I notice NCC (LON:NCC) dropped 34% this morning, which is on my watchlist. Having read the RNS it doesn't seem that bad, I wouldn't normally consider catching a falling knife but.....
It feels like the company has dropped back to a fair valuation and I think the management can make a deccent run of it from here.
Thoughts anyone?
Hi Carey,
Just seen this and read the RNS. NCC is a company that's on my watch list and I've been reading through the annual reports recently - though I don't currently hold any, thankfully (mostly dumb luck it must be said)!
The phrase that would concern me here is "However, the loss of three major contracts along with difficulties with contract renewals within the managed security services business unit (formerly Accumuli plc) is causing a significant erosion of margin." (emphasis added)
"Significant" is one of those unquantified words, so who knows what it really means, but it will be a big amount, maybe the margin could be cut by a third? Who knows....
And the thing with NCC is that one of its key characteristics from an investment perspective was that its revenue was recurring - but obviously this kind of event is going to make investors question whether that is right.
It's a difficult one, this. I'm going to have a think about it and see where the price settles, and also go back and see when NCC acquired Accumuli and what they said about it.
For the record, the reasons I've not invested to date are partly lethargy, partly valuation, and partly that I was a bit concerned at the Fox-IT acquisition - I much prefer companies to expand incrementally rather than by making big acquisitions (small bolt-ons I don't mind so much). To be fair it doesn't sound like these problems are to do with Fox-IT so I just lucked out really.
