NCC profits plummet in 2023 following two rounds of layoffs
Cybersecurity service provider sees drop in profits by 94.5 per cent
NCC Group has reported a 94.5 per cent drop in operating profits in 2023 to £1.9m, quoting a reduced trading performance in assurance (cybersecurity) and a loss before taxation of £4.3m.
NCC reported increased finance costs of £2.5m due to increased borrowing after the IPM acquisition and an increase in base interest rates.
Mike Maddison, CEO, commented: "While the market conditions we announced in our March trading update have impacted our FY23 revenue performance and profitability, we are confident about the medium-term growth drivers for cybersecurity and that continued progress on strategic actions will position the business to deliver greater growth and profitability in the years ahead.
"I am pleased to report that since the launch of our Next Chapter strategy in February 2023, the group has delivered foundational components of strategic change to create a more agile and resilient business, improve profitability and deliver shareholder value.
"I am grateful to all my NCC Group colleagues for their unwavering commitment and energy as we execute our plan to capitalise on the enduring opportunities in our markets, particularly given the material cost savings that we are realising in the business.
"We have fortified our leadership team in key areas with high-calibre individuals with deep cyber industry expertise, accelerated the diversification of our client base across our fastest growing sectors, launched our new global delivery and operations centre in Manila and will reveal today a new distinct brand for our software resilience business, which will give us a clearer, simpler proposition with which to increase our presence in this market."
In August 2023, NCC also announced the second round of layoffs in the space of six months to their UK staff, quoting a "renewed global strategy in response to changing market dynamics and client demands".
The vendor said that its FY24 current trading was in line with expectations.
"Cost efficiencies across assurance (cybersecurity) and corporate functions are already being realised, global professional services sales orders have stabilised, and no material clients lost.
"However, North America revenue performance experienced in H2 FY23 is currently annualising through H1 FY24 giving rise to year-on-year double digit Q1 revenue decline," a statement by NCC read.
A look ahead
In the report, NCC said it expects FY24 to be a period of considerable change, targeting a modest improvement in group adjusted operating profit in both the assurance (cybersecurity) and software resilience businesses in assurance (cybersecurity).
"We expect low single-digit revenue growth arising from stronger performance in high-value managed services, including XDR," it read.
"This will offset the annualisation of the sales declines in North American and UK professional services experienced during H2 FY23."
In software resilience, the vendor said it expects revenue growth in the low single digits, underpinned by sustainable actions successfully taken on pricing and sales execution.
"The operating profit growth will be delivered net of in-year systems investments that will realise newly identified contribution efficiencies of around £1m from FY25 onwards."