Ncc Group EBITDA jumped on 14.5% and EBITDA Margin increased slightly on 1.4 pp from 15.4% to 16.7%
03 Sep 2020 • About Ncc Group (
$NCC) • By InTwits
Ncc Group reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- Ncc Group is a growth stock: FY2020 revenue growth was 5.2%, 5 year revenue CAGR was 14.6% at FY2020 ROIC 6.1%
- EBITDA Margin is expanding: 16.7% in FY2020 vs. 15.4% in FY2019 vs. 11.3% in FY2016
- EBITDA Margin is quite volatile: 16.7% in FY2020, 15.4% in FY2019, 15.2% in FY2018, -13.7% in FY2017, 11.3% in FY2016
- Ncc Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's in pair with industry average of 2.2%
- CAPEX is quite volatile: £3m in FY2020, £3m in FY2019, £8m in FY2018, £7m in FY2017, £5m in FY2016
- The company has potentially unprofitable business model: ROIC is 6.1%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.0x while industry average is -1.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 5.2%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 15.5 pp from -28.8% to -13.3% in FY2020. During the last 5 years EBITDA Margin bottomed in FY2017 at -13.7% and was growing since that time.
Gross Margin decreased slightly on 1.0 pp from 40.6% to 39.6% in FY2020. During the last 5 years Gross Margin topped in FY2018 at 41.2% and was declining since that time. SG&A as a % of Revenue decreased on 9.9 pp from 32.8% to 22.9% in FY2020. During the last 5 years SG&A as a % of Revenue topped in FY2018 at 35.4% and was declining since that time.
Net Income margin decreased slightly on 0.95 pp from 5.4% to 4.4% in FY2020.
Investments (CAPEX, working capital and M&A)
In FY2020 the company had CAPEX/Revenue of 1.1%. The company showed small CAPEX/Revenue decline of 1.9 pp from 3.0% in FY2017 to 1.1% in FY2020. Average CAPEX/Revenue for the last three years was 1.9%. During FY2016-FY2020 CAPEX as a % of Revenue topped in FY2018 at 3.3% and was declining since that time.
Return on investment
The company operates at low ROIC (6.1%) and ROE (5.5%). ROIC decreased slightly on 1.2 pp from 7.3% to 6.1% in FY2020. ROE decreased slightly on 0.96 pp from 6.5% to 5.5% in FY2020.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.0x and Debt / EBITDA is 3.1x. Net Debt / EBITDA jumped on 0.4x from 0.5x to 1.0x in FY2020. Debt jumped on 149% while cash jumped on 172%.
Ncc Group has no short term refinancing risk: cash is higher than short term debt (1,792.5%).
Valuation and dividends
Ncc Group's trades at EV/EBITDA 13.0x and P/E 45.5x.
Management team
Ncc Group's CEO is Adam Palser. Adam Palser has 3 years tenure with the company. Tim J Kowalski is a Ncc Group's CFO. Tim J Kowalski has spent 2 years at the company.
Financial and operational results
FY ended 31 May 2020
Ncc Group ($NCC) key annual financial indicators| mln. £ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 209.1 | 244.5 | 233.0 | 250.7 | 263.7 | 5.2% |
| Gross Profit | 58.6 | 84.3 | 95.9 | 101.8 | 104.4 | 2.6% |
| SG&A | 20.1 | 57.0 | 82.4 | 82.3 | 60.4 | -26.6% |
| EBITDA | 23.5 | -33.5 | 35.3 | 38.5 | 44.1 | 14.5% |
| Net Income | 6.3 | -56.6 | 6.7 | 13.5 | 11.7 | -13.3% |
Balance Sheet
|
|---|
| Cash | 20.7 | 12.3 | 21.2 | 34.9 | 95.0 | 172.2% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 5.0 | 5.3 | 6.0% |
| Long Term Debt | 33.4 | 56.0 | 49.0 | 50.1 | 132.1 | 163.7% |
Cash flow
|
|---|
| Capex | 4.6 | 7.3 | 7.7 | 3.0 | 2.8 | -6.7% |
Ratios
|
|---|
| Revenue growth | 56.4% | 16.9% | -4.7% | 7.6% | 5.2% | |
| EBITDA growth | -15.8% | -242.3% | -205.4% | 9.1% | 14.5% | |
|
|---|
| Gross Margin | 28.0% | 34.5% | 41.2% | 40.6% | 39.6% | -1.0% |
| EBITDA Margin | 11.3% | -13.7% | 15.2% | 15.4% | 16.7% | 1.4% |
| SG&A, % of revenue | 9.6% | 23.3% | 35.4% | 32.8% | 22.9% | -9.9% |
| Net Income Margin | 3.0% | -23.1% | 2.9% | 5.4% | 4.4% | -0.9% |
| CAPEX, % of revenue | 2.2% | 3.0% | 3.3% | 1.2% | 1.1% | -0.1% |
|
|---|
| ROIC | 4.5% | -18.3% | 5.0% | 7.3% | 6.1% | -1.2% |
| ROE | 3.2% | -23.8% | 3.2% | 6.5% | 5.5% | -1.0% |
| Net Debt/EBITDA | 0.5x | | 0.8x | 0.5x | 1.0x | 0.4x |
Peers in Software & Computer Services
Below you can find Ncc Group benchmarking vs. other companies in Software & Computer Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Actual Experience ($ACT) | 2.3% | -49.1% | 195.1% | 79.7% | - |
| Ideagen ($IDEA) | 52.4% | 23.6% | 33.2% | 29.2% | - |
| Eagle Eye Solutions Ltd ($EYE) | 33.0% | 71.2% | 24.6% | 22.8% | - |
| Arcontech Group ($ARC) | - | 7.8% | 9.2% | 12.8% | 4.0% |
| Oxford Metrics ($OMG) | 14.6% | -1.1% | 8.6% | 11.7% | - |
| |
|---|
| Median (15 companies) | 13.6% | 14.1% | 21.8% | 4.7% | -4.6% |
|---|
| Ncc Group ($NCC) | - | 16.9% | -4.7% | 7.6% | 5.2% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Craneware ($CRW) | 94.0% | 93.8% | 94.9% | 93.8% | - |
| Eagle Eye Solutions Ltd ($EYE) | 78.8% | 88.3% | 89.3% | 93.1% | - |
| Ideagen ($IDEA) | 88.0% | 89.5% | 91.2% | 91.6% | - |
| Netcall ($NET) | 91.2% | 91.7% | 90.2% | 89.8% | - |
| Dotdigital Group ($DOTD) | 87.4% | 86.1% | 78.9% | 89.7% | - |
| |
|---|
| Median (14 companies) | 61.5% | 59.8% | 56.0% | 78.0% | 36.1% |
|---|
| Ncc Group ($NCC) | 28.0% | 34.5% | 41.2% | 40.6% | 39.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dotdigital Group ($DOTD) | 30.4% | 31.7% | 26.9% | 34.9% | - |
| Arcontech Group ($ARC) | 14.5% | 16.7% | 23.0% | 32.4% | 40.4% |
| Micro Focus International ($MCRO) | 40.9% | 38.9% | 27.5% | 30.3% | - |
| Craneware ($CRW) | 32.3% | 30.4% | 31.1% | 30.3% | - |
| Ideagen ($IDEA) | 23.9% | 21.8% | 23.8% | 23.5% | - |
| |
|---|
| Median (15 companies) | 10.5% | 11.3% | 12.2% | 15.4% | 17.5% |
|---|
| Ncc Group ($NCC) | 11.3% | -13.7% | 15.2% | 15.4% | 16.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Netcall ($NET) | 2.7% | 0.7% | 0.8% | 4.7% | - |
| International Bus Mach Corp ($IBM) | 4.5% | 4.1% | 4.3% | 3.1% | 4.1% |
| Unisys Corp ($USY) | 3.0% | 4.1% | 3.8% | 2.9% | 2.9% |
| Micro Focus International ($MCRO) | 0.8% | 0.9% | 0.8% | 1.7% | - |
| Ideagen ($IDEA) | 1.6% | 1.1% | 1.4% | 1.5% | - |
| |
|---|
| Median (15 companies) | 1.1% | 1.1% | 0.8% | 1.1% | 2.9% |
|---|
| Ncc Group ($NCC) | 2.2% | 3.0% | 3.3% | 1.2% | 1.1% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Craneware ($CRW) | 27.9% | 30.0% | 34.9% | 33.4% | - |
| Rm ($RM.) | 254.7% | 73.8% | 39.0% | 31.6% | - |
| Dotdigital Group ($DOTD) | 28.9% | 29.3% | 26.6% | 25.9% | - |
| Arcontech Group ($ARC) | 14.5% | 14.5% | 17.8% | 22.9% | 20.4% |
| Oxford Metrics ($OMG) | 16.3% | 12.7% | 16.4% | 14.7% | - |
| |
|---|
| Median (16 companies) | 7.1% | 5.6% | 5.6% | 2.0% | 13.6% |
|---|
| Ncc Group ($NCC) | 4.5% | -18.3% | 5.0% | 7.3% | 6.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Micro Focus International ($MCRO) | 2.1x | 6.6x | 4.2x | 4.3x | - |
| International Bus Mach Corp ($IBM) | 1.7x | 1.8x | 1.7x | 3.8x | 4.1x |
| Rm ($RM.) | -2.2x | 0.7x | 0.2x | 0.5x | - |
| Unisys Corp ($USY) | -0.3x | -0.6x | 0.1x | 0.4x | -0.6x |
| Ideagen ($IDEA) | -1.2x | -0.7x | -0.1x | 0.1x | - |
| |
|---|
| Median (10 companies) | -1.0x | -0.5x | -0.4x | -0.1x | -0.6x |
|---|
| Ncc Group ($NCC) | 0.5x | - | 0.8x | 0.5x | 1.0x |
