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NCC Group – update on a concerning profit warning & boardroom change - Vindication!

By Steve Moore | Friday 3 March 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Having concluded on previously writing on NCC Group (NCC) in November with the shares just below 200p, to avoid on the back of a confusing update and with also the company continuing to acquire despite the recent noted “number of setbacks”, I note the shares now sliding towards 110p following recent announcements.

A further sell-off followed an attempted ‘no-one watching o’clock’ (4:16pm) “Trading update; strategic review initiated” announcement on 21st February and the company has now also announced that Rob Cotton “has stepped down as Chief Executive of the group and as an Executive Director of the board with immediate effect”.

This follows the 21st February announcement including that “the board now anticipates that the group's full year adjusted EBITDA will be approximately 20% below the £45.5m to £47.5m range, which it published in the trading update announcement on 13th December 2016” as “the performance of the Assurance division will be significantly lower than previously anticipated”. Additionally, “in light of the deterioration in trading in the Assurance division… the board is initiating a comprehensive review of NCC Group's operating strategy”.

Such a deterioration in just a couple of months particularly concerns - and a “strategic review” suggests the company doesn’t really know what’s going on! However, it still argues that it “continues to firmly believe that the Assurance division has significant growth prospects”. Hmmm.

The announcement of Rob Cotton’s departure also included that there is a continued search for a Chairman “to replace Paul Mitchell when he steps down at the end of May” as well as that “Brian Tenner, Chief Financial Officer, will take over as Interim Chief Executive and will lead the strategic review”. Tenner only joined last month – and it will thus be particularly interesting what the “comprehensive review” finds.

It clearly currently remains a state of confusion and uncertainty here – and hopefully my previous stance was heeded. Natch, presently this is a bargepole stock.

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