel over the years. But to have consensus-beating results, even though the main profit driver was underperforming, is testament to the depth and breadth of the business,” said Jonathan Imlah at Collins Stewart.

The company is hoping for rapid growth in the US assurance market after the acquisition of California-based iSec. “iSec is the biggest player in that market – they work for all the great and the good in Silicon Valley,” Mr Cotton said.

Arun George, at Altium, said “the momentum [in the assurance division] has clearly increased”, with NCC boosting revenues by selling higher-value services to existing customers.

Adjusted diluted earnings per share rose 25 per cent to 36.7p, while the final dividend rose to 8.85p (7.25p), lifting the total by 21 per cent to 13p.

The shares rose 5p to 650p on Thursday.

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